SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO. 2-41839)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 70 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. ______ [ ]
Fidelity Fixed-Income Trust__________________________________________
(Exact Name of Registrant as Specified in Charter)
82 Devonshire Street, Boston, MA
02109_______________________________________
(Address Of Principal Executive Offices)
Registrant's Telephone Number (617)
570-7000_________________________________
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, MA 02109__________________________________________________________
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b)
( ) On ( ) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)
(X) On June 21, 1994 pursuant to paragraph (a) of Rule 485
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the notice required by
such Rule before June 30, 1994.
SPARTAN HIGH INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment Principles and
Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Doing Business with Fidelity; Charter
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Charter
f .............................. Expenses
g .............................. *
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares; Exchange
Restrictions; Transaction Details
iii.......................... Charter
b ............................. *
c .............................. Exchange Restrictions; Transaction Details
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i............................ FMR
ii........................... Trustees and Officers
.
iii.......................... Management Contract
.
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated with FMR
e ............................ Management Contracts
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated with FMR
17 a - c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated with FMR
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated June 21, 1994 has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference (is legally considered a part of this prospectus). The Statement
of Additional Information is available free upon request by calling
Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
Spartan High Income seeks high current income by investing mainly in
high-yielding debt securities.
Many of the fund's investments are lower-quality debt securities. These
carry increased risk of untimely interest and principal payments, default,
and price volatility, and may present problems of liquidity and valuation.
SPARTAN(Registered trademark) HIGH
INCOME FUND
PROSPECTUS
JUNE 21, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SPH-pro-694
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income. As with any mutual fund, there is no assurance
that the fund will achieve its goal.
STRATEGY: Invests mainly in high-yielding debt securities, with emphasis on
lower-quality securities.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager.
SIZE: As of April 30, 1994, the fund had over $__ million in assets.
WHO MAY WANT TO INVEST
The fund is designed for those who want high current income with some
potential for capital growth from a portfolio of high-yielding debt
securities and income-producing equity securities. The fund may be
appropriate for long-term aggressive investors who understand the potential
risks and rewards of investing in lower-quality securities, including
defaulted securities, and are willing to accept their greater price
movements and credit risks.
By itself, the fund does not constitute a balanced investment plan. The
value of the fund's investments and the income they generate will vary from
day to day, generally reflecting changes in company news, interest rates,
market conditions, and other political and economic news. When you sell
your shares, they may be worth more or less than what you paid for them.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(Registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Spartan
High Income is in the
INCOME category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(arrow) INCOME Seeks income by
investing in bonds.
(bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See page for more information.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Redemption fee
(on shares held less than 270 days) 1%
Exchange and wire transaction fees $5.00
Account closeout fee $5.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. Expenses are factored into the fund's share
price or dividends and are not charged directly to shareholder accounts
(see page ).
The following are projections based on historical expenses, adjusted to
reflect current fees, and are calculated as a percentage of average net
assets.
Management fee .80%
12b-1 fee None
Other expenses .00%
Total fund operating expenses .80%
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
Account open Account closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows has been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in the fund's
Annual Report. The Annual Report is incorporated by reference into (is
legally a part of) the Statement of Additional Information.
[Financial Highlights to be filed by subsequent amendment.]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of taxes or any transaction fees you may have paid.
The figures would be lower if fees were taken into account.
The fund's fiscal year runs from May 1 through April 30. The tables below
show the fund's performance over past fiscal years compared to a measure of
inflation. The chart on page __ helps you compare the yields of this fund
to those of its competitors.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Life of
April 30, 1994 year fundA
Spartan High Income
Consumer Price
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Life of
April 30, 1994 year fundA
Spartan High Income
Consumer Price
Index
A FROM AUGUST 29, 1990
UNDERSTANDING
PERFORMANCE
Because this fund invests in
fixed-income securities, its
performance is related to
changes in interest rates.
Funds that hold short-term
bonds are usually less
affected by changes in
interest rates than long-term
bond funds. For that reason,
long-term bond funds typically
offer higher returns and carry
more risk than short-term
bond funds.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper High Yield Bond Funds Average,
which currently reflects the performance of over ___ mutual funds with
similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
30-DAY YIELDS
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: 0.0
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 2, Col: 3, Value: 0.0
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 3, Col: 3, Value: 0.0
Row: 4, Col: 1, Value: nil
Row: 4, Col: 2, Value: nil
Row: 4, Col: 3, Value: 0.0
Row: 5, Col: 1, Value: nil
Row: 5, Col: 2, Value: nil
Row: 5, Col: 3, Value: 0.0
Row: 6, Col: 1, Value: nil
Row: 6, Col: 2, Value: nil
Row: 6, Col: 3, Value: 0.0
Row: 7, Col: 1, Value: nil
Row: 7, Col: 2, Value: nil
Row: 7, Col: 3, Value: 0.0
Row: 8, Col: 1, Value: nil
Row: 8, Col: 2, Value: nil
Row: 8, Col: 3, Value: 0.0
Row: 9, Col: 1, Value: nil
Row: 9, Col: 2, Value: nil
Row: 9, Col: 3, Value: 0.0
Row: 10, Col: 1, Value: nil
Row: 10, Col: 2, Value: nil
Row: 10, Col: 3, Value: 0.0
Row: 11, Col: 1, Value: nil
Row: 11, Col: 2, Value: nil
Row: 11, Col: 3, Value: 0.0
Row: 12, Col: 1, Value: nil
Row: 12, Col: 2, Value: nil
Row: 12, Col: 3, Value: 0.0
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: nil
Row: 13, Col: 3, Value: 0.0
Row: 14, Col: 1, Value: nil
Row: 14, Col: 2, Value: nil
Row: 14, Col: 3, Value: 0.0
Row: 15, Col: 1, Value: nil
Row: 15, Col: 2, Value: nil
Row: 15, Col: 3, Value: 0.0
Row: 16, Col: 1, Value: nil
Row: 16, Col: 2, Value: nil
Row: 16, Col: 3, Value: 0.0
Row: 17, Col: 1, Value: nil
Row: 17, Col: 2, Value: nil
Row: 17, Col: 3, Value: 0.0
Row: 18, Col: 1, Value: nil
Row: 18, Col: 2, Value: nil
Row: 18, Col: 3, Value: 0.0
Row: 19, Col: 1, Value: nil
Row: 19, Col: 2, Value: nil
Row: 19, Col: 3, Value: 0.0
Row: 20, Col: 1, Value: nil
Row: 20, Col: 2, Value: nil
Row: 20, Col: 3, Value: 0.0
Row: 21, Col: 1, Value: nil
Row: 21, Col: 2, Value: nil
Row: 21, Col: 3, Value: 0.0
Row: 22, Col: 1, Value: nil
Row: 22, Col: 2, Value: nil
Row: 22, Col: 3, Value: 0.0
Row: 23, Col: 1, Value: nil
Row: 23, Col: 2, Value: nil
Row: 23, Col: 3, Value: 0.0
Row: 24, Col: 1, Value: nil
Row: 24, Col: 2, Value: nil
Row: 24, Col: 3, Value: 0.0
Row: 25, Col: 1, Value: nil
Row: 25, Col: 2, Value: nil
Row: 25, Col: 3, Value: 0.0
Row: 26, Col: 1, Value: nil
Row: 26, Col: 2, Value: nil
Row: 26, Col: 3, Value: 0.0
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 27, Col: 3, Value: 0.0
Row: 28, Col: 1, Value: nil
Row: 28, Col: 2, Value: nil
Row: 28, Col: 3, Value: 0.0
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 29, Col: 3, Value: 0.0
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 30, Col: 3, Value: 0.0
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 31, Col: 3, Value: 0.0
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Row: 32, Col: 3, Value: 0.0
Spartan High
Income
Competitive
funds average
1993
1992
1994
THE CHART SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST DAY OF EACH MONTH FROM
JANUARY 199 THROUGH APRIL 1994. YIELDS FOR THE FUND WOULD HAVE BEEN
LOWER IF FIDELITY HAD NOT REIMBURSED CERTAIN FUND EXPENSES.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
SPARTAN HIGH INCOME IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. In technical
terms, the fund is currently a diversified fund of Fidelity Fixed-Income
Trust, an open-end management investment company organized as a
Massachusetts business trust on September 7, 1984.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR
Far East) assist FMR with foreign investments.
David Glancy is manager of Spartan High Income, which he has managed since
April 1993. Before joining Fidelity in 1990, Mr. Glancy was a high-income
analyst for Dean Witter and a rating officer for Standard & Poor's.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
The fund seeks high current income, by investing primarily in all types of
income-producing debt securities, preferred stocks, and convertible
securities. FMR normally invests at least 65% of the fund's total assets in
these securities. When consistent with its goal, the fund may also consider
the potential for growth of capital.
Although the fund has no limits on the quality and maturity of its
investments, its strategy typically leads to longer-term, lower-quality,
fixed-income securities. These domestic and foreign investments may
present the risk of default or may be in default. If consistent with its
investment objective, however, the fund can also invest in common stocks,
other equity securities and debt securities not currently paying interest
but are expected to do so in the future.
In addition, the fund's yield and share price will change based on changes
in interest rates, market conditions and other political and economic news.
In general, bond prices rise when interest rates fall, and vice versa. FMR
may use various investment techniques to hedge the fund's risks, but there
is no guarantee that these strategies will work as intended. When you sell
your shares, they may be worth more or less than what you paid for them.
Because of the funds investment stategy its performance is especially
affected by individual company news.
FMR normally invests the fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes,
however, it may temporarily invest substantially in high-quality debt
securities, preferred stock, or short-term instruments.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive financial reports
every six months detailing fund holdings and describing recent investment
activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in interest rates, economic conditions, and the
issuer's creditworthiness. As a result, their market prices tend to
fluctuate more than higher-quality securities. Lower-quality securities are
those rated lower than Baa by Moody's or BBB by Moody's or S&P, and
unrated debt securities of equivalent quality.
The default rate of lower-quality debt securities is likely to be higher
when issuers have difficulty meeting projected goals or obtaining
additional financing. This could occur during economic recessions or
periods of high interest rates. If an issuer defaults, the fund may try to
protect its interests and those of other security holders if it determines
this to be in the interest of its shareholders.
Lower-quality securities may be thinly traded, making them difficult to
sell promptly at an acceptable price. If market quotations are unavailable,
lower-quality securities are valued under guidelines established by the
Board of Trustees, including the use of outside pricing services. Negative
publicity or investor perceptions may make this difficult, and could hurt
the fund's ability to dispose of these securities.
The table below provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the fund's portfolio. These
figures are dollar-weighted averages of month-end portfolio holdings during
fiscal 1994, and are presented as a percentage of total investments. These
percentages are historical and do not necessarily indicate the fund's
current or future debt holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa % AA %
Upper-medium grade A A
Medium grade Baa % BBB %
LOWER QUALITY
Moderately speculative Ba % BB %
Speculative B % B %
Highly speculative Caa % CCC %
Poor quality Ca % CC %
Lowest quality, no interest C C
In default, in arrears -- D %
% %
A FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT.THE DOLLAR-WEIGHTED AVERAGE
OF DEBT SECURITIES NOT RATED DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P
AMOUNTED TO ___%. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS
DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR __%
OF THE FUND'S INVESTMENTS. REFER TO THE APPENDIX FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
Equity Securities may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. This ownership interest
often gives the fund the right to vote on measures affecting the company's
organization and operations. Although common stocks have a history of
long-term growth in value, their prices tend to fluctuate in the shorter
term, particularly those of smaller companies.
RESTRICTIONS: The fund may not invest more than 20% of its total assets in
equity securities. This restriction does not apply to income-producing
preferred stocks and convertible securities, nor to equity securities
acquired as part of a unit with fixed-income securities.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
ASSET-BACKED AND MORTGAGE SECURITIES may include pools of consumer loans or
mortgages, such as collateralized mortgage obligations and stripped
mortgage-backed securities. The value of these securities may be
significantly affected by changes in interest rates, the market's
perception of the issuers, and the creditworthiness of the parties
involved. These securities may also be subject to prepayment risk.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on demand.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 15% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of total assets, the fund may not invest
more than 5% of its total assets in any one issuer. The fund may not invest
more than 25% of its total assets in any one industry. These limitations do
not apply to U.S. government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering the fund's securities. The
fund may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks a high level of current income by investing primarily in
high-yielding, fixed-income securities. In pursuing this objective, growth
of capital may also be considered when consistent with the fund's objective
of seeking high current income. With respect to 75% of total assets, the
fund may not invest more than 5% of its total assets in any one issuer. The
fund may not invest more than 25% of its total assets in any one industry.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 33% of its total assets. Loans, in the aggregate, may not
exceed 33% of the fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn may pay fees to affiliates who provide
assistance with these services.
FMR may, from time to time, agree to reimburse the fund for management fees
above a specified limit. FMR retains the ability to be repaid by the fund
if expenses fall below the specified limit prior to the end of the fiscal
year. Reimbursement arrangements, which may be terminated at any time
without notice, can decrease the fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fund pays
the fee at the annual rate of .80% of its average net assets.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on companies
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services.
FSC performs many transaction and accounting functions for the fund. These
services include processing shareholder transactions and calculating the
fund's share price. FMR, and not the fund, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
fund's $5.00 exchange fee, $5.00 account closeout fee, and $5.00 fee for
wire purchases and redemptions. For fiscal 1994, these fees amounted to
$_____, $_____, and $_____, respectively.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for fiscal 1994 was __%. This rate
varies from year to year. High turnover rates increase transaction costs
and may increase taxable capital gains. FMR considers these effects when
evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers the fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over ___
(bullet) Assets in Fidelity mutual
funds: over $___ billion
(bullet) Number of shareholder
accounts: over __ million
(bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Fidelity retirement accounts $10,000
TO ADD TO AN ACCOUNT $1,000
For Fidelity retirement accounts $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Fidelity retirement accounts $5,000
UNDERSTANDING THE
SPARTAN
APPROACH(Registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to "Spartan
check payable to High Income Fund."
"Spartan High Income Indicate your fund
Fund." Mail to the account number on
address indicated on your check and mail to
the application. the address printed on
your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
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Wire (wire_graphic) (bullet) There may be a $5.00 (bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Spartan High
Bank Routing Income Fund" and
#021001033, include your account
Account #00163053. number and your
Specify "Spartan High name.
Income Fund" and
include your new
account number and
your name.
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Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF THE FUND AFTER HOLDING THEM LESS THAN 270 DAYS, THE FUND WILL
DEDUCT A REDEMPTION FEE EQUAL TO 1% OF THE VALUE OF THOSE SHARES. IF YOUR ACCOUNT
BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION TRANSACTIONS:
$5.00 FOR EACH EXCHANGE, BANK WIRE, AND ACCOUNT CLOSEOUT.
</TABLE>
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the fund, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For complete policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in June and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in the fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, the fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the fund
may have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
If quotations are not readily available, assets are valued by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
(bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you
a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when the fund is priced on
the following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
THE REDEMPTION FEE, if applicable, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR, and it does not
apply to shares that were acquired through reinvestment of distributions.
If shares you are redeeming were not all held for the same length of time,
those shares you held longest will be redeemed first for purposes of
determining whether the fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(bullet) The $5.00 exchange fee will be deducted from the amount of your
exchange.
(bullet) The $5.00 wire fee will be deducted from the amount of your wire.
(bullet) The $5.00 account closeout fee does not apply to exchanges or
wires.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed and the $5.00 account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) The fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issued so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The D rating will
also be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
From Filler pages
SPARTAN HIGH INCOME FUND
A FUND OF FIDELITY FIXED-INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
JUNE 21, 1994
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated June 21, 1994 ). Please retain
this document for future reference. The Annual Report for the fiscal year
ended April 30, 1994 is incorporated herein by reference. To obtain an
additional cop y of the Prospectus or the Annual Report, please
call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions 9
Valuation of Portfolio Securities 10
Performance 10
Additional Purchase and Redemption Information 12
Distributions and Taxes 13
FMR 13
Trustees and Officers 13
Management Contract 15
Distribution and Service Plan 16
Contracts with Companies Affiliated with FMR 16
Description of the Trust 16
Financial Statements 17
Appendix 17
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
SPH-pt b - 694
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued
or guaranteed by the government of the United States or its agencies or
instrumentalities) if, as a result, (a) more than 25% of the value of its
total assets would be invested in the securities of a single issuer, or (b)
with respect to 75% of its total assets, more than 5% of the value of its
total assets would be invested in the securities of a single issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than obligations issued
or guaranteed by the government of the United States or its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets (taken at current value) would be invested in the securities of
issuers having their principal business activities in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (but this limit
does not apply to purchases of debt securities or to repurchase
agreements).
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not currently
intend to 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, the fund would own more than 10% of the
outstanding voting securities of such issuer.
(ii) 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.
(iii) 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.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __ . For the fund's limitations on short sales, see
the section entitled "Short Sales" on page 10.
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that the fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or
reorganization of the company or a portion of its assets; or supporting or
opposing third party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that the fund could be
involved in lawsuits related to such activities. FMR will monitor such
activities with a view to mitigating, to the extent possible, the risk of
litigation against the fund and the risk of actual liability if the fund is
involved in litigation. No guarantee can be made, however, that litigation
against the fund will not be undertaken or liabilities incurred.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
non-government-stripped fixed-rate mortgage-backed securities, and
over-the-counter options. Also, FMR may determine some restricted
securities, government- stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 15% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating
interest rates and carry rights that permit holders to demand payment of
the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate instruments have interest
rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment
in the interest rate. These formulas are designed to result in a market
value for the instrument that approximates its par value.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed-upon price, which obligation is
in effect secured by the value (at least equal to the amount of the
agreed-upon resale price and marked to market daily) of the underlying
security. The fund may engage in a repurchase agreement with respect to any
security in which it is authorized to invest. While it does not presently
appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the fund in
connection with bankruptcy proceedings), it is the fund's current policy to
limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. The fund has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowing normally will extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. The fund will lend through the program only
when the returns are higher than those available at the same time from
other short-term instruments (such as repurchase agreements), and will
borrow through the program only when the costs are equal to or lower than
the cost of bank loans. The fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed. Any
delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. The fund is not limited to any
particular form of swap agreement if FMR determines it is consistent with
the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. The fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If the fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, the fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
fund may invest in them if FMR determines they are consistent with the
fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Mortgage-backed
securities are subject to prepayment risk. Prepayment, which occurs when
unscheduled or early payments are made on the underlying mortgages, may
shorten the effective maturities of these securities and may lower their
total returns.
ASSET-BACKED SECURITIES consist of undivided fractional interests in pools
of consumer loans (unrelated to mortgage loans) held in a trust. Payments
of principal and interest are passed through to certificate holders and are
typically supported by some form of credit enhancement, such as a letter of
credit, surety bond, limited guaranty, or senior/subordination. The degree
of credit enhancement varies, but generally amounts to only a fraction of
the asset-backed security's par value until exhausted. If the credit
enhancement is exhausted, certificate holders may experience losses or
delays in payment if the required payments of principal and interest are
not made to the trust with respect to the underlying loans. The value of
these securities also may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the loan
pool, the originator of the loans, or the financial institution providing
the credit enhancement. Asset-backed securities are ultimately dependent
upon payment of consumer loans by individuals, and the certificate holder
generally has no recourse to the entity that originated the loans. The
underlying loans are subject to prepayments which shorten the securities'
weighted average life and may lower their returns. (As prepayments flow
through at par, total returns would be affected by the prepayments: If a
security were trading at a premium, its total return would be lowered by
prepayments, and if a security were trading at a discount, its total return
would be increased by prepayments.)
FMR believes that CMOs, asset-backed securities, and mortgage-backed
securities are readily marketable based on the size of the market and the
number of trades transacted each day.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price and/or yield, with payment and delivery taking place
after the customary settlement period for that type of security (and more
than seven days in the future). Typically, no interest accrues to the
purchaser until the security is delivered. The fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If the fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The fund may dispose of or renegotiate delayed-delivery transactions after
they are entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to the fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
principal and interest. Direct debt instruments may not be rated by any
nationally recognized rating service. If the fund does not receive
scheduled interest or principal payments on such indebtedness, the fund's
share price and yield could be adversely affected. Loans that are fully
secured offer the fund more protections than an unsecured loan in the event
of non-payment of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor
involves substantially greater risks and ma y be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of developing countries also involves a risk that the
governmental entities responsible for the repayment of the debt may be
unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks
to the fund. For example, if a loan is foreclosed, the fund could become
part owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, the
fund could be held liable as a co-lender. Direct debt instruments may also
involve a risk of insolvency of the lending bank or other intermediary.
Direct debt instruments that are not in the form of securities may offer
less legal protection to the fund in the event of fraud or
misrepresentation. In the absence of definitive regulatory guidance, the
fund relies on FMR's research in an attempt to avoid situations where fraud
or misrepresentation could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, the fund has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against
a borrower. If assets held by the agent for the benefit of the fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by the fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
The fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
The fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations 1 and 5).
For purposes of these limitations, the fund generally will treat the
borrower as the "issuer" of indebtedness held by the fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between the fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict the fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and
interest from such securities, can change significantly when foreign
currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity
than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be
more difficult to obtain reliable information regarding an issuer's
financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult
to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects.
The considerations noted above generally are intensified for investments
in developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid
than foreign securities of the same class that are not subject to such
restrictions.
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may hold foreign currency deposits
from time to time, and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may
be exchanged on a spot (i.e., cash) basis, or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The fund may use currency forward contracts to manage currency risks and
to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the fund.
In connection with purchases and sales of securities denominated in
foreign currencies, the fund may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the fund's foreign investments. The fund
could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if the fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. The fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if
FMR increases a fund's exposure to a foreign currency, and that currency's
value declines, the fund will realize a loss. There is no assurance that
FMR's use of forward currency contracts will be advantageous to the fund or
that it will hedge at an appropriate time. The policies described in this
section are non-fundamental policies of the fund.
LIMITATIONS O N FUTURES A ND OPTIONS TRANSACTIONS. The fund
has filed a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The fund intends to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which the
fund can commit assets to initial margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Stock
Price Index (S&P 500). Futures can be held until their delivery dates,
or can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the Securities and Exchange Commission
( SEC ) with respect to coverage of options and futures strategies
by mutual funds, and if the guidelines so require will set aside
appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while
the futures or option strategy is outstanding, unless they are replaced
with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
SHORT SALES. The fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security the fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. The fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
When the fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. The fund will
incur transaction costs, including interest expenses, in connection with
opening, maintaining, and closing short sales.
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 management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR will consider
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions. Commissions for foreign investments
traded on foreign exchanges will generally be higher than for U.S.
investments and may not be subject to negotiation.
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. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is 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.
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 or its other clients, and conversely, such research
provided by broker-dealers who have executed 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.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of FMR Corp., if
the commissions are fair, reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such requirements, the Board of
Trustees has authorized FBSI to execute fund portfolio transaction on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund. For the fiscal years ended April 30, 1994,
1993, and 1992 the fund paid no brokerage commissions.
For fiscal 1994 and 1993 the fund's portfolio turnover rates
amounted to ___% and 136% , respectively.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and
accounts are managed by the same investment adviser, particularly when
the same security is suitable for the investment objective of more than one
fund or account .
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the fund is
concerned. In other cases, however, the ability of the fund to participate
in volume transactions will produce better executions and prices for the
fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Securities and other assets for which market quotations are readily
available are valued at market values determined by their most recent bid
prices (sales prices if the principal market is an exchange) in the
principal market in which such securities normally are traded. Securities
and other assets for which market quotations are not readily available
(including restricted securities, if any) are appraised at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
Securities may also be valued on the basis of valuations furnished by a
pricing service that uses both dealer-supplied valuations and evaluations
based on expert analysis of market data and other factors if such
valuations are believed to reflect more accurately the fair value of such
securities. Use of a pricing service has been approved by the Board of
Trustees. There are a number of pricing services available, and the
Trustees, or officers acting on behalf of the Trustees, on the basis of
ongoing evaluation of these pricing services, may use other pricing
services or may discontinue the use of any pricing service in whole or in
part.
Securities not valued by the pricing service, and for which quotations are
readily available, are valued at market values determined on the basis of
their latest available bid prices as furnished by recognized dealers in
such securities.
PERFORMANCE
The fund may quote its performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price, yield, and
total returns fluctuate in response to market conditions and other factors,
and the value of fund shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. Yields for the fund used in advertising are computed
by dividing the fund's interest and dividend income for a given 30-day or
one-month period, net of expenses, by the average number of shares entitled
to receive distributions during the period, dividing this figure by the
fund's net asset value per share (NAV) at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. Dividends from equity investments are treated as if they
were accrued on a daily basis, solely for the purpose of yield
calculations. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of calculating the fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, the fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
In calculating the fund's yield, the fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's returns, including the effect of reinvesting
dividends and capital gain distributions, and any change in the fund's NAV
over a period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in
the fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the entire period. For
example, a cumulative return of 100% over ten years would produce an
average annual return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years. While
average annual returns are a convenient means of comparing investment
alternatives, investors should realize that the fund's performance is not
constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration and may omit or include the effects of the $5.00 account
closeout fee and the 1% redemption fee applicable to shares held less than
270 days.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table shows the fund's yield and
total returns for the periods ended April 30, 199 4 . Figures include
the effect of the fund's $5.00 account closeout fee, but not the fund's 1%
redemption fee, applicable to shares held less than 270 days.
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
30-Day Yield One Year Life of Fund* One Year Life of Fund*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
_______ % _______ % ______ % ______ % ______ %
</TABLE>
* From August 29, 1990 (commencement of operations).
The table below compares the fund's return to the record of the Standard
& Poor's 500 Composite Stock Price Index (S&P (registered
trademark) 500), the Dow Jones Industrial Average (DJIA), and the cost of
living (measured by the Consumer Price Index, or CPI) over the same period.
The S&P 500 and DJIA comparisons are provided to show how the fund's
total return compared to the record of a broad average of common stock
prices and a narrower set of stocks of major industrial companies,
respectively, over the same period. Common stocks represent a different
type of investment from the fund, which will normally invest a substantial
portion of its assets in fixed-income securities. Common stocks generally
offer greater growth potential than the fund, but generally fluctuate more
in value and may offer greater potential for loss. In addition, common
stocks generally provide lower income than a bond fund investment such as
the fund. The S&P 500 and DJIA are based on the prices of unmanaged
groups of stocks and, unlike the fund's returns, their returns do not
include the effect of paying brokerage commissions and other costs of
investing.
During the period from August 29, 1990 (commencement of operations)
through April 30, 199 4 , a hypothetical $10,000 investment in Spartan
High Income Fund would have grown to $ _______ assuming all
distributions were reinvested and not including the effect of the fund's
$5.00 account closeout fee. This was a period of widely fluctuating stock
prices and interest rates and should not be considered representative of
the dividend income or capital gain or loss that could be realized from an
investment in the fund today.
SPARTAN HIGH INCOME FUND INDICES
1 VALUE OF VALUE OF VALUE OF
2PERIOD INITIAL REINVESTED REINVESTED
3ENDED $10,000 DIVIDEND CAPITAL GAIN TOTAL
4APRIL 30 INVESTMENT DISTRIBUTIONS DISTRIBUTIONS VALUE S&P 500 DJIA
CPI**
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $________ $______ $______ $______ $_______ $_____ $______
1993 12,220 4,364 919 17,503 14,890 14,28 3 10,942
1992 11,900 2,664 401 14,966 13,629 13,587 10,600
1991* 10,640 893 0 11,533 11,950 11,326 10,274
</TABLE>
* From August 29, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August
29, 1990, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ _______ . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
the cash payments for the period would have amounted to $ ________
for income dividends and $ ______ for capital gain distributions. Tax
consequences of different investments have not been factored into the
figures above. The figures in the table do not reflect the effect of the
fund's $5.00 account closeout fee.
The fund's performance may be compared in advertising to the performance
of other mutual funds in general, or to the performance of particular types
of mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance
of mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition
to the mutual fund rankings, the fund's performance may be compared to
mutual fund performance indices prepared by Lipper.
From time to time, the fund's performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
The fund may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, the fund may offer greater
liquidity or higher potential returns than CDs, and the fund does not
guarantee your principal or your return.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchSM Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The fund may compare its performance or the performance of securities
in which it may invest to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND
AVERAGES(trademark)/All-Taxable, which is reported in the MONEY FUND
REPORT(Registered trademark), covers over ___ taxable money market funds.
The BOND FUND REPORT AVERAGES(trademark), which is reported in the BOND
FUND REPORT, covers over ___ taxable bond funds. When evaluating
comparisons to money market funds, investors should consider the relevant
differences in investment objectives and policies. Specifically, money
market funds invest in short-term, high-quality instruments and seek to
maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
In addition, the fund's performance may be compared in advertising to the
performance of the following unmanaged indices of bond prices and yields:
SALOMON BROTHERS HIGH YIELD COMPOSITE INDEX is an index of high-yielding
utility and corporate bonds with a minimum maturity of seven years and with
total debt outstanding of at least $50 million. Issues included in the
index are rated Baa or lower by Moody's Investors Service, Inc. (Moody's)
or BBB or lower by Standard & Poor's Corporation (S&P).
SALOMON BROTHERS HIGH GRADE CORPORATE BOND INDEX is an index of
high-quality corporate bonds with a minimum maturity of at least ten years
and with total debt outstanding of at least $50 million. Issues included in
the index are rated Aa or better by Moody's or AA or better by S&P. It
is important to note that the fund does not invest in high-quality
securities under normal conditions.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar-cost averaging ; s aving for college;
charitable giving; and the Fidelity credit card. In addition, Fidelity may
quote financial or business publications and periodicals, including model
portfolios or allocations, as they relate to management, investment
philosophy, and investment techniques. Fidelity may also reprint, and
use as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund
shareholders.
The fund may discuss its fund number, Quotron number (trademark), and
CUSIP number, and discuss or quote its current portfolio manager.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
the investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares through periods of low price levels.
The fund may be available for purchase through retirement plans or other
programs offering deferral of , or exemption from , income
taxes, which may produce superior after-tax returns over time. For example,
a $1,000 investment earning a taxable return of 10% annually would have an
after-tax value of $1,949 after ten years, assuming tax was deducted from
the return each year at a 31% rate. An equivalent tax-deferred investment
would have an after-tax value of $2,100 after ten years, assuming tax was
deducted at a 31% rate from the tax-deferred earnings at the end of the
ten-year period.
Although the achievement of favorable investment returns cannot be
assured, FMR believes that investing for income can be an effective
discipline to achieve positive results with respect to all elements of
investment return. The fund is designed to achieve higher yields than the
average high current yield fund through a lower expense format and by
remaining as fully invested as practicable given necessary liquidity
considerations. As of April 30, 199 4 , FMR managed ____
Spartan funds with approximately $ ___ billion in assets.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 199 4 :
W ashington's Birthday (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day (observed). Although FMR expects the same holiday schedule , with the
exception of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (1940
Act), the fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to
be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of
its shares because it is unable to invest amounts effectively in
accordance with its investment objective and polices.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity will alternate instructions.
DIVIDENDS. Because the fund's income is primarily derived from interest,
dividends from the fund generally will not qualify for the
dividends-received deduction available to corporations. A portion of the
fund's dividends derived from certain U.S. government obligations may be
exempt from state and local taxation. Gains (losses) attributable to
foreign currency fluctuations are generally taxable as ordinary income
and therefore will increase (decrease) dividend distributions.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund, and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital gains.
Distributions from short-term capital gains do not qualify for the
dividends-received deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends or
interest paid with respect to foreign securities. Because the fund does not
currently anticipate that securities of foreign issuers will constitute
more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund has qualified and intends to continue to
qualify each year as a "regulated investment company" for tax purposes, so
that it will not be liable for federal tax at the fund level on income and
capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes, the fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar year
as well as on a fiscal year basis. The fund intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some forward currency contracts, futures contracts,
and options, are included in this 30% calculation, which may limit the
fund's investments in such instruments. The fund is treated as a separate
entity from the other funds of Fidelity Fixed-Income Trust for tax
purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions. Investors should consult their tax
advisers to determine whether the fund is suitable to their particular tax
situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for institutional customers; and
Fidelity Investments Retail Marketing Company, which provides marketing
services to various companies within the Fidelity organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity
Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989), Sanifill Corporation (non-hazardous waste,
1993), and CH2M Hill Companies (engineering). In addition, he served on the
Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989),
is Chairman of G.M. Management Group (strategic advisory services). Prior
to his retirement in July 1988, he was Chairman and Chief Executive Officer
of Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee.
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). He is also
a Trustee of Rensselaer Polytechnic Institute and of Corporate Property
Investors and a member of the Advisory Boards of Butler Capital Corporation
Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of
FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of April 30, 199 4 , the Trustees and officers owned in the
aggregate less than __ % of the fund's total outstanding
shares.
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, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or FMR, and all personnel of the trust 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
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
FMR is responsible for the payment of all expenses of the fund with
certain exceptions. Specific expenses payable by FMR include, without
limitation, the fees and expenses of registering and qualifying the fund
and its shares for distribution under federal and state securities laws;
expenses of typesetting for printing prospectuses and statements of
additional information; custodian charges; audit and legal expenses;
insurance expenses; association membership dues; and the expenses of
mailing reports to shareholders, shareholder meetings, and proxy
solicitations. FMR also provides for transfer agent and dividend disbursing
services, and portfolio and general accounting record maintenance through
FSC.
FMR pays all other expenses of the fund with the following exceptions:
fees and expenses of the Trustees who are not "interested persons" of the
trust or FMR (the non-interested Trustees); interest on borrowings; taxes;
brokerage commissions (if any); and such nonrecurring expenses as may
arise, including costs of any litigation to which the fund may be a party,
and any obligation it may have to indemnify the officers and Trustees with
respect to litigation.
FMR is the fund's manager pursuant to a management contract dated November
1, 1993, which was approved by shareholders on October 20, 1993.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee at the annual rate of .80% of its average net assets
throughout the month. Pursuant to the management contract in effect
prior to November 1, 1993, the fund paid FMR a monthly management fee at
the annual rate of .70% of its average net assets. FMR reduces its fee by
an amount equal to the fees and expenses of the non-interested Trustees.
The table below lists the management fees paid to FMR after the reduction
of these expenses For the fiscal years ended April 30, 1994, 1993, and
1992 .
Management Fees
Year After Reduction of Expenses
1994 $________
1993 $3,295,594
1992 $1,404,991
To defray shareholder service costs, FMR or its affiliates also collect
the fund's $5.00 exchange fee, $5.00 account closeout fee, and $5.00 fee
for wire purchases and redemptions for accounts over $50,000.
Shareholder transaction fees collected for fiscal 1994, 1993, and 1992
are indicated in the table below.
Account
Exchange Closeout Wire
Year Fees Fees Fees
1994 $______
$______ $_____
1993 $30,420 $1,110 $1,620
1992 $10,355 $835 $1,450
SUB-ADVISERS. On November 1, 1993, FMR entered into sub-advisory
agreements with FMR U.K. and FMR Far East , wholly-owned subsidiaries of
FMR, which were approved by shareholders on October 20, 1993. P ursuant
to the sub-advisory agreements, FMR may receive investment research and
recommendation with respect to foreign securities for the benefit of
the fund.
The sub-advisory agreements provide that FMR will pay fees to FMR U.K. and
FMR Far East equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with each agreement, said costs to
be determined in relation to the assets of the fund that benefit from the
services of the sub-advisers.
The fees paid to FMR U.K. and FMR Far East for the fiscal period November
1, 1993 through April 30, 1994 were $_______ and $________,
respectively.
DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the plan) under Rule
12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides
in substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of the fund except pursuant to a plan adopted by the fund under the
Rule. The Board of Trustees has adopted the plan to allow the fund and FMR
to incur certain expenses that might be considered to constitute indirect
payment by the fund of distribution expenses. Under the plan, if the
payment by the fund to FMR of management fees should be deemed to be
indirect financing by the fund of the distribution of its shares, such
payment is authorized by the plan.
The plan specifically recognizes that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the fund. In addition, the
plan provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that provide assistance in
selling the fund's shares, or to third parties, including banks, that
render shareholder support services. The Trustees have not authorized third
party payments to date.
As required by the Rule, the Trustees carefully considered all pertinent
factors relating to implementation of the plan prior to its approval, and
have determined that there is a reasonable likelihood that the plan will
benefit the fund and its shareholders. In particular, the Trustees noted
that the plan does not authorize payments by the fund other than those made
to FMR under its management contract with the fund. To the extent that the
plan gives FMR and FDC greater flexibility in connection with the
distribution of shares of the fund, additional sales of the fund's shares
may result. Additionally, certain shareholder support services may be
provided more effectively under the plan by local entities with whom
shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state chartered
or supervised banks from engaging in the business of underwriting, selling,
or distributing securities. Although the scope of this prohibition under
the Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services,
and servicing and recordkeeping functions. FDC intends to engage banks only
to perform such functions. However, changes in federal or state statutes
and regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of these occurrences. The fund may execute portfolio transactions
with and purchase securities issued by depository institutions that receive
payments under the plan. No preference will be shown in the selection of
investments for the instruments of such depository institutions. In
addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein, and banks and other
financial institutions may be required to register as dealers pursuant to
state law.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC performs transfer agency, dividend disbursing, and shareholder
servicing functions for the fund. The costs of these services are borne by
FMR pursuant to its management contract with the fund. FSC also calculates
the fund's net asset value per share and dividends, maintains the fund's
general accounting records, and administers the fund's securities lending
program. The costs of these services are also borne by FMR pursuant to its
management contract with the fund.
The fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution 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. Promotional and administrative expenses in connection
with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan High Income Fund is a fund of Fidelity
Fixed-Income Trust (the trust), an open-end management investment company
organized as a Massachusetts business corporation on June 25, 1970. On
September 7, 1984, the trust was reorganized as a Massachusetts business
trust, at which time its name was changed from Fidelity Corporate Bond
Fund, Inc. to Fidelity Corporate Bond Fund. On October 23, 1985 the trust's
name was changed to Fidelity Flexible Bond Fund and on August 31, 1986 it
was changed to Fidelity Fixed-Income Trust. There are currently five funds
of the trust: Fidelity Investment Grade Bond Fund, Fidelity Short-Term Bond
Portfolio, Spartan Government Income Fund, Spartan High Income Fund, and
Spartan Short-Intermediate Government Fund. The Declaration of Trust
permits the Trust to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust or
a fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest . As a shareholder, you receive one vote for each dollar value
of net asset value per share you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of redemption,
and the privilege of exchange are described in the Prospectus. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder and Trustee Liability" above. Shareholders representing 10% or
more of the trust or a fund may, as set forth in the Declaration of Trust,
call meetings of the trust or a fund for any purpose related to the trust
or fund, as the case may be, including, in the case of a meeting of the
entire trust, the purpose of voting on removal of one or more Trustees. The
trust or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of t he trust or the fund , as determined by the current
value of each shareholder's investment in the fund or trust . If not so
terminated, the trust and its funds will continue indefinitely.
CUSTODIAN. Bank of New York, 110 Washington Street, New York, New York, is
custodian of the assets of the fund. The custodian is responsible for the
safekeeping of the fund's assets and the appointment of the subcustodian
bank and clearing agencies. The custodian takes no part in determining
the investment policies of the fund or in deciding which securities
are purchased or sold by the fund. The fund may, however, invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The fund's Annual Report for the fiscal year ended April 30, 199 4
is a separate report supplied with this Statement of Additional Information
and is incorporated herein by reference.
APPENDIX
DOLLAR WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
assuming a constant prepayment rate for the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
FIDELITY FIXED-INCOME TRUST
FIDELITY SHORT-TERM BOND PORTFOLIO
FIDELITY INVESTMENT GRADE BOND FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance;
Who May Want to Invest
3 a, b .............................. *
c .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment
Principles and Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment
Principles and Risks
5 a .............................. Charter
b i............................. Doing Business with Fidelity;
Charter
ii........................... Charter; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Charter; Breakdown of Expenses;
Cover Page; FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g i............................. FMR and its Affiliates
.
ii............................ *
..
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell
Shares; Transaction Details;
Exchange Restrictions
iii.......................... *
b ............................. *
c .............................. Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How
to Buy Shares; How to Sell Shares;
Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction
Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor
Services; Transaction Details;
Exchange Restrictions
9 .............................. *
</TABLE>
Not applicable
FIDELITY FIXED-INCOME TRUST
FIDELITY SHORT-TERM BOND PORTFOLIO
FIDELITY INVESTMENT GRADE BOND FUND
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated
with FMR
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated
with FMR
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption
Information
b ............................ Additional Purchase and Redemption
Information; Valuation of Portfolio
Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated
with FMR
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
A Statement of Additional Information dated June 21, 1994 June 21, 1994 has
been filed with the Securities and Exchange Commission, and is incorporated
herein by reference (is legally considered a part of this prospectus). The
Statement of Additional Information is available free upon request by
calling Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the
Federal Reserve Board, or any other agency, and are subject to investment
risk, including the possible loss of principal.
FIDELITY
SHORT-TERM BOND
PORTFOLIO
FIDELITY
INVESTMENT
GRADE BOND
FUND
These funds invest mainly in investment-grade corporate debt securities.
Short-Term Bond seeks high current income with preservation of capital.
Investment Grade Bond seeks high current income from investments with
longer maturities.
PROSPECTUS
JUNE 21, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109JUNE 21, 1994
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
BON-pro-694
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
SPARTAN HIGH INCOME
GOAL: High current income with preservation of capita l.
STRATEGY: Invests mainly in investment-grade debt securities while
maintaining an average maturity of three years or less.
SIZE: As of April 30, 1994, the fund had over $__ billion in assets.
INVESTMENT GRADE BOND
GOAL: High current income. The fund also considers preservation of
capita l and capital appreciation.
STRATEGY: Invests mainly in investment-grade debt securities, with a focus
on medium and long-term bonds.
SIZE: As of April 30, 1994, the fund had over $__ billion in assets.
WHO MAY WANT TO INVEST
Either fund may be appropriate for investors who seek high current income
from a portfolio of investment-grade debt securities. Short-Term Bond is
designed to offer greater share price stability by focusing on short-term
securities. However, since Investment Grade Bond can invest in securities
with any maturity and may invest in lower quality securities, it has
greater potential for higher yields and capital appreciation, but also
carries more risk.
By themselves, these funds do not constitute a balanced investment plan.
The value of the funds' investments and the income they generate will vary
from day to day, generally reflecting changes in interest rates, market
conditions, and other political and economic news. When you sell your
shares, they may be worth more or less than what you paid for them.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. The
funds in this prospectus are
in the INCOME category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(arrow) INCOME Seeks income by
investing in bonds.
(bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports. A fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
SPARTAN HIGH INCOME
Management fee .__%
12b-1 fee None
Other expenses .__%
Total fund operating expenses .__%
INVESTMENT GRADE BOND
Management fee .__%
12b-1 fee None
Other expenses .__ %
Total fund operating expenses .__%
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
SPARTAN HIGH INCOME
After 1 year $
After 3 years $
After 5 years $
After 10 years $
INVESTMENT GRADE BOND
After 1 year $
After 3 years $
After 5 years $
After 10 years $
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow have been audited by Coopers & Lybrand,
independent accountants. Their unqualified reports are included in each
fund's Annual Report. Each fund's Annual Report is incorporated by
reference into (is legally a part of) the Statement of Additional
Information.
[Financial Highlights to be filed by subsequent amendment.]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of taxes.
Each fund's fiscal year runs from May 1 through April 30. The tables below
show each fund's performance over past fiscal years compared to a measure
of inflation. The charts on page 8 help you compare the yields of these
funds to those of their competitors.
SPARTAN HIGH INCOME
Fiscal periods ended Past 1 Past 5 Life of
April 30, 1994 year years fundA
Average annual
total return
Cumulative
total return
Consumer Price
Index
INVESTMENT GRADE BOND
Fiscal periods ended Past 1 Past 5 Past 10
April 30, 1994 year years years
Average annual
total return
Cumulative
total return
Consumer Price
Index
A FROM SEPTEMBER 15, 1986
UNDERSTANDING
PERFORMANCE
Because these funds invest
in fixed-income securities,
their performance is related
to changes in interest rates.
Funds that hold short-term
bonds are usually less
affected by changes in
interest rates than long-term
bond funds. For that reason,
long-term bond funds typically
offer higher returns and carry
more risk than short-term
bond funds.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGES, which assume reinvestment of distributions,
are published by Lipper Analytical Services, Inc. Spartan High Income
compares its performance to the Lipper Short Investment Grade Debt Funds
Average and Investment Grade Bond compares to the Lipper Corporate Bond
Funds Average.These averages currently reflect the performance of over ___
and ___ mutual funds with similar objectives, respectively.
SPARTAN HIGH INCOME
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: nil
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Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Spartan High
Income
Competitive
funds average
1992
1993
1994
INVESTMENT GRADE BOND
30-day yields
Percentage (%)
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Row: 25, Col: 1, Value: nil
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Row: 26, Col: 1, Value: nil
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Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
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Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Investment
Grade Bond
Competitive
funds average
1992
1993
1994
THE CHARTS SHOW THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUNDS AND
THEIR COMPETITIVE FUNDS AVERAGES AS OF THE LAST DAY OF EACH MONTH FROM
JANUARY 1992 THROUGH APRIL 1994.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, each fund is
currently a diversified fund of Fidelity Fixed-Income Trust, an open-end
management investment company organized as a Massachusetts business trust
on September 7, 1984.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and handles
their business affairs. Fidelity Management & Research (U.K.) Inc. (FMR
U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far East)
assist FMR with foreign investments.
Donald G. Taylor is manager and vice president of Fidelity Short-Term Bond,
which he has managed since September 1989. Mr. Taylor also manages Advisor
Short Fixed Income, Spartan Short-Term Income, and VIP II: Investment
Grade Bond. In addition, Mr. Taylor manages Income Plus for Fidelity
International. Previously, he managed Corporate Trust, Qualified Dividend,
VIP: Zero Coupon Bond Series, and Utilities Income. Mr. Taylor joined
Fidelity in 1986.
Michael Gray is manager and vice president of Fidelity Investment Grade
Bond, which he has managed since September 1987. Mr. Gray also manages
Advisor Limited Term Bond, Intermediate Bond, and Spartan Investment Grade
Bond. Mr. Gray joined Fidelity in 1982.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
SHORT-TERM BOND seeks high current income, consistent with preservation of
capital, by investing primarily in a broad range of fixed-income
securities.
INVESTMENT GRADE BOND seeks high current income by investing in a broad
range of fixed-income securities. FMR normally invests at least 65% of the
fund's total assets in debt securities of investment-grade quality. The
fund also considers preservation of capital and, where appropriate, also
takes advantage of opportunities to realize capital appreciation.
EACH FUND pursues its goal in different ways. Short-Term Bond is less
risky, and has lower potential rewards, than Investment Grade Bond.
Although both funds focus on investment-grade securities of domestic and
foreign issuers, Short-Term Bond invests exclusively in these securities,
while Investment Grade Bond may invest in some lower-quality securities.
Also, the dollar-weighted average maturity of Short-Term Bond's investments
is limited to three years, while Investment Grade Bond typically invests in
longer-term securities. Investments with longer maturities usually have
higher yields and carry more risk.
Each fund's yield and share price will change based on changes in interest
rates, market conditions, and other political and economic news. In
general, bond prices rise when interest rates fall, and vice versa. FMR may
use various investment techniques to hedge a fund's risks, but there is no
guarantee that these strategies will work as intended. When you sell your
shares, they may be worth more or less than what you paid for them.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. As a shareholder, you will receive financial
reports every six months detailing fund holdings and describing recent
investment activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness. The market prices
of these securities may fluctuate more than higher-quality securities and
may decline significantly in periods of general economic difficulty.
The table below provides a summary of ratings assigned to debt holdings
(not including money market instruments) in Investment Grade Bond's
portfolio. These figures are dollar-weighted averages of month-end
portfolio holdings during fiscal 1994, and are presented as a percentage of
total investments. These percentages are historical and do not necessarily
indicate a fund's current or future debt holdings.
INVESTMENT GRADE BOND
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa % AA %
Upper-medium grade A A
Medium grade Baa % BBB %
LOWER QUALITY
Moderately speculative Ba % BB %
Speculative B % B %
Highly speculative Caa % CCC %
Poor quality Ca % CC %
Lowest quality, no interest C C
In default, in arrears -- D %
% %
A FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT. THE DOLLAR-WEIGHTED AVERAGE
OF DEBT SECURITIES NOT RATED DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P
AMOUNTED TO __%. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS
DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR __%
OF THE FUND'S TOTAL INVESTMENTS. REFER TO THE FUND'S STATEMENT OF
ADDITIONAL
INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: Short-Term Bond does not currently intend to invest in
securities rated below Baa by Moody's or BBB by S&P, or in unrated
securities judged by FMR to be of equivalent quality. Investment Grade
Bond does not currently intend to invest more than 35% of its assets in
securities rated below Baa by Moody's or BBB by S&P, and unrated
securities judged by FMR to be of equivalent quality. The fund does not
currently intend to invest in securities rated below B by Moody's or
S&P.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by the full
faith and credit of the United States. For example, securities issued by
the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
ASSET-BACKED AND MORTGAGE SECURITIES may include pools of consumer loans or
mortgages, such as collateralized mortgage obligations and stripped
mortgage-backed securities. The value of these securities may be
significantly affected by changes in interest rates, the market's
perception of the issuers, and the creditworthiness of the parties
involved. These securities may also be subject to prepayment risk.
MONEY MARKET INSTRUMENTS are high quality instruments that present minimal
credit risk. They may include U.S. government obligations, commercial
paper and other short-term corporate obligations, and certificates of
deposit, bankers' acceptances, bank deposits, and other financial
institution obligations. These instruments may carry fixed or variable
interest rates.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, and
purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for a fund, or there may be a requirement
that a fund supply additional cash to a borrower on demand.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the a fund's yield.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
OTHER INSTRUMENTS may include convertible securities and preferred stocks.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of total assets, a fund may not invest
more than 5% of its total assets in any one issuer. A fund may not invest
more than 25% of its total assets in any one industry. These limitations do
not apply to U.S. government securities.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering a fund's securities. A fund
may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of a fund's total
assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
SHORT-TERM BOND seeks to obtain a high level of current income, consistent
with preservation of capital, by investing primarily in a broad range of
fixed-income securities.
INVESTMENT GRADE BOND seeks to provide a high rate of income, consistent
with reasonable risk, by investing in a broad range of fixed-income
securities. In addition, the fund seeks to protect your capital. Where
appropriate, the fund will take advantage of opportunities to realize
capital appreciation.
EACH FUND, with respect to 75% of total assets, may not invest more than
5% of its total assets in any one issuer. Each fund may not invest more
than 25% of its total assets in any one industry. Each fund may borrow
only for temporary or emergency purposes, but not in an amount exceeding
33% of its total assets. Loans, in the aggregate, may not exceed 33% of a
fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn may pay fees to affiliates who provides
assistance with these services. Each fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .37%, and it drops as
total assets under management increase.
For fiscal 1994, the group fee rate was ._____%. The individual fund fee
rate for each fund is .80%. The total management fee rate for fiscal 1994
was .----% for Spartan High Income and .---% for Investment Grade Bond.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on companies
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services.
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
The funds contract with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing each fund's investments, and handling securities loans. In fiscal
1994, Spartan High Income and Investment Grade Bond paid FSC fees equal to
__% and __%, respectively, of average net assets.
The funds also pay other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 1994, the portfolio turnover rates for Spartan High Income and
Investment Grade Bond were __% and __%, respectively. These rates vary from
year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over __ walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in a fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers a fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over ___
(bullet) Assets in Fidelity mutual
funds: over $___ billion
(bullet) Number of shareholder
accounts: over __ million
(bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(bullet) 401(K) PROGRAMS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
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Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
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In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
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Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
</TABLE>
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Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open ($500 for retirement
accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
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Check (check_graphic) All account types (bullet) Minimum check: $500.
except retirement (bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
<TABLE>
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE APPROPRIATE
CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in June and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options:
5. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
6. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
8. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, each fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution from its NAV, you will pay the full price for the shares
and then receive a portion of the price back in the form of a taxable
distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
Each fund's assets are valued primarily on the basis of market quotations.
If quotations are not readily available, assets are valued by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) Each fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees a fund or its transfer agent has
incurred.
(bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect a
fund, it may take up to seven days to pay you.
(bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) Each fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
(bullet) If you sell shares by writing a check and the amount of the check
is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without
reimbursement from the funds. Qualified recipients are securities dealers
who have sold fund shares or others, including banks and other financial
institutions, under special arrangements in connection with FDC's sales
activities. In some instances, these incentives may be offered only to
certain institutions whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, each fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) Each fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if a fund receives or
anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
From Filler pages
5FIDELITY SHORT-TERM BOND PORTFOLIO
6FIDELITY INVESTMENT GRADE BOND FUND
7FUNDS OF FIDELITY FIXED-INCOME TRUST
8STATEMENT OF ADDITIONAL INFORMATION
9JUNE 2 1 , 1994
10This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus ( dated June 21, 1994). Please retain
this document for future reference. Each fund's Annual Report for the
fiscal year ended April 30, 199 4 is incorporated herein by
reference. To obtain an additional copy of the Prospectus, or the Annual
Reports, please call Fidelity Distributors Corporation at 1-800-544-8888.
11TABLE OF CONTENTS PAGE
12Investment Policies and Limitations
13Portfolio Transaction
14Valuation of Portfolio Securities
15Performance
16Additional Purchase and Redemption Information
17Distributions and Taxes
18FMR
19Trustees and Officers
20Management Contracts
21Distribution and Service Plans
22Contracts With Companies Affiliated With FMR
23Description of the Trust
24Financial Statements
25Appendix
26INVESTMENT ADVISER
27Fidelity Management & Research Company (FMR)
28INVESTMENT SUB-ADVISERS
29Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
30Fidelity Management & Research (Far East) Inc. (FMR Far East)
31DISTRIBUTOR
32Fidelity Distributors Corporation (FDC)
33TRANSFER AGENT
34Fidelity Service Co. (FSC)
35 BON-ptB- 69 4
36
37INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the funds' investment policies and
limitations.
38 A fund's fundamental investment policies and limitations cannot be
changed without approval by a " majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
39 INVESTMENT LIMITATIONS OF FIDELITY SHORT-TERM BOND PORTFOLIO
40 THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities) if, as a
result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
sale of restricted securities or the purchase of bonds in accordance with
the fund's investment objective, policies, and limitations, either directly
from the issuer, or from an underwriter for an issuer, may be deemed to be
underwriting;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities) if,
as a result, more than 25% of the value of its total assets would be
invested in securities of companies having their principal business
activities in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities) or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).
(7) The fund may not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
41 THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments.
(This limitation does not apply to purchases of debt securities or to
repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 9.
42INVESTMENT LIMITATIONS OF FIDELITY INVESTMENT GRADE BOND FUND
43 THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities) if, as a
result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
44 (2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others , except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements; or
45 (9) invest in companies for the purpose of exercising control or
management.
46 THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
(ix) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 9.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The funds may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the funds will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, a fund could miss a
favorable price or yield opportunity, or could suffer a loss.
A fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of each fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the funds to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
non-government stripped fixed-rate mortgage-backed securities, and
over-the-counter options. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options a fund writes,
all or a portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and terms
of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If through a change in values, net assets, or
other circumstances, a fund were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time the fund may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, the fund might obtain
a less favorable price than prevailed when it decided to seek registration
of the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed-upon price, which obligation is
in effect secured by the value (at least equal to the amount of the
agreed-upon resale price and marked to market daily) of the underlying
security. Each fund may engage in repurchase agreements with respect to any
security in which it is authorized to invest. While it does not presently
appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to a fund in connection
with bankruptcy proceedings), it is each fund's current policy to limit
repurchase agreement transactions to those parties whose creditworthiness
has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. Each fund
will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of a fund's assets and may be
viewed as a form of leverage.
MORTGAGE-BACKED SECURITIES. The funds may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
funds may invest in them if FMR determines they are consistent with the
funds' investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, a fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
A broker-dealer creates a derivative zero by separating the interest
and principal components of a U.S. Treasury security and selling them as
two individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion. Original issue zeros are zero coupon securities
originally issued by the U.S. government, a government agency, or a
corporation in zero coupon form.
LOWER-RATED DEBT SECURITIES. (Investment Grade Bond only) While the market
for high-yield corporate debt securities has been in existence for many
years and has weathered previous economic downturns, the 1980s brought a
dramatic increase in the use of such securities to fund highly leveraged
corporate acquisitions and restructurings. Past experience may not provide
an accurate indication of the future performance of the high-yield bond
market, especially during periods of economic recession. In fact, from 1989
to 1991, the percentage of lower-rated debt securities that defaulted rose
significantly above prior levels, although the default rate decreased in
1992.
47 The market for lower-rated debt securities may be thinner and less
active than that for higher-rated debt securities, which can adversely
affect the prices at which the former are sold. If market quotations are
not available, lower-rated debt securities will be valued in accordance
with procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-rated debt
securities and the fund's ability to dispose of these securities.
Since the risk of default is higher for lower-rated debt securities, FMR's
research and credit analysis are an especially important part of managing
securities of this type held by the fund. In considering investments for
the fund, FMR will attempt to identify those issuers of high-yielding debt
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of the fund's shareholders.
SECURITIES LENDING. Each fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the
funds may engage in loan transactions only under the following conditions:
(1) a fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, a fund must be able to terminate
the loan at any time; (4) a fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) a fund may pay only reasonable custodian
fees in connection with the loan; and (6) the Board of Trustees must be
able to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
INTERFUND BORROWING PROGRAM. The fund has received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates. Interfund loans and borrowing normally will extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. The fund will lend through the program only
when the returns are higher than those available at the same time from
other short-term instruments (such as repurchase agreements), and will
borrow through the program only when the costs are equal to or lower than
the cost of bank loans. The fund may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity
or additional borrowing cost.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. A fund is not limited to any
particular form of swap agreement if FMR determines it is consistent with
the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of a fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from a fund. If a swap
agreement calls for payments by a fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. The funds expect to be able to eliminate
their exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
Each fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
If a fund enters into a swap agreement on a net basis, it will segregate
assets with a daily value at least equal to the excess, if any, of the
fund's accrued obligations under the swap agreement over the accrued amount
the fund is entitled to receive under the agreement. If a fund enters into
a swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. Each fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to each fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of
principal and interest. Direct debt instruments may not be rated by any
nationally recognized rating service. If a fund does not receive scheduled
interest or principal payments on such indebtedness, the fund's share price
and yield could be adversely affected. Loans that are fully secured offer a
fund more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral could be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater
risks and may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a small
fraction of the amount owed. Direct indebtedness of developing countries
also involves a risk that the governmental entities responsible for the
repayment of the debt may be unable, or unwilling, to pay interest and
principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve additional risks
to a fund. For example, if a loan is foreclosed, a fund could become part
owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, it is
conceivable that under emerging legal theories of lender liability, a fund
could be held liable as a co-lender. Direct debt instruments may also
involve a risk of insolvency of the lending bank or other intermediary.
Direct debt instruments that are not in the form of securities may offer
less legal protection to a fund in the event of fraud or misrepresentation.
In the absence of definitive regulatory guidance, the funds rely on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the funds.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, a fund has direct recourse against the borrower, it may
have to rely on the agent to apply appropriate credit remedies against a
borrower. If assets held by the agent for the benefit of a fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by a fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring a fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
A fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
Each fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations (1) and (5)
for Short-Term Bond and for Investment Grade Bond. For purposes of these
limitations, a fund generally will treat the borrower as the
" issuer" of indebtedness held by a fund. In the case of loan
participations where a bank or other lending institution serves as
financial intermediary between a fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as " issuers" for these purposes.
Treating a financial intermediary as an issuer of indebtedness may restrict
a fund's ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and
interest from such securities, can change significantly when foreign
currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity
than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be
more difficult to obtain reliable information regarding an issuer's
financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult
to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects.
The considerations noted above generally are intensified for investments
in developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
Each fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
such transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to
such restrictions.
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs), are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in the U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The funds may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies
in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged on a spot (i.e., cash) basis, or by entering
into forward contracts to purchase or sell foreign currencies at a future
date and price. Forward contracts generally are traded in an interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or may
hold the contract to maturity and complete the contemplated currency
exchange.
A fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by a fund.
In connection with purchases and sales of securities denominated in
foreign currencies, a fund may enter into currency forward contracts to fix
a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a
" settlement hedge" or " transaction hedge." FMR expects to
enter into settlement hedges in the normal course of managing each fund's
foreign investments. A fund could also enter into forward contracts to
purchase or sell a foreign currency in anticipation of future purchases or
sales of securities denominated in foreign currency, even if the specific
investments have not yet been selected by FMR.
A fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if a fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a " position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. A fund could also hedge
the position by selling another currency expected to perform similarly to
the pound sterling - for example, by entering into a forward contract to
sell Deutschemarks or European Currency Units in return for U.S. dollars.
This type of hedge, sometimes referred to as a " proxy hedge," could
offer advantages in terms of cost, yield, or efficiency, but generally
would not hedge currency exposure as effectively as a simple hedge into
U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, a fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. A fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change a fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged a fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if
FMR increases a fund's exposure to a foreign currency, and that currency's
value declines, the fund will realize a loss. There is no assurance that
FMR's use of forward currency contracts will be advantageous to the funds
or that it will hedge at an appropriate time. The policies described in
this section are non-fundamental policies of the funds.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The funds have filed
notices of eligibility for exclusion from the definition of the term
" commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The funds intend to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which a
fund can commit assets to initial margin deposits and option premiums.
In addition, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on each fund's investments in futures contracts and
options, and each fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when a fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit " initial margin" with a futures
broker, known as a futures commission merchant (FCM), when the contract is
entered into. Initial margin deposits are typically equal to a percentage
of the contract's value. If the value of either party's position declines,
that party will be required to make additional " variation margin"
payments to settle the change in value on a daily basis. The party that has
a gain may be entitled to receive all or a portion of this amount. Initial
and variation margin payments do not constitute purchasing securities on
margin for purposes of each fund's investment limitations. In the event of
the bankruptcy of an FCM that holds margin on behalf of a fund, the fund
may be entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers, potentially resulting in
losses to the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. A fund may
terminate its position in a put option it has purchased by allowing it to
expire or by exercising the option. If the option is allowed to expire, the
fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, a fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option a fund has written, however, the fund
must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. A fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invest, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular option or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows a fund
greater flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. A fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. A fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
a fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect a
fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a fund's foreign-denominated
investments changes in response to many factors other than exchange rates,
it may not be possible to match the amount of currency options and futures
to the value of the fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so require
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating
interest rates and carry rights that permit holders to demand payment of
the unpaid principal balance plus accrued interest from the issuers or
certain financial intermediaries. Floating rate instruments have interest
rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment
in the interest rate. These formulas are designed to result in a market
value for the instrument that approximates its par value.
48PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the funds by FMR pursuant to authority contained in the
management contracts. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR will
consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions. Commissions for foreign investments
traded on foreign exchanges will generally be higher than for U.S.
investments and may not be subject to negotiation.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. 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 a
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
funds 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.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds, to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of
FMR Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such requirements, the Board of
Trustees has authorized FBSI to execute fund portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of
each fund and review the commissions paid by each fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the funds.
49 For the fiscal years ended April 30, 199 4 and 199 3 ,
Short-Term Bond's portfolio turnover rates were __ % and 63 %,
respectively. For the fiscal years ended April 30, 199 4 and
199 3 , Investment Grade Bond's portfolio turnover rates were
__ % and 74 %, respectively.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment, whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of the funds are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases, this system could have a detrimental
effect on the price or value of the security as far as the funds are
concerned. In other cases, however, the ability of the funds to participate
in volume transactions will produce better executions and prices for the
funds. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the funds outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
50VALUATION OF PORTFOLIO SECURITIES
Securities and other assets for which market quotations are readily
available are valued at market values determined by their most recent bid
prices (sales prices if the principal market is an exchange) in the
principal market in which such securities normally are traded. Securities
and other assets for which market quotations are not readily available
(including restricted securities, if any) are appraised at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
51 Securities may also be valued on the basis of valuations furnished by a
pricing service that uses both dealer-supplied valuations and evaluations
based on expert analysis of market data and other factors if such
valuations are believed to reflect more accurately the fair value of such
securities. Use of a pricing service has been approved by the Board of
Trustees. There are a number of pricing services available, and the
Trustees, or officers acting on behalf of the Trustees, on the basis of
ongoing evaluation of these pricing services, may use other pricing
services or may discontinue the use of any pricing service in whole or in
part.
52 Securities not valued by the pricing service, and for which quotations
are readily available, are valued at market values determined on the basis
of their latest available bid prices as furnished by recognized dealers in
such securities. Futures contracts and options are valued on the basis of
market quotations, if available.
53PERFORMANCE
The funds may quote their performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The funds' share prices, yields, and
total returns fluctuate in response to market conditions and other factors,
and the value of a fund's shares when redeemed may be more or less than
their original cost.
YIELD CALCULATIONS. Yields for the funds used in advertising are computed
by dividing a fund's interest and dividend income for a given 30-day or
one-month period, net of expenses, by the average number of shares entitled
to receive distributions during the period, dividing this figure by the
fund's net asset value per share (NAV) at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. In general, interest income is reduced with respect to
bonds trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of determining a fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions (if any), and any change in the fund's NAV
over the period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in a
fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative return of 100% over ten years would produce an average annual
total return of 7.18%, which is the steady annual rate of return that would
equal 100% growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that a fund's performance is not constant over
time, but changes from year to year, and that average annual total returns
represent averaged figures as opposed to the actual year-to-year
performance of a fund.
In addition to average annual total returns, a fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table shows the funds' 30-day
yields and total returns for the periods ended April 30, 199 4 .
54SHORT-TERM BOND
55 AVERAGE ANNUAL RETURNS CUMULATIVE RETURNS
5630-DAY ONE FIVE LIFE OF ONE FIVE LIFE OF
57YIELD YEAR YEARS FUND* YEAR YEARS FUND*
58____ ____ ____ ____ ____ ____ ____
* Life of fund figures are from September 15, 1986 (commencement of
operations). If FMR had not reimbursed certain fund expenses during this
period, the fund's total returns would have been lower.
59INVESTMENT GRADE BOND
60 AVERAGE ANNUAL RETURNS CUMULATIVE RETURNS
6130-DAY ONE FIVE TEN ONE FIVE TEN
62YIELD YEAR YEARS YEARS YEAR YEARS YEARS
63____ ____ ____ ____ ____ ____ ____
The tables below show the income and capital elements of each fund's
cumulative total returns. The tables compare the funds' returns to the
record of the Standard & Poor's 500 Composite Stock Price Index
(S&P 500), the Dow Jones Industrial Average (DJIA), and the cost of
living (measured by the Consumer Price Index or CPI) over the same period.
The S&P 500 and DJIA comparisons are provided to show how the funds'
total returns compared to the returns of a broad range of common stocks and
a narrower set of stocks of major industrial companies, respectively, over
the same period. Of course, since the funds invest in fixed-income
securities, common stocks represent a different type of investment than
those which the funds invest in. Fixed-income securities are not included
in the indices. Common stocks generally offer greater growth potential than
the funds, but generally experience greater price volatility which means a
greater potential for loss. In addition, common stocks generally provide
lower income than a fund investment such as the funds. Figures for the
S&P 500 and DJIA are based on the prices of unmanaged groups of stocks
and, unlike the funds' returns, their returns do not include the effect of
paying brokerage commissions and other costs of investing. During the
periods quoted, interest rates and bond prices fluctuated widely; thus the
tables should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment in either of
the funds today.
SHORT-TERM BOND. During the period from September 15, 1986 (commencement
of operations) to April 30, 199 4 , a hypothetical $10,000 investment
in the fund would have grown to $16,630, assuming all distributions were
reinvested.
64
65 SHORT-TERM BOND INDICES
66 VALUE OF VALUE OF VALUE OF
67 INITIAL REINVESTED REINVESTED
68YEAR ENDED $10,000 DIVIDEND CAPITAL GAIN TOTAL
69APRIL 30 INVESTMENT DISTRIBUTIONS DISTRIBUTIONS VALUE S&P 500
DJIA CPI**
701987* $9,670 $479 $0 $10,149 $12,755 $13,266 $10,227
711988 9,470 1,381 0 10,851 11,929 12,185 10,626
721989 9,180 2,294 0 11,474 14,662 15,036 11,171
731990 9,170 3,288 0 12,458 16,210 17,148 11,697
741991 9,180 4,461 0 13,641 19,065 19,360 12,269
751992 9,430 5,848 0 15,278 21,743 23,224 12,659
761993 9,510 7,120 0 16,630 23,755 24,413 13,067
771994
78 * From September 15, 1986 (commencement of operations).
79 ** From month end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on September
15, 1986 (commencement of operations), the net amount invested in fund
shares was $10,000. The cost of the initial investment ($10,000), together
with the aggregate cost of reinvested dividends for the period covered
(their cash value at the time they were reinvested), amounted to
$ _____ . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments (dividends) for the period would have amounted to
$ _____ . There were no capital gain distributions during this period.
Tax consequences of different investments have not been factored into the
figures.
INVESTMENT GRADE BOND. During the period from April 30, 198 4 to
April 30, 199 4 , a hypothetical $10,000 investment in the fund would
have grown to $ _____ , assuming all distributions were reinvested.
80 INVESTMENT GRADE BOND INDICES
81 VALUE OF VALUE OF VALUE OF
82 INITIAL REINVESTED REINVESTED
83YEAR ENDED $10,000 DIVIDEND CAPITAL GAIN TOTAL
84APRIL 30 INVESTMENT DISTRIBUTIONS DISTRIBUTIONS VALUE S&P 500 DJIA
CPI
851985 9,053 2,048 0 11,461 11,972 11,284 10,842
861986 10,233 4,161 0 14,394 16,312 16,667 11,014
871987 9,602 5,203 0 14,806 20,639 22,094 11,430
881988 9,287 6,370 0 15,657 19,303 20,293 11,876
891989 9,150 7,719 0 16,869 23,725 25,041 12,485
901990 8,999 9,104 0 18,103 26,230 28,560 13,073
911991 9,369 11,235 0 20,604 30,848 32,242 13,712
921992 9,698 13,507 0 23,205 35,182 38,678 14,148
931993 10,384 16,447 0 26,831 38,437 40,659 14,604
941994
Explanatory Notes: With an initial investment of $10,000 made on April 30,
198 4 , the net amount invested in fund shares was $10,000. The cost
of the initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $ _____ . If distributions had not
been reinvested, the amount of distributions earned from the fund over time
would have been smaller, and cash payments (dividends) for the period would
have amounted to $ _____ . There were no capital gain distributions
during this period. Tax consequences of different investments have not been
factored into the figures.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to
the mutual fund rankings, a fund's performance may be compared to mutual
fund performance indices prepared by Lipper.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in
advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, a fund may offer greater
liquidity or higher potential returns than CDs, and a fund does not
guarantee your principal or your return.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial strategies.
For example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the funds. Ibbotson calculates total returns in the same method
as the funds. The funds may also compare performance to that of other
compilations or indices that may be developed and made available in the
future.
The fund may compare its performance or the performance of securities
in which it may invest to averages published by IBC USA (Publications),
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Taxable, which is reported in the MONEY FUND REPORT(trademark), covers over
200 taxable money market funds. The Bond Fund Report
AverageS(trademark)/All Taxable, which is reported in the BOND FUND
REPORT(trademark), covers over 442 taxable bond funds. When evaluating
comparisons to money market funds, investors should consider the relevant
differences in investment objectives and policies. Specifically, money
market funds invest in short-term, high-quality instruments and seek to
maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
The funds may also quote the following unmanaged indices of bond prices
and yields in advertising, and may compare the price volatility of these
indices to the price volatility of the S&P 500.
LEHMAN BROTHERS GOVERNMENT BOND INDEX is an index comprised of all public
obligations of the U.S. Treasury, U.S. government agencies, quasi-federal
corporations, and of corporate debt guaranteed by the U.S. government. The
index excludes flower bonds, foreign targeted issues, and mortgage-backed
securities.
LEHMAN BROTHERS CORPORATE BOND INDEX is an index comprised of all public,
fixed-rate, non-convertible investment-grade domestic corporate debt.
Issues included in this index are rated at least Baa by Moody's Investors
Service (Moody's) or BBB by Standard & Poor's Corporation (S&P) or,
in the case of non-rated bonds, BBB by Fitch Investors Service (Fitch).
Collateralized mortgage obligations are not included in the Corporate Bond
Index.
The Government Bond Index and the Corporate Bond Index are combined to
form the Government/Corporate Bond Index.
LEHMAN BROTHERS INTERMEDIATE CORPORATE BOND INDEX is an index comprised of
all public, fixed-rate, non-convertible investment-grade domestic corporate
debt. Issues included in this index have remaining maturities of one to ten
years and are rated at least Baa by Moody's or BBB by S&P or, in the
case of non-rated bonds, BBB by Fitch.
LEHMAN BROTHERS LONG-TERM CORPORATE BOND INDEX is an index comprised of
all public, fixed-rate, non-convertible investment-grade domestic corporate
debt. Issues included in this index have remaining maturities greater than
ten years and are rated at least Baa by Moody's or BBB by S&P or, in
the case of non-rated bonds, BBB by Fitch.
SALOMON BROTHERS HIGH YIELD COMPOSITE INDEX is an index of high yielding
utility and corporate bonds with a minimum maturity of seven years and with
total debt outstanding of at least $50 million. Issues included in the
index are rated Baa or lower by Moody's or BBB or lower by S&P.
SALOMON BROTHERS HIGH GRADE CORPORATE BOND INDEX is an index of high
quality corporate bonds with a minimum maturity of at least ten years and
with total debt outstanding of at least $50 million. Issues included in the
index are rated Aa or better by Moody's or AA or better by S&P.
MERRILL LYNCH HIGH AND MEDIUM QUALITY INTERMEDIATE-TERM CORPORATE INDEX is
an index comprised of all public, fixed-rate, non-convertible corporate
debt. Issues included in this index have remaining maturities of between 1
and 9.99 years. Issues included in the index are rated at least Baa3 by
Moody's and BBB- by S&P.
MERRILL LYNCH HIGH AND MEDIUM QUALITY LONG-TERM CORPORATE BOND INDEX is an
index comprised of all public, fixed-rate, non-convertible domestic
corporate debt. Issues included in this index have remaining maturities of
greater than 15 years and are rated at least Baa3 by Moody's and BBB- by
S&P.
MERRILL LYNCH MEDIUM QUALITY SHORT-TERM CORPORATE INDEX is an index
comprised of all public, fixed-rate, non-convertible corporate debt. Issues
included in this index have remaining maturities of 1 to 2.99 years. Issues
included in this index are rated at least Baa3 by Moody's and BBB- by
S&P, and below Aa3 by Moody's and AA- by S&P.
MERRILL LYNCH HIGH AND MEDIUM QUALITY SHORT-TERM CORPORATE INDEX is an
index comprised of all public, fixed rate, non-convertible corporate debt.
Issues included in this index have remaining maturities of 1 to 2.99 years.
Issues included in this index are rated at least Baa3 by Moody's and BBB-
by S&P.
The funds may be compared in advertising to Certificates of Deposit (CDs),
the Bank Rate Monitor National Index, an average of the quoted rates for
100 leading banks and thrifts in ten U.S. cities chosen to represent the
ten largest Consumer Metropolitan Statistical Areas, or other investments
issued by banks. The funds differ from bank investments in several
respects. The funds may offer greater liquidity or higher potential returns
than CDs; but unlike CDs, the funds have a fluctuating share price and are
not FDIC insured.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price
levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
95ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV)
is calculated each day the New York Stock Exchange (NYSE) is open for
trading. The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a fund's NAV may be affected on days when investors do
not have access to the funds to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (1940
Act), each fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or by the SEC, or the fund to be
acquired suspends the sale of its shares because it is unable to invest
amounts effectively in accordance with its investment objective and
policies.
In the Prospectus, each fund has notified shareholders that they reserve
the right at any time, without prior notice, to refuse exchange purchases
by any person or group if, in FMR's judgment, a fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
96DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity will alternate instructions.
DIVIDENDS. Because each fund's income is primarily derived from interest,
dividends from the fund generally will not qualify for the
dividends-received deduction available to corporations. A portion of a
fund's dividends derived from certain U.S. government obligations may be
exempt from state and local taxation. Gains (losses) attributable to
foreign currency fluctuations are generally taxable as ordinary income, and
therefore will increase (decrease) dividend distributions. The funds will
send each shareholder a notice in January describing the tax status of
dividends and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the funds on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund and such shares are held less
than six months and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the funds are taxable to
shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the funds do not
currently anticipate that securities of foreign issuers will constitute
more than 50% of their total assets at the end of their fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue
to qualify each year as a " regulated investment company" for tax
purposes so that it will not be liable for federal tax on income and
capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes at the fund level, each fund intends to distribute
substantially all of its net investment income and net realized capital
gains within each calendar year as well as on a fiscal year basis. The
funds intend to comply with other tax rules applicable to regulated
investment companies, including a requirement that capital gains from the
sale of securities held less than three months constitute less than 30% of
a fund's gross income for each fiscal year. Gains from some forward
currency contracts, futures contracts, and options are included in this 30%
limitation, which may limit a fund's investments in such instruments.
If a fund purchases shares of certain foreign investment entities, defined
as passive foreign investment companies (PFICs) in the Internal Revenue
Code, it may be subject to U.S. federal income tax on a portion of any
excess distribution or gain in the disposition of such shares. Interest
charges may also be imposed on a fund with respect to deferred taxes
arising from such distributions or gains.
Each fund is treated as a separate entity from the other funds of Fidelity
Fixed-Income Trust for tax purposes.
As of April 30, 199 4 the funds had capital loss carryovers
available to offset future capital gains as follows:
97 AGGREGATE
98 CAPITAL LOSS EXPIRES ON APRIL 30 ,
99 CARRYOVERS 199 7 199 8 199 9 2000
100SHORT-TERM BOND $17,888,000 $6,892,000 $7,352,000 $2,771,000
101INVESTMENT GRADE BOND $7,540,000 -------- $4,144,000 $3,396,000
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions. Investors should consult their tax
advisers to determine whether either fund is suitable to their particular
tax situation.
102FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
103TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the 1940
Act) by virtue of their affiliation with either the Trust or FMR are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Tr ustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity
Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989), Sanifill Corporation (non-hazardous waste,
1993), and CH2M Hill Companies (engineering). In addition, he served on
the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior
to his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989),
is Chairman of G.M. Management Group (strategic advisory services). Prior
to his retirement in July 1988, he was Chairman and Chief Executive Officer
of Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee.
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
104 M ICHAEL GRAY, Vice President (1988) is also Vice President of
other funds advised by FMR and is an employee of FMR.
105 D ONALD TAYLOR, Vice President (1991) is also Vice President of
other funds advised by FMR and is an employee of FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
106[Beneficial Ownership To be updated]
107MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides the funds with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust 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 funds. These services include providing
facilities for maintaining each fund's organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters,
and other persons dealing with the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state law, developing management and shareholder services for the funds;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, each fund pays all of its expenses, without limitation, that are not
assumed by those parties. Each fund pays for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although each fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to existing shareholders, the trust has entered into a
revised transfer agent agreement with FSC, pursuant to which FSC bears the
cost of providing these services to existing shareholders. Other expenses
paid by each fund include interest, taxes, brokerage commissions, each
fund's proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal and state
securities laws. Each fund is also liable for such nonrecurring expenses as
may arise, including costs of any litigation to which a fund may be a party
and any obligation it may have to indemnify the trust's officers and
Trustees with respect to litigation.
FMR is the manager of Short-Term Bond and Investment Grade Bond pursuant
to management contracts dated November 1, 1993, which were approved by
shareholders on October 20, 1993. For the services of FMR under the
contracts, each 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 on the left . On the right, is the
effective fee rate schedule shows the results of cumulatively applying
the annualized rates at varying asset levels . For example, the
effective annual fee rate at $190 billion of group net assets - their
approximate level for April 199 4 - was .1671%, which is the weighted
average of the respective fee rates for each level of group net assets up
to $___billion .
108GROUP FEE RATE SCHEDULE* 109EFFECTIVE ANNUAL FEE
RATES
110 111AVERAGE 112 113GROUP 114EFFECTIVE
115 116GROUP 117ANNUALIZED 118NET 119 ANNUAL
120 121ASSETS 122 RATE 123ASSETS 124FEE RATE
125 126 0 127- 128$ 3 129.3700% 130$ 0.5 131.3700%
billion billion
132 133 3 134- 135 6 136.3400 137 25 138.2664
139 140 6 141- 142 9 143.3100 144 50 145.2188
146 147 9 148- 149 12 150.2800 151 75 152.1986
153 154 155- 156 15 157.2500 158100 159.1869
12
160 161 162- 163 18 164.2200 165125 166.1793
15
167 168 169- 170 21 171.2000 172150 173.1736
18
174 175 176- 177 24 178.1900 179175 180.1695
21
181 182 183- 184 30 185.1800 186200 187.1658
24
188 189 190- 191 36 192.1750 193225 194.1629
30
195 196 197- 198 42 199.1700 200250 201.1604
36
202 203 204- 205 48 206.1650 207275 208.1583
42
209 210 211- 212 66 213.1600 214300 215.1565
48
216 217 218- 219 84 220.1550 221325 222.1548
66
223 224 225- 226120 227.1500 228350 229.1533
84
230 2311 232- 233174 234.1450 235 236
20
237 2381 239- 240228 241.1400 242 243
74
244 2452 246- 247282 248.1375 249 250
28
251 2522 253- 254336 255.1350 256 257
82
258 259O 2603 261 262.1325 263 264
ver 36
265 266 267 268 269 270 271
108 The individual fund fee rate for Short-Term Bond and for Investment
Grade Bond is .30%*.
Based on the average net assets of funds advised by FMR for April
199 4 , the annual management fee rate would be calculated as follows:
109 GROUP FEE RATE INDIVIDUAL FUND FEE RATE MANAGEMENT FEE RATE
110SHORT-TERM BOND .1671% + .30% = .4671%
111INVESTMENT GRADE BOND .1671% + .30% = .4671%
* At a shareholder meeting on October 20, 1993, Investment Grade Bond fund
shareholders approved an amended management contract which increased the
fund's individual fund fee rate from .20% to .30%, effective November 1,
1993.
One-twelfth (1/12) of each fund's annual management fee rate is then
applied to the fund's average net assets for the current month, giving a
dollar amount which is the fee for that month.
The rates shown for average group assets between $120 billion and $228
billion were adopted by FMR on a voluntary basis on January 1, 1992.The
rates shown for assets in excess of $228 billion were adopted by FMR on a
voluntary basis on November 1, 1993. The extended schedule provides for
lower management fees as total assets under FMR's management increase and
will be presented to shareholders for approval at each fund's next
shareholder meeting. On August 5, 1992, (for Investment Grade Bond) and
October 20, 1993 (for Short-Term Bond) shareholders approved a management
contract for their respective fund which reflects the extended schedule up
to $228 billion.
112 Management fees paid by to FMR for the fiscal years ended April 30,
199 4 , 199 3 , and 199 2 are indicated in the table below.
113 MANAGEMENT FEES
114 199 4 199 3 199 2
115SHORT-TERM BOND $7,689,730 $2,279,994
116INVESTMENT GRADE BOND $3,885,654 $2,444,228
Each fund's management fees for the fiscal years ended April 30,
199 4 and 199 3 reflect FMR's voluntary implementation of a
reduced fee structure as of January 1, 1992. If voluntary implementation
had not been in effect, fiscal 199 4 and 199 3 fees would have
been higher. Short-Term Bond's fees were equal to .___, .47%, and
. 48%, respectively, of the fund's average net assets for fiscal
199 4 , 199 3 , and 199 2 , respectively. Investment-Grade
Bond's fees were equal to .___, .37%, and .38%, respectively, of the
fund's average net assets for each of those years.
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISERS. On November 1, 1989, FMR entered into sub-advisory
agreements with FMR U.K. and FMR Far East pursuant to which FMR U.K. and
FMR Far East supply FMR with investment research and recommendations
concerning foreign securities for the benefit of the funds. The
sub-advisory agreements provide that FMR will pay fees to FMR U.K. and FMR
Far East equal to 110% and 105%, respectively, of FMR U.K.'s and FMR Far
East's costs incurred in connection with each agreement, said costs to be
determined in relation to the assets of the fund that benefits from the
services of the sub-advisers.
117DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a distribution and service plan (the plans) under
Rule 12b-1 of the Investment Company Act of 1940 (the Rule). The Rule
provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by the
fund under the Rule. The Board of Trustees has adopted the plans to allow
the funds and FMR to incur certain expenses that might be considered to
constitute indirect payment by the funds of distribution expenses. Under
the plans, if the payment by a fund to FMR of management fees should be
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the fund's plan.
The plans specifically recognize that FMR, either directly or through FDC,
may use its management fee revenues, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the funds. In addition, the
plans provide that FMR may use its resources, including its management fee
revenues, to make payments to third parties that provide assistance in
selling the funds' shares, or to third parties, including banks, that
render shareholder support services. For the fiscal year ended April 30,
199 4 , payments to third parties amounted to $ _____
(Short-Term Bond) and $ _____ (Investment Grade Bond).
Each fund's plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
implementation of the plans prior to their approval, and have determined
that there is a reasonable likelihood that the plans will benefit the funds
and their shareholders. In particular, the Trustees noted that the plans do
not authorize payments by the funds other than those made to FMR under its
management contracts with the funds. To the extent that the Plans give FMR
and FDC greater flexibility in connection with the distribution of shares
of the funds, additional sales of the funds' shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the plans by local entities with whom shareholders have
other relationships. The plans were approved by the funds' shareholders on
November 18, 1987 (Short-Term Bond) and November 19, 1986 (Investment Grade
Bond).
The Glass-Steagall Act generally prohibits federally and state chartered
or supervised banks from engaging in the business of underwriting, selling,
or distributing securities. Although the scope of this prohibition under
the Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of a fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. Each fund may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the Plans. No preference will be shown in the
selection of investments for the instruments of such depository
institutions. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers
pursuant to state law.
118CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC is transfer, dividend disbursing, and shareholders' servicing agent
for the funds. Under the trust's contract with FSC, each fund pays an
annual fee of $26.03 per basic retail account with a balance of $5,000 or
more, $15.31 per basic retail account with a balance of less than $5,000,
and a supplemental activity charge of $2.25 for standing order transactions
and $6.11 for other monetary transactions. These fees and charges are
subject to annual cost escalation based on postal rate changes and changes
in wage and price levels as measured by the National Consumer Price Index
for Urban Areas. With respect to certain institutional client master
accounts, the funds pay FSC a per-account fee of $95 and monetary
transaction charges of $20 or $17.50, depending on the nature of services
provided. With respect to certain broker-dealer master accounts, the funds
pay FSC a per-account fee of $30 and a charge of $6 for monetary
transactions. Fees for certain institutional retirement plan accounts are
based on the net assets of all such accounts in a fund.
Under the contract, FSC pays out-of-pocket expenses associated with
providing transfer agent services. In addition, FSC bears the expense of
typesetting, printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
shareholders, with the exception of proxy statements.
119 The table below shows the transfer agent fees paid to FSC during each
fund's last three fiscal years ended April 30, 199 4 , 199 3 ,
and 199 2 .
120 TRANSFER AGENT FEES
121 199 4 199 3 199 2
122SHORT-TERM BOND $3,157,954 $1,205,091
123INVESTMENT GRADE BOND $2,304,490 $1,440,584
The trust's contract with FSC also provides that FSC will perform the
calculations necessary to determine each fund's net asset value per share
and dividends, and maintain the fund's accounting records. Prior to July 1,
1991, the annual fee for these pricing and bookkeeping services was based
on two schedules, one pertaining to each fund's average net assets, and one
pertaining to the type and number of transactions the fund made. The fee
rates in effect as of July 1, 1991 are based on each fund's average net
assets, specifically, .04% for the first $500 million of average net assets
and .02% for average net assets in excess of $500 million. The fee is
limited to a minimum of $45,000 and a maximum of $750,000 per year.
124 The table below shows the fees paid to FSC for pricing and bookkeeping
services, including related out-of-pocket expenses during each fund's last
three fiscal years.
125 PRICING AND BOOKKEEPING FEES
126 199 4 199 3 199 2
127
128SHORT-TERM BOND $449,231 $154,704
129INVESTMENT GRADE BOND $342,240 $229,931
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreements call
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
130 DESCRIPTION OF THE TRUST
131 TRUST ORGANIZATION. Fidelity Short-Term Bond Portfolio and Fidelity
Investment Grade Bond Fund are funds of Fidelity Fixed-Income Trust (the
trust), an open-end management investment company originally organized as a
Massachusetts corporation on June 25, 1970. On September 7, 1984, the trust
was reorganized as a Massachusetts business trust, at which time its name
was changed from Fidelity Corporate Bond Fund, Inc. to Fidelity Corporate
Bond Fund. On October 23, 1985, the Trust's name was changed to Fidelity
Flexible Bond Fund and on August 31, 1986 the Trust's name was changed to
Fidelity Fixed-Income Trust. Currently, there are five funds of Fidelity
Fixed-Income Trust (Fidelity Short-Term Bond Portfolio, Fidelity Investment
Grade Bond Fund, Spartan Government Income Fund, Spartan High Income Fund,
and Spartan Short-Intermediate Government Fund). The Declaration of Trust
permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of the trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees shall include a provision limiting the obligations
created thereby to the trust and its assets. The Declaration of Trust
provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value per share you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of redemption,
and the privilege of exchange are described in the Prospectus. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder and Trustee Liability" above. Shareholders representing 10% or
more of the trust or a fund may, as set forth in the Declaration of Trust,
call meetings of the trust or a fund for any purpose related to the trust
or fund, as the case may be, including, in the case of a meeting of the
entire trust, the purpose of voting on removal of one or more Trustees. The
trust or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the trust or the fund, as determined by the current value of
each shareholder's investment in the fund or trust. If not so terminated,
the trust and the funds will continue indefinitely.
132 CUSTODIAN. The Bank of New York, New York, N.Y., is custodian of the
assets of each fund. The custodian is responsible for the safekeeping of
the fund's assets and the appointment of subcustodian banks and clearing
agencies. The custodian takes no part in determining investment policies of
the funds or in deciding which securities are purchased or sold by the
funds. The funds, may, however, invest in obligations of the custodian and
may purchase securities from or sell securities to the custodian.
133 FMR, its officers and directors, its affiliated companies, and the
trust's Trustees may from time to time have transactions with various
banks, including banks serving as custodians for certain of the funds
advised by FMR. Transactions that have occurred to date include mortgages
and personal and general business loans. In the judgment of FMR, the terms
and conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
134 AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts serves as the trust's independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
135FINANCIAL STATEMENTS
136 The Annual Reports for each fund for the fiscal year ended April 30,
199 4 are separate reports supplied with this Statement of Additional
Information and are incorporated herein by reference.
137APPENDIX
138 DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of a fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
139 For example, if it is probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call, refunding,
or redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
assuming a constant prepayment rate for the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
140DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
141AAA - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
142AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
143A - Bonds rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
144BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
145BA - Bonds rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
146B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
147Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
148DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND
RATINGS:
149AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
150AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
151A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions.
152BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
153BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
154B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied BB- rating.
155The ratings from AA to B may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
FIDELITY FIXED-INCOME TRUST:
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND AND
SPARTAN GOVERNMENT INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER
PROSPECTUS PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1................................................. Cover Page
...
2a................................................ Expenses
..
Contents; The Funds at a Glance; Who May Want to Invest
b,c...............................................
3a............................................... Financial Highlights
*
b.................................................
.
Performance
c.................................................
.
4a(i) Charter
..............................................
The Funds at a Glance; Investment Principles; Securities and
(ii).............................................. Investment Practices; Fundamental Investment Policies and
Restrictions
Securities and Investment Practices
b.................................................
.
Who May Want to Invest; Investment Principles; Securities and
c................................................. Investment Practices
.
5a Charter
.................................................
Doing Business with Fidelity; Charter
b(i)..............................................
b(ii) Charter; Your Account
............................................
Expenses; Breakdown of Expenses
b(iii)...........................................
.
Charter
c,d...............................................
FMR and Its Affiliates
d.................................................
.
Expenses; Breakdown of Expenses
e.................................................
.
Charter
f..................................................
.
5A Performance
................................................
6a(i)............................................ Charter
...
a(ii) How to Buy Shares; How to Sell Shares; Transaction Details;
............................................ Exchange Restrictions
*
a(iii)...........................................
*
b.................................................
Exchange Restrictions
c................................................
*
d.................................................
Doing Business with Fidelity; How to Buy Shares; How to Sell
e................................................. Shares; Investor Services
Dividends, Capital Gains, and Taxes
f,g...............................................
7a................................................ Charter
..
How to Buy Shares; Transaction Details
b.................................................
.
*
c.................................................
.
How to Buy Shares
d.................................................
.
*
e.................................................
.
Breakdown of Expenses
f..................................................
.
8................................................. How to Buy Shares, Investor Services; Transaction Details;
.. Exchange Restrictions
9................................................. *
..
</TABLE>
* Not Applicable
Part B Statement of Additional Information Section
<TABLE>
<CAPTION>
<S> <C>
10, Cover Page
11........................................
12............................................. *
.
13a-c....................................... Investment Policies and Limitations
Portfolio Transactions
d............................................
14a, Trustees and Officers
b........................................
*
c.............................................
15a, *
b.........................................
Trustees and Officers
c.............................................
16a(i)....................................... FMR
..
Trustees and Officers
a(ii)........................................
a(iii), Management Contracts
b...................................
*
c............................................
*
d,e..........................................
Distribution and Service Plans
f............................................
*
g.............................................
Description of the Trust
h.............................................
Contracts with Companies Affiliated with FMR
i.............................................
17a........................................... Portfolio Transactions
.
*
b............................................
Portfolio Transactions
c............................................
*
d,e.........................................
18a........................................... Description of the Trust
..
*
b.............................................
19a........................................... Additional Purchase and Redemption Information
..
Valuation of Portfolio Securities; Additional Purchase and
b............................................ Redemption Information
*
c.............................................
20............................................. Distributions and Taxes
..
21a(i),(ii).................................. Contracts with Companies Affiliated with FMR
..
*
a(iii),b,c..................................
22a........................................... *
..
Performance
b.............................................
23............................................. Financial Statements
..
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
A Statement of Additional Information dated June 21, 1994 has been filed
with the Secur ities and Exchange Commission, and is incorporated herein
by reference (is legally considered a part of this prospectus). The
Statement of Additional Information is available free upon request by
calling Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depositary institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including possible loss of principal.
These funds invest in securities issued or guaranteed by the U.S.
government and its agencies. Spartan Short-Intermediate Government seeks
high current income with preservation of capital. Spartan Government Income
seeks high current income.
SPARTAN(Registered trademark)
SHORT-INTERMEDIATE
GOVERNMENT
FUND
and
SPARTAN(Registered trademark)
GOVERNMENT
INCOME
FUND
PROSPECTUS
JUNE 21, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SPH-pro-694
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND
DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
</TABLE>
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
SPARTAN HIGH INCOME
GOAL: High current income with preservation of capital.
STRATEGY: I nvests mainly in securities guaranteed b y the U.S.
government or its agencies while maintaining an average maturity of
two to five years.
SIZE: As of April 30, 1994, the fund had over $__ million in
assets.
INVESTMENT GRADE BOND
GOAL: High current income.
STRATEGY: Invests mainly in se curities of any maturity issued or
guaranteed by the U.S. government and its agencies.
SIZE: As of April 30, 1994, the fund had over $__ million in
assets.
WHO MAY WANT TO INVEST
Either fund may be appropriate for investors who seek high current income
from a portfolio of U.S. government securities. Because Spartan Government
Income can invest in securities with any maturity, it has the potential for
higher yields, but also carries a higher degree of risk.
These funds do not constitute a balanced investment plan. The value of the
funds' investments and the income they generate will vary from day to day,
generally reflecting changes in interest rates, market conditions, and
other political and economic news. When you sell your shares, they may be
worth more or less than what you paid for them.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. The
funds in this prospectus are
in the INCOME category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(arrow) INCOME Seeks income by
investing in bonds.
(bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
The Spartan family of funds i s designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(Registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See page__ for more information.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written $2.00
Account closeout fee $5.00
THESE FEES ARE WAIVED if your account balance at the time of the
transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each
fund's share price or dividends and are not charged directly to shareholder
accounts (see page__).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
SPARTAN HIGH INCOME
Management fee (after reimbursement) ___%
12b-1 fee None
Other expenses %
Total fund operating expenses ___%
INVESTMENT GRADE BOND
Management fee ___%
12b-1 fee None
Other expenses %
Total fund operating expenses ___%
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
SPARTAN HIGH INCOME
Account open Account closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
INVESTMENT GRADE BOND
Account open Account closed
After 1 year $ $
After 3 years $ $
After 5 years $ $
After 10 years $ $
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FMR has voluntarily agreed to temporarily limit Spartan High Income's
operating expenses to __% of its average net assets. If this agreement were
not in effect, the management fee, other expenses, and total operating
expenses would be .65%, .00%, and .65%, respectively. Expenses eligible for
reimbursement do not include interest, taxes, brokerage commissions, or
extraordinary expenses.
FINANCIAL HIGHLIGHTS
The tables that follow have been audited by Coopers & Lybrand,
independent accountants. Their unqualified reports are included in each
fund's Annual Report. Each fund's Annual Report is incorporated by
reference into (is legally a part of) the Statement of Additional
Information.
[Financial Highlights to be filed by subsequent amendment.]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of taxes or any transaction fees you may have paid.
The figures would be lower if fees were taken into account.
Each fund's fiscal year runs from May 1 through April 30. The tables below
show each fund's performance over past fiscal years compared to a measure
of inflation. The charts on page __ help you compare the yields of these
funds to those of their competitors.
SPARTAN HIGH INCOME
Fiscal periods ended Past 1 Life of
April 30, 1994 Year Fund A
Average annual
total return
Cumulative
total return
Consumer Price
Index
INVESTMENT GRADE BOND
Fiscal periods ended Past 1 Life of
April 30, 1994 Year Fund B
Average annual
total return
Cumulative
total return
Consumer Price
Ind ex
[A] FROM AUGUST 29, 1990
[B] FROM DECEMBER 20, 1988
UNDERSTANDING
PERFORMANCE
Because these funds invest
in fixed-income securities,
their performance is related
to changes in interest rates.
Funds that hold short-term
bonds are usually less
affected by changes in
interest rates than long-term
bond funds. For that reason,
long-term bond funds typically
offer higher returns and carry
more risk than short-term
bond funds.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results .
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGES, which assume reinvestment of distributions,
are published by Lipper Analytical Services, Inc. Spartan High Income
compares its performance to the Lipper High Yield Bond Funds Average, and
Investment Grade Bond compares to the Lipper General U.S. Government Funds
Average. These averages currently re flect the performance of over ___
and ___ mutual funds with similar objectives, respectively .
INVESTMENT GRADE BOND
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: nil
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Row: 5, Col: 1, Value: nil
Row: 5, Col: 2, Value: nil
Row: 6, Col: 1, Value: nil
Row: 6, Col: 2, Value: nil
Row: 7, Col: 1, Value: nil
Row: 7, Col: 2, Value: nil
Row: 8, Col: 1, Value: nil
Row: 8, Col: 2, Value: nil
Row: 9, Col: 1, Value: nil
Row: 9, Col: 2, Value: nil
Row: 10, Col: 1, Value: nil
Row: 10, Col: 2, Value: nil
Row: 11, Col: 1, Value: nil
Row: 11, Col: 2, Value: nil
Row: 12, Col: 1, Value: nil
Row: 12, Col: 2, Value: nil
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: nil
Row: 14, Col: 1, Value: nil
Row: 14, Col: 2, Value: nil
Row: 15, Col: 1, Value: nil
Row: 15, Col: 2, Value: nil
Row: 16, Col: 1, Value: nil
Row: 16, Col: 2, Value: nil
Row: 17, Col: 1, Value: nil
Row: 17, Col: 2, Value: nil
Row: 18, Col: 1, Value: nil
Row: 18, Col: 2, Value: nil
Row: 19, Col: 1, Value: nil
Row: 19, Col: 2, Value: nil
Row: 20, Col: 1, Value: nil
Row: 20, Col: 2, Value: nil
Row: 21, Col: 1, Value: nil
Row: 21, Col: 2, Value: nil
Row: 22, Col: 1, Value: nil
Row: 22, Col: 2, Value: nil
Row: 23, Col: 1, Value: nil
Row: 23, Col: 2, Value: nil
Row: 24, Col: 1, Value: nil
Row: 24, Col: 2, Value: nil
Row: 25, Col: 1, Value: nil
Row: 25, Col: 2, Value: nil
Row: 26, Col: 1, Value: nil
Row: 26, Col: 2, Value: nil
Row: 27, Col: 1, Value: nil
Row: 27, Col: 2, Value: nil
Row: 28, Col: 1, Value: nil
Row: 28, Col: 2, Value: nil
Row: 29, Col: 1, Value: nil
Row: 29, Col: 2, Value: nil
Row: 30, Col: 1, Value: nil
Row: 30, Col: 2, Value: nil
Row: 31, Col: 1, Value: nil
Row: 31, Col: 2, Value: nil
Row: 32, Col: 1, Value: nil
Row: 32, Col: 2, Value: nil
Investment
Grade Bond
Competitive
funds average
1992
1993
1994
THE CHART SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR SPARTAN
GOVERNMENT INCOME AND ITS COMPETITIVE FUNDS AVERAGES AS OF THE LAST
DAY OF EACH MONTH FROM JANUARY 1992 THROUGH APRIL 1994. SPARTAN
SHORT-INTERMEDIATE GOVERNMENT IS NOT INCLUDED IN THE CHART BECAUSE IT
HAS NOT COMPLETED 18 MONTHS OF OPERATIONS.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. In technical
terms, each fund is currently a diversified fund o f Fidelity
Fixed-Income Trust, an open-end management investment company organized
as a Massachusetts business trust on September 7, 1984.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you
are entitled to is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and handles
their business affairs.
Curt Hollingsworth is manager of Spartan Short-Intermediate Government,
which he has managed since December 1992. Mr. Hollingsworth also manages
Advisor Government Investment, Fidelity Short-Intermediate Government,
Government Securities, Institutional Short-Intermediate Government,
Spartan Limited Maturity Government Bond and Spartan Long-Term Government
Bond. Mr. Hollingsworth joined Fidelity in 1983.
Robert Ives is manager of Spartan Government Income, which he has
managed since October 1993. Mr. Ives also manages Mortgage Securities,
Ginnie Mae, and Spartan Ginnie Mae. Mr. Ives joined Fidelity in 1991, after
receiving an M.B.A. from the University of Chicago. Previously, he was a
consultant to the U.S. Air Force for MITRE Corp. and an engineer at Bell
Labs.
Fidelity Distributors Corporation (FDC) dist ributes and markets
Fidelity's funds and services. Fidelity Service Co. (FSC) performs transfer
agent servicing functions for the funds.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
SPARTAN HIGH INCOMEseeks as high a level of current income as is consistent
with preservation of capital. FMR normally invests at least 65% of the
fund's total assets in U.S. government securities whose principal and
interest payments are fully guaranteed by the U.S. government, or in
repurchase agreements secured by these securities.
The fund normally maintains a dollar-weighted average maturity of
between two and five years. This tends to help stabilize its share
price.
INVESTMENT GRADE BONDseeks a high level of current income by investing
principally in securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities. FMR normally invests at least 65% of the
fund's total assets in these securities.
FMR chooses bonds f or the fund mainly based on yield to maturity, a
measure of income that takes into account the difference between a bond's
face value and its current market value. Longer-term bonds normally carry
the highest yields to maturity, so the fund often invests in them, although
it can invest in securities of any maturity. FMR manages the fund so that
its sensitivity to interest rate changes roughly matches the average for
government bonds with maturities between five and eight years.
EACH FUND intends to invest exclusively in U.S. government
securities, or in instruments that are backed by, or related to, government
securities. While this policy adds a measure of safety for both funds, it
may also limit their potential performance.
Each fund's yield and share price will change based on changes in interest
rates, market conditions, and other political and economic news . In
general, bond prices rise when interest rates fall, and vice versa. FMR may
use various investment techniques to hedge a fund's risks, but there is no
guarantee that these strategies will work as intended. When you sell your
shares, they may be worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes ,
however, each fund may temporarily invest substantially in instruments with
remaining maturities of one year or less.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's i nvestment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. As a shareholder, you will receive financial
reports every six months detailing fund holdings and describing recent
investment activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are
generally more sensitive to interest rate changes than short-term
bonds.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued
or guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. government. Not all U.S. government securities are backed by the
full faith and credit of the United States. For example, securities issued
by the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
ASSET-BACKED AND MORTGAGE SECURITIES may include pools of
consumer loans or mortgages, such as collateralized mortgage obligations
and stripped mortgage-backed securities. The value of these securities may
be significantly affected by changes in interest rates, the market's
perception of the issuers, and the creditworthiness of the parties
involved. These securities may also be subject to prepayment risk.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into swap agreements, and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID SECURITIES. Some investments may be determined by FMR, under
the supervision of the Board of Trustees , to be illiquid, which means
that they may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly to a
fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
SPARTAN SHORT-INTERMEDIATE GOVERNMENT seeks as high a level of current
income as is consistent with preservation of capital.
SPARTAN GOVERNMENT INCOME seeks a high level of current income by investing
principally in U.S. government securities (securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities).
EACH FUND may borrow only for temporary or emergency purposes, but not
in an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs.
FMR may, from time to time, agree to reimburse the funds for management
fees above a specified limit. FMR retains the ability to be repaid by a
fund if expenses fall below the specified limit prior to the end of the
fiscal year. Reimbursement arrangements, which may be terminated at any
time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Each fund
pays a management fee at a fixed annual rate of its average net assets:
.80% for Spartan High Incomeand .65% for Investment Grade Bond. The total
management fee rate for Spartan-Short Intermediate Government for fiscal
1994 , after reimbursement, was __%.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and the $2.00 checkwriting charge. For fisca l
1994, these fees amounted to $_____, $_____, $______, and $_____,
respectively, for Spartan High Income and $_____, $_____, $_____, and
$_____, respectively, for Investment Grade Bond.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 1994, the portfolio turnover rates for Spartan
High Income and Investment Grade Bond were __% and __%,
respectively. These rates vary from year to year . High turnover
rates increase transaction costs and may increase taxable capital gains.
FMR considers these effects when evaluating the anticipated benefits of
short-term investing .
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a rep resentative in person, Fidelity
has over __ walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers a fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over ___
(bullet) Assets in Fidelity mutual
funds: over $___ billion
(bullet) Number of shareholder
accounts: over __ million
(bullet) Number of investment
analysts and portfolio
managers: over ___
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated
every business day. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Fidelity retirement accounts $10,000
TO ADD TO AN ACCOUNT $1,000
For Fidelity retirement accounts $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Fidelity retirement accounts $5,000
UNDERSTANDING THE
SPARTAN
APPROACH(Registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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<TABLE>
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Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to the com plete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your chec k and mail to
indicated on the the address printed on
application. your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
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Wire (wire_graphic) (bullet) There may be a $5.00 (bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION
TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE,
AND ACCOUNT CLOSEOUT.
</TABLE>
<TABLE>
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum :
$10; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
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Check (check_graphic) All account types (bullet) Minimum check: $1,000.
except retirement (bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports ( every six months)
To reduce expenses, only one copy of most financia l reports will be
mailed to your household, even if you have more than one account in the
fund. Call 1-800-544-6666 if you need copies of financial reports or
historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the funds, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page __.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
</TABLE>
<TABLE>
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<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE APPROPRIATE
CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in June and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options:
9. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
10. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
11. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
12. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, each fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
Mutual fund dividends from U.S. government securities are generally free
from state and local income taxes. However, particular states may
limit this benefit, and some types of securities, such as repurchase
agreements and some agency-backed securities, may not qualify for the
benefit. In addition, some states may impose intangible property taxes.
You should consult your own tax adviser for details and up-to-date
information on the tax laws in your state.
During fiscal 1994, __% of Spartan High Income's and __% of
Investment Grade Bond's income distributions were from U.S. government
securities.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a
capital gain distribution from its NAV, you will pay the full price
for the shares and then receive a portion of the price back in the form of
a taxable distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, a fund may
have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
Each fund's assets are valued primarily on the basis of market
quotations. If quotations are not readily available, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you
do not want the ability to redeem and exchange by telephone, call Fidelity
for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page__. Purchase orders may be refused if, in FMR's opinion, they
would disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) Each fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees a fund or its transfer agent has
incurred.
(bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales
agreements with FDC may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than the time when a
fund is priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for resulting
fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect a
fund, it may take up to seven days to pay you.
(bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third busines s day after your phone
call.
(bullet) Each fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
(bullet) If you sell shares by writing a check and the amount of the check
is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(bullet) The $2.00 checkwriting charge will be deducted from your account.
(bullet) The $5.00 exchange fee will be deducted from the amount of your
exchange.
(bullet) The $5.00 wire fee will be deducted from the amount of your wire.
(bullet) The $5.00 account closeout fee does not apply to exchanges or
wires, but it will apply to checkwriting.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed and the $5.00 account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, each fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) Each fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if a fund receives or
anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
From Filler pages
SPARTAN(Registered trademark) SHORT-INTERMEDIATE GOVERNMENT FUND
SPARTAN(Registered trademark) GOVERNMENT INCOME FUND
FUNDS OF FIDELITY FIXED-INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
JUNE 21, 1994
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated June 21, 1994). Please retain this
document for future reference. The Annual Report of each fund for the
fiscal year ended April 30, 1994 is incorporated herein by reference. To
obtain an additional copy of the Prospectus or an Annual Report, please
call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Contracts with Companies Affiliated with FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
SSG/SPG-ptb-694
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the fund's investment
policies and limitations.
A fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940) of the fund. However,
except for the fundamental investment limitations set forth below, the
investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT POLICIES AND LIMITATIONS OF SPARTAN SHORT-INTERMEDIATE
GOVERNMENT FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to make loans, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets.
Included in that amount, but not to exceed 2% of the fund's net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the fund in units or
attached to securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
INVESTMENT POLICIES AND LIMITATIONS OF SPARTAN GOVERNMENT INCOME FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (other than obligations issued or
guaranteed by the government of the United States or its agencies or
instrumentalities) if, as a result, (a) more than 25% of the value of its
total assets would be invested in the securities of a single issuer, or (b)
with respect to 75% of its total assets, more than 5% of the value of its
total assets would be invested in the securities of a single issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities (but this shall not prevent the fund from investing in
securities or other instruments backed by real estate or securities of
companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing and selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not currently
intend to 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, the fund would own more than 10% of the
outstanding voting securities of such issuer.
(ii) 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.
(iii) 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.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market system.
(vii) The fund does not currently intend make loans, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
or retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page __.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The funds may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, a fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The funds may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed-upon price, which obligation is
in effect secured by the value (at least equal to the amount of the
agreed-upon resale price and marked to market daily) of the underlying
security. Each fund may engage in repurchase agreements with respect to
any security in which it is authorized to invest. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the fund in
connection with bankruptcy proceedings), it is each fund's current policy
to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer in return for cash and agrees to repurchase the instrument at
a particular price and time. While a reverse repurchase agreement is
outstanding, a fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. Each fund
will enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of a fund's assets and may be
viewed as a form of leverage.
ZERO COUPON BONDS. Zero coupon bonds do not make interest payments;
instead, they are sold at a deep discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not
pay current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, a fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
A broker-dealer creates a derivative zero by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros. Each fund has been advised
that the staff of the Division of Investment Management of the Securities
and Exchange Commission does not consider these instruments U.S. government
securities as defined by the Investment Company Act of 1940. Therefore,
the funds will not treat these obligations as U.S. government securities
for purposes of the 65% portfolio composition test.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation and the Financing Corporation can also be separated in this
fashion. Original issue zeros are zero coupon securities originally issued
by the U.S. government , a government agency, or a corporation in zero
coupon form.
MORTGAGE-BACKED SECURITIES. The funds may purchase mortgage-backed
securities issued by government and non-government entities, such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
fund may invest in them if FMR determines they are consistent with the
fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while
the holder of the "interest-only" security (IO) receives interest payments
from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
INTERFUND BORROWING PROGRAM. The funds have received permission from the
SEC to lend money to and borrow money from other funds advised by FMR or
its affiliates, but they will participate in the interfund borrowing
program only as borrowers. Interfund loans normally will extend overnight,
but can have a maximum duration of seven days. The funds will borrow
through the program only when the costs are equal to or lower than the cost
of bank loans. The funds will not borrow money through the program if,
after doing so, total outstanding borrowings would exceed 15% of total
assets. Loans may be called on one day's notice, and the funds may have to
borrow from a bank at a higher interest rate if an interfund loan is called
or not renewed.
SECURITIES LENDING. Each fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows a fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that a fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which a fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the funds' investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the funds' investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
non-government stripped fixed-rate mortgage-backed securities, and
over-the-counter options. Also, FMR may determine some government-stripped
fixed-rate mortgage-backed securities to be illiquid. However, with
respect to over-the-counter options a fund writes, all or a portion of the
value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the fund
may have to close out the option before expiration. In the absence of
market quotations, illiquid investments are priced at fair value as
determined in good faith by a committee appointed by the Board of Trustees.
If through a change in values, net assets, or other circumstances, a fund
were in a position where more than 10% of its net assets were invested in
illiquid securities, it would seek to take appropriate steps to protect
liquidity.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease a fund's exposure to long- or
short-term interest rates, mortgage securities, corporate borrowing rates,
or other factors such as security prices or inflation rates. Swap
agreements can take many different forms and are known by a variety of
names. A fund is not limited to any particular form of swap agreement if
FMR determines it is consistent with a fund's investment objective and
policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift a fund's investment exposure from one
type of investment to another. For example, if a fund agreed to pay fixed
rates in exchange for floating rates while holding fixed-rate bonds, the
swap would tend to decrease the fund's exposure to long-term interest
rates. Caps and floors have an effect similar to buying or writing
options. Depending on how they are used, swap agreements may increase or
decrease the overall volatility of a fund's investments and its share
price.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, or other factors that determine the
amounts of payments due to and from the fund. If a swap agreement calls
for payments by a fund, the fund must be prepared to make such payments
when due. In addition, if the counterparty's creditworthiness declined,
the value of a swap agreement would be likely to decline, potentially
resulting in losses. The fund expects to be able to eliminate its exposure
under swap agreements either by assignment or other disposition, or by
entering into an offsetting swap agreement with the same party or a
similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If a fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If the fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. Each fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. A mortgage
indexed security, for example, could be synthesized to replicate the
performance of mortgage securities and the characteristics of direct
ownership.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Spartan
Short-Intermediate Fund intends to file and Spartan Government Income Fund
has filed a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets before engaging in any purchases or sales of
futures contracts or options on futures contracts. The funds intend to
comply with Rule 4.5 under the Commodity Exchange Act, which limits the
extent to which a fund can commit assets to initial margin deposits and
option premiums.
In addition, Spartan Short-Intermediate Government Fund will not: (a) sell
futures contracts, purchase put options, or write call options if, as a
result, more than 50% of the fund's total assets would be hedged with
futures and options under normal conditions; (b) purchase futures contracts
or write put options if, as a result, the fund's total obligations upon
settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; (c) purchase call options if,
as a result, the current value of option premiums for options purchased by
the fund would exceed 5% of the fund's total assets; or (d) write call
options on securities if, as a result, the aggregate value of the
securities underlying the calls would exceed 25% of the fund's net assets.
These limitations do not apply to options attached to, or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
Spartan Government Income will not enter into any futures contract or
option if, as a result, it would have less than 65% of its total assets
invested in government securities, and will not write call options on more
than 25% of its net assets. The fund limits its options and futures
investments to options and futures contracts relating to U.S. government
securities.
The above limitations on the funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date.
When a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures
can be held until their delivery dates, or can be closed out before then if
a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract a fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult
to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the funds' current or
anticipated investments exactly. The funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically
invest, which involves a risk that the options or futures position will not
track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require the fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result,
the fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
funds greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in
a segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
fund's assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
PORTFOLIO MANAGEMENT STRATEGIES USING FUTURES CONTRACTS AND OPTIONS. FMR
will use futures contracts and options primarily to increase or decrease a
fund's volatility (the sensitivity of its portfolio to price fluctuations
caused by changes in interest rates). FMR currently intends to use options
and futures contracts to attempt to maintain a fund's overall sensitivity
to interest rate changes in a range similar to the average for intermediate
term government bonds -- roughly equivalent to an average maturity of five
to eight years under current market conditions. When a fund holds mainly
long-term bonds, which offer the highest yields to maturity during a normal
interest rate climate, FMR will engage in strategies designed to hedge
against interest rate changes and reduce the fund's volatility. Although
FMR may seek to hedge particular security holdings, its overall goal is to
attempt to control the volatility of the entire portfolio, in order to
maintain the fund's overall sensitivity to interest rate changes in the
moderate range described above. During relatively unusual interest rate
conditions when short-term securities offer the highest yields, FMR will
engage in strategies designed to increase a fund's volatility, if in its
judgment, the fund's sensitivity to interest changes is below its target
range.
FMR will choose among potential futures and options strategies based on its
evaluation of their possible risks and rewards, as well as such factors as
relative prices in the options and futures markets. In addition to
strategies designed to increase or decrease the fund's volatility, FMR may
use transactions in futures and options as an alternative to purchases or
sales of actual securities. In these types of strategies, a fund would use
futures contracts and options to attempt to achieve an overall return --
whether positive or negative -- similar to an actual purchase or sale of
securities, while taking advantage of potentially greater liquidity that
the futures or options markets may offer.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the funds by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations), based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. 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 funds 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 funds and their 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.
FMR is authorized to use research services provided by and to place
transactions with brokerage firms that have provided assistance in the
distribution of shares of the funds or shares of other Fidelity funds to
the extent permitted by law. FMR may use research services provided by and
place agency transactions with Fidelity Brokerage Services, Inc. (FBSI), a
member of the New York Stock Exchange and a subsidiary of FMR Corp., if the
commissions are fair and reasonable and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such regulations, the Board of
Trustees has authorized FBSI to execute fund portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine whether they are reasonable in relation to the
benefits to the funds.
For the fiscal years ended April 30, 1994 and 1993, Spartan
Short-Intermediate Government Fund's portfolio turnover rates were ___% and
587% (annualized), respectively. For the fiscal years ended April 30, 1994
and 1993, Spartan Government Income Fund's portfolio turnover rates were
___% and 170%, respectively.
From time to time the Trustees will review whether the recapture for the
benefits of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. The funds seek to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to
continue to review whether recapture opportunities are available and are
legally permissible and, if so, to determine in the exercise of their
business judgment whether it would be advisable for the funds to seek such
recapture.
Although the Trustees and officers of the funds are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the funds are
concerned. In other cases, however, the ability of the funds to
participate in volume transactions will produce better executions and
prices for the funds. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to the funds outweigh
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
Each fund's net asset value (NAV) per share is determined by FSC under
procedures established by the Board of Trustees. Portfolio securities are
valued primarily on the basis of valuations furnished by a pricing service
which uses both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance on quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Use of the pricing service
has been approved by the Board of Trustees. There are a number of pricing
services available, and the Trustees, or officers acting on behalf of the
Trustees, on the basis of ongoing evaluation of these services, may use
other pricing services or discontinue the use of any pricing service in
whole or in part. Securities not valued by the pricing service and for
which quotations are readily available are valued at market values
determined on the basis of their latest available bid prices as furnished
by recognized dealers in such securities. Futures contracts and options are
valued on the basis of market quotations, if available. Securities and
other assets for which quotations or pricing service valuations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The funds' share price, yield, and
total returns fluctuate in response to market conditions and other factors,
and the value of each fund's shares when redeemed may be more or less than
their original cost.
YIELD CALCULATIONS. Yields for the funds used in advertising are computed
by dividing a fund's interest income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the fund's
net asset value per share at the end of the period, and annualizing the
result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for purposes of calculating a fund's yield differs from
income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's returns, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over the
period. Average annual total returns are calculated by determining the
growth or decline in value of a hypothetical investment in the fund over a
stated period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
total return of 100% over ten years would produce an average annual total
return of 7.18%, which is the steady annual rate that would equal 100%
growth on a compounded basis in ten years. While average annual returns
are a convenient means of comparing investment alternatives, investors
should realize that a fund's performance is not constant over time, but
changes from year to year, and that average annual total returns represent
averaged figures as opposed to the actual year-to-year performance of a
fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration, and may omit or include the effect of the $5.00
account closeout fee. Omitting fees will cause the funds' total return
figures to be higher.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table shows each fund's 30-day
yield and total returns for the period ended April 30, 1994:
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total Returns* Cumulative Total Returns*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
30-Day Yield One Year Life of Fund** One Year Life of Fund**
_____ ____% ___% ____% ____%
</TABLE>
* Total return includes the effect of the fund's $5 account closeout fee on
an average sized account.
** Life of fund figures are from December 18, 1992 (commencement of
operations). If FMR had not reimbursed certain fund expenses during
this period, the fund's yield and total returns would have been lower.
SPARTAN GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total Returns* Cumulative Total Returns*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
30-Day Yield One Year Life of Fund** One Year Life of Fund**
_____ ____% ___% ____% ____%
</TABLE>
* Total return includes the effect of the fund's $5 account closeout fee on
an average sized account.
** Life of fund figures are from December 20, 1988 (commencement of
operations). If FMR had not reimbursed certain fund expenses during
this period, the fund's total returns would have been lower.
The tables on the next page show the income and capital elements of Spartan
Short-Intermediate Government Fund's total return from December 18, 1992
(commencement of operations) through April 30, 1994 and Spartan Government
Income Fund's total return from December 20, 1988 (commencement of
operations) through April 30, 1994. The tables compare each fund's return
to the record of the Standard & Poor's 500 Composite Stock Price Index
(S&P 500), the Dow Jones Industrial Average (DJIA), and the cost of
living (measured by the Consumer Price Index, or CPI) over the same period.
The S&P 500 and DJIA comparisons are provided to show how the funds'
total returns compared to the return of a broad range of common stocks and
a narrower set of stocks of major industrial companies, respectively, over
the same period. Of course, since the funds invest in fixed-income
securities, common stocks represent a different type of investment from the
funds. Common stocks generally offer greater growth potential than the
funds, but generally experience greater price volatility, which means
greater potential for loss. In addition, common stocks generally provide
lower income than a bond fund investment such as the funds. Figures for
the S&P 500 and DJIA are based on the prices of unmanaged groups of
stocks and, unlike each fund's returns, their returns do not include the
effect of paying brokerage commissions or other costs of investing.
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND. During the period from
December 18, 1992 (commencement of operations) to April 30, 1994, a
hypothetical $10,000 investment in Spartan Short-Intermediate Government
Fund would have grown to $______, assuming all distributions were
reinvested. This was a period of fluctuating interest rates and bond
prices and should not be considered representative of the dividend income
or capital gain or loss that could be realized from an investment in the
fund today.
<TABLE>
<CAPTION>
<S> <C>
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested
Period Ended $10,000 Dividend Capital Gain Total
April 30 Investment Distributions Distributions Value S&P DJIA CPI**
500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 $_______ $_____ $____ $______ $_____ $_____ $_____
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993* 10,090 253 0 10,343 10,201 10,601 10,148
</TABLE>
* From December 18, 1992 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on December
18, 1992, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $________.
If distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and the cash
payments for the period would have come to $250 for income dividends. The
fund did not distribute any capital gains during the period. If FMR had
not reimbursed certain fund expenses during the periods shown above, the
fund's total returns would have been lower. Tax consequences of different
investments have not been factored into the figures above. The figures in
the table do not reflect the effect of the fund's $5 account closeout fee.
SPARTAN GOVERNMENT INCOME FUND. During the period from December 20, 1988
(commencement of operations) to April 30, 1994, a hypothetical $10,000
investment in Spartan Government Income Fund would have grown to $______,
assuming all distributions were reinvested. This was a period of
fluctuating interest rates and bond prices and should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
SPARTAN GOVERNMENT INCOME FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested
Period Ended $10,000 Dividend Capital Gain Total
April 30 Investment Distributions Distributions Value S&P DJIA CPI**
500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $______ $______ $______ $_____ $______ $_____ $_____
1993 10,930 4,566 672 16,168 18,191 18,322 11,950
1992 10,900 3,565 84 14,550 16,651 17,428 11,577
1991 10,640 2,429 33 13,102 14,600 14,528 11,220
1990 10,030 1,305 31 11,366 12,414 12,869 10,697
1989* 10,050 333 0 10,383 11,228 11,283 10,216
</TABLE>
* From December 20, 1988 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on December
20, 1988, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $______.
If the distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and the cash
payments for the period would have come to $________ for income dividends
and $______ for capital gain distributions. If FMR had not reimbursed
certain fund expenses during the periods shown above, the fund's total
returns would have been lower. Tax consequences of different investments
have not been factored into the figures above. The figures in the table do
not reflect the effect of the fund's $5 account closeout fee.
The funds may also quote unmanaged indices of bond prices and yields,
including the following:
MERRILL LYNCH GOVERNMENT MASTER INDEX is an index comprised of
publicly-placed, coupon bearing U.S. Treasury notes and bonds and
non-convertible agency obligations, with maturities of at least one year.
Par amounts of the bonds in the index must be no less than $10 million.
The index excludes flower bonds, collateralized mortgage obligations, and
agency pass-throughs.
MERRILL LYNCH SHORT-TERM U.S. TREASURY INDEX is an index comprised of U.S.
Treasury securities with remaining maturities of between 1 and 2.99 years.
MERRILL LYNCH INTERMEDIATE-TERM U.S. TREASURY INDEX is an index comprised
of U.S. Treasury securities with remaining maturities of between 7 and 9.99
years.
MERRILL LYNCH LONG-TERM U.S. TREASURY INDEX is an index comprised of U.S.
Treasury securities with remaining maturities of over 15 years.
MERRILL LYNCH ALL MORTGAGES INDEX is an index comprised of a variety of
mortgage-backed securities including but not limited to Ginnie Mae, Fannie
Mae and Freddie Mac mortgage-backed securities with varying coupons and
maturities.
MERRILL LYNCH ALL GNMAS INDEX is an index comprised of Ginnie Mae
mortgage-backed securities with varying coupons and maturities.
LEHMAN BROTHERS ALL GOVERNMENT BOND INDEX is an index comprised of all
public obligations of the U.S. Treasury, U.S. government agencies,
quasi-federal corporations, and corporate debt guaranteed by the U.S.
government. The index excludes flower bonds, foreign-targeted issues,
mortgage-backed securities, and securities maturing in less than one year.
LEHMAN BROTHERS ONE TO THREE YEAR GOVERNMENT BOND INDEX is an index
comprised of public obligations of the U.S. Treasury, U.S. government
agencies, quasi-federal corporations, and corporate debt guaranteed by the
U.S. government maturing between one and three years. The index excludes
flower bonds, foreign-targeted issues, and mortgage-backed securities.
LEHMAN BROTHERS LONG-TERM TREASURY INDEX is an unmanaged index of long-term
U.S. Treasury bonds including all public obligations of the U.S. Treasury,
excluding zero-coupon bonds, with at least $25 million outstanding and with
maturities between 10 and 30 years. This index may be used to illustrate
the volatility of long-term Treasury securities.
These indices may be used as broad indicators of prices and yields in the
government securities market. Since these indices are unmanaged, no
attempt is made to control the volatility of their component securities as
is done with the fund. Certain securities in which the funds may invest,
particularly mortgage-backed instruments, are excluded from the indices.
A fund may also compare its performance to the performance of individual
U.S. Treasury securities. Treasury securities are guaranteed by the U.S.
government as to the timely payment of principal and interest. A fund may
offer higher potential returns than Treasury securities, but shares of the
funds are not guaranteed by the U.S. government.
156A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, a fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
157From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
158A fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks. Mutual funds differ from bank
investments in several respects. For example, a fund may offer greater
liquidity or higher potential returns than CDs; and a fund does not
guarantee your principal or your return.
159Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
160Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
161Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
162A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND
AVERAGES(trademark)/Government, which is reported in the MONEY FUND
REPORT(trademark), covers over ___ government money market funds. The Bond
Fund Report AverageS(trademark)/Government, which is reported in the BOND
FUND REPORT(trademark), covers over ___ government bond funds. When
evaluating comparisons to money market funds, investors should consider the
relevant differences in investment objectives and policies. Specifically,
money market funds invest in short-term, high-quality instruments and seek
to maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
163In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investing plans and dollar-cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
164A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
165A fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
the investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares had been purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares through periods of low price levels.
A fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
In addition to performance rankings, the funds may compare their total
expense ratio to the average total expense ratio of government bond funds
tracked by Lipper. A fund's total expense ratio is a significant factor in
comparing bond fund investments because of its effect on yield. According
to Lipper Directors Analytical Data, Third Edition, 1994, the average
expense ratio for U.S. government bond funds was ___%.
As of April 30, 1994, FMR managed __ Spartan Funds with approximately $__
billion in assets.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a fund's NAV may be affected on days when investors do
not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other
property on redemption may realize either a gain or loss for tax purposes,
and will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), each fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
exchange, or (ii) a fund suspends the redemption of shares to be exchanged
as permitted under the 1940 Act or the rules and regulations thereunder, or
the fund to be acquired suspends the sale of its shares because it is
unable to invest amounts effectively in accordance with its investment
objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. Because each fund's income is primarily derived from interest,
dividends from the fund normally will not qualify for the
dividends-received deduction available to corporations.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business trusts,
state law provides for a pass-through of the state and local income tax
exemption afforded to direct owners of U.S. government securities. Some
states limit this pass-through to mutual funds that invest a certain amount
in U.S. government securities, and some types of securities, such as
repurchase agreements and some agency backed securities, may not qualify
for this pass-through benefit. The tax treatment of your dividend
distributions from a fund will be the same as if you directly owned your
proportionate share of the U.S. government securities in the fund's
portfolio. Because the income earned on the U.S. government securities in
which the fund invests is exempt from state and local income taxes, the
portion of your dividends from the fund attributable to these securities
will also be free from income taxes. The exemption from state and local
income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to
shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on the fund level on income and capital gains
distributed to shareholders. In order to qualify as a regulated investment
company and avoid being subject to federal income or excise taxes, each
fund intends to distribute substantially all of its net taxable income and
net realized capital gains within each calendar year as well as on a fiscal
year basis. The funds intend to comply with other tax rules applicable to
regulated investment companies, including a requirement that capital gains
from the sale of securities held less than three months constitute less
than 30% of a fund's gross income for each fiscal year. Gains from some
futures contracts and options are included in the 30% calculation, which
may limit a fund's investments in such instruments. Each fund is treated
as a separate entity from the other portfolios of Fidelity Fixed-Income
Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the funds and their shareholders,
and no attempt has been made to discuss individual tax consequences.
Investors should consult their tax advisors to determine whether the funds
are suitable to their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.), Inc.
(FMR U.K.) and Fidelity Management & Research (Far East), Inc. (FMR Far
East), both wholly owned subsidiaries of FMR formed in 1986, supply
investment research, and may supply portfolio management services, to FMR
in connection with certain funds advised by FMR. Analysts employed by FMR,
FMR U.K., and FMR Far East research and visit thousands of domestic and
foreign companies each year. FMR Texas Inc., a wholly owned subsidiary of
FMR formed in 1989, supplies portfolio management and research services in
connection with certain money market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the trust or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989), Sanifill Corporation (non-hazardous waste,
1993), and CH2M Hill Companies (engineering). In addition, he served on
the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of
FDC.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of April 30, 1994, the Trustees and officers owned _________________.
MANAGEMENT CONTRACT
Each fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides the funds with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of the trusts, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust 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 each fund. These services include providing
facilities for maintaining the funds' organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters,
and other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state law; developing management and shareholder services for the funds;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the Board of Trustees.
FMR is responsible for the payment of all expenses of each fund with
certain exceptions. Specific expenses payable by FMR include, without
limitation, the fees and expenses of registering and qualifying the trust,
the funds, and their shares for distribution under federal and state
securities laws; expenses of typesetting for printing the prospectus and
statement of additional information; custodian charges, audit and legal
expenses; insurance expense; association membership dues; and the expenses
of mailing reports to shareholders, shareholder meetings, and proxy
solicitations. FMR also provides for transfer agent and dividend
disbursing services and portfolio and general accounting record maintenance
through FSC.
FMR pays all other expenses of each fund with the following exceptions:
fees and expenses of all Trustees who are not "interested persons" of the
trust or of FMR (the non-interested Trustees); interest on borrowings;
taxes; brokerage commissions (if any); and 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 the officers and
Trustees with respect to litigation.
FMR is Spartan Short-Intermediate Government Fund's manager pursuant to a
management contract dated November 19, 1992, which was approved by FMR,
then sole shareholder on November 19, 1992. FMR is Spartan Government
Income Fund's manager pursuant to a management contract dated November 1,
1989, which was approved by the fund's shareholders on October 18, 1989.
For the services of FMR under the management contract, each fund pays FMR a
monthly management fee at the annual rate of .65% of average net assets
throughout the month. FMR reduces its fee by an amount equal to the fees
and expenses of the non-interested Trustees. For the fiscal period ended
April 30, 1994, Spartan Short-Intermediate Government Fund and Spartan
Government Income Fund paid $____ and $____ in management fees,
respectively.
FMR may, from time to time, voluntarily reimburse all or a portion of a
fund operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). The tables on the next page
outline expense limitations (as a percentage of the fund average net
assets) in effect from Spartan Short-Intermediate Government Fund's
commencement of operations (December 18, 1992) through the date of this
Statement of Additional Information. The tables also show the amount of
management fees incurred under each contract and the amounts reimbursed by
FMR, if any, for each fiscal period from commencement of operations through
the date of this Statement of Additional Information.
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND
From To Expense Limitation
June 1, 1993 -- .10%
April 1, 1993 May 31, 1993 .05%
December 17, 1992 March 31, 1993 .00%
Management Fees Amount of
Fiscal Year Before Reimbursement Reimbursement
1994 $ _____ $ _____
1993* $56,101 $54,145
* From December 18, 1992 (commencement of operations).
SPARTAN GOVERNMENT INCOME FUND
Amount of
Fiscal Year Management Fees Reimbursement
1994 $ $
1993 $3,184,918 $0
1992 $3,119,326 $0
* From December 20, 1988 (commencement of operations).
If FMR were not temporarily reimbursing these expenses, Spartan
Short-Intermediate Government Fund's yields would be lower and its total
operating expenses would be .65% of the fund's net assets.
To defray shareholder service costs, FMR or its affiliates also collect
each fund's $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for
wire purchases and redemptions, and the $2.00 checkwriting charge.
Shareholder transaction fees and charges collected for fiscal 1994 and 1993
for Spartan Short-Intermediate Government, and for fiscal 1994, 1993, and
1992 for Spartan Government Income, are indicated in the tables below.
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Exchange Fees Account Closeout Fees Wire Fees Checkwriting Charge
</TABLE>
1994 $ $ $ $
1993 $235 $5 $70 $20
SPARTAN GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Exchange Fees Account Closeout Fees Wire Fees Checkwriting Charge
</TABLE>
1994 $ $ $ $
1993 $33,475 $1,635 $1,905 $32
1992 $41,525 $1,440 $2,285 N/A
DISTRIBUTION AND SERVICE PLAN
Each fund has adopted a distribution and service plan (the Plan) under Rule
12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides
in substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of the fund except pursuant to a plan adopted by the fund under the
Rule. The Board of Trustees have adopted the Plan to allow the funds and
FMR to incur certain expenses that might be considered to constitute
indirect payment by the funds of distribution expenses. Under the Plan, if
the payment to FMR of management fees should be deemed to be indirect
financing by a fund of the distribution of its shares, such payment is
authorized by the Plan.
The Plan specifically recognizes that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the funds. In addition,
the Plan provides that FMR may use their resources, including its
management fee revenues, to make payments to third parties that provide
assistance in selling shares of the funds, or to third parties, including
banks, that render shareholder support services.
Each fund's Plan has been approved by Trustees. As required by the Rule,
the Trustees carefully considered all pertinent factors relating to the
implementation of the Plan prior to its approval, and have determined that
there is a reasonable likelihood that the Plans will benefit the funds and
their shareholders. In particular, the Trustees noted that the Plan does
not authorize payments by the funds other than those made to FMR under its
management contract with the funds. To the extent that the Plan gives FMR
and FDC greater flexibility in connection with the distribution of shares
of the funds, additional sales of the funds' shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the Plan by local entities with whom shareholders have
other relationships. Spartan Short-Intermediate Government Fund's Plan was
approved by FMR, as initial shareholder, on November 19, 1992. Spartan
Government Income Fund's Plan was approved by shareholders on October 18,
1989.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. The funds may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the Plan. No preference will be shown in the
selection of investments for the instruments of such depository
institutions. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers
pursuant to state law.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC performs transfer agency, dividend disbursing, and shareholder
servicing functions for the funds. The costs of these services are borne
by FMR pursuant to its management contracts with the funds. FSC also
calculates each fund's NAV and dividends, maintains each fund's general
accounting records, and administers each fund's securities lending program.
The costs of these services are also borne by FMR pursuant to its
management contract with the funds.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities and Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. Each fund's 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. Promotional and administrative
expenses in connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan Short-Intermediate Government Fund and Spartan
Government Income Fund are funds of Fidelity Fixed-Income Trust, an
open-end management investment company originally organized as a
Massachusetts business corporation on June 25, 1970. On September 7, 1984,
the trust was reorganized as a Massachusetts business trust, at which time
its name was changed from Fidelity Corporate Bond Fund, Inc. to Fidelity
Corporate Bond Fund. On October 23, 1985 the trust's name was changed to
Fidelity Flexible Bond Fund, and on August 31, 1986 it was changed to
Fidelity Fixed-Income Trust. Currently, there are five funds of the trust:
Fidelity Investment Grade Bond Fund, Fidelity Short-Term Bond Portfolio,
Spartan Government Income Fund, Spartan High Income Fund, and Spartan
Short-Intermediate Government Fund. The Declaration of Trust permits the
trust to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value per share you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of redemption,
and the privilege of exchange are described in the Prospectus. Shares are
fully paid and nonassessable, except as set forth under the heading
"Shareholder and Trustee Liability" above. Shareholders representing 10%
or more of the trust or a fund may, as set forth in the Declaration of
Trust, call meetings of the trust or a fund for any purpose related to the
trust or fund, as the case may be, including, in the case of a meeting of
the entire trust, the purpose of voting on removal of one or more Trustees.
The trust or any fund may be terminated upon the sale of its assets to
another open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of the trust
or the fund, as determined by the current value of each shareholder's
investment in the fund or trust. If not so terminated, the trust and its
funds will continue indefinitely.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of each fund. The custodian is
responsible for the safekeeping of each fund's assets and the appointment
of subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of a fund or in deciding which
securities are purchased or sold by the fund. The funds may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and
personal and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. _______________________________ serves as the trust's independent
accountant. The auditor examines financial statements for the fund and
provides other audit, tax, and related services.
FINANCIAL STATEMENTS
The funds' Annual Reports for the fiscal year ended April 30, 1994 are
separate reports supplied with this Statement of Additional Information and
are incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of a fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
assuming a constant prepayment rate for the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
Fidelity Fixed-Income Trust
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not applicable.
(b) Exhibits
1. (a) Amended and Restated Declaration of Trust, dated March 17, 1994, is
filed herein as Exhibit 1(a).
2. By-laws of the trust are incorporated herein by reference to Exhibit 2
to Post-Effective Amendment No. 29.
3. Not applicable.
4. Not applicable.
5. (a) Form of Management Contract, dated November 1, 1993, between
Fidelity Short-Term Bond Portfolio and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(a) to
Post-Effective Amendment No. 67.
(b) Form of Management Contract, dated November 1, 1993, on behalf of
Fidelity Investment Grade Bond Fund and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(b) to
Post-Effective Amendment No. 67.
(c) Management Contract, dated November 1, 1989, between Spartan
Government Fund and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(c) to Post-Effective
Amendment No. 53.
(d) Form of Management Contract, dated November 1, 1993, between Spartan
High Income Fund and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(d) to Post-Effective
Amendment No. 53.
(e) Management Contract between Spartan Short-Intermediate Government
Fund and Fund and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(e) to Post-Effective
Amendment No. 64.
(f) Sub-Advisory Agreement, dated November 1, 1989, between Fidelity
Management & Research Company and Fidelity Management & Research
(U.K.) on behalf of Fidelity Short-Term Bond Portfolio is incorporated
herein by reference to Exhibit 5(e) to Post-Effective Amendment No. 53.
(g) Sub-Advisory Agreement, dated November 1, 1989, between Fidelity
Management & Research Company and Fidelity Management & Research
(Far East) on behalf of Fidelity Short-Term Bond Portfolio is incorporated
herein by reference to Exhibit 5(f) to Post-Effective Amendment No. 53.
(h) Sub-Advisory Agreement, dated November 1, 1989, between Fidelity
Management & Research Company and Fidelity Management & Research
(U.K.) on behalf of Fidelity Flexible Bond Portfolio is incorporated herein
by reference to Exhibit 5(g) to Post-Effective Amendment No. 53.
(i) Sub-Advisory Agreement, dated November 1, 1989, between Fidelity
Management & Research Company and Fidelity Management & Research
(Far East) on behalf of Fidelity Flexible Bond Portfolio is incorporated
herein by reference to Exhibit 5(h) to Post-Effective Amendment No. 53.
(j) Form of Sub-Advisory Agreement, dated November 1, 1993, between
Fidelity Management & Research Company and Fidelity Management &
Research (U.K.) on behalf of Spartan High Income Fund is incorporated
herein by reference to Exhibit 5(j) to Post-Effective Amendment No. 67.
(k) Form of Sub-Advisory Agreement, dated November 1, 1993, between
Fidelity Management & Research Company and Fidelity Management &
Research (Far East) on behalf of Spartan High Income Fund is incorporated
herein by reference to Exhibit 5(k) to Post-Effective Amendment No. 67.
6. (a) General Distribution Agreement, dated April 1, 1987, between
Fidelity Flexible Bond Portfolio and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(a) to Post-Effective
Amendment No. 43.
(b) Amendment, dated January 1, 1988, to General Distribution Agreement
between Fidelity Flexible Bond Portfolio and Fidelity Distributors
Corporation is incorporated herein by reference to Exhibit 6(b) to
Post-Effective Amendment No. 43.
(c) General Distribution Agreement, dated April 1, 1987, between Fidelity
Short-Term Bond Portfolio and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(c) to Post-Effective
Amendment No. 43.
(d) Amendment, dated January 1, 1988, to General Distribution Agreement
between Fidelity Short-Term Bond Portfolio and Fidelity Distributors
Corporation is incorporated herein by reference to Exhibit 6(d) to
Post-Effective Amendment No. 43.
(e) General Distribution Agreement, dated November 7, 1988, between
Spartan Government Fund and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(f) to Post-Effective
Amendment No. 53.
(f) General Distribution Agreement, dated July 19, 1989, between Spartan
High Income Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(f) to Post-Effective Amendment No. 58.
(g) Form of General Distribution Agreement between Spartan
Short-Intermediate Government Fund and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(g) to Post-Effective
Amendment No. 64.
7. Retirement Plan for non-interested Person Trustees, Directors, or
General Partners, effective November 1, 1989, is incorporated herein by
reference to Exhibit 7 to Post-Effective Amendment No. 61.
8. Custodian Agreement, dated July 18, 1991, between Fidelity Fixed-Income
Trust and the Bank of New York is incorporated herein by reference to
Exhibit 8 to Post-Effective Amendment No. 61.
9. (a) Amended Service Agreement, dated June 1, 1989 between Fidelity
Fixed-Income Trust, FMR Corp. and Fidelity Service Co. is incorporated
herein by reference to Exhibit 9(e) to Post-Effective Amendment No. 53.
(b) Schedules A, B, and C to the Amended Service Agreement for Fidelity
Short-Term Bond Portfolio dated June 1, 1989 are incorporated herein by
reference to Exhibit 9(f) to Post-Effective Amendment No. 53.
(c) Schedules A, B, and C to the Amended Service Agreement for Fidelity
Flexible Bond Portfolio dated June 1, 1989 are incorporated herein by
reference to Exhibit 9(g) to Post-Effective Amendment No. 53.
(d) Form of Schedules A, B, and C to the Amended Service Agreement for
Spartan Short-Intermediate Government Fund is incorporated herein by
reference to Exhibit 9(d) to Post-Effective Amendment No. 64.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. (a) Individual Retirement Account Custodial Agreement and Disclosure
Statement as currently in effect are incorporated herein by reference to
Exhibit 14(a) to Post-Effective Amendment No. 39.
(b) 403(b)(7) Custodial Account Agreement as currently in effect is
incorporated herein by reference to Exhibit 14(b) to Post-Effective
Amendment No. 58.
(c) Fidelity Defined Contribution Retirement Plan and Trust Agreement as
currently in effect are incorporated herein by reference to Exhibit 14(c)
to Post-Effective Amendment No. 57.
(d) Defined Benefit Pension Plan and Trust as currently in effect are
incorporated herein by reference to Exhibit 14(d) to Post-Effective
Amendment No. 57.
(e) 401(a) Prototype Plan for Tax-Exempt Employers as currently in effect
are incorporated herein by reference to Exhibit 14(e) to Post-Effective
Amendment No. 57.
(f) Fidelity Master Plan for Savings and Investments as currently in
effect are incorporated herein by reference to Exhibit 14(f) to
Post-Effective Amendment No. 58.
(g) Group Individual Retirement Account Custodial Agreement and
Disclosure Statement as currently in effect are incorporated herein by
reference to Exhibit 14(g) to Post-Effective Amendment No. 57.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Short-Term Bond Portfolio is incorporated herein by reference to Exhibit
15(a) to Post-Effective Amendment No. 39.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Flexible Bond Portfolio is incorporated herein by reference to Exhibit
15(b) to Post-Effective Amendment No. 39.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan High
Income Fund is incorporated herein by reference to Exhibit 15(d) to
Post-Effective Amendment No. 49.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Government Fund is incorporated herein by reference to Exhibit 15(d) to
Post-Effective Amendment No. 53.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Short-Intermediate Government Fund is incorporated herein by reference to
Exhibit 15(e) to Post-Effective Amendment No. 64.
16. (a) A schedule for computation of performance quotations for Fidelity
Flexible Bond Portfolio and Fidelity Short-Term Bond Portfolio is
incorporated herein by reference to Exhibit 16 to Post-Effective Amendment
No. 44.
(b) A supplement to the schedule of performance quotations is
incorporated herein by reference to Exhibit 16(b) to Post-Effective
Amendment No. 45.
(c) A supplement to the schedule of performance quotations in
incorporated herein by reference to Exhibit 16(b) to Post-Effective
Amendment No. 49.
(d) A schedule for computation of performance quotations for Spartan
Short-Intermediate Government Fund is incorporated herein by reference to
Exhibit 16(d) to Post-Effective Amendment No. 64.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of Registrant is the same as the boards of other
funds advised by FMR, each of which has Fidelity Management & Research
Company as its investment adviser. In addition, the officers of these
funds are substantially identical. Nonetheless, Registrant takes the
position that it is not under common control with these other funds since
the power residing in the respective boards and officers arises as the
result of an official position with the respective funds.
Item 26. Number of Holders of Securities
February 28, 1994
Title of Class: Shares of Beneficial Interest
Name of Series Number of Recordholders
Fidelity Investment Grade Bond Fund 89,685
Fidelity Short-Term Bond Portfolio 113,865
Spartan Government Income Fund 10,314
Spartan High Income Fund 21,609
Spartan Short-Intermediate Government Fund 1,835
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc.;
President and Trustee of funds advised by FMR;
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Charles F. Dornbush Senior Vice President of FMR; Chief Financial Officer of
the Fidelity funds; Treasurer of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR. Prior to assuming the position as Treasurer he
was Senior Vice President, Fund Accounting - Fidelity
Accounting & Custody Services Co.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Income/Growth Group
Leader and International Group Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephan Jonas Vice President of FMR (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Group Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Brian Posner Vice President of FMR (1993) and of a fund advised by
FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Head.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management &
Research (Far East) Inc.; President and Trustee of funds advised
by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director
of Worldwide Research of FMR.
Charles F. Dornbush Treasurer of FMR U.K.; Treasurer of Fidelity Management
& Research (Far East) Inc.; Treasurer of FMR Texas Inc.,
Senior Vice President and Chief Financial Officer of the Fidelity
funds.
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management &
Research (Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management
& Research (U.K.) Inc.; Senior Vice President and
Trustee of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research
(U.K.) Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Charles F. Dornbush Treasurer of FMR Far East; Treasurer of Fidelity
Management & Research (U.K.) Inc.; Treasurer of
FMR Texas Inc.; Senior Vice President and Chief
Financial Officer of the Fidelity funds.
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management
& Research (U.K.) Inc.; Secretary of FMR Texas
Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
The Victory Funds
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Co., 82 Devonshire Street, Boston, MA 02109, or the funds'
custodian The Bank of New York, 110 Washington Street, New York, N.Y.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes for the funds 1) to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees, when requested to do so by record holders of not less
than 10% of its outstanding shares; and 2) to assist in communications with
other shareholders pursuant to Section 16(c)(1) and (2), whenever
shareholders meeting the qualifications set forth in Section 16(c) seek the
opportunity to communicate with other shareholders with a view toward
requesting a meeting.
(b) The Registrant on behalf of Fidelity Investment Grade Bond Fund,
Fidelity Short-Term Bond Portfolio, Spartan Government Income Fund, Spartan
High Income Fund, and Spartan Short-Intermediate Government Fund
undertakes, provided the information required by Item 5A is contained in
the annual report, to furnish each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 70 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and Commonwealth of Massachusetts, on the 4th day of April 1994.
FIDELITY FIXED-INCOME TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee April 4, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer April 4, 1994
Gary L. French
/s/J. Gary Burkhead Trustee April 4, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee April 4, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee April 4, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee April 4, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee April 4, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee April 4, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee April 4, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee April 4, 1994
Edward H. Malone
/s/Marvin L. Mann * Trustee April 4, 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee April 4, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee April 4, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity, all
Pre-Effective Amendments to any Registration Statements of the Funds, any
and all subsequent Post-Effective Amendments to said Registration
Statements, any Registration Statements on Form N-14, and any supplements
or other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series IV Fidelity School Street Trust
Fidelity Advisor Series VI Fidelity Select Portfolios
Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P.
Fidelity Beacon Street Trust Fidelity Trend Fund
Fidelity Capital Trust Fidelity Union Street Trust
Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Phyllis Burke Davis October 20, 1993
Phyllis Burke Davis
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Special Situations Fund
Fidelity Advisor Series IV Fidelity Sterling Performance Portfolio, L.P.
Fidelity Advisor Series VI Fidelity Trend Fund
Fidelity Advisor Series VII Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Advisor Series VIII Fidelity U.S. Investments-Government Securities
Fidelity Contrafund Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P.
Portfolio, L.P. Spartan U.S. Treasury Money Market
Fidelity Fixed-Income Trust Fund
Fidelity Government Securities Fund Variable Insurance Products Fund
Fidelity Hastings Street Trust Variable Insurance Products Fund II
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Marvin L. Mann October 20, 1993
Marvin L. Mann
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument this 17th day of March, 1994.
/s/Edward C. Johnson 3d /s/Donald S. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
Richard J. Flynn Marvin L. Mann
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
AMENDED AND RESTATED DECLARATION OF TRUST
DATED MARCH 17, 1994
AMENDED AND RESTATED DECLARATION OF TRUST, made March 17, 1994 by each of
the Trustees whose signature is affixed hereto (the "Trustees")
WHEREAS, the Trustees desire to amend and restate this Declaration of
Trust for the sole purpose of supplementing the Declaration to incorporate
amendments duly adopted; and
WHEREAS, this Trust was initially made on September 5, 1984 by Edward C.
Johnson 3d, Caleb Loring, Jr., and Frank Nesvet inorder to establish a
trust fund for the investment and reinvestment of funds contributed
thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in Trust
under this Declaration of Trust as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Fidelity Fixed-Income Trust".
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the context
or specifically provided:
(a) The Terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the
third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them
in the 1940 Act, as amended from time to time;
(b) The "Trust" refers to Fidelity Fixed-Income Trust and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article X, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refer to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the
time being in office as such trustee or trustees;
(f) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series shall be divided from
time to time, and includes fractions of shares as well as whole shares
consistent with the requirements of Federal and/or other securities laws;
and
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The Purpose of this Trust is to provide investors a continuous source of
managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series as the
Trustees shall from time to time create and establish. The number of Shares
is unlimited and each Share shall be without par value and shall be fully
paid and nonassessable. The Trustees shall have full power and authority,
in their sole discretion and without obtaining any prior authorization or
vote of the Shareholders of the Trust to create and establish (and to
change in any manner) Shares with such preferences, voting powers, rights
and privileges as the Trustees may from time to time determine, to divide
or combine the Shares into a greater or lesser number, to classify or
reclassify any issued Shares into one or more Series of Shares, to abolish
any one or more Series of Shares, and to take such other action with
respect to the Shares as the Trustees may deem desirable.
ESTABLISHMENT OF SERIES
Section 2. The establishment of any Series shall be effective upon the
adoption of a resolution by a majority of the then Trustees setting forth
such establishment and designation and the relative rights and preferences
of the Shares of such Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated,
the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of the
Trust. The Trustees may make such rules as they consider appropriate for
the transfer of Shares and similar matters. The record books of the Trust
shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the
appropriate Series is authorized to invest, valued as provided in Article
X, Section 3. After the date of the initial contribution of capital, the
number of Shares to represent the initial contribution may in the Trustees'
discretion be considered as outstanding and the amount received by the
Trustees on account of the contribution shall be treated as an asset of the
Trust. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge
upon investments in the Trust and (b) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Series, shall
be allocated by the Trustees between and among one or more of the Series in
such manner as they, in their sole discretion, deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders
of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall
be so recorded upon the books of the Trust, and shall be held by the
Trustees in Trust for the benefit of the holders of Shares of that Series.
The assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees between or among any one or more of the Series in such manner as
the Trustees in their sole discretion deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Any creditor of any Series may look only to the
assets of that Series to satisfy such creditor's debt.
In case any holder of record of Shares of a particular Series desires to
dispose of his Shares, he may deposit at the office of the transfer agent
or other authorized agent of that Series a written request or such other
form of request as the Trustees may from time to time authorize, requesting
that the Series purchase the Shares in accordance with this Section 2; and
the Shareholder so requesting shall be entitled to require the Series to
purchase, and the Series or the principal underwriter of the Series shall
purchase his said Shares, but only at the Net Asset Value thereof (as
described in Section 3 hereof). The Series shall make payment for any such
Shares to be redeemed, as aforesaid, in cash or property from the assets of
that Series and payment for such Shares shall be made by the Series or the
principal underwriter of the Series to the Shareholder of record within
seven (7) days after the date upon which the request is effective.
NO PREEMPTIVE RIGHTS
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees.
LIMITATION OF PERSONAL LIABILITY
Section 7. The Trustees shall have no power to bind any Shareholder
personally or to call upon any shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust shall include a
recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility.
ELECTION: INITIAL TRUSTEES
Section 2. On a date fixed by the Trustees, the Shareholders shall elect
not less than three Trustees. A Trustee shall not be required to be a
Shareholder of the Trust. The initial Trustees shall be Edward C. Johnson
3rd, Caleb Loring, Jr. and Frank Nesvet and such other individuals as the
Board of Trustees shall appoint pursuant to Section 4 of the Article IV.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that
any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may
be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests in
writing to be retired or who has become incapacitated by illness or injury
may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) a Trustee may be
removed at any Special Meeting of the Trust by a vote of two-thirds of the
outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, in case a vacancy
shall, by reason of an increase in number, or for any other reason, exist,
the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the
limitations under the Investment Company Act of 1940. Such appointment
shall be evidenced by a written instrument signed by a majority of the
Trustees in office or by recording in the records of the Trust, whereupon
the appointment shall take effect. Within three months of such appointment
the Trustees shall cause notice of such appointment to be mailed to each
Shareholder at his address as recorded on the books of the Trust. An
appointment of a Trustee may be made by the Trustees then in office and
notice thereof mailed to Shareholders as aforesaid in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number
of Trustees effective at a later date, provided that said appointment shall
become effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this trust, the trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
The power of appointment is subject to the provisions of Section 16(a) of
the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more than
twelve (12), serving hereunder at any time shall be determined by the
Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from his
state of domicile, or is physically or mentally incapacitated by reason of
disease or otherwise, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy,
absence or incapacity, shall be conclusive, provided, however, that no
vacancy shall remain unfilled for a period longer than six calendar months.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of
the Trust shall at all times be considered as vested in the Trustees. No
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest
in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in the Declaration of
Trust or the Bylaws of the Trust, the Trustees shall have power and
authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by Trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ a bank or trust company as custodian of any assets of the
Trust subject to any conditions set forth in this Declaration of Trust or
in the Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, custodian or underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XII, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its
own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series, or to apportion the same between or among two or more
Series, provided that any liabilities or expenses incurred by a particular
Series shall be payable solely out of the assets belonging to that Series
as provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes.
(q) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided for.
(r) To borrow money for temporary or emergency purposes and not for
investment purposes, and to pledge, mortgage or hypothecate the assets of
the Trust, subject to applicable requirements of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving notice
to such Shareholder.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of Shares to the same extent as if he were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued
and sold Shares to and buy such Shares from any such person of any firm or
company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all
subject to any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone
consent provided a quorum of Trustees participate in any such telephonic
meeting, unless the 1940 Act requires that a particular action be taken
only at a meeting of the Trustees. At any meeting of the Trustees, a
majority of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the Trustees
or by any two other Trustees. Notice of the time, date and Place of all
meetings of the Trustees shall be given by the party calling the meeting to
each Trustee by telephone or telegram sent to his home or business address
at least twenty-four hours in advance of the meeting or by written notice
mailed to his home or business address at least seventy-two hours in
advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a
written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to
any one of their number their authority to approve particular matters or
take particular actions on behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman of
the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by
the Trustees and the administration of the Trust, and may be the chief
executive, financial and accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets belonging
to the appropriate Series for their expenses and disbursements, including,
without limitation, fees and expenses of Trustees who are not Interested
Persons of the Trust, interest expense, taxes, fees and commissions of
every kind, expenses of pricing Trust portfolio securities, expenses of
issue, repurchase and redemption of shares including expenses attributable
to a program of periodic repurchases or redemptions, expenses of
registering and qualifying the Trust and its Shares under Federal and State
laws and regulations, charges of custodians, transfer agents, and
registrars, expenses of preparing and setting up in type Prospectuses and
Statements of Additional Information, expenses of printing and distributing
prospectuses sent to existing Shareholders, auditing and legal expenses,
reports to Shareholders, expenses of meetings of Shareholders and proxy
solicitations therefor, insurance expense, association membership dues and
for such non-recurring items as may arise, including litigation to which
the Trust is a party, and for all losses and liabilities by them incurred
in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series prior to any rights or interests
of the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in
their discretion from time to time enter into an investment advisory or
management contract(s) with respect to the Trust or any Series thereof
whereby the other party(ies) to such contract(s) shall undertake to furnish
the Trustees such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and
all upon such terms and conditions, as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser(s) (subject to such general
or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities and other
investment instruments of the Trust on behalf of the Trustees or may
authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all
without further action by the Trustees). Any such purchases, sales and
exchanges shall be deemed to have been authorized by all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform
such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser
and sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter
into (a) contract(s) providing for the sale of the Shares, whereby the
Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In
either case, the contract shall be on such terms and conditions as may be
prescribed in the Bylaws, if any, and such further terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provision of this Article VII, or of the Bylaws, if any; and such contract
may also provide for the repurchase or sale of Shares by such other party
as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service contract whereby the other
party shall undertake to furnish the Trustees with transfer agency and
Shareholder services. The contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Declaration of Trust or of the Bylaws, if any. Such
services may be provided by one or more entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and 3
of this Article VII or in Article IX hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more
of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no
such contract shall be invalidated or rendered voidable by reason of the
existence of any relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was reasonable and fair and not inconsistent
with the provisions of this Article VII or the Bylaws, if any. The same
person (including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to Sections 1, 2
and 3 above or Article IX, and any individual may be financially interested
or otherwise affiliated with persons who are parties to any or all of the
contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of this
Article VII shall be consistent with and subject to the requirements of
Section 15 of the 1940 Act (including any amendments thereof or other
applicable Act of Congress hereafter enacted) with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any
contract, entered into pursuant to Section 1 shall be effective unless
assented to by a Majority Shareholder Vote.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII,
Section 1, (iv) with respect to the amendment of this Declaration of Trust
as provided in Article XII, Section 7, (v) to the same extent as the
shareholders of a Massachusetts business corporation, as to whether or not
a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, provided, however, that a Shareholder of a particular Series
shall not be entitled to bring any derivative or class action on behalf of
any other Series of the Trust, and (vi) with respect to such additional
matters relating to the Trust as may be required or authorized by law, by
this Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any State, as the Trustees may consider desirable. On any
matter submitted to a vote of the Shareholders, all shares shall be voted
by individual Series, except (i) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series; and (ii) when
the Trustees have determined that the matter affects only the interests of
one or more Series, then only the Shareholders of such Series shall be
entitled to vote thereon. A Shareholder of each series shall be entitled
to one vote for each dollar of net asset value (number of Shares owned
times net asset value per Share) of such series, on any matter on which
such shareholder is entitled to vote and each fractional dollar amount
shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in
person or by proxy. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required or permitted by
law, this Declaration of Trust or any Bylaws of Trust to be taken by
Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Shareholders
of any Series may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth
of the outstanding Shares entitled to vote. Whenever ten or more
Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view
to obtaining signatures on such a request for a meeting, the Trustees shall
comply with the provisions of said Section 16(c) with respect to providing
such Shareholders access to the list of the Shareholders of record of the
Trust or the mailing of such materials to such Shareholders of record.
Shareholders shall be entitled to at least fifteen days' notice of any
meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Declaration of
Trust permits or requires that holders of any Series shall vote as a
Series, then a majority of the aggregate number of Shares of that Series
entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that Series. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting,
without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the Bylaws, a
majority of the Shares voted in person or by proxy shall decide any
questions and a plurality shall elect a Trustee, provided that where any
provision of law or of this Declaration of Trust permits or requires that
the holders of any Series shall vote as a Series, then a majority of the
Shares of that Series voted on the matter shall decide that matter insofar
as that Series is concerned.
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank or trust company
having capital, surplus and undivided profits of at least two million
dollars ($2,000,000), or such other amount or such other entity as shall be
allowed by the Commission or by the 1940 Act, as custodian with authority
as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order, if confirmed in writing, or by such
electro-mechanical or electronic devices as are agreed to by the Trust and
the custodian, if such procedures have been authorized in writing by the
Trust;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset
Value of any Series in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by
it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital and surplus and undivided profits of at least
two million dollars ($2,000,000) or such other person as may be permitted
by the Commission, or otherwise in accordance with the 1940 Act as from
time to time amended.
CENTRAL CERTIFICATE SYSTEM
Section 2. Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the custodian to deposit all or any part
of the securities owned by the Trust in a system for the central handling
of securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act as from time to
time amended, pursuant to which system all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall
be subject to withdrawal only upon the order of the Trust.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends. The
amount of such dividends and the payment of them shall be wholly in the
discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by the
laws of Massachusetts, at any time to declare and cause to be paid
dividends on Shares of a particular Series, from the assets belonging to
that Series, which dividends, at the election of the Trustees, may be paid
daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, and may be
payable in Shares of that Series at the election of each Shareholder of
that Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute pro rata among the
Shareholders of a particular Series as of the record date of that Series
fixed as provided in Section 3 hereof a "stock dividend".
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular Series
desires to dispose of his Shares, he may deposit at the office of the
transfer agent or other authorized agent of that Series a written request
or such other form of request as the Trustees may from time to time
authorize, requesting that the Series purchase the Shares in accordance
with this Section 2; and the Shareholder so requesting shall be entitled to
require the Series to purchase, and the Series or the principal underwriter
of the Series shall purchase his said Shares, but only at the Net Asset
Value thereof (as described in Section 3 hereof). The Series shall make
payment for any such Shares to be redeemed, as aforesaid, in cash from the
assets of that Series and payment for such Shares shall be made by the
Series or the principal underwriter of the Series to the Shareholder of
record within seven (7) days after the date upon which the request is
effective.
DETERMINATION OF NET ASSET VALUE
AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that amount
by which the assets of that Series, exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value per Share
shall be determined separately for each Series of Shares and shall be
determined on such days and at such times as the Trustees may determine.
Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees, provided, however, that
the Trustees, without Shareholder approval, may alter the method of
appraising portfolio securities insofar as permitted under the 1940 Act and
the rules, regulations and interpretations thereof promulgated or issued by
the Commission or insofar as permitted by any Order of the Commission
applicable to the Series. The Trustees may delegate any of its powers and
duties under this Section 3 with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the value par Share last
determined to be determined again in similar manner and may fix,the time
when such redetermined value shall become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940 Act.
Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no
right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share existing after the
termination of the suspension.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of
the Trust, the Trustees shall not be responsible for or liable in any event
for neglect or wrongdoing of them or any officer, agent, employee or
investment adviser of the Trust, but nothing contained herein shall protect
any Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expense" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither interested
persons of the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees, or by
independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Trustees and officers, and other persons may be entitled by contract
or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 2 may be paid by the applicable Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the applicable Series if it is ultimately determined
that he is not entitled to indemnification under this Section 2; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of
the Trustees who are neither interested persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 2.
SHAREHOLDERS
Section 3. In case any Shareholder or former Shareholder of any Series of
the Trust shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Series shall, upon request by the
Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon.
ARTICLE XII
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to
bind personally either the Trust's officers or any Shareholder. All persons
extending credit to, contracting with or having any claim against the Trust
or the Trustees shall look only to the assets of the appropriate Series for
payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of their agents, whether past, present or future,
shall be personally liable therefor. Nothing in this Declaration of Trust
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to the
provisions of Section 1 of this Article XII and to Article XI, the Trustees
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice counsel or other experts with respect to the
meaning and operation this Declaration of Trust, and subject to the
provisions of Section 1 of this Article XII and to Article XI, shall be
under no liability for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust
for a perIod not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends, or
the date for the allotment of rights, or the date when any change or
conversion or exchange of Shares shall go into effect; or in lieu of
closing the stock transfer books as aforesaid, the Trustees may fix in
advance a date not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion
or exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote at,
any such meeting, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting, or to receive payment of such dividend, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell and convey the assets of the Trust or any affected Series to
another trust, partnership, association or corporation organized under the
laws of any state which is a diversified open-end management investment
company as defined in the 1940 Act, for adequate consideration which may
include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or any affected Series,
and which may include shares of beneficial interest or stock of such trust,
partnership, association or corporation; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making provision for the payment of all such liabilities in either
(i) or (ii), by such assumption or otherwise, the Trustees shall distribute
the remaining proceeds or assets (as the case may be) ratably among the
holders of the Shares of the Trust or any affected Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest
of all parties shall be cancelled and discharged.
FILING OF COPIES, REFERENCES, AND HEADINGS
Section 5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental declaration of trust shall be filed by
the Trustees with the Secretary of the Commonwealth of Massachusetts and
the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether
or not any such supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this instrument or of any
such supplemental declaration of trust. In this instrument or in any such
supplemental declaration of trust, references to this instrument and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to
refer to this instrument as amended or affected by any such supplemental
declaration of trust. Headings are placed herein for convenience of
reference only and in case of any conflict, the text of this instrument,
rather than the headings, shall control. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.
AMENDMENTS
Section 7. If authorized by votes of the Trustees and a Majority
Shareholder Vote, or by any larger vote which may be required by applicable
law or this Declaration of Trust in any particular case, the Trustees shall
amend or otherwise supplement this instrument, by making a declaration of
trust supplemental hereto, which thereafter shall form a part hereof,
except that an amendment which shall affect the Shareholders of one or more
Series but not the Shareholders of all outstanding Series shall be
authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote of each Series affected and no vote of Shareholders of a
Series not affected shall be required. Amendments having the purpose of
changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require authorization by
Shareholder vote. Copies of the supplemental declaration of trust shall be
filed as specified in Section 5 of this Article XII.
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date as
set forth in the Bylaws, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 9. Fidelity Management & Research Company ("FMR") has
consented to the use by any Series of the Trust of the identifying word
"Fidelity" in the name of any Series of the Trust at some future date. Such
consent is conditioned upon the employment of FMR as investment adviser of
each Series of the Trust. As between the Trust and itself, FMR controls the
use of the name of the Trust insofar as such name contains the identifying
word "Fidelity". FMR may from time to time use the identifying word
"Fidelity" in other connections and for other purposes, including, without
limitation, in the names of other investment companies, corporations or
businesses which it may manage, advise, sponsor or own or in which it may
have a financial interest. FMR may require the Trust or any Series thereof
to cease using the identifying word "Fidelity" in the name of the Trust or
any Series thereof if the Trust or any Series thereof ceases to employ FMR
or a subsidiary or affiliate thereof as investment adviser.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument this 17th day of March, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
Richard J. Flynn Marvin L. Mann
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
SECRETARY OF THE COMMONWEALTH
STATE HOUSE - BOSTON, MA
AMENDED AND RESTATED DECLARATION OF TRUST
We, J. Gary Burkhead, Senior Vice President and Arthur S. Loring,
Secretary of
FIDELITY FIXED-INCOME TRUST
82 Devonshire Street
Boston, MA 02109
do certify that, in accordance with ARTICLE XII, SECTION 7 of the
Declaration of Trust of Fidelity Fixed-Income Trust, the Amended and
Restated Declaration of Trust, which amends it in its entirety, effective
March 17, 1994, incorporates any and all previous amendments duly adopted
and amends the Declaration of Trust by incorporating all amendments duly
adopted by the Trustees or a majority vote of the shareholders of the Trust
at a Special Meeting of the Shareholders held October 20, 1993.
The attached Restatement will become effective provided that it is filed,
in accordance with Chapter 182, Section 2 of the General Laws.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto
signed our names this 17th day of March, 1994.
/s/J. Gary Burkhead /s/Arthur S. Loring
J. Gary Burkhead Arthur S. Loring
Senior Vice President Secretary
