SPARTAN(registered trademark) SHORT-TERM BOND FUND
A FUND OF
FIDELITY CHARLES STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Spartan Short-Term Bond Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan Short-Term Bond Fund (Spartan Short-Term) will be
held at the office of Fidelity Charles Street Trust (the trust), 82
Devonshire Street, Boston, Massachusetts 02109 on June 16, 1999, at
9:00 a.m. Eastern time. The purpose of the Meeting is to consider and
act upon the following proposal, and to transact such other business
as may properly come before the Meeting or any adjournments thereof.
(1) To approve an Agreement and Plan of Reorganization between
Spartan Short-Term and Fidelity Short-Term Bond Fund (Fidelity
Short-Term) providing for the transfer of all of the assets of Spartan
Short-Term to Fidelity Short-Term in exchange solely for shares of
beneficial interest of Fidelity Short-Term and the assumption by
Fidelity Short-Term of Spartan Short-Term's liabilities, followed by
the distribution of Fidelity Short-Term shares to shareholders of
Spartan Short-Term in liquidation of Spartan Short-Term.
The Board of Trustees has fixed the close of business on April 19,
1999 as the record date for the determination of the shareholders of
Spartan Short-Term entitled to notice of, and to vote at, such Meeting
and any adjournments thereof.
By order of the Board of Trustees,
ERIC D. ROITER, Secretary
April 19, 1999
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins, Trustee
2) ABC Trust Ann B. Collins, Trustee
3) Ann B. Collins, Trustee Ann B. Collins, Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
SPARTAN(registered trademark) SHORT-TERM BOND FUND
A FUND OF
FIDELITY CHARLES STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
PROXY STATEMENT AND PROSPECTUS
APRIL 19, 1999
This Proxy Statement and Prospectus (Proxy Statement) is being
furnished to shareholders of Spartan Short-Term Bond Fund (Spartan
Short-Term), a fund of Fidelity Charles Street Trust (the trust), in
connection with the solicitation of proxies by the trust's Board of
Trustees for use at the Special Meeting of Shareholders of Spartan
Short-Term and at any adjournments thereof (the Meeting). The Meeting
will be held on Wednesday, June 16, 1999, at 9:00 a.m. Eastern time at
82 Devonshire Street, Boston, Massachusetts 02109, the principal
executive office of the trust.
As more fully described in the Proxy Statement, the purpose of the
Meeting is to vote on a proposed reorganization (Reorganization).
Pursuant to an Agreement and Plan of Reorganization (the Agreement),
Spartan Short-Term would transfer all of its assets to Fidelity
Short-Term Bond Fund (Fidelity Short-Term), a fund of Fidelity
Fixed-Income Trust, in exchange solely for shares of beneficial
interest of Fidelity Short-Term and the assumption by Fidelity
Short-Term of Spartan Short-Term's liabilities. The number of shares
to be issued in the proposed Reorganization will be based upon the
relative net asset values of the funds at the time of the exchange. As
provided in the Agreement, Spartan Short-Term will distribute shares
of Fidelity Short-Term to its shareholders in liquidation of Spartan
Short-Term on June 24, 1999, or such other date as the parties may
agree (the Closing Date).
Fidelity Short-Term, a taxable bond fund, is a diversified fund of
Fidelity Fixed-Income Trust, an open-end management investment company
organized as a Massachusetts business trust on September 5, 1984.
Fidelity Short-Term's investment objective is to seek as high a level
of current income as is consistent with preservation of capital.
Fidelity Short-Term seeks to achieve its investment objective by
investing principally in investment-grade debt securities while
normally maintaining an average maturity of three years or less.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT
AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Reorganization and
Fidelity Short-Term that a shareholder should know before voting on
the proposed Reorganization. The Statement of Additional Information
dated April 19, 1999 relating to this Proxy Statement has been filed
with the Securities and Exchange Commission (SEC) and is incorporated
herein by reference. This Proxy Statement is accompanied by the
Prospectus, dated June 26, 1998, which offers shares of Fidelity
Short-Term. The Statement of Additional Information for Fidelity
Short-Term, dated June 26, 1998, is available upon request. Attachment
1 contains excerpts from the Annual Report of Fidelity Short-Term
dated April 30, 1998. The Prospectus and Statement of Additional
Information for Fidelity Short-Term have been filed with the SEC and
are incorporated herein by reference. A Prospectus and Statement of
Additional Information for Spartan Short-Term, both dated November 24,
1998, and a supplement to the Prospectus dated January 1, 1999, have
been filed with the SEC and are incorporated herein by reference.
Copies of these documents may be obtained without charge by contacting
the trust or Fidelity Fixed-Income Trust at Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts 02109 or by
calling 1-800-544-8888.
TABLE OF CONTENTS
Voting Information 1
Synopsis 3
Comparison Of Other Policies Of The Funds 10
Comparison Of Principal Risk Factors 12
The Proposed Transaction 13
Additional Information About Fidelity Short-Term Bond Fund 17
Miscellaneous 20
Attachment 1. Excerpts from the Annual Report of Fidelity
Short-Term Bond Fund dated April 30, 1998 21
Exhibit 1. Form of Agreement and Plan of Reorganization between
Fidelity Short-Term Bond Fund and Spartan Short-Term Bond Fund 28
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS OF
SPARTAN(registered trademark) SHORT-TERM BOND FUND
A FUND OF
FIDELITY CHARLES STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
TO BE HELD ON JUNE 16, 1999
VOTING INFORMATION
This Proxy Statement and Prospectus (Proxy Statement) is furnished in
connection with a solicitation of proxies made by, and on behalf of,
the Board of Trustees of Fidelity Charles Street Trust (the trust) to
be used at the Special Meeting of Shareholders of Spartan Short-Term
Bond Fund (Spartan Short-Term) and at any adjournments thereof (the
Meeting), to be held on Wednesday, June 16, 1999 at 9:00 a.m. at 82
Devonshire Street, Boston, Massachusetts 02109, the principal
executive office of the trust and Fidelity Management & Research
Company (FMR), the fund's investment adviser.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about April 19, 1999.
Supplementary solicitations may be made by mail, telephone, telegraph,
facsimile, electronic means or by personal interview by
representatives of the trust. In addition, D.F. King & Co., Inc.
and/or Management Information Services Corp. may be paid on a per-call
basis to solicit shareholders on behalf of the fund at an anticipated
cost of approximately $1,000. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all
solicitations will be borne by FMR. FMR will reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by the trust, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and which
are not revoked, will be voted at the Meeting. Shares represented by
such proxies will be voted in accordance with the instructions
thereon. If no specification is made on a proxy card, it will be voted
FOR the matters specified on the proxy card. Only proxies that are
voted will be counted toward establishing a quorum. Broker non-votes
are not considered voted for this purpose. Shareholders should note
that while votes to ABSTAIN will count toward establishing a quorum,
passage of any proposal being considered at the Meeting will occur
only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same
effect in determining whether the proposal is approved.
Spartan Short-Term also may arrange to have votes recorded by
telephone. D.F. King & Co., Inc. may be paid on a per-call basis for
vote-by-phone solicitations on behalf of the fund at an anticipated
cost of approximately $2,000. The expenses in connection with
telephone voting will be borne by FMR. If the fund records votes by
telephone, it will use procedures designed to authenticate
shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to
confirm that their instructions have been properly recorded. Proxies
given by telephone may be revoked at any time before they are voted in
the same manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting but sufficient votes to approve the proposed item are
not received, or if other matters arise requiring shareholder
attention, the persons named as proxy agents may propose one or more
adjournments of the Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority
of those shares present at the Meeting or represented by proxy. When
voting on a proposed adjournment, the persons named as proxy agents
will vote FOR the proposed adjournment all shares that they are
entitled to vote with respect to each item, unless directed to vote
AGAINST the item, in which case such shares will be voted against the
proposed adjournment with respect to that item. A shareholder vote may
be taken on the item in this Proxy Statement or on any other business
properly presented at the Meeting prior to such adjournment if
sufficient votes have been received and it is otherwise appropriate.
On January 31, 1999, there were 33,237,490 and 99,761,849 shares
issued and outstanding for Spartan Short-Term and Fidelity Short-Term
Bond Fund (Fidelity Short-Term), respectively. Shareholders of record
at the close of business on April 19, 1999 will be entitled to vote at
the Meeting. Each such shareholder will be entitled to one vote for
each dollar of net asset value held on that date.
As of January 31, 1999, the Trustees, Members of the Advisory Board,
and officers of each fund owned, in the aggregate, less than 1% of
each fund's total outstanding shares. To the knowledge of the trust
and Fidelity Fixed-Income Trust, no other shareholder owned of record
or beneficially 5% or more of the outstanding shares of each fund on
that date.
VOTE REQUIRED: APPROVAL OF THE REORGANIZATION REQUIRES THE AFFIRMATIVE
VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF SPARTAN
SHORT-TERM. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT),
THE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" MEANS
THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF THE VOTING
SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE
HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE
PRESENT OR REPRESENTED BY PROXY OR (B) MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED
"PRESENT" FOR THIS PURPOSE.
SYNOPSIS
The following is a summary of certain information contained elsewhere
in this Proxy Statement, in the Agreement, and in the Prospectuses of
Spartan Short-Term and Fidelity Short-Term, which are incorporated
herein by this reference. Shareholders should read the entire Proxy
Statement and the Prospectus of Fidelity Short-Term for more complete
information.
The proposed reorganization (the Reorganization) would merge Spartan
Short-Term into Fidelity Short-Term, a larger bond fund also managed
by FMR. If the Reorganization is approved, Spartan Short-Term will
cease to exist and current shareholders of the fund will become
shareholders of Fidelity Short-Term instead.
INVESTMENT OBJECTIVES AND POLICIES
Spartan Short-Term and Fidelity Short-Term have substantially similar
investment objectives and policies. Fidelity Short-Term seeks high
current income, consistent with preservation of capital, by investing
in U.S. dollar-denominated investment-grade debt securities. Spartan
Short-Term seeks high current income by investing in U.S.
dollar-denominated investment-grade debt securities. The funds have
the same manager.
The benchmark index for each fund is the Lehman Brothers 1-3 Year
Government/Corporate Bond Index (the Index), a market value weighted
benchmark of government and investment-grade corporate fixed-rate debt
issues with maturities between one and three years. FMR manages each
fund to have similar overall interest rate risk to the Index. In
addition, each fund normally maintains a dollar-weighted average
maturity of three years or less. As of January 31, 1999, the average
maturities of Spartan Short-Term and Fidelity Short-Term and the Index
were approximately 2.5 years, 2.5 years and 1.9 years, respectively.
EXPENSE STRUCTURES
Spartan Short-Term and Fidelity Short-Term have different contractual
expense structures. Both funds pay a monthly management fee to FMR.
Spartan Short-Term pays an all-inclusive management fee to FMR (at an
annual rate of 0.65% of average net assets) which covers substantially
all of the fund's expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses). Fidelity Short-Term, by
contrast, pays its management fee and other expenses separately. Its
management fee and other expenses, as a percentage of its average net
assets, vary from year to year. Fidelity Short-Term's total operating
expenses for the 12 months ended October 31, 1998 were 0.68% before
reimbursement. In anticipation of the merger, effective June 27, 1998,
FMR voluntarily capped Fidelity Short-Term's total operating expenses
(the sum of its management fee and other expenses) at 0.65% of its
average net assets.
If the Reorganization is approved, FMR has agreed to limit the
combined fund's expenses to 0.63% of average net assets through June
30, 2001 (excluding interest, taxes, brokerage commissions and
extraordinary expenses). After that date, the combined fund's expenses
could increase.
In sum, the proposed Reorganization would provide Spartan Short-Term
shareholders with the opportunity to participate in a larger fund with
an investment objective and policies similar to Spartan Short-Term's
and expenses guaranteed to be lower than Spartan Short-Term's for two
years.
The Board of Trustees believes that the Reorganization would benefit
Spartan Short-Term shareholders and recommends that shareholders vote
in favor of the Reorganization.
THE PROPOSED REORGANIZATION
Shareholders of Spartan Short-Term will be asked at the Meeting to
vote upon and approve the Reorganization and the Agreement, which
provide for the acquisition by Fidelity Short-Term of all of the
assets of Spartan Short-Term in exchange solely for shares of Fidelity
Short-Term and the assumption by Fidelity Short-Term of the
liabilities of Spartan Short-Term. Spartan Short-Term will then
distribute the shares of Fidelity Short-Term to its shareholders, so
that each shareholder will receive the number of full and fractional
shares of Fidelity Short-Term equal in value to the aggregate net
asset value of the shareholder's shares of Spartan Short-Term on the
Closing Date (defined below). The exchange of Spartan Short-Term's
assets for Fidelity Short-Term's shares will occur as of the close of
business of the New York Stock Exchange (NYSE) on June 24, 1999 or
such other time and date as the parties may agree (the Closing Date).
Spartan Short-Term will then be liquidated as soon as practicable
thereafter. Approval of the Reorganization will be determined solely
by approval of the shareholders of Spartan Short-Term.
The funds have received an opinion of counsel that the Reorganization
will not result in any gain or loss for federal income tax purposes to
either Spartan Short-Term, Fidelity Short-Term, or the shareholders of
each fund. The rights and privileges of the former shareholders of
Spartan Short-Term will be effectively unchanged by the Reorganization
(except as described on page 8 under the heading "Forms of
Organization").
COMPARATIVE FEE TABLES
Each fund pays a management fee to FMR for managing its investments
and business affairs which is calculated and paid to FMR every month.
Spartan Short-Term pays FMR a management fee at an annual rate of
0.65% of its average net assets. FMR not only provides the fund with
investment advisory and research services, but also pays all of the
fund's expenses, with the exception of fees and expenses of the
non-interested Trustees, interest, taxes, brokerage commissions (if
any), and such nonrecurring expenses as may arise, including costs of
any litigation to which a fund may be a party, and any obligation it
may have to indemnify its officers and Trustees with respect to
litigation. The management fee that Spartan Short-Term pays FMR is
reduced by an amount equal to the fees and expenses paid by the fund
to the non-interested Trustees.
In contrast, Fidelity Short-Term pays a management fee and other
expenses separately. Fidelity Short-Term's management fee is
calculated by adding a monthly group fee rate to a monthly individual
fund fee rate, and multiplying the result by the fund's monthly
average net assets. The group fee rate is based on the monthly average
net assets of all mutual funds advised by FMR. The individual fund fee
rate is 0.30% of the fund's average net assets. In addition to the
management fee payable by the fund, Fidelity Short-Term also incurs
other expenses for services such as maintaining shareholder records
and furnishing shareholder statements and financial reports. For the
12 months ended October 31, 1998, Fidelity Short-Term's total
management fee rate and total operating expense ratio were 0.43% and
0.68% (after reimbursement), respectively. Effective June 27, 1998,
FMR has voluntarily agreed to limit the total operating expenses of
Fidelity Short-Term to 0.65% of average net assets (excluding
interest, taxes, brokerage commissions and extraordinary expenses).
If shareholders approve the Reorganization, the combined fund will
retain Fidelity Short-Term's expense structure, requiring payment of a
management fee and other expenses separately. FMR has agreed to limit
the combined fund's expense ratio to 0.63% of its average net assets
through June 30, 2001 (excluding interest, taxes, brokerage
commissions and extraordinary expenses). This expense limitation would
lower Spartan Short-Term's total operating expenses from 0.65% to
0.63% of its average net assets beginning on the first business day
after the Closing Date of the Reorganization. After June 30, 2001, the
combined fund's expenses could increase. If the proposed
Reorganization is not approved, Spartan Short-Term will maintain its
current fee structure. For more information about the funds' current
fees, refer to their Prospectuses.
The following table shows the fees and expenses of Spartan Short-Term
and Fidelity Short-Term for the 12 months ended October 31, 1998,
adjusted to reflect current fees, and pro forma fees for the combined
fund based on the same time period after giving effect to the
Reorganization, including the effect of FMR's guaranteed expense
limitation of 0.63% of average net assets through June 30, 2001
(excluding interest, taxes, brokerage commissions and extraordinary
expenses).
FUND OPERATING EXPENSES
Fund operating expenses are paid out of each fund's assets. Expenses
are factored into each fund's share price or dividends and are not
charged directly to shareholder accounts. The following figures are
based on historical expenses, adjusted to reflect current fees, of
each fund for the 12-month period ending October 31, 1998 and are
calculated as a percentage of average net assets of each fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Spartan Short-Term Fidelity Short-Term* Pro Forma Expenses** -
Combined Fund
Management Fee 0.65% 0.40% 0.40%
12b-1 Fee None None None
Other Expenses 0.00% 0.25% 0.23%
Total Operating Expenses 0.65% 0.65% 0.63%
</TABLE>
* Effective June 27, 1998, FMR voluntarily agreed to reimburse
Fidelity Short-Term to the extent that the management fee, other
expenses and total operating expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed 0.65% of its
average net assets. If this agreement were not in effect, the
management fee, other expenses and total operating expenses, as a
percentage of average net assets, of Fidelity Short-Term would have
been 0.43%, 0.25% and 0.68%, respectively.
** If the Reorganization is approved, FMR has agreed to limit the
total operating expenses of the combined fund to 0.63% of its average
net assets (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) through June 30, 2001. If this agreement were
not in effect, the combined fund's pro forma management fee, other
expenses, and total operating expenses would be 0.43%, 0.23% and
0.66%, respectively.
EXAMPLES OF EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical $1,000
investment in each fund under the current and pro forma (combined
fund) expenses calculated at the rates stated above, assuming a 5%
annual return.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Spartan Short-Term Fidelity Short-Term*** Combined Fund (Pro Forma)***
1 year $ 7 $ 7 $ 6
3 years $ 21 $ 21 $ 20
5 years $ 36 $ 36 $ 35
10 years $ 81 $ 81 $ 79
</TABLE>
*** After FMR Reimbursement
These examples assume that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. These examples
illustrate the effect of expenses, but are not meant to suggest actual
or expected expenses, which may vary. The assumed return of 5% is not
a prediction of, and does not represent, actual or expected
performance of any fund.
FORMS OF ORGANIZATION
Spartan Short-Term is a diversified fund of Fidelity Charles Street
Trust, an open-end management investment company organized as a
Massachusetts business trust on July 7, 1981. Fidelity Short-Term is a
diversified fund of Fidelity Fixed-Income Trust, an open-end
management investment company organized as a Massachusetts business
trust on September 5, 1984. Each trust is authorized to issue an
unlimited number of shares of beneficial interest.
Except as discussed below, because the funds are series of
Massachusetts business trusts that are organized under substantially
similar Declarations of Trust, the rights of security holders of each
fund under state law and the governing documents would be expected to
remain unchanged after the Reorganization. However, on April 14, 1999,
shareholders of Fidelity Fixed-Income Trust (Fixed-Income Trust), of
which Fidelity Short-Term is a series, will vote at a Special Meeting
of Shareholders. Among the proposals to be considered at that meeting
is a proposal to adopt an amended and restated Declaration of Trust
(Amended Declaration of Trust). If shareholders approve the proposal,
Fixed-Income Trust's Amended Declaration of Trust will permit
Trustees, subject to the 1940 Act and applicable state law, to
reorganize or terminate Fixed-Income Trust or any of its series
without shareholder approval. Fixed-Income Trust's Amended Declaration
of Trust also would permit the Trustees, with certain exceptions, to
amend the Amended Declaration of Trust without shareholder approval.
The Declarations of Trust under which both funds currently are
organized require shareholder approval to reorganize or terminate the
trusts or any of their series and to amend the Declarations of Trust.
Therefore, if the Reorganization is approved, and if shareholders of
Fixed-Income Trust vote to approve the Amended Declaration of Trust,
the former shareholders of Spartan Short-Term would become
shareholders of a fund organized under a Declaration of Trust that
would give Trustees broader powers, subject to the limitations of the
1940 Act and applicable state law. For more information regarding
shareholder rights, refer to the section of each fund's Statement of
Additional Information called "Description of the Trust."
INVESTMENT OBJECTIVES AND POLICIES
Spartan Short-Term and Fidelity Short-Term have substantially similar
investment objectives. Spartan Short-Term seeks high current income by
investing in U.S. dollar-denominated investment-grade debt securities.
Fidelity Short-Term seeks high current income, consistent with the
preservation of capital, by investing in U.S. dollar-denominated
investment-grade debt securities. The funds have the same manager.
The Index for each fund is a market value weighted benchmark of
government and investment-grade corporate fixed-rate debt issues with
maturities between one and three years. FMR manages each fund to have
similar overall interest rate risk to the Index. In addition, each
fund normally maintains a dollar-weighted average maturity of three
years or less. As of January 31, 1999, the average maturities of
Spartan Short-Term, Fidelity Short-Term and the Index were
approximately 2.5 years, 2.5 years and 1.9 years, respectively.
The investment objective of each fund is fundamental and may not be
changed without the approval of a vote of at least a majority of the
outstanding voting securities of the fund. There can be no assurance
that any fund will achieve its objective. With the exception of
fundamental policies, investment policies of the funds can be changed
without shareholder approval.
PERFORMANCE COMPARISONS OF THE FUNDS
The following table compares the funds' annual total returns for the
periods indicated. Please note that total returns are based on past
results and are not an indication of future performance.
Annual Total Returns (periods
ended December 31)
1995 1996 1997 1998
Spartan Short-Term* 9.94% 5.03% 6.54% 6.58%
Fidelity Short-Term 9.82% 4.78% 6.21% 6.15%*
* If the fund had not been in reimbursement during the periods shown,
total returns would have been lower.
The following table compares the individual cumulative returns of
Spartan Short-Term and Fidelity Short-Term for the periods indicated.
Please note that total returns are based on past results and are not
an indication of future performance.
Cumulative Total Returns
(periods ended December 31,
1998)
1 Year 3 Year
Spartan Short-Term* 6.58% 19.27%
Fidelity Short-Term* 6.15% 18.12%
* If the fund had not been in reimbursement during the periods shown,
total returns would have been lower.
The total return tables above show that the funds have experienced
generally similar performance over the time periods shown, with
Spartan Short-Term outperforming Fidelity Short-Term. Differences in
performance may be attributed to the funds' different expense
structures, reimbursement arrangements and asset size.
The following graph shows the value of a hypothetical $10,000
investment in each fund made on December 30, 1994 assuming all
distributions are reinvested. The graph compares the cumulative
returns of the funds on a quarterly basis from December 30,
1994 to December 31, 1998 , and illustrates the relative volatility
of their performance over shorter periods of time.
<TABLE>
<CAPTION>
<S> <C> <C>
Spartan Short-Term Bond Fund (00449) Fidelity Short-Term Bond Fund
(00450)
Period Ending Spartan Short-Term Bond Fund Fidelity Short-Term Bond Fund
December 31, 1994 $10,000.00 $10,000.00
January 31, 1995 $10,079.57 $10,076.34
February 28, 1995 $10,177.16 $10,182.59
March 31, 1995 $10,233.97 $10,247.39
April 30, 1995 $10,335.13 $10,346.34
May 31, 1995 $10,507.63 $10,530.72
June 30, 1995 $10,573.80 $10,594.01
July 31, 1995 $10,616.79 $10,623.66
August 31, 1995 $10,683.84 $10,690.99
September 30, 1995 $10,738.05 $10,746.07
October 31, 1995 $10,832.16 $10,816.65
November 30, 1995 $10,922.60 $10,910.12
December 31, 1995 $10,994.42 $10,982.00
January 31, 1996 $11,090.09 $11,066.22
February 29, 1996 $11,050.65 $11,035.24
March 31, 1996 $11,027.94 $11,010.22
April 30, 1996 $11,040.17 $11,021.00
May 31, 1996 $11,066.03 $11,044.05
June 30, 1996 $11,151.69 $11,115.69
July 31, 1996 $11,189.29 $11,163.01
August 31, 1996 $11,227.00 $11,198.00
September 30, 1996 $11,325.11 $11,296.24
October 31, 1996 $11,450.81 $11,410.41
November 30, 1996 $11,536.56 $11,496.89
December 31, 1996 $11,547.86 $11,506.43
January 31, 1997 $11,596.08 $11,554.55
February 28, 1997 $11,625.46 $11,584.32
March 31, 1997 $11,624.79 $11,566.09
April 30, 1997 $11,712.88 $11,666.46
May 31, 1997 $11,790.33 $11,742.68
June 30, 1997 $11,880.54 $11,816.92
July 31, 1997 $12,013.05 $11,948.38
August 31, 1997 $12,026.74 $11,957.47
September 30, 1997 $12,117.83 $12,046.55
October 31, 1997 $12,198.69 $12,124.47
November 30, 1997 $12,222.93 $12,143.61
December 31, 1997 $12,303.50 $12,220.63
January 31, 1998 $12,425.43 $12,339.76
February 28, 1998 $12,445.98 $12,355.46
March 31, 1998 $12,499.79 $12,405.87
April 30, 1998 $12,552.43 $12,467.34
May 31, 1998 $12,632.68 $12,530.56
June 30, 1998 $12,697.75 $12,592.12
July 31, 1998 $12,750.42 $12,655.27
August 31, 1998 $12,857.80 $12,745.92
September 30, 1998 $13,006.26 $12,908.38
October 31, 1998 $13,028.24 $12,910.73
November 30, 1998 $13,048.21 $12,910.85
December 31, 1998 $13,113.15 $12,971.96
</TABLE>
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION. Spartan Short-Term and Fidelity Short-Term are
diversified funds. As a matter of fundamental policy, with respect to
75% of each fund's total assets, the fund may not invest more than 5%
of its total assets in the securities of a single issuer, and the fund
may not hold more than 10% of the outstanding voting securities of a
single issuer. These limitations do not apply to U.S. Government
securities.
BORROWING. Each fund may borrow money from banks or from other funds
advised by FMR, or through reverse repurchase agreements. As a matter
of fundamental policy, each fund may borrow money for temporary or
emergency purposes, but not in an amount exceeding 33 1/3% of its
total assets.
LENDING. Each fund does not currently intend to lend assets, other
than securities, to other parties, except by lending money (up to 7.5%
of the fund's net assets) to other funds or portfolios advised by FMR
or an affiliate, or by acquiring loans, loan participations, or other
forms of direct debt instruments. As a matter of fundamental policy,
each fund may not lend more than 33-1/3% of its total assets to other
parties, but this limitation does not apply to purchases of debt
securities or to repurchase agreements.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to the fund's investment strategy. Each fund also reserves
the right to invest without limitation in investment-grade money
market instruments or short-term debt instruments for temporary
defensive purposes.
For more information about the risks and restrictions associated with
these policies, see each fund's Prospectus, and for a more detailed
discussion of the funds' investments, see their Statements of
Additional Information, which are incorporated herein by reference.
OPERATIONS OF FIDELITY SHORT-TERM FOLLOWING THE REORGANIZATION
FMR does not expect Fidelity Short-Term to revise its investment
policies as a result of the Reorganization. In addition, FMR does not
anticipate significant changes to the fund's management or to agents
that provide the fund with services. Specifically, the Trustees and
officers, the investment adviser, distributor, and other agents will
continue to serve Fidelity Short-Term in their current capacities.
Andrew Dudley, who is currently the Portfolio Manager of Fidelity
Short-Term and Spartan Short-Term, is expected to continue to be
responsible for portfolio management of Fidelity Short-Term after the
Reorganization.
All of the current investments of Spartan Short-Term are permissible
investments for Fidelity Short-Term. Nevertheless, FMR may sell
securities held by Spartan Short-Term or Fidelity Short-Term between
shareholder approval and the Closing Date of the Reorganization.
Transaction costs associated with such adjustments that occur between
shareholder approval and the Closing Date will be borne by the fund
that incurred them. Transaction costs associated with such adjustments
that occur after the Closing Date will be borne by Fidelity
Short-Term.
PURCHASES AND REDEMPTIONS
The price to buy one share of each fund is each fund's net asset
value per share (NAV). Each fund's shares are sold without a sales
charge. S hares are purchased at the next NAV calculated after
an investment is received in proper form . Each fund's
NAV is normally calculated each business day at 4:00 p.m. Eastern
time.
The redemption policies for each fund are identical. The price to
sell one share of each fund is the fund's NAV. S hares will be
sold at the next NAV calculated after an order is received
in proper form . Each fund's NAV is normally calculated each
business day at 4:00 p.m. Eastern time. Refer to each fund's
Prospectus for more information regarding how to buy and sell shares.
For Spartan Short-Term, the minimum initial investment amount is
$10,000, the minimum additional investment amount is $1,000, and the
minimum account balance is $5,000. For Fidelity Short-Term, the
minimum initial investment amount is $2,500, the minimum additional
investment amount is $250, and the minimum account balance is $2,000.
If shareholders of Spartan Short-Term approve the Reorganization, they
would be shareholders of a fund with lower minimum investment and
balance requirements than Spartan Short-Term.
On June 26, 1998, Spartan Short-Term closed to new accounts pending
the Reorganization. Spartan Short-Term shareholders on or prior to
that date may continue to purchase shares in accounts existing on that
date. Shareholders of Spartan Short-Term may redeem shares through the
Closing Date of the Reorganization. If the Reorganization is approved,
the purchase and redemption policies of the combined fund will be the
same as the current policies of Fidelity Short-Term.
EXCHANGES
The exchange privilege currently offered by each fund is the same and
is not expected to change after the Reorganization. Shareholders of
the funds may exchange their shares for shares of any other Fidelity
fund available in a shareholder's state. Refer to each fund's
Prospectus for restrictions governing exchanges.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Each fund declares income
dividends daily and pays them monthly. Capital gains for Spartan
Short-Term are normally distributed in December. Capital gains for
Fidelity Short-Term are normally distributed in June and December. On
or before the Closing Date, Spartan Short-Term may declare additional
dividends or other distributions in order to distribute substantially
all of its investment company taxable income and net realized capital
gain. A portion of these distributions may be non-taxable.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Each fund has received an opinion of its counsel, Kirkpatrick &
Lockhart LLP, that the Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). Accordingly, no
gain or loss will be recognized to the funds or their shareholders as
a result of the Reorganization. Please see the section entitled
"Federal Income Tax Considerations" for more information.
As of October 31, 1998, Spartan Short-Term and Fidelity Short-Term
had net unrealized gains of approximately $1,482,000 and $3,600,000,
respectively. During the period between shareholder approval and the
Closing Date, FMR may sell certain securities to make portfolio
adjustments in connection with the Reorganization. Selling these
securities may result in realization of capital gains, which, when
distributed, would be taxable to the selling fund's shareholders.
As of September 30, 1998, Spartan Short-Term had capital loss
carryforwards for federal income tax purposes of approximately
$81,724,000. As of April 30, 1998, Fidelity Short-Term had capital
loss carryforwards for federal income tax purposes of approximately
$166,788,000. Under current federal tax law, Fidelity Short-Term may
be limited to using only a portion, if any, of its capital loss
carryforwards or the capital loss carryforwards transferred by Spartan
Short-Term at the time of the Reorganization. There is no assurance
that Fidelity Short-Term will be able to realize sufficient capital
gains to use the capital loss carryforwards before they expire. The
capital loss carryforwards attributable to Spartan Short-Term will
expire between April 30, 2002 and April 30, 2005. The capital loss
carryforwards attributable to Fidelity Short-Term will expire between
April 30, 1999 and April 30, 2006.
COMPARISON OF PRINCIPAL RISK FACTORS
Each fund is subject to the risks normally associated with bond
funds. As described more fully above, each fund has substantially the
same investment objective, policies and permissible investments. The
yield and share price of a bond fund change daily based on changes in
interest rates and market conditions, and in response to other
economic, political or financial events. The types and maturities of
the securities a bond fund purchases and the credit quality of their
issuers will impact a bond fund's reaction to these events.
Because each fund normally invests in investment-grade debt
securities while maintaining an average maturity of three years or
less, the funds have substantially similar levels of risk. As of
January 31, 1999, the average maturities of Spartan Short-Term and
Fidelity Short-Term were approximately 2.5 years and 2.5 years,
respectively. A slightly longer average maturity may present a
slightly higher risk.
For a more complete discussion of the risk associated with bond
funds, please refer to the Investment Principles and Risks section of
each fund's Prospectus.
THE PROPOSED TRANSACTION
TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
SHORT-TERM AND FIDELITY SHORT-TERM.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of
the Agreement are summarized below; however, this summary is qualified
in its entirety by reference to the Agreement, a copy of which is
attached at Exhibit 1 to this Proxy Statement.
The Agreement contemplates (a) Fidelity Short-Term acquiring as of
the Closing Date all of the assets of Spartan Short-Term in exchange
solely for shares of Fidelity Short-Term and the assumption by
Fidelity Short-Term of Spartan Short-Term's liabilities; and (b) the
distribution of shares of Fidelity Short-Term to the shareholders of
Spartan Short-Term as provided for in the Agreement.
The assets of Spartan Short-Term to be acquired by Fidelity
Short-Term include all cash, cash equivalents, securities, receivables
(including interest or dividends receivables), claims, choses in
action, and other property owned by Spartan Short-Term, and any
deferred or prepaid expenses shown as an asset on the books of Spartan
Short-Term on the Closing Date. Fidelity Short-Term will assume from
Spartan Short-Term all liabilities, debts, obligations, and duties of
Spartan Short-Term of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable on the
Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Spartan Short-Term will use its
best efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred
in the ordinary course of business. Fidelity Short-Term also will
deliver to Spartan Short-Term the number of full and fractional shares
of Fidelity Short-Term having an aggregate net asset value equal to
the value of the assets of Spartan Short-Term less the liabilities of
Spartan Short-Term as of the Closing Date. Spartan Short-Term shall
then distribute the Fidelity Short-Term shares PRO RATA to its
shareholders.
The value of Spartan Short-Term's assets to be acquired by Fidelity
Short-Term and the amount of its liabilities to be assumed by Fidelity
Short-Term will be determined as of the close of business of the NYSE
on the Closing Date, using the valuation procedures set forth in
Spartan Short-Term's then-current Prospectus and Statement of
Additional Information. The net asset value of a share of Fidelity
Short-Term will be determined as of the same time using the valuation
procedures set forth in its then-current Prospectus and Statement of
Additional Information.
As of the Closing Date, Spartan Short-Term will distribute to its
shareholders of record the shares of Fidelity Short-Term it received,
so that each Spartan Short-Term shareholder will receive the number of
full and fractional shares of Fidelity Short-Term equal in value to
the aggregate net asset value of shares of Spartan Short-Term held by
such shareholder on the Closing Date; Spartan Short-Term will be
liquidated as soon as practicable thereafter. Such distribution will
be accomplished by opening accounts on the books of Fidelity
Short-Term in the names of the Spartan Short-Term shareholders and by
transferring thereto shares of Fidelity Short-Term. Each Spartan
Short-Term shareholder's account shall be credited with the respective
PRO RATA number of full and fractional shares (rounded to the third
decimal place) of Fidelity Short-Term due that shareholder. Fidelity
Short-Term shall not issue certificates representing its shares in
connection with such exchange.
Accordingly, immediately after the Reorganization, each former
Spartan Short-Term shareholder will own shares of Fidelity Short-Term
equal to the aggregate net asset value of that shareholder's shares of
Spartan Short-Term immediately prior to the Reorganization. The net
asset value per share of Fidelity Short-Term will be unchanged by the
transaction. Thus, the Reorganization will not result in a dilution of
any shareholder interest.
Any transfer taxes payable upon issuance of shares of Fidelity
Short-Term in a name other than that of the registered holder of the
shares on the books of Spartan Short-Term as of that time shall be
paid by the person to whom such shares are to be issued as a condition
of such transfer. Any reporting responsibility of Spartan Short-Term
is and will continue to be its responsibility up to and including the
Closing Date and such later date on which Spartan Short-Term is
terminated.
Pursuant to its all-inclusive management contract with Spartan
Short-Term, FMR will bear the cost of the Reorganization.
Reorganization costs include professional fees, expenses associated
with the filing of registration statements, and the cost of soliciting
proxies for the Meeting, which will consist principally of printing
and mailing prospectuses and proxy statements, together with the cost
of any supplementary solicitation. However, there may be some
transaction costs associated with portfolio adjustments to Spartan
Short-Term due to the Reorganization prior to the Closing Date that
will be borne by Spartan Short-Term. Any transaction costs associated
with portfolio adjustments due to the Reorganization which occur after
the Closing Date and any additional merger-related costs attributable
to Fidelity Short-Term which occur after the Closing Date will be
borne by Fidelity Short-Term. The funds may recognize a taxable gain
or loss on the disposition of securities pursuant to these portfolio
adjustments. See the section entitled "Reasons for the
Reorganization."
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by
a fund. In addition, the Agreement may be amended in any mutually
agreeable manner, except that no amendment that may have a materially
adverse effect on the shareholders' interests may be made subsequent
to the Meeting.
REASONS FOR THE REORGANIZATION
The Boards of Trustees (the Boards) of the funds have determined that
the Reorganization is in the best interests of the shareholders of
both funds and that the Reorganization will not result in a dilution
of the interests of shareholders of either fund.
In considering the Reorganization, the Boards considered a number of
factors, including the following:
(1) the compatibility of the funds' investment objectives and
policies;
(2) the historical performance of the funds;
(3) the relative expense ratios of the funds;
(4) the costs to be incurred by each fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the funds;
(7) the elimination of duplicative funds;
(8) the impact of changes to the taxable bond product line on the
funds and their shareholders; and
(9) the benefit to FMR and to the shareholders of the funds.
FMR recommended the Reorganization to the Boards at a meeting of the
Boards on December 17, 1998. In recommending the Reorganization, FMR
advised the Boards that the funds have similar investment objectives,
policies, and investment portfolios. In particular, FMR informed the
Boards that the funds differed primarily with respect to their expense
structures and their initial and additional investment and account
balance minimums.
The Boards considered that the proposed merger would provide
shareholders of Spartan Short-Term with a fund that has generally
comparable historical performance on a year-to-year and cumulative
basis.
In addition, the Boards also considered that if the Reorganization is
approved, FMR would voluntarily limit the combined fund's total
operating expenses to 0.63% of its average net assets (excluding
interest, taxes, brokerage commissions, and extraordinary expenses)
through June 30, 2001. This expense limitation would lower the total
operating expenses of Spartan Short-Term from 0.65% to 0.63% of its
average net assets.
Finally, the Boards considered the proposed Reorganization in the
context of a general goal of reducing the number of duplicative funds
managed by FMR. While the reduction of similar funds and funds with
lower assets potentially would benefit FMR, it also should benefit
shareholders by facilitating increased operational efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fixed-Income Trust is registered with the SEC as an open-end
management investment company. Fixed-Income Trust's Trustees are
authorized to issue an unlimited number of shares of beneficial
interest of separate series. Fidelity Short-Term is one of five funds
of the trust. Each share of Fidelity Short-Term represents an equal
proportionate interest with each other share of the fund, and each
such share of Fidelity Short-Term is entitled to equal voting,
dividend, liquidation, and redemption rights. Each shareholder of the
fund is entitled to one vote for each dollar value of net asset value
of the fund that shareholder owns. Shares of Fidelity Short-Term have
no preemptive or conversion rights. The voting and dividend rights,
the right of redemption, and the privilege of exchange are described
in the fund's Prospectus. Shares are fully paid and nonassessable,
except as set forth in the fund's Statement of Additional Information
under the heading "Shareholder and Trustee Liability."
Fixed-Income Trust does not hold annual meetings of shareholders.
There will normally be no meetings of shareholders for the purpose of
electing Trustees unless less than a majority of the Trustees holding
office have been elected by shareholders, at which time the Trustees
then in office will call a shareholder meeting for the election of
Trustees. Under the 1940 Act, shareholders of record of at least
two-thirds of the outstanding shares of an investment company may
remove a Trustee by votes cast in person or by proxy at a meeting
called for that purpose. The Trustees are required to call a meeting
of shareholders for the purpose of voting upon the question of removal
of any Trustee when requested in writing to do so by the shareholders
of record holding at least 10% of the trust's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Spartan Short-Term's assets for Fidelity Short-Term's
shares and the assumption of the liabilities of Spartan Short-Term by
Fidelity Short-Term is intended to qualify for federal income tax
purposes as a tax-free reorganization under the Code. With respect to
the Reorganization, the participating funds have received an opinion
from Kirkpatrick & Lockhart LLP, counsel to Spartan Short-Term and
Fidelity Short-Term, substantially to the effect that:
(i) The acquisition by Fidelity Short-Term of all of the assets of
Spartan Short-Term solely in exchange for Fidelity Short-Term shares
and the assumption by Fidelity Short-Term of Spartan Short-Term's
liabilities, followed by the distribution by Spartan Short-Term of
Fidelity Short-Term shares to the shareholders of Spartan Short-Term
pursuant to the liquidation of Spartan Short-Term and constructively
in exchange for their Spartan Short-Term shares, will constitute a
reorganization within the meaning of section 368(a)(1)(C) of the Code,
and Spartan Short-Term and Fidelity Short-Term will each be "a party
to a reorganization" within the meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Short-Term upon
the transfer of all of its assets to Fidelity Short-Term in exchange
solely for Fidelity Short-Term shares and Fidelity Short-Term's
assumption of Spartan Short-Term's liabilities, followed by Spartan
Short-Term's subsequent distribution of those shares to shareholders
in liquidation of Spartan Short-Term;
(iii) No gain or loss will be recognized by Fidelity Short-Term upon
the receipt of the assets of Spartan Short-Term in exchange solely for
Fidelity Short-Term shares and its assumption of Spartan Short-Term's
liabilities;
(iv) The shareholders of Spartan Short-Term will recognize no gain or
loss upon the exchange of their Spartan Short-Term shares solely for
Fidelity Short-Term shares;
(v) The basis of Spartan Short-Term's assets in the hands of Fidelity
Short-Term will be the same as the basis of those assets in the hands
of Spartan Short-Term immediately prior to the Reorganization, and the
holding period of those assets in the hands of Fidelity Short-Term
will include the holding period of those assets in the hands of
Spartan Short-Term;
(vi) The basis of Spartan Short-Term shareholders in Fidelity
Short-Term shares will be the same as their basis in Spartan
Short-Term shares to be surrendered in exchange therefor; and
(vii) The holding period of the Fidelity Short-Term shares to be
received by the Spartan Short-Term shareholders will include the
period during which the Spartan Short-Term shares to be surrendered in
exchange therefor were held, provided such Spartan Short-Term shares
were held as capital assets by those shareholders on the date of the
Reorganization.
Shareholders of Spartan Short-Term should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light
of their individual circumstances. Because the foregoing discussion
relates only to the federal income tax consequences of the
Reorganization, those shareholders also should consult their tax
advisers as to state and local tax consequences, if any, of the
Reorganization.
CAPITALIZATION
The following table shows the capitalization of the funds as of
October 31, 1998 and on a pro forma combined basis (unaudited) as of
that date giving effect to the Reorganization.
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net Assets Net Asset Value Per Share Shares Outstanding
Spartan Short-Term $ 358,705 $ 9.09 39,469
Fidelity Short-Term $ 876,140 $ 8.75 100,126
Pro Forma Combined Fund $ 1,234,845 $ 8.75 141,121
</TABLE>
CONCLUSION
The Agreement and Plan of Reorganization and the transactions
provided for therein were approved by the Board at a meeting held on
December 17, 1998. The Boards of Trustees of Fidelity Charles Street
Trust and Fidelity Fixed-Income Trust determined that the proposed
Reorganization is in the best interests of shareholders of each fund
and that the interests of existing shareholders of Spartan Short-Term
and Fidelity Short-Term would not be diluted as a result of the
Reorganization. In the event that the Reorganization is not
consummated, Spartan Short-Term will continue to engage in business as
a fund of a registered investment company and the Board of Fidelity
Charles Street Trust will consider other proposals for the
reorganization or liquidation of the fund.
ADDITIONAL INFORMATION ABOUT FIDELITY SHORT-TERM
Fidelity Short-Term's Prospectus dated June 26, 1998, is enclosed
with this Proxy Statement and is incorporated herein by reference. The
Prospectus contains additional information about the fund including
its investment objective and policies, investment adviser, advisory
fees and expenses, organization, and procedures for purchasing and
redeeming shares. The prospectus also contains Fidelity Short-Term's
financial highlights for the fiscal year ended April 30, 1998, which
have been updated to include the semiannual unaudited data for the six
months ended October 31, 1998, as shown below:
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY SHORT-TERM BOND FUND
Selected Per-Share Data and
Ratios
Years ended April 30 1998 E 1998 1997 1996 1995 1994 1993 1992 1991 1990
Net asset value, beginning $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080 $ 9.510 $ 9.430 $ 9.180 $ 9.170 $ 9.180
of period
Income from Investment .130B .546B .558B .579 .344 .588 .744 .810 .792 .778
Operations
Net investment income
Net realized and .176 .033 (.061) (.020) (.156) (.392) .063 .251 .040 (.010)
unrealized gain (loss)
Total from investment .306 .579 .497 .559 .188 .196 .807 1.061 .832 .768
operations
Less Distributions From (.256) (.539) (.552) (.504) (.430) (.592) (.727) (.811) (.822) (.778)
net investment income
In excess of net -- -- -- -- -- (.034) -- -- -- --
investment income
Return of capital -- -- (.005) (.055) (.118) -- -- -- -- --
Total distributions (.256) (.539) (.557) (.559) (.548) (.626) (.727) (.811) (.822) (.778)
Net asset value, $ 8.750 $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080 $ 9.510 $ 9.430 $ 9.180 $ 9.170
end of period
Total return A,H 3.56% 6.86% 5.86% 6.52% 2.17% 1.99% 8.85% 12.00% 9.49% 8.58%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FIDELITY SHORT-TERM BOND FUND
Selected Per-Share Data and
Ratios
Years ended April 30 1989
Net asset value, beginning $ 9.470
of period
Income from Investment .809
Operations
Net investment income
Net realized and (.290)
unrealized gain (loss)
Total from investment .519
operations
Less Distributions From (.809)
net investment income
In excess of net --
investment income
Return of capital --
Total distributions (.809)
Net asset value, $ 9.180
end of period
Total return A,H 5.74%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 876 $ 809 $ 922 $ 1,048 $ 1,304 $ 1,962 $ 1,990 $ 984 $ 235 $ 197 $ 237
(In millions)
Ratio of expenses to .67% F,G .70% .70% .69% .69% .80% .77% .86% .83% .83% .89%
average net assets
Ratio of expenses to .66% C,F .70% .70% .68%C .69% .80% .77% .86% .83% .83% .89%
average net assets after
expense reductions
Ratio of net investment 5.92% F 6.26% 6.41% 6.37% 6.37% 6.70% 7.68% 8.23% 8.65% 8.28% 8.77%
income to average net
assets
Portfolio turnover rate 103% F 117% 104%D 151% 113% 73% 63% 87% 164% 148% 171%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
D THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
E SIX MONTHS ENDED OCTOBER 31, U NAUDITED
F ANNUALIZED
G FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
H TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
MISCELLANEOUS
LEGAL MATTERS. Certain legal matters in connection with the issuance
of Fidelity Short-Term shares have been passed upon by Kirkpatrick &
Lockhart LLP, counsel to the trust.
EXPERTS. The audited financial statements of Spartan Short-Term and
Fidelity Short-Term incorporated by reference into the Statements of
Additional Information, have been examined by PricewaterhouseCoopers
LLP, independent accountants, whose reports thereon are included in
the Annual Report to Shareholders for the fiscal year ended September
30, 1998 and April 30, 1998, respectively. Unaudited financial
statements for Fidelity Short-Term for the six-month period ended
October 31, 1998 are also incorporated by reference into the Statement
of Additional Information that relates to this Proxy Statement and
Prospectus. The financial statements audited by PricewaterhouseCoopers
LLP have been incorporated by reference in reliance on their reports
given on their authority as experts in auditing and accounting.
AVAILABLE INFORMATION. Fidelity Charles Street Trust and Fidelity
Fixed-Income Trust are each subject to the informational requirements
of the Securities Exchange Act of 1934 and the 1940 Act, and in
accordance therewith file reports, proxy material, and other
information with the SEC. Such reports, proxy material, and other
information can be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington D.C. 20549
and 7 World Trade Center, New York, NY 10048. Copies of such material
can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington D.C. 20549, at prescribed rates.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR
NOMINEES. Please advise Fidelity Charles Street Trust, in care of
Fidelity Services Company, Inc., P.O. Box 789, Boston, Massachusetts
02102, whether other persons are beneficial owners of shares for which
proxies are being solicited and, if so, the number of copies of the
Proxy Statement you wish to receive in order to supply copies to the
beneficial owners of the respective shares.
ATTACHMENT 1
EXCERPTS FROM ANNUAL REPORT OF FIDELITY SHORT-TERM BOND FUND DATED
APRIL 30, 1998
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1998 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Fidelity Short-Term Bond 6.86% 4.66% 6.76%
Lehman Brothers 1-3 Year 7.17% 5.53% 7.27%
Govt/Corp Bond Index
Lipper Short Investment Grade 6.67% 5.24% 6.95%
Debt Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual
total returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
<TABLE>
<CAPTION>
<S> <C> <C>
$10,000 OVER 10 YEARS
Fidelity Short-Term Bond Fund (00450) Lehman Brothers 1-3 Year
Government/Corporate Bond Index (LB013)
Period Ending Fidelity Short-Term Bond Fund Lehman Brother 1-3 Govt/Corp
April 30, 1988 $10,000.00 $10,000.00
May 31, 1988 $9,976.83 $9,996.00
June 30, 1988 $10,080.03 $10,096.12
July 31, 1988 $10,088.44 $10,103.20
August 31, 1988 $10,106.19 $10,128.77
September 30, 1988 $10,200.21 $10,246.14
October 31, 1988 $10,305.26 $10,349.34
November 30, 1988 $10,270.03 $10,324.70
December 31, 1988 $10,301.74 $10,348.42
January 31, 1989 $10,390.56 $10,431.59
February 28, 1989 $10,409.48 $10,434.06
March 31, 1989 $10,441.21 $10,476.26
April 30, 1989 $10,574.21 $10,646.31
May 31, 1989 $10,734.99 $10,797.57
June 30, 1989 $10,915.28 $10,996.89
July 31, 1989 $11,052.13 $11,160.78
August 31, 1989 $11,024.48 $11,097.62
September 30, 1989 $11,070.11 $11,162.93
October 31, 1989 $11,253.00 $11,336.99
November 30, 1989 $11,329.88 $11,438.34
December 31, 1989 $11,385.01 $11,483.63
January 31, 1990 $11,363.02 $11,495.64
February 28, 1990 $11,414.57 $11,556.64
March 31, 1990 $11,456.98 $11,593.30
April 30, 1990 $11,481.30 $11,622.25
May 31, 1990 $11,673.32 $11,801.85
June 30, 1990 $11,757.32 $11,926.62
July 31, 1990 $11,893.67 $12,071.10
August 31, 1990 $11,875.62 $12,113.92
September 30, 1990 $11,896.13 $12,204.80
October 31, 1990 $11,866.57 $12,330.80
November 30, 1990 $11,928.58 $12,451.25
December 31, 1990 $12,043.46 $12,596.96
January 31, 1991 $12,026.80 $12,710.95
February 28, 1991 $12,165.14 $12,802.75
March 31, 1991 $12,402.22 $12,895.78
April 30, 1991 $12,571.38 $13,022.09
May 31, 1991 $12,699.59 $13,103.42
June 30, 1991 $12,746.17 $13,152.09
July 31, 1991 $12,847.67 $13,267.61
August 31, 1991 $13,063.44 $13,447.52
September 30, 1991 $13,198.54 $13,592.31
October 31, 1991 $13,351.46 $13,738.64
November 30, 1991 $13,489.61 $13,877.58
December 31, 1991 $13,732.58 $14,087.37
January 31, 1992 $13,788.94 $14,072.89
February 29, 1992 $13,908.57 $14,117.56
March 31, 1992 $14,003.97 $14,114.48
April 30, 1992 $14,080.13 $14,243.55
May 31, 1992 $14,215.71 $14,376.94
June 30, 1992 $14,348.35 $14,523.89
July 31, 1992 $14,518.33 $14,694.25
August 31, 1992 $14,645.38 $14,812.85
September 30, 1992 $14,766.40 $14,953.02
October 31, 1992 $14,661.92 $14,863.07
November 30, 1992 $14,648.04 $14,842.12
December 31, 1992 $14,747.07 $14,982.29
January 31, 1993 $14,990.18 $15,142.17
February 28, 1993 $15,157.49 $15,265.70
March 31, 1993 $15,251.35 $15,315.30
April 30, 1993 $15,326.27 $15,411.42
May 31, 1993 $15,352.58 $15,376.30
June 30, 1993 $15,519.63 $15,492.75
July 31, 1993 $15,609.45 $15,528.17
August 31, 1993 $15,781.02 $15,658.17
September 30, 1993 $15,839.44 $15,708.70
October 31, 1993 $15,940.61 $15,745.36
November 30, 1993 $15,972.68 $15,749.98
December 31, 1993 $16,093.47 $15,813.75
January 31, 1994 $16,198.32 $15,914.48
February 28, 1994 $16,057.43 $15,818.06
March 31, 1994 $15,751.53 $15,736.73
April 30, 1994 $15,630.68 $15,676.97
May 31, 1994 $15,717.12 $15,698.22
June 30, 1994 $15,572.34 $15,739.50
July 31, 1994 $15,689.54 $15,882.75
August 31, 1994 $15,753.91 $15,936.35
September 30, 1994 $15,779.49 $15,900.93
October 31, 1994 $15,771.59 $15,937.28
November 30, 1994 $15,795.89 $15,870.43
December 31, 1994 $15,434.74 $15,900.62
January 31, 1995 $15,552.58 $16,119.04
February 28, 1995 $15,716.57 $16,342.07
March 31, 1995 $15,816.58 $16,434.80
April 30, 1995 $15,969.31 $16,583.59
May 31, 1995 $16,253.90 $16,870.71
June 30, 1995 $16,351.58 $16,962.51
July 31, 1995 $16,397.35 $17,030.28
August 31, 1995 $16,501.27 $17,133.48
September 30, 1995 $16,586.28 $17,218.20
October 31, 1995 $16,695.22 $17,361.14
November 30, 1995 $16,839.49 $17,510.55
December 31, 1995 $16,950.44 $17,643.33
January 31, 1996 $17,080.42 $17,794.28
February 29, 1996 $17,032.61 $17,726.50
March 31, 1996 $16,993.99 $17,713.56
April 30, 1996 $17,010.62 $17,731.43
May 31, 1996 $17,046.21 $17,772.40
June 30, 1996 $17,156.78 $17,902.41
July 31, 1996 $17,229.82 $17,972.03
August 31, 1996 $17,283.83 $18,038.26
September 30, 1996 $17,435.46 $18,203.38
October 31, 1996 $17,611.67 $18,408.86
November 30, 1996 $17,745.15 $18,546.87
December 31, 1996 $17,759.88 $18,549.95
January 31, 1997 $17,834.15 $18,639.60
February 28, 1997 $17,880.09 $18,685.81
March 31, 1997 $17,851.96 $18,671.33
April 30, 1997 $18,006.87 $18,824.44
May 31, 1997 $18,124.52 $18,955.98
June 30, 1997 $18,239.11 $19,087.83
July 31, 1997 $18,442.02 $19,299.78
August 31, 1997 $18,456.05 $19,317.95
September 30, 1997 $18,593.53 $19,466.74
October 31, 1997 $18,713.80 $19,606.91
November 30, 1997 $18,743.35 $19,656.20
December 31, 1997 $18,862.22 $19,785.90
January 31, 1998 $19,046.10 $19,976.90
February 28, 1998 $19,070.33 $19,996.92
March 31, 1998 $19,148.14 $20,074.86
April 30, 1998 $19,243.02 $20,174.36
</TABLE>
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Short-Term Bond Fund on April 30, 1988. As the
chart shows, by April 30, 1998, the value of the investment would have
grown to $19,243 -- a 92.43% increase on the initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year
Government/Corporate Bond Index, which reflects the performance of
U.S. Government and corporate fixed-rate debt securities with
maturities between one and three years, did over the same period.
With dividends reinvested, the same $10,000 would have grown to
$20,174 -- a 101.74% increase.
MARKET RECAP
A continued lack of inflationary
pressure resulted in a favorable
investing climate for bonds during
the 12 months that ended April 30,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable bond
market - returned 10.91% during
this period. Bonds enjoyed a strong
rally from May through
September 1997 on the heels of
encouraging economic data, as well
as the Federal Reserve Board's
reluctance to raise short-term interest
rates. In the fourth quarter of 1997,
global market volatility and
historically low interest rates were
the main stories. When financial
problems erupted in Asia in late
October, the bond market attracted
wary stock investors in search of
investments offering lower volatility.
Interest rates also plummeted, with
the 30-year Treasury bond going
below the 6% mark in November.
The Lehman Brothers Corporate
Bond Index returned 12.07% during
the period, as corporate bonds
benefited from continued economic
growth and high demand for yield.
Despite increased prepayment
activity in early 1998 due to lower
rates, mortgage-backed bonds also
fared relatively well. The Lehman
Brothers Mortgage-Backed
Securities Index returned 10.02%
during the period. The period ended
on a positive note as the Commerce
Department reported that gross
domestic product grew at a
stronger-than-expected rate of 4.2%
in the first quarter of 1998 and
employment costs grew at a
slower-than-expected pace - signs
of continued strong economic
growth and benign inflation.
However, the Fed tempered this
news slightly with warnings about
the rising prices of stocks and real
estate.
(photograph of Andrew Dudley)
An interview with Andrew Dudley, Portfolio Manager of Fidelity
Short-Term Bond Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the 12 months that ended April 30, 1998, the fund had a total
return of 6.86%. That outperformed the 6.67% return of the short
investment grade debt funds average tracked by Lipper Analytical
Services. For the same period, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 7.17%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE?
A. The fund benefited from maintaining overweighted positions,
relative to the index, in corporate bonds, asset-backed securities and
mortgage-backed securities. Generally, these so-called spread products
offered attractive yield spreads - or yield advantages - over
comparable Treasuries during the period.
Q. HOW WERE THE FUND'S INVESTMENTS ALLOCATED?
A. Corporate bonds, including asset-backed securities - bonds backed
by a pool of loans such as credit cards - accounted for about 66% of
the fund's investments at the end of the period. Corporate bonds
offered only neutral returns during the 12-month period after
weakening in the fourth quarter of 1997 during the economic slowdown
in Asia, and then stabilizing in the first quarter of 1998. The fund
was able to generate modest returns from its corporate position by
emphasizing its cable, media and telecommunications holdings. Growth
in these industries is much more dependent on the health of the U.S.
economy than on Asian markets. In addition, asset-backed securities
were a very stable component of the portfolio because of their high
credit quality. In fact, a majority of the fund's asset-backed
position was rated Aaa. These securities offered the fund a way to get
additional yield without taking on the credit risks associated with
many corporate bonds.
Q. WHAT ABOUT MORTGAGE-BACKED SECURITIES?
A. More than half of the fund's mortgage-backed holdings were invested
in commercial mortgage-backed securities (CMBS) - bonds that are
backed by loans on commercial property, such as office buildings or
retail malls. The market for these securities has gained considerable
acceptance among investors, leading to better returns for the issues.
Q. HOW MUCH OVERALL IMPACT DID THE ASIAN SITUATION HAVE ON THE FUND'S
PERFORMANCE?
A. Not much. The Asian situation definitely weakened the corporate
bond market, but as I said, I shielded the portfolio from many of
these ill effects by buying securities in sectors that were more
dependent on the domestic economy. In fact, the fund sold many of the
fund's corporate positions that did have exposure to Asia in October,
helping its performance versus the peer group. Longer term, I see Asia
as an opportunity. The Asian turmoil has caused volatility in the bond
market, which allows me to apply Fidelity's strong research to find
attractive securities that have been unfairly repriced in the past few
months.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET?
A. The yield curve was very flat at the end of the period, meaning
longer-term bonds were not offering much of a yield advantage over
short-term issues. As a result, many buyers of fixed-income securities
will try to get additional yield by buying non-Treasury securities.
Consequently, I think increased demand for these spread products will
benefit their pricing. In addition, the equity markets generated
healthy gains in the first quarter of 1998, which bodes well for
high-grade corporate bonds in the next few months. I also expect
asset-backed securities, which have high credit quality, to continue
to perform well as investors seek out defensive instruments in periods
of turmoil. Finally, opportunities in the mortgage-backed sector will
depend on the level of interest rates. These securities may
underperform other fixed-income securities in the short term if the
market rallies and prepayment - or refinancing - levels remain high.
If that's the case, I may increase the fund's position in
mortgage-backed bonds in anticipation of a rebound and outperformance
in the long term.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH APRIL 30, 1998. THE MANAGER'S VIEWS ARE SUBJECT
TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. ANDREW
DUDLEY IS THE FUND'S PORTFOLIO MANAGER.
EXHIBIT 1
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of April 19, 1999, by and between Fidelity Charles Street Trust, a
Massachusetts business trust, on behalf of its series Spartan
Short-Term Bond Fund (Acquired Fund), and Fidelity Fixed-Income Trust,
a Massachusetts business trust, on behalf of its series Fidelity
Short-Term Bond Fund (Acquiring Fund). Fidelity Charles Street Trust
and Fidelity Fixed-Income Trust may be referred to herein collectively
as the "Trusts" or each individually as a "Trust." The Trusts are duly
organized business trusts under the laws of the Commonwealth of
Massachusetts with their principal place of business at 82 Devonshire
Street, Boston, Massachusetts 02109. Fidelity Short-Term Bond Fund and
Spartan Short-Term Bond Fund may be referred to herein collectively as
the "Funds" or each individually as the "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise: (a) the transfer of all of the assets of
Spartan Short-Term Bond Fund to Fidelity Short-Term Bond Fund solely
in exchange for shares of beneficial interest in Fidelity Short-Term
Bond Fund (the Fidelity Short-Term Bond Fund Shares) and the
assumption by Fidelity Short-Term Bond Fund of Spartan Short-Term Bond
Fund's liabilities; and (b) the constructive distribution of such
shares by Spartan Short-Term Bond Fund PRO RATA to its shareholders in
complete liquidation and termination of Spartan Short-Term Bond Fund
in exchange for all of Spartan Short-Term Bond Fund's outstanding
shares. Spartan Short-Term Bond Fund shall receive shares of Fidelity
Short-Term Bond Fund having an aggregate net asset value equal to the
value of the assets of Spartan Short-Term Bond Fund on the Closing
Date (as defined in Section 6), which Spartan Short-Term Bond Fund
shall then distribute PRO RATA to its shareholders. The foregoing
transactions are referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN SHORT-TERM BOND FUND.
Spartan Short-Term Bond Fund represents and warrants to and agrees
with Fidelity Short-Term Bond Fund that:
(a) Spartan Short-Term Bond Fund is a series of Fidelity Charles
Street Trust, a business trust duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Massachusetts,
and has the power to own all of its properties and assets and to carry
out its obligations under this Agreement. It has all necessary
federal, state, and local authorizations to carry on its business as
now being conducted and to carry out this Agreement;
(b) Fidelity Charles Street Trust is an open-end, management
investment company duly registered under the Investment Company Act of
1940, as amended (the 1940 Act), and such registration is in full
force and effect;
(c) The Prospectus and Statement of Additional Information of Spartan
Short-Term Bond Fund dated November 24, 1998, previously furnished to
Fidelity Short-Term Bond Fund, did not and do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan Short-Term Bond Fund,
threatened against Spartan Short-Term Bond Fund which assert liability
on the part of Spartan Short-Term Bond Fund. Spartan Short-Term Bond
Fund knows of no facts which might form the basis for the institution
of such proceedings;
(e) Spartan Short-Term Bond Fund is not in, and the execution,
delivery, and performance of this Agreement will not result in,
violation of any provision of its Amended and Restated Declaration of
Trust or By-laws, or, to the knowledge of Spartan Short-Term Bond
Fund, of any agreement, indenture, instrument, contract, lease, or
other undertaking to which Spartan Short-Term Bond Fund is a party or
by which Spartan Short Bond Fund is bound or result in the
acceleration of any obligation or the imposition of any penalty under
any agreement, judgment or decree to which Spartan Short-Term Bond
Fund is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Spartan Short-Term Bond Fund at September 30, 1998, have been
audited by PricewaterhouseCoopers LLP, independent accountants, and
have been furnished to Fidelity Short-Term Bond Fund. Said Statement
of Assets and Liabilities and Schedule of Investments fairly present
the Fund's financial position as of such date and said Statement of
Operations, Statement of Changes in Net Assets, and Financial
Highlights fairly reflect its results of operations, changes in
financial position, and financial highlights for the periods covered
thereby in conformity with generally accepted accounting principles
consistently applied;
(g) Spartan Short-Term Bond Fund has no known liabilities of a
material nature, contingent or otherwise, other than those shown as
belonging to it on its statement of assets and liabilities as of
September 30, 1998 and those incurred in the ordinary course of
Spartan Short-Term Bond Fund's business as an investment company since
September 30, 1998;
(h) The registration statement (Registration Statement) filed with
the Securities and Exchange Commission (Commission) by Fidelity
Short-Term Bond Fund on Form N-14 relating to the shares of Fidelity
Short-Term Bond Fund issuable hereunder and the proxy statement of
Spartan Short-Term Bond Fund included therein (Proxy Statement), on
the effective date of the Registration Statement and insofar as they
relate to Spartan Short-Term Bond Fund (i) comply in all material
respects with the provisions of the Securities Act of 1933, as amended
(the 1933 Act), the Securities Exchange Act of 1934, as amended (the
1934 Act), and the 1940 Act, and the rules and regulations thereunder,
and (ii) do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the
time of the shareholders' meeting referred to in Section 7 and on the
Closing Date, the prospectus contained in the Registration Statement
of which the Proxy Statement is a part (the Prospectus), as amended or
supplemented, insofar as it relates to Spartan Short-Term Bond Fund,
does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(i) All material contracts and commitments of Spartan Short-Term Bond
Fund (other than this Agreement) will be terminated without liability
to Spartan Short-Term Bond Fund prior to the Closing Date (other than
those made in connection with redemptions of shares and the purchase
and sale of portfolio securities made in the ordinary course of
business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan
Short-Term Bond Fund of the transactions contemplated by this
Agreement, except such as have been obtained under the 1933 Act, the
1934 Act, the 1940 Act, and state securities or blue sky laws (which
term as used herein shall include the District of Columbia and Puerto
Rico);
(k) Spartan Short-Term Bond Fund has filed or will file all federal
and state tax returns which, to the knowledge of Spartan Short-Term
Bond Fund's officers, are required to be filed by Spartan Short-Term
Bond Fund and has paid or will pay all federal and state taxes shown
to be due on said returns or provision shall have been made for the
payment thereof, and, to the best of Spartan Short-Term Bond Fund's
knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(l) Spartan Short-Term Bond Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company for all prior taxable years and intends
to meet such requirements for its current taxable year ending on the
Closing Date;
(m) All of the issued and outstanding shares of Spartan Short-Term
Bond Fund are, and at the Closing Date will be, duly and validly
issued and outstanding and fully paid and nonassessable as a matter of
Massachusetts law (except as disclosed in the Fund's Statement of
Additional Information), and have been offered for sale and in
conformity with all applicable federal securities laws. All of the
issued and outstanding shares of Spartan Short-Term Bond Fund will, at
the Closing Date, be held by the persons and in the amounts set forth
in the list of shareholders submitted to Fidelity Short-Term Bond Fund
in accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan Short-Term Bond Fund will have the full right,
power, and authority to sell, assign, transfer, and deliver its
portfolio securities and any other assets of Spartan Short-Term Bond
Fund to be transferred to Fidelity Short-Term Bond Fund pursuant to
this Agreement. As of the Closing Date, subject only to the delivery
of Spartan Short-Term Bond Fund's portfolio securities and any such
other assets as contemplated by this Agreement, Fidelity Short-Term
Bond Fund will acquire Spartan Short-Term Bond Fund's portfolio
securities and any such other assets subject to no encumbrances,
liens, or security interests (except for those that may arise in the
ordinary course and are disclosed to Fidelity Short-Term Bond Fund and
without any restrictions upon the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Spartan Short-Term Bond Fund, and this
Agreement constitutes a valid and binding obligation of Spartan
Short-Term Bond Fund enforceable in accordance with its terms, subject
to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY SHORT-TERM BOND FUND.
Fidelity Short-Term Bond Fund represents and warrants to and agrees
with Spartan Short-Term Bond Fund that:
(a) Fidelity Short-Term Bond Fund is a series of Fidelity
Fixed-Income Trust, a business trust duly organized, validly existing,
and in good standing under the laws of the Commonwealth of
Massachusetts, and has the power to own all of its properties and
assets and to carry out its obligations under this Agreement. It has
all necessary federal, state, and local authorizations to carry on its
business as now being conducted and to carry out this Agreement;
(b) Fidelity Fixed-Income Trust is an open-end, management investment
company duly registered under the 1940 Act, and such registration is
in full force and effect;
(c) The Prospectus and Statement of Additional Information of
Fidelity Short-Term Bond Fund, dated June 26, 1998, previously
furnished to Spartan Short-Term Bond Fund did not and do not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity Short-Term Bond Fund,
threatened against Fidelity Short-Term Bond Fund which assert
liability on the part of Fidelity Short-Term Bond Fund. Fidelity
Short-Term Bond Fund knows of no facts which might form the basis for
the institution of such proceedings;
(e) Fidelity Short-Term Bond Fund is not in, and the execution,
delivery, and performance of this Agreement will not result in,
violation of any provision of its Amended and Restated Declaration of
Trust or By-laws, or, to the knowledge of Fidelity Short-Term Bond
Fund, of any agreement, indenture, instrument, contract, lease, or
other undertaking to which Fidelity Short-Term Bond Fund is a party or
by which Fidelity Short-Term Bond Fund is bound or result in the
acceleration of any obligation or the imposition of any penalty under
any agreement, judgment, or decree to which Fidelity Short-Term Bond
Fund is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Fidelity Short-Term Bond Fund at April 30, 1998, have been audited
by PricewaterhouseCoopers LLP, independent accountants, and have been
furnished to Spartan Short-Term Bond Fund together with such unaudited
financial statements and schedule of investments (including market
values) for the six month period ended October 31, 1998. Said
Statements of Assets and Liabilities and Schedule of Investments
fairly present its financial position as of such date and said
Statement of Operations, Statement of Changes in Net Assets, and
Financial Highlights fairly reflect its results of operations, changes
in financial position, and financial highlights for the periods
covered thereby in conformity with generally accepted accounting
principles consistently applied;
(g) Fidelity Short-Term Bond Fund has no known liabilities of a
material nature, contingent or otherwise, other than those shown as
belonging to it on its statement of assets and liabilities as of April
30, 1998, and those incurred in the ordinary course of Fidelity
Short-Term Bond Fund's business as an investment company since April
30, 1998;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity
Short-Term Bond Fund of the transactions contemplated by this
Agreement, except such as have been obtained under the 1933 Act, the
1934 Act, the 1940 Act, and state securities or blue sky laws (which
term as used herein shall include the District of Columbia and Puerto
Rico);
(i) Fidelity Short-Term Bond Fund has filed or will file all federal
and state tax returns which, to the knowledge of Fidelity Short-Term
Bond Fund's officers, are required to be filed by Fidelity Short-Term
Bond Fund and has paid or will pay all federal and state taxes shown
to be due on said returns or provision shall have been made for the
payment thereof, and, to the best of Fidelity Short-Term Bond Fund's
knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(j) Fidelity Short-Term Bond Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company for all prior taxable years and intends
to meet such requirements for its current taxable year ending on
April 30, 1999 ;
(k) As of the Closing Date, the shares of beneficial interest of
Fidelity Short-Term Bond Fund to be issued to Spartan Short-Term Bond
Fund will have been duly authorized and, when issued and delivered
pursuant to this Agreement, will be legally and validly issued and
will be fully paid and nonassessable (except as disclosed in the
Fund's Statement of Additional Information) by Fidelity Short-Term
Bond Fund, and no shareholder of Fidelity Short-Term Bond Fund will
have any preemptive right of subscription or purchase in respect
thereof;
(l) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Fidelity Short-Term Bond Fund, and
this Agreement constitutes a valid and binding obligation of Fidelity
Short-Term Bond Fund enforceable in accordance with its terms, subject
to approval by the shareholders of Spartan Short-Term Bond Fund;
(m) The Registration Statement and the Proxy Statement, on the
effective date of the Registration Statement and insofar as they
relate to Fidelity Short-Term Bond Fund, (i) will comply in all
material respects with the provisions of the 1933 Act, the 1934 Act,
and the 1940 Act, and the rules and regulations thereunder, and (ii)
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 7 and on the Closing
Date, the Prospectus, as amended or supplemented, insofar as it
relates to Fidelity Short-Term Bond Fund, will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(n) The issuance of the Fidelity Short-Term Bond Fund Shares pursuant
to this Agreement will be in compliance with all applicable federal
securities laws; and
(o) All of the issued and outstanding shares of beneficial interest
of Fidelity Short-Term Bond Fund have been offered for sale and sold
in conformity with the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan
Short-Term Bond Fund and to the other terms and conditions contained
herein, Spartan Short-Term Bond Fund agrees to assign, sell, convey,
transfer, and deliver to Fidelity Short-Term Bond Fund as of the
Closing Date all of the assets of Spartan Short-Term Bond Fund of
every kind and nature existing on the Closing Date. Fidelity
Short-Term Bond Fund agrees in exchange therefor: (i) to assume all of
Spartan Short-Term Bond Fund's liabilities existing on or after the
Closing Date, whether or not determinable on the Closing Date, and
(ii) to issue and deliver to Spartan Short-Term Bond Fund the number
of full and fractional shares of Fidelity Short-Term Bond Fund having
an aggregate net asset value equal to the value of the assets of
Spartan Short-Term Bond Fund transferred hereunder, less the value of
the liabilities of Spartan Short-Term Bond Fund, determined as
provided for under Section 4.
(b) The assets of Spartan Short-Term Bond Fund to be acquired by
Fidelity Short-Term Bond Fund shall include, without limitation, all
cash, cash equivalents, securities, receivables (including interest or
dividends receivables), claims, choses in action, and other property
owned by Spartan Short-Term Bond Fund, and any deferred or prepaid
expenses shown as an asset on the books of Spartan Short-Term Bond
Fund on the Closing Date. Spartan Short-Term Bond Fund will pay or
cause to be paid to Fidelity Short-Term Bond Fund any dividend or
interest payments received by it on or after the Closing Date with
respect to the assets transferred to Fidelity Short-Term Bond Fund
hereunder, and Fidelity Short-Term Bond Fund will retain any dividend
or interest payments received by it after the Valuation Time with
respect to the assets transferred hereunder without regard to the
payment date thereof.
(c) The liabilities of Spartan Short-Term Bond Fund to be assumed by
Fidelity Short-Term Bond Fund shall include (except as otherwise
provided for herein) all of Spartan Short-Term Bond Fund's
liabilities, debts, obligations, and duties, of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether
or not arising in the ordinary course of business, whether or not
determinable on the Closing Date, and whether or not specifically
referred to in this Agreement. Notwithstanding the foregoing, Spartan
Short-Term Bond Fund agrees to use its best efforts to discharge all
of its known liabilities prior to the Closing Date, other than
liabilities incurred in the ordinary course of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable, Spartan Short-Term Bond Fund will
constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the Fidelity
Short-Term Bond Fund Shares in exchange for such shareholders' shares
of beneficial interest in Spartan Short-Term Bond Fund and Spartan
Short-Term Bond Fund will be liquidated in accordance with Spartan
Short-Term Bond Fund's Amended and Restated Declaration of Trust. Such
distribution shall be accomplished by the Funds' transfer agent
opening accounts on Fidelity Short-Term Bond Fund's share transfer
books in the names of the Spartan Short-Term Bond Fund shareholders
and transferring the Fidelity Short-Term Bond Fund Shares thereto.
Each Spartan Short-Term Bond Fund shareholder's account shall be
credited with the respective PRO RATA number of full and fractional
(rounded to the third decimal place) Fidelity Short-Term Bond Fund
Shares due that shareholder. All outstanding Spartan Short-Term Bond
Fund shares, including any represented by certificates, shall
simultaneously be canceled on Spartan Short-Term Bond Fund's share
transfer records. Fidelity Short-Term Bond Fund shall not issue
certificates representing the Fidelity Short-Term Bond Fund Shares in
connection with the Reorganization.
(e) Any reporting responsibility of Spartan Short-Term Bond Fund is
and shall remain its responsibility up to and including the date on
which it is terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity
Short-Term Bond Fund Shares in a name other than that of the
registered holder on Spartan Short-Term Bond Fund's books of the
Spartan Short-Term Bond Fund shares constructively exchanged for the
Fidelity Short-Term Bond Fund Shares shall be paid by the person to
whom such Fidelity Short-Term Bond Fund Shares are to be issued, as a
condition of such transfer.
4. VALUATION.
(a) The Valuation Time shall be as of the close of business of the
New York Stock Exchange on the Closing Date, or such other date as may
be mutually agreed upon in writing by the parties hereto (the
Valuation Time).
(b) As of the Closing Date, Fidelity Short-Term Bond Fund will
deliver to Spartan Short-Term Bond Fund the number of Fidelity
Short-Term Bond Fund Shares having an aggregate net asset value equal
to the value of the assets of Spartan Short-Term Bond Fund transferred
hereunder less the liabilities of Spartan Short-Term Bond Fund,
determined as provided in this Section 4.
(c) The net asset value per share of the Fidelity Short-Term Bond
Fund Shares to be delivered to Spartan Short-Term Bond Fund, the value
of the assets of Spartan Short-Term Bond Fund transferred hereunder,
and the value of the liabilities of Spartan Short-Term Bond Fund to be
assumed hereunder shall in each case be determined as of the Valuation
Time.
(d) The net asset value per share of the Fidelity Short-Term Bond
Fund Shares shall be computed in the manner set forth in the
then-current Fidelity Short-Term Bond Fund Prospectus and Statement of
Additional Information, and the value of the assets and liabilities of
Spartan Short-Term Bond Fund shall be computed in the manner set forth
in the then-current Spartan Short-Term Bond Fund Prospectus and
Statement of Additional Information.
(e) All computations pursuant to this Section shall be made by or
under the direction of Fidelity Service Company, Inc., a wholly-owned
subsidiary of FMR Corp., in accordance with its regular practice as
pricing agent for Spartan Short-Term Bond Fund and Fidelity Short-Term
Bond Fund.
5. FEES; EXPENSES.
(a) Pursuant to Spartan Short-Term Bond Fund's all-inclusive
management contract with Fidelity Management & Research Company (FMR),
FMR will pay all fees and expenses, including legal, accounting,
printing, filing, and proxy solicitation expenses, portfolio transfer
taxes (if any), or other similar expenses incurred in connection with
the transactions contemplated by this Agreement (but not including
costs incurred in connection with the purchase or sale of portfolio
securities).
Any expenses incurred in connection with the transactions contemplated
by this Agreement which may be attributable to Fidelity Short-Term
Bond Fund will be borne by Fidelity Short-Term Bond Fund provided that
they do not exceed the fund's 0.65% expense cap in effect since June
27, 1998. Expenses exceeding the fund's expense cap will be paid by
FMR (but not including costs incurred in connection with the purchase
or sale of portfolio securities).
(b) Each of Fidelity Short-Term Bond Fund and Spartan Short-Term Bond
Fund represents that there is no person who has dealt with it who by
reason of such dealings is entitled to any broker's or finder's or
other similar fee or commission arising out of the transactions
contemplated by this Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to
consummate the same (the Closing), unless otherwise provided herein,
shall occur at the principal office of the Trusts, 82 Devonshire
Street, Boston, Massachusetts, as of the Valuation Time on June 24,
1999, or at some other time, date, and place agreed to by Spartan
Short-Term Bond Fund and Fidelity Short-Term Bond Fund (the Closing
Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the Funds is closed to trading, or (ii) trading
thereon is restricted, or (iii) trading or the reporting of trading on
said market or elsewhere is disrupted, all so that accurate appraisal
of the total net asset value of Spartan Short-Term Bond Fund and the
net asset value per share of Fidelity Short-Term Bond Fund is
impracticable, the Valuation Time and the Closing Date shall be
postponed until the first business day after the day when such trading
shall have been fully resumed and such reporting shall have been
restored, or such other date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN SHORT-TERM BOND
FUND.
(a) Spartan Short-Term Bond Fund agrees to call a meeting of its
shareholders after the effective date of the Registration Statement,
to consider transferring its assets to Fidelity Short-Term Bond Fund
as herein provided, adopting this Agreement, and authorizing the
liquidation of Spartan Short-Term Bond Fund.
(b) Spartan Short-Term Bond Fund agrees that as soon as reasonably
practicable after distribution of the Fidelity Short-Term Bond Fund
Shares, Spartan Short-Term Bond Fund shall be terminated as a series
of Fidelity Charles Street Trust pursuant to its Amended and Restated
Declaration of Trust, any further actions shall be taken in connection
therewith as required by applicable law, and on and after the Closing
Date Spartan Short-Term Bond Fund shall not conduct any business
except in connection with its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF FIDELITY SHORT-TERM BOND FUND.
(a) That Spartan Short-Term Bond Fund furnishes to Fidelity
Short-Term Bond Fund a statement, dated as of the Closing Date, signed
by an officer of Fidelity Charles Street Trust, certifying that as of
the Valuation Time and the Closing Date all representations and
warranties of Spartan Short-Term Bond Fund made in this Agreement are
true and correct in all material respects and that Spartan Short-Term
Bond Fund has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to
such dates;
(b) That Spartan Short-Term Bond Fund furnishes Fidelity Short-Term
Bond Fund with copies of the resolutions, certified by an officer of
Fidelity Charles Street Trust, evidencing the adoption of this
Agreement and the approval of the transactions contemplated herein by
the requisite vote of the holders of the outstanding shares of
beneficial interest of Spartan Short-Term Bond Fund;
(c) That, on or prior to the Closing Date, Spartan Short-Term Bond
Fund will declare one or more dividends or distributions which,
together with all previous such dividends or distributions
attributable to its current taxable year, shall have the effect of
distributing to the shareholders of Spartan Short-Term Bond Fund
substantially all of Spartan Short-Term Bond Fund's investment company
taxable income and all of its net realized capital gain, if any, as of
the Closing Date;
(d) That Spartan Short-Term Bond Fund shall deliver to Fidelity
Short-Term Bond Fund at the Closing a statement of its assets and
liabilities, together with a list of its portfolio securities showing
each such security's adjusted tax basis and holding period by lot,
with values determined as provided in Section 4 of this Agreement, all
as of the Valuation Time, certified on Spartan Short-Term Bond Fund's
behalf by its Treasurer or Assistant Treasurer;
(e) That Spartan Short-Term Bond Fund's custodian shall deliver to
Fidelity Short-Term Bond Fund a certificate identifying the assets of
Spartan Short-Term Bond Fund held by such custodian as of the
Valuation Time on the Closing Date and stating that as of the
Valuation Time: (i) the assets held by the custodian will be
transferred to Fidelity Short-Term Bond Fund; (ii) Spartan Short-Term
Bond Fund's assets have been duly endorsed in proper form for transfer
in such condition as to constitute good delivery thereof; and (iii) to
the best of the custodian's knowledge, all necessary taxes in
conjunction with the delivery of the assets, including all applicable
federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made;
(f) That Spartan Short-Term Bond Fund's transfer agent shall deliver
to Fidelity Short-Term Bond Fund at the Closing a certificate setting
forth the number of shares of Spartan Short-Term Bond Fund outstanding
as of the Valuation Time and the name and address of each holder of
record of any such shares and the number of shares held of record by
each such shareholder;
(g) That Spartan Short-Term Bond Fund calls a meeting of its
shareholders to be held after the effective date of the Registration
Statement, to consider transferring its assets to Fidelity Short-Term
Bond Fund as herein provided, adopting this Agreement, and authorizing
the liquidation and termination of Spartan Short-Term Bond Fund;
(h) That Spartan Short-Term Bond Fund delivers to Fidelity Short-Term
Bond Fund a certificate of an officer of Fidelity Charles Street
Trust, dated as of the Closing Date, that there has been no material
adverse change in Spartan Short-Term Bond Fund's financial position
since September 30, 1998, other than changes in the market value of
its portfolio securities, or changes due to net redemptions of its
shares, dividends paid, or losses from operations; and
(i) That all of the issued and outstanding shares of beneficial
interest of Spartan Short-Term Bond Fund shall have been offered for
sale and sold in conformity with all applicable state securities laws
and, to the extent that any audit of the records of Spartan Short-Term
Bond Fund or its transfer agent by Fidelity Short-Term Bond Fund or
its agents shall have revealed otherwise, Spartan Short-Term Bond Fund
shall have taken all actions that in the opinion of Fidelity
Short-Term Bond Fund are necessary to remedy any prior failure on the
part of Spartan Short-Term Bond Fund to have offered for sale and sold
such shares in conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN SHORT-TERM BOND FUND.
(a) That Fidelity Short-Term Bond Fund shall have executed and
delivered to Spartan Short-Term Bond Fund an Assumption of
Liabilities, certified by an officer of Fidelity Fixed-Income Trust,
dated as of the Closing Date pursuant to which Fidelity Short-Term
Bond Fund will assume all of the liabilities of Spartan Short-Term
Bond Fund existing at the Valuation Time in connection with the
transactions contemplated by this Agreement;
(b) That Fidelity Short-Term Bond Fund furnishes to Spartan
Short-Term Bond Fund a statement, dated as of the Closing Date, signed
by an officer of Fidelity Fixed-Income Trust, certifying that as of
the Valuation Time and the Closing Date all representations and
warranties of Fidelity Short-Term Bond Fund made in this Agreement are
true and correct in all material respects, and Fidelity Short-Term
Bond Fund has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to
such dates; and
(c) That Spartan Short-Term Bond Fund shall have received an opinion
of Kirkpatrick & Lockhart LLP, counsel to Spartan Short-Term Bond Fund
and Fidelity Short-Term Bond Fund, to the effect that the Fidelity
Short-Term Bond Fund Shares are duly authorized and upon delivery to
Spartan Short-Term Bond Fund as provided in this Agreement will be
validly issued and will be fully paid and nonassessable by Fidelity
Short-Term Bond Fund (except as disclosed in Fidelity Short-Term Bond
Fund's Statement of Additional Information) and no shareholder of
Fidelity Short-Term Bond Fund has any preemptive right of subscription
or purchase in respect thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY SHORT-TERM BOND FUND AND
SPARTAN SHORT-TERM BOND FUND.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of
the holders of the outstanding shares of beneficial interest of
Spartan Short-Term Bond Fund;
(b) That all consents of other parties and all other consents,
orders, and permits of federal, state, and local regulatory
authorities (including those of the Commission and of state Blue Sky
and securities authorities, which term as used herein shall include
the District of Columbia and Puerto Rico, and including "no action"
positions of such federal or state authorities) deemed necessary by
Fidelity Short-Term Bond Fund or Spartan Short-Term Bond Fund to
permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order, or permit would not involve a risk of
a material adverse effect on the assets or properties of Fidelity
Short-Term Bond Fund or Spartan Short-Term Bond Fund, provided that
either party hereto may for itself waive any of such conditions;
(c) That all proceedings taken by either Fund in connection with the
transactions contemplated by this Agreement and all documents
incidental thereto shall be satisfactory in form and substance to it
and its counsel, Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall
have been instituted or, to the knowledge of Fidelity Short-Term Bond
Fund and Spartan Short-Term Bond Fund, threatened by the Commission;
and
(f) That Fidelity Short-Term Bond Fund and Spartan Short-Term Bond
Fund shall have received an opinion of Kirkpatrick & Lockhart LLP
satisfactory to Fidelity Short-Term Bond Fund and Spartan Short-Term
Bond Fund that for federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan Short-Term Bond Fund and
Fidelity Short-Term Bond Fund will each be parties to the
Reorganization under section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Short-Term Bond
Fund upon the transfer of all of its assets to Fidelity Short-Term
Bond Fund in exchange solely for the Fidelity Short-Term Bond Fund
Shares and the assumption of Spartan Short-Term Bond Fund's
liabilities followed by the distribution of those Fidelity Short-Term
Bond Fund Shares to the shareholders of Spartan Short-Term Bond Fund
in liquidation of Spartan Short-Term Bond Fund;
(iii) No gain or loss will be recognized by Fidelity Short-Term Bond
Fund on the receipt of Spartan Short-Term Bond Fund's assets in
exchange solely for the Fidelity Short-Term Bond Fund shares and the
assumption of Spartan Short-Term Bond Fund's liabilities;
(iv) The basis of Spartan Short-Term Bond Fund's assets in the hands
of Fidelity Short-Term Bond Fund will be the same as the basis of such
assets in Spartan Short-Term Bond Fund's hands immediately prior to
the Reorganization;
(v) Fidelity Short-Term Bond Fund's holding period in the assets to
be received from Spartan Short-Term Bond Fund will include Spartan
Short-Term Bond Fund's holding period in such assets;
(vi) A Spartan Short-Term Bond Fund shareholder will recognize no
gain or loss on the exchange of his or her shares of beneficial
interest in Spartan Short-Term Bond Fund for the Fidelity Short-Term
Bond Fund shares in the Reorganization;
(vii) A Spartan Short-Term Bond Fund shareholder's basis in the
Fidelity Short-Term Bond Fund Shares to be received by him or her will
be the same as his or her basis in the Spartan Short-Term Bond Fund
shares exchanged therefor;
(viii) A Spartan Short-Term Bond Fund shareholder's holding period
for his or her Fidelity Short-Term Bond Fund Shares will include the
holding period of Spartan Short-Term Bond Fund shares exchanged,
provided that those Spartan Short-Term Bond Fund shares were held as
capital assets on the date of the Reorganization.
Notwithstanding anything herein to the contrary, neither Spartan
Short-Term Bond Fund nor Fidelity Short-Term Bond Fund may waive the
conditions set forth in this subsection 10(f).
11. COVENANTS OF FIDELITY SHORT-TERM BOND FUND AND SPARTAN SHORT-TERM
BOND FUND.
(a) Fidelity Short-Term Bond Fund and Spartan Short-Term Bond Fund
each covenants to operate its respective business in the ordinary
course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the
payment of customary dividends and distributions;
(b) Spartan Short-Term Bond Fund covenants that it is not acquiring
the Fidelity Short-Term Bond Fund Shares for the purpose of making any
distribution other than in accordance with the terms of this
Agreement;
(c) Spartan Short-Term Bond Fund covenants that it will assist
Fidelity Short-Term Bond Fund in obtaining such information as
Fidelity Short-Term Bond Fund reasonably requests concerning the
beneficial ownership of Spartan Short-Term Bond Fund's shares; and
(d) Spartan Short-Term Bond Fund covenants that its liquidation and
termination will be effected in the manner provided in its Amended and
Restated Declaration of Trust in accordance with applicable law and
after the Closing Date, Spartan Short-Term Bond Fund will not conduct
any business except in connection with its liquidation and
termination.
12. TERMINATION; WAIVER.
Fidelity Short-Term Bond Fund and Spartan Short-Term Bond Fund may
terminate this Agreement by mutual agreement. In addition, either
Fidelity Short-Term Bond Fund or Spartan Short-Term Bond Fund may at
its option terminate this Agreement at or prior to the Closing Date
because:
(i) of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
(ii) a condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan Short-Term Bond Fund or Fidelity
Short-Term Bond Fund, or their respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter
hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement
signed by each party hereto and shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity Short-Term
Bond Fund or Spartan Short-Term Bond Fund; provided, however, that
following the shareholders' meeting called by Spartan Short-Term Bond
Fund pursuant to Section 7 of this Agreement, no such amendment may
have the effect of changing the provisions for determining the number
of Fidelity Short-Term Bond Fund Shares to be paid to Spartan
Short-Term Bond Fund shareholders under this Agreement to the
detriment of such shareholders without their further approval.
(c) Either Fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on
the interests of such Fund's shareholders.
The representations, warranties, and covenants contained in the
Agreement, or in any document delivered pursuant hereto or in
connection herewith, shall survive the consummation of the
transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of each Fund's Declaration of Trust, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of each Fund as trustees and not
individually and that the obligations of each Fund under this
instrument are not binding upon any of such Fund's Trustees, officers,
or shareholders individually but are binding only upon the assets and
property of such Fund. Each Fund agrees that its obligations hereunder
apply only to such Fund and not to its shareholders individually or to
the Trustees of such Fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer of any rights or obligations hereunder shall be made by
any party without the written consent of the other parties. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation other than the
parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by an appropriate officer.
[SIGNATURE LINES OMITTED]
SSTX-pxs-0499 CUSIP#316069509/FUND#449
1.716787.100
IMPORTANT PROXY MATERIALS
PLEASE CAST YOUR VOTE NOW!
Dear Shareholder:
I am writing to ask you for your vote on an important proposal to
merge Spartan(Registered trademark) Short-Term Bond Fund into Fidelity
Short-Term Bond Fund. A shareholder meeting is scheduled for June 16,
1999. Votes received in time to be counted at the meeting will decide
whether the merger takes place. This package contains information
about the proposal and includes all the materials you will need to
vote by mail.
The fund's Board of Trustees has reviewed the proposed merger and has
recommended that the proposed merger be presented to shareholders.
The Trustees, most of whom are not affiliated with Fidelity, are
responsible for protecting your interests as a shareholder. The
Trustees have determined that the proposed merger is in shareholders'
best interest. However, the final decision is up to you.
The proposed merger would give shareholders of Spartan Short-Term Bond
Fund the opportunity to participate in a larger fund with similar
investment policies. The combined fund would also have lower expenses
guaranteed through June 30, 2001. We have attached a Q&A to assist
you in understanding the proposal. The enclosed proxy statement
includes a detailed description of the proposed merger.
Please read the enclosed materials and promptly cast your vote on the
proxy card. You are entitled to one vote for each dollar of net asset
value you own of the fund on the record date (April 19, 1999). Your
vote is extremely important, no matter how large or small your
holdings may be.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED.
To cast your vote, simply complete the proxy card enclosed in this
package. Be sure to sign the card before mailing it in the
postage-paid envelope provided.
If you have any questions before you vote, please call us at
1-800-544-8888. We will be glad to help you get your vote in quickly.
Thank you for your participation in this important initiative for your
fund.
Sincerely,
Edward C. Johnson 3d
Chairman and Chief Executive Officer
Important information to help you understand and vote on the proposal
Please read the full text of the enclosed proxy statement. Below is a
brief overview of the proposal to be voted upon. Your vote is
important. We appreciate you placing your trust in Fidelity and look
forward to helping you achieve your financial goals.
WHAT PROPOSAL AM I BEING ASKED TO VOTE ON?
You are being asked to approve a merger of Spartan Short-Term Bond
Fund into Fidelity Short-Term Bond Fund.
WHAT IS THE REASON FOR AND ADVANTAGES OF THIS MERGER?
The proposed merger is part of a wider strategy by Fidelity to reduce
the number of similar bond funds it manages. The combined fund would
have lower expenses guaranteed through June 30, 2001, and similar
investment policies.
DO THE FUNDS BEING MERGED HAVE SIMILAR INVESTMENT POLICIES?
Both funds are bond funds that seek high current income by investing
in U.S. dollar-denominated investment-grade bonds, including
corporate, government, and mortgage securities. In addition, both
funds have similar portfolios in terms of holdings, interest rate
risk, and average maturity.
WHO IS THE FUND MANAGER FOR THESE FUNDS?
Andrew Dudley currently manages both funds and is expected to manage
the combined fund.
HOW DO THE EXPENSE STRUCTURES OF THE FUNDS COMPARE?
Spartan Short-Term Bond Fund and Fidelity Short-Term Bond Fund have
different contractual expense structures. Spartan Short-Term Bond Fund
pays an all-inclusive management fee to Fidelity Management & Research
Company (FMR) while Fidelity Short-Term Bond Fund pays its management
fees and other expenses separately. If the merger is approved the
combined fund will retain Fidelity Short-Term Bond Fund's current
expense structure. However, FMR has agreed to limit the combined
fund's total operating expenses to 0.63% of average net assets through
June 30, 2001. After that date, the combined fund's expenses could
increase or decrease, as permitted by the Fidelity Short-Term Bond
Fund management contract.
WHAT WILL BE THE NAME OF THE COMBINED FUND AFTER THE MERGER IS
COMPLETED?
If shareholders of Spartan Short-Term Bond Fund approve the merger of
their fund into Fidelity Short-Term Bond Fund, the combined fund's
name will remain Fidelity Short-Term Bond Fund.
IS THE MERGER A TAXABLE EVENT FOR FEDERAL INCOME TAX PURPOSES?
Typically, the exchange of shares pursuant to a merger does not result
in a gain or loss for federal income tax purposes.
WHAT WILL BE THE SIZE OF FIDELITY SHORT-TERM BOND FUND AFTER THE
MERGER AND HOW HAS THE FUND PERFORMED?
If the proposal is approved, the combined fund is anticipated to have
over $1.1 billion in assets.
The table below shows average annual total returns for both Fidelity
Short-Term Bond Fund and its Lipper peer group over the last 1, 3, 5,
and 10 year periods. Please keep in mind that past performance is no
guarantee of future results and you may have a gain or loss when you
sell your shares.
AVERAGE ANNUAL TOTAL RETURN AS OF MARCH 31, 1999*
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Fidelity Short-Term Bond Fund 5.66% 5.98% 5.13% 6.84%
Lipper Short Investment Grade
Debt Funds Average** 5.13% 5.75% 5.69% 6.96%
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF FIDELITY SHORT-TERM
BOND FUND THAT I WILL RECEIVE?
As of the close of business of the New York Stock Exchange on the
Closing Date of the merger, shareholders will receive the number of
full and fractional shares of Fidelity Short-Term Bond Fund that is
equal in value to the net asset value of their shares of Spartan
Short-Term Bond Fund on that date. The anticipated closing date is
June 24, 1999.
WHAT IF THERE ARE NOT ENOUGH VOTES TO REACH QUORUM BY THE SCHEDULED
SHAREHOLDER MEETING DATE?
To facilitate receiving sufficient votes, we will need to take further
action. We or D.F. King & Co., Inc., a proxy solicitation firm, may
contact you by mail or telephone. Therefore, we encourage
shareholders to vote as soon as they review the enclosed proxy
materials to avoid additional mailings or telephone calls.
If there are not sufficient votes to approve the proposal by the time
of the Shareholder Meeting (June 16, 1999), the meeting may be
adjourned to permit further solicitation of proxy votes.
HAS THE FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSAL?
Yes. The Board of Trustees has unanimously approved the proposal and
recommends that you vote to approve it.
HOW MANY VOTES AM I ENTITLED TO CAST?
As a shareholder, you are entitled to one vote for each dollar of net
asset value you own of Spartan Short-Term Bond Fund on the record
date. The record date is April 19, 1999.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy
card, and mailing it in the enclosed postage paid envelope. If you
need any assistance, or have any questions regarding the proposal or
how to vote your shares, please call Fidelity at 800-544-8888.
HOW DO I SIGN THE PROXY CARD?
INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names
appear on the account registration shown on the card.
JOINT ACCOUNTS: Either owner may sign, but the name of the person
signing should conform exactly to a name shown in the registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her
capacity. For example, a trustee for a trust or other entity should
sign, "Ann B. Collins, Trustee."
* Average annual total returns are historical and include changes in
share price, reinvestment of dividends and capital gains, if any.
Share price, yield and return will vary.
** Lipper, Inc. is a nationally recognized organization that reports
on mutual fund total return performance and calculates fund rankings.
Lipper averages are based on universes of funds with the same
investment objective. Peer group averages include reinvested dividends
and capital gains, if any, and exclude sales charges.
Fidelity Distributors Corporation
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- ----------------------------------------------------------------------
FIDELITY CHARLES STREET TRUST: SPARTAN SHORT-TERM BOND FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Thomas R. Williams, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of FIDELITY CHARLES STREET TRUST: SPARTAN SHORT-TERM BOND FUND,
which the undersigned is entitled to vote at the Special Meeting of
Shareholders of the fund to be held at the office of the trust at 82
Devonshire St., Boston, MA 02109, on June 16, 1999 at 9:00 a.m.
Eastern time and at any adjournments thereof. All powers may be
exercised by a majority of said proxy holders or substitutes voting or
acting or, if only one votes and acts, then by that one. This Proxy
shall be voted on the proposal described in the Proxy Statement as
specified on the reverse side. Receipt of the Notice of the Meeting
and the accompanying Proxy Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
Date , 1999
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 316069509/fund# 449
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
PLEASE DETACH AT PERFORATION BEFORE MAILING.
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To approve an Agreement and FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
Plan of Reorganization
between Spartan Short-Term
Bond Fund and Fidelity
Short-Term Bond Fund
providing for the transfer
of all of the assets of
Spartan Short-Term Bond Fund
to Fidelity Short-Term Bond
Fund in exchange solely for
shares of beneficial
interest of Fidelity
Short-Term Bond Fund and the
assumption by Fidelity
Short-Term Bond Fund of
Spartan Short-Term Bond
Fund's liabilities, followed
by the distribution of
Fidelity Short-Term Bond
Fund shares to shareholders
of Spartan Short-Term Bond
Fund in liquidation of
Spartan Short-Term Bond Fund.
</TABLE>
SST-PXC-499 cusip # 316069509/fund# 449
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a
copy of each fund's most recent financial report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
dated June 26, 1998. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov). The SAI
is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call
Fidelity(registered trademark) at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
BON-pro-0698
704235
FIDELITY
SHORT-TERM BOND
FUND
(fund number 450, trading symbol FSHBX)
and
FIDELITY
INVESTMENT
GRADE BOND
FUND
(fund number 026, trading symbol FBNDX)
Each fund invests normally in investment-grade debt securities.
Short-Term Bond seeks high current income with preservation of
capital. Investment Grade Bond seeks high current income from
securities with longer maturities.
PROSPECTUS
JUNE 26, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 35 THE FUNDS AT A GLANCE
35 WHO MAY WANT TO INVEST
37 EXPENSES Each fund's yearly
operating expenses.
39 FINANCIAL HIGHLIGHTS A
summary of each fund's
financial data.
42 PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL 45 CHARTER How each fund is
organized.
45 INVESTMENT PRINCIPLES AND
RISKS Each fund's overall
approach to investing.
47 BREAKDOWN OF EXPENSES How
operating costs are
calculated and what they
include.
YOUR ACCOUNT 48 DOING BUSINESS WITH FIDELITY
48 TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-advantaged
retirement plans.
50 HOW TO BUY SHARES Opening an
account and making
additional investments.
54 HOW TO SELL SHARES Taking
money out and closing your
account.
58 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND ACCOUNT 59 DIVIDENDS, CAPITAL GAINS, AND
POLICIES TAXES
60 TRANSACTION DETAILS Share
price calculations and the
timing of purchases and
redemptions.
61 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments(registered trademark), which
was established in 1946 and is now America's largest mutual fund
manager.
Beginning January 1, 1999, Fidelity Investments Money Management, Inc.
(FIMM), a subsidiary of FMR, will choose investments for the funds.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
SHORT-TERM BOND
GOAL: High current income with preservation of capital.
STRATEGY: Normally invests in investment-grade debt securities while
maintaining an average maturity of three years or less. FMR uses the
Lehman Brothers 1-3 Year Government/Corporate Bond Index as a guide in
structuring the fund and selecting its investments.
SIZE: As of April 30, 1998, the fund had over $808 million in assets.
INVESTMENT GRADE BOND
GOAL: High current income.
STRATEGY: Normally invests in investment-grade debt securities. FMR
uses the Lehman Brothers Aggregate Bond Index as a guide in
structuring the fund and selecting its investments.
SIZE: As of April 30, 1998, the fund had over $1.9 billion in assets.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who seek high current
income with a focus on investment-grade debt securities. A fund's
level of risk and potential reward depend on the quality and maturity
of its investments. Short-Term Bond is designed to offer greater share
price stability by investing in shorter-term securities. Investment
Grade Bond, because it can invest in securities with any maturity, has
potential for higher yields and capital appreciation, but also carries
more risk.
The value of the funds' investments and the income they generate will
vary from day to day, and generally reflect interest rates, market
conditions, and other economic and political news. When you sell your
shares they may be worth more or less than what you paid for them. By
themselves, the funds do not constitute a balanced investment plan.
(checkmark)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.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME Seeks
long-term growth and income
by investing in stocks and
bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of a fund. In addition, you may be charged an annual
account maintenance fee if your account balance falls below $2,500.
See "Transaction Details," page 77, for an explanation of how and when
these charges apply.
Sales charge on purchases and None
reinvested distributions
Deferred sales charge on None
redemptions
Annual account maintenance $12.00
fee (for accounts under
$2,500)
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 "Breakdown of Expenses," page
64).
The following figures are based on historical expenses, adjusted to
reflect current fees, of each fund and are calculated as a percentage
of average net assets of each fund. A portion of the brokerage
commissions that a fund pays is used to reduce that fund's expenses.
In addition, each fund has entered into arrangements with its
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances are used to reduce custodian and transfer
agent expenses. Including these reductions, the total fund operating
expenses presented in the table would have been 0.71% for Investment
Grade Bond.
SHORT-TERM BOND
Management fee (after 0.39%
reimbursement)
12b-1 fee None
Other expenses 0.26%
Total fund operating expenses 0.65%
INVESTMENT GRADE BOND
Management fee 0.44%
12b-1 fee None
Other expenses 0.28%
Total fund operating expenses 0.72%
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual 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:
(checkmark)UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
These expenses are paid from
each fund's assets, and their
effect is already factored into
any quoted share price or
return. Also, as an investor,
you may pay certain
expenses directly.
SHORT-TERM BOND
1 year $ 7
3 years $ 21
5 years $ 36
10 years $ 81
INVESTMENT GRADE BOND
1 year $ 7
3 years $ 23
5 years $ 40
10 years $ 89
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
FMR has voluntarily agreed to reimburse Short-Term Bond to the extent
that total operating expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) exceed 0.65% of its average
net assets. If this agreement were not in effect, the management fee,
other expenses and total operating expenses, as a percentage of
average net assets, of the fund would have been 0.44%, 0.26% and
0.70%, respectively.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow for Short-Term Bond and
Investment Grade Bond have been audited by Coopers & Lybrand L.L.P.,
independent accountants. The funds' financial highlights, financial
statements, and reports of the auditor are included in each fund's
Annual Report, and are incorporated by reference into (are legally a
part of) the funds' SAI. Contact Fidelity for a free copy of an Annual
Report or the SAI.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM BOND FUND
Selected Per-Share Data
and Ratios
Years ended April 30 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Net asset value, $ 8.660 $ 8.720 $ 8.720 $ 9.080 $ 9.510 $ 9.430 $ 9.180 $ 9.170 $ 9.180 $ 9.470
beginning of period
Income from Investment .546B .558B .579 .344 .588 .744 .810 .792 .778 .809
Operations Net investment
income
Net realized and .033 (.061) (.020) (.156) (.392) .063 .251 .040 (.010) (.290)
unrealized gain (loss)
Total from investment .579 .497 .559 .188 .196 .807 1.061 .832 .768 .519
operations
Less Distributions From (.539) (.552) (.504) (.430) (.592) (.727) (.811) (.822) (.778) (.809)
net investment income
In excess of net -- -- -- -- (.034) -- -- -- -- --
investment income
Return of capital -- (.005) (.055) (.118) -- -- -- -- -- --
Total distributions (.539) (.557) (.559) (.548) (.626) (.727) (.811) (.822) (.778) (.809)
Net asset value, end of $ 8.700 $ 8.660 $ 8.720 $ 8.720 $ 9.080 $ 9.510 $ 9.430 $ 9.180 $ 9.170 $ 9.180
period
Total returnA 6.86% 5.86% 6.52% 2.17% 1.99% 8.85% 12.00% 9.49% 8.58% 5.74%
Net assets, end of period $ 809 $ 922 $ 1,048 $ 1,304 $ 1,962 $ 1,990 $ 984 $ 235 $ 197 $ 237
(In millions)
Ratio of expenses to .70% .70% .69% .69% .80% .77% .86% .83% .83% .89%
average net assets
Ratio of expenses to .70% .70% .68%C .69% .80% .77% .86% .83% .83% .89%
average net assets after
expense reductions
Ratio of net investment 6.26% 6.41% 6.37% 6.37% 6.70% 7.68% 8.23% 8.65% 8.28% 8.77%
income to average net assets
Portfolio turnover rate 117% 104%D 151% 113% 73% 63% 87% 164% 148% 171%
</TABLE>
I THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
J NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
K FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
L THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND
Selected Per-Share Data
and Ratios
Years ended April 30 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Net asset value, $ 7.020 $ 7.040 $ 7.010 $ 7.300 $ 7.570 $ 7.070 $ 6.830 $ 6.560 $ 6.670 $ 6.770
beginning of period
Income from Investment .441C .460C .484 .464 .522 .570 .591 .592 .597 .595
Operations Net investment
income
Net realized and .282 (.020) .047 (.147) (.254) .499 .244 .277 (.110) (.095)
unrealized gain (loss)
Total from investment .723 .440 .531 .317 .268 1.069 .835 .869 .487 .500
operations
Less Distributions From (.443) (.460) (.471) (.487) (.525) (.569) (.595) (.599) (.597) (.600)
net investment income
In excess of net -- -- -- -- (.013) -- -- -- -- --
investment income
From net realized gain -- -- -- (.120) -- -- -- -- -- --
In excess of net realized -- -- (.030) -- -- -- -- -- -- --
gain
Total distributions (.443) (.460) (.501) (.607) (.538) (.569) (.595) (.599) (.597) (.600)
Net asset value, end of $ 7.300 $ 7.020 $ 7.040 $ 7.010 $ 7.300 $ 7.570 $ 7.070 $ 6.830 $ 6.560 $ 6.670
period
Total returnA 10.54% 6.42% 7.62% 4.63% 3.35% 15.63% 12.63% 13.82% 7.31% 7.74%
Net assets, end of period $ 1,909 $ 1,442 $ 1,358 $ 1,087 $ 943 $ 1,018 $ 943 $ 455 $ 360 $ 334
(In millions)
Ratio of expenses to .72% .76% .77% .75% .74% .68% .70% .67% .70% .66%
average net assets
Ratio of expenses to .71%B .75%B .76%B .75% .74% .68% .70% .67% .70% .66%
average net assets after
expense reductions
Ratio of net investment 6.12% 6.53% 6.58% 7.00% 6.94% 7.74% 8.29% 8.84% 8.76% 8.91%
income to average net assets
Portfolio turnover rate 207% 120% 134% 90% 61% 74% 77% 101% 103% 128%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns 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
different measures, including a comparative index and a competitive
funds average. The charts on page present calendar year performance.
(checkmark)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 yields and carry
more risk than short-term bond
funds.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended April Past 1 year Past 5 years Past 10 years
30, 1998
Short-Term Bond 6.86% 4.66% 6.76%
Lehman Bros. 1-3 Yr. 7.17% 5.53% 7.27%
Gov't./Corp. Bond Index
Lipper Sht. Inv. Gr. Debt 6.67% 5.24% 6.95%
Funds Avg.
Investment Grade Bond 10.54% 6.48% 8.90%
Lehman Bros. Aggregate Bond 10.91% 6.91% 9.06%
Index
Lipper Int. Inv. Grade Debt 9.84% 6.17% 8.35%
Funds Avg.
CUMULATIVE TOTAL RETURNS
Fiscal periods ended April Past 1 year Past 5 years Past 10 years
30, 1998
Short-Term Bond 6.86% 25.56% 92.43%
Lehman Bros. 1-3 Yr. 7.17% 30.91% 101.74 %
Gov't./Corp. Bond Index
Lipper Sht. Inv. Gr. Debt 6.67% 29.13% 96.16%
Funds Avg.
Investment Grade Bond 10.54% 36.91% 134.62%
Lehman Bros. Aggregate Bond 10.91% 39.65% 138.01%
Index
Lipper Int. Inv. Grade Debt 9.84% 34.98% 123.58%
Funds Avg.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
SHORT-TERM BOND 5.71% 10.52% 5.78% 14.03% 7.39% 9.13% -4.09% 9.82% 4.78% 6.21%
Lehman Bros. 1-3 Yr. Gov't/Corp.
Bond Index 6.34% 10.97% 9.69% 11.83% 6.35% 5.55% 0.55% 10.96% 5.14% 6.66%
Lipper Sht. Inv. Gr. Debt Funds Avg. 6.86% 10.22% 7.87% 12.88% 5.97% 6.45% -0.44% 10.84% 4.64% 6.19%
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
Percentage (%)
Row: 1, Col: 1, Value: 5.71
Row: 2, Col: 1, Value: 10.52
Row: 3, Col: 1, Value: 5.78
Row: 4, Col: 1, Value: 14.03
Row: 5, Col: 1, Value: 7.39
Row: 6, Col: 1, Value: 9.129999999999999
Row: 7, Col: 1, Value: -4.09
Row: 8, Col: 1, Value: 9.82
Row: 9, Col: 1, Value: 4.78
Row: 10, Col: 1, Value: 6.21
(LARGE SOLID BOX) Short-Term
Bond
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
INVESTMENT GRADE BOND 7.92% 13.00% 6.07% 18.91% 8.31% 16.23% -5.35% 15.51% 3.02% 8.91%
Lehman Bond Aggregate
Bond Index 7.89% 14.53% 8.96% 16.00% 7.40% 9.75% -2.92% 18.47% 3.63% 9.65%
Lipper Int. Inv. Grade Debt Funds Avg. 7.11% 11.54% 7.22% 15.70% 6.94% 9.77% -3.46% 16.59% 3.12% 8.57%
Consumer Price Index 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 7.92
Row: 2, Col: 1, Value: 13.0
Row: 3, Col: 1, Value: 6.07
Row: 4, Col: 1, Value: 18.91
Row: 5, Col: 1, Value: 8.310000000000001
Row: 6, Col: 1, Value: 16.23
Row: 7, Col: 1, Value: -5.35
Row: 8, Col: 1, Value: 15.51
Row: 9, Col: 1, Value: 3.02
Row: 10, Col: 1, Value: 8.91
(LARGE SOLID BOX) Investment
Grade Bond
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.
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT/CORPORATE BOND INDEX is a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and three years.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year.
Unlike each fund's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGES are the Lipper Short Investment Grade
Debt Funds Average and the Lipper Intermediate Investment Grade Debt
Funds Average for Short-Term Bond and Investment Grade Bond,
respectively. As of April 30, 1998, the averages reflected the
performance of 103 and 209 mutual funds with similar investment
objectives, respectively. These averages, published by Lipper
Analytical Services, Inc., exclude the effect of sales loads.
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. Each fund is a
diversified fund of Fidelity Fixed-Income Trust, an open-end
management investment company organized as a Massachusetts business
trust on September 5, 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 periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. 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.), in London, England, and Fidelity Management &
Research (Far East) Inc. (FMR Far East), in Tokyo, Japan, assist FMR
with foreign investments.
Beginning January 1, 1999, FIMM, located in Merrimack, New Hampshire,
will have primary responsibility for providing investment management
services for each fund.
Andrew Dudley is manager of Short-Term Bond, which he has managed
since February 1997. He also manages other Fidelity funds. Prior to
joining Fidelity in 1996, Mr. Dudley was a portfolio manager for
Putnam Investments from 1991 to 1996.
Kevin Grant is Vice President and manager of Investment Grade Bond,
which he has managed since February 1997. He also manages several
other Fidelity funds. Prior to joining Fidelity as a manager in 1993,
Mr. Grant was a vice president and chief mortgage strategist at Morgan
Stanley for three years.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East and FIMM. Members of the Edward C. Johnson 3d family are the
predominant owners of a class of shares of common stock representing
approximately 49% of the voting power of FMR Corp. Under the
Investment Company Act of 1940 (the 1940 Act), control of a company is
presumed where one individual or group of individuals owns more than
25% of the voting stock of that company; therefore, the Johnson family
may be deemed under the 1940 Act to form a controlling group with
respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out a fund's transactions, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political or financial events. The types
and maturities of the securities a bond fund purchases and the credit
quality of their issuers will impact a bond fund's reaction to these
events.
The total return from a bond includes both income and price gains or
losses. While income is the most important component of bond returns
over time, a bond fund's emphasis on income does not mean the fund
invests only in the highest-yielding bonds available, or that it can
avoid losses of principal.
INTEREST RATE RISK. In general, bond prices rise when interest rates
fall and fall when interest rates rise. Longer-term bonds are usually
more sensitive to interest rate changes. In other words, the longer
the maturity of a bond, the greater the impact a change in interest
rates is likely to have on the bond's price. In addition, short-term
interest rates and long-term interest rates do not necessarily move in
the same amount or in the same direction. A short-term bond tends to
react to changes in short-term interest rates and a long-term bond
tends to react to changes in long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of
its issuer. Changes in the financial condition of an issuer, changes
in general economic conditions, and changes in specific economic
conditions that affect a particular type of issuer can impact the
credit quality of an issuer. Lower quality bonds generally tend to be
more sensitive to these changes than higher quality bonds.
PREPAYMENT RISK. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment risk occurs
when the issuer of a security can prepay principal prior to the
security's maturity. Securities subject to prepayment risk generally
offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising
interest rate environment. In addition, the potential impact of
prepayment features on the price of a debt security may be difficult
to predict and result in greater volatility.
FIDELITY'S APPROACH TO BOND FUNDS. In managing bond funds, FMR selects
a benchmark index that is representative of the universe of securities
in which a fund invests. FMR uses this benchmark as a guide in
structuring the fund and selecting its investments.
FMR allocates assets among different market sectors (for example,
corporate or government securities) and different maturities based on
its view of the relative value of each sector or maturity.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the universe of securities in which a fund may invest. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market inefficiencies.
SHORT-TERM BOND seeks high current income, consistent with
preservation of capital, by investing in U.S. dollar-denominated
investment-grade debt securities under normal conditions. The
benchmark index for the fund is the Lehman Brothers 1-3 Year
Government/Corporate Bond Index, a market value weighted benchmark of
government and investment-grade corporate fixed-rate debt issues with
maturities between one and three years. FMR manages the fund to have
similar overall interest rate risk to the index. As of April 30, 1998,
the dollar-weighted average maturity of the fund and the index was
approximately 2.4 and 1.9 years, respectively. In addition, the fund
normally maintains a dollar-weighted average maturity of three years
or less.
In determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
INVESTMENT GRADE BOND seeks high current income, consistent with
reasonable risk, by investing in U.S. dollar-denominated
investment-grade debt securities under normal conditions. The fund
also considers capital preservation and, where appropriate, takes
advantage of opportunities to realize capital appreciation. The
benchmark index for the fund is the Lehman Brothers Aggregate Bond
Index, a market value weighted benchmark of investment-grade
fixed-rate debt issues with maturities of one year or more. FMR
manages the fund to have similar overall interest rate risk to the
index. As of April 30, 1998, the dollar-weighted average maturity of
the fund and the index was approximately 8.8 and 8.8 years,
respectively.
In determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
Each fund normally invests in U.S. dollar-denominated investment-grade
debt securities. The funds differ primarily with respect to the
maturity of their investments and therefore their sensitivity to
interest rate changes. Although each fund can invest in securities of
any maturity, Investment Grade Bond generally maintains a longer
average maturity. As a result, Investment Grade Bond will tend to have
greater share price fluctuation.
FMR may use various techniques to hedge a portion of a fund's risks,
but there is no guarantee that these strategies will work as FMR
intends. When you sell your shares of a fund, 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. Each fund also reserves the right to invest without
limitation in investment-grade money market or short-term debt
instruments for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating 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 sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
In addition, bond prices are also affected by the credit quality of
the issuer. Investment-grade debt securities are medium- and
high-quality securities. Some, however, may possess speculative
characteristics, and may be more sensitive to economic changes and to
changes in the financial condition of issuers.
RESTRICTIONS: Each fund normally invests in investment-grade
securities, but reserves the right to invest up to 5% of its assets in
below investment-grade securities (sometimes called "junk bonds"). A
security is considered to be investment-grade if it is rated
investment-grade by Moody's Investors Service, Standard & Poor's, Duff
& Phelps Credit Rating Co., or Fitch IBCA, Inc., or is unrated but
judged to be of equivalent quality by FMR.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments 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, U.S.
Government securities such as those issued by Fannie Mae are supported
by the instrumentality's right to borrow money from the U.S. Treasury
under certain circumstances. Other U.S. Government securities, such as
those issued by the Federal Farm Credit Banks Funding Corporation, are
supported only by the credit of the entity that issued them.
FOREIGN EXPOSURE. Securities issued by foreign entities, including
foreign governments, corporations, and banks, and securities issued by
U.S. entities with substantial foreign operations may involve
additional risks and considerations. Extensive public information
about the foreign entity may not be available, and unfavorable
political, economic, or governmental developments in the foreign
country involved could affect the repayment of principal or payment of
interest.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. 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 a 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 a
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.
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 some illiquid securities, and some
other 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 invest more than 10% of its assets in
illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
OTHER INSTRUMENTS may include real estate-related instruments.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one
industry. Economic, business, or political changes can affect all
securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, Short-Term Bond
and Investment Grade Bond may not invest more than 5% in the
securities of any one issuer. This limitation does not apply to U.S.
Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
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.
With respect to 75% of its total assets, each fund may not invest more
than 5% in the securities of any one issuer. This limitation does not
apply to U.S. Government securities.
Each fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
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 each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of 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 pays fees to affiliates who provide
assistance with these services. Each fund also pays OTHER EXPENSES,
which are explained on page 67.
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, multiplying the result by the fund's monthly average net assets
and dividing by twelve.
(checkmark)UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in
FMR's total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For April 1998, the group fee rate was 0.1339%. The individual fund
fee rate is 0.30% for both Short-Term Bond and Investment Grade Bond.
The total management fee, as a percentage of each fund's average net
assets, for the fiscal year ended April 1998 was 0.44% for both
Short-Term Bond and 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
issuers 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.
Beginning January 1, 1999, FIMM will have primary responsibility for
managing each fund's investments. FMR will pay FIMM 50% of its
management fee (before expense reimbursements) for FIMM's 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 transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing each
fund's investments, handling securities loans for each fund, and
calculating each fund's share price and dividends.
For the fiscal year ended April 1998, transfer agency and pricing and
bookkeeping fees paid (as a percentage of average net assets) amounted
to the following. These amounts are before expense reductions, if any.
Transfer Agency and Pricing
and Bookkeeping Fees Paid by
Fund
Short-Term Bond 0.25%
Investment Grade Bond 0.26%
Each fund also pays other expenses, such as legal, audit, and
custodian fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by a fund to
reduce that fund's custodian or transfer agent fees.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees of each fund has authorized such
payments.
For the fiscal year ended April 1998, the portfolio turnover rates for
Short-Term Bond and Investment Grade Bond were 117% and 207%,
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, FBSI. Fidelity is also a
leader in providing tax-advantaged retirement plans for individuals
investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid 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.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the funds through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com, or
contact Fidelity directly, as appropriate.
(checkmark)FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 225
(solid bullet) Assets in Fidelity mutual
funds: over $595 billion
(solid bullet) Number of shareholder
accounts: over 37 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 250
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to save
for retirement, either with tax-deductible contributions or tax-free
growth. Retirement accounts require special applications and typically
have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to $2,000
per tax year. Married couples can contribute up to $4,000 per tax
year, provided no more than $2,000 is contributed on behalf of either
spouse. (These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income limits.
(solid bullet) ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with assets held
in a Traditional IRA or Rollover IRA to convert those assets to a Roth
Conversion IRA. Eligibility is subject to certain income limits.
Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages for
certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) 401(K) PLANS, and certain other 401(a)-qualified plans,
are employer-sponsored retirement plans that allow employer
contributions and may allow employee after-tax contributions. In
addition, 401(k) plans allow employee pre-tax (tax-deferred)
contributions. Contributions to these plans may be tax-deductible to
the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or small
business owners to make tax-deductible contributions for themselves
and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow employees of
businesses with 25 or fewer employees to contribute a percentage of
their wages on a tax-deferred basis. These plans must have been
established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
501(c)(3) tax-exempt institutions, including schools, hospitals, and
other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are available
to employees of most state and local governments and their agencies
and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
Each fund reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange Restrictions"
on page 83. Purchase orders may be refused if, in FMR's opinion, they
would disrupt management of a fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit Fidelity's
Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-ADVANTAGED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 or visit Fidelity's Web site at www.fidelity.com for
more information and a retirement application.
If you buy shares by check or Fidelity Money 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 certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
For certain Fidelity retirement accountsA $250
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accountsA $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE 80.
These minimums may be lower for investments through a Fidelity
GoalPlannerSM account. There is no minimum account balance or initial
or subsequent investment minimum for investments through Fidelity
Portfolio Advisory ServicesSM, a qualified state tuition program,
certain Fidelity retirement accounts funded through salary deduction,
or accounts opened with the proceeds of distributions from such
retirement accounts. Refer to the program materials for details. In
addition, each fund reserves the right to waive or lower investment
minimums in other circumstances.
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TO OPEN AN ACCOUNT
Phone 1-800-544-7777 (phone_graphic) (small solid bullet) Exchange
from another Fidelity fund
account with the same
registration, including
name, address, and taxpayer
ID number.
The Internet www.fidelity.com (computer graphic) (small solid bullet) Complete
and sign the application.
Make your check payable to
the complete name of the
fund. Mail to the address
indicated on the application.
Mail (mail_graphic) (small solid bullet) Complete
and sign the application.
Make your check payable to
the complete name of the
fund. Mail to the address
indicated on the application.
In Person (hand_graphic) (small solid bullet) Bring
your application and check
to a Fidelity Investor
Center. Call 1-800-544-9797
for the center nearest you.
Wire (wire_graphic) (small solid bullet) Call
1-800-544-7777 to set up
your account and to arrange
a wire transaction. Not
available for retirement
accounts.
(small solid bullet) Wire
within 24 hours to: Bankers
Trust Company, Bank Routing
#021001033, Account
#00163053. Specify the
complete name of the fund
and include your new account
number and your name.
Automatically (automatic_graphic) (small solid bullet) Not
available.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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TO ADD TO AN ACCOUNT
Phone 1-800-544-7777 (phone_graphic) (small solid bullet) Exchange
from another Fidelity fund
account with the same
registration, including
name, address, and taxpayer
ID number.
(small solid bullet) Use
Fidelity Money Line to
transfer from your bank
account. Call before your
first use to verify that
this service is in place on
your account. Maximum Money
Line: up to $100,000.
The Internet www.fidelity.com (computer graphic) (small solid bullet) Exchange
from another Fidelity fund
account with the same
registration, including
name, address, and taxpayer
ID number.
(small solid bullet) Use
Fidelity Money Line to
transfer from your bank
account. Visit Fidelity's
Web site before your first
use to verify that this
service is in place on your
account. Maximum Money Line:
up to $100,000.
Mail (mail_graphic) (small solid bullet) Make
your check payable to the
complete name of the fund.
Indicate your fund account
number on your check and
mail to the address printed
on your account statement.
(small solid bullet) Exchange
by mail: call 1-800-544-6666
for instructions.
In Person (hand_graphic) (small solid bullet) Bring
your check to a Fidelity
Investor Center. Call
1-800-544-9797 for the
center nearest you.
Wire (wire_graphic) (small solid bullet) Not
available for retirement
accounts.
(small solid bullet) Wire to:
Bankers Trust Company, Bank
Routing #021001033, Account
#00163053. Specify the
complete name of the fund
and include your account
number and your name.
Automatically (automatic_graphic) (small solid bullet) Use
Fidelity Automatic Account
Builder. Sign up for this
service when opening your
account, visit Fidelity's
Web site at www.fidelity.com
to obtain the form to add
the service, or call
1-800-544-6666 to add the
service.
(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.
THE PRICE TO SELL ONE SHARE of each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Each fund's NAV is normally calculated
each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web site.
Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. 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.
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ACCOUNT TYPE
Phone 1-800-544-7777 (phone_graphic) All account types except
retirement
All account types
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant,
Sole Proprietorship, UGMA,
UTMA
Retirement account
Trust
Business or Organization
Executor, Administrator,
Conservator, Guardian
Wire (wire_graphic) All account types except
retirement
Check (check_graphic) All account types
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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SPECIAL REQUIREMENTS
Phone 1-800-544-7777 (phone_graphic) (small solid bullet) Maximum
check request: $100,000.
(small solid bullet) For
Money Line transfers to your
bank account; minimum: $10;
maximum: up to $100,000.
(small solid bullet) You may
exchange to other Fidelity
funds if both accounts are
registered with the same
name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) (small solid bullet) The
letter of instruction must
be signed by all persons
required to sign for
transactions, exactly as
their names appear on the
account.
(small solid bullet) The
account owner should
complete a retirement
distribution form. Call
1-800-544-6666 to request one.
(small solid bullet) The
trustee must sign the letter
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
(small solid bullet) At least
one person authorized by
corporate resolution to act
on the account must sign the
letter.
(small solid bullet) Include
a corporate resolution with
corporate seal or a
signature guarantee.
(small solid bullet) Call
1-800-544-6666 for
instructions.
Wire (wire_graphic) (small solid bullet) You must
sign up for the wire feature
before using it. To verify
that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your
wire redemption request must
be received in proper form
by Fidelity before 4:00 p.m.
Eastern time for money to be
wired on the next business
day.
Check (check_graphic) (small solid bullet) Minimum
check: $500.
(small solid bullet) All
account owners must sign a
signature card to receive a
checkbook.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
FIDELITY'S WEB SITE at www.fidelity.com offers product and servicing
information, customer education, planning tools, and the ability to
make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
(checkmark)24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESS(registered trademark)
1-800-544-5555
WEB SITE
www.fidelity.com
AUTOMATED SERVICE
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through Fidelity's
Web site.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page 83.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE enables you to transfer money by phone between
your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web site
at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or quarterly (small solid bullet) For a
new account, complete the
appropriate section on the
fund application.
(small solid bullet) For
existing accounts, call
1-800-544-6666 or visit
Fidelity's Web site at
www.fidelity.com for an
application.
(small solid 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.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay period (small solid bullet) Check
the appropriate box on the
fund application, or call
1-800-544-6666 or visit
Fidelity's Web site at
www.fidelity.com for an
authorization form.
(small solid bullet) Changes
require a new authorization
form.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, bimonthly, (small solid bullet) To
quarterly, or annually establish, call
1-800-544-6666 after both
accounts are opened.
(small solid bullet) To
change the amount or
frequency of your
investment, call
1-800-544-6666.
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. For each fund, 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:
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.
If you select distribution option 2 or 3 and the U.S. Postal Service
does not deliver your checks, your election may be converted to the
Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
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.
TAXES
(checkmark)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.
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax-advantaged retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but
not yet distributed capital gains, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on a
fund and its investments, and these taxes generally will reduce the
fund's distributions.
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. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 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 on the basis of information furnished by
a pricing service or market quotations, if available, or by another
method that the Board of Trustees believes accurately reflects fair
value. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value. Foreign securities 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. If the values have been materially affected by events occurring
after the closing of a foreign market, assets may be valued by another
method that the Board of Trustees believes accurately reflects fair
value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to redeem and
exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in proper
form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on the first
business day following the day of 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.
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 order is received in proper form.
Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the
amount of the check is greater than the value of your account, your
check will be returned to you and you may be subject to additional
charges.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, TouchTone Xpress, Fidelity Automatic
Account Builder, and Directed Dividends are registered trademarks of
FMR Corp.
Portfolio Advisory Services and Fidelity GoalPlanner are servicemarks
of FMR Corp.
This prospectus is printed on recycled paper using soy-based inks.
