SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] PRELIMINARY PROXY STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO SEC. 240.14A-11(C) OR SEC. 240.14A-12
</TABLE>
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(IF YOU CHECKED "FILED BY REGISTRANT ABOVE" DO NOT FILL THIS IN:
NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE
REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] NO FEE REQUIRED.
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH
TRANSACTION APPLIES:
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH
TRANSACTION APPLIES:
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION
COMPUTED PURSUANT TO EXCHANGE ACT RULE 0-11:
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
(5) TOTAL FEE PAID:
<TABLE>
<CAPTION>
<S> <C>
[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE 0-11(A) (2)
AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID PREVIOUSLY. IDENTIFY THE
PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF
ITS FILING.
</TABLE>
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
FIDELITY ADVISOR MORTGAGE SECURITIES FUND
A FUND OF
FIDELITY INCOME FUND
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
FIDELITY MORTGAGE SECURITIES FUND ("I NITIAL CLASS ")
1-800-544-8888
CLASS A, CLASS T, CLASS B, AND INSTITUTIONAL CLASS
1-800-522-7297
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Fidelity Advisor Mortgage Securities Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Fidelity Advisor Mortgage Securities Fund (the fund), will
be held at the office of Fidelity Income Fund (the t rust),
82 Devonshire Street, Boston, Massachusetts 02109 on July 15,
1998, at 9:00 a.m. The purpose of the Meeting is to consider and act
upon the following proposals, and to transact such other business as
may properly come before the Meeting or any adjournments thereof.
1. To elect a Board of Trustees.
2. To ratify the selection of Price Waterhouse LLP as independent
accountants of the fund.
3. To authorize the Trustees to adopt an Amended and Restated
Declaration of Trust.
4. To approve an Agreement and Plan providing for the reorganization
of the fund from a separate series of one Massachusetts business trust
to another.
5. To approve an amended management contract for the fund.
6. To amend the fund's fundamental investment limitation concerning
diversification.
The Board of Trustees has fixed the close of business on May 18, 1998
as the record date for the determination of the shareholders of
Fidelity Advisor Mortgage Securities Fund 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
May 8, 1998
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC CORP. JOHN SMITH, TREASURER
2) ABC CORP. JOHN SMITH, TREASURER
C/O JOHN SMITH, TREASURER
B. 1) ABC CORP. PROFIT SHARING PLAN ANN B. COLLINS, TRUSTEE
2) ABC TRUST ANN B. COLLINS, TRUSTEE
3) ANN B. COLLINS, TRUSTEE ANN B. COLLINS, TRUSTEE
U/T/D 12/28/78
C. 1) ANTHONY B. CRAFT, CUST. ANTHONY B. CRAFT
F/B/O ANTHONY B. CRAFT, JR.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY INCOME FUND:
FIDELITY ADVISOR MORTGAGE SECURITIES FUND
TO BE HELD ON JULY 15, 1998
This Proxy Statement is furnished in connection with a solicitation
of proxies made by, and on behalf of, the Board of Trustees of
Fidelity Income Fund (the trust) to be used at the Special Meeting of
Shareholders of Fidelity Advisor Mortgage Securities Fund (the fund)
and at any adjournments thereof (the Meeting), to be held on July 15,
1998 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.
Shareholders of the trust's other funds (Fidelity Ginnie Mae Fund,
Fidelity Government Securities Fund, and Spartan Limited Maturity
Government Fund) will also participate in the Meeting and have been
mailed a separate notice and proxy statement relating to proposals to
be voted upon by the trust and/or by the shareholders of those funds.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is being made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about May 18, 1998.
Supplementary solicitations may be made by mail, telephone, telegraph,
facsimile, electronic means or by personal interview by
representatives of the trust. In addition, Management Information
Services Corp. and D.F. King & Co., Inc. (D.F. King) may be paid on a
per-call basis to solicit shareholders on behalf of the fund at an
anticipated cost of approximately $4,000. The expenses in connection
with preparing this Proxy Statement and its enclosures and of all
solicitations will be paid by the fund, provided the expenses do not
exceed each class's existing expense caps listed on page .
Expenses exceeding each class's expense cap will be paid by FMR. The
fund will reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners
of shares. The principal business address of Fidelity Distributors
Corporation (FDC), the fund's principal underwriter and distribution
agent, and Fidelity Management & Research (U.K.) Inc. (FMR U.K.) and
Fidelity Management & Research (Far East) Inc. (FMR Far East),
subadvisers to the fund, is 82 Devonshire Street, Boston,
Massachusetts 02109.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by the trust, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting and are
not revoked will be voted at the Meeting. Shares represented by such
proxies will be voted in accordance with the instructions thereon. If
no specification is made on a proxy card, it will be voted FOR the
matters specified on the proxy card. Only proxies that are voted will
be counted towards establishing a quorum. Broker non-votes are not
considered voted for this purpose. Shareholders should note that while
votes to ABSTAIN will count toward establishing a quorum, passage of
any proposal being considered at the Meeting will occur only if a
sufficient number of votes are cast FOR the proposal. Accordingly,
votes to ABSTAIN and votes AGAINST will have the same effect in
determining whether the proposal is approved.
The fund may also arrange to have votes recorded by telephone. D.F.
King may be paid on a per call basis for vote-by-phone solicitations
on behalf of the fund at an anticipated cost of approximately $4,000.
The expenses in connection with telephone voting will be paid by the
fund, provided the expenses do not exceed the fund's existing class
expense caps, as described on page . Expenses exceeding each
class's expense cap will be paid 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
voted by telephone may be revoked at any time before they are voted in
the same manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting , but sufficient votes to approve one or more of
the proposed items are not received, or if other matters arise
requiring shareholder attention, the persons named as 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 one or more of the items in
this Proxy Statement prior to such adjournment if sufficient votes
have been received and it is otherwise appropriate.
Shares of each class of Fidelity Advisor Mortgage Securities Fund and
of each of the other funds of the trust issued and outstanding as of
March 31, 1998 are indicated in the following table:
FIDELITY ADVISOR MORTGAGE SECURITIES FUND
CLASS A 47,521
CLASS T 1,044,896
CLASS B 273,870
INSTITUTIONAL CLASS 1,896,386
INITIAL CLASS 42,830,336
FIDELITY GINNIE MAE FUND 80,429,219
FIDELITY GOVERNMENT SECURITIES FUND 122,878,636
SPARTAN LIMITED MATURITY GOVERNMENT FUND 73,270,644
To the knowledge of the trust, substantial (5% or more) record or
beneficial ownership of a fund or a class on March 31, 1998 was as
follows:
FIDELITY ADVISOR MORTGAGE SECURITIES FUND - CLASS A: FMR Corp.,
Boston, MA (21.82%); Vestax Securities, Hudson, OH (7.82%); United
Financial Markets, Houston, TX (7.55%); Linsco/Private Ledger, San
Diego, CA (7.24%); Quest Capital Strategies Inc., Santa Ana Heights,
CA (5.72%).
FIDELITY ADVISOR MORTGAGE SECURITIES FUND - CLASS T: Commonwealth
Equity Services, Waltham, MA (29.18%); Sunamerica Securities Inc.,
Phoenix, AZ (6.04%); LaSalle St. Securities, Inc., Chicago, IL
(5.19%).
FIDELITY ADVISOR MORTGAGE SECURITIES FUND - CLASS B: United
Financial Markets, Houston, TX (9.41%); 1717 Capital Management
Company, Newark, DE (7.99%); Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL (6.82%); Intersecurities, Inc., Largo, FL (6.73%);
Commercial Federal bank, Denver, CO (5.27%); Nathan & Lewis
Securities, New York, NY (5.26%).
FIDELITY ADVISOR MORTGAGE SECURITIES FUND - INSTITUTIONAL CLASS:
Magna Bank, Belleville, IL (26.88%); Reliance Financial Services,
Defiance, OH (10.35%); Oak Brook Bank, Oak brook, IL (9.38%).
FIDELITY GOVERNMENT SECURITIES FUND: The Bank of New York, New
York, NY (5.24%).
FMR Corp. has advised the trust that for Proposals 1 through 6
contained in this Proxy Statement, it will vote its shares at the
Meeting for each Proposal. To the knowledge of the trust, no other
shareholder owned of record or beneficially more than 5% of the
classes on that date.
Shareholders of record at the close of business on May 18,
1998 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.
FOR A FREE COPY OF THE FUND'S ANNUAL REPORTS FOR THE FISCAL YEAR
ENDED JULY 31, 1997 AND FOR THE FISCAL PERIOD ENDED OCTOBER
31, 1997, C ALL 1-800- 544 - 8888 (INITIAL CLASS) OR
1-800- 843 - 3001 ( CLASS A, CLASS T, CLASS B, AND
INSTITUTIONAL CLASS ) OR WRITE TO F DC AT 82 DEVONSHIRE
STREET, BOSTON, MASSACHUSETTS 02109.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING IS
SUFFICIENT TO APPROVE PROPOSAL 1 AND A MAJORITY OF ALL VOTES OF THE
FUND CAST AT THE MEETING IS SUFFICIENT TO APPROVE PROPOSAL 2.
APPROVAL OF PROPOSAL 3 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF
THE OUTSTANDING VOTING SECURITIES" OF THE ENTIRE TRUST. APPROVAL OF
PROPOSALS 4 THROUGH 6 REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF
THE OUTSTANDING VOTING SECURITIES" OF THE FUND. UNDER THE INVESTMENT
COMPANY ACT OF 1940 (THE 1940 ACT), THE VOTE OF A "MAJORITY OF THE
OUTSTANDING VOTING SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE
LESSER OF (A) 67% OR MORE OF THE VOTING SECURITIES PRESENT AT THE
MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY PROXY OR
(B) MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES. BROKER
NON-VOTES ARE NOT CONSIDERED "PRESENT" FOR THIS PURPOSE.
1. TO ELECT A BOARD OF TRUSTEES.
The purpose of this proposal is to elect a Board of Trustees of the
trust. Pursuant to the provisions of the Declaration of Trust of
Fidelity Income Fund, the Trustees have determined that the number of
Trustees shall be fixed at twelve. It is intended that the enclosed
proxy card will be voted for the election as Trustees of the twelve
nominees listed below, unless such authority has been withheld in the
proxy card.
All nominees named below are currently Trustees of Fidelity Income
Fund and have served in that capacity continuously since originally
elected or appointed. Robert M. Gates, William O. McCoy, and Robert C.
Pozen, were selected by the trust's Nominating and Administration
Committee (see page ) and were appointed to the Board in March 1997,
Ja nuary 1997, and August 1997, respectively . None of the
nominees is related to one another. Those nominees indicated by
an asterisk (*) are "interested persons" of the trust by virtue of,
among other things, their affiliation with either the trust, the
funds' investment adviser (FMR, or the Adviser), or the funds'
distribution agent, FDC. The business address of each nominee who is
an "interested person" is 82 Devonshire Street, Boston, Massachusetts
02109, and the business address of all other nominees is Fidelity
Investments, P.O. Box 9235, Boston, Massachusetts 02205-9235. Except
for Robert M. Gates, William O. McCoy, and Robert C. Pozen, each of
the nominees is curr ently a Trustee or General Partner, as the case
may be, of 60 registered investment companies (trusts or partnerships)
advised by FMR. Mr. Gates and Mr. McCoy are currently a Trustee or
General Partner, as the case may be, of 53 registered investment
companies (trusts or partnerships) advised by FMR. Mr. Pozen is
currently a Trustee or General Partner, as the case may be, of 52
registered investment companies (trusts or partnerships) advised by
FMR.
In the election of Trustees, those twelve nominees receiving the
highest number of votes cast at the Meeting, providing a quorum is
present, shall be elected.
NOMINEE PRINCIPAL OCCUPATION ** YEAR OF
(AGE) ELECTION OR
APPOINTMENT
RALPH F. COX PRESIDENT OF RABAR ENTERPRISES 1991
(66) (MANAGEMENT CONSULTING-ENGINEERING
INDUSTRY, 1994). PRIOR TO FEBRUARY
1994, HE WAS PRESIDENT OF GREENHILL
PETROLEUM CORPORATION (PETROLEUM
EXPLORATION AND PRODUCTION). UNTIL
MARCH 1990, MR. COX WAS PRESIDENT
AND CHIEF OPERATING OFFICER OF UNION
PACIFIC RESOURCES COMPANY
(EXPLORATION AND PRODUCTION). HE IS A
DIRECTOR OF USA WASTE SERVICES, INC.
(NON-HAZARDOUS WASTE, 1993), CH2M
HILL COMPANIES (ENGINEERING), RIO
GRANDE, INC. (OIL AND GAS PRODUCTION),
AND DANIEL INDUSTRIES (PETROLEUM
MEASUREMENT EQUIPMENT
MANUFACTURER). IN ADDITION, HE IS A
MEMBER OF ADVISORY BOARDS OF TEXAS
A&M UNIVERSITY AND THE UNIVERSITY OF
TEXAS AT AUSTIN.
<TABLE>
<CAPTION>
NOMINEE PRINCIPAL OCCUPATION ** YEAR OF
(AGE) ELECTION OR
APPOINTMENT
<S> <C> <C>
PHYLLIS BURKE DAVIS PRIOR TO HER RETIREMENT IN 1992
(66) SEPTEMBER 1991, MRS. DAVIS WAS
THE SENIOR VICE PRESIDENT OF
CORPORATE AFFAIRS OF AVON PRODUCTS,
INC. SHE IS CURRENTLY A DIRECTOR OF
BELLSOUTH CORPORATION
(TELECOMMUNICATIONS), EATON
CORPORATION (MANUFACTURING, 1991),
AND THE TJX COMPANIES, INC. (RETAIL
STORES), AND PREVIOUSLY SERVED AS A
DIRECTOR OF HALLMARK CARDS, INC.
(1985-1991) AND NABISCO BRANDS,
INC. IN ADDITION, SHE IS A MEMBER OF
THE PRESIDENT'S ADVISORY COUNCIL OF
THE UNIVERSITY OF VERMONT SCHOOL
OF BUSINESS ADMINISTRATION.
ROBERT M. GATES CONSULTANT, AUTHOR, AND LECTURER 1997
(54) (1993). MR. GATES WAS DIRECTOR OF
THE CENTRAL INTELLIGENCE AGENCY
(CIA) FROM 1991-1993. FROM 1989
TO 1991, MR. GATES SERVED AS
ASSISTANT TO THE PRESIDENT OF THE
UNITED STATES AND DEPUTY NATIONAL
SECURITY ADVISOR. MR. GATES IS A
DIRECTOR OF LUCASVARITY PLC
(AUTOMOTIVE COMPONENTS AND DIESEL
ENGINES), CHARLES STARK DRAPER
LABORATORY (NON-PROFIT), NACCO
INDUSTRIES, INC. (MINING AND
MANUFACTURING), AND TRW INC.
(ORIGINAL EQUIPMENT AND
REPLACEMENT PRODUCTS). MR. GATES
ALSO IS A TRUSTEE OF THE FORUM FOR
INTERNATIONAL POLICY AND OF THE
ENDOWMENT ASSOCIATION OF THE
COLLEGE OF WILLIAM AND MARY. IN
ADDITION, HE IS A MEMBER OF THE
NATIONAL EXECUTIVE BOARD OF THE BOY
SCOUTS OF AMERICA.
*EDWARD C. JOHNSON 3D PRESIDENT, IS CHAIRMAN, CHIEF 1968
(68) EXECUTIVE OFFICER AND A DIRECTOR OF
FMR CORP.; A DIRECTOR AND
CHAIRMAN OF THE BOARD AND OF THE
EXECUTIVE COMMITTEE OF FMR;
CHAIRMAN AND A DIRECTOR OF FIDELITY
INVESTMENTS MONEY MANAGEMENT,
INC. (1998), FIDELITY MANAGEMENT &
RESEARCH (U.K.) INC., AND FIDELITY
MANAGEMENT & RESEARCH (FAR EAST)
INC.
E. BRADLEY JONES PRIOR TO HIS RETIREMENT IN 1984, 1990
(70) MR. JONES WAS CHAIRMAN AND CHIEF
EXECUTIVE OFFICER OF LTV STEEL
COMPANY. HE IS A DIRECTOR OF TRW
INC. (ORIGINAL EQUIPMENT AND
REPLACEMENT PRODUCTS),
CONSOLIDATED RAIL CORPORATION,
BIRMINGHAM STEEL CORPORATION, AND
RPM, INC. (MANUFACTURER OF
CHEMICAL PRODUCTS), AND HE
PREVIOUSLY SERVED AS A DIRECTOR OF
NACCO INDUSTRIES, INC. (MINING AND
MANUFACTURING, 1985-1995),
HYSTER-YALE MATERIALS HANDLING, INC.
(1985-1995), AND CLEVELAND-CLIFFS
INC. (MINING), AND AS A TRUSTEE OF
FIRST UNION REAL ESTATE INVESTMENTS.
IN ADDITION, HE SERVES AS A TRUSTEE
OF THE CLEVELAND CLINIC FOUNDATION,
WHERE HE HAS ALSO BEEN A MEMBER
OF THE EXECUTIVE COMMITTEE AS WELL
AS CHAIRMAN OF THE BOARD AND
PRESIDENT, A TRUSTEE AND MEMBER OF
THE EXECUTIVE COMMITTEE OF
UNIVERSITY SCHOOL (CLEVELAND), AND A
TRUSTEE OF CLEVELAND CLINIC FLORIDA.
DONALD J. KIRK EXECUTIVE-IN-RESIDENCE (1995) AT 1987
(65) COLUMBIA UNIVERSITY GRADUATE
SCHOOL OF BUSINESS AND A FINANCIAL
CONSULTANT. FROM 1987 TO JANUARY
1995, MR. KIRK WAS A PROFESSOR AT
COLUMBIA UNIVERSITY GRADUATE
SCHOOL OF BUSINESS. PRIOR TO 1987,
HE WAS CHAIRMAN OF THE FINANCIAL
ACCOUNTING STANDARDS BOARD.
MR. KIRK IS A DIRECTOR OF GENERAL RE
CORPORATION (REINSURANCE), AND HE
PREVIOUSLY SERVED AS A DIRECTOR OF
VALUATION RESEARCH CORP.
(APPRAISALS AND VALUATIONS,
1993-1995). IN ADDITION, HE SERVES
AS CHAIRMAN OF THE BOARD OF
DIRECTORS OF THE NATIONAL ARTS
STABILIZATION FUND, CHAIRMAN OF THE
BOARD OF TRUSTEES OF THE GREENWICH
HOSPITAL ASSOCIATION, A MEMBER OF
THE PUBLIC OVERSIGHT BOARD OF THE
AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS' SEC PRACTICE
SECTION (1995), AND AS A PUBLIC
GOVERNOR OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS,
INC. (1996).
*PETER S. LYNCH VICE CHAIRMAN AND DIRECTOR OF FMR. 1990
(55) PRIOR TO MAY 31, 1990, HE WAS A
DIRECTOR OF FMR AND EXECUTIVE VICE
PRESIDENT OF FMR (A POSITION HE
HELD UNTIL MARCH 31, 1991); VICE
PRESIDENT OF FIDELITY MAGELLAN FUND
AND FMR GROWTH GROUP LEADER; AND
MANAGING DIRECTOR OF FMR CORP. MR.
LYNCH WAS ALSO VICE PRESIDENT OF
FIDELITY INVESTMENTS CORPORATE
SERVICES (1991-1992). IN ADDITION,
HE SERVES AS A TRUSTEE OF BOSTON
COLLEGE, MASSACHUSETTS EYE & EAR
INFIRMARY, HISTORIC DEERFIELD (1989)
AND SOCIETY FOR THE PRESERVATION OF
NEW ENGLAND ANTIQUITIES, AND AS AN
OVERSEER OF THE MUSEUM OF FINE
ARTS OF BOSTON.
WILLIAM O. MCCOY VICE PRESIDENT OF FINANCE FOR THE 1997
(64) UNIVERSITY OF NORTH CAROLINA
(16-SCHOOL SYSTEM, 1995). PRIOR TO
HIS RETIREMENT IN DECEMBER 1994, MR.
MCCOY WAS VICE CHAIRMAN OF THE
BOARD OF BELLSOUTH CORPORATION
(TELECOMMUNICATIONS, 1984) AND
PRESIDENT OF BELLSOUTH ENTERPRISES
(1986). HE IS CURRENTLY A DIRECTOR OF
LIBERTY CORPORATION (HOLDING
COMPANY, 1984), WEEKS CORPORATION
OF ATLANTA (REAL ESTATE, 1994),
CAROLINA POWER AND LIGHT COMPANY
(ELECTRIC UTILITY, 1996) AND THE KENAN
TRANSPORT CO. (1996). PREVIOUSLY, HE
WAS A DIRECTOR OF FIRST AMERICAN
CORPORATION (BANK HOLDING COMPANY,
1979-1996). IN ADDITION, MR. MCCOY
SERVES AS A MEMBER OF THE BOARD OF
VISITORS FOR THE UNIVERSITY OF NORTH
CAROLINA AT CHAPEL HILL (1994) AND FOR
THE KENAN-FLAGER BUSINESS SCHOOL
(UNIVERSITY OF NORTH CAROLINA AT
CHAPEL HILL, 1988).
GERALD C. MCDONOUGH CHAIRMAN OF G.M. MANAGEMENT 1989
(70) GROUP (STRATEGIC ADVISORY SERVICES).
MR. MCDONOUGH IS A DIRECTOR OF
YORK INTERNATIONAL CORP. (AIR
CONDITIONING AND REFRIGERATION),
COMMERCIAL INTERTECH CORP.
(HYDRAULIC SYSTEMS, BUILDING
SYSTEMS, AND METAL PRODUCTS,
1992), CUNO, INC. (LIQUID AND GAS
FILTRATION PRODUCTS, 1996), AND
ASSOCIATED ESTATES REALTY
CORPORATION (A REAL ESTATE
INVESTMENT TRUST, 1993). MR.
MCDONOUGH SERVED AS A DIRECTOR OF
ACME-CLEVELAND CORP. (METAL
WORKING, TELECOMMUNICATIONS, AND
ELECTRONIC PRODUCTS) FROM
1987-1996 AND BRUSH-WELLMAN INC.
(METAL REFINING) FROM 1983-1997).
MARVIN L. MANN CHAIRMAN OF THE BOARD, PRESIDENT, 1993
(65) AND CHIEF EXECUTIVE OFFICER OF
LEXMARK INTERNATIONAL, INC. (OFFICE
MACHINES, 1991). PRIOR TO 1991, HE
HELD THE POSITIONS OF VICE PRESIDENT
OF INTERNATIONAL BUSINESS MACHINES
CORPORATION ("IBM") AND PRESIDENT
AND GENERAL MANAGER OF VARIOUS IBM
DIVISIONS AND SUBSIDIARIES. MR. MANN
IS A DIRECTOR OF M.A. HANNA
COMPANY (CHEMICALS, 1993), IMATION
CORP. (IMAGING AND INFORMATION
STORAGE, 1997), AND INFOMART
(MARKETING SERVICES, 1991),
A TRAMMELL CROW CO. IN ADDITION, HE
SERVES AS THE CAMPAIGN VICE
CHAIRMAN OF THE TRI-STATE UNITED WAY
(1993) AND IS A MEMBER OF THE
UNIVERSITY OF ALABAMA PRESIDENT'S
CABINET.
*ROBERT C. POZEN SENIOR VICE PRESIDENT, IS PRESIDENT 1997
(51) AND A DIRECTOR OF FMR (1997); AND
PRESIDENT AND A DIRECTOR OF FIDELITY
INVESTMENTS MONEY MANAGEMENT,
INC. (1998), FIDELITY MANAGEMENT &
RESEARCH (U.K.) INC. (1997), AND
FIDELITY MANAGEMENT & RESEARCH
(FAR EAST) INC. (1997). PREVIOUSLY,
MR. POZEN SERVED AS GENERAL
COUNSEL, MANAGING DIRECTOR, AND
SENIOR VICE PRESIDENT OF FMR CORP.
</TABLE>
NOMINEE PRINCIPAL OCCUPATION ** YEAR OF
(AGE) ELECTION OR
APPOINTMENT
THOMAS R. WILLIAMS PRESIDENT OF THE WALES GROUP, INC. 1989
(69) (MANAGEMENT AND FINANCIAL ADVISORY
SERVICES). PRIOR TO RETIRING IN 1987,
MR. WILLIAMS SERVED AS CHAIRMAN OF
THE BOARD OF FIRST WACHOVIA
CORPORATION (BANK HOLDING
COMPANY), AND CHAIRMAN AND CHIEF
EXECUTIVE OFFICER OF THE FIRST
NATIONAL BANK OF ATLANTA AND FIRST
ATLANTA CORPORATION (BANK HOLDING
COMPANY). HE IS CURRENTLY A OF
DIRECTOR OF CONAGRA, INC.
(AGRICULTURAL PRODUCTS), GEORGIA
POWER COMPANY (ELECTRIC UTILITY),
NATIONAL LIFE INSURANCE COMPANY OF
VERMONT, AMERICAN SOFTWARE, INC.,
AND APPLESOUTH, INC. (RESTAURANTS,
1992).
** Except as otherwise indicated, each individual has held the office
shown or other offices in the same company for the last five years.
As of March 31, 1998, the nominees, Trustees and officers of the
trust and the funds of the trust owned, in the aggregate, less than 1%
of the outstanding shares of each class of the fund and less than 1%
of the outstanding shares of each of the other funds.
If elected, the Trustees will hold office without limit in time
except that (a) any Trustee may resign; (b) any Trustee may be removed
by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal; (c) any Trustee who requests to be
retired or who has become incapacitated by illness or injury may be
retired by written instrument signed by a majority of the other
Trustees; and (d) a Trustee may be removed at any Special Meeting of
shareholders by a two-thirds vote of the outstanding voting securities
of the trust. In case a vacancy shall for any reason exist, the
remaining Trustees will fill such vacancy by appointing another
Trustee, so long as, immediately after such appointment, at least
two-thirds of the Trustees have been elected by shareholders. If, at
any time, less than a majority of the Trustees holding office has been
elected by the shareholders, the Trustees then in office will promptly
call a shareholders' meeting for the purpose of electing a Board of
Trustees. Otherwise, there will normally be no meeting of shareholders
for the purpose of electing Trustees.
The trust's Board, which is currently composed of 3 interested and 9
non-interested Trustees, met eleven times during the fiscal
year ended July 31, 1997. It is expected that the Trustees
will meet at least ten times a year at regularly scheduled meetings.
The trust's Audit Committee is composed entirely of Trustees who are
not interested persons of the trust, FMR , or its affiliates and
normally meets four times a year, or as required, prior to meetings of
the Board of Trustees. Currently, Messrs. Kirk (Chairman), Gates,
McCoy, and Mrs. Davis are members of the c ommittee. The
committee oversees and monitors the trust's internal control
structure, its auditing function and its financial reporting process,
including the resolution of material reporting issues. The committee
recommends to the Board of Trustees the appointment of auditors for
the t rust. It reviews audit plans, fees and other material
arrangements in respect of the engagement of auditors, including
non-audit services to be performed. It reviews the qualifications of
key personnel involved in the foregoing activities. The committee
plays an oversight role in respect of the trust's investment
compliance procedures and the code of ethics. During the fiscal
year ended July 31, 1997 the committee held four meetings.
The trust's Nominating and Administration Committee is currently
composed of Messrs. McDonough (Chairman), Jones, and Williams. The
committee members confer periodically and hold meetings as required.
The committee makes nominations for independent trustees, and for
membership on committees. The committee periodically reviews
procedures and policies of the Board of Trustees and committees. It
acts as the administrative committee under the Retirement Plan for
non-interested trustees who retired prior to December 30, 1996. It
monitors the performance of legal counsel employed by the trust and
the independent trustees. The committee in the first instance monitors
compliance with, and acts as the administrator of the provisions of
the code of ethics applicable to the independent trustees. During the
fiscal year ended July 31, 1997, the committee held one
meeting. The Nominating and Administration Committee will consider
nominees recommended by shareholders. Recommendations should be
submitted to the committee in care of the Secretary of the Trust. The
trust does not have a compensation committee; such matters are
considered by the Nominating and Administration Committee.
The following table sets forth information describing the
compensation of each Trustee and Member of the Advisory Board of the
fund for his or her services for the fiscal year ended July 31,
1997, or calender year ended December 31,1997, as applicable.
COMPENSATION TABLE
TRUSTEES AGGREGATE TOTAL
AND MEMBERS OF THE COMPENSATION COMPENSATION
ADVISORY BOARD FROM FIDELITY FROM THE FUND
ADVISOR MORTGAGE COMPLEX*A
SECURITIES FUNDB,C, D
J. GARY BURKHEAD**,# $ 0 $ 0
RALPH F. COX $ 2 04 214,500
PHYLLIS BURKE DAVIS $ 199 210,000
RICHARD J. FLYNN*** $ 82 0
ROBERT M. GATES**** $ 98 176,000
EDWARD C. JOHNSON 3D** $ 0 0
E. BRADLEY JONES $ 2 00 211,500
DONALD J. KIRK $ 2 00 211,500
PETER S. LYNCH** $ 0 0
WILLIAM O. MCCOY***** $ 20 2 214,500
GERALD C. MCDONOUGH $ 2 35 264,500
EDWARD H. MALONE*** $ 68 0
MARVIN L. MANN $ 2 04 214,500
ROBERT C. POZEN** $ 0 0
THOMAS R. WILLIAMS $ 2 04 214,500
* Information is for the calendar year ended December 31, 1997 for 230
funds in the complex.
** Interested Trustees of the fund and Mr. Burkhead are compensated by
FMR.
*** Richard J. Flynn and Edward H. Malone served on the Board of
Trustees through December 31, 1996.
**** Mr. Gates was appointed to the Board of Trustees of Fidelity
Income Fund effective March 1, 1997.
***** During the period from May 1, 1996 through December 31, 1996,
William O. McCoy served as a Member of the Advisory Board of the
trust. Mr. McCoy was appointed to the Board of Trustees of Fidelity
Income Fund effective January 1, 1997.
# J. Gary Burkhead served on the Board of Trustees through July 31,
1997. Effective August 1, 1997, Mr. Burkhead serves as a Member of the
Advisory Board of the trust.
A Compensation figures include cash, amounts required to be deferred,
and may included amounts deferred at the election of Trustees. For the
calender year ended December 31, 1997, the Trustees accrued required
deferred compensation from the fund complex as follows: Ralph
F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates,
$62,500; E. Bradley Jones, $75,000; Donald J. Kirk, $75,000; William
O. McCoy, $75,000; Gerald C. McDonough, $87,500; Marvin L. Mann,
$75,000; and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation as follows: Ralph F. Cox, $53,699; Marvin L. Mann,
$53,699; and Thomas R. Williams, $62,462.
B Compensation figures include cash, and may include amounts required
to be deferred, a pro rata portion of benefits accrued under the
retirement program for the period ended December 30, 1996 and required
to be deferred, and amounts deferred at the election of Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $6, Phyllis Burke Davis, $6, Richard J. Flynn, $0, Robert M.
Gates, $0, E. Bradley Jones, $6, Donald J. Kirk, $6, William O. McCoy,
$0, Gerald C. McDonough, $6, Edward H. Malone, $6, Marvin L. Mann, $6,
and Thomas R. Williams, $6.
D Aggregate compensation for the three month period ended October
31, 1997: J. Gary Burkhead, $0, Ralph F. Cox, $51, Phyllis Burke
Davis, $51, Richard J. Flynn, $0, Robert M. Gates, $51, Edward C.
Johnson 3d, $0, E. Bradley Jones, $51, Donald J. Kirk, $51, Peter S.
Lynch, $0, William O. McCoy, $51, Gerald C. McDonough, $63, Edward H.
Malone, $0, Marvin L. Mann, $51, and Thomas R. Williams, $51.
Under a retirement program adopted in July 1988 and modified in
November 1995 and November 1996, each non-interested Trustee who
retired before December 30, 1996 may receive payments from a Fidelity
fund during his or her lifetime based on his or her basic trustee fees
and length of service. The obligation of a fund to make such payments
is neither secured nor funded. A Trustee became eligible to
participate in the program at the end of the calendar year in which he
or she reached age 72, provided that, at the time of retirement, he or
she had served as a Fidelity fund Trustee for at least five years.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are treated as though equivalent dollar amounts had been invested
in shares of a cross-section of Fidelity funds including funds in each
major investment discipline and representing a majority of Fidelity's
assets under management (the Reference Funds). The amounts ultimately
received by the Trustees under the Plan will be directly linked to the
investment performance of the Reference Funds. Deferral of fees in
accordance with the Plan will have a negligible effect on a fund's
assets, liabilities, and net income per share, and will not obligate a
fund to retain the services of any Trustee or to pay any particular
level of compensation to the Trustee. A fund may invest in the
Reference Funds under the Plan without shareholder approval.
As of December 30, 1996, the non-interested Trustees terminated the
retirement program for Trustees who retire after such date. In
connection with the termination of the retirement program, each
then-existing non-interested Trustee received a credit to his or her
Plan account equal to the present value of the estimated benefits that
would have been payable under the retirement program. The amounts
credited to the non-interested Trustees' Plan accounts are subject to
vesting and are treated as though equivalent dollar amounts had been
invested in shares of the Reference Funds. The amounts ultimately
received by the Trustees in connection with the credits to their Plan
accounts will be directly linked to the investment performance of the
Reference Funds. The termination of the retirement program and related
crediting of estimated benefits to the Trustees' Plan accounts did not
result in a material cost to the funds.
2. TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS OF THE FUND.
By a vote of the non-interested Trustees, the firm of Price
Waterhouse LLP has been selected as independent accountants for the
fund, to sign or certify any financial statements of the fund required
by any law or regulation to be certified by an independent accountant
and filed with the Securities and Exchange Commission (SEC) or any
state. Pursuant to the 1940 Act, such selection requires the
ratification of shareholders. In addition, as required by the 1940
Act, the vote of the Trustees is subject to the right of the fund, by
vote of a majority of its outstanding voting securities at any meeting
called for the purpose of voting on such action, to terminate such
employment without penalty. Price Waterhouse LLP has advised the fund
that it has no direct or material indirect ownership interest in the
fund.
The independent accountants examine annual financial statements for
the fund and provide other audit and tax-related services. In
recommending the selection of the fund's accountants, the Audit
Committee reviewed the nature and scope of the services to be provided
(including non-audit services) and whether the performance of such
services would affect the accountants' independence. Representatives
of Price Waterhouse LLP are not expected to be present at the Meeting,
but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their
presence.
On September 18, 1997, Coopers & Lybrand L.L.P. and Price Waterhouse
LLP announced plans to merge their practices world wide. Coopers &
Lybrand L.L.P. and Price Waterhouse LLP expect the merger, which is
subject to approval by regulators, to become effective in 1998.
3. TO AUTHORIZE THE TRUSTEES TO ADOPT AN AMENDED AND RESTATED
DECLARATION OF TRUST.
The Board of Trustees has approved and recommends that the
shareholders of the trust authorize them to adopt and execute an
Amended and Restated Declaration of Trust for the trust and the
funds of the trust in the form attached to this Proxy Statement
as Exhibit 1 (New Declaration of Trust). The attached New Declaration
of Trust has been marked to show changes from the trust's existing
Declaration of Trust (Current Declaration of Trust). The New
Declaration of Trust is a more modern form of trust instrument for a
Massachusetts business trust and, going forward, will be used as the
standard Declaration of Trust for all new Fidelity Massachusetts
business trusts.
The New Declaration of Trust gives the Trustees more flexibility and,
subject to applicable requirements of the 1940 Act and Massachusetts
law, broader authority to act. This increased flexibility may allow
the Trustees to react more quickly to changes in competitive and
regulatory conditions and, as a consequence, may allow the funds to
operate in a more efficient and economical manner. ADOPTION OF THE NEW
DECLARATION OF TRUST WILL NOT ALTER IN ANY WAY THE TRUSTEES' EXISTING
FIDUCIARY OBLIGATIONS TO ACT WITH DUE CARE AND IN THE SHAREHOLDERS'
INTERESTS. BEFORE UTILIZING ANY NEW FLEXIBILITY THAT THE NEW
DECLARATION OF TRUST MAY AFFORD, THE TRUSTEES MUST FIRST CONSIDER THE
SHAREHOLDERS' INTERESTS AND THEN ACT IN ACCORDANCE WITH SUCH
INTERESTS.
Adoption of the New Declaration of Trust will NOT result in any
changes in the funds' Trustees or officers or in the investment
policies and shareholder services described in the funds' current
prospectuses.
Generally, a majority of the Trustees may amend the Current
Declaration of Trust when authorized by a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Trust. On
October 16, 1997, the Trustees approved the form of the New
Declaration of Trust and authorized the submission of the New
Declaration of Trust to the trust's shareholders for their
authorization at this Meeting. On December 18, 1997, the Board
approved several additional changes to the form of the New Declaration
of Trust, which changes have been incorporated into the form attached
to this Proxy Statement.
The New Declaration of Trust amends the Current Declaration of Trust
in a number of significant ways. The following discussion summarizes
some of the more significant amendments to the Current Declaration of
Trust effected by the New Declaration of Trust.
IN ADDITION TO THE CHANGES DESCRIBED BELOW, THERE ARE OTHER
SUBSTANTIVE AND STYLISTIC DIFFERENCES BETWEEN THE NEW DECLARATION OF
TRUST AND THE CURRENT DECLARATION OF TRUST. THE FOLLOWING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE NEW DECLARATION OF TRUST
ITSELF, WHICH IS ATTACHED AS EXHIBIT 1 TO THIS PROXY STATEMENT.
SIGNIFICANT CHANGES EFFECTED BY THE NEW DECLARATION OF TRUST
REORGANIZATION OR TERMINATION OF THE TRUST OR ITS SERIES. Unlike the
Current Declaration of Trust, the New Declaration of Trust generally
permits the Trustees, subject to applicable Federal and state law, to
reorganize or terminate the Trust or any of its series. The Current
Declaration of Trust requires shareholder approval in order to
reorganize or terminate the trust or any of its series.
Under certain circumstances, it may not be in the shareholders'
interest to require a shareholder meeting to permit the trust or a
fund to reorganize into another entity. For example, in order to
reduce the cost and scope of state regulatory constraints or to take
advantage of a more favorable tax treatment offered by another state,
the Trustees may determine that it would be in the shareholders'
interests to reorganize a fund to domicile it in another state or to
change its legal form. Under the Current Declaration of Trust, the
Trustees cannot effectuate such a potentially beneficial
reorganization without first conducting a shareholder meeting and
incurring the attendant costs and delays. In contrast, the New
Declaration of Trust gives the Trustees the flexibility to reorganize
the trust or any of its series and achieve potential shareholder
benefits without incurring the delay and potential costs of a proxy
solicitation. Such flexibility should help to assure that the trust
and its funds operate under the most appropriate form of organization.
Similarly, under certain circumstances, it may not be in the
shareholders' interest to require a shareholder meeting to permit the
Trustees to terminate a fund. For example, a fund may have
insufficient assets to invest effectively or excessively high expense
levels due to operational needs. Under such circumstances, absent
viable alternatives, the Trustees may determine that terminating the
fund is in the shareholders' interest and the only appropriate course
of action. The process of obtaining shareholder approval of the fund's
termination may, however, make it more difficult to complete the
fund's liquidation and termination and, in general, will increase the
costs associated with the termination. In such a case, it may be in
the shareholders' interest to permit fund termination without
incurring the costs and delays of a shareholder meeting.
As discussed above, before allowing the trust or fund reorganization
or termination to proceed without shareholder approval, the Trustees
have a fiduciary responsibility to first determine that the proposed
transaction is in the shareholders' interest. Any exercise of the
Trustees' increased authority under the New Declaration of Trust is
also subject to any applicable requirements of the 1940 Act and
Massachusetts law. Of course, in all cases, the New Declaration of
Trust would require that shareholders receive written notification of
any proposed transaction.
The New Declaration of Trust does NOT give the Trustees the authority
to merge a fund with another operating mutual fund or sell all of a
fund's assets to another operating mutual fund without first seeking
shareholder approval. Under the New Declaration of Trust, shareholder
approval is still required for these transactions.
FUTURE AMENDMENTS OF THE DECLARATION OF TRUST. The New Declaration of
Trust permits the Trustees, with certain exceptions, to amend the
Declaration of Trust without shareholder approval. Under the New
Declaration of Trust, shareholders generally have the right to vote on
any amendment affecting their right to vote, on any amendment altering
the maximum number of permitted Trustees, on any amendment affecting
the New Declaration of Trust's amendment provisions, on any amendment
required by law or the Trust's registration statement, and on any
matter submitted to shareholders by the Trustees. The Current
Declaration of Trust, on the other hand, generally gives shareholders
the exclusive power to amend the Declaration of Trust. By allowing
amendment of the Declaration of Trust without shareholder approval,
the New Declaration of Trust gives the Trustees the necessary
authority to react quickly to future contingencies. As mentioned
above, such increased authority remains subordinate to the Trustees'
continuing fiduciary obligations to act with due care and in the
shareholders' interest.
OTHER CHANGES EFFECTED BY THE NEW DECLARATION OF TRUST
In addition to the significant changes above, the New Declaration of
Trust modifies the Current Declaration of Trust in a number of
important ways, including the following:
1. The New Declaration of Trust modifies the Current Declaration of
Trust to allow FMR and the trust, on behalf of the fund, to amend the
fund's Management Contract subject to the provisions of Section 15 of
the 1940 Act, as modified or interpreted by the SEC. In contrast, the
Current Declaration of Trust explicitly requires the vote of a
majority of the outstanding voting securities of a fund to authorize
all such amendments. A corresponding change is also proposed for the
fund's Management Contract. For more information on this topic
generally, see "Modification of Management Contract Amendment
Provisions" on page .
2. The New Declaration of Trust clarifies that the Trustees may
impose other fees (for example, purchase fees) in addition to sales
charges upon investment in a fund and clarifies that deferred sales
charges and other fees (for example, redemption fees) may be imposed
upon redemption of a fund's shares.
3. The New Declaration of Trust confirms and clarifies various
existing Trustee powers. For example, the New Declaration of Trust
clarifies that the Trustees, in addition to banks and trust companies,
may employ as fund custodians companies that are members of a national
securities exchange or other entities permitted under the 1940 Act;
delegate authority to investment advisers and other agents; adopt and
offer dividend reinvestment and related plans; operate and carry on
the business of an investment company; and interpret the investment
policies, practices, and limitations of any fund.
4. The New Declaration of Trust clarifies that no shareholder of a
trust series shall have a claim on the assets of another series and
further clarifies that, by virtue of investing in a fund, a
shareholder is deemed to have assented to and agreed to be bound by
the terms of the New Declaration of Trust.
5. The New Declaration of Trust deletes various technical and/or
antiquated requirements from the Current Declaration of Trust,
including existing requirements that a Trustee vacancy be deemed to
occur when a Trustee is absent from his or her state of residence,
that Trustee vacancies must be filled within six calendar months, and
that portfolio securities be held pursuant to safeguards prescribed by
usual Massachusetts practice.
6. As a general matter, the New Declaration of Trust modifies the
Current Declaration of Trust to incorporate appropriate references to
classes of shares.
7. Lastly, the New Declaration of Trust generally expands various
1940 Act defined terms to encompass SEC modifications and
interpretations. Specific references to discrete sections of the 1940
Act that are contained in the New Declaration of Trust have likewise
been expanded to include SEC modifications and interpretations.
CONCLUSION. The Board of Trustees has concluded that the proposed
adoption of the New Declaration of Trust is in the best interests of
the trust's shareholders. Accordingly, the Trustees unanimously
recommend that the shareholders vote FOR the proposal to authorize
them to adopt and execute the New Declaration of Trust. If the
proposal is not approved, the Current Declaration of Trust will remain
unchanged and in effect.
4. TO APPROVE AN AGREEMENT AND PLAN PROVIDING FOR THE REORGANIZATION
OF FIDELITY ADVISOR MORTGAGE SECURITIES FUND FROM A SEPARATE SERIES OF
ONE MASSACHUSETTS BUSINESS TRUST TO ANOTHER.
The Board of Trustees has approved an Agreement and Plan of
Reorganization (the Plan of Reorganization) in the form attached to
this Proxy Statement as Exhibit 2. The Plan of Reorganization provides
for a reorganization of Fidelity Advisor Mortgage Securities Fund (the
fund) from a separate series of the trust, a Massachusetts business
trust, to a newly-established, separate series of Fidelity Advisor
Series II (Advisor II), also a Massachusetts business trust (the
Reorganization).
The investment objective, policies, and limitations of the fund will
not change except as approved by shareholders and as described in this
proxy statement. A separate series of Advisor II will carry on the
business of the fund following the Reorganization (the Series). The
Series, which has not yet commenced business operations, will have an
investment objective, policies, and limitations identical to those of
the fund (except as they may be modified pursuant to a vote of the
shareholders as proposed in this proxy statement).
Both the trust and Advisor II are Massachusetts business trusts and
currently have substantially similar Declarations of Trust. Both the
trust and Advisor II are presently seeking shareholder authorization
to amend and restate their current Declarations of Trust. Both trusts
are seeking to adopt the form of New Declaration of Trust that is
described in Proposal 3 and is attached as Exhibit 1 to this Proxy
Statement. If neither trust adopts the New Declaration of Trust, the
rights of the fund's shareholders under state law and the fund's
governing documents would be unaffected by the Reorganization. If both
trusts adopt the New Declaration of Trust, the rights of the fund's
shareholders would likewise be unaffected by the Reorganization. If
only one trust adopts the New Declaration of Trust, the Trustees of
the adopting trust would enjoy greater flexibility and, subject to
applicable requirements of the 1940 Act and Massachusetts law, broader
authority to act. See Proposal 3 for more information on the changes
effected by the New Declaration of Trust.
The Reorganization will not affect the operation of the fund in a
material manner. The same individuals serve as Trustees of both
trusts. Both trusts are authorized to issue an unlimited number of
shares of beneficial interest, and each Declaration of Trust permits
the Trustees to create one or more additional series or funds. The
fund's fiscal year end will not change as a result of this
Reorganization, although the Trustees may change the fiscal year end
of the fund at their discretion in the future.
Fidelity Management & Research Company (FMR), the fund's investment
adviser, will be responsible for the investment management of the
Series, subject to the supervision of the Board of Trustees, under a
management contract substantively identical to the contract in effect
between FMR and the fund immediately prior to the Closing Date
(including as it may be modified pursuant to a vote of shareholders of
the fund as proposed in the Proxy Statement) (the New Management
Contract); similarly, Fidelity Management & Research (U.K.) Inc. (FMR
U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far
East), the fund's sub-advisers, will have primary responsibility for
providing investment advice and research services outside the United
States or investment management authority under Sub-Advisory
Agreements substantively identical to the agreements in effect between
FMR U.K. and FMR Far East and FMR immediately prior to the Closing
Date (the New Sub-Advisory Agreements).
The fund's distribution agent, Fidelity Distributors Corporation
(FDC) will distribute shares of the Series under a General
Distribution Agreement substantively identical to the contract in
effect between FDC and the fund immediately prior to the Closing Date.
REASON FOR THE PROPOSED REORGANIZATION. The fund is presently
organized as a series of the trust, which has four series of shares or
funds. The Board of Trustees unanimously recommend s
reorganization of the fund to a separate series of Advisor II (i.e.,
into the Series), which will succeed to the business of the fund.
Moving the fund from the trust to Advisor II will consolidate and
streamline the production and mailing of certain legal documents. THE
PROPOSED CHANGE WILL HAVE NO MATERIAL EFFECT ON SHAREHOLDERS OR THE
MANAGEMENT OF THE FUND.
The proposal to present the Plan of Reorganization to shareholders
was approved by the Board of Trustees of the trust, including all of
the Trustees who are not interested persons of FMR, on October 16,
1997. The Board of Trustees recommend that fund shareholders vote FOR
the approval of the Plan of Reorganization described below. Such a
vote encompasses approval of the reorganization of the fund to a
separate series of Advisor II; t emporary waiver of certain
investment limitations of the fund to permit the Reorganization (see
"Temporary Waiver of Investment Restrictions" on page ); and
authorization of the trust, as sole shareholder of the Series, to
approve (i) the New Management Contract for the Series between Advisor
II and FMR, (ii) the New Sub-Advisory Agreements between FMR and FMR
U.K. and FMR Far East with respect to the Series and (iii)
Distribution and Service Plans under Rule 12b-1 for each class of the
Series substantively identical to the plans in effect with respect to
each class of the fund immediately prior to the Closing Date (the New
Plans). If shareholders of the fund do not approve the Plan of
Reorganization, the fund will continue to operate as a series of the
trust.
SUMMARY OF THE PLAN OF REORGANIZATION. The following discussion
summarizes the important terms of the Plan of Reorganization. This
summary is qualified in its entirety by reference to the Plan of
Reorganization itself, which is attached as Exhibit 2 to this
Proxy Statement.
On the Closing Date of the Reorganization (defined below), the fund
will transfer all of its assets to the Series, a series of shares of
Advisor II established for the purpose of effecting the
Reorganization, in exchange for the assumption by the Series of all of
the liabilities of the fund and the issuance of shares of beneficial
interest of the corresponding classes of the Series (Series Shares)
equal to the number of fund shares outstanding on the Closing Date.
Immediately thereafter, the fund will distribute one Series Share of
the applicable class for each fund share (the F und Shares) held
by the shareholder on the Closing Date to each fund shareholder, in
liquidation of such F und Shares. Immediately after this
distribution of the Series Shares, the fund will be terminated and, as
soon as practicable thereafter, will be wound up and liquidated. UPON
COMPLETION OF THE REORGANIZATION, EACH FUND SHAREHOLDER WILL BE THE
OWNER OF FULL AND FRACTIONAL SERIES SHARES EQUAL IN NUMBER,
DENOMINATION, AND AGGREGATE NET ASSET VALUE TO HIS OR HER F UND
SHARES.
The Plan of Reorganization authorizes the trust as the then sole
initial shareholder of the Series or class, as appropriate, to approve
(i) the New Management Contract, (ii) the New Sub-Advisory Agreements,
and (iii) the New Plans.
Advisor II's Board of Trustees will hold office without limit in time
except that (a) any Trustee may resign; (b) any Trustee may be removed
by written instrument signed by at least two-thirds of the number of
Trustees prior to removal; (c) any Trustee who requests to be retired
by written instrument signed by a majority of the other Trustees or
who is unable to serve due to physical or mental incapacity by reason
of disease or otherwise, death, or for any other reason, may be
retired; and (d) a Trustee may be removed at any Special Meeting of
the shareholders by a vote of two-thirds of the outstanding shares of
Advisor II. In case a vacancy shall for any reason exist, the
remaining Trustees will fill such vacancy by appointing another
Trustee, so long as, immediately after such appointment, at least
two-thirds of the Trustees have been elected by shareholders. If, at
any time, less than a majority of the Trustees holding office has been
elected by shareholders, the Trustees then in office will promptly
call a shareholders' meeting for the purpose of electing a Board of
Trustees. Otherwise, there will normally be no meeting of shareholders
for the purpose of electing Trustees.
The New Management Contract, the New Sub-Advisory Agreements, and the
New Plans will take effect on the Closing Date. The New Management
Contract and the New Sub-Advisory Agreements will continue in force
until June 30, 1999. The New Plans will continue in force until April
30, 1999. The agreements and contract will continue in force
thereafter from year to year so long as its continuance is approved at
least annually by (i) the vote of a majority of the Trustees who are
not "interested persons" of Advisor II, FMR, or, in the case of the
agreements, FMR U.K. or FMR Far East, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by the
vote of a majority of the Trustees or by the vote of a majority of the
outstanding shares of the Series. The New Plans will continue in
effect only if approved annually by a vote of the Trustees and of
those Trustees who are not interested persons, cast in person at a
meeting called for that purpose. The New Management Contract and
Sub-Advisory Agreements will be terminable without penalty on sixty
days' written notice either by Advisor II, FMR, FMR U.K. or FMR Far
East, as the case may be, and will terminate automatically in the
event of its assignment. The New Plans may be terminable at any time,
without the payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding
voting securities of the applicable class.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Reorganization will become effective at the
close of business on February 26, 1999 (the Closing Date). However,
the Reorganization may become effective at such other date as the
parties may agree in writing.
The obligations of the trust and Advisor II under the Plan of
Reorganization are subject to various conditions as stated therein.
Notwithstanding the approval of the Plan of Reorganization by fund
shareholders, the Plan of Reorganization may be terminated or amended
at any time prior to the Reorganization by action of the Trustees to
provide against unforeseen events, if (1) there is a material breach
by the other party of any representation, warranty, or agreement
contained in the Plan of Reorganization to be performed at or prior to
the Closing Date or (2) it reasonably appears that a party will not or
cannot meet a condition of the Plan of Reorganization. Generally,
either party may at any time waive compliance with any of the
covenants and conditions contained in, or both parties may amend, the
Plan of Reorganization, provided that such waiver or amendment does
not materially adversely affect the interests of fund shareholders.
CONTINUATION OF FUND SHAREHOLDER ACCOUNTS AND PLANS. The trust's
transfer agent will establish an account for the Series' shareholders
containing the appropriate number and denominations of Series Shares
to be received by each holder of F und Shares under the Plan of
Reorganization. Such accounts will be identical in all material
respects to the accounts currently maintained by the fund's transfer
agent for the fund's shareholders. Fund shareholders who are receiving
payment under a withdrawal plan with respect to F und Shares
will retain the same rights and privileges as to Series Shares under
the Plan of Reorganization. Similarly, no further action will be
necessary in order to continue any automatic investment plan or
retirement plan currently maintained by a fund shareholder with
respect to F und Shares.
EXPENSES. The fund and the Series shall each be responsible for all
of their respective expenses of the Reorganization, estimated at
$ 9,000 in the aggregate, provided that they do not exceed the
expense cap for each class of each fund. Expenses exceeding a class's
expense cap, as applicable, will be paid by FMR.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS. Certain fundamental
investment restrictions of the fund, which prohibit the fund from
acquiring more than a stated percentage of ownership of another
company, might be construed as restricting the fund's ability to carry
out the Reorganization. By approving the Plan of Reorganization, fund
shareholders will be agreeing to waive, only for the purpose of the
Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.
TAX CONSEQUENCES OF THE REORGANIZATION. Each trust has received an
opinion from their counsel, Kirkpatrick & Lockhart LLP, that the
Reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended. Accordingly, no gain or loss will be recognized for
federal income tax purposes by the fund, the Series, or the fund's
shareholders upon (1) the transfer of the fund's assets in exchange
solely for the Series Shares and the assumption by Advisor II on
behalf of the Series of the fund's liabilities or (2) the distribution
of Series Shares to the fund's shareholders in liquidation of their
F und Shares. The opinion further provides, among other things,
that (a) the basis for federal income tax purposes of the Series
Shares to be received by each fund shareholder will be the same as
that of his or her F und Shares immediately prior to the
Reorganization; and (b) each fund shareholder's holding period for his
or her Series Shares will include the fund shareholder's holding
period for his or her F und Shares, provided that said
F und Shares were held as capital assets on the date of the
exchange.
CONCLUSION. The Board of Trustees has concluded that the proposed
Plan of Reorganization to reorganize the fund into a separate series
of a Massachusetts business trust is in the best interest of the
fund's shareholders. The Trustees recommend that the fund's
shareholders vote FOR the approval of the Plan of Reorganization as
described above. Such a vote encompasses approval of the
reorganization of the fund to a separate series of a Massachusetts
business trust; temporary waiver of certain investment limitations of
the fund to permit the Reorganization (see "Temporary Waiver of
Investment Restrictions" above ); authorization of the trust, as
sole shareholder of the Series, to approve (i) the New Management
Contract, (ii) the New Sub-Advisory Agreements, and (iii) the New
Plans. If approved, the Plan of Reorganization will take effect on the
Closing Date. If the Plan of Reorganization is not approved, the fund
will continue to operate as a series of the trust.
5. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR FIDELITY ADVISOR
MORTGAGE SECURITIES FUND
The Board of Trustees, including the Trustees who are not "interested
persons" of the trust or of FMR (the Independent Trustees), has
approved, and recommends that shareholders of the fund approve, a
proposal to adopt an amended management contract with FMR (the Amended
Contract). The Amended Contract modifies the management fee that FMR
receives from the fund to provide for lower fees when FMR's assets
under management exceed certain levels. In addition, the Amended
Contract allows FMR and the trust, on behalf of the fund, to modify
the Management Contract subject to the requirements of the 1940 Act.
The existing Management Contract currently requires the vote of a
majority of the fund's outstanding voting securities to authorize all
amendments. See "Modification of Management Contract Amendment
Provisions" on page for more details. THE AMENDED CONTRACT
WILL RESULT IN A MANAGEMENT FEE THAT IS THE SAME AS, OR LOWER THAN,
THE FEE PAYABLE UNDER THE PRESENT MANAGEMENT CONTRACT (THE PRESENT
CONTRACT). (For information on FMR, see the section entitled
"Activities and Management of FMR" on page .)
PROPOSED AMENDMENTS TO THE PRESENT MANAGEMENT CONTRACT. A copy of the
Amended Contract, marked to indicate the proposed amendments, is
supplied as Exhibit 3 on page . Except for the modifications
discussed above, it is substantially identical to the Present
Contract. (For a detailed discussion of the fund's Present Contract,
refer to the section entitled "Present Management Contract" beginning
on page .) If approved by shareholders, the Amended Contract
will take effect on August 1, 1998 (or, if later, the first day of the
first month following approval) and will remain in effect through June
30, 1999 and thereafter, but only as long as its continuance is
approved at least annually by (i) the vote, cast in person at a
meeting called for the purpose, of a majority of the Independent
Trustees and (ii) the vote of either a majority of the Trustees or by
the vote of a majority of the outstanding shares of the fund. If the
Amended Contract is not approved, the Present Contract will continue
in effect through June 30, 1999, and thereafter only as long as its
continuance is approved at least annually as above.
The management fee is an annual percentage of the fund's average net
assets (the management fee rate), calculated and paid monthly. The
management fee rate is the sum of two components: a Group Fee Rate,
which varies according to assets under management by FMR, and a fixed
Individual Fund Fee Rate. The Amended Contract modifies the Group Fee
Rate by providing for lower fee rates if FMR's assets under management
remain above $1 56 billion.
MODIFICATION TO GROUP FEE RATE. The Group Fee Rate varies based upon
the monthly average of the aggregate net assets of all registered
investment companies having management contracts with FMR (assets
under management by FMR). For example, as assets under management by
FMR increase, the Group Fee Rate declines. The Amended Contract would
not change the group fee calculation for assets under management by
FMR of $1 56 billion or less. Above $1 56 billion in
assets under FMR's management, the Group Fee Rate declines under both
the Present Contract and the Amended Contact, but under the Amended
Contract, it declines faster. Group Fee Rates that are lower than
those contained in the fund's Present Contract have been voluntarily
implemented by FMR on August 1, 1994 and January 1, 1996.
The Group Fee Rate is calculated according to a graduated schedule
providing for different rates for different levels of assets under
management by FMR. The rate at which the Group Fee Rate declines is
determined by fee "breakpoints" that provide for lower fee rates when
assets increase. The Amended Contract adds 1 1 fee breakpoints
for assets under FMR's management above $1 56 billion as
illustrated in the following table. (For an explanation of how the
Group Fee Rate is used to calculate the management fee, see the
section entitled "Present Management Contract" beginning on page
.)
GROUP FEE RATE BREAKPOINTS
PRESENT CONTRACT AMENDED CONTRACT
AVERAGE GROUP PRESENT AVERAGE GROUP AMENDED
ASSETS CONTRACT* ASSETS CONTRACT
($ BILLIONS) ($ BILLIONS)
120 - 174 0 .1450% 120 - 156 0 .1450%
174 - 228 0 .1400% 156 - 192 0 .1400%
228 - 282 0 .1375% 192 - 228 0 .1350%
282 - 336 0 .1350% 228 - 264 0 .1300%
OVER 336 0 .1325% 264 - 300 0 .1275%
300 - 336 0 .1250%
336 - 372 0 .1225%
372 - 408 0 .1200%
408 - 444 0 .1175%
444 - 480 0 .1150%
480 - 516 0 .1125%
OVER 516 0 .1100%
The result at various levels of group net assets is illustrated by the
table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net Present Amended
Assets Contract* Contract
($ billions)
150 0 .1736% 0 .1736%
200 0 .1758% 0 .1652%
250 0 .1604% 0 .1587%
300 0 .1565% 0 .1536%
350 0 .1533% 0 .1494%
400 0 .1507% 0 .1459%
450 0 .1487% 0 .1427%
500 0 .1471% 0 .1399%
550 0 .1457% 0 .1372%
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on August 1, 1994 and January 1, 1996.
Average assets under FMR's management for March 1998 were
approximately $608 billion.
COMPARISON OF MANAGEMENT FEES. For the month ended March 1998,
average assets under management by FMR were $608 billion. The fund's
management fee rate under the Amended Contract for the month ended
March 1998 would have been 0 .4346%, compared to 0 .4445%
under the Present Contract. The management fee rate remains the same
under both the Present Contract and the Amended Contract until assets
under FMR's management exceed $1 56 billion, at which point the
management fee rate under the Amended Contract begins to decline
relative to the Present Contract.
The following chart compares the fund's management fee as calculated
under the terms of the Present Contract for the fiscal year ended
July 31, 1997 to the management fee the fund would have
incurred if the Amended Contract had been in effect.
Present Contract Amended Contract Percentage
Management Fee* Management Fee Difference
$ 2,3 05,695 $ 2,2 73 ,7 88 (1. 39 %)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on August 1, 1994 and January 1, 1996.
The following chart compares the fund's management fee as
calculated under the terms of the Present Contract for the three month
period ended October 31, 1997 to the management fee the fund would
have incurred if the Amended Contract had been in effect.
Present Contract Amended Contract Percentage
Management Fee* Management Fee Difference
$ 589,351 $ 578,471 (1.85%)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on August 1, 1994 and January 1, 1996.
The following chart compares the fund's management fee under the
terms of the Present Contract for the twelve month period ended March
31,1998 to the management fee the fund would have incurred if the
Amended Contract had been in effect.
Present Contract Amended Contract Percentage
Management Fee* Management Fee Difference
$ 2,320,740 $ 2,278,723 (1.81%)
* Does not reflect voluntary adoption of extended group fee rate
schedules by FMR on August 1, 1994 and January 1, 1996.
MODIFICATION OF MANAGEMENT CONTRACT AMENDMENT PROVISIONS. The Amended
Contract allows FMR and the trust, on behalf of the fund, to amend the
Management Contract subject to the provisions of Section 15 of the
1940 Act, as modified or interpreted by the Securities and Exchange
Commission. In contrast, the Present Contract explicitly requires the
vote of a majority of the outstanding voting securities of the fund to
authorize all amendments. Generally, the proposed modification to the
Present Contract's amendment provisions will allow FMR and the trust,
on behalf of the fund, to amend the Management Contract without
shareholder vote IF THE 1940 ACT PERMITS THEM TO DO SO. For example,
under current interpretations of Section 15 of the 1940 Act, the
Amended Contract would give FMR and the trust the ability to amend the
Management Contract to immediately reflect a management fee decrease
without the delay of having to first conduct a proxy solicitation. In
short, the proposed modification gives FMR and the trust added
flexibility to amend the Management Contract subject to 1940 Act
constraints. Of course, any future amendments to the Management
Contract would require the approval of the fund's Board of Trustees.
MATTERS CONSIDERED BY THE BOARD
The mutual funds for which the members of the Board of Trustees serve
as Trustees are referred to herein as the "Fidelity funds." The Board
of Trustees meets eleven times a year. The Board of Trustees,
including the Independent Trustees, believe that matters bearing on
the appropriateness of the fund's management fees are considered at
most, if not all, of their meetings. While the full Board of Trustees
or the Independent Trustees, as appropriate, act on all major matters,
a significant portion of the activities of the Board of Trustees
(including certain of those described herein) are conducted through
committees. The Independent Trustees meet frequently in executive
session and are advised by independent legal counsel selected by the
Independent Trustees.
The proposal to present the Amended Contract to shareholders was
approved by the Board of Trustees of the fund, including all of the
Independent Trustees on October 16, 1997. The Board of Trustees
considered and approved the modifications to the Group Fee Rate
schedule during the two month period from November to December 1995
and June to July 1994. The Board of Trustees received materials
relating to the Amended Contract in advance of the meeting at which
the Amended Contract was considered, and had the opportunity to ask
questions and request further information in connection with such
consideration.
INFORMATION RECEIVED BY THE INDEPENDENT TRUSTEES. In connection with
their meetings , Trustees receive materials specifically
relating to the Amended Contract. These materials include: (i)
information on the investment performance of the fund, a peer group of
funds and an appropriate index or combination of indices, (ii) sales
and redemption data in respect of the fund, (iii) the economic outlook
and the general investment outlook in the markets in which the fund
invests, and (iv) notable changes in the fund's investments. The Board
of Trustees and the Independent Trustees also consider periodically
other material facts, such as (1) FMR's results and financial
condition, (2) arrangements in respect of the distribution of the
fund's shares, (3) the procedures employed to determine the value of
the fund's assets, (4) the allocation of the fund's brokerage, if any,
including allocations to brokers affiliated with FMR (5) FMR's
management of the relationships with the fund's custodian and
subcustodians, (6) the resources devoted to and the record of
compliance with the fund's investment policies and restrictions and
with policies on personal securities transactions , and (7) the
nature, cost and audit of non-investment management services provided
by FMR and its affiliates.
In response to questions raised by the Independent Trustees,
additional information was furnished by FMR including, among other
items, information on and analysis of (a) the overall organization of
FMR, (b) the choice of performance indices and benchmarks, (c) the
composition of peer groups of funds, (d) transfer agency and
bookkeeping fees paid to affiliates of FMR, (e) investment
performance, (f) investment management staffing, (g) the potential for
achieving further economies of scale, (h) operating expenses paid to
third parties, and (i) the information furnished to investors,
including the fund's shareholders.
In considering the Amended Contract, the Board of Trustees and the
Independent Trustees did not identify any single factor as
all-important or controlling, and the following summary does not
detail all the matters considered. Matters considered by the Board of
Trustees and the Independent Trustees in connection with their
approval of the Amended Contract include the following:
INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the
Independent Trustees considered whether the fund has operated within
its investment objective and its record of compliance with its
investment restrictions. They also reviewed monthly the fund's
investment performance as well as the performance of a peer group of
mutual funds, and the performance of an appropriate index or
combination of indices.
FMR'S PERSONNEL AND METHODS. The Board of Trustees and the
Independent Trustees annually review a report detailing the background
of the fund's portfolio manager and the fund's investment objective
and discipline. The Independent Trustees have also had discussions
with senior management of FMR responsible for investment operations
and the senior management of Fidelity's fixed-income group. Among
other things , they considered the size, education and
experience of FMR's investment staff, its use of technology, and FMR's
approach to recruiting, training and retaining portfolio managers and
other research, advisory , and management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the
Independent Trustees considered the nature, quality, cost and extent
of administrative and shareholder services performed by FMR and
affiliated companies, both under the Amended Contract and under
separate agreements covering transfer agency functions and pricing,
bookkeeping and securities lending services, if any. The Board of
Trustees and the Independent Trustees have also considered the nature
and extent of FMR's supervision of third party service providers,
principally custodians and subcustodians.
EXPENSES. The Board of Trustees and the Independent Trustees
considered the classes' expense ratio s and expense ratios of a
peer group of funds. They also considered the amount and nature of
fees paid by shareholders.
PROFITABILITY. The Board of Trustees and the Independent Trustees
considered the level of FMR's profits in respect of the management of
the Fidelity funds, including the fund. This consideration included an
extensive review of FMR's methodology in allocating its costs to the
management of the fund. The Board of Trustees and the Independent
Trustees have concluded that the cost allocation methodology employed
by FMR has a reasonable basis and is appropriate in light of all of
the circumstances. They considered the profits realized by FMR in
connection with the operation of the fund and whether the amount of
profit is a fair entrepreneurial profit for the management of the
fund. They also considered the profits realized from non-fund
businesses which may benefit from or be related to the fund's
business. The Board of Trustees and the Independent Trustees also
considered FMR's profit margins in comparison with available industry
data, both accounting for and ignoring marketing expenses.
ECONOMIES OF SCALE. The Board of Trustees and the Independent
Trustees considered whether there have been economies of scale in
respect of the management of the Fidelity funds, whether the Fidelity
funds (including the fund) have appropriately benefitted from any
economies of scale, and whether there is potential for realization of
any further economies of scale. The Board of Trustees and the
Independent Trustees have concluded that FMR's mutual fund business
presents some limited opportunities to realize economies of scale and
that these economies are being shared between fund shareholders and
FMR in an appropriate manner. The Independent Trustees have also
concluded that the existing group fee structure should be continued
but determined that it would be appropriate to change the group fee
structure as proposed herein.
OTHER BENEFITS TO FMR. The Board of Trustees and the Independent
Trustees also considered the character and amount of fees paid by the
fund and the fund's shareholders for services provided by FMR and its
affiliates, including fees for services like transfer agency, fund
accounting and direct shareholder services. They also considered the
allocation of fund brokerage to brokers affiliated with FMR and the
receipt of sales loads and payments under Rule 12b-1 plans in respect
of certain of the Fidelity funds. The Board of Trustees and the
Independent Trustees also considered the revenues and profitability of
FMR businesses other than its mutual fund business, including FMR's
retail brokerage, correspondent brokerage, capital markets, trust,
investment advisory, pension record keeping, credit card, insurance,
publishing, real estate, international research and investment funds,
and others. The Board of Trustees and the Independent Trustees
considered the intangible benefits that accrue to FMR and its
affiliates by virtue of their relationship with the fund.
OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the
Independent Trustees considered the benefit to shareholders of
investing in a fund that is part of a large family of funds offering a
variety of investment disciplines and providing for a large variety of
fund and shareholder services. With regard to the proposed
modification to the Present Contract's amendment provisions, the Board
of Trustees and the Independent Trustees considered the benefit to
shareholders of FMR's and the trust's increased flexibility (within
1940 Act constraints) to amend the Management Contract without the
delays and potential costs of a proxy solicitation.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the existing management fee structure is fair and reasonable
and (ii) that the proposed modifications to the management fee
structure, that is the reduction of the Group Fee Rate schedule
and the proposed modification to the Present Contract's amendment
provisions, are in the best interest of the fund's
shareholders. The Board of Trustees, including the Independent
Trustees, voted to approve the submission of the Amended Contract to
shareholders of the fund and recommends that shareholders of the fund
vote FOR the Amended Contract. If approved, the Amended Contract will
take effect on the first day of the first month following shareholder
approval.
6. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION.
The fund's current fundamental investment limitation concerning
diversification is as follows:
"The fund may not with respect to 75% of the fund's total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting
securities of that issuer."
The Trustees recommend that shareholders of the fund vote to replace
the fund's current fundamental investment limitation with the
following amended fundamental investment limitation governing
diversification:
"The fund may not with respect to 75% of the fund's total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. G overnment or any of its agencies or
instrumentalities((, or securities of other investment companies)))
if, as a result, (a) more than 5% of the fund's total assets would be
invested in the securities of that issuer, or (b) the fund would hold
more than 10% of the outstanding voting securities of that issuer."
The percentage limits in the proposed fundamental limitation
concerning diversification are the percentage limitations imposed by
the 1940 Act for diversified investment companies. The amended
fundamental diversification limitation makes one change from the
current limitation: subject to applicable 1940 Act requirements, it
would permit the fund to invest without limit in the securities of
other investment companies. Pursuant to an order of exemption granted
by the SEC, the fund may invest up to 25% of total assets in
non-publicly offered money market or short-term bond funds (the
Central Funds) managed by FMR or an affiliate of FMR. The Central
Funds do not currently pay investment advisory, management, or
transfer agent fees, but do pay minimal fees for services, such as
custodian, auditor, and Independent Trustees fees. FMR anticipates
that making use of the Central Funds will benefit the fund by
enhancing the efficiency of cash management and by providing increased
short-term investment opportunities. If the proposal is approved, the
Central Funds are expected to serve as a principal option for cash
investment for the fund.
If this proposal is approved, the amended fundamental diversification
limitation cannot be changed without the approval of the shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund and its shareholders. The Trustees
recommend voting FOR the proposal. The amended fundamental
diversification limitation, upon shareholder approval, will become
effective when the disclosure is revised to reflect the changes. If
the proposal is not approved by the shareholders of the fund, the
fund's current fundamental diversification limitation will remain
unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the
Meeting. However, if any other matters properly come before the
Meeting, it is the intention that proxies that do not contain specific
instructions to the contrary will be voted on such matters in
accordance with the judgment of the persons therein designated.
ACTIVITIES AND MANAGEMENT OF FMR
FMR, a corporation organized in 1946, serves as investment adviser to
a number of investment companies. Information concerning the advisory
fees, net assets, and total expenses of funds with investment
objectives similar to Fidelity Advisor Mortgage Securities Fund and
advised by FMR is contained in the Table of Average Net Assets and
Expense Ratios in Exhibit 4 beginning on page .
FMR, its officers and directors, its affiliated companies, and the
Trustees, from time to time have transactions with various banks,
including the custodian banks for certain of the funds advised by FMR.
Those transactions that have occurred to date have included mortgages
and personal and general business loans. In the judgment of FMR, the
terms and conditions of those transactions were not influenced by
existing or potential custodial or other fund relationships.
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board
and of the Executive Committee; Robert C. Pozen, President; and Peter
S. Lynch, Vice Chairman. Each of the Directors is also a Trustee of
the trust. Messrs. Johnson 3d, Pozen, J. Gary Burkhead, John H.
Costello, Eric D. Roiter, Richard A. Silver, Leonard M. Rush, Fred L.
Henning, Jr., Dwight D. Churchill, and Kevin E. Grant are currently
officers of the trust and officers or employees of FMR or FMR Corp.
With the exception of Mr. Costello and Mr. Silver, all of these
persons hold or have options to acquire stock of FMR Corp. The
principal business address of each of the Directors of FMR is 82
Devonshire Street, Boston, Massachusetts 02109.
All of the stock of FMR is owned by its parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. Members of Mr. Edward C. Johnson 3d's family are the
predominant owners of a class of shares of common stock, representing
approximately 49% of the voting power of FMR Corp., and, therefore,
under the 1940 Act may be deemed to form a controlling group with
respect to FMR Corp.
During the period August 1, 1996 through March 31, 1998, no
transactions were entered into by Trustees and nominees as Trustee of
the trust involving more than 1% of the voting common, non-voting
common and equivalent stock, or preferred stock of FMR Corp.
ACTIVITIES AND MANAGEMENT OF FMR U.K. AND FMR FAR EAST
FMR U.K. and FMR Far East are wholly-owned subsidiaries of FMR formed
in 1986 to provide research and investment advice with respect to
companies based outside the United States for certain funds for which
FMR acts as investment adviser. FMR may also grant the sub-advisers
investment management authority as well as authority to buy and sell
securities for certain of the funds for which it acts as investment
adviser, if FMR believes it would be beneficial to a fund.
Funds with investment objectives similar to Fidelity Advisor Mortgage
Securities Fund managed by FMR with respect to which FMR currently has
sub-advisory agreements with either FMR U.K. or FMR Far East, and the
net assets of each of these funds, are indicated in the Table of
Average Net Assets and Expense Ratios in Exhibit 4 beginning on
page .
The Directors of FMR U.K. and FMR Far East are Edward C. Johnson 3d,
Chairman, and Robert C. Pozen, President. Mr. Johnson 3d also is
President and a Trustee of the trust and other funds advised by FMR;
Chairman and a Director of Fidelity Investments Money Management, Inc.
(FIMM); Chairman, Chief Executive Officer, President, and a Director
of FMR Corp., and a Director and Chairman of the Board and of the
Executive Committee of FMR. In addition, Mr. Pozen is Senior Vice
President and a Trustee of the trust and of other funds advised by
FMR; President and a Director of FMR; and President and a Director of
FIMM. Each of the Directors is a stock holder of FMR Corp. The
principal business address of the Directors is 82 Devonshire Street,
Boston, Massachusetts 02109.
PRESENT MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other
services. Under its management contract with the fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of the fund in accordance with its
investment objective, policies, and limitations. FMR also provides the
fund with all necessary office facilities and personnel for servicing
the fund's investments, compensates all officers of the fund and all
Trustees who are "interested persons" of the trust or of FMR, and all
personnel of the fund or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal and state laws;
developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects
to the Trustees. Services provided by affiliates of FMR will continue
under the proposed management contract described in proposal 5.
In addition to the management fee payable to FMR, Class A, Class T,
Class B and Institutional Class shares pay transfer agent fees to
Fidelity Investments Institutional Operations Company , Inc.
(FIIOC), an affiliate of FMR. Initial Class shares pay transfer agent
fees to Fidelity Service Company, Inc. (FSC), an affiliate of FMR. The
fund pays pricing and bookkeeping fees to FSC on behalf of each class
of the fund. Although the fund's current management contract provides
that the fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices and
reports to shareholders, the trust, on behalf of the fund , has
entered into a revised transfer agent agreement with FIIOC or FSC, as
applicable, pursuant to which FIIOC or FSC, as applicable, bears the
costs of providing these services to existing shareholders of the
applicable classes. Other expenses paid by the fund include interest,
taxes, brokerage commissions, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. The fund is
also liable for such non-recurring expenses as may arise, including
costs of any litigation to which the fund may be a party, and any
obligation it may have to indemnify its officers and Trustees with
respect to litigation.
Transfer agent fees, including reimbursement for out-of-pocket
expenses, paid to FIIOC and FSC by the applicable class for the fiscal
year ended July 31, 1997 amounted to $789 for Class A, $1,513 for
Class T, $881 for Class B, $2,620 for Institutional Class, and
$1,028,957 for Initial Class. Transfer agent fees, including
reimbursement for out-of-pocket expenses, paid to FIIOC and FSC by the
applicable class for the three month period ended October 31, 1997
amounted to $1,160 for Class A, $16,843 for Class T, $1,270 for Class
B, $9,273 for Institutional Class and $249,064 for Initial Class.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid to FSC by the fund for the fiscal year
ended July 31, 1997 and the three month period ended October 31, 1997
amounted to $208,321 and $52,896, respectively.
The fund also has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer
registered under the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc. The
distribution agreement calls for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of
the fund, which are continuously offered. Promotional and
administrative expenses in connection with the offer and sale of
shares are paid by FMR. Sales charge revenue paid to, and retained by,
FDC for the fiscal year ended July 31, 1997 for the fund
amounted to the following:
Paid to FDC Retained by FDC
Class T Class A Class T Class A
$ 9,662 $ 7,090 $ 2,170 $ 67
Sales charge revenue paid to, and retained by, FDC for the three
month period ended October 31, 1997 amounted to the following:
Paid to FDC Retained by FDC
Class T Class A Class T Class A
$ 8,746 $ 263 $ 1,749 $ 180
FDC collected no deferred sales charge revenue on Class B
shares of the fund during the fiscal year ended July 31,
1997. For the three month period ended October 31, 1997, FDC collected
deferred sales charge revenue on Class B shares of $72. When
shares subject to a deferred sales charge are sold, FDC pays
commissions from its own resources to dealers through which the sales
are made. In addition, for the fiscal year ended July 31, 1997
FDC received from the respective class fees pursuant to
Distribution and Service Plans under Rule 12b-1 as follows:
Fees Paid to FDC
Class A $ 530
Class T $ 2,602
Class B $ 991
Institutional Class $ 0
Initial Class $ 0
For the three month period ended October 31, 1997 FDC received
from the respective class fees pursuant to Distribution and Service
plans under Rule 12b-1 as follows:
Fees Paid to FDC
Class A $ 600
Class T $ 8,099
Class B $ 2,699
Institutional Class $ 0
Initial Class $ 0
Currently, the full amount of distribution fees paid by Class A and
Class T under their respective Distribution and Service Plans is
reallowed to investment professionals (including FDC) as compensation
for their services in connection with the distribution of Class A or
Class T shares, as applicable, and for providing support services to
Class A or Class T shareholders, as applicable, based upon the level
of services provided.
Currently, the full amount of distribution fees paid by Class B under
its Distribution and Service Plan is retained by FDC as compensation
for its services and expenses in connection with the distribution of
Class B shares, and the full amount of service fees paid by Class B
under its Distribution and Service Plan is reallowed to investment
professionals (including FDC) for providing personal service to and/or
maintenance of Class B shareholder accounts.
FMR is the fund's manager pursuant to a management contract dated
August 1, 1994, which was approved by shareholders on July 13, 1994.
The management contract approved by shareholders on July 13, 1994
provides for lower fees when FMR's assets under management exceed
certain levels.
For the services of FMR under the contract, the fund pays FMR a
monthly management fee composed of the sum of two elements: a group
fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts and is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown below on the left. The schedule
below on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $550 billion of group net assets - the approximate level for
October 31, 1997 - was 0 .1372%, which is the weighted average
of the respective fee rates for each level of group net assets up to
$550 billion.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective
Assets Rate Assets Annual
Fee Rate
0 - $ 3 billion 0 .370 0 % $ 0.5 billion 0 .3700%
3 - 6 0 .3400 25 0 .2664
6 - 9 0 .3100 50 0 .2188
9 - 12 0 .2800 75 0 .1986
12 - 15 0 .2500 100 0 .1869
15 - 18 0 .2200 125 0 .1793
18 - 21 0 .2000 150 0 .1736
21 - 24 0 .1900 175 0 .1695
24 - 30 0 .1800 200 0 .1658
30 - 36 0 .1750 225 0 .1629
36 - 42 0 .1700 250 0 .1604
42 - 48 0 .1650 275 0 .1583
48 - 66 0 .1600 300 0 .1565
66 - 84 0 .1550 325 0 .1548
84 - 120 0 .1500 350 0 .1533
120 - 174 0 .1450 400 0 .1507
174 - 228 0 .1400
228 - 282 0 .1375
282 - 336 0 .1350
Over 336 0 .1325
</TABLE>
Prior to August 1, 1994, the group fee rate was based on a schedule
with breakpoints ending at 0.1500% for average group assets in excess
of $84 billion. The group fee rate breakpoints shown above for average
group assets in excess of $120 billion and under $228 billion were
voluntarily adopted by FMR on January 1, 1992. The additional
breakpoints shown above for average group assets in excess of $228
billion were voluntarily adopted by FMR on November 1, 1993. The
fund's current management contract reflects this extension of the
group fee rate schedule.
On August 1, 1994, FMR voluntarily revised the prior extensions to
the group fee rate schedule, and added new breakpoints for average
group assets in excess of $156 billion and under $372 billion as shown
in the schedule below, pending shareholder approval of a new
management contract reflecting the revised schedule. The revised group
fee rate schedule provides for lower management fee rates as FMR's
assets under management increase. The revised group fee rate schedule
was identical to the above schedule for average group assets under
$156 billion.
On January 1, 1996, FMR voluntarily added new breakpoints to the
revised schedule for average group assets in excess of $372 billion,
pending shareholder approval of a new management contract reflecting
the revised schedule and additional breakpoints. The revised group fee
rate schedule and its extensions provide for lower management fee
rates as FMR's assets under management increase. For average group
assets in excess of $156 billion, the revised group fee rate schedule
with additional breakpoints voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective
Assets Rate Assets Annual
Fee Rate
120 - $156 0 .1450% $ 150 billion 0 .1736%
billion
156 - 192 0 .1400 175 0 .1690
192 - 228 0 .1350 200 0 .1652
228 - 264 0 .1300 225 0 .1618
264 - 300 0 .1275 250 0 .1587
300 - 336 0 .1250 275 0 .1560
336 - 372 0 .1225 300 0 .1536
372 - 408 0 .1200 325 0 .1514
408 - 444 0 .1175 350 0 .1494
444 - 480 0 .1150 375 0 .1476
480 - 516 0 .1125 400 0 .1459
Over 516 0 .1100 425 0 .1443
450 0 .1427
475 0 .1413
500 0 .1399
525 0 .1385
550 0 .1372
The individual fund fee rate is 0.30%. Based on the average group net
assets of the funds advised by FMR for October 31, 1997, the annual
management fee rate would be calculated as follows:
Group Fee Rate Individual Fund Management Fee Rate
Fee Rate
0.1372% + 0.30% = 0.4372%
One-twelfth of this annual management fee rate is applied to the
fund's net assets averaged for the month, giving a dollar amount,
which is the fee for that month.
For the fiscal year ended July 31, 1997, and the
three month period ended October 31, 1997, FMR received
$2,273,788 and $578,471, respectively, for its services as
investment adviser to the fund. This fee was equivalent to 0.44% for
the fiscal year ended July 31, 1997 and 0.44% (annualized) for the
three month period ended October 31, 1997, of the average net
assets of the fund.
FMR may, from time to time, voluntarily reimburse all or a portion of
a class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year. Expense
reimbursements by FMR will increase the applicable class's total
returns and yield and repayment of the reimbursement by the applicable
class will lower its total returns and yield.
As of March 1, 1997, FMR has voluntarily agreed, subject to revision
or termination, to reimburse each class of the fund to the extent that
its total operating expenses were in excess of its respective
expense cap, i.e., Class A's expense cap of 0.90%, Class T's
expense cap of 1.00%, Class B's expense cap of 1.65%,
Institutional Class's expense cap of 0.75%, and Initial Class's
expense cap of 0.75 %. If this reimbursement had not been in
effect, for the fiscal year ended July 31, 1997, the total operating
expenses for each class of the fund would have amounted to $13,605 for
Class A, $21,012 for Class T, $13,458 for Class B, and $21,449 for
Institutional Class, which would have been the equivalent to 3.84%,
1.99%, 8.78%, and 1.72%, respectively, of average net assets of each
class. If this reimbursement had not been in effect, for the
three month period ended October 31, 1997, the total operating
expenses for each class of the fund would have amounted to $ 12,259
for Class A , $ 50,370 for Class T , $13,953
for Class B, and $38,170 for Institutional Class, which would have
been equivalent to 3.04 %, 1.54 %, 4.61 % and
1.00% , respectively, of average net assets of each class.
SUB-ADVISORY AGREEMENTS
On behalf of Fidelity Advisor Mortgage Securities Fund, FMR
has entered into sub-advisory agreements with FMR U.K. and FMR Far
East. Pursuant to the sub-advisory agreements, FMR may receive
investment advice and research services outside the United States from
the sub-advisors. FMR may also grant the sub-advisors investment
management authority as well as the authority to buy and sell
securities if FMR believes it would be beneficial to the fund. The
sub-advisory agreement with FMR U.K., dated August 1, 1994, was
approved by shareholders on July 13, 1994. The sub-advisory agreement
with FMR Far East, dated August 1, 1994, was approved by shareholders
on July 13, 1994. For providing discretionary investment management
and executing portfolio transactions, FMR pays FMR U.K. and FMR Far
East a fee equal to 50% of its monthly management fee rate with
respect to the fund's average net assets managed by the sub-adviser on
a discretionary basis.
Currently, FMR U.K. and FMR Far East each focus on issuers in
countries other than the United States such as those in Europe, Asia,
and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements ,
FMR pays the fees of FMR U.K. and FMR Far East. For providing
non-discretionary investment advice and research services, FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of FMR U.K.'s and FMR Far East's costs incurred in connection with
providing investment advice and research services.
For the fiscal year ended July 31, 1997 and the three month period
ended October 31, 1997, no fees were paid by FMR to FMR U.K. and FMR
Far East on behalf of the fund.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are
placed on behalf of each fund by FMR pursuant to authority contained
in the fund's management contract.
FMR may place agency transactions with National Financial Services
Corporation (NFSC) and Fidelity Brokerage Services Japan, LLC (FBSJ),
indirect subsidiaries of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. Prior to December 9,
1997, FMR used research services provided by and placed agency
transactions with Fidelity Brokerage Services (FBS), an indirect
subsidiary of FMR Corp.
For the fiscal year ended July 31, 1997 and the three month period
ended October 31, 1997, the fund paid no brokerage commissions to
affiliated brokers.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The trust does not hold annual shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to
the Secretary of the Trust, 82 Devonshire Street, Boston,
Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the trust, in care of Fidelity Service
Company, Inc. at 1-800-544-8888 (Initial Class) or Client
Services at 1-800-843-3001 (Class A, Class T, Class B, and
Institutional Class) , whether other persons are beneficial owners
of shares for which proxies are being solicited and, if so, the number
of copies of the Proxy Statement and Annual Reports you wish to
receive in order to supply copies to the beneficial owners of the
respective shares.
EXHIBIT 1
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED.
FORM OF AMENDED AND RESTATED DECLARATION OF TRUST
(Headings that were underlined in the trust's current Amended and
Restated Declaration of Trust remain underlined in this Exhibit.)
AMENDED AND RESTATED DECLARATION OF TRUST
[DATED SEPTEMBER 15, 1994]
((DATED ___________, 1998))
AMENDED AND RESTATED DECLARATION OF TRUST, made [September 15,
1994]((______________, 1998)) by each of the Trustees whose signature
is affixed hereto (the"Trustees").
WHEREAS, the Trustees desire to amend and restate this Declaration of
Trust for the sole purpose of supplementing the Declaration ((of
Trust)) to incorporate amendments duly adopted; and
WHEREAS, this Trust was initially made on August 7, 1984 by Edward C.
Johnson 3d, Caleb Loring, Jr., and Frank Nesvet in order to establish
a trust fund for the investment and reinvestment of funds contributed
thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in
[T]((t))rust under this Amended and Restated Declaration of Trust as
herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Fidelity Income
Fund."
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) The [T]((t))erms "Affiliated Person((,))" "Assignment((,))"
"Commission((,))" "Interested Person((,))" "Majority Shareholder Vote"
(the 67% or 50% requirement of the third sentence of Section 2(a)(42)
of the 1940 Act, whichever may be applicable)((,)) and "Principal
Underwriter" shall have the meanings given them in the 1940 Act, as
[amended from time to time] ((modified by or interpreted by any
applicable order or orders of the Commission or any rules or
regulations adopted or interpretative releases of the Commission
thereunder;
(b) "Bylaws" shall mean the bylaws of the Trust, if any, as amended
from time to time;
(c) "Class" refers to the class of Shares of a Series of the Trust
established in accordance with the provisions of Article III;
(d) "Declaration of Trust" means this Amended and Restated
Declaration of Trust, as further amended or restated, from time to
time;))
[(c)]((( e) )) "Net Asset Value" means the net asset value of
each Series of the Trust ((or Class thereof)) determined in the manner
provided in Article X, Section 3;
[(d)]((( f) )) "Shareholder" means a record owner of Shares of
the Trust;
[(f)](((g ) )) "Shares" means the equal proportionate
transferable units of interest into which the beneficial interest of
((the Trust or)) each Series shall be divided from time to time,
((including such Class or Classes of Shares as the Trustees may from
time to time create and establish)) and [includes] ((including))
fractions of [s]((S))hares as well as whole [s]((Shares ((as))
consistent with the requirements of Federal and/or [other] ((state))
securities laws; [and]
(h) "Series" refers to ((any)) series of Shares of the Trust
established in accordance with the provisions of Article III;
[(b)](( (i) )) "Trust" refers to Fidelity Income [Bond]Fund and
reference to the Trust, when applicable to one or more Series of the
Trust, shall refer to any such Series;
[(e)](( (j) )) [The]"Trustees" refer to the individual trustees
in their capacity as trustees hereunder of the Trust and their
successor or successors for the time being in office as such trustee
or trustees; ((and))
[(g)](( (k) ))[The]"1940 Act" refers to the Investment Company
Act of 1940, as amended from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source
of managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into
such transferable Shares of one or more separate and distinct Series
((or Classes of Series)) as the Trustees shall((,)) from time to
time((,)) create and establish. The number of ((authorized)) Shares
((of each Series)), and ((Class thereof)), is unlimited. [e]((E))ach
Share shall be without par value and shall be fully paid and
nonassessable. The Trustees shall have full power and authority, in
their sole discretion, and without obtaining any prior authorization
or vote of the ((Shareholders or any Series or Class of)) Shareholders
of the Trust (( (a) )) to create and establish (and to change in
any manner) Shares ((or any Series or Classes thereof)) with such
preferences, voting powers, rights, and privileges as the Trustees
may((,)) from time to time, determine((;)) (( (b) to divide or
combine the Shares ((or any Series or Classes thereof)) into a greater
or lesser number((;)) (( (c) )) to classify or reclassify any
issued Shares into one or more Series ((or Classes)) of Shares((;))
((( d) )) to abolish any one or more Series ((or Classes)) of
Shares((;)) and (( (e) )) to take such other action with respect
to the Shares as the Trustees may deem desirable.
[ES TABLISHMENT O F SERIES]
((ESTABLISHMENT OF SERIES AND CLASSES))
Section 2. The establishment of any Series ((or Class thereof)) shall
be effective upon the adoption of a resolution by a majority of the
then Trustees setting forth such establishment and designation and the
relative rights and preferences of the Shares of such Series ((or
Class)). At any time that there are no Shares outstanding of any
particular Series ((or Class)) previously established and designated,
the Trustees may by a majority vote abolish [that]((such)) Series ((or
Class)) and the establishment and designation thereof.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of
the Trust ((or a transfer or similar agent)). The Trustees may make
such rules as they consider appropriate for the transfer of Shares and
similar matters. The record books of ((the Trust as kept by)) the
Trust ((or by any transfer or similar agent, as the case may be,))
shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from
such persons and on such terms as they may((,)) from time to time((,))
authorize. Such investments may be in the form of cash((,)) [or]
securities(( , o r other property)) in which the appropriate
Series is authorized to invest, valued as provided in Article X,
Section 3. After the date of the initial contribution of capital, the
number of Shares to represent the initial contribution may in the
Trustees' discretion be considered as outstanding((,)) and the amount
received by the Trustees on account of the contribution shall be
treated as an asset of the Trust. Subsequent investments in the Trust
shall be credited to each Shareholder's account in the form of full
Shares at the Net Asset Value per Share next determined after the
investment is received; provided, however, that the Trustees may, in
their sole discretion[,] (a) impose a sales charge ((or other fee))
upon investments in the Trust ((or Series or any Classes thereof,))
and (b) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES AND CLASSES
Section 5. All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange, or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be referred to as "assets
belonging to" that Series. In addition, any assets, income, earnings,
profits, and proceeds thereof, funds, or payments [which]((that))
are no t readily identifiable as belonging to any particular
Series ((or Class,)) shall be allocated by the Trustees between and
among one or more of the Series ((or Classes)) in such manner as they,
in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of
all Series ((or Classes)) for all purposes and shall be referred to as
assets belonging to that Series ((or Class.)) The assets belonging to
a particular Series shall be so recorded upon the books of the Trust
((or of its agent or agents and)) shall be held by the Trustees in
[T]((t))rust for the benefit of the holders of Shares of that Series.
The assets belonging to each particular Series shall be charged with
the liabilities of that Series and all expenses, costs, charges, and
reserves attributable to that Series, ((except that liabilities and
expenses may, in the Trustees' discretion, be allocated solely to a
particular Class and, in which case, shall be borne by that Class.))
Any general liabilities, expenses, costs, charges, or reserves of the
Trust that are not readily identifiable as belonging to any particular
Series or Class shall be allocated and charged by the Trustees between
or among any one or more of the Series or Classes in such manner as
the Trustees, in their sole discretion, deem fair and equitable ((and
shall be referred to as "liabilities belonging to" that Series or
Class.)) Each such allocation shall be conclusive and binding upon the
Shareholders of all Series or Classes for all purposes. Any creditor
of any Series may look only to the assets of that Series to satisfy
such creditor's debt. ((No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or
belonging to any other Series.))
NO PREEMPTIVE RIGHTS
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the
Trust or the Trustees.
[LIMITATION OF PERSONAL LIABILITY]
((STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY))
Section 7. ((Shares shall be deemed to be personal property giving
only the rights provided in this instrument. Every shareholder by
virtue of having become a shareholder shall be held to have expressly
assented and agreed to be bound by the terms hereof. No Shareholder of
the Trust and of each Series shall be personally liable for the debts,
liabilities, obligations, and expenses incurred by, contracted for, or
otherwise existing with respect to, the Trust or by or on behalf of
any Series.)) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum
of money or assessment whatsoever other than such as the Shareholder
may, at any time, personally agree to pay by way of subscription for
any Shares or otherwise. Every note, bond, contract, or other
undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust ((or to a Series)) shall include a recitation
limiting the obligation represented thereby to the Trust ((or to one
or more Series)) and its ((or their assets)) (but the omission of such
a recitation shall not operate to bind any Shareholder ((or
Trustee).))
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable
to carry out that responsibility.
[ELECTION: INITIAL TRUSTEES]
((INITIAL TRUSTEES; ELECTION))
Section 2. ((The initial Trustees shall be at least three individuals
who shall affix their signatures hereto.)) On a date fixed by the
Trustees, the Shareholders shall elect not less than three Trustees. A
Trustee shall not be required to be a Shareholder of the Trust. [The
initial Trustees shall be Edward C. Johnson 3d, Caleb Loring, Jr. and
Frank Nesvet and such other individuals as the Board of Trustees shall
appoint pursuant to Section 4 of the Article IV.]
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a)
that any Trustee may resign his trust by written instrument signed by
him and delivered to the other Trustees, which shall take effect upon
such delivery or upon such later date as is specified therein; (b)
that any Trustee may be removed at any time by written instrument,
signed by at least two-thirds (((2/3 ) )) of the number of
Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing
to be retired or who has become incapacitated by illness or injury may
be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) a Trustee may
be removed at any [S]((s))pecial [M]((m))eeting of the Trust by a vote
of two-thirds(((2/3 ) )) of the outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation,
retirement, [removal][incapacity,]or [inability]removal of any of the
Trustees, or in case a vacancy shall, by reason of an increase in
number ((of the Trustees,)) or for any other reason, exist, the
remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the
limitations under the [Investment Company Act of] 1940 ((Act)). Such
appointment shall be evidenced by a written instrument signed by a
majority of the Trustees in office or by recording in the records of
the Trust, whereupon the appointment shall take effect. An appointment
of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement,
resignation((,)) or increase in number of Trustees effective at a
later date, provided that said appointment shall become effective only
at or after the effective date of said retirement, resignation((,)) or
increase in number of Trustees. As soon as any Trustee so appointed
shall have accepted this [t]((T))rust((, t ))he [t]((T))rust
estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he
shall be deemed a Trustee hereunder. The ((foregoing)) power of
appointment is subject to the provisions of Section 16(a) of the 1940
Act((, as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted or
interpretative releases of the Commission.))
TEMPORARY ABSENCE OF TRUSTEES
Section 5. Any Trustee may, by power of attorney, delegate his power
for a period not exceeding six (((6 ) )) months at any one time
to any other Trustee or Trustees, provided that in no case shall less
than two Trustees personally exercise the other powers hereunder
except as herein otherwise expressly provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more
than twelve (12), serving hereunder at any time shall be determined by
the Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is [absent from the
Commonwealth of Massachusetts or, if not a domiciliary of
Massachusetts, is absent from his state of domicile, or is] physically
or mentally incapacitated by reason of disease or otherwise, the other
Trustees shall have all the powers hereunder and the certificate of
the other Trustees of such vacancy [,absence] or incapacity shall be
conclusive [, provided, however, that no vacancy shall remain unfilled
for a period longer than six calendar months].
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall
not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart
from any assets now or hereafter held in any capacity other than as
Trustee hereunder by the Trustees or any successor Trustees. All of
the assets of the Trust shall at all times be considered as vested in
the Trustees. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or any right of
partition or possession thereof, but each Shareholder shall have a
proportionate undivided beneficial interest in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees, in all instances, shall act as principals[,]
and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts
and to make and execute any and all contracts and instruments that
they may consider necessary or appropriate in connection with the
management of the Trust. ((Except as otherwise provided herein or in
the 1940 Act,)) [T]((t))he Trustees shall not in any way be bound or
limited by present or future laws or customs in regard to trust
investments, but shall have full authority and power to make any and
all investments [which]((that)) they, in their
[uncontrolled]discretion, shall deem proper to accomplish the purpose
of this Trust. Subject to any applicable limitation in [the]((this))
Declaration of Trust or the Bylaws of the Trust, ((if any,)) the
Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested[,] without((,)) in any event((,)) being
bound or limited by any present or future law or custom in regard to
investments by Trustees, and to sell, exchange, lend, pledge,
mortgage, hypothecate, write options on, and lease any or all of the
assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to
the Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ ((one or more)) [a] bank((s)), [or trust
company]((trust companies, companies that are members of a national
securities exchange, or other entities permitted under the 1940 Act,
as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretative
releases of the Commission thereunder,)) as custodian((s)) of any
assets of the Trust subject to any conditions set forth in this
Declaration of Trust or in the Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or
both.
(f) To provide for the distribution of interests of the Trust either
through a [p]((P))rincipal [u]((U))nderwriter in the manner
hereinafter provided for or by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any
officers of the Trust and to any [agent,]((investment adviser,
manager,)) custodian((,)) [or] underwriter ((, or other agent or
independent contractor)).
(i) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XII, Section [4(b)]((4)) hereof.
(j) To vote or give assent [,] or exercise any rights of ownership
[,] with respect to stock or other securities or property; and to
execute and deliver powers of attorney to such person or persons as
the Trustees shall deem proper, granting to such person or persons
such power and discretion with relation to securities or property as
the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered((,)) or other negotiable form;
or either in its own name or in the name of a custodian or a nominee
or nominees [, subject in either case to proper safeguards according
to the usual practice of Massachusetts trust companies or investment
companies].
(m) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment
purposes in accordance with the provisions of Article III(( and to
establish Classes of such Series having relative rights, powers, and
duties as the Trustees may provide consistent with applicable laws.))
(n) To allocate assets, liabilities, and expenses of the Trust to a
particular Series ((or Class, as appropriate,)) or to apportion the
same between or among two or more Series ((or Classes, as
appropriate,)) provided that any liabilities or expenses incurred by a
particular Series ((or Class)) shall be payable solely out of the
assets belonging to that Series as provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation, or merger of any corporation or concern, any security
of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to any
security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy((,)) including, but
not limited to, claims for taxes.
(q) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for.
(r) To borrow money, and to pledge, mortgage((,)) or hypothecate the
assets of the Trust, subject to ((the)) applicable
[limitations]((requirements)) of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders[,] and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving
notice to such Shareholder.
(((t) To operate as and carry on the business of an investment
company and to exercise all the powers necessary and appropriate to
the conduct of such operations.
(u) To interpret the investment policies, practices or limitations of
any Series.
(v) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore
set forth, either alone or in association with others, and to do every
other act or thing incidental or appurtenant to or growing out of or
connected with the aforesaid business or purposes, objects or
powers.))
[(t)](((w ) )) Notwithstanding any other provision hereof, to
invest all of the assets of any [s]((S))eries in a single open-end
investment company, including investment by means of transfer of such
assets in exchange for an interest or interests in such investment
company.
((The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be
held to limit or restrict in any manner the general powers of the
Trustees. Any action by one or more of the Trustees in their capacity
as such hereunder shall be deemed an action on behalf of the Trust or
the applicable Series and not an action in an individual capacity.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust or any Series or
Class thereof.))
No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see
to the application of any payments made or property transferred to the
Trustees or upon their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of Shares to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may issue and sell
or cause to be issued and sold Shares to and buy such Shares from any
such person of any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and
purchase of such Shares; and all subject to any restrictions which may
be contained in the Bylaws((, if any.))
ACTION BY THE TRUSTEES
Section 3. [The]((Except as otherwise provided herein or in the 1940
Act, the)) Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by
telephone consent provided a quorum of Trustees participate in any
such telephonic meeting, unless the 1940 Act requires that a
particular action be taken only at a meeting [of] ((at which)) the
Trustees ((are present in person.)) At any meeting of the Trustees, a
majority of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the
Trustees or by any two other Trustees. Notice of the time, date((,))
and place of all meetings of the Trustees shall be given by the party
calling the meeting to each Trustee by telephone((, telefax)),
telegram((,)) or ((other electro-mechanical means)) sent to his home
or business address at least twenty-four (( ( 24 ) )) hours
in advance of the meeting or by written notice mailed to his home or
business address at least seventy-two(( ( 72 ) )) hours in
advance of the meeting. Notice need not be given to any Trustee who
attends the meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting.
Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any one of their number their authority to
approve particular matters or take particular actions on behalf of the
Trust. ((Written consents or waivers of Trustees may be executed in
one or more counterparts. Execution of a written consent or waiver and
delivery thereof to the Trust may be accomplished by telefax or other
electro-mechanical means.))
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be
Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees, shall be responsible for the execution of
policies established by the Trustees and the administration of the
Trust, and may be the chief executive, financial and accounting
officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets
belonging to the appropriate Series for their expenses and
disbursements, including, without limitation, fees and expenses of
Trustees who are not Interested Persons of the Trust((;)) interest
expense, taxes, fees and commissions of every kind[,]((;)) expenses of
pricing Trust portfolio securities[,]((;)) expenses of issue,
repurchase and redemption of shares including expenses attributable to
a program of periodic repurchases or redemptions, expenses of
registering and qualifying the Trust and its Shares under Federal and
[S]((s))tate laws and regulations[,]((;)) charges of custodians,
transfer agents, and registrars[,]((;))expenses of preparing and
setting up in type [P]((p))rospectuses and[S]((s))tatements of
[A]((a))dditional [I]information[,]((;)) expenses of printing and
distributing prospectuses sent to existing Shareholders[,]((;))
auditing and legal expenses[,]((;)) reports to Shareholders[,]((;
))expenses of meetings of Shareholders and proxy solicitations
therefor[,]((;)) insurance expense[,]((;)) association membership
dues((;)) and for such non-recurring items as may arise, including
litigation to which the Trust is a party[,]((;)) and for all losses
and liabilities by them incurred in administering the Trust, and for
the payment of such expenses, disbursements, losses((,)) and
liabilities the Trustees shall have a lien on the assets belonging to
the appropriate Series prior to any rights or interests of the
Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER, AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees
may((,)) in their discretion ((and)) from time to time, enter into an
investment advisory or management contract(s) with respect to the
Trust or any Series thereof whereby the other party(ies) to such
contract(s) shall undertake to furnish the Trustees such management,
investment advisory, statistical, and research facilities and services
and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may((,)) in their
discretion((,)) determine. Notwithstanding any provisions of this
Declaration of Trust, the Trustees may authorize the investment
adviser(s) (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales or
exchanges of portfolio securities and other investment instruments of
the Trust on behalf of the Trustees or may authorize any officer,
agent, or Trustee to effect such purchases, sales((,)) or exchanges
pursuant to recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales((,)) and
exchanges shall be deemed to have been authorized by all of the
Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
((as modified by or interpreted by any applicable order or orders of
the Commission or any rules or regulations adopted or interpretative
releases of the Commission thereunder,)) including those relating to
Shareholder approval, authorize the investment adviser to employ one
or more sub-advisers from time to time to perform such of the acts and
services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and
sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time
enter into [(a)]((an exclusive or non-exclusive contract(s) on behalf
of the Trust or any Series or Class thereof)) providing for the sale
of the Shares, whereby the Trust may either agree to sell the Shares
to the other party to the contract or appoint such other party its
sales agent for such Shares. In either case, the contract shall be on
such terms and conditions as may be prescribed in the Bylaws, if any,
and such further terms and conditions as the Trustees may((,)) in
their discretion((,)) determine not inconsistent with the provisions
of this Article [,]VII or of the Bylaws, if [;]any((.))
[and][s]((S))uch contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may, in their discretion ((and)) from time to
time((,)) enter into [a]((one or more)) transfer agency and
Shareholder service contract((s)) whereby the other party shall
undertake to furnish the Trustees with transfer agency and Shareholder
services. [The]((Such)) contract((s)) shall be on such terms and
conditions as the Trustees may((,)) in their discretion((,)) determine
not inconsistent with the provisions of this Declaration of Trust or
of the Bylaws, if any. Such services may be provided by one or more
entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2
and 3 of this Article VII or in Article IX hereof may be entered into
with any corporation, firm, partnership, trust or association,
although one or more of the Trustees or officers of the Trust may be
an officer, director, trustee, shareholder, or member of such other
party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any relationship, nor
shall any person holding such relationship be liable merely by reason
of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when
entered into was reasonable and fair and not inconsistent with the
provisions of this Article VII or the Bylaws, if any. The same person
(including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to Sections
1, 2 and 3 above or Article IX, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any
or all of the contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of
this Article VII shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act, ((as modified by or
interpreted by any applicable order or orders of the Commission or any
rules or regulations adopted or interpretative releases of the
Commission)) ([including any amendments thereof] or other applicable
Act of Congress hereafter enacted)((,)) with respect to its
continuance in effect, [and no amendment to any contract, entered into
pursuant to Section 1 shall be effective unless assented to by a
Majority Shareholder Vote] ((its amendment)), its termination, and the
method of authorization and approval of such contract or renewal
thereof.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote
[(i)](((a ) )) for the election of Trustees as provided in
Article IV, Section 2[,]((;)) [(ii)](((b ) )) for the removal of
Trustees as provided in Article IV, Section 3(d)[,]((;))[
(iii)](((c ))) with respect to any investment advisory or
management contract as provided in Article VII, Section 1[,] ((and 5;
(d) with respect to any termination, merger, consolidation,
reorganization, or sale of assets of the Trust or any of its Series or
Classes as provided in Article XII, Section 4;)) [(iv)](((e ) ))
with respect to the amendment of this Declaration of Trust as provided
in Article XII, Section 7; [(v)](f) to the same extent as the
shareholders of a Massachusetts business corporation, as to whether or
not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or
the Shareholders, provided, however, that a Shareholder of a
particular Series shall not be entitled to bring any derivative or
class action on behalf of any other Series of the Trust; and
[(vi)](((g ) )) with respect to such additional matters relating
to the Trust as may be required or authorized by law, by this
Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Commission [the Securities and
Exchange Commission (the "Commission")] or any [S]((s))tate, as the
Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares
shall be voted by individual Series, ((except as provided in the
following sentence and)) except [(i)](((a ) )) when required by
the 1940 Act, Shares shall be voted in the aggregate and not by
individual Series; and[ (ii)](((b ) )) when the Trustees have
determined that the matter affects only the interests of one or more
Series, then only the Shareholders of such Series shall be entitled to
vote thereon. ((The Trustees may also determine that a matter affects
only the interests of one or more Classes of a Series, in which case,
any such matter shall be voted on by such Class or Classes.)) A
Shareholder of each Series or Class thereof shall be entitled to one
vote for each dollar of net asset value (number of Shares owned times
net asset value per share) of such [s]((S))eries[,] ((or Class
thereof)) on any matter on which such [s]((S))hareholder is entitled
to vote((,)) and each fractional dollar amount shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or by proxy.
Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law,
this Declaration of Trust or any Bylaws of the Trust((, if any,)) to
be taken by Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified
in Section 2 of Article IV at the principal office of the Trust or
such other place as the Trustees may designate. Special meetings of
the Shareholders of any Series may be called by the Trustees and shall
be called by the Trustees upon the written request of Shareholders
owning at least one-tenth (( ( 1/10 ) )) of the outstanding
Shares entitled to vote. Whenever ten or more Shareholders meeting the
qualifications set forth in Section 16(c) of the 1940 Act, as
((modified by or interpreted by any applicable order or orders of))
the [same may be amended from time to time] ((Commission or any rules
or regulations adopted or interpretative releases of the Commission,))
seek the opportunity of furnishing materials to the other Shareholders
with a view to obtaining signatures on such a request for a meeting,
the Trustees shall comply with the provisions of said Section 16(c)
with respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials
to such Shareholders of record. Shareholders shall be entitled to at
least fifteen (((15 ) )) days' notice of any meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by
proxy shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of
this Declaration of Trust permits or requires that holders of any
Series ((or Class)) shall vote as a Series ((or Class)) then a
majority of the aggregate number of Shares of that Series ((or Class))
entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that Series ((or Class)). Any lesser number
shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for
the original meeting, without the necessity of further notice. Except
when a larger vote is required ((by applicable law or)) by any
provision of this Declaration of Trust or the Bylaws, ((if any,)) a
majority of the Shares voted in person or by proxy shall decide any
questions and a plurality shall elect a Trustee, provided that where
any provision of law or of this Declaration of Trust permits or
requires that the holders of any Series ((or Class)) shall vote as a
Series[,] ((or Class,)) then a majority of the Shares of that Series
((or Class)) voted on the matter shall decide that matter insofar as
that Series ((or Class ))is concerned. ((Shareholders may act by
unanimous written consent. Actions taken by a Series or Class may be
consented to unanimously in writing by Shareholders of that Series or
Class.))
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank((, a company
that is a member of a national securities exchange, ))[or](( trust
company, or other entity permitted under the 1940 Act, as modified by
or interpreted by any applicable order or orders of the Commission or
any rules or regulations adopted or interpretative releases of the
Commission thereunder,)) having capital, surplus, and undivided
profits of at least two million dollars ($2,000,000), or such other
amount as shall be allowed by the Commission or by the 1940 Act, as
custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust((, if any:))
(1) to hold the securities owned by the Trust and deliver the same
upon written order or oral order, if confirmed in writing, or by such
electro-mechanical or electronic devices as are agreed to by the Trust
and the custodian, if such procedures have been authorized in writing
by the Trust;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct; and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical
and accounting services; and
(2) to compute, if authorized to do so, [by the Trustees],the Net
Asset Value of any Series ((or Class thereof)) in accordance with the
provisions hereof; all upon such basis of compensation as may be
agreed upon between the Trustees and the custodian.
[If so directed by a Majority Shareholder Vote, the custodian shall
deliver and pay over all property of the Trust held by it as specified
in such vote.]
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and
services of the custodian, and upon such terms and conditions, as may
be agreed upon between the custodian and such sub-custodian and
approved by the Trustees, provided that in every case such
sub-custodian shall be a bank, ((a company that is a member of a
national securities exchange,)) [or] trust company, ((or other entity
permitted)) [organized] ((under the)) [laws of the United States or
one of the states thereof] ((1940 Act, as modified by or interpreted
by any applicable order or orders of the Commission or any rules or
regulations adopted or interpretative releases of the Commission
thereunder, having capital,)) [and] surplus, and undivided profits of
at least two million dollars ($2,000,000)((,)) or such other [person
as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act as from time to time amended] ((amount as shall be
allowed by the Commission, or by the 1940 Act)).
CENTRAL [CERTIFICATE]DEPOSITORY SYSTEM
Section 2. Subject to such rules, regulations and orders as the
Commission may adopt, the Trustees may direct the custodian to deposit
all or any part of the securities owned by the Trust in a system for
the central handling of securities established by a national
securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934[,] or
such other person as may be permitted by the Commission[,] or
otherwise in accordance with the 1940 Act((,))[as from time to time
amended,] pursuant to which system all securities of any particular
[c]((Class or [s]((S))eries of any issuer deposited within the system
are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such
((securities))[,]((;)) provided that all such deposits shall be
subject to withdrawal only upon the order of the Trust ((or its
custodian, subcustodians, or other authorized agents.))
ARTICLE X
[DISTRIBUTIONS AND REDEMPTIONS]
((DISTRIBUTIONS, REDEMPTIONS AND DETERMINATION OF NET ASSET
VALUE))
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends. The
amount of such dividends and the payment of them shall be wholly in
the discretion of the Trustees.
(b) The Trustees shall have the power, to the fullest extent
permitted by the laws of Massachusetts, at any time to declare and
cause to be paid dividends on Shares of a particular Series, from the
assets belonging to that Series, which dividends, at the election of
the Trustees, may be paid daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, and may be payable in Shares of that
Series(( , or Classes thereof,)) at the election of each
Shareholder of that Series.
((The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans, or related plans as
the Trustees shall deem appropriate.))
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute ((a stock dividend))
pro rata among the Shareholders of a particular Series((, or Class
thereof,)) as of the record date of that Series ((or Class)) fixed as
provided in ((Article XII,)) Section3[hereof a "stockdividend"].
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular
Series ((or Class of a Series)) desires to dispose of his Shares, he
may deposit at the office of the transfer agent or other authorized
agent of that Series a written request or such other form of request
as the Trustees may((,)) from time to time((,)) authorize, requesting
that the Series purchase the Shares in accordance with this Section 2;
and the Shareholder so requesting shall be entitled to require the
Series to purchase, and the Series or the principal underwriter of the
Series shall purchase his said Shares, but only at the Net Asset Value
thereof (as described in Section 3 hereof). The Series shall make
payment for any such Shares to be redeemed, as aforesaid, in cash or
property from the assets of that Series, and payment for such Shares
((less any applicable deferred sales charges and/or fees)) shall be
made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which
the request is effective.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series ((or Class))
shall mean that amount by which the assets of that ((Series))[,] or
Class exceed its liabilities, all as determined by or under the
direction of the Trustees. Such value per Share shall be determined
separately for each Series ((or Class)) of Shares and shall be
determined on such days and at such times as the Trustees may
determine. Such determination shall be made with respect to securities
for which market quotations are readily available, at the market value
of such securities; and with respect to other securities and assets,
at the fair value as determined in good faith by the Trustees,
provided, however, that the Trustees, without Shareholder approval,
may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations((,)) and
interpretations thereof promulgated or issued by the Commission or
insofar as permitted by any [O]((o))rder of the Commission applicable
to the Series. The Trustees may delegate any of its powers and duties
under this Section 3 with respect to appraisal of assets and
liabilities. At any time((,)) the Trustees may cause the value
[par]((per)) Share last determined to be determined again in ((a))
similar manner and may fix the time when such redetermined value shall
become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940
Act. Such suspension shall take effect at such time as the Trustees
shall specify, but not later than the close of business on the
business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment until the
Trustees shall declare the suspension at an end. In the case of a
suspension of the right of redemption, a Shareholder may either
withdraw his request for redemption or receive payment based on the
Net Asset Value per Share existing after the termination of the
suspension. ((In the event that any Series is divided into Classes,
the provisions of this Section, to the extent applicable as determined
in the discretion of the Trustees and consistent with applicable law,
may be equally applied to each such Class.))
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 1. Provided they have exercised reasonable care and have
acted under the reasonable belief that their actions are in the best
interest of the Trust, the Trustees shall not be responsible for or
liable in any event for neglect or wrongdoing of them or any officer,
agent, employee((,)) or investment adviser of the Trust, but nothing
contained herein shall protect any Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence((,)) or reckless disregard of the duties
involved in the conduct of his office.
[INDEMNIFICATION]
((INDEMNIFICATION OF COVERED PERSONS))
Section 2.
(a) Subject to the exceptions and limitations contained in Section
(b) below:
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be
indemnified by the appropriate Series to the fullest extent permitted
by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit((,)) or
proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office((;)) or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence((,)) or reckless disregard of
the duties involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
[i]((I))nterested [p]((P))ersons of the Trust nor are parties to the
matter based upon a review of readily available facts (as opposed to a
full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any Shareholder may, by appropriate
legal proceedings, challenge any such determination by the Trustees,
or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be such Trustee or officer((,)) and shall inure to
the benefit of the heirs, executors((,)) and administrators of such a
person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise
under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit((,)) or proceeding of the character
described in [p]((P))aragraph (a) of this Section 2 may be paid by the
applicable Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the applicable Series if
it is ultimately determined that he is not entitled to indemnification
under this Section 2; provided, however, that either
[(a)](((i ) )) such Covered Person shall have provided
appropriate security for such undertaking[,]((;)) [(b)](((ii ) ))
the Trust is insured against losses arising out of any such advance
payments((;)) or [(c)](((iii ) )) either a majority of the
Trustees who are neither interested persons of the Trust nor parties
to the matter, or independent legal counsel in a written opinion,
shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there
is reason to believe that such Covered Person will be found entitled
to indemnification under this Section 2.
[SHAREHOLDERS]
((INDEMNIFICATION OF SHAREHOLDERS))
Section 3. In case any Shareholder or former Shareholder of any
Series of the Trust shall be held to be personally liable solely by
reason of his being or having been a Shareholder and not because of
his acts or omissions or for some other reason, the Shareholder or
former Shareholder (or his heirs, executors, administrators((,)) or
other legal representatives or((,)) in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled out of the assets belonging to the applicable Series to be
held harmless from and indemnified against all loss and expense
arising from such liability. The Series shall, upon request by the
Shareholder, assume the defense of any claim made against the
Shareholder for any act or obligation of the Series and satisfy any
judgment thereon.
ARTICLE XII
MISCELLANEOUS
[TRUST NOT A PARTNERSHIP ETC.]
((TRUST NOT A PARTNERSHIP, ETC.))
Section 1. It is hereby expressly declared that a trust is created
hereby and not a partnership((, joint stock association, corporation,
bailment, or any form of a legal relationship other than a trust.)) No
Trustee hereunder shall have any power to ((personally)) bind
[personally] either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with((,)) or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series for payment under such credit, contract((,)) or
claim; and neither the Shareholders nor the Trustees, nor any of their
agents, whether past, present((,)) or future, shall be personally
liable therefor. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which the Trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence((,)) or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
[TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY]
((TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY))
Section 2. The exercise by the Trustees of their powers and
discretions hereunder in good faith and with reasonable care under the
circumstances then prevailing, shall be binding upon everyone
interested. Subject to the provisions of Section 1 of this Article XII
and to Article XI, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operation of
this Declaration of Trust, and subject to the provisions of Section 1
of this Article XII and to Article XI, shall be under no liability for
any act or [O]((o))mission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the
Trust for a period not exceeding sixty (60) days preceding the date of
any meeting of Shareholders, or the date for the payment of any
dividend((s,)) or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into
effect; or in lieu of closing the stock transfer books as aforesaid,
the Trustees may fix in advance a date not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for
payment of any dividend((s)), or the date for the allotment of rights,
or the date when any change or conversion or exchange of Shares shall
go into effect, as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting,
or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of
record on the date so fixed shall be entitled to such notice of, and
to vote at, such meeting, or to receive payment of such dividend, or
to receive such allotment or rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any Shares on the
books of the Trust after any such record date fixed or aforesaid.
[TERMINATION OF TRUST]
((DURATION; TERMINATION OF TRUST, A SERIES OR A CLASS; MERGERS, ETC.))
[Section 4.]
[(a)] ((Section 4.1 Duration.)) [This] ((The)) Trust shall continue
without limitation of time((,)) but subject to the provisions [of
sub-section] [(b)]of this [Section 4]((Article XII.))
[(b) Subject to a Majority Shareholder Vote of each Series affected
by the matter or, if applicable, to a Majority Shareholder Vote of the
Trust, the Trustees may
(i) sell and convey the assets of the Trust or any affected Series
to another trust, partnership, association or corporation organized
under the laws of any state which is a diversified open-end management
investment company as defined in the 1940 Act, for adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of
the Trust or any affected Series, and which may include shares of
beneficial interest or stock of such trust, partnership, association
or corporation; or
(ii) at any time sell and convert into money all of the assets of
the Trust or any affected Series.
Upon making provision for the payment of all such liabilities in
either (i) or (ii), by such assumption or otherwise, the Trustees
shall distribute the remaining proceeds or assets (as the case may be)
ratably among the holders of the Shares of the Trust or any affected
Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-section (b), the Trust or any
affected Series shall terminate and the Trustees shall be discharged
of any and all further liabilities and duties hereunder and the right,
title and interest of all parties shall be cancelled and discharged.]
(( Section 4.2 Termination of the Trust, a Series or a Class.
(a) Subject to applicable Federal and state law, the Trust or any
Series or Class thereof may be terminated (i) by Majority Shareholder
Vote of the Trust, each Series affected, or each Class affected, as
the case may be; or (ii) without the vote or consent of Shareholders
by a majority of the Trustees either at a meeting or by written
consent. The Trustees shall provide written notice to the affected
Shareholders of a termination effected under clause (ii) above. Upon
the termination of the Trust or the Series or Class,
(i) the Trust or the Series or Class shall carry on no business
except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust
or the Series or Class, and all of the powers of the Trustees under
this Declaration of Trust shall continue until the affairs of the
Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or the Series or Class thereof;
collect its assets; sell, convey, assign, exchange, transfer, or
otherwise dispose of all or any part of the remaining Trust property
or Trust property allocated or belonging to such Series or Class to
one or more persons at public or private sale for consideration that
may consist in whole or in part of cash, securities, or other property
of any kind; discharge or pay its liabilities; and do all other acts
appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer, or other disposition of
all or substantially all the Trust property or Trust property
allocated or belonging to such Series or Class (other than as provided
in (iii) below) shall require Shareholder approval in accordance with
Section 4.3 below.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities, and
refunding agreements as they deem necessary for their protection, the
Trustees may distribute the remaining Trust property or the remaining
property of the terminated Series or Class, in cash or in kind or
partly each, among the Shareholders of the Trust or the Series or
Class according to their respective rights.
(b) After termination of the Trust or the Series or Class and
distribution to the Shareholders as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust and
file with the Secretary of The Commonwealth of Massachusetts, as
appropriate, an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties with respect to the Trust or the
terminated Series or Class, and the rights and interests of all
Shareholders of the Trust or the terminated Series or Class shall
thereupon cease.
Section 4.3. Merger, Consolidation, and Sale of Assets.
Subject to applicable Federal and state law and except as
otherwise provided in Section 4.4 below, the Trust or any Series
thereof may merge or consolidate with any other corporation,
association, trust, or other organization or may sell, lease, or
exchange all or substantially all of the Trust property or Trust
property allocated or belonging to such Series, including its good
will, upon such terms and conditions and for such consideration when
and as authorized at any meeting of Shareholders called for such
purpose by a Majority Shareholder Vote of the Trust or affected
Series, as the case may be. Any such merger, consolidation, sale,
lease, or exchange shall be deemed for all purposes to have been
accomplished under and pursuant to Massachusetts law.
Section 4.4.Incorporation; Reorganization . Subject to
applicable Federal and state law, the Trustees may without the vote or
consent of Shareholders cause to be organized or assist in organizing
a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, limited liability company, association,
or other organization to take over all of the Trust property or the
Trust property allocated or belonging to such Series or to carry on
any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust property or the
Trust property allocated or belonging to such Series to any such
corporation, trust, limited liability company, partnership,
association, or organization in exchange for the shares or securities
thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such
corporation, trust, partnership, limited liability company,
association, or organization, or any corporation, partnership, limited
liability company, trust, association, or organization in which the
Trust or such Series holds or is about to acquire shares or any other
interest. Subject to applicable Federal and state law, the Trustees
may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership,
limited liability company, association, or other organization. Nothing
contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one
or more corporations, trusts, partnerships, limited liability
companies, associations, or other organizations and selling,
conveying, or transferring the Trust property or a portion of the
Trust property to such organization or entities; provided, however,
that the Trustees shall provide written notice to the affected
Shareholders of any transaction whereby, pursuant to this Section 4.4,
the Trust or any Series thereof sells, conveys, or transfers
substantially all of its assets to another entity or merges or
consolidates with another entity.))
FILING OF COPIES, REFERENCES, AND HEADINGS
Section 5. The original or a copy of this instrument and of each
Declaration of Trust supplemental hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each supplemental Declaration of Trust shall be
filed by the Trustees with the Secretary of [t]((T))he Commonwealth of
Massachusetts and the Boston City Clerk, as well as any other
governmental office where such filing may from time to time be
required. Anyone dealing with the Trust may rely on a certificate by
an officer or Trustee of the Trust as to whether or not any such
supplemental Declarations of Trust have been made and as to any
matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this instrument or of
any such supplemental Declaration of Trust. In this instrument or in
any such supplemental Declaration of Trust, references to this
instrument and all expressions like "herein," "hereof" and
"hereunder," shall be deemed to refer to this instrument as amended or
affected by any such supplemental Declaration of Trust. Headings are
placed herein for convenience of reference only and in case of any
conflict, the text of this instrument, rather than the headings, shall
control. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The [t]((T))rust set forth in this instrument is made in
[t]((T))he Commonwealth of Massachusetts, and it is created under and
is to be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type commonly
called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust((, and the absence of a specific
reference herein to any such power, privilege, or action shall not
imply that the Trust may not exercise such power or privilege or take
such actions.))
AMENDMENTS
[Section 7. If authorized by votes of the Trustees and a Majority
Shareholder Vote, or by any larger vote which may be required by
applicable law or this Declaration of Trust in any particular case,
the Trustees shall amend or otherwise supplement this instrument, by
making a declaration of trust supplemental hereto, which thereafter
shall form a part hereof, except that an amendment which shall affect
the Shareholders of one or more Series but not the Shareholders of all
outstanding Series shall be authorized by vote of the Shareholders
holding a majority of the Shares entitled to vote of each Series
affected and no vote of Shareholders of a Series not affected shall be
required. Amendments having the purpose of changing the name of the
Trust or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision
contained herein shall not require authorization by Shareholder vote.
Copies of the supplemental declaration of trust shall be filed as
specified in Section 5 of this Article XII.]
((Section 7. Except as specifically provided herein, the Trustees
may, without shareholder vote, amend or otherwise supplement this
Declaration of Trust by making an amendment, a Declaration of Trust
supplemental hereto or an amended and restated Declaration of Trust.
Shareholders shall have the right to vote (a) on any amendment that
would affect their right to vote granted in Section 1 of Article VIII;
(b) on any amendment that would alter the maximum number of Trustees
permitted under Section 6 of Article IV; (c) on any amendment to this
Section 7; (d) on any amendment as may be required by law or by the
Trust's registration statement filed with the Commission; and (e) on
any amendment submitted to them by the Trustees. Any amendment
required or permitted to be submitted to Shareholders that, as the
Trustees determine, shall affect the Shareholders of one or more
Series or Classes shall be authorized by vote of the Shareholders of
each Series or Class affected and no vote of shareholders of a Series
or Class not affected shall be required. Notwithstanding anything else
herein, any amendment to Article XI shall not limit the rights to
indemnification or insurance provided therein with respect to action
or omission of Covered Persons prior to such amendment.))
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date
as set forth in the Bylaws, ((if any,)) provided, however, that the
Trustees may, without Shareholder approval, change the fiscal year of
the Trust.
USE OF THE WORD "FIDELITY"
Section 9. Fidelity Management & Research Company ("FMR") has
consented to the use by any Series of the Trust of the identifying
word "Fidelity" in the name of any Series of the Trust at some future
date. Such consent is conditioned upon the employment of FMR ((or a
subsidiary or affiliate thereof)) as investment adviser of each Series
of the Trust. As between the Trust and itself, FMR controls the use of
the name of the Trust insofar as such name contains the identifying
word "Fidelity((.))"[.] FMR may from time to time use the identifying
word "Fidelity" in other connections and for other purposes,
including, without limitation, in the names of other investment
companies, corporations((,)) or businesses [which]((that)) it may
manage, advise, sponsor or own or in which it may have a financial
interest. FMR may require the Trust or any Series thereof to cease
using the identifying word "Fidelity" in the name of the Trust or any
Series thereof if the Trust or any Series thereof ceases to employ FMR
or a subsidiary or affiliate thereof as investment adviser.
((PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.))
((Section 10. (a) The provisions of this Declaration of Trust are
severable, and, if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue
Code or with other applicable laws and regulations, the conflicting
provision shall be deemed never to have constituted a part of this
Declaration of Trust; provided, however, that such determination shall
not affect any of the remaining provisions of this Declaration of
Trust or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of this Declaration Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any
other jurisdiction or any other provision of this Declaration of Trust
in any jurisdiction.))
IN WITNESS WHEREOF, the undersigned, being all [of] the [initial]
Trustees of the Trust, have executed this instrument this [ 15th day
of September, 1994] ((_________ day of__________, 1998.))
(([SIGNATURE LINES OMITTED]))
EXHIBIT 2
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of the __ day of ____ 199_, by and between Fidelity Income Fund
(Income Fund), on behalf of Fidelity Advisor Mortgage Securities Fund
(the Fund), a separate series of Income Fund, and Fidelity Advisor
Series II (the Trust), each a business trust duly formed under the
laws of The Commonwealth of Massachusetts.
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise: (a) the transfer of all of the assets of
the Fund to a series of the Trust (the Series) solely in exchange for
shares of beneficial interest of the applicable classes of the Series
(the Trust Series Shares) and the assumption by the Series of the
Fund's liabilities; and (b) the constructive distribution of such
Trust Series Shares of the applicable classes by the Fund to its
shareholders (Fund Shareholder) in complete liquidation and
termination of the Fund in exchange for all of the Fund's outstanding
shares of the corresponding classes (Fund Shares). The Fund shall
receive shares of the applicable classes of the Series equal to the
number and class of Fund Shares on the Closing Date (as defined
below). Immediately thereafter, the Fund shall then distribute to each
Fund Shareholder one Trust Series Share for each Fund Share held by
the shareholder on the Closing Date. The foregoing transactions are
referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE FUND
Income Fund on behalf of the Fund represents and warrants as follows:
(a) The Fund is a series of Income Fund, a business trust duly
formed, validly existing, and in good standing under the laws of The
Commonwealth of Massachusetts and has the power to own all of its
properties and assets and to carry out its obligations under this
Agreement. It has all necessary federal, state, and local
authorizations to carry out its business as now being conducted and to
carry out this Agreement;
(b) The Fund is duly registered as an open-end management investment
company under the Investment Company Act of 1940 (the 1940 Act), as
amended, or is a series of a registrant and such registration is in
full force and effect;
(c) The Fund is not in, and the execution, delivery and performance
of this Agreement will not result in, violation of any provision of
the Amended and Restated Declaration of Trust or the Fund's Bylaws,
or, to the Fund's knowledge, of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Fund is a party or
by which the Fund is bound or result in the acceleration of any
obligation or the imposition of any penalty under any agreement,
judgment or decree to which the Fund is a party or is bound;
(d) The Fund has no material contracts or other commitments (other
than this Agreement) that will not be terminated without liability to
the Fund on or prior to the Closing Date;
(e) To the Fund's knowledge, no material legal, administrative, or
other proceeding or investigation of, or before, any court or
governmental body presently is pending or threatened against the Fund
or any of its properties or assets which assert liability on the part
of the Fund, except as previously disclosed in writing to the Trust.
The Fund knows of no facts that might form the basis for the
institution of such proceedings;
(f) The Fund has filed or will file all federal and state tax returns
which, to the knowledge of the Fund's officers, are required to be
filed by the Fund and has paid or will pay all federal and state taxes
shown to be due on said returns or provision shall have been made for
the payment thereof, and, to the best of the Fund's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to such returns;
(g) All of the issued and outstanding shares of the Fund are, and at
the Closing Date will be, duly and validly issued and outstanding and
fully paid and nonassessable as a matter of Massachusetts (except as
disclosed in the Fund's Statement of Additional Information), and have
been offered for sale in conformity with all applicable federal
securities laws. All of the issued and outstanding shares of the Fund
will, at the Closing Date, be held by the persons and in the amounts
as certified in accordance with the provisions of this Agreement;
(h) The information to be furnished by the Fund for use in
applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and
shall comply in all material respects with federal securities and
other laws and regulations thereunder applicable thereto;
(i) At both the Valuation Time (as defined in Section 4) and the
Closing Date (as defined in Section 6), the Fund will have the full
right, power, and authority to sell, assign, transfer, and deliver its
portfolio securities and any other assets of the Fund to be
transferred to the Series pursuant to this Agreement. As of the
Closing Date, subject only to the delivery of the Fund's portfolio
securities and any such other assets as contemplated by this
Agreement, the Series will acquire the Fund's portfolio securities and
any such other assets subject to no encumbrances, liens, or security
interests (except for those that may arise in the ordinary course and
are disclosed to the Series) and without any restrictions upon the
transfer thereof;
(j) The execution, delivery, and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of the Fund, and this Agreement
constitutes a valid and binding obligation of the Fund enforceable in
accordance with its terms, subject to shareholder approval;
(k) To the best of the knowledge of the Fund's management, there is
no plan or intention by the Fund's shareholders to sell, exchange or
otherwise dispose of any of the Trust Series Shares to be received in
the Reorganization;
(l) The Fund shares are widely held and may be purchased and redeemed
upon request;
(m) No consideration other than Trust Series Shares will be issued in
exchange for the Fund Shares in the Reorganization;
(n) Immediately following consummation of the Reorganization, the
Fund Shareholders will own all of the Trust Series Shares and will own
such shares solely by reason of their ownership of the Fund Shares
immediately prior to the Reorganization;
(o) Immediately following the consummation of the Reorganization, the
Trust will hold on behalf of the Series the same assets and be subject
to the same liabilities that the Fund held or was subject to
immediately prior thereto, except for assets used to pay expenses
incurred in connection with the Reorganization. Assets used to pay
expenses and all distributions (except for distributions and
redemptions arising in the ordinary course of the Fund's business as
an open-end investment company) made by the Fund immediately preceding
the Reorganization will, in the aggregate, constitute less than 1% of
the net assets of the Fund;
(p) At the time of the Reorganization, the Fund will not have
outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire
s hares of beneficial interest in the Fund;
(q) There is no intercompany indebtedness between the Series and the
Fund that was issued, acquired or that will be settled at a discount;
(r) The Fund's liabilities to be assumed by the Series in the
Reorganization were incurred by the Fund in the ordinary course of its
business and are associated with the assets to be transferred;
(s) The Fund's shareholders each will pay their own expenses, if any,
incurred in connection with the Reorganization;
(t) The fair market value of the Fund's assets to be transferred by
the Fund to the Series will equal or exceed the Fund's liabilities to
be assumed by the Series plus the liabilities to which the transferred
assets are subject;
(u) The Fund is a regulated investment company as defined in Section
851 of the Code;
(v) At the time of the Reorganization, the Fund is not under the
jurisdiction of a court in a proceeding under Title 11 of the United
States Code or similar case within the meaning of Section 368(a)(3)(A)
of the Code;
(w) To the Fund's knowledge, no consent, approval, authorization, or
order of any court or governmental authority is required for the
consummation by the Fund of the transactions contemplated by this
Agreement, except such as have been obtained under the Securities Act
of 1933 (the 1933 Act), the Securities Exchange Act of 1934 (the 1934
Act), and the 1940 Act;
(x) The Fund has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on
its statement of assets and liabilities as of July 31, 1997 and
those incurred in the ordinary course of the Fund's business as an
investment company since July 31, 1997; and
(y) The Fund will be liquidated immediately after the Reorganization.
2. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants as follows:
(a) The Trust is a business trust duly formed, validly existing, and
in good standing under the laws of The Commonwealth of Massachusetts.
It has all necessary federal, state, and local authorizations to carry
out its business as now being conducted and to carry out this
Agreement;
(b) The Trust is duly registered as an open-end management investment
company under the 1940 Act, and the Series is a duly established and
designated series of the Trust;
(c) The Trust is not in, and the execution, delivery and performance
of this Agreement will not result in, violation of any provision of
the Amended and Restated Declaration of Trust or the Trust's Bylaws,
or, to the Trust's knowledge, of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Trust is a party or
by which the Trust is bound or result in the acceleration of any
obligation or the imposition of any penalty under any agreement,
judgment or decree to which the Trust is a party or is bound;
(d) To the Trust's knowledge, no material legal, administrative, or
other proceeding or investigation of, or before, any court or
governmental body presently is pending or threatened against the Trust
or any of its properties or assets which assert liability on the part
of the Trust, except as previously disclosed in writing to the Trust.
The Trust knows of no facts that might form the basis for the
institution of such proceedings;
(e) The Trust intends for the Series to be a regulated investment
company, under Section 851 of the Code;
(f) Prior to the Closing Date, there shall be no issued and
outstanding Trust Series Shares or any other securities issued by the
Series (except for the one share that may be issued to FMR); Trust
Series Shares issued in connection with the transactions contemplated
herein will be, duly and validly issued and outstanding, fully paid
and non-assessable under Massachusetts law on the Closing Date;
(g) The execution, delivery, and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of the Trust, and, upon its proper
execution, this Agreement will constitute a valid and binding
obligation of the Trust enforceable against the Series in accordance
with its terms;
(h) As of the Closing Date, the Trust Series Shares will have been
duly authorized and, when so issued and delivered, will be duly and
validly issued shares of the Series, fully paid and non-assessable
under Massachusetts law except that under Massachusetts law,
shareholders of a Massachusetts business trust, under certain
circumstances, may be held personally liable for obligations of the
Trust;
(i) The fair market value of the Trust Series Shares to be received
by the Fund Shareholders will be equal to the fair market value of
their Fund Shares constructively surrendered in exchange therefor;
(j) The Trust has no plan or intention on behalf of the Series to
issue additional Trust Series Shares following the Reorganization
except for issuance of shares arising in the ordinary course of the
business of the Series as the series of an open-end investment
company;
(k) The Trust has no plan or intention to reacquire the Trust Series
Shares issued to the Fund Shareholders pursuant to the Reorganization
other than through redemptions arising in the ordinary course of the
business of the Series as a series of an open-end investment company;
(l) Following the Reorganization, the Trust, on behalf of the Series,
will continue the Fund's historic business;
(m) The Trust has no plan or intention to sell or otherwise dispose
of any of the Fund's assets to be acquired by the Series in the
Reorganization, except for dispositions made in the ordinary course of
its business and dispositions necessary to maintain the status of the
Series as a regulated investment company under Section 851 of the
Code;
(n) The information to be furnished by the Trust with respect to the
Series for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate
and complete and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The Trust, on behalf of the Series, shall use all reasonable
efforts to obtain the approvals and authorizations required by the
1933 Act and the 1940 Act as it may deem appropriate in order to
operate after the Closing Date; and
(p) To the Trust's knowledge, no consent, approval, authorization, or
order of any court or governmental authority is required for the
consummation by the Series of the transactions contemplated by this
Agreement, except such as have been obtained under the 1933 Act, the
1934 Act, and the 1940 Act.
3. REORGANIZATION
(a) Subject to the requisite approval of the shareholders of the Fund
and to the other terms and conditions contained herein, the Fund
agrees to assign, convey, transfer, and deliver to the Series
established by the Trust solely for the purpose of acquiring all of
the assets of the Fund, which Series has not issued any Trust Series
Shares (except for one share of each class that may be issued to FMR)
or commenced operations, as of the Closing Date all of the assets of
the Fund of any kind and nature existing on the Closing Date. The
Series agrees in exchange therefor (1) to assume all of the Fund's
liabilities existing on or after the Closing Date, whether or not
determinable on the Closing Date, and (2) to issue and deliver to the
Fund the number of full and fractional Trust Series Shares of the
applicable classes equal to the value and number of full and
fractional shares of the corresponding classes of the Fund outstanding
at the time of the closing, as described in paragraph 6, as of the
Closing Date provided for in Section 6(a).
(b) The assets of the Fund to be acquired by the Series and allocated
thereto shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by the Fund, and
any deferred or prepaid expenses shown as an asset on the books of the
Fund on the Closing Date. The Fund will pay or cause to be paid to the
Series any dividend or interest payments received by it on or after
the Closing Date with respect to the assets transferred to the Series
hereunder, and the Series will retain any dividend or interest
payments received by it after the Valuation Time (as defined in
Section 4) with respect to the assets transferred hereunder without
regard to the payment date thereof. The assets of the Fund to be
assumed by the Series and allocated thereto, shall include (except as
otherwise provided herein) all of the Fund's liabilities, debts,
obligations, and duties,of whatever kind or nature, whether absolute,
accrued, contingent,or otherwise, whether or not on the Closing Date,
and whether or not specifically referred to in this Agreement.
(c) Immediately upon delivery to the Fund of the Trust Series Shares,
the individual Trustees of Income Fund or any officer duly authorized
by them, on the Income Fund's behalf as the then sole shareholder of
the Series, shall (1) approve (i) a Management Contract between the
Trust on behalf of the Series and FMR, (ii) Sub-Advisory Agreements
between FMR and Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc., (iii) a Distribution
and Service Plan for each class under Rule 12b-1 under the 1940 Act
between the Trust on behalf of the Series and Fidelity Distributors
Corporation (FDC) substantively identical to the contracts, agreements
and plans currently in effect with respect to the Fund or class
immediately prior to the Closing Date (as defined below), except as to
the parties to such contract, agreement and plan and (iv) the
independent accountants who currently serve in that capacity for the
Fund, and (v) the adoption of revised fundamental policies described
in Proposal 6 of the Proxy Statement.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), the Fund will
constructively distribute the Trust Series Shares of the applicable
classes pro rata in proportion to their respective shares of
beneficial interest of the corresponding classes of the Fund to Fund
Shareholders of record determined as of the Valuation Time on the
Closing Date in accordance with the Amended and Restated Declaration
of Trust of Advisor II, in liquidation of such Fund. Such
distribution will be accomplished by the Fund's transfer agent opening
accounts on the share records of the Series in the names of such Fund
Shareholders and transferring the Trust Series Shares of the
applicable classes thereto. Each Fund Shareholder's account shall be
credited with the respective pro rata number of full and fractional
(rounded to the third decimal place) Trust Series Shares of the
applicable classes due that shareholder. All outstanding Fund Shares,
including any represented by certificates, shall simultaneously be
canceled on the Fund's share transfer records. The Series shall not
issue certificates representing Trust Series Shares in connection with
such distribution.
(e) Immediately after the distribution of the Trust Series Shares as
set forth in Section 3(d), the Fund shall be liquidated and terminated
and any such further actions shall be taken in connection therewith as
required by applicable law.
(f) Any transfer taxes payable upon issuance of Trust Series Shares
in a name other than that of the registered holder on the Fund's books
of the Fund Shares constructively exchanged for the Trust Series
Shares shall be paid by the person to whom such Trust Series Shares
are to be issued, as a condition of such transfer.
(g) Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the date on which it is
liquidated.
4. VALUATION
(a) The valuation time shall be the close of business of the New York
Stock Exchange on the Closing Date (the Valuation Time), or such other
date as may be mutually agreed upon in writing by the parties hereto.
(b) The value of the Fund's net assets to be acquired by the Series
hereunder shall be the net asset value per share computed as of the
Valuation Time, using the valuation procedures set forth in the Fund's
then current Prospectus and Statement of Additional Information.
(c) The number, value, class, and denomination of full and fractional
Trust Series Shares to be issued in exchange for the Fund's net assets
shall be equal to the number, value, class, and denomination of full
and fractional Fund Shares outstanding on the Closing Date.
(d) All computations pursuant to this Section shall be made by
Fidelity Service Company, Inc. (FSC), a wholly-owned subsidiary of FMR
Corp., in accordance with its regular practice as pricing agent for
the Fund.
5. FEES; EXPENSES
(a) The Trust and the Fund each represent that there is no person who
dealt with it who by reason of such dealings is entitled to any
broker's or finder's fees or commissions arising out of the
transactions contemplated hereby.
(b) The Fund shall be responsible for all expenses, fees and other
charges in connection with the transactions contemplated by the
agreement, provided that they do not exceed the following expense caps
for each class in effect since March 1, 1997: Class A: 0.90%; Class T:
1.00%; Class B: 1.65%; Institutional Class: 0.75%; and Initial Class:
0.75%, as applicable. Expenses exceeding the each class's expense cap,
as applicable, will be paid by FMR, but not including costs incurred
in connection with the purchase or sale of portfolio securities.
6. CLOSING DATE
(a) The transfer of the Fund's assets in exchange for the assumption
by the Series of the Fund's liabilities and the issuance of Trust
Series Shares, as described above, together with related acts
necessary to consummate the same, (the Closing), unless otherwise
provided herein, shall occur at the principal office of the Income
Fund and the Trust, 82 Devonshire Street, Boston, Massachusetts, on
February 26, 1999, or at such other place or date as the parties may
agree in writing (the Closing Date). All acts taking place at the
Closing shall be deemed to take place simultaneously as of the
Valuation Time or at such other time and/or place as the parties may
agree.
(b) In the event that, on the Closing Date: (i) any of the markets
for securities held by the Fund are closed to trading, or (ii) trading
thereon is restricted, or (iii) trading or reporting of trading on
said markets or elsewhere is disrupted, all so that accurate appraisal
of the total net asset value of the Fund is impracticable, the Closing
Date shall be postponed until the first business day after the day
when such trading shall have been fully resumed and reporting shall
have been restored, or such other date as the parties may agree.
(c) The Fund shall deliver at the Closing a certificate of an
authorized officer stating that it has notified Bank of New York, as
custodian for the Fund, of the Fund's reorganization to a series of
the Trust.
(d) Fidelity Service Company Inc. (FSC), as transfer agent for the
Fund, shall deliver at the Closing a certificate as to the conversion
on its books and records of each Fund Shareholder account to an
account as a holder of Trust Series Shares. The Trust shall issue and
deliver a confirmation to the Fund evidencing the Trust Series Shares
to be credited as of the Closing Date or provide evidence satisfactory
to the Fund that such Trust Series Shares have been credited to the
Fund's account on the books of the Trust. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
stock certificates, receipts or other documents as such other party or
its counsel may reasonably request.
7. SHAREHOLDER MEETING AND TERMINATION OF THE FUND
(a) The Fund agrees to call a meeting of its shareholders (the
Shareholder's Meeting) to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated hereby.
(b) The Fund agrees that as soon as reasonably practicable after
distribution of the Trust Series Shares, the Fund shall be liquidated
and terminated as a series of Income Fund 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 the Fund shall not conduct any business except in
connection with its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF THE TRUST
The obligations of the Trust hereunder shall be subject to the
following conditions:
(a) That the Fund furnishes to the Trust a statement, dated as of the
Closing Date, signed by an officer of Income Fund, certifying that as
of the Valuation Time and the Closing Date all representations and
warranties of the Fund made in this Agreement are true and correct in
all material respects and that the Fund has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such dates;
(b) That the Fund furnishes the Trust with copies of the resolutions,
certified by an officer of Income Fund, evidencing the adoption of
this Agreement and the approval of the transactions contemplated
herein by the requisite vote of the holders of the outstanding shares
of beneficial interest of the Fund;
(c) That the Fund shall deliver to the Trust at the Closing a
statement of its assets and liabilities, together with a certificate
as to the aggregate asset value of the Fund's portfolio securities,
all as of the Valuation Time, certified on the Fund's behalf by its
Treasurer or Assistant Treasurer;
(d) That the Fund's custodian shall deliver to the Trust a
certificate identifying the assets of the Fund held by such custodian
as of the Valuation Time on the Closing Date and stating that at the
Valuation Time: (i) the assets held by the custodian will be
transferred to the Series; (ii) the Fund's assets have been duly
endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the
custodian's knowledge, all necessary taxes in conjunction with the
delivery of the assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment
has been made;
(e) That the Fund's transfer agent shall deliver to the Trust at the
Closing a certificate setting forth the number of shares of the Fund
outstanding as of the Valuation Time and the name and address of each
holder of record of any such shares and the number of shares held of
record by each such shareholder;
(f) That the Fund calls a Shareholder's Meeting to consider and act
upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated hereby;
(g) That the Fund delivers to the Trust a certificate of an officer
of Income Fund, dated the Closing Date, that there has been no
material adverse change in the Fund's financial position since
July 31, 1997, other than changes in the market value of its
portfolio securities, or changes due to net redemptions of its shares,
dividends paid, or losses from operations; and
(h) That all of the issued and outstanding shares of beneficial
interest of the Fund shall have been offered for sale and sold in
conformity with all applicable state securities laws and, to the
extent that any audit of the records of the Fund or its transfer agent
by the Trust or its agents shall have revealed otherwise, the Fund
shall have taken all actions that in the opinion of the Trust are
necessary to remedy any prior failure on the part of the Fund to have
offered for sale and sold such shares in conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF THE FUND
The obligations of the Fund hereunder shall be subject to the
following conditions:
(a) That the Trust shall have executed and delivered to the Fund an
Assumption of Liabilities, certified by an officer of the Trust, dated
as of the Closing Date pursuant to which Trust on behalf of the Series
will assume all of the liabilities of the Fund existing at the
Valuation Time in connection with the transactions contemplated by
this Agreement;
(b) That the Trust furnishes to the Fund a statement, dated as of the
Closing Date, signed by an officer of Trust, certifying that as of the
Valuation Time and the Closing Date all representations and warranties
of the Series made in this Agreement are true and correct in all
material respects, and the Trust has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to such dates; and
(c) That the Fund shall have received an opinion of Kirkpatrick &
Lockhart LLP, counsel to the Fund and the Trust, to the effect that
the Trust Series Shares are duly authorized and upon delivery to the
Fund as provided in this Agreement will be validly issued and will be
fully paid and nonassessable under Massachusetts law.
10. CONDITIONS TO OBLIGATIONS OF THE FUND AND THE TRUST
The obligations of the Fund and the Trust hereunder shall be subject
to the following conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of
the holders of the outstanding shares of beneficial interest of the
Fund;
(b) That all consents of other parties and all other consents,
orders, and permits of federal, state, and local regulatory
authorities (including those of the Commission and of state blue sky
and securities authorities, including "no action" positions of such
federal or state authorities) deemed necessary by the Trust or the
Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order, or permit would not
involve a risk of a material adverse effect on the assets or
properties of the Trust or the Fund, provided that either party hereto
may for itself waive any of such conditions;
(c) That all proceedings taken by either the Fund or the Series in
connection with the transactions contemplated by this Agreement and
all documents incidental thereto shall be satisfactory in form and
substance to it and its counsel, Kirkpatrick & Lockhart LLP;
(d) That the Trust shall have taken all necessary action so that the
Series shall be a series of a registered open-end investment company
under the 1940 Act immediately after the closing.
(e) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement;
(f) That the Trust and the Fund shall have received an opinion of
Kirkpatrick & Lockhart LLP satisfactory to the Trust and the Fund that
for federal income tax purposes:
(i) The Reorganization will be a reorganization under Section
368(a)(1)(F) of the Code, and the Fund and the Series will each be
parties to the Reorganization under section 368(b) of the Code;
(ii) No gain or loss will be recognized by the Fund upon the
transfer of all of its assets to the Series in exchange solely for the
Trust Series Shares of the applicable classes and the assumption of
the Fund's liabilities followed by the distribution of those the Trust
Series Shares to the shareholders of the corresponding classes of the
Fund in liquidation of the Fund;
(iii) No gain or loss will be recognized by the Series on the
receipt of the Fund's assets in exchange solely for the the Trust
Series Shares and the assumption of the Fund's liabilities;
(iv) The basis of the Fund's assets in the hands of the Series will
be the same as the basis of such assets in the Fund's hands
immediately prior to the Reorganization;
(v) The Series' holding period in the assets to be received from the
Fund will include the Fund's holding period in such assets;
(vi) A Fund Shareholder will recognize no gain or loss on the
exchange of his or her shares of beneficial interest in the Fund for
the Trust Series Shares in the Reorganization;
(vii) A Fund Shareholder's basis in the the Trust Series Shares to
be received by him or her will be the same as his or her basis in the
Fund Shares exchanged therefor;
(viii) A Fund Shareholder's holding period for his or her Trust
Series Shares will include the holding period of the Fund Shares
exchanged, provided that those Fund Shares were held as capital assets
on the date of the Reorganization.
Notwithstanding anything herein to the contrary, neither the Fund nor
the Trust may waive the conditions set forth in this subsection 10(f).
11. COVENANTS OF THE FUND AND THE TRUST
(a) The Fund covenants to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that
such ordinary course of business will include the payment of customary
dividends and distributions.
(b) The Fund covenants that the Trust Series Shares are not being
acquired for the purpose of making any distribution thereof, other
than in accordance with the terms of this Agreement.
(c) The Fund covenants that it will assist the Trust in obtaining
such information as the Trust reasonably requests concerning the
beneficial ownership of Fund Shares.
(d) The Fund covenants that its liquidation and termination will be
effected in the manner provided in its Amended and Restated
Declaration of Trust in accordance with applicable law and, after the
Closing Date, the Fund will not conduct any business except in
connection with its liquidation and termination.
12. TERMINATION; WAIVER
(a) The Trust and Income Fund may terminate this Agreement by mutual
agreement. In addition, either the Trust or Income Fund, on behalf of
the F und, may at its option terminate this Agreement at or
prior to the Closing Date because:
(i) Of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
(ii) A condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
(b) In the event of any such termination, there shall be no liability
for damages on the part of the Trust or the Fund, or their respective
Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter
hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement
signed by each party hereto and shall be construed in accordance with
and governed by the laws of The Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of the Series or the Fund;
provided, however, that following the shareholders' meeting called by
the Fund pursuant to Section 7 of this Agreement, no such amendment
may have the effect of changing the provisions for determining the
number of the Series Shares to be received by the Fund
S hareholders under this Agreement to the detriment of such
shareholders without their further approval.
(c) Either party may waive any condition to its obligations
hereunder, provided that such waiver does not have any material
adverse effect on the interests of 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. MASSACHUSETTS TO MASSACHUSETTS
Copies of the Declaration of Trust of the Trust and Income Fund, as
restated and amended, are on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust and
Income Fund as trustees and not individually and that the obligations
of the Fund and the Series under this instrument are not binding upon
any of such Fund's or Trust's Trustees, officers, or shareholders
individually but are binding only upon the assets and property of such
Fund or Series. The Fund and the Trust each agrees that its
obligations hereunder apply only to such Fund and the Series,
respectively, and not to its shareholders individually or to the
Trustees of such Fund or Series.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation other than the
parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
FIDELITY INCOME FUND:
ON BEHALF OF FIDELITY ADVISOR
MORTGAGE SECURITIES FUND
[SIGNATURE LINES OMITTED]
FIDELITY ADVISOR SERIES II:
[SIGNATURE LINES OMITTED]
FMR hereby agrees, pursuant to its Management
Contract with the Income Fund in respect
of the Fund and with the Trust in respect of the Series,
to assume the expenses provided for in
accordance with paragraph 5(b) of this Agreement.
FIDELITY MANAGEMENT & RESEARCH COMPANY
[SIGNATURE LINES OMITTED]
EXHIBIT 3
((UNDERLINED)) DISCLOSURE WILL BE ADDED
[BRACKETED] DISCLOSURE WILL BE DELETED.
FORM OF MANAGEMENT CONTRACT
MANAGEMENT CONTRACT
BETWEEN
FIDELITY INCOME FUND
FIDELITY ADVISOR MORTGAGE SECURITIES [PORTFOLIO] ((FUND))
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
[MODIFICATION made]((AGREEMENT AMENDED and RESTATED as of)) this [1st
day of August, 1994](( day of 1998,)) by and between Fidelity
Income Fund, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity ((Advisor)) Mortgage Securities
[Portfolio] ((Fund)) (hereinafter called the "Portfolio"), and
Fidelity Management & Research Company, a Massachusetts corporation
(hereinafter called the "Adviser") ((as set forth in its entirety
below.))
Required authorization and approval by shareholders and Trustees
having been obtained, the Fund, on behalf of the Portfolio, and the
Adviser hereby consent, pursuant to Paragraph 6 of the existing
Management Contract dated [September 29, 1989] ((August 1, 1994, to a
modification of said Contract in the manner set forth below. The
[Modified] Amended Management Contract shall, when executed by duly
authorized officers of the Fund and Adviser, take effect on [August 1,
1994]
(( )).
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
Average Net Assets Annualized Fee Rate (for each level)
0 - $ 3 billion .3700%
3 - 6 .3400
6 - 9 .3100
9 - 12 .2800
12 - 15 .2500
15 - 18 .2200
18 - 21 .2000
21 - 24 .1900
24 - 30 .1800
30 - 36 .1750
36 - 42 .1700
42 - 48 .1650
48 - 66 .1600
66 - 84 .1550
84 - 120 .1500
120 - [174]((156)) .1450
[174 - 228] [.1400]
[228 - 282] [.1375]
[282 - 336] [.1350]
[over - 336] [.1325]
((156)) - ((192)) ((.1400))
((192)) - ((228)) ((.1350))
((228)) - ((264)) ((.1300))
((264)) - ((300)) ((.1275))
((300)) - ((336)) ((.1250))
((336)) - ((372)) ((.1225))
((372)) - ((408)) ((.1200))
((408)) - ((444)) ((.1175))
((444)) - ((480)) ((.1150))
((480)) - ((516)) ((.1125))
((Over)) - ((516)) ((.1100))
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
((0)).30%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the
fee for that month shall be reduced proportionately on the basis of
the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser; (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for Fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security ((or other investment
instrument.))
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Contract shall continue in force until June
30, [1995] ((1999)) and indefinitely thereafter, but only so long as
the continuance after such date shall be specifically approved at
least annually by vote of the Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent[, such consent
on the part of the Fund to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio] ((subject to the
provisions of Section 15 of the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Securities and
Exchange Commission (the "Commission") or any rules or regulations
adopted by, or interpretative releases of, the Commission.))
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment
of any penalty, by action of its Trustees or Board of Directors, as
the case may be, or with respect to the Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
or other organizational document and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all
cases to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other Portfolios of the Fund. In
addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, as now in effect or
as hereafter amended, and subject to such orders as may be granted by
the [Securities and Exchange]Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 4
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS
(A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT FISCAL AVERAGE RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
TAXABLE BOND
Capital & Income ((pound)) 4/30/97 $ 2,173.2 0.61%
Intermediate Bond ((pound)) 4/30/97 3,007.7 0.44
Investment Grade Bond ((pound)) 4/30/97 1,418.2 0.44
Short-Term Bond ((pound)) 4/30/97 986.3 0.44
Spartan Government Income 4/30/97 275.3 0.60*
Spartan High Income ((pound)) 4/30/97 1,634.2 0.80
Spartan Short-Intermediate 4/30/97 73.0 0.65
Government
The North Carolina Capital
Management Trust:
Term Portfolio 6/30/9 7 6 6.5 0.3 6
Ginnie Mae ((pound)) 7/31/97 794.2 0.44
Spartan Limited Maturity 7/31/97 702.1 0.54*
Government ((pound))
Target Timeline Funds: ((pound))
1999 7/31/97 9.7 0.00*
2001 7/31/97 8.2 0.00*
2003 7/31/97 10.6 0.00*
Spartan Ginnie Mae 8/31/97 461.8 0.51*
Government Securities 9/30/97 978.5 0.44
Short-Intermediate Government 9/30/97 122.2 0.44
Spartan Investment Grade Bond ((pound)) 9/30/97 404.0 0.48*
Spartan Short-Term Bond ((pound)) 9/30/97 306.6 0.50*
Advisor Mortgage Securities:
Class A 10/31/97 1.6 0.4 4*
Class B 10/31/97 1.2 0.4 4*
Class T 10/31/97 13.0 0.4 4*
Institutional Class 10/31/97 15.2 0.4 4*
Initial Class 10/31/97 497.7 0.44
Advisor Government Investment:
Class A 10/31/97 0.7 0.44*
Class B 10/31/97 17.3 0.44*
Class T 10/31/97 171.0 0.44*
Class C ((hollow diamond)) 10/31/98** 1.2 0.44*
Institutional Class 10/31/97 22.0 0.44*
Advisor High Yield: ((pound))
Class A 10/31/97 $ 19.7 0.59%
Class B 10/31/97 460.7 0.59
Class T 10/31/97 1,972.7 0.59
Class C ((hollow diamond)) 10/31/98** 34.4 0.59*
Institutional Class 10/31/97 54.6 0.59
Advisor Short Fixed-Income: ((pound))
Class A 10/31/97 3.1 0.44*
Class T 10/31/97 380.2 0.44
Class C ((hollow diamond)) 10/31/98** 0.7 0.44*
Institutional Class 10/31/97 5.9 0.44*
Advisor Intermediate Bond: ((pound))
Class A 11/30/97 2.1 0.44*
Class B 11/30/97 19.6 0.44*
Class T 11/30/97 262.1 0.44
Class C 11/30/97 0.0 0.44*
Institutional Class 11/30/97 192.5 0.44
Institutional Short-Intermediate 11/30/97 342.8 0.45
Government
Real Estate High Income 11/30/97 46.1 0.74
Advisor Emerging Markets
Income: (Rex-All)
Class A 12/31/97 1.3 0.69*
Class B 12/31/97 22.3 0.69
Class T 12/31/97 92.2 0.69
Class C 12/31/97 0.0 0.69*
Institutional Class 12/31/97 3.6 0.69*
Advisor Strategic Income: (Rex-All)
Class A 12/31/97 1.7 0.59*
Class B 12/31/97 45.5 0.59
Class T 12/31/97 110.6 0.59
Class C 12/31/97 0.3 0.59*
Institutional Class 12/31/97 6.2 0.59*
Global Bond ((epslon)) 12/31/97 92.5 0.69
New Markets Income (Rex-all) 12/31/97 386.4 0.69
Real Estate High Income II 12/31/97 73.9 0.74
INVESTMENT FISCAL AVERAGE RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
Variable Insurance Products: ((pound))
High Income:
Initial Class 12/31/97 $ 1,936.9 0.59%
Service Class 12/31/97 0.0 0.59
Variable Insurance Products II:
Investment Grade Bond 12/31/97 262.9 0.44
U.S. Bond Index 2/2 8 /98 632.8 0.32*
</TABLE>
(a) All fund data are as of the fiscal year end noted in the chart or
as of February 28, 1998, if fiscal year end figures are not yet
available.
(b) Average net assets are computed on the basis of average net assets
of each fund at the close of business on each business day throughout
its fiscal period.
(c) Reflects reductions for any expense reimbursement paid by or due
from FMR pursuant to voluntary or state expense limitations. Funds so
affected are indicated by an (*).
** Less than a complete fiscal year
(Rex-all) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: Fidelity
Management & Research (U.K.) Inc. (FMR U.K.), Fidelity Management &
Research (Far East) Inc. (FMR Far East), Fidelity Investments Japan
Ltd. (FIJ), Fidelity International Investment Advisors (FIIA), and
Fidelity International Investment Advisors (U.K.) Limited (FIIAL
U.K.), with respect to the fund.
((epslon)) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: FMR U.K., FMR
Far East, FIIA, and FIIAL U.K., with respect to the fund.
((pound)) Fidelity Management & Research Company has entered into
sub-advisory agreements with FMR U.K. and FMR Far East, with respect
to the fund.
((hollow diamond)) The ratio of net advisory fees to average net
assets paid to FMR represents the amount as of the prior fiscal year
end. Updated ratios will be presented for each class of shares of the
fund when the next fiscal year end figures are available.
AMOR-pxs-0598 CUSIP#31617K402/FUND#237
701686 CUSIP#31617K501/FUND#238
CUSIP#31617K600/FUND#239
CUSIP#31617K204/FUND#040
CUSIP#31617K709/FUND#240
Vote this proxy card TODAY! Your prompt response will
save your fund the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- ---------------------------------------------------------------------
FIDELITY INCOME FUND: FIDELITY ADVISOR MORTGAGE SECURITIES FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Phyllis Burke Davis, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of Fidelity Income Fund: Fidelity Advisor Mortgage Securities
Fund which the undersigned is entitled to vote at the Special Meeting
of Shareholders of the fund to be held at the office of the trust at
82 Devonshire St., Boston, MA 02109, on July 15, 1998 at 9:00 a.m. and
at any adjournments thereof. All powers may be exercised by a
majority of said proxy holders or substitutes voting or acting or, if
only one votes and acts, then by that one. This Proxy shall be voted
on the proposals described in the Proxy Statement as specified on the
reverse side. Receipt of the Notice of the Meeting and the
accompanying Proxy Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
Date______________________________, 1998
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 31617K402/fund # 237
cusip # 31617K600/fund # 239
cusip # 31617K501/fund # 238
cusip # 31617K709/fund # 240
cusip # 31617K204/fund # 040
Please refer to the Proxy Statement discussion of each of these
matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. To elect the twelve nominees specified below as [ ] FOR all [ ] 1.
Trustees: Ralph F. Cox, Phyllis Burke Davis, nominees listed WITHHOLD
Robert M. Gates, Edward C. Johnson 3d, E. (except as marked to authority to
Bradley Jones, Donald J. Kirk, Peter S. Lynch, the contrary below). vote for all
William O. McCoy, Gerald C. McDonough, Marvin nominees.
L. Mann, Robert C. Pozen, and Thomas R.
Williams.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE(S), WRITE THE NAME(S) OF
THE NOMINEE(S) ON THE LINE BELOW.)
</TABLE>
______________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To ratify the selection of Price Waterhouse LLP as FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
independent accountants of the fund.
3. To authorize the Trustees to adopt an Amended and FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
Restated Declaration of Trust.
4. To approve an Agreement and Plan providing for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
reorganization of the fund from a separate series of
one Massachusetts business trust to another.
5. To approve an amended management contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
fund.
6. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
limitation concerning diversification.
</TABLE>
AMOR-PXC-0598 cusip # 31617K402/fund # 237
cusip # 31617K600/fund # 239
cusip # 31617K501/fund # 238
cusip # 31617K709/fund # 240
cusip # 31617K204/fund # 040
Q&A IMPORTANT INFORMATION TO HELP
YOU UNDERSTAND THE PROPOSALS
THAT YOU ARE BEING ASKED TO
VOTE ON.
PLEASE READ THE FULL TEXT OF THE PROXY STATEMENT. BELOW IS A BRIEF
OVERVIEW OF THE MATTERS 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.
Q. WHY IS THE FUND PROPOSING TO ADOPT AN AMENDED AND RESTATED
DECLARATION OF TRUST (THE NEW DECLARATION OF TRUST)?
A. The New Declaration of Trust is a more modern form of trust
instrument for a Massachusetts business trust. It gives the Trustees
more flexibility and, subject to the applicable requirements of
Federal and state law, broader authority to act. This increased
flexibility may allow the Trustees to react more quickly to changes in
competitive and regulatory conditions. Adoption of the New
Declaration of Trust will not alter the Trustees existing fiduciary
obligations to act in the best interests of the shareholders. Before
utilizing any new flexibility that the New Declaration of Trust may
afford, the Trustees must first consider the shareholders' interests
and act in accordance with such interests. The New Declaration of
Trust amends the current Declaration of Trust in a number of
significant ways. Please review the Proxy Statement for specific
details.
Q. WHY IS THE FUND REORGANIZING FROM ONE MASSACHUSETTS BUSINESS TRUST
TO ANOTHER?
A. Advisor Mortgage Securities Fund is presently organized as a series
of Fidelity Income Fund, a Massachusetts business trust. The Board of
Trustees unanimously recommends reorganization of Advisor Mortgage
Securities Fund to a separate series of Fidelity Advisor Series II.
The proposed changes will consolidate and streamline production and
mailing of legal documents and have no material effect on shareholders
or management of the fund.
(v) WHY IS THE FUND PROPOSING TO ADOPT AN AMENDED MANAGEMENT CONTRACT?
A. The amended contract is principally designed to modify the
management fee that FMR receives by providing for lower fees when
FMR's assets under management exceed certain levels (the Group Fee
Rate), as well as lowering the fund's individual fund fee rate. The
amended contract will result in a management fee that is lower than
the fee payable under the present management contract. The Board of
Trustees believes that the existing management fee structure is fair
and reasonable and that the proposed modifications to the management
fee are in the best interest of the fund's shareholders. Please refer
to the Proxy Statement for specific details of each change.
Q. WILL THE AMENDMENT TO CHANGE THE FUNDAMENTAL INVESTMENT LIMITATION
CONCERNING DIVERSIFICATION FOR THE FUND AFFECT MY FUND'S INVESTMENT
OBJECTIVE?
A. No. The Board of Trustees believes that this proposal is in the
best interest of the fund's shareholders, and will not affect the
fund's investment philosophies. The proposal will allow the fund to
invest without limit in the securities of other investment companies.
As a result of an order of exemption by the SEC, the fund may
currently invest up to 25% of its total assets in non-publicly offered
money market and short-term bond funds (the Central Funds), managed by
FMR or an affiliate of FMR. If the proposal is approved, the fund may
increase its investment in the Central Funds. FMR believes that the
Central Funds will benefit the fund through enhanced efficiency of
cash management and increased short-term investment opportunities.
Q. WHAT ABOUT THE OTHER PROPOSALS IN THIS PROXY?
A. The other proposals that require your vote have been unanimously
approved by the fund's Board of Trustees. Proposals regarding the
election of a new Board of Trustees and the ratification of the
selection of Price Waterhouse LLP as independent accountants of the
fund are explained clearly in the fund's Proxy Statement.
Q. HAS MY FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSALS?
A. Yes. The Board of Trustees of the fund has unanimously approved
all of the proposals, and recommends that you vote to approve each
one.
Q. HOW DO I VOTE MY SHARES?
A. 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 proposals
or how to vote your shares, please call the number for your share
class:
(solid bullet) Shareholders of Initial Class: call 800-544-8888
(solid bullet) Shareholders of Class A, Class T, Class B, and
Institutional Class: call 800-522-7297
IMPORTANT PROXY MATERIALS...
PLEASE CAST YOUR VOTE NOW!
Dear Fidelity Advisor Fund Shareholder:
On July 15, 1998, a special shareholder meeting of the following
Fidelity Advisor Fund will be held:
(solid bullet) Mortgage Securities Fund (Class A, Class T, Class B,
Institutional Class, and Initial Class)
The matters to be discussed are important, and directly affect your
investment. As a shareholder, the number of votes your are entitled
to is based upon the dollar value of your investment. YOU MAY THINK
YOUR VOTE IS INSIGNIFICANT, BUT EVERY VOTE IS EXTREMELY IMPORTANT. We
must continue sending requests to vote until a majority of the shares
are voted prior to the meeting. Additional mailings are expensive,
and these costs may be charged directly to the fund.
The enclosed Proxy Statement details the proposals under
consideration. In addition, we have attached a Q&A to assist you in
understanding the proposals that require your vote. After you have
read the material, please cast your vote promptly by signing and
returning the enclosed proxy card. It is important that you sign your
proxy card exactly as your name appears in the registration of the
proxy card. A postage-paid envelope has been provided. Your time
will be well spent, and you will help save the cost of additional
mailings.
These proposals have been carefully considered by the fund's Board of
Trustees, which is responsible for protecting your interests as a
shareholder. THE BOARD OF TRUSTEES BELIEVES THESE PROPOSALS ARE FAIR
AND REASONABLE, AND RECOMMENDS THAT YOU APPROVE THEM. If you have any
questions about any of the proposals, please do not hesitate to
contact Fidelity at 800-544-8888 (Initial Class) or 800-522-7297
(Class A, Class T, Class B, and Institutional Class).
Remember, this is your opportunity to voice your opinion on matters
affecting your fund. YOUR PARTICIPATION IS EXTREMELY IMPORTANT NO
MATTER HOW MANY OR HOW FEW SHARES YOU OWN.
Thank you. We appreciate your prompt attention.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Chairman and Chief Executive Officer
