SPARTAN(registered trademark) GINNIE MAE FUND
A FUND OF
FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Spartan Ginnie Mae Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan Ginnie Mae Fund (Spartan Ginnie Mae) will be held
at the office of Fidelity Union Street Trust (the trust), 82
Devonshire Street, Boston, Massachusetts 02109 on May 19, 1999, at
10:00 a.m. Eastern time. The purpose of the Meeting is to consider and
act upon the following proposal, and to transact such other business
as may properly come before the Meeting or any adjournments thereof.
1. To approve an Agreement and Plan of Reorganization between
Spartan Ginnie Mae and Fidelity Income Fund: Fidelity Ginnie Mae Fund
(Fidelity Ginnie Mae) providing for the transfer of all of the assets
of Spartan Ginnie Mae to Fidelity Ginnie Mae in exchange solely for
shares of beneficial interest of Fidelity Ginnie Mae and the
assumption by Fidelity Ginnie Mae of Spartan Ginnie Mae's liabilities,
followed by the distribution of Fidelity Ginnie Mae shares to
shareholders of Spartan Ginnie Mae in liquidation of Spartan Ginnie
Mae.
The Board of Trustees has fixed the close of business on March 22,
1999 as the record date for the determination of the shareholders of
Spartan Ginnie Mae 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
March 22, 1999
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins, Trustee
2) ABC Trust Ann B. Collins, Trustee
3) Ann B. Collins, Trustee Ann B. Collins, Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
SPARTAN(registered trademark) GINNIE MAE FUND
A FUND OF
FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
PROXY STATEMENT AND PROSPECTUS
MARCH 22, 1999
This Proxy Statement and Prospectus (Proxy Statement) is being
furnished to shareholders of Spartan Ginnie Mae Fund (Spartan Ginnie
Mae), a fund of Fidelity Union Street Trust (the trust), in connection
with the solicitation of proxies by the trust's Board of Trustees for
use at the Special Meeting of Shareholders of Spartan Ginnie Mae and
at any adjournments thereof (the Meeting). The Meeting will be held on
May 19, 1999 at 10:00 a.m. Eastern time at 82 Devonshire Street,
Boston, Massachusetts 02109, the principal executive office of the
trust.
As more fully described in the Proxy Statement, the purpose of the
Meeting is to vote on a proposed reorganization (Reorganization).
Pursuant to an Agreement and Plan of Reorganization (the Agreement),
Spartan Ginnie Mae would transfer all of its assets to Fidelity Income
Fund: Fidelity Ginnie Mae Fund (Fidelity Ginnie Mae) in exchange
solely for shares of beneficial interest of Fidelity Ginnie Mae and
the assumption by Fidelity Ginnie Mae of Spartan Ginnie Mae's
liabilities. The number of shares to be issued in the proposed
Reorganization will be based upon Spartan Ginnie Mae's net
asset value relative to the net asset value per share of Fidelity
Ginnie Mae at the time of the exchange. As provided in the
Agreement, Spartan Ginnie Mae will distribute shares of Fidelity
Ginnie Mae to its shareholders in liquidation of Spartan Ginnie Mae on
May 27, 1999, or such other date as the parties may agree (the Closing
Date).
Fidelity Ginnie Mae is a bond fund, a diversified fund of Fidelity
Income Fund, an open-end management investment company organized as a
Massachusetts business trust on August 7, 1984. Fidelity Ginnie Mae's
investment objective is to seek a high level of current income
consistent with prudent investment risk, by investing primarily in
mortgage-related securities. In seeking current income, the fund may
also consider the potential for capital gain.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT
AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Reorganization and
Fidelity Ginnie Mae that a shareholder should know before voting on
the proposed Reorganization. The Statement of Additional Information
dated March 22, 1999 relating to this Proxy Statement has been filed
with the Securities and Exchange Commission (SEC) and is incorporated
herein by reference. This Proxy Statement is accompanied by the
Prospectus dated September 21, 1998 and supplemented January 1, 1999,
which offers shares of Fidelity Ginnie Mae. The Statement of
Additional Information for Fidelity Ginnie Mae dated September 21,
1998 and supplemented October 8, 1998, is available upon request.
Attachment 1 contains excerpts from the Annual Report of Fidelity
Ginnie Mae dated July 31, 1998. The Prospectus and Statement of
Additional Information for Fidelity Ginnie Mae have been filed with
the SEC and are incorporated herein by reference. A Prospectus and
Statement of Additional Information for Spartan Ginnie Mae, both dated
October 20, 1998 and supplemented, in the case of the prospectus, on
January 1, 1999, have been filed with the SEC and are incorporated
herein by reference. Copies of these documents may be obtained without
charge by contacting the trust or Fidelity Income Fund at Fidelity
Distributors Corporation, 82 Devonshire Street, Boston, Massachusetts
02109 or by calling 1-800-544-8888.
<TABLE>
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TABLE OF CONTENTS
Voting Information 1
Synopsis 6
Comparison Of Other Policies Of The Funds 10
Comparison Of Principal Risk Factors 11
The Proposed Transaction 11
Additional Information About Fidelity Ginnie Mae Fund 14
Miscellaneous 17
Attachment 1 - Excerpts From Annual Report Of Fidelity Ginnie Mae Fund
Dated July 31, 1998 18
Exhibit 1. Form of Agreement and Plan of Reorganization between
Spartan Ginnie Mae Fund and Fidelity Ginnie Mae Fund 22
</TABLE>
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS OF
SPARTAN GINNIE MAE FUND
A FUND OF
FIDELITY UNION STREET TRUST
TO BE HELD ON MAY 19, 1999
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
VOTING INFORMATION
This Proxy Statement and Prospectus (Proxy Statement) is furnished in
connection with a solicitation of proxies made by, and on behalf of,
the Board of Trustees of Fidelity Union Street Trust (the trust) to be
used at the Special Meeting of Shareholders of Spartan Ginnie Mae Fund
(Spartan Ginnie Mae) and at any adjournments thereof (the Meeting), to
be held on Wednesday, May 19, 1999 at 10:00 a.m. at 82 Devonshire
Street, Boston, Massachusetts 02109, the principal executive office of
the trust and Fidelity Management & Research Company (FMR), Spartan
Ginnie Mae's investment adviser.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about March 22, 1999.
Supplementary solicitations may be made by mail, telephone, telegraph,
facsimile, electronic means or by personal interview by
representatives of the trust. In addition, D.F. King & Co., Inc.
and/or Management Information Services Corp. may be paid on a per-call
basis to solicit shareholders on behalf of the fund at an anticipated
cost of approximately $3,000. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all
solicitations will be borne by FMR. FMR will reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by the trust, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and which
are not revoked, will be voted at the Meeting. Shares represented by
such proxies will be voted in accordance with the instructions
thereon. If no specification is made on a proxy card, it will be voted
FOR the matter specified on the proxy card. Only proxies that
are voted will be counted toward establishing a quorum. Broker
non-votes are not considered voted for this purpose. Shareholders
should note that while votes to ABSTAIN will count toward establishing
a quorum, passage of any proposal being considered at the Meeting will
occur only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same
effect in determining whether the proposal is approved.
Spartan Ginnie Mae may also arrange to have votes recorded by
telephone. D.F. King & Co., Inc. may be paid on a per-call basis for
vote-by-phone solicitations on behalf of the fund at an anticipated
cost of approximately $4,000. The expenses in connection with
telephone voting will be borne by FMR. If the fund records votes by
telephone, it will use procedures designed to authenticate
shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to
confirm that their instructions have been properly recorded. Proxies
given by telephone may be revoked at any time before they are voted in
the same manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting but sufficient votes to approve the proposed
item are not received, or if other matters arise requiring
shareholder attention, the persons named as proxy agents may propose
one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of
a majority of those shares present at the Meeting or represented by
proxy. When voting on a proposed adjournment, the persons named as
proxy agents will vote FOR the proposed adjournment all shares that
they are entitled to vote with respect to the item, unless
directed to vote AGAINST the item, in which case such shares will be
voted against the proposed adjournment with respect to the
item. A shareholder vote may be taken on the item in this
Proxy Statement or on any other business properly presented at the
meeting prior to such adjournment if sufficient votes have been
received and it is otherwise appropriate.
On November 30, 1998 there were 63,494,036.819 and 97,654,630.651
shares issued and outstanding for Spartan Ginnie Mae and Fidelity
Ginnie Mae Fund (Fidelity Ginnie Mae), respectively. Spartan Ginnie
Mae s hareholders of record at the close of business on March 22,
1999 will be entitled to vote at the Meeting. Each such shareholder
will be entitled to one vote for each dollar of net asset value held
on that date.
As of November 30, 1998, the Trustees, Members of the Advisory Board,
and officers of each fund owned, in the aggregate, less than 1% of
each fund's total outstanding shares.
To the knowledge of the trust and Fidelity Income Fund, no
shareholder owned of record or beneficially 5% or more of the
outstanding shares of each fund on that date. It is not anticipated
that any shareholders will own of record or beneficially 5% or more of
the outstanding shares of the combined fund as a result of the
Reorganization.
VOTE REQUIRED: APPROVAL OF THE REORGANIZATION REQUIRES THE AFFIRMATIVE
VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF SPARTAN
GINNIE MAE. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT),
THE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" MEANS
THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF THE VOTING
SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE
HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE
PRESENT OR REPRESENTED BY PROXY OR (B) MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED
"PRESENT" FOR THIS PURPOSE.
SYNOPSIS
The following is a summary of certain information contained elsewhere
in this Proxy Statement, in the Agreement, and in the Prospectuses of
Spartan Ginnie Mae and Fidelity Ginnie Mae, which are incorporated
herein by this reference. Shareholders should read the entire Proxy
Statement and the Prospectus of Fidelity Ginnie Mae carefully for more
complete information.
The proposed reorganization (the Reorganization) would merge Spartan
Ginnie Mae into Fidelity Ginnie Mae, a bond fund also managed by FMR.
If the Reorganization is approved, Spartan Ginnie Mae will cease to
exist and current shareholders of the fund will become shareholders of
Fidelity Ginnie Mae instead.
INVESTMENT OBJECTIVES AND POLICIES
The following summarizes the investment objective and policy
differences, if any, between Spartan Ginnie Mae and Fidelity Ginnie
Mae.
Spartan Ginnie Mae and Fidelity Ginnie Mae have substantially similar
investment objectives and policies. Each fund's investment objective
is to seek high current income by investing in mortgage securities
issued by the Government National Mortgage Association (Ginnie Maes).
When consistent with its goal, each fund may also consider the
potential for capital gain.
FMR normally invests at least 65% of each fund's total assets in
Ginnie Maes. Ginnie Maes are government securities that are interests
in pools of mortgage loans. Their principal and interest payments are
fully guaranteed by the U.S. Government, making them high-quality
investments. Each fund may also invest in other U.S. Government
securities and instruments related to U.S. Government securities.
Other instruments may include futures or options on U.S. Government
securities or interests in U.S. Government securities that have been
repackaged by dealers or other third parties.
Each fund is managed to have similar overall interest rate risk to
the Lehman Brothers GNMA Index (the GNMA Index), a market
capitalization weighted index of fixed-rate securities that represent
interests in pools of mortgage loans with original terms of 15 and 30
years and that are issued by the Government National Mortgage
Association. As of November 30, 1998, the average maturities of
Spartan Ginnie Mae, Fidelity Ginnie Mae and the GNMA Index were
approximately 5.4 years, 5.2 years and 5.5 years, respectively.
EXPENSE STRUCTURES
The funds differ in their expense structures. Each fund pays a
monthly management fee to FMR. Spartan Ginnie Mae pays an
all-inclusive management fee to FMR (at an annual rate of 0.65% of
average net assets) which covers substantially all of the fund's
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses). Fidelity Ginnie Mae, by contrast, pays its
management fee and other expenses separately. Its management fee and
other expenses, as a percentage of its average net assets, vary from
year to year. Fidelity Ginnie Mae's total operating expenses (the sum
of its management fee and other expenses) were 0.74% (before
reimbursement) of its average net assets for the fiscal year ended
July 31, 1998. Effective June 27, 1998, FMR voluntarily agreed to
reimburse Fidelity Ginnie Mae to the extent that total operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed 0.65% of its average net assets. If the
Reorganization is approved, FMR has agreed to limit the combined
fund's total operating expenses to 0.63% of its average net assets
through June 30, 2001 (excluding interest, taxes, brokerage
commissions and extraordinary expenses). After that date, the combined
fund's expenses could increase.
In sum, the proposed merger would provide Spartan Ginnie Mae
shareholders with the opportunity to participate in a larger Ginnie
Mae fund with a similar investment objective, strategies and interest
rate risk and expenses guaranteed to be lower than Spartan Ginnie
Mae's for more than two years.
The Board of Trustees believes that the Reorganization would benefit
Spartan Ginnie Mae shareholders and recommends that shareholders vote
in favor of the Reorganization.
THE PROPOSED REORGANIZATION
Shareholders of Spartan Ginnie Mae will be asked at the Meeting to
vote upon and approve the Reorganization and the Agreement, which
provide for the acquisition by Fidelity Ginnie Mae of all of the
assets of Spartan Ginnie Mae in exchange solely for shares of Fidelity
Ginnie Mae and the assumption by Fidelity Ginnie Mae of the
liabilities of Spartan Ginnie Mae. Spartan Ginnie Mae will then
distribute the shares of Fidelity Ginnie Mae to its respective
shareholders, so that each shareholder will receive the number of full
and fractional shares of Fidelity Ginnie Mae equal in value to the
aggregate net asset value of the shareholder's shares of Spartan
Ginnie Mae on the Closing Date (defined below). The exchange of
Spartan Ginnie Mae's assets for Fidelity Ginnie Mae's shares will
occur as of the close of business of the New York Stock Exchange
(NYSE) on May 27, 1999, or such other time and date as the parties may
agree (the Closing Date). Spartan Ginnie Mae will then be liquidated
as soon as practicable thereafter.
The funds have received an opinion of counsel that the Reorganization
will not result in any gain or loss for federal income tax purposes
either to Spartan Ginnie Mae or Fidelity Ginnie Mae or to the
shareholders of either fund. The rights and privileges of the former
shareholders of Spartan Ginnie Mae and the shareholders of
Fidelity Ginnie Mae will be effectively unchanged by the
Reorganization (except as described on page 8 under the heading
"Forms of Organization").
COMPARATIVE FEE TABLES
Each fund pays a management fee to FMR for managing its investments
and business affairs which is calculated and paid to FMR every month.
Spartan Ginnie Mae pays FMR a management fee at an annual rate of
0.65% of its average net assets. FMR not only provides the fund with
investment advisory and research services, but also pays all of the
fund's expenses, with the exception of fees and expenses of the
non-interested Trustees; interest; taxes; brokerage commissions (if
any); and such nonrecurring expenses as may arise, including costs of
any litigation to which a fund may be a party, and any obligation it
may have to indemnify its officers and Trustees with respect to
litigation. The management fee the fund pays FMR is reduced by an
amount equal to the fees and expenses paid by th e fund to the
non-interested Trustees.
In contrast, Fidelity Ginnie Mae pays its management fee and other
expenses separately. Fidelity Ginnie Mae's management fee is
calculated by adding a group fee rate to an individual fund fee rate,
and multiplying the result by the fund's monthly average net assets.
The group fee rate is based on the monthly average net assets of all
mutual funds advised by FMR. In addition to the management fee payable
by the fund, Fidelity Ginnie Mae also incurs other expenses for
services such as maintaining shareholder records and furnishing
shareholder statements and financial reports. For the 12 months ended
July 31, 1998 Fidelity Ginnie Mae's total management fee rate and
total operating expense ratio were 0.44% and 0.72% (after
reimbursement), respectively. Effective June 27, 1998, FMR has
voluntarily agreed to limit the total operating expenses of Fidelity
Ginnie Mae to 0.65% of average net assets (excluding interest, taxes,
brokerage commissions and extraordinary expenses).
If shareholders approve the Reorganization, the combined fund will
retain Fidelity Ginnie Mae's expense structure, requiring payment of a
management fee and other operating expenses. FMR has agreed to limit
the combined fund's expense ratio to 0.63% of its average net assets
through June 30, 2001 (excluding interest, taxes, brokerage
commissions and extraordinary expenses). This expense limitation would
lower the total operating expenses for the former
shareholders of Spartan Ginnie Mae from 0.65% to 0.63% beginning
on the first business day after the effective date of the
Reorganization through June 30, 2001. After June 30, 2001, the
combined fund's expenses could increase. If the proposed
Reorganization is not approved, Spartan Ginnie Mae will maintain its
current fee structure. For more information about the funds' current
fees, refer to their Prospectuses.
The following table shows the fees and expenses of Spartan Ginnie Mae
and Fidelity Ginnie Mae for the 12 months ended July 31, 1998,
adjusted, in the case of Fidelity Ginnie Mae, to reflect current fees,
and pro forma fees for the combined fund based on the same time period
after giving effect to the Reorganization and including the effect of
FMR's guaranteed expense limitation of 0.63% of average net assets
through June 30, 2001 (excluding interest, taxes, brokerage
commissions and extraordinary expenses).
ANNUAL FUND OPERATING EXPENSES
Annual fund operating expenses are paid out of each fund's assets.
Expenses are factored into each fund's share price or dividends and
are not charged directly to shareholder accounts. The following
figures are based on historical expenses, adjusted, in the case of
Fidelity Ginnie Mae, to reflect current fees, of each fund and are
calculated as a percentage of average net assets of each fund.
<TABLE>
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Spartan Ginnie Mae Fidelity Ginnie Mae* Pro Forma Expenses** -
Combined Fund
Management Fee 0.65% 0.35% (after reimbursement) 0.38% (after reimbursement)
12b-1 Fee None None None
Other Expenses 0.00% 0.30% 0.25%
Total Operating Expenses 0.65% 0.65% (after reimbursement) 0.63% (after reimbursement)
</TABLE>
* Effective June 27, 1998, FMR has voluntarily agreed to reimburse
Fidelity Ginnie Mae to the extent that the management fee, other
expenses and total operating expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed 0.65% of its
average net assets. If this agreement were not in effect, the
management fee, other expenses and total operating expenses, as a
percentage of average net assets, of Fidelity Ginnie Mae would have
been 0.44%, 0.30% and 0.74%, respectively.
** If the Reorganization is approved, FMR has agreed to limit the
total operating expenses of the combined fund to 0.63% of its average
net assets (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) through June 30, 2001. Had the pro forma
expenses of the combined fund not included the effect of FMR's
voluntary expense limitations, the combined fund's management fee,
other expenses and total operating expenses would have been
0.4 4 %, 0.2 5 % and 0.69%, respectively.
EXAMPLES OF EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical $1,000
investment in each fund under the current and pro forma (combined
fund) expenses calculated at the rates stated above, assuming a 5%
annual return.
<TABLE>
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Spartan Ginnie Mae Fidelity Ginnie Mae*** Combined Fund (Pro Forma)***
1 year $ 7 $ 7 $ 6
3 years $ 21 $ 21 $ 20
5 years $ 36 $ 36 $ 35
10 years $ 81 $ 81 $ 79
</TABLE>
***After FMR r eimbursement
These examples assume that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. These examples
illustrate the effect of expenses but are not meant to suggest actual
or expected expenses, which may vary. The assumed return of 5% is not
a prediction of, and does not represent, actual or expected
performance of any fund.
FORMS OF ORGANIZATION
Spartan Ginnie Mae is a non-diversified fund of Fidelity Union Street
Trust, an open-end management investment company organized as a
Massachusetts business trust on March 1, 1974. Fidelity Ginnie Mae is
a diversified fund of Fidelity Income Fund, an open-end management
investment company organized as a Massachusetts business trust on
August 7, 1984. Each trust is authorized to issue an unlimited number
of shares of beneficial interest. The Declaration of Trust under which
Fidelity Ginnie Mae is organized permits the Trustees, subject to the
Investment Company Act of 1940 and applicable state law, to reorganize
or terminate the trust or any of its series without shareholder
approval. Also, it permits the Trustees, with certain exceptions, to
amend the Declaration of Trust without shareholder approval. The
Declaration of Trust under which Spartan Ginnie Mae is organized
requires shareholder approval to reorganize or terminate the trust or
any of its series and to amend the Declaration of Trust. Therefore, if
the Reorganization is approved, the former shareholders of Spartan
Ginnie Mae would become shareholders of a fund organized under a
Declaration of Trust that gives Trustees broader powers, subject to
the limitations of the 1940 Act and applicable state law. For more
information regarding shareholder rights, refer to the section of the
funds' Statements of Additional Information called "Description of the
Trust."
INVESTMENT OBJECTIVES AND POLICIES
Spartan Ginnie Mae and Fidelity Ginnie Mae have substantially similar
investment objectives. Spartan Ginnie Mae seeks a high level of
current income. Fidelity Ginnie Mae seeks a high level of current
income consistent with prudent investment risk, by investing primarily
in mortgage-related securities. In seeking current income, Fidelity
Ginnie Mae may also consider the potential for capital gain.
Spartan Ginnie Mae and Fidelity Ginnie Mae also have substantially
similar investment strategies. FMR normally invests at least 65% of
each fund's total assets in Ginnie Maes. Each fund may also invest in
other U.S. Government securities and instruments related to U.S.
Government securities. Other instruments may include futures or
options on U.S. Government securities or interests in U.S. Government
securities that have been repackaged by dealers or other third
parties.
FMR manages each fund to have similar overall interest rate risk to
the GNMA Index. As of November 30, 1998, the average maturities of
Spartan Ginnie Mae, Fidelity Ginnie Mae and the GNMA Index were 5.4
years, 5.2 years and 5.5 years, respectively.
The investment objective of each fund is fundamental and may not be
changed without the approval of a vote of at least a majority of the
outstanding voting securities of the fund. There can be no assurance
that any fund will achieve its objective. With the exception of
fundamental policies, investment policies of the funds can be changed
without shareholder approval. The funds ' policies discussed
above, except as noted, could be changed without a vote of
shareholders.
PERFORMANCE COMPARISONS OF THE FUNDS
The following table compares the funds' annual total returns for the
periods indicated. Please note that total returns are based on past
results and are not an indication of future performance.
Annual Total Returns (periods
ended December 31)
1995 1996 1997 1998
Fidelity Ginnie Mae* 16.60% 4.86% 8.70% 6.39%
Spartan Ginnie Mae* 16.66% 4.98% 8.95% 6.79%
* If FMR had not reimbursed certain fund expenses during these
periods, returns for the funds would have been lower.
The following table compares each fund's individual cumulative
returns for the periods indicated. Please note that total returns are
based on past results and are not an indication of future performance.
Cumulative Total Returns
(periods ended December 31,
1998)
1 Year 3 Year
Fidelity Ginnie Mae* 6.39% 21.26%
Spartan Ginnie Mae* 6.79% 22.13%
* If FMR had not reimbursed certain fund expenses during these
periods, returns for the funds would have been lower.
The tables above show that the funds have experienced relatively
comparable performance over the time periods shown, with Spartan
Ginnie Mae slightly outperforming Fidelity Ginnie Mae. Differences in
performance may be attributed, in part, to the funds' different
expense structures.
The following graph shows the value of a hypothetical $10,000
investment in each fund made on December 31, 1995, assuming all
distributions are reinvested. The graph compares the cumulative
returns of the funds on a quarterly basis from December 31,
1995 to December 3 1 , 1998, and illustrates the relative
volatility of their performance over shorter periods of time.
Spartan Ginnie Mae Fidelity Ginnie Mae
00461 00015
1995/12/31 10000.00 10000.00
1996/01/31 10073.18 10062.44
1996/02/29 9989.31 9986.82
1996/03/31 9964.01 9965.95
1996/04/30 9936.45 9934.11
1996/05/31 9897.61 9983.41
1996/06/30 10011.72 10004.08
1996/07/31 10047.01 10040.49
1996/08/31 10050.69 10047.25
1996/09/30 10209.06 10198.06
1996/10/31 10400.79 10399.09
1996/11/30 10553.00 10543.78
1996/12/31 10497.50 10485.78
1997/01/31 10566.63 10554.45
1997/02/28 10591.15 10583.01
1997/03/31 10483.32 10474.17
1997/04/30 10653.01 10633.65
1997/05/31 10758.69 10733.28
1997/06/30 10884.79 10863.52
1997/07/31 11077.22 11055.31
1997/08/31 11063.17 11034.48
1997/09/30 11192.18 11166.49
1997/10/31 11310.49 11278.38
1997/11/30 11339.50 11296.58
1997/12/31 11436.78 11398.18
1998/01/31 11545.64 11501.07
1998/02/28 11574.97 11519.70
1998/03/31 11617.91 11562.12
1998/04/30 11680.80 11635.18
1998/05/31 11777.18 11719.04
1998/06/30 11805.08 11747.57
1998/07/31 11868.17 11808.43
1998/08/31 11965.55 11901.16
1998/09/30 12121.88 12048.24
1998/10/31 12090.26 12020.19
1998/11/30 12163.71 12079.30
1998/12/31 12213.21 12126.07
IMATRL PRASUN SHR__CHT 19981231 19990127 150634 R00000000000099
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION. Spartan Ginnie Mae is a non - diversified
fund. In order to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the Code), the
Code generally requires Spartan Ginnie Mae to invest no more than 25%
of its total assets in securities of any one issuer and to invest at
least 50% of its total assets so that no more than 5% of Spartan
Ginnie Mae's total assets are invested in securities of any one
issuer. However, the Code allows unlimited investments in cash,
cash items, government securities and securities of other investment
companies. Fidelity Ginnie Mae, by contrast, is a diversified
fund. As a matter of fundamental policy, with respect to 75% of
Fidelity Ginnie Mae's total assets, Fidelity Ginnie Mae may not invest
more than 5% of its total assets in the securities of a single issuer,
and Fidelity Ginnie Mae may not hold more than 10% of the outstanding
voting securities of a single issuer. These limitations do not
apply to U.S. Government securities or to securities of other
investment companies. Fidelity Ginnie Mae is therefore required to
maintain broader diversification among its investments than Spartan
Ginnie Mae.
BORROWING. Each fund may borrow money from banks or from other funds
advised by FMR, or through reverse repurchase agreements. As a matter
of fundamental policy, each fund may borrow money for temporary or
emergency purposes, but not in an amount exceeding 33-1/3% of its
total assets.
LENDING. Each fund does not currently intend to lend assets, other
than securities, to other parties, except by lending money (up to 7.5%
of the fund's net assets) to other funds or portfolios advised by FMR
or an affiliate, or by acquiring loans, loan participations, or other
forms of direct debt instruments. As a matter of fundamental policy,
each fund may not lend more than 33-1/3% of its total assets to other
parties, but this limitation does not apply to purchases of debt
securities or to repurchase agreements.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to the fund's investment strategy. Each fund also reserves
the right to invest without limitation in investment-grade money
market instruments or short-term debt instruments for temporary
defensive purposes.
As stated above, for more information about the risks and
restrictions associated with these policies, see each fund's
Prospectus, and for a more detailed discussion of the funds'
investments, see their Statements of Additional Information, which are
incorporated herein by reference.
OPERATIONS OF FIDELITY GINNIE MAE FOLLOWING THE REORGANIZATION
FMR does not expect Fidelity Ginnie Mae to change its investment
policies as a result of the Reorganization. In addition, FMR does not
anticipate significant changes to the fund's management or to agents
that provide the fund with services. Specifically, the Trustees and
officers, the investment adviser, distributor, and other agents will
continue to serve Fidelity Ginnie Mae in their current capacities.
Thomas Silvia, who is currently the Portfolio Manager of Fidelity
Ginnie Mae and Spartan Ginnie Mae, is expected to continue to be
responsible for portfolio management of Fidelity Ginnie Mae after the
Reorganization.
All of the current investments of Spartan Ginnie Mae are permissible
investments for Fidelity Ginnie Mae. Nevertheless, FMR may sell
securities held by Spartan Ginnie Mae or Fidelity Ginnie Mae between
the time of shareholder approval and the Closing Date. Transaction
costs associated with such adjustments that occur between shareholder
approval and the Closing Date will be borne by the fund that incurred
them. Transaction costs associated with such adjustments that occur
after the Closing Date will be borne by Fidelity Ginnie Mae.
PURCHASES AND REDEMPTIONS
The price to buy one share of each fund is each fund's net asset
value per share (NAV). Each fund's shares are sold without a sales
charge. Shares are purchased at the next NAV calculated after an
investment is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
The redemption policies for each fund are identical. The price to
sell one share of each fund is the fund's NAV. Shares will be sold at
the next NAV calculated after an order is received in proper form.
Each fund's NAV is normally calculated each business day at 4:00 p.m.
Eastern time. Refer to each fund's Prospectus for more information
regarding how to buy or sell shares.
For Spartan Ginnie Mae, the minimum initial investment amount is
$10,000, the minimum additional investment amount is $1,000, and the
minimum account balance is $5,000. For Fidelity Ginnie Mae, the
minimum initial investment amount is $2,500, the minimum additional
investment amount is $250, and the minimum account balance is $2,000.
If shareholders of Spartan Ginnie Mae approve the Reorganization, they
would become shareholders of a fund with lower minimum investment and
balance requirements than Spartan Ginnie Mae.
On June 26, 1998, Spartan Ginnie Mae closed to new accounts pending
the Reorganization. Spartan Ginnie Mae shareholders on or prior to
that date can continue to purchase shares of the fund. Shareholders of
Spartan Ginnie Mae may redeem shares through the Closing Date
of the Reorganization. If the Reorganization is approved, the purchase
and redemption policies of Fidelity Ginnie Mae will remain unchanged.
EXCHANGES
The exchange privilege currently offered by each fund is the same and
is not expected to change after the Reorganization. Shareholders of
the funds may exchange their shares of a fund for shares of any other
Fidelity fund available in a shareholder's state.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Each fund declares income
dividends daily and pays them monthly. Spartan Ginnie Mae normally
distributes capital gains in October and December. Fidelity Ginnie Mae
normally distributes capital gains in September and December. On or
before the Closing Date, Spartan Ginnie Mae may declare additional
dividends or other distributions in order to distribute substantially
all of its investment company taxable income and net realized capital
gain. Due largely to pay-downs on mortgage securities, a portion of
such distributions may be non-taxable.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Each fund has received an opinion of its counsel, Kirkpatrick &
Lockhart LLP, that the Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the Code.
Accordingly, no gain or loss will be recognized to the funds or their
shareholders as a result of the Reorganization. Please see the section
entitled "Federal Income Tax Considerations" for more information.
As of September 30, 1998, Fidelity Ginnie Mae and Spartan Ginnie Mae
had net unrealized gains of approximately $18,290,832 and $11,635,740,
respectively. During the period between shareholder approval and the
Closing Date, FMR may sell certain securities to make portfolio
adjustments in connection with the Reorganization. Selling these
securities may result in realization of capital gains, which, when
distributed, would be taxable to the selling fund's shareholders.
As of August 31, 1998, Spartan Ginnie Mae had capital loss
carryforwards for federal income tax purposes of approximately
$10,012,000. As of July 31, 1998, Fidelity Ginnie Mae had capital loss
carryforwards for federal income tax purposes of approximately
$15,434,000. Under current federal tax law, Fidelity Ginnie Mae may be
limited to using only a portion, if any, of its capital loss
carryforwards or the capital loss carryforwards transferred by Spartan
Ginnie Mae at the time of the Reorganization. There is no assurance
that Fidelity Ginnie Mae will be able to realize sufficient capital
gains to use the capital loss carryforwards before they expire. The
capital loss carryforwards attributable to Spartan Ginnie Mae will
expire between July 31, 2002 and July 31, 2003, and the capital loss
carryforwards attributed to Fidelity Ginnie Mae will expire between
July 31, 2003 and July 31, 2004.
COMPARISON OF PRINCIPAL RISK FACTORS
Because each fund invests primarily in Ginnie Mae securities and is
managed to have similar overall interest rate risk to the GNMA Index,
the funds have substantially similar levels of investment risk.
Because each fund invests in securities that represent interests in
pools of mortgage loans, each fund is exposed to prepayment risk,
which can lower the funds' yields, particularly in periods of
declining interest rates. The reaction of mortgage securities to
changes in interest rates can be difficult to predict because mortgage
securities are subject to prepayment of principal and interest and can
be structured in a complex manner. In determining a security's
maturity for purposes of calculating a fund's average maturity, an
estimate of the average time for its principal to be paid may be used.
This can be substantially shorter than its stated final maturity.
As a non-diversified fund, Spartan Ginnie Mae has the ability to
invest a greater percentage of its assets in the securities of a
single issuer than does Fidelity Ginnie Mae. Thus, changes in the
financial condition of an issuer, changes in general economic
conditions, and changes in specific economic conditions that affect a
particular type of issuer have the potential to have a greater impact
on a non-diversified fund such as Spartan Ginnie Mae than such changes
might have on a diversified fund such as Fidelity Ginnie Mae.
THE PROPOSED TRANSACTION
TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
GINNIE MAE AND FIDELITY GINNIE MAE.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of
the Agreement are summarized below; however, this summary is qualified
in its entirety by reference to the Agreement, a copy of which is
attached as Exhibit 1 to this Proxy Statement.
The Agreement contemplates (a) Fidelity Ginnie Mae acquiring as of
the Closing Date all of the assets of Spartan Ginnie Mae in exchange
solely for shares of Fidelity Ginnie Mae and the assumption by
Fidelity Ginnie Mae of Spartan Ginnie Mae's liabilities; and (b) the
distribution of shares of Fidelity Ginnie Mae to the shareholders of
Spartan Ginnie Mae as provided for in the Agreement.
The assets of Spartan Ginnie Mae to be acquired by Fidelity Ginnie
Mae include all cash, cash equivalents, securities, receivables
(including interest or dividends receivables), claims, chooses in
action, and other property owned by Spartan Ginnie Mae, and any
deferred or prepaid expenses shown as an asset on the books of Spartan
Ginnie Mae on the Closing Date. Fidelity Ginnie Mae will assume from
Spartan Ginnie Mae all liabilities, debts, obligations, and duties of
Spartan Ginnie Mae of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable on the
Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Spartan Ginnie Mae will use its
best efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred
in the ordinary course of business. Fidelity Ginnie Mae also will
deliver to Spartan Ginnie Mae the number of full and fractional shares
of Fidelity Ginnie Mae having an aggregate net asset value equal to
the value of the assets of Spartan Ginnie Mae less the liabilities of
Spartan Ginnie Mae as of the Closing Date. Spartan Ginnie Mae shall
then distribute the Fidelity Ginnie Mae shares PRO RATA to its
shareholders.
The value of Spartan Ginnie Mae's assets to be acquired by Fidelity
Ginnie Mae and the amount of its liabilities to be assumed by Fidelity
Ginnie Mae will be determined as of the close of business of the NYSE
on the Closing Date, using the valuation procedures set forth in
Spartan Ginnie Mae's then-current Prospectus and Statement of
Additional Information. The net asset value of a share of Fidelity
Ginnie Mae will be determined as of the same time using the valuation
procedures set forth in its then-current Prospectus and Statement of
Additional Information.
As of the Closing Date, Spartan Ginnie Mae will distribute to its
shareholders of record the shares of Fidelity Ginnie Mae it received,
so that each Spartan Ginnie Mae shareholder will receive the number of
full and fractional shares of Fidelity Ginnie Mae equal in value to
the aggregate net asset value of shares of Spartan Ginnie Mae held by
such shareholder on the Closing Date; Spartan Ginnie Mae will be
liquidated as soon as practicable thereafter. Such distribution will
be accomplished by opening accounts on the books of Fidelity Ginnie
Mae in the names of the Spartan Ginnie Mae shareholders and by
transferring thereto shares of Fidelity Ginnie Mae. Each Spartan
Ginnie Mae shareholder's account shall be credited with the respective
PRO RATA number of full and fractional shares (rounded to the third
decimal place) of Fidelity Ginnie Mae due that shareholder. Fidelity
Ginnie Mae shall not issue certificates representing its shares in
connection with such exchange.
Accordingly, immediately after the Reorganization, each former
Spartan Ginnie Mae shareholder will own shares of Fidelity Ginnie Mae
equal in value to the aggregate net asset value of that
shareholder's shares of Spartan Ginnie Mae immediately prior to the
Reorganization. The net asset value per share of Fidelity Ginnie Mae
will be unchanged by the transaction. Thus, the Reorganization will
not result in a dilution of any shareholder interest.
Any transfer taxes payable upon issuance of shares of Fidelity Ginnie
Mae in a name other than that of the registered holder of the shares
on the books of Spartan Ginnie Mae as of that time shall be paid by
the person to whom such shares are to be issued as a condition of such
transfer. Any reporting responsibility of Spartan Ginnie Mae is and
will continue to be its responsibility up to and including the date on
which it is terminated.
Pursuant to its all-inclusive management contract with Spartan Ginnie
Mae, FMR will bear the cost of the Reorganization, including
professional fees, expenses associated with the filing of registration
statements, and the cost of soliciting proxies for the Meeting, which
will consist principally of printing and mailing prospectuses and
proxy statements, together with the cost of any supplementary
solicitation. However, there may be some transaction costs associated
with portfolio adjustments to Spartan Ginnie Mae and Fidelity Ginnie
Mae due to the Reorganization prior to the Closing Date which will be
borne by Spartan Ginnie Mae and Fidelity Ginnie Mae, respectively. Any
transaction costs associated with portfolio adjustments to Spartan
Ginnie Mae and Fidelity Ginnie Mae due to the Reorganization which
occur after the Closing Date and any additional merger-related costs
attributable to Fidelity Ginnie Mae which occur after the Closing Date
will be borne by Fidelity Ginnie Mae. The funds may recognize a
taxable gain or loss on the disposition of securities pursuant to
these portfolio adjustments.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by
a fund. In addition, the Agreement may be amended, modified or
supplemented in any mutually agreeable manner, except that no
amendment that may have a materially adverse effect on the
shareholders' interests may be made subsequent to the meeting.
REASONS FOR THE REORGANIZATION
The Boards of Trustees (the Boards) of the funds have determined that
the Reorganization is in the best interests of the shareholders of
both funds and that the Reorganization will not result in a dilution
of the interests of shareholders of either fund.
In considering the Reorganization, the Boards considered a number of
factors, including the following:
(1) the compatibility of the funds' investment objectives and
policies;
(2) the historical performance of the funds;
(3) the relative expense ratios of the funds;
(4) the costs to be incurred by each fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the funds;
(7) the elimination of similar funds;
(8) the impact of changes to the taxable bond product line on the
funds and their shareholders; and
(9) the benefit to FMR and to the shareholders of the funds.
FMR recommended the Reorganization to the Boards at a meeting of the
Boards on November 19, 1998. In recommending the Reorganization, FMR
advised the Boards that the funds have similar investment objectives,
policies, and investment portfolios. In particular, FMR informed the
Boards that the funds differed primarily with respect to their expense
structures and initial and additional investment and account balance
minimums.
The Boards considered that the proposed merger would provide
shareholders of Spartan Ginnie Mae with a fund that has generally
comparable historical performance on a year-to-year and cumulative
basis.
In addition, the Boards also considered that if the Reorganization is
approved, FMR would limit the combined fund's total operating expenses
to 0.63% of its average net assets (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) through June 30,
2001. This expense limitation would reduce the total operating
expenses for the former shareholders of Spartan Ginnie Mae from
0.65% to 0.63% of its average net assets through June 30, 2001.
Finally, the Boards considered the proposed Reorganization in the
context of a general goal of reducing the number of similar funds
managed by FMR. While the reduction of similar funds and funds with
lower assets potentially would benefit FMR, it should also benefit
shareholders by facilitating increased operational efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fidelity Income Fund (the trust) is registered with the SEC as an
open-end management investment company. The trust's Trustees are
authorized to issue an unlimited number of shares of beneficial
interest of separate series. Fidelity Ginnie Mae is one of four funds
of the trust. Each share of Fidelity Ginnie Mae represents an equal
proportionate interest with each other share of the fund, and each
such share of Fidelity Ginnie Mae is entitled to equal voting,
dividend, liquidation, and redemption rights. Each shareholder of the
fund is entitled to one vote for each dollar value of net asset value
of the fund that shareholder owns. Shares of Fidelity Ginnie Mae have
no preemptive or conversion rights. The voting and dividend rights,
the right of redemption, and the privilege of exchange are described
in the fund's Prospectus. Shares are fully paid and nonassessable,
except as set forth in the fund's Statement of Additional Information
under the heading "Shareholder and Trustee Liability."
The trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless less than a majority of the Trustees holding office
have been elected by shareholders, at which time the Trustees then in
office will call a shareholder meeting for the election of Trustees.
Under the 1940 Act, shareholders of record of at least two-thirds of
the outstanding shares of an investment company may remove a Trustee
by votes cast in person or by proxy at a meeting called for that
purpose. The Trustees are required to call a meeting of shareholders
for the purpose of voting upon the question of removal of any Trustee
when requested in writing to do so by the shareholders of record
holding at least 10% of the trust's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Spartan Ginnie Mae's assets for Fidelity Ginnie Mae's
shares and the assumption of the liabilities of Spartan Ginnie Mae by
Fidelity Ginnie Mae is intended to qualify for federal income tax
purposes as a tax-free reorganization under the Code. With respect to
the Reorganization, the participating funds have received an opinion
from Kirkpatrick & Lockhart LLP, counsel to Spartan Ginnie Mae and
Fidelity Ginnie Mae, substantially to the effect that:
(i) The acquisition by Fidelity Ginnie Mae of all of the assets of
Spartan Ginnie Mae solely in exchange for Fidelity Ginnie Mae shares
and the assumption by Fidelity Ginnie Mae of Spartan Ginnie Mae's
liabilities, followed by the distribution by Spartan Ginnie Mae of
Fidelity Ginnie Mae shares to the shareholders of Spartan Ginnie Mae
pursuant to the liquidation of Spartan Ginnie Mae and constructively
in exchange for their Spartan Ginnie Mae shares, will constitute a
reorganization within the meaning of section 368(a)(1)(C) of the Code,
and Spartan Ginnie Mae and Fidelity Ginnie Mae will each be "a party
to a reorganization" within the meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Ginnie Mae upon
the transfer of all of its assets to Fidelity Ginnie Mae in exchange
solely for Fidelity Ginnie Mae shares and Fidelity Ginnie Mae's
assumption of Spartan Ginnie Mae's liabilities, followed by Spartan
Ginnie Mae's subsequent distribution of those shares to its
shareholders in liquidation of Spartan Ginnie Mae;
(iii) No gain or loss will be recognized by Fidelity Ginnie Mae upon
the receipt of the assets of Spartan Ginnie Mae in exchange solely for
Fidelity Ginnie Mae shares and its assumption of Spartan Ginnie Mae's
liabilities;
(iv) The shareholders of Spartan Ginnie Mae will recognize no gain or
loss upon the exchange of their Spartan Ginnie Mae shares solely for
Fidelity Ginnie Mae shares;
(v) The basis of Spartan Ginnie Mae's assets in the hands of Fidelity
Ginnie Mae will be the same as the basis of those assets in the hands
of Spartan Ginnie Mae immediately prior to the Reorganization, and the
holding period of those assets in the hands of Fidelity Ginnie Mae
will include the holding period of those assets in the hands of
Spartan Ginnie Mae;
(vi) The basis of Spartan Ginnie Mae shareholders in Fidelity Ginnie
Mae shares will be the same as their basis in Spartan Ginnie Mae
shares to be surrendered in exchange therefor; and
(vii) The holding period of the Fidelity Ginnie Mae shares to be
received by the Spartan Ginnie Mae shareholders will include the
period during which the Spartan Ginnie Mae shares to be surrendered in
exchange therefor were held, provided such Spartan Ginnie Mae shares
were held as capital assets by those shareholders on the date of the
Reorganization.
Shareholders of Spartan Ginnie Mae should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light
of their individual circumstances. Because the foregoing discussion
relates only to the federal income tax consequences of the
Reorganization, those shareholders also should consult their tax
advisers as to state and local tax consequences, if any, of the
Reorganization.
COMBINED CAPITALIZATION
The following table shows the capitalization of the funds as of July
31, 1998 and on a pro forma combined basis (unaudited) as of that date
giving effect to the Reorganization.
Net Assets NAV Per Share Shares Outstanding
Spartan Ginnie Mae $ 667,426,201 $ 10.16 65,662,073
Fidelity Ginnie Mae $ 917,229,648 $ 10.87 84,361,995
Pro Forma Combined Fund $ 1,584,655,849 $ 10.87 145,762,749
CONCLUSION
The Agreement and the transactions provided for therein were approved
by the Boards at a meeting held on November 19, 1998. The Boards of
Trustees of Fidelity Union Street Trust and Fidelity Income Fund
determined that the proposed Reorganization is in the best interests
of shareholders of each fund and that the interests of existing
shareholders of Spartan Ginnie Mae and Fidelity Ginnie Mae would not
be diluted as a result of the Reorganization. In the event that the
Reorganization is not consummated, Spartan Ginnie Mae will continue to
engage in business as a fund of a registered investment company and
the Board of Trustees of Fidelity Union Street Trust will consider
other proposals for the reorganization or liquidation of the fund.
ADDITIONAL INFORMATION ABOUT FIDELITY GINNIE MAE FUND
Fidelity Ginnie Mae's Prospectus, dated September 21, 1998 and
supplemented on January 1, 1999, is enclosed with this Proxy Statement
and is incorporated herein by reference. The Prospectus contains
additional information about the fund including its investment
objective and policies, investment adviser, advisory fees and
expenses, organization, and procedures for purchasing and redeeming
shares. The prospectus also contains Fidelity Ginnie Mae's financial
highlights for the fiscal year ended July 31, 1998, as shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
FIDELITY GINNIE MAE FUND
Selected Per-Share Data and
Ratios
Years ended July 31 1998 1997 1996 1995 1994 1993 1992 1991 1990
Net asset value, beginning $ 10.850 $ 10.530 $ 10.640 $ 10.360 $ 11.260 $ 11.060 $ 10.650 $ 10.370 $ 10.420
of period
Income from Investment .714B .720B .688 .721 .582 .800 .833 .845 .891
Operations Net investment
income
Net realized and .004 .310 (.107) .292 (.650) .083 .373 .288 (.099)
unrealized gain (loss)
Total from investment .718 1.030 .581 1.013 (.068) .883 1.206 1.133 .792
operations
Less Distributions From (.698) (.710) (.691) (.713) (.582) (.683) (.796) (.853) (.842)
net investment income
From net realized gain -- -- -- -- (.190) -- -- -- --
In excess of net -- -- -- (.020) (.060) -- -- -- --
realized gain
Total distributions (.698) (.710) (.691) (.733) (.832) (.683) (.796) (.853) (.842)
Net asset value, end of $ 10.870 $ 10.850 $ 10.530 $ 10.640 $ 10.360 $ 11.260 $ 11.060 $ 10.650 $ 10.370
period
Total returnA 6.81% 10.11% 5.55% 10.26% (.63)% 8.23% 11.65% 11.36% 8.01%
Net assets, end of period $ 917 $ 822 $ 790 $ 767 $ 769 $ 976 $ 914 $ 797 $ 658
(in millions)
Ratio of expenses to .72%C .76% .76% .75% .82% .80% .80% .83% .83%
average net assets
Ratio of expenses to .72% .75%D .75%D .75% .82% .80% .80% .83% .83%
average net assets after
expense reductions
Ratio of net investment 6.58% 6.75% 6.69% 7.24% 7.03% 7.26% 7.73% 8.24% 8.71%
income to average net assets
Portfolio turnover rate 172% 98% 107% 210% 303% 259% 114% 125% 96%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS
FIDELITY GINNIE MAE FUND
Selected Per-Share Data and
Ratios
Years ended July 31 1989
Net asset value, beginning $ 10.020
of period
Income from Investment .916
Operations Net investment
income
Net realized and .322
unrealized gain (loss)
Total from investment 1.238
operations
Less Distributions From (.838)
net investment income
From net realized gain --
In excess of net --
realized gain
Total distributions (.838)
Net asset value, end of $ 10.420
period
Total returnA 13.00%
Net assets, end of period $ 651
(in millions)
Ratio of expenses to .85%
average net assets
Ratio of expenses to .85%
average net assets after
expense reductions
Ratio of net investment 9.03%
income to average net assets
Portfolio turnover rate 291%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
MISCELLANEOUS
LEGAL MATTERS. Certain legal matters in connection with the issuance
of Fidelity Ginnie Mae shares have been passed upon by Kirkpatrick &
Lockhart LLP, counsel to the trust.
EXPERTS. The audited financial statements of Spartan Ginnie Mae and
Fidelity Ginnie Mae , incorporated by reference into the
Statement s of Additional Information, have been examined by
PricewaterhouseCoopers LLP, independent accountants, whose reports
thereon are included in the Annual Report s to Shareholders for
the fiscal years ended August 31, 1998 and July 31, 1998,
respectively. The financial statements audited by
PricewaterhouseCoopers LLP have been incorporated by reference in
reliance on their reports given on their authority as experts in
auditing and accounting.
AVAILABLE INFORMATION. Fidelity Union Street Trust and Fidelity
Income Fund are each subject to the informational requirements of the
Securities and Exchange Act of 1934 and the 1940 Act, and in
accordance therewith file reports, proxy material, and other
information with the SEC. Such reports, proxy material, and other
information can be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington D.C. 20549
and 7 World Trade Center, New York, NY 10048. Copies of such material
can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington D.C. 20549, at prescribed rates.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR
NOMINEES. Please advise Fidelity Union Street Trust, in care of
Fidelity Service Company, Inc., P.O. Box 789, Boston, Massachusetts
02102, whether other persons are beneficial owners of shares for which
proxies are being solicited and, if so, the number of copies of the
Proxy Statement you wish to receive in order to supply copies to the
beneficial owners of the respective shares.
ATTACHMENT 1
EXCERPTS FROM ANNUAL REPORT OF FIDELITY GINNIE MAE FUND DATED JULY 31,
1998
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Fidelity Ginnie Mae Fund 6.81% 6.34% 8.37%
Lehman Brothers GNMA Index 7.46% 7.01% 9.25%
Salomon Brothers GNMA Index 7.37% 6.94% 9.27%
Lipper GNMA Funds Average 6.81% 6.11% 8.27%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Ginnie Mae LB GNMA
00015 LB020
1988/07/31 10000.00 10000.00
1988/08/31 10014.21 10011.68
1988/09/30 10213.94 10269.83
1988/10/31 10392.46 10497.02
1988/11/30 10287.00 10351.89
1988/12/31 10232.83 10294.65
1989/01/31 10395.62 10460.81
1989/02/28 10341.76 10399.49
1989/03/31 10353.94 10412.63
1989/04/30 10556.05 10636.61
1989/05/31 10824.61 10961.34
1989/06/30 11115.48 11267.96
1989/07/31 11300.02 11502.75
1989/08/31 11193.52 11359.95
1989/09/30 11220.03 11431.78
1989/10/31 11459.68 11696.06
1989/11/30 11569.99 11829.81
1989/12/31 11649.80 11909.82
1990/01/31 11522.15 11809.66
1990/02/28 11589.08 11875.07
1990/03/31 11611.79 11906.03
1990/04/30 11481.24 11800.61
1990/05/31 11847.88 12170.31
1990/06/30 12014.39 12357.79
1990/07/31 12205.44 12586.15
1990/08/31 12174.15 12416.48
1990/09/30 12249.62 12511.97
1990/10/31 12385.10 12666.45
1990/11/30 12663.64 12954.09
1990/12/31 12873.07 13169.31
1991/01/31 13035.14 13366.14
1991/02/28 13087.75 13477.11
1991/03/31 13178.96 13574.35
1991/04/30 13276.58 13701.67
1991/05/31 13377.36 13813.51
1991/06/30 13393.50 13839.80
1991/07/31 13592.08 14076.33
1991/08/31 13834.46 14337.99
1991/09/30 14038.45 14590.59
1991/10/31 14229.50 14831.50
1991/11/30 14305.83 14934.30
1991/12/31 14619.57 15282.39
1992/01/31 14498.31 15093.16
1992/02/29 14653.27 15251.14
1992/03/31 14567.01 15164.41
1992/04/30 14691.56 15303.70
1992/05/31 14935.29 15573.24
1992/06/30 15102.46 15763.64
1992/07/31 15175.76 15901.76
1992/08/31 15343.57 16114.36
1992/09/30 15453.88 16257.74
1992/10/31 15328.96 16135.97
1992/11/30 15407.52 16209.55
1992/12/31 15599.02 16414.85
1993/01/31 15804.92 16621.31
1993/02/28 15945.38 16790.09
1993/03/31 16032.67 16882.08
1993/04/30 16087.55 16943.70
1993/05/31 16179.82 17059.92
1993/06/30 16338.36 17198.63
1993/07/31 16424.19 17271.05
1993/08/31 16465.04 17313.98
1993/09/30 16465.98 17328.88
1993/10/31 16522.28 17358.66
1993/11/30 16426.89 17333.84
1993/12/31 16552.48 17494.74
1994/01/31 16738.77 17632.29
1994/02/28 16581.19 17544.68
1994/03/31 16164.81 17071.02
1994/04/30 16035.53 16954.21
1994/05/31 16049.83 17002.69
1994/06/30 15995.56 16977.86
1994/07/31 16320.21 17309.02
1994/08/31 16360.87 17362.17
1994/09/30 16133.19 17117.74
1994/10/31 16112.48 17090.59
1994/11/30 16060.55 17042.40
1994/12/31 16222.05 17231.63
1995/01/31 16564.45 17588.48
1995/02/28 16990.50 18051.92
1995/03/31 17074.58 18140.40
1995/04/30 17305.96 18409.06
1995/05/31 17837.90 18971.21
1995/06/30 17941.11 19100.28
1995/07/31 17993.92 19140.58
1995/08/31 18161.82 19337.40
1995/09/30 18341.20 19526.63
1995/10/31 18490.23 19686.66
1995/11/30 18694.23 19914.15
1995/12/31 18915.67 20169.96
1996/01/31 19033.79 20310.42
1996/02/29 18890.75 20158.57
1996/03/31 18851.27 20107.17
1996/04/30 18791.04 20054.61
1996/05/31 18714.05 19987.15
1996/06/30 18923.40 20249.68
1996/07/31 18992.27 20325.90
1996/08/31 19005.04 20334.66
1996/09/30 19290.32 20675.15
1996/10/31 19670.58 21093.33
1996/11/30 19944.27 21400.25
1996/12/31 19834.56 21285.77
1997/01/31 19964.45 21449.30
1997/02/28 20018.47 21526.69
1997/03/31 19812.61 21314.39
1997/04/30 20114.26 21663.94
1997/05/31 20302.71 21886.17
1997/06/30 20549.08 22145.49
1997/07/31 20911.86 22547.31
1997/08/31 20872.47 22499.12
1997/09/30 21122.17 22798.15
1997/10/31 21333.81 23035.86
1997/11/30 21368.24 23106.53
1997/12/31 21560.43 23315.03
1998/01/31 21755.04 23540.18
1998/02/28 21790.29 23592.75
1998/03/31 21870.52 23692.62
1998/04/30 22008.73 23830.16
1998/05/31 22167.36 23992.82
1998/06/30 22221.33 24093.86
1998/07/31 22336.44 24229.35
IMATRL PRASUN SHR__CHT 19980731 19980811 133226 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Ginnie Mae Fund on July 31, 1988. As the
chart shows, by July 31, 1998, the value of the investment would have
grown to $22,336 -- a 123.36% increase on the initial investment. For
comparison, look at how the Lehman Brothers GNMA Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $24,229 -- a 142.29% increase. The
fund will compare its performance to that of the Lehman Brothers GNMA
Index rather than the Salomon Brothers GNMA Index. The indexes include
the same types of bonds, and their performance is not materially
different. The fund recently changed to the Lehman Brothers index
mainly because Lehman Brothers indexes are used by most other Fidelity
bond funds. For comparison purposes, both indexes are shown in the
total returns chart above.
MARKET RECAP
Investors worldwide flocked to the
perceived safe haven of U.S. bonds
amid a sharp sell-off in Russian
bonds, weakness in overseas
markets and concerns about U.S.
corporate profits. The Lehman
Brothers Aggregate Bond Index -
a broad gauge of the U.S. taxable
bond market - returned 7.87%
during the 12-month period that
ended July 31, 1998. In the
fourth quarter of 1997 and the first
half of 1998, global market volatility
and low interest rates were the main
stories behind bond market
performance. As investors moved
assets from stocks and riskier bonds
to highly rated corporate bonds
and U.S. Treasuries, bond yields -
which move in the opposite
direction of bond prices - fell to
their lowest levels in decades. The
yield on the benchmark 30-year
bond fell to 5.70% from 6.50%
during the period. The Lehman
Brothers Corporate Bond Index
returned 7.35% for the past 12
months as corporate bond investors
benefited from domestic economic
stability and high demand for yield.
The period ended on a positive note
for bonds when the National
Association of Purchasing
Management's July index fell to
49.1, below the 49.8 reading
expected. A reading above 50
indicates an expansion in the
manufacturing economy, while one
below 50 points to a contraction. The
report also indicated there were no
new signs of inflationary pressure.
Since inflation erodes the value of
fixed-income holdings such as
bonds, this was positive news for
bond investors.
(photograph of Curt Hollingsworth)
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Ginnie Mae Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the 12-month period that ended July 31, 1998, the fund had a
total return of 6.81%. To get a sense of how the fund did relative to
its competitors, the GNMA funds average also returned 6.81% for the
same one-year period, according to Lipper Analytical Services.
Additionally, the Lehman Brothers GNMA Index - which tracks the types
of securities in which the fund invests - returned 7.46%.
Q. MORTGAGE-BACKED SECURITIES, INCLUDING GINNIE MAE SECURITIES,
OUTPACED TREASURIES THROUGHOUT MUCH OF THE PAST YEAR, BUT RECENTLY
HAVE LAGGED THEM. WHAT ACCOUNTED FOR THAT SHIFT?
A. Because interest rates fell substantially over the past year, home
sales and mortgage refinancings have occurred at or near record rates
so far this year. Those transactions, in turn, prompted a significant
rise in the prepayment of mortgage-backed securities. As prepayment
activity accelerated, mortgage security prices came under pressure.
While refinancings often put money in consumers' pockets, they take
steady long-term streams of payments away from holders of
mortgage-backed securities. When refinancings step up, many mortgage
security holders must find a new place to put their money - usually at
lower interest rates.
Q. WHICH HOLDINGS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's holdings in securities containing loans that originated
between five and 10 years ago was relatively light throughout the
year, a strategy that proved beneficial for the fund. Those securities
proved to be less immune to prepayment activity in the face of
substantial interest-rate declines than many observers first thought.
On the other hand, the fund's stake in loans originated in early 1998
with coupons - the interest rate the borrower promises to pay - of
7.5% and 8.0% was relatively heavy. In large part because of the
newness of the underlying mortgages and the very slight risk that the
mortgage holders would turn around and refinance just months after
taking out the loan, these securities offered relatively good
protection against prepayment. They were bid up in response.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. I wouldn't point to a specific security that was a disappointment
or that meaningfully detracted from the fund's performance. However,
I'd point to the ever-decreasing number of opportunities to find
securities that offered good protection against prepayment, at a
reasonable price. In previous years, there were occasions when a
particular coupon became cheap, but that hasn't been the case for some
time.
Q. WHAT WERE THE OTHER KEY ELEMENTS TO YOUR STRATEGY?
A. I kept the fund's duration - or interest-rate sensitivity -
neutral. By that I mean I didn't structure the fund to benefit from
interest rates moving higher or lower. I believe that it is extremely
difficult to predict the direction of interest rates with any regular
success over an extended time period. As a result, I kept duration in
line with the market rather than making it more or less sensitive
based on where I think interest rates are headed. Additionally, by
keeping the fund's investments evenly spread across the various
coupons available in the mortgage market, I have attempted to position
the fund to perform well whether interest rates rise, fall or remain
stable.
Q. WHAT'S YOUR OUTLOOK FOR THE GINNIE MAE MARKET?
A. I believe that prepayments will continue at a fairly quick pace
until interest rates stabilize or move higher. As is always the case,
the direction of interest rates will be the main factor that
determines the performance of mortgage securities. But since I'm not
in the business of forecasting interest rates, I won't try to predict
where rates will end up six months or a year from today. I'll continue
to focus on finding securities that I believe will offer the best
total-return potential, whether interest rates are heading higher,
lower or remain the same.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH JULY 31, 1998. THE MANAGER'S VIEWS ARE SUBJECT TO
CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. CURT
HOLLINGSWORTH WAS THE PORTFOLIO MANAGER OF THE FUND THROUGH DECEMBER
6, 1998. EFFECTIVE DECEMBER 7, 1998, THOMAS SILVIA IS THE FUND'S
PORTFOLIO MANAGER.
EXHIBIT 1
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of March 22, 1999, by and between Fidelity Union Street Trust, a
Massachusetts business trust, on behalf of its series Spartan Ginnie
Mae Fund (Spartan Ginnie Mae), and Fidelity Income Fund, a
Massachusetts business trust, on behalf of its series Fidelity Ginnie
Mae Fund (Fidelity Ginnie Mae). Fidelity Union Street Trust and
Fidelity Income Fund may be referred to herein collectively as the
"Trusts" or each individually as a "Trust." The Trusts are duly
organized business trusts under the laws of the Commonwealth of
Massachusetts with their principal place of business at 82 Devonshire
Street, Boston, Massachusetts 02109. Fidelity Ginnie Mae and Spartan
Ginnie Mae may be referred to herein collectively as the "Funds" or
each individually as a "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise: (a) the transfer of all of the assets of
Spartan Ginnie Mae to Fidelity Ginnie Mae solely in exchange for
shares of beneficial interest in Fidelity Ginnie Mae (the Fidelity
Ginnie Mae Shares) and the assumption by Fidelity Ginnie Mae of
Spartan Ginnie Mae's liabilities; and (b) the constructive
distribution of such shares by Spartan Ginnie Mae pro rata to its
shareholders in complete liquidation and termination of Spartan Ginnie
Mae in exchange for all of Spartan Ginnie Mae's outstanding shares.
Spartan Ginnie Mae shall receive shares of Fidelity Ginnie Mae having
an aggregate net asset value equal to the value of the assets of
Spartan Ginnie Mae on the Closing Date (as defined in Section 6),
which Spartan Ginnie Mae shall then distribute pro rata to its
shareholders. The foregoing transactions are referred to herein as the
"Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN GINNIE MAE.
Spartan Ginnie Mae represents and warrants to and agrees with
Fidelity Ginnie Mae that:
(a) Spartan Ginnie Mae is a series of Fidelity Union Street Trust, a
business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power
to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state,
and local authorizations to carry on its business as now being
conducted and to carry out this Agreement;
(b) Fidelity Union Street Trust is an open-end, management investment
company duly registered under the Investment Company Act of 1940, as
amended (the 1940 Act), and such registration is in full force and
effect;
(c) The Prospectus and Statement of Additional Information of Spartan
Ginnie Mae dated October 20, 1998, and supplemented J anuary 1,
1999, previously furnished to Fidelity Ginnie Mae, did not and do
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan Ginnie Mae, threatened against
Spartan Ginnie Mae which assert liability on the part of Spartan
Ginnie Mae. Spartan Ginnie Mae knows of no facts which might form the
basis for the institution of such proceedings;
(e) Spartan Ginnie Mae is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Restated Declaration of Trust or By-laws, or, to the
knowledge of Spartan Ginnie Mae, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Spartan
Ginnie Mae is a party or by which Spartan Ginnie Mae is bound or
result in the acceleration of any obligation or the imposition of any
penalty under any agreement, judgment or decree to which Spartan
Ginnie Mae is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Spartan Ginnie Mae at August 31, 1998, have been audited by
PricewaterhouseCoopers LLP, independent accountants, and have been
furnished to Fidelity Ginnie Mae together with such unaudited
financial statements and schedule of investments (including market
values) for the six month period ended February 28, 1999. Said
Statements of Assets and Liabilities and Schedule of Investments
fairly present the Fund's financial position as of such date and said
Statement of Operations, Statement of Changes in Net Assets, and
Financial Highlights fairly reflect its results of operations, changes
in financial position, and financial highlights for the periods
covered thereby in conformity with generally accepted accounting
principles consistently applied;
(g) Spartan Ginnie Mae 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 August 31, 1998 and
those incurred in the ordinary course of Spartan Ginnie Mae's business
as an investment company since August 31, 1998;
(h) The registration statement (Registration Statement) filed with
the Securities and Exchange Commission (Commission) by Fidelity Income
Fund on Form N-14 relating to the shares of Fidelity Ginnie Mae
issuable hereunder and the proxy statement of Spartan Ginnie Mae
included therein (Proxy Statement), on the effective date of the
Registration Statement and insofar as they relate to Spartan Ginnie
Mae (i) comply in all material respects with the provisions of the
Securities Act of 1933, as amended (the 1933 Act), the Securities
Exchange Act of 1934, as amended (the 1934 Act), and the 1940 Act, and
the rules and regulations thereunder, and (ii) do not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and at the time of the shareholders' meeting
referred to in Section 7 and on the Closing Date, the prospectus
contained in the Registration Statement of which the Proxy Statement
is a part (the Prospectus), as amended or supplemented, insofar as it
relates to Spartan Ginnie Mae, does not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(i) All material contracts and commitments of Spartan Ginnie Mae
(other than this Agreement) will be terminated without liability to
Spartan Ginnie Mae prior to the Closing Date (other than those made in
connection with redemptions of shares and the purchase and sale of
portfolio securities made in the ordinary course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan
Ginnie Mae of the transactions contemplated by this Agreement, except
such as have been obtained under the 1933 Act, the 1934 Act, the 1940
Act, and state securities or blue sky laws (which term as used herein
shall include the District of Columbia and Puerto Rico);
(k) Spartan Ginnie Mae has filed or will file all federal and state
tax returns which, to the knowledge of Spartan Ginnie Mae's officers,
are required to be filed by Spartan Ginnie Mae and has paid or will
pay all federal and state taxes shown to be due on said returns or
provision shall have been made for the payment thereof, and, to the
best of Spartan Ginnie Mae's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(l) Spartan Ginnie Mae has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment
company for all prior taxable years and intends to meet such
requirements for its current taxable year ending on the Closing Date;
(m) All of the issued and outstanding shares of Spartan Ginnie Mae
are, and at the Closing Date will be, duly and validly issued and
outstanding and fully paid and nonassessable as a matter of
Massachusetts law (except as disclosed in the Fund's Statement of
Additional Information), and have been offered for sale and sold in
conformity with all applicable federal securities laws. All of the
issued and outstanding shares of Spartan Ginnie Mae will, at the
Closing Date, be held by the persons and in the amounts set forth in
the list of shareholders submitted to Fidelity Ginnie Mae in
accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan Ginnie Mae will have the full right, power, and
authority to sell, assign, transfer, and deliver its portfolio
securities and any other assets of Spartan Ginnie Mae to be
transferred to Fidelity Ginnie Mae pursuant to this Agreement. As of
the Closing Date, subject only to the delivery of Spartan Ginnie Mae's
portfolio securities and any such other assets as contemplated by this
Agreement, Fidelity Ginnie Mae will acquire Spartan Ginnie Mae's
portfolio securities and any such other assets subject to no
encumbrances, liens, or security interests (except for those that may
arise in the ordinary course and are disclosed to Fidelity Ginnie Mae)
and without any restrictions upon the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Spartan Ginnie Mae, and this Agreement
constitutes a valid and binding obligation of Spartan Ginnie Mae
enforceable in accordance with its terms, subject to shareholder
approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY GINNIE MAE.
Fidelity Ginnie Mae represents and warrants to and agrees with
Spartan Ginnie Mae that:
(a) Fidelity Ginnie Mae is a series of Fidelity Income Fund, a
business trust duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Massachusetts, and has the power
to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state,
and local authorizations to carry on its business as now being
conducted and to carry out this Agreement;
(b) Fidelity Income Fund is an open-end, management investment
company duly registered under the 1940 Act, and such registration is
in full force and effect;
(c) The Prospectus and Statement of Additional Information of
Fidelity Ginnie Mae, dated September 21, 1998, and supplemented on
January 1, 1999 and October 8, 1998, respectively, previously
furnished to Spartan Ginnie Mae did not and do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity Ginnie Mae, threatened
against Fidelity Ginnie Mae which assert liability on the part of
Fidelity Ginnie Mae. Fidelity Ginnie Mae knows of no facts which might
form the basis for the institution of such proceedings;
(e) Fidelity Ginnie Mae is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws,
or, to the knowledge of Fidelity Ginnie Mae, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Fidelity Ginnie Mae is a party or by which Fidelity Ginnie Mae is
bound or result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree to
which Fidelity Ginnie Mae is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Fidelity Ginnie Mae at July 31, 1998, have been audited by
PricewaterhouseCoopers L LP, independent accountants, and have
been furnished to Spartan Ginnie Mae together with such unaudited
financial statements and schedule of investments (including market
values) for the six month period ended January 31, 1999. Said
Statements of Assets and Liabilities and Schedule of Investments
fairly present its financial position as of such date and said
Statement of Operations, Statement of Changes in Net Assets, and
Financial Highlights fairly reflect its results of operations, changes
in financial position, and financial highlights for the periods
covered thereby in conformity with generally accepted accounting
principles consistently applied;
(g) Fidelity Ginnie Mae 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, 1998
and those incurred in the ordinary course of Fidelity Ginnie Mae's
business as an investment company since July 31, 1998;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity
Ginnie Mae of the transactions contemplated by this Agreement, except
such as have been obtained under the 1933 Act, the 1934 Act, the 1940
Act, and state securities or blue sky laws (which term as used herein
shall include the District of Columbia and Puerto Rico);
(i) Fidelity Ginnie Mae has filed or will file all federal and state
tax returns which, to the knowledge of Fidelity Ginnie Mae's officers,
are required to be filed by Fidelity Ginnie Mae and has paid or will
pay all federal and state taxes shown to be due on said returns or
provision shall have been made for the payment thereof, and, to the
best of Fidelity Ginnie Mae's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(j) Fidelity Ginnie Mae has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment
company for all prior taxable years and intends to meet such
requirements for its current taxable year ending on July 31, 1999;
(k) As of the Closing Date, the shares of beneficial interest of
Fidelity Ginnie Mae to be issued to Spartan Ginnie Mae will have been
duly authorized and, when issued and delivered pursuant to this
Agreement, will be legally and validly issued and will be fully paid
and nonassessable (except as disclosed in the Fund's Statement of
Additional Information) by Fidelity Ginnie Mae, and no shareholder of
Fidelity Ginnie Mae will have any preemptive right of subscription or
purchase in respect thereof;
(l) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Fidelity Ginnie Mae, and this
Agreement constitutes a valid and binding obligation of Fidelity
Ginnie Mae enforceable in accordance with its terms, subject to
approval by the shareholders of Spartan Ginnie Mae;
(m) The Registration Statement and the Proxy Statement, on the
effective date of the Registration Statement and insofar as they
relate to Fidelity Ginnie Mae, (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act, and the
1940 Act, and the rules and regulations thereunder, and (ii) will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 7 and on the Closing
Date, the Prospectus, as amended or supplemented, insofar as it
relates to Fidelity Ginnie Mae, will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(n) The issuance of the Fidelity Ginnie Mae Shares pursuant to this
Agreement will be in compliance with all applicable federal securities
laws; and
(o) All of the issued and outstanding shares of beneficial interest
of Fidelity Ginnie Mae have been offered for sale and sold in
conformity with the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan
Ginnie Mae and to the other terms and conditions contained herein,
Spartan Ginnie Mae agrees to assign, sell, convey, transfer, and
deliver to Fidelity Ginnie Mae as of the Closing Date all of the
assets of Spartan Ginnie Mae of every kind and nature existing on the
Closing Date. Fidelity Ginnie Mae agrees in exchange therefor: (i) to
assume all of Spartan Ginnie Mae's liabilities existing on or after
the Closing Date, whether or not determinable on the Closing Date, and
(ii) to issue and deliver to Spartan Ginnie Mae the number of full and
fractional shares of Fidelity Ginnie Mae having an aggregate net asset
value equal to the value of the assets of Spartan Ginnie Mae
transferred hereunder, less the value of the liabilities of Spartan
Ginnie Mae, determined as provided for under Section 4.
(b) The assets of Spartan Ginnie Mae to be acquired by Fidelity
Ginnie Mae shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest or dividends
receivables), claims, choses in action, and other property
owned by Spartan Ginnie Mae, and any deferred or prepaid expenses
shown as an asset on the books of Spartan Ginnie Mae on the Closing
Date. Spartan Ginnie Mae will pay or cause to be paid to Fidelity
Ginnie Mae any dividend or interest payments received by it on or
after the Closing Date with respect to the assets transferred to
Fidelity Ginnie Mae hereunder, and Fidelity Ginnie Mae will retain any
dividend or interest payments received by it after the Valuation Time
with respect to the assets transferred hereunder without regard to the
payment date thereof.
(c) The liabilities of Spartan Ginnie Mae to be assumed by Fidelity
Ginnie Mae shall include (except as otherwise provided for herein) all
of Spartan Ginnie Mae's liabilities, debts, obligations, and duties,
of whatever kind or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of business,
whether or not determinable on the Closing Date, and whether or not
specifically referred to in this Agreement. Notwithstanding the
foregoing, Spartan Ginnie Mae agrees to use its best efforts to
discharge all of its known liabilities prior to the Closing Date,
other than liabilities incurred in the ordinary course of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable, Spartan Ginnie Mae will constructively
distribute pro rata to its shareholders of record, determined as of
the Valuation Time on the Closing Date, the Fidelity Ginnie Mae Shares
in exchange for such shareholders' shares of beneficial interest in
Spartan Ginnie Mae and Spartan Ginnie Mae will be liquidated in
accordance with Spartan Ginnie Mae's Restated Declaration of Trust.
Such distribution shall be accomplished by the Funds' transfer agent
opening accounts on Fidelity Ginnie Mae's share transfer books in the
names of the Spartan Ginnie Mae shareholders and transferring the
Fidelity Ginnie Mae Shares thereto. Each Spartan Ginnie Mae
shareholder's account shall be credited with the respective pro rata
number of full and fractional (rounded to the third decimal place)
Fidelity Ginnie Mae Shares due that shareholder. All outstanding
Spartan Ginnie Mae shares, including any represented by certificates,
shall simultaneously be canceled on Spartan Ginnie Mae's share
transfer records. Fidelity Ginnie Mae shall not issue certificates
representing the Fidelity Ginnie Mae Shares in connection with the
Reorganization.
(e) Any reporting responsibility of Spartan Ginnie Mae is and shall
remain its responsibility up to and including the date on which it is
terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity Ginnie
Mae Shares in a name other than that of the registered holder on
Spartan Ginnie Mae's books of the Spartan Ginnie Mae shares
constructively exchanged for the Fidelity Ginnie Mae Shares shall be
paid by the person to whom such Fidelity Ginnie Mae Shares are to be
issued, as a condition of such transfer.
4. VALUATION.
(a) The Valuation Time shall be as of the close of business of the
New York Stock Exchange on the Closing Date, or such other date as may
be mutually agreed upon in writing by the parties hereto (the
Valuation Time).
(b) As of the Closing Date, Fidelity Ginnie Mae will deliver to
Spartan Ginnie Mae the number of Fidelity Ginnie Mae Shares having an
aggregate net asset value equal to the value of the assets of Spartan
Ginnie Mae transferred hereunder less the liabilities of Spartan
Ginnie Mae, determined as provided in this Section 4.
(c) The net asset value per share of the Fidelity Ginnie Mae Shares
to be delivered to Spartan Ginnie Mae, the value of the assets of
Spartan Ginnie Mae transferred hereunder, and the value of the
liabilities of Spartan Ginnie Mae to be assumed hereunder shall in
each case be determined as of the Valuation Time.
(d) The net asset value per share of the Fidelity Ginnie Mae Shares
shall be computed in the manner set forth in the then-current Fidelity
Ginnie Mae Prospectus and Statement of Additional Information, and the
value of the assets and liabilities of Spartan Ginnie Mae shall be
computed in the manner set forth in the then-current Spartan Ginnie
Mae Prospectus and Statement of Additional Information.
(e) All computations pursuant to this Section shall be made by or
under the direction of Fidelity Service Company, Inc., a wholly-owned
subsidiary of FMR Corp., in accordance with its regular practice as
pricing agent for Spartan Ginnie Mae and Fidelity Ginnie Mae.
5. FEES; EXPENSES.
(a) Pursuant to Spartan Ginnie Mae's all-inclusive management
contract with Fidelity Management & Research Company (FMR), FMR will
pay all fees and expenses, including legal, accounting, printing,
filing, and proxy solicitation expenses, portfolio transfer taxes (if
any), or other similar expenses incurred in connection with the
transactions contemplated by this Agreement (but not including costs
incurred in connection with the purchase or sale of portfolio
securities). Any expenses incurred in connection with the transactions
contemplated by this Agreement which may be attributable to Fidelity
Ginnie Mae will be borne by Fidelity Ginnie Mae provided that they,
in combination with the fund's other operating expenses d o not
exceed the fund's 0.65% expense cap in effect since June 27, 1998.
Expenses exceeding the fund's expense cap will be paid by FMR (but not
including costs incurred in connection with the purchase or sale of
portfolio securities or interest, taxes, brokerage commissions or
extraordinary expenses).
(b) Each of Fidelity Ginnie Mae and Spartan Ginnie Mae represents
that there is no person who has dealt with it who by reason of such
dealings is entitled to any broker's or finder's or other similar fee
or commission arising out of the transactions contemplated by this
Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to
consummate the same (the Closing), unless otherwise provided herein,
shall occur at the principal office of the Trusts, 82 Devonshire
Street, Boston, Massachusetts, as of the Valuation Time on May 27,
1999, or at some other time, date, and place agreed to by Spartan
Ginnie Mae and Fidelity Ginnie Mae (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the Funds is closed to trading, or (ii) trading
thereon is restricted, or (iii) trading or the reporting of trading on
said market or elsewhere is disrupted, all so that accurate appraisal
of the total net asset value of Spartan Ginnie Mae and the net asset
value per share of Fidelity Ginnie Mae is impracticable, the Valuation
Time and the Closing Date shall be postponed until the first business
day after the day when such trading shall have been fully resumed and
such reporting shall have been restored, or such other date as the
parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN GINNIE MAE.
(a) Spartan Ginnie Mae agrees to call a meeting of its shareholders
after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity Ginnie Mae as herein provided,
adopting this Agreement, and authorizing the liquidation of Spartan
Ginnie Mae.
(b) Spartan Ginnie Mae agrees that as soon as reasonably practicable
after distribution of the Fidelity Ginnie Mae Shares, Spartan Ginnie
Mae shall be terminated as a series of Fidelity Union Street Trust
pursuant to its Restated Declaration of Trust, any further actions
shall be taken in connection therewith as required by applicable law,
and on and after the Closing Date Spartan Ginnie Mae shall not conduct
any business except in connection with its liquidation and
termination.
8. CONDITIONS TO OBLIGATIONS OF FIDELITY GINNIE MAE.
(a) That Spartan Ginnie Mae furnishes to Fidelity Ginnie Mae a
statement, dated as of the Closing Date, signed by an officer of
Fidelity Union Street Trust, certifying that as of the Valuation Time
and the Closing Date all representations and warranties of Spartan
Ginnie Mae made in this Agreement are true and correct in all material
respects and that Spartan Ginnie Mae has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such dates;
(b) That Spartan Ginnie Mae furnishes Fidelity Ginnie Mae with copies
of the resolutions, certified by an officer of Fidelity Union Street
Trust, evidencing the adoption of this Agreement and the approval of
the transactions contemplated herein by the requisite vote of the
holders of the outstanding shares of beneficial interest of Spartan
Ginnie Mae;
(c) That, on or prior to the Closing Date, Spartan Ginnie Mae will
declare one or more dividends or distributions which, together with
all previous such dividends or distributions attributable to its
current taxable year, shall have the effect of distributing to the
shareholders of Spartan Ginnie Mae substantially all of Spartan Ginnie
Mae's investment company taxable income and all of its net realized
capital gain, if any, as of the Closing Date;
(d) That Spartan Ginnie Mae shall deliver to Fidelity Ginnie Mae at
the Closing a statement of its assets and liabilities, together with a
list of its portfolio securities showing each such security's adjusted
tax basis and holding period by lot, with values determined as
provided in Section 4 of this Agreement, all as of the Valuation Time,
certified on Spartan Ginnie Mae's behalf by its Treasurer or Assistant
Treasurer;
(e) That Spartan Ginnie Mae's custodian shall deliver to Fidelity
Ginnie Mae a certificate identifying the assets of Spartan Ginnie Mae
held by such custodian as of the Valuation Time on the Closing Date
and stating that as of the Valuation Time: (i) the assets held by the
custodian will be transferred to Fidelity Ginnie Mae; (ii) Spartan
Ginnie Mae's assets have been duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof; and
(iii) to the best of the custodian's knowledge, all necessary taxes in
conjunction with the delivery of the assets, including all applicable
federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made;
(f) That Spartan Ginnie Mae's transfer agent shall deliver to
Fidelity Ginnie Mae at the Closing a certificate setting forth the
number of shares of Spartan Ginnie Mae outstanding as of the Valuation
Time and the name and address of each holder of record of any such
shares and the number of shares held of record by each such
shareholder;
(g) That Spartan Ginnie Mae calls a meeting of its shareholders to be
held after the effective date of the Registration Statement, to
consider transferring its assets to Fidelity Ginnie Mae as herein
provided, adopting this Agreement, and authorizing the liquidation and
termination of Spartan Ginnie Mae;
(h) That Spartan Ginnie Mae delivers to Fidelity Ginnie Mae a
certificate of an officer of Fidelity Union Street Trust, dated as of
the Closing Date, that there has been no material adverse change in
Spartan Ginnie Mae's financial position since August 31, 1998, other
than changes in the market value of its portfolio securities, or
changes due to net redemptions of its shares, dividends paid, or
losses from operations; and
(i) That all of the issued and outstanding shares of beneficial
interest of Spartan Ginnie Mae shall have been offered for sale and
sold in conformity with all applicable state securities laws and, to
the extent that any audit of the records of Spartan Ginnie Mae or its
transfer agent by Fidelity Ginnie Mae or its agents shall have
revealed otherwise, Spartan Ginnie Mae shall have taken all actions
that in the opinion of Fidelity Ginnie Mae are necessary to remedy any
prior failure on the part of Spartan Ginnie Mae to have offered for
sale and sold such shares in conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN GINNIE MAE.
(a) That Fidelity Ginnie Mae shall have executed and delivered to
Spartan Ginnie Mae an Assumption of Liabilities, certified by an
officer of Fidelity Income Fund, dated as of the Closing Date pursuant
to which Fidelity Ginnie Mae will assume all of the liabilities of
Spartan Ginnie Mae existing at the Valuation Time in connection with
the transactions contemplated by this Agreement;
(b) That Fidelity Ginnie Mae furnishes to Spartan Ginnie Mae a
statement, dated as of the Closing Date, signed by an officer of
Fidelity Income Fund, certifying that as of the Valuation Time and the
Closing Date all representations and warranties of Fidelity Ginnie Mae
made in this Agreement are true and correct in all material respects,
and Fidelity Ginnie Mae has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to such dates; and
(c) That Spartan Ginnie Mae shall have received an opinion of
Kirkpatrick & Lockhart LLP, counsel to Spartan Ginnie Mae and Fidelity
Ginnie Mae, to the effect that the Fidelity Ginnie Mae Shares are duly
authorized and upon delivery to Spartan Ginnie Mae as provided in this
Agreement will be validly issued and will be fully paid and
nonassessable by Fidelity Ginnie Mae (except as disclosed in Fidelity
Ginnie Mae's Statement of Additional Information) and no shareholder
of Fidelity Ginnie Mae has any preemptive right of subscription or
purchase in respect thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY GINNIE MAE AND SPARTAN
GINNIE MAE.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of
the holders of the outstanding shares of beneficial interest of
Spartan Ginnie Mae;
(b) That all consents of other parties and all other consents,
orders, and permits of federal, state, and local regulatory
authorities (including those of the Commission and of state Blue Sky
and securities authorities, which term as used herein shall include
the District of Columbia and Puerto Rico, and including "no action"
positions of such federal or state authorities) deemed necessary by
Fidelity Ginnie Mae or Spartan Ginnie Mae to permit consummation, in
all material respects, of the transactions contemplated hereby shall
have been obtained, except where failure to obtain any such consent,
order, or permit would not involve a risk of a material adverse effect
on the assets or properties of Fidelity Ginnie Mae or Spartan Ginnie
Mae, provided that either party hereto may for itself waive any of
such conditions;
(c) That all proceedings taken by either Fund in connection with the
transactions contemplated by this Agreement and all documents
incidental thereto shall be satisfactory in form and substance to it
and its counsel, Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall
have been instituted or, to the knowledge of Fidelity Ginnie Mae and
Spartan Ginnie Mae, threatened by the Commission; and
(f) That Fidelity Ginnie Mae and Spartan Ginnie Mae shall have
received an opinion of Kirkpatrick & Lockhart LLP satisfactory to
Fidelity Ginnie Mae and Spartan Ginnie Mae that for federal income tax
purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan Ginnie Mae and Fidelity Ginnie
Mae will each be parties to the Reorganization under section 368(b) of
the Code;
(ii) No gain or loss will be recognized by Spartan Ginnie Mae upon
the transfer of all of its assets to Fidelity Ginnie Mae in exchange
solely for the Fidelity Ginnie Mae Shares and the assumption of
Spartan Ginnie Mae's liabilities followed by the distribution of those
Fidelity Ginnie Mae Shares to the shareholders of Spartan Ginnie Mae
in liquidation of Spartan Ginnie Mae;
(iii) No gain or loss will be recognized by Fidelity Ginnie Mae on
the receipt of Spartan Ginnie Mae's assets in exchange solely for the
Fidelity Ginnie Mae Shares and the assumption of Spartan Ginnie Mae's
liabilities;
(iv) The basis of Spartan Ginnie Mae's assets in the hands of
Fidelity Ginnie Mae will be the same as the basis of such assets in
Spartan Ginnie Mae's hands immediately prior to the Reorganization;
(v) Fidelity Ginnie Mae's holding period in the assets to be
received from Spartan Ginnie Mae will include Spartan Ginnie Mae's
holding period in such assets;
(vi) A Spartan Ginnie Mae shareholder will recognize no gain or loss
on the exchange of his or her shares of beneficial interest in Spartan
Ginnie Mae for the Fidelity Ginnie Mae Shares in the Reorganization;
(vii) A Spartan Ginnie Mae shareholder's basis in the Fidelity
Ginnie Mae Shares to be received by him or her will be the same as his
or her basis in the Spartan Ginnie Mae shares exchanged therefor;
(viii) A Spartan Ginnie Mae shareholder's holding period for his or
her Fidelity Ginnie Mae Shares will include the holding period of
Spartan Ginnie Mae shares exchanged, provided that those Spartan
Ginnie Mae shares were held as capital assets on the date of the
Reorganization.
Notwithstanding anything herein to the contrary, neither Spartan
Ginnie Mae nor Fidelity Ginnie Mae may waive the conditions set forth
in this subsection 10(f).
11. COVENANTS OF FIDELITY GINNIE MAE AND SPARTAN GINNIE MAE.
(a) Fidelity Ginnie Mae and Spartan Ginnie Mae each covenants to
operate its respective business in the ordinary course between the
date hereof and the Closing Date, it being understood that such
ordinary course of business will include the payment of customary
dividends and distributions;
(b) Spartan Ginnie Mae covenants that it is not acquiring the
Fidelity Ginnie Mae Shares for the purpose of making any distribution
other than in accordance with the terms of this Agreement;
(c) Spartan Ginnie Mae covenants that it will assist Fidelity Ginnie
Mae in obtaining such information as Fidelity Ginnie Mae reasonably
requests concerning the beneficial ownership of Spartan Ginnie Mae's
shares; and
(d) Spartan Ginnie Mae covenants that its liquidation and termination
will be effected in the manner provided in its Restated Declaration of
Trust in accordance with applicable law and after the Closing Date,
Spartan Ginnie Mae will not conduct any business except in connection
with its liquidation and termination.
12. TERMINATION; WAIVER.
Fidelity Ginnie Mae and Spartan Ginnie Mae may terminate this
Agreement by mutual agreement. In addition, either Fidelity Ginnie Mae
or Spartan Ginnie Mae may at its option terminate this Agreement at or
prior to the Closing Date because:
(i) of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
(ii) a condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan Ginnie Mae or Fidelity Ginnie Mae, or
their respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter
hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement
signed by each party hereto and shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity Ginnie Mae or
Spartan Ginnie Mae; provided, however, that following the
shareholders' meeting called by Spartan Ginnie Mae pursuant to Section
7 of this Agreement, no such amendment may have the effect of changing
the provisions for determining the number of Fidelity Ginnie Mae
Shares to be paid to Spartan Ginnie Mae shareholders under this
Agreement to the detriment of such shareholders without their further
approval.
(c) Either Fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on
the interests of such Fund's shareholders.
The representations, warranties, and covenants contained in the
Agreement, or in any document delivered pursuant hereto or in
connection herewith, shall survive the consummation of the
transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of each Fund's Declaration of Trust, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of each Fund as trustees and not
individually and that the obligations of each Fund under this
instrument are not binding upon any of such Fund's Trustees, officers,
or shareholders individually but are binding only upon the assets and
property of such Fund. Each Fund agrees that its obligations hereunder
apply only to such Fund and not to its shareholders individually or to
the Trustees of such Fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer of any rights or obligations hereunder shall be made by
any party without the written consent of the other parties. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation other than the
parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by an appropriate officer.
[SIGNATURE LINES OMITTED]
SGMX-pxs-0399 CUSIP#316448307/FUND#461
1.715670.100
IMPORTANT PROXY MATERIALS
PLEASE CAST YOUR VOTE NOW!
Dear Shareholder:
I am writing to ask you for your vote on an important proposal to
merge Spartan(Registered trademark) Ginnie Mae Fund into Fidelity
Ginnie Mae Fund. A shareholder meeting is scheduled for May 19, 1999.
Votes received in time to be counted at the meeting will decide
whether the merger takes place. This package contains information
about the proposal and includes all the materials you will need to
vote by mail.
The fund's Board of Trustees has reviewed the proposed merger and has
recommended that the proposed merger be presented to shareholders.
The Trustees, most of whom are not affiliated with Fidelity, are
responsible for protecting your interests as a shareholder. The
Trustees have determined that the proposed merger is in shareholders'
best interest. However, the final decision is up to you.
The proposed merger would give shareholders of Spartan Ginnie Mae the
opportunity to participate in a larger fund with similar investment
policies. The combined fund would also have lower expenses guaranteed
through June 30, 2001. We have attached a Q&A to assist you in
understanding the proposal. The enclosed proxy statement includes a
detailed description of the proposed merger.
Please read the enclosed materials and promptly cast your vote on the
proxy card. You are entitled to one vote for each dollar of net asset
value you own of a fund on the record date (March 22, 1999). Your
vote is extremely important, no matter how large or small your
holdings may be.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED.
To cast your vote, simply complete the proxy card enclosed in this
package. Be sure to sign the card before mailing it in the
postage-paid envelope provided.
If you have any questions before you vote, please call us at
1-800-544-8888. We will be glad to help you get your vote in quickly.
Thank you for your participation in this important initiative for your
fund.
Sincerely,
Edward C. Johnson 3d
Chairman and Chief Executive Officer
Important information to help you understand and vote on the proposal
Please read the full text of the enclosed proxy statement. Below is a
brief overview of the proposal to be voted upon. Your vote is
important. We appreciate you placing your trust in Fidelity and look
forward to helping you achieve your financial goals.
WHAT PROPOSAL AM I BEING ASKED TO VOTE ON?
You are being asked to approve a merger of Spartan Ginnie Mae Fund
into Fidelity Ginnie Mae Fund.
WHAT IS THE REASON FOR AND ADVANTAGES OF THIS MERGER?
The proposed merger is part of a wider strategy by Fidelity to reduce
the number of similar bond funds it manages. The combined fund would
have lower expenses guaranteed through June 30, 2001, and similar
investment policies.
DO THE FUNDS BEING MERGED HAVE SIMILAR INVESTMENT POLICIES?
Both funds are bond funds that seek high current income by investing
primarily in GNMA (Government National Mortgage Association)
securities whose interest and principal are guaranteed by the U.S.
Government. In addition, both funds have similar portfolios in terms
of holdings, interest rate risk, and average maturity.
WHO IS THE FUND MANAGER FOR THESE FUNDS?
Tom Silvia currently manages both funds and is expected to manage the
combined fund.
HOW DO THE EXPENSE STRUCTURES OF THE FUNDS COMPARE?
Spartan Ginnie Mae Fund and Fidelity Ginnie Mae Fund have different
contractual expense structures. Spartan Ginnie Mae Fund pays an
all-inclusive management fee to Fidelity Management & Research Company
(FMR) while Fidelity Ginnie Mae Fund pays its management fees and
other expenses separately. If the merger is approved the combined
fund will retain Fidelity Ginnie Mae's current expense structure.
However, FMR has agreed to limit the combined fund's total operating
expenses to 0.63% of average net assets through June 30, 2001. After
that date, the combined fund's expenses could increase or decrease, as
permitted by the Fidelity Ginnie Mae Fund management contract.
WHAT WILL BE THE NAME OF THE COMBINED FUND AFTER THE MERGER IS
COMPLETED?
If shareholders of Spartan Ginnie Mae Fund approve the merger of their
fund into Fidelity Ginnie Mae Fund, the combined fund's name will
remain Fidelity Ginnie Mae Fund.
IS THE MERGER A TAXABLE EVENT FOR FEDERAL INCOME TAX PURPOSES?
Typically, the exchange of shares pursuant to a merger does not result
in a gain or loss for federal income tax purposes.
WHAT WILL BE THE SIZE OF FIDELITY GINNIE MAE FUND AFTER THE MERGER AND
HOW HAS THE FUND PERFORMED?
If the proposal is approved, the combined fund is anticipated to have
over $1.5 billion in assets.
The table below shows average annual total returns for both Fidelity
Ginnie Mae Fund and its Lipper peer group over the last 1, 3, 5, and
10 year periods. Please keep in mind that past performance is no
guarantee of future results and you may have a gain or loss when you
sell your shares.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998*
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Fidelity Ginnie Mae Fund 6.39% 6.64% 6.74% 8.41%
Lipper GNMA Funds Average** 6.47% 6.36% 6.51% 8.30%
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF FIDELITY GINNIE MAE
THAT I WILL RECEIVE?
As of the close of business of the New York Stock Exchange on the
Closing Date of the merger, shareholders will receive the number of
full and fractional shares of Fidelity Ginnie Mae Fund that is equal
in value to the net asset value of their shares of Spartan Ginnie Mae
Fund on that date. The anticipated closing date is May 27, 1999.
WHAT IF THERE ARE NOT ENOUGH VOTES TO REACH QUORUM BY THE SCHEDULED
SHAREHOLDER MEETING DATE?
To facilitate receiving sufficient votes, we will need to take further
action. We or D.F. King & Co., Inc., a proxy solicitation firm, may
contact you by mail or telephone. Therefore, we encourage
shareholders to vote as soon as they review the enclosed proxy
materials to avoid additional mailings or telephone calls.
If there are not sufficient votes to approve the proposal by the time
of the Shareholder Meeting (May 19, 1999), the meeting may be
adjourned to permit further solicitation of proxy votes.
HAS THE FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSAL?
Yes. The Board of Trustees has unanimously approved the proposal and
recommends that you vote to approve it.
HOW MANY VOTES AM I ENTITLED TO CAST?
As a shareholder, you are entitled to one vote for each dollar of net
asset value you own of Spartan Ginnie Mae on the record date. The
record date is March 22, 1999.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy
card, and mailing it in the enclosed postage paid envelope. If you
need any assistance, or have any questions regarding the proposal or
how to vote your shares, please call Fidelity at 800-544-8888.
HOW DO I SIGN THE PROXY CARD?
INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names
appear on the account registration shown on the card.
JOINT ACCOUNTS: Either owner may sign, but the name of the person
signing should conform exactly to a name shown in the registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her
capacity. For example, a trustee for a trust or other entity should
sign, "Ann B. Collins, Trustee."
* Average annual total returns are historical and include changes in
share price, reinvestment of dividends and capital gains, if any.
Share price, yield and return will vary.
** Lipper, Inc. is a nationally recognized organization that reports
on mutual fund total return performance and calculates fund rankings.
Lipper averages are based on universes of funds with the same
investment objective. Peer group averages include reinvested dividends
and capital gains, if any, and exclude sales charges.
FOR MORE COMPLETE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES
AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
Fidelity Distributors Corporation
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- ----------------------------------------------------------------------
FIDELITY UNION STREET TRUST: SPARTAN GINNIE MAE FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and Gerald C. McDonough, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of Fidelity Union Street Trust: Spartan Ginnie Mae 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 May 19, 1999 at 10:00 a.m.
Eastern time and at any adjournments thereof. All powers may be
exercised by a majority of said proxy holders or substitutes voting or
acting or, if only one votes and acts, then by that one. This Proxy
shall be voted on the proposal described in the Proxy Statement
as specified on the reverse side. Receipt of the Notice of the
Meeting and the accompanying Proxy Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
Date _____________, 1999
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 316448307/fund # 461
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
- ----------------------------------------------------------------------
______________________________________________________________________
1. To approve an Agreement and FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
Plan of Reorganization
between Spartan Ginnie Mae
Fund and Fidelity Income
Fund: Fidelity Ginnie Mae
Fund, providing for the
transfer of all of the
assets of Spartan Ginnie Mae
Fund to Fidelity Ginnie Mae
Fund in exchange solely for
shares of beneficial
interest in Fidelity Ginnie
Mae Fund and the assumption
by Fidelity Ginnie Mae Fund
of Spartan Ginnie Mae Fund's
liabilities, followed by the
distribution of Fidelity
Ginnie Mae Fund shares to
shareholders of Spartan
Ginnie Mae Fund in
liquidation of Spartan
Ginnie Mae Fund.
SGM-PXC-399 cusip # 316448307/fund# 461
SUPPLEMENT TO FIDELITY'S GOVERNMENT BOND FUNDS SEPTEMBER 21, 1998
PROSPECTUS
The following information replaces similar information found in the
"Expenses" section on page 6.
INTERMEDIATE GOV'T INCOME
Management fee 0.65%
12b-1 fee None
Other expenses 0.00%
Total fund operating expenses 0.65%
The following information replaces similar information found in the
"expenses" section on page 7.
INTERMEDIATE GOV'T INCOME
1 year $ 7
3 years $ 21
5 years $ 36
10 years $ 81
The following information replaces footnote D to the Financial
Highlights table for Fidelity Ginnie Mae Fund found on page 8.
FMR or the fund has entered into varying arrangements with third
parties who either paid or reduced a portion of the fund's expenses.
The following information replaces the biographical information for
Curt Hollingsworth found in the "Charter" section on page 15.
Thomas Silvia is Vice President and manager of Ginnie Mae and
Government Income, which he has managed since December 1998. He also
manages other Fidelity funds. Mr. Silvia joined Fidelity as a senior
mortgage trader in 1993. Previously, he was a quantitative analyst
with Donaldson, Lufkin & Jenrette in New York from 1990 to 1993.
Andrew Dudley is Vice President and manager of Intermediate Government
Income, which he has managed since December 1998. He also manages
other Fidelity funds. Prior to joining Fidelity in 1996, Mr. Dudley
was a portfolio manager for Putnam Investments from 1991 to 1996.
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a
copy of each fund's most recent financial report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
dated September 21, 1998. The SAI has been filed with the Securities
and Exchange Commission (SEC) and is available along with other
related materials on the SEC's Internet Web Site (http://www.sec.gov).
The SAI is incorporated herein by reference (legally forms a part of
the prospectus). For a free copy of either document, call
Fidelity(registered trademark) at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
GVT-pro-0998
1.537653.101
FIDELITY'S
GOVERNMENT BOND
FUNDS
Each of these funds seeks high current income by investing mainly in
U.S. Government securities. The funds have different investment
strategies, however, and carry varying degrees of risk and yield
potential.
FIDELITY GINNIE MAE FUND
(fund number 015, trading symbol FGMNX)
FIDELITY GOVERNMENT INCOME FUND (formerly Fidelity Government
Securities Fund)
(fund number 054, trading symbol FGOVX)
FIDELITY INTERMEDIATE GOVERNMENT INCOME FUND (formerly
Spartan(registered trademark) Limited Maturity Government Fund)
(fund number 452, trading symbol FSTGX)
PROSPECTUS
SEPTEMBER 21, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 28 THE FUNDS AT A GLANCE
29 WHO MAY WANT TO INVEST
30 EXPENSES Each fund's yearly
operating expenses.
32 FINANCIAL HIGHLIGHTS A
summary of each fund's
financial data.
41 PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL 44 CHARTER How each fund is
organized.
44 INVESTMENT PRINCIPLES AND
RISKS Each fund's overall
approach to investing.
46 BREAKDOWN OF EXPENSES How
operating costs are
calculated and what they
include.
YOUR ACCOUNT 47 DOING BUSINESS WITH FIDELITY
47 TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-advantaged
retirement plans.
49 HOW TO BUY SHARES Opening an
account and making
additional investments.
53 HOW TO SELL SHARES Taking
money out and closing your
account.
57 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND ACCOUNT 58 DIVIDENDS, CAPITAL GAINS,
POLICIES AND TAXES
59 TRANSACTION DETAILS Share
price calculations and the
timing of purchases and
redemptions.
60 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments(registered trademark), which
was established in 1946 and is now America's largest mutual fund
manager. Foreign affiliates of FMR may help choose investments for
some of the funds.
Beginning January 1, 1999, Fidelity Investments Money Management, Inc.
(FIMM), a subsidiary of FMR, will choose investments for the funds.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
GINNIE MAE
GOAL: High current income.
STRATEGY: Invests mainly in mortgage securities issued by the
Government National Mortgage Association (Ginnie Maes). FMR uses the
Lehman Brothers GNMA Index as a guide in structuring the fund and
selecting its investments.
SIZE: As of July 31, 1998, the fund had over $917 million in assets.
GOVERNMENT INCOME
GOAL: High current income with preservation of capital.
STRATEGY: Normally invests in U.S. Government securities and
instruments related to U.S. Government securities. FMR uses the Lehman
Brothers Government Bond Index as a guide in structuring the fund and
selecting its investments.
SIZE: As of July 31, 1998, the fund had over $1.2 billion in assets.
INTERMEDIATE GOV'T INCOME
GOAL: High current income with preservation of capital.
STRATEGY: Normally invests in U.S. Government securities and
instruments related to U.S. Government securities while maintaining a
dollar-weighted average maturity of three to ten years. FMR uses the
Lehman Brothers Intermediate Government Bond Index as a guide in
structuring the fund and selecting its investments.
SIZE: As of July 31, 1998, the fund had over $703 million in assets.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who seek high current
income from a portfolio of U.S. Government securities. A fund's level
of risk and potential reward depend on the quality and maturity of its
investments.
The value of the funds' investments and the income they generate will
vary from day to day, and generally reflect interest rates, market
conditions, and other economic and political news. Ginnie Mae's
investments are also subject to prepayment risk, which can lower the
fund's yield, particularly in periods of declining interest rates.
When you sell your shares, they may be worth more or less than what
you paid for them. By themselves, the funds do not constitute a
balanced investment plan.
(checkmark)THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. The funds
in this prospectus are in the
INCOME category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME Seeks
long-term growth and income
by investing in stocks and
bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy,
sell, or exchange shares of a fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page 79, for an explanation of how
and when these charges apply.
Sales charge on purchases and None
reinvested distributions
Deferred sales charge on None
redemptions
Annual account maintenance $12.00
fee (for accounts under
$2,500)
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays a management fee to FMR. FMR is responsible for the
payment of all other expenses for Intermediate Government Income with
certain limited exceptions. Each of Ginnie Mae and Government Income
also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and
financial reports. A fund's expenses are factored into its share price
or dividends and are not charged directly to shareholder accounts (see
"Breakdown of Expenses" page 66).
The following figures are based on historical expenses, adjusted to
reflect current fees, of each fund and are calculated as a percentage
of average net assets of each fund. In addition, on behalf of
Intermediate Government Income, FMR has entered into arrangements with
the fund's custodian and transfer agent whereby credits realized as a
result of uninvested cash balances are used to reduce fund expenses.
Each of Ginnie Mae and Government Income has entered into arrangements
with its custodian and transfer agent whereby credits realized as a
result of uninvested cash balances are used to reduce custodian and
transfer agent expenses. Including these reductions, the total fund
operating expenses presented in the table would have been 0.68% for
Government Income.
GINNIE MAE
Management fee (after 0.35%
reimbursement)
12b-1 fee None
Other expenses 0.30%
Total fund operating expenses 0.65%
(after reimbursement)
GOVERNMENT INCOME
Management fee 0.44%
12b-1 fee None
Other expenses 0.25%
Total fund operating expenses 0.69%
INTERMEDIATE GOV'T INCOME
Management fee (after 0.38%
reimbursement)
12b-1 fee None
Other expenses 0.00%
Total fund operating expenses 0.38%
(after reimbursement)
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
GINNIE MAE
1 year $ 7
3 years $ 21
5 years $ 36
10 years $ 81
GOVERNMENT INCOME
1 year $ 7
3 years $ 22
5 years $ 38
10 years $ 86
INTERMEDIATE GOV'T INCOME
1 year $ 4
3 years $ 12
5 years $ 21
10 years $ 48
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
Effective June 27, 1998, FMR has voluntarily agreed to reimburse
Ginnie Mae to the extent that the management fee, other expenses and
total operating expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) exceed 0.65% of its average
net assets. If this agreement were not in effect, the management fee,
other expenses and total operating expenses, as a percentage of
average net assets, of the fund would have been 0.44%, 0.30% and
0.74%, respectively.
Effective March 1, 1997, FMR has voluntarily agreed to reimburse
Intermediate Government Income to the extent that total operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed 0.38% of its average net assets. If
this agreement were not in effect, the management fee, other expenses,
and total operating expenses would have been 0.65%, 0.00%, and 0.65%,
respectively.
The reimbursement agreement for Intermediate Government Income will
continue through December 31, 1998.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow have been audited by
PricewaterhouseCoopers LLP, independent accountants. The funds'
financial highlights, financial statements, and reports of the auditor
are included in the funds' Annual Report, and are incorporated by
reference into (are legally a part of) the funds' SAI. Contact
Fidelity for a free copy of an Annual Report or the SAI.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY GINNIE MAE FUND
Selected Per-Share Data
and Ratios
Years ended July 31 1998 1997 1996 1995 1994 1993 1992 1991 1990
Net asset value, beginning $ 10.850 $ 10.530 $ 10.640 $ 10.360 $ 11.260 $ 11.060 $ 10.650 $ 10.370 $ 10.420
of period
Income from Investment .714B .720B .688 .721 .582 .800 .833 .845 .891
Operations Net investment
income
Net realized and .004 .310 (.107) .292 (.650) .083 .373 .288 (.099)
unrealized gain (loss)
Total from investment .718 1.030 .581 1.013 (.068) .883 1.206 1.133 .792
operations
Less Distributions From (.698) (.710) (.691) (.713) (.582) (.683) (.796) (.853) (.842)
net investment income
From net realized gain -- -- -- -- (.190) -- -- -- --
In excess of net -- -- -- (.020) (.060) -- -- -- --
realized gain
Total distributions (.698) (.710) (.691) (.733) (.832) (.683) (.796) (.853) (.842)
Net asset value, end of $ 10.870 $ 10.850 $ 10.530 $ 10.640 $ 10.360 $ 11.260 $ 11.060 $ 10.650 $ 10.370
period
Total returnA 6.81% 10.11% 5.55% 10.26% (.63)% 8.23% 11.65% 11.36% 8.01%
Net assets, end of period $ 917 $ 822 $ 790 $ 767 $ 769 $ 976 $ 914 $ 797 $ 658
(in millions)
Ratio of expenses to .72%C .76% .76% .75% .82% .80% .80% .83% .83%
average net assets
Ratio of expenses to .72% .75%D .75%D .75% .82% .80% .80% .83% .83%
average net assets after
expense reductions
Ratio of net investment 6.58% 6.75% 6.69% 7.24% 7.03% 7.26% 7.73% 8.24% 8.71%
income to average net assets
Portfolio turnover rate 172% 98% 107% 210% 303% 259% 114% 125% 96%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FIDELITY GINNIE MAE FUND
Selected Per-Share Data
and Ratios
Years ended July 31 1989
Net asset value, beginning $ 10.020
of period
Income from Investment .916
Operations Net investment
income
Net realized and .322
unrealized gain (loss)
Total from investment 1.238
operations
Less Distributions From (.838)
net investment income
From net realized gain --
In excess of net --
realized gain
Total distributions (.838)
Net asset value, end of $ 10.420
period
Total returnA 13.00%
Net assets, end of period $ 651
(in millions)
Ratio of expenses to .85%
average net assets
Ratio of expenses to .85%
average net assets after
expense reductions
Ratio of net investment 9.03%
income to average net assets
Portfolio turnover rate 291%
</TABLE>
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
F NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
G FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY GOVERNMENT INCOME FUND
Selected Per-Share Data
and Ratios
Year ended July 31 1998E 1997D 1996D 1995D 1994D 1993D 1992F 1991G 1990G 1989G
Net asset value, beginning $ 9.760 $ 9.620 $ 9.890 $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610 $ 9.270
of period
Income from Investment .481I .625I .670 .625 .626 .672 .556 .801 .832 .784
Operations
Net investment
income
Net realized and .208 .175 (.299) .564 (1.225) .627 .198 .660 .030 .340
unrealized gain (loss)
Total from investment .689 .800 .371 1.189 (.599) 1.299 .754 1.461 .862 1.124
operations
Less Distributions
From net investment income (.469) (.660) (.641) (.609) (.631) (.679) (.554) (.801) (.832) (.784)
From net realized gain -- -- -- -- (.310) (.250) -- -- -- --
In excess of net -- -- -- (.020) -- -- -- -- -- --
realized gain
Total distributions (.469) (.660) (.641) (.629) (.941) (.929) (.554) (.801) (.832) (.784)
Net asset value, end of $ 9.980 $ 9.760 $ 9.620 $ 9.890 $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610
period
Total returnB,C 7.19% 8.61% 3.82% 13.21% (5.81)% 13.18% 7.65% 15.96% 9.53% 12.62%
Net assets, end of period $ 1,253 $ 1,023 $ 949 $ 897 $ 614 $ 729 $ 582 $ 522 $ 469 $ 560
(in millions)
Ratio of expenses to .69%A .73% .72% .71% .69% .69% .70%A .70% .66% .73%
average net assets
Ratio of expenses to .68%A,H .72%H .71%H .71% .69% .69% .70%A .70% .66% .73%
average net assets after
expense reductions
Ratio of net investment 5.82%A 6.48% 6.52% 6.36% 6.26% 6.40% 7.31%A 8.23% 8.84% 8.29%
income to average net assets
Portfolio turnover rate 289%A 199% 124% 391% 402% 323% 219%A 257% 302% 312%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FIDELITY GOVERNMENT INCOME FUND
Selected Per-Share Data
and Ratios
Year ended July 31 1988G
Net asset value, beginning $ 9.520
of period
Income from Investment .839
Operations Net investment
income
Net realized and (.250)
unrealized gain (loss)
Total from investment .589
operations
Less Distributions From (.839)
net investment income
From net realized gain --
In excess of net --
realized gain
Total distributions (.839)
Net asset value, end of $ 9.270
period
Total returnB,C 6.36%
Net assets, end of period $ 568
(in millions)
Ratio of expenses to .79%
average net assets
Ratio of expenses to .79%
average net assets after
expense reductions
Ratio of net investment 8.87%
income to average net assets
Portfolio turnover rate 283%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D YEAR ENDED SEPTEMBER 30
E TEN MONTHS ENDED JULY 31,1998
F NINE MONTHS ENDED SEPTEMBER 30, 1992
G YEAR ENDED DECEMBER 31
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
I NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY INTERMEDIATE GOVERNMENT INCOME FUND
Selected Per-Share Data
and Ratios
Years ended July 31 1998 1997 1996 1995 1994 1993 1992 1991 1990
Net asset value, beginning $ 9.790 $ 9.650 $ 9.760 $ 9.610 $ 10.310 $ 10.180 $ 10.060 $ 9.930 $ 10.030
of period
Income from Investment .652C .675C .678 .610 .470 .872 .836 .853 .816
Operations Net investment
income
Net realized and (.008) .124 (.150) .143 (.410) (.087) .021 .142 (.100)
unrealized gain (loss)
Total from investment .644 .799 .528 .753 .060 .785 .857 .995 .716
operations
Less Distributions From (.654) (.659) (.638) (.603) (.540) (.605) (.677) (.845) (.816)
net investment income
From net realized gain -- -- -- -- -- (.050) (.060) (.020) --
In excess of net -- -- -- -- (.220) -- -- -- --
realized gain
Total distributions (.654) (.659) (.638) (.603) (.760) (.655) (.737) (.865) (.816)
Net asset value, end of $ 9.780 $ 9.790 $ 9.650 $ 9.760 $ 9.610 $ 10.310 $ 10.180 $ 10.060 $ 9.930
period
Total returnA,B 6.78% 8.56% 5.49% 8.16% .57% 7.96% 8.78% 10.43% 7.49%
Net assets, end of period $ 704 $ 704 $ 740 $ 817 $ 1,018 $ 1,529 $ 1,770 $ 880 $ 132
(in millions)
Ratio of expenses to .38%E .54%E .63%E .65% .65% .65% .61%E .50%E .83%
average net assets
Ratio of expenses to .38% .54% .62%D .65% .65% .65% .61% .50% .83%
average net assets after
expense reductions
Ratio of net investment 6.65% 6.96% 6.89% 7.18% 7.37% 8.05% 8.24% 8.63% 8.28%
income to average net assets
Portfolio turnover rate 188% 105% 105% 210% 391% 324% 330% 288% 270%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FIDELITY INTERMEDIATE GOVERNMENT INCOME FUND
Selected Per-Share Data
and Ratios
Years ended July 31 1989
Net asset value, beginning $ 9.880
of period
Income from Investment .806
Operations Net investment
income
Net realized and .150
unrealized gain (loss)
Total from investment .956
operations
Less Distributions From (.806)
net investment income
From net realized gain --
In excess of net --
realized gain
Total distributions (.806)
Net asset value, end of $ 10.030
period
Total returnA,B 10.14%
Net assets, end of period $ 125
(in millions)
Ratio of expenses to .68%E
average net assets
Ratio of expenses to .68%
average net assets after
expense reductions
Ratio of net investment 8.20%
income to average net assets
Portfolio turnover rate 806%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
Each fund's fiscal year runs from August 1 through July 31. The tables
below show each fund's performance over past fiscal years compared to
different measures, including a comparative index and a competitive
funds average. The charts on page present calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended July 31, Past 1 year Past 5 years Past 10 years
1998
Ginnie Mae* 6.81% 6.34% 8.37%
Lehman Brothers GNMA Index 7.46% 7.01% 9.25%
Lipper GNMA Funds Average 6.81% 6.11% 8.27%
Government Income 7.67% 5.87% 8.70%
Lehman Brothers Gov't Bond 8.35% 6.57% 8.97%
Index
Lipper General U.S. Gov't 7.32% 5.60% 7.93%
Funds Average
Intermediate Gov't Income* 6.78% 5.87% 7.40%
Lehman Brothers Intermediate 6.83% 5.95% 8.12%
Gov't Bond Index
Lipper Short-Intermediate 5.67% 5.00% 7.38%
U.S. Gov't. Funds Average
* IF FMR HAD NOT REIMBURSED CERTAIN FUND EXPENSES DURING THESE
PERIODS, YIELDS AND TOTAL RETURNS WOULD HAVE BEEN LOWER.
CUMULATIVE TOTAL RETURNS
Fiscal periods ended July 31, Past 1 year Past 5 years Past 10 years
1998
Ginnie Mae* 6.81% 36.00% 123.36%
Lehman Brothers GNMA Index 7.46% 40.29% 142.29%
Lipper GNMA Funds Average 6.81% 34.54% 121.63%
Government Income 7.67% 33.00% 130.27%
Lehman Brothers Gov't Bond 8.35% 37.43% 135.99%
Index
Lipper General U.S. Gov't 7.32% 31.41% 115.07%
Funds Average
Intermediate Gov't Income* 6.78% 33.02% 104.23%
Lehman Brothers Intermediate 6.83% 33.48% 118.39%
Gov't Bond Index
Lipper Short-Intermediate 5.67% 27.74% 104.03%
U.S. Gov't Funds Average
* IF FMR HAD NOT REIMBURSED CERTAIN FUND EXPENSES DURING THESE
PERIODS, YIELDS AND TOTAL RETURNS WOULD HAVE BEEN LOWER.
(checkmark)UNDERSTANDING
PERFORMANCE
Because these funds invest in
fixed-income securities, their
performance is related to
changes in interest rates.
Funds that hold short-term
bonds are usually less
affected by changes in
interest rates than long-term
bond funds. For that reason,
long-term bond funds typically
offer higher yields and carry
more risk than short-term bond
funds.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. Yields
are calculated according to a standard that is required for all stock
and bond funds. Because this differs from other accounting methods,
the quoted yield may not equal the income actually paid to
shareholders.
LEHMAN BROTHERS GNMA INDEX is a market capitalization weighted index
of fixed-rate securities issued by the Government National Mortgage
Association.
LEHMAN BROTHERS GOVERNMENT BOND INDEX is an index of U.S. Government
and government agency securities (other than mortgage securities) with
maturities of one year or more.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX is a market value
weighted index of U.S. Government fixed-rate debt issues with
maturities between one and ten years.
Unlike each fund's returns, the total returns of each comparative
index do not include the effect of any brokerage commissions,
transaction fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGES are the Lipper GNMA Funds Average,
Lipper General U.S. Government Funds Average, and Lipper
Short-Intermediate U.S. Government Funds Average for Ginnie Mae,
Government Income, and Intermediate Government Income, respectively.
As of July 31, 1998, the averages reflected the performance of 53,
185, and 100 mutual funds with similar investment objectives,
respectively. These averages, published by Lipper Analytical Services,
Inc., exclude the effect of sales loads.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1989 1990 1991 1992 1993 1994 1995 1996 1997
INTERMEDIATE GOV'T INCOME 10.35% 9.13% 11.91% 5.76% 6.42% -0.95% 13.93% 4.14% 7.70%
Lehman Brothers Intermediate
Government 12.68% 9.56% 14.11% 6.93% 8.17% -1.75% 14.41% 4.06% 7.72%
Lipper Short-Intermediate U.S. Govt.
Fund Average 10.84% 9.22% 13.11% 5.94% 6.96% -2.26% 12.46% 3.52% 6.72%
Consumer Price Index 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 10.35
Row: 3, Col: 1, Value: 9.129999999999999
Row: 4, Col: 1, Value: 11.91
Row: 5, Col: 1, Value: 5.76
Row: 6, Col: 1, Value: 6.42
Row: 7, Col: 1, Value: -0.9500000000000001
Row: 8, Col: 1, Value: 13.93
Row: 9, Col: 1, Value: 4.14
Row: 10, Col: 1, Value: 7.7
(LARGE SOLID BOX) Intermediate
Gov't Income
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1989 1990 1991 1992 1993 1994 1995 1996 1997
GOVERNMENT INCOME 12.62% 9.53% 15.96% 7.97% 12.32% -5.21% 18.07% 2.09% 8.93%
Lehman Brothers Government
Bond Index 14.22% 8.72% 15.32% 7.23% 10.66% -3.37% 18.34% 2.77% 9.59%
Lipper General U.S. Government
Funds Average 12.46% 8.22% 14.44% 6.41% 9.42% -4.64% 17.34% 1.72% 8.84%
Consumer Price Index 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 12.62
Row: 3, Col: 1, Value: 9.529999999999999
Row: 4, Col: 1, Value: 15.96
Row: 5, Col: 1, Value: 7.970000000000001
Row: 6, Col: 1, Value: 12.32
Row: 7, Col: 1, Value: -5.21
Row: 8, Col: 1, Value: 18.07
Row: 9, Col: 1, Value: 2.09
Row: 10, Col: 1, Value: 8.93
(LARGE SOLID BOX) Government Income
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1989 1990 1991 1992 1993 1994 1995 1996 1997
GINNIE MAE 13.85% 10.50% 13.57% 6.70% 6.11% -2.00% 16.60% 4.86% 8.70%
Lehman Brothers GNMA Index 15.69% 10.58% 16.04% 7.41% 6.58% -1.50% 17.05% 5.53% 9.53%
Lipper GNMA Funds Average 13.28% 9.55% 14.86% 6.49% 6.57% -2.49% 16.25% 3.81% 8.80%
Consumer Price Index 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54% 3.32% 1.70%
</TABLE>
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 13.85
Row: 3, Col: 1, Value: 10.5
Row: 4, Col: 1, Value: 13.57
Row: 5, Col: 1, Value: 6.7
Row: 6, Col: 1, Value: 6.109999999999999
Row: 7, Col: 1, Value: -2.0
Row: 8, Col: 1, Value: 16.6
Row: 9, Col: 1, Value: 4.859999999999999
Row: 10, Col: 1, Value: 8.699999999999999
(LARGE SOLID BOX) Ginnie Mae
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Ginnie Mae and
Intermediate Government Income are diversified funds, and Government
Income is a non-diversified fund of Fidelity Income Fund, an open-end
management investment company organized as a Massachusetts business
trust on August 7, 1984.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
funds' activities, review contractual arrangements with companies that
provide services to the funds, and review the funds' performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses the funds' investments and
handles their business affairs.
Affiliates assist FMR with foreign investments:
(small solid bullet) Fidelity Management & Research (U.K.) Inc. (FMR
U.K.), in London, England, serves as a sub-adviser for Ginnie Mae and
Intermediate Government Income.
(small solid bullet) Fidelity Management & Research (Far East) Inc.
(FMR Far East), in Tokyo, Japan, serves as a sub-adviser for Ginnie
Mae and Intermediate Government Income.
Beginning January 1, 1999, FIMM, located in Merrimack, New Hampshire,
will have primary responsibility for providing investment management
services for the funds.
Curt Hollingsworth is Vice President and manager of Ginnie Mae and
Government Income, which he has managed since February 1997; and
Intermediate Government Income, which he has managed since May 1988.
Since joining Fidelity in 1983, Mr. Hollingsworth has worked as a
fixed-income trader and portfolio manager.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for each fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., FMR Far
East, and FIMM. Members of the Edward C. Johnson 3d family are the
predominant owners of a class of shares of common stock representing
approximately 49% of the voting power of FMR Corp. Under the
Investment Company Act of 1940 (the 1940 Act), control of a company is
presumed where one individual or group of individuals owns more than
25% of the voting stock of that company; therefore, the Johnson family
may be deemed under the 1940 Act to form a controlling group with
respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out a fund's transactions, provided that the fund
receives brokerage services and commission rates comparable to those
of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political, or financial events. The types
and maturities of the securities a bond fund purchases and the credit
quality of their issuers will impact a bond fund's reaction to these
events.
The total return from a bond includes both income and price gains or
losses. While income is the most important component of bond returns
over time, a bond fund's emphasis on income does not mean the fund
invests only in the highest-yielding bonds available, or that it can
avoid losses of principal.
INTEREST RATE RISK. In general, bond prices rise when interest rates
fall and fall when interest rates rise. Longer-term bonds are usually
more sensitive to interest rate changes. In other words, the longer
the maturity of a bond, the greater the impact a change in interest
rates is likely to have on the bond's price. In addition, short-term
interest rates and long-term interest rates do not necessarily move in
the same amount or in the same direction. A short-term bond tends to
react to changes in short-term interest rates and a long-term bond
tends to react to changes in long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of
its issuer. Changes in the financial condition of an issuer, changes
in general economic conditions, and changes in specific economic
conditions that affect a particular type of issuer can impact the
credit quality of an issuer. Lower quality bonds generally tend to be
more sensitive to these changes than higher quality bonds.
PREPAYMENT RISK. Many types of debt securities, including mortgage
securities, are subject to prepayment risk. Prepayment risk occurs
when the issuer of a security can prepay principal prior to the
security's maturity. Securities subject to prepayment risk generally
offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising
interest rate environment. In addition, the potential impact of
prepayment features on the price of a debt security may be difficult
to predict and result in greater volatility.
FIDELITY'S APPROACH TO BOND FUNDS. In managing bond funds, FMR selects
a benchmark index that is representative of the universe of securities
in which a fund invests. FMR uses this benchmark as a guide in
structuring the fund and selecting its investments.
FMR allocates assets among different market sectors (for example,
fixed-rate or adjustable rate mortgages) and different maturities
based on its view of the relative value of each sector or maturity.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the universe of securities in which a fund may invest. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market inefficiencies.
GINNIE MAE seeks high current income, consistent with prudent
investment risk, by investing in Ginnie Maes. When consistent with its
goal, the fund may also consider the potential for capital gain. FMR
normally invests at least 65% of the fund's total assets in Ginnie
Maes. The fund may also invest in other U.S. Government securities and
instruments related to U.S. Government securities. Other instruments
may include futures or options on U.S. Government securities or
interests in U.S. Government securities that have been repackaged by
dealers or other third parties. It is important to note that neither
the fund's share price nor its yield is guaranteed by the U.S.
Government.
Ginnie Maes are government securities that are interests in pools of
mortgage loans. Their principal and interest payments are fully
guaranteed by the U.S. Government, making them high-quality
investments.
The benchmark index for the fund is the Lehman Brothers GNMA Index, a
market capitalization weighted index of fixed-rate securities that
represent interests in pools of mortgage loans with original terms of
15 and 30 years and are issued by the Government National Mortgage
Association (GNMA). FMR manages the fund to have similar overall
interest rate risk to the index. As of July 31, 1998, the
dollar-weighted average maturity of the fund and the index was
approximately 6.10 years and 5.75 years, respectively.
The reaction of mortgage securities to changes in interest rates can
be difficult to predict because mortgage securities are subject to
prepayment of principal and interest and can be structured in a
complex manner. In determining a security's maturity for purposes of
calculating a fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially
shorter than its stated final maturity.
GOVERNMENT INCOME seeks high current income, consistent with
preservation of principal, by investing in U.S. Government securities
and instruments related to U.S. Government securities under normal
conditions. The benchmark index for the fund is the Lehman Brothers
Government Bond Index, a market value weighted benchmark of U.S.
Government and government agency securities (other than mortgage
securities) with maturities of one year or more. FMR manages the fund
to have similar overall interest rate risk to the index. As of July
31,1998, the dollar-weighted average maturity of the fund and the
index was approximately 8.70 years and 8.90 years, respectively.
In determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
The fund normally invests only in U.S. Government securities,
repurchase agreements and other instruments related to U.S. Government
securities. FMR normally invests at least 65% of the fund's total
assets in U.S. Government securities and repurchase agreements for
U.S. Government securities. Other instruments may include futures or
options on U.S. Government securities or interests in U.S. Government
securities that have been repackaged by dealers or other third
parties. It is important to note that neither the fund's share price
nor its yield is guaranteed by the U.S. Government.
INTERMEDIATE GOVERNMENT INCOME seeks high current income, consistent
with preservation of capital, by investing in U.S. Government
securities and instruments related to U.S. Government securities under
normal conditions. The benchmark index for the fund is the Lehman
Brothers Intermediate Government Bond Index, a market value weighted
benchmark of U.S. Government fixed-rate debt issues with maturities
between one and 10 years. FMR manages the fund to have similar overall
interest rate risk to the index. As of July 31, 1998, the
dollar-weighted average maturity of the fund and the index was
approximately 4.70 years and 3.88 years, respectively. In addition,
the fund normally maintains a dollar-weighted average maturity of
between three and 10 years.
In determining a security's maturity for purposes of calculating the
fund's average maturity, an estimate of the average time for its
principal to be paid may be used. This can be substantially shorter
than its stated final maturity.
The fund normally invests only in U.S. Government securities,
repurchase agreements and other instruments related to U.S. Government
securities. FMR normally invests at least 65% of the fund's total
assets in U.S. Government securities and repurchase agreements for
U.S. Government securities. Other instruments may include futures or
options on U.S. Government securities or interests in U.S. Government
securities that have been repackaged by dealers or other third
parties. It is important to note that neither the fund's share price
nor its yield is guaranteed by the U.S. Government.
FMR may use various investment techniques to hedge a portion of a
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. When you sell your shares of a fund, they may be
worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. Each fund also reserves the right to invest without
limitation in investment-grade money market or short-term debt
instruments for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of each fund's limitations and more
detailed information about each fund's investments are contained in
the funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in each fund's financial reports, which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes. In addition, bond prices are also
affected by the credit quality of the issuer.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. Government. Not all U.S. Government securities are backed by
the full faith and credit of the United States. For example, U.S.
Government securities such as those issued by Fannie Mae are supported
by the instrumentality's right to borrow money from the U.S. Treasury
under certain circumstances. Other U.S. Government securities, such as
those issued by the Federal Farm Credit Banks Funding Corporation, are
supported only by the credit of the entity that issued them.
ASSET-BACKED SECURITIES include interests in pools of debt securities,
commercial or consumer loans, or other receivables. The value of these
securities depends on many factors, including changes in interest
rates, the availability of information concerning the pool and its
structure, the credit quality of the underlying assets, the market's
perception of the servicer of the pool, and any credit enhancement
provided. In addition, these securities may be subject to prepayment
risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private entities.
The price of a mortgage security may be significantly affected by
changes in interest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
RESTRICTIONS: Each of Government Income and Intermediate Government
Income does not currently intend to invest more than 40% of its assets
in mortgage securities.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile, and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, commodity prices, or other factors that affect
security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts, entering
into swap agreements and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with a fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of a
fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
ILLIQUID SECURITIES. Some investments may be determined by FMR, under
the supervision of the Board of Trustees, to be illiquid, which means
that they may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly
to a fund.
RESTRICTIONS: A fund may not invest more than 10% of its assets in
illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
OTHER INSTRUMENTS may include real estate-related instruments.
CASH MANAGEMENT. A fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
BORROWING. Each fund may borrow from banks or from other funds advised
by FMR or its affiliates, or through reverse repurchase agreements. If
a fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a fund makes
additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: Each fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering a fund's securities. A fund may also lend money to
other funds advised by FMR or its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of a
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
GINNIE MAE seeks a high level of current income consistent with
prudent investment risk, by investing primarily in mortgage-related
securities. In seeking current income, the fund may also consider the
potential for capital gain.
GOVERNMENT INCOME seeks a high level of current income, consistent
with preservation of principal. The fund invests in securities issued
by the U.S. Government or issued by U.S. Government agencies or
instrumentalities, and in certain options and futures contracts.
INTERMEDIATE GOVERNMENT INCOME seeks a high level of current income as
is consistent with the preservation of capital.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of each fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, each fund pays fees related to its daily
operations. Expenses paid out of each fund's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments
and business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services for certain funds. Each of Ginnie Mae
and Government Income also pays OTHER EXPENSES, which are explained on
page 69.
FMR may, from time to time, agree to reimburse the funds for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a fund if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which, in the case of certain funds, may be terminated
at any time without notice, can decrease a fund's expenses and boost
its performance.
MANAGEMENT FEE AND OTHER EXPENSES
The management fee is calculated and paid to FMR every month. FMR pays
all of the other expenses of Intermediate Government Income with
limited exceptions.
Intermediate Government Income's annual management fee rate is 0.65%
of its average net assets. For the fiscal year ended July 31, 1998,
Intermediate Government Income paid a management fee of 0.38% of the
fund's average net assets, after reimbursement.
For each of Ginnie Mae and Government Income, the fee is calculated by
adding a group fee rate to an individual fund fee rate, dividing by
twelve, and multiplying the result by the fund's average net assets
throughout the month.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For July 1998, the group fee rate was 0.1331%. The individual fund fee
rate is 0.30% for each of Ginnie Mae and Government Income.
The total management fee for the fiscal year ended July 31, 1998 was
0.42%, after reimbursement, of the fund's average net assets for
Ginnie Mae and 0.44% (annualized) of the fund's average net assets for
Government Income.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East on
behalf of Ginnie Mae and Intermediate Government Income. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to a fund's investments that the
sub-adviser manages on a discretionary basis.
Beginning January 1, 1999, FIMM will have primary responsibility for
managing each fund's investments. FMR will pay FIMM 50% of its
management fee (before expense reimbursements) for FIMM's services.
While the management fee is a significant component of each of Ginnie
Mae's and Government Income's annual operating costs, these funds have
other expenses as well.
The funds contract with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing each
fund's investments, handling securities loans for each fund, and
calculating each fund's share price and dividends.
For the fiscal year ended July 1998, transfer agency and pricing and
bookkeeping fees paid (as a percentage of average net assets) amounted
to the following. These amounts are before expense reductions, if any.
Transfer Agency and Pricing
and Bookkeeping Fees Paid by
Fund
Ginnie Mae 0.26%
Government Income* 0.21%
* ANNUALIZED
In the case of Intermediate Government Income, FMR, not the fund, pays
for these services.
Each of Ginnie Mae and Government Income also pays other expenses,
such as legal, audit, and custodian fees; in some instances, proxy
solicitation costs; and the compensation of trustees who are not
affiliated with Fidelity. A broker-dealer may use a portion of the
commissions paid by a fund to reduce that fund's custodian or transfer
agent fees.
Intermediate Government Income also pays other expenses, such as
brokerage fees and commissions, interest on borrowings, taxes, and the
compensation of trustees who are not affiliated with Fidelity.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees of each fund has authorized such
payments.
For the fiscal year ended July 1998, the portfolio turnover rates for
Ginnie Mae, Government Income and Intermediate Government Income were
172%, 289% (annualized), and 188%, respectively. These rates vary from
year to year. High turnover rates increase transaction costs and may
increase taxable capital gains. FMR considers these effects when
evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, FBSI. Fidelity is also a
leader in providing tax-advantaged retirement plans for individuals
investing on their own or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend
to purchase individual securities as part of your total investment
portfolio, you may consider investing in a fund through a brokerage
account.
You may purchase or sell shares of the funds through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
(checkmark)FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 225
(solid bullet) Assets in Fidelity mutual
funds: over $611 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 250
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the funds through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com, or
contact Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVINGS
Retirement plans provide individuals with tax-advantaged ways to save
for retirement, either with tax-deductible contributions or tax-free
growth. Retirement accounts require special applications and typically
have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to $2,000
per tax year. Married couples can contribute up to $4,000 per tax
year, provided no more than $2,000 is contributed on behalf of either
spouse. (These limits are aggregate for Traditional and Roth IRAs.)
Contributions may be tax-deductible, subject to certain income limits.
(solid bullet) ROTH IRAS allow individuals to make non-deductible
contributions of up to $2,000 per tax year. Married couples can
contribute up to $4,000 per tax year, provided no more than $2,000 is
contributed on behalf of either spouse. (These limits are aggregate
for Traditional and Roth IRAs.) Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with assets held
in a Traditional IRA or Rollover IRA to convert those assets to a Roth
Conversion IRA. Eligibility is subject to certain income limits.
Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages for
certain eligible rollover distributions from employer-sponsored
retirement plans.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or small
business owners to make tax-deductible contributions for themselves
and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employment income (and their eligible employees) with many
of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employment income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow employees of
businesses with 25 or fewer employees to contribute a percentage of
their wages on a tax-deferred basis. These plans must have been
established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
501(c)(3) tax-exempt institutions, including schools, hospitals, and
other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are available
to employees of most state and local governments and their agencies
and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
Each fund reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange Restrictions"
on page 85. Purchase orders may be refused if, in FMR's opinion, they
would disrupt management of a fund.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888 or visit Fidelity's
Web site at www.fidelity.com for an application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-ADVANTAGED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 or visit Fidelity's Web site at www.fidelity.com for
more information and a retirement application.
If you buy shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by
exchange to another Fidelity fund, the payment may be delayed for up
to seven business days to ensure that your previous investment has
cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $250
Through regular investment plansB $100
MINIMUM BALANCE $2000
A THIS LOWER MINIMUM APPLIES TO FIDELITY TRADITIONAL IRA, ROTH
IRA, ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE
REFER TO "INVESTOR SERVICES," PAGE 82.
These minimums may be lower for investments through a Fidelity
GoalPlannerSM account in Ginnie Mae.
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio Advisory
ServicesSM, a qualified state tuition program, certain Fidelity
retirement accounts funded through salary deduction, or accounts
opened with the proceeds of distributions from such retirement
accounts.
Refer to the program materials for details. In addition, each fund
reserves the right to waive or lower investment minimums in other
circumstances.
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TO OPEN AN ACCOUNT
Phone 1-800-544-7777 (phone_graphic) (small solid bullet) Exchange
from another Fidelity fund
account with the same
registration, including
name, address, and taxpayer
ID number.
The Internet www.fidelity.com (computer graphic) (small solid bullet) Complete
and sign the application.
Make your check payable to
the complete name of the
fund. Mail to the address
indicated on the application.
Mail (mail_graphic) (small solid bullet) Complete
and sign the application.
Make your check payable to
the complete name of the
fund. Mail to the address
indicated on the application.
In Person (hand_graphic) (small solid bullet) Bring
your application and check
to a Fidelity Investor
Center. Call 1-800-544-9797
for the center nearest you.
Wire (wire_graphic) (small solid bullet) Call
1-800-544-7777 to set up
your account and to arrange
a wire transaction. Not
available for retirement
accounts.
(small solid bullet) Wire
within 24 hours to: Bankers
Trust Company, Bank Routing
#021001033, Account
#00163053. Specify the
complete name of the fund
and include your new account
number and your name.
Automatically (automatic_graphic) (small solid bullet) Not
available.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
<TABLE>
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TO ADD TO AN ACCOUNT
Phone 1-800-544-7777 (phone_graphic) (small solid bullet) Exchange
from another Fidelity fund
account with the same
registration, including
name, address, and taxpayer
ID number.
(small solid bullet) Use
Fidelity Money Line to
transfer from your bank
account. Call before your
first use to verify that
this service is in place on
your account. Maximum Money
Line: up to $100,000.
The Internet www.fidelity.com (computer graphic) (small solid bullet) Exchange
from another Fidelity fund
account with the same
registration, including
name, address, and taxpayer
ID number.
(small solid bullet) Use
Fidelity Money Line to
transfer from your bank
account. Visit Fidelity's
Web site before your first
use to verify that this
service is in place on your
account. Maximum Money Line:
up to $100,000.
Mail (mail_graphic) (small solid bullet) Make
your check payable to the
complete name of the fund.
Indicate your fund account
number on your check and
mail to the address printed
on your account statement.
(small solid bullet) Exchange
by mail: call 1-800-544-6666
for instructions.
In Person (hand_graphic) (small solid bullet) Bring
your check to a Fidelity
Investor Center. Call
1-800-544-9797 for the
center nearest you.
Wire (wire_graphic) (small solid bullet) Not
available for retirement
accounts.
(small solid bullet) Wire to:
Bankers Trust Company, Bank
Routing #021001033, Account
#00163053. Specify the
complete name of the fund
and include your account
number and your name.
Automatically (automatic_graphic) (small solid bullet) Use
Fidelity Automatic Account
Builder. Sign up for this
service when opening your
account, visit Fidelity's
Web site at www.fidelity.com
to obtain the form to add
the service, or call
1-800-544-6666 to add the
service.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Each fund's NAV is normally calculated
each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web site.
Call 1-800-544-6666 for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
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ACCOUNT TYPE
Phone 1-800-544-7777 (phone_graphic) All account types except
retirement
All account types
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint Tenant,
Sole Proprietorship, UGMA,
UTMA
Retirement account
Trust
Business or Organization
Executor, Administrator,
Conservator, Guardian
Wire (wire_graphic) All account types except
retirement
Check (check_graphic) All account types
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
<TABLE>
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SPECIAL REQUIREMENTS
Phone 1-800-544-7777 (phone_graphic) (small solid bullet) Maximum
check request: $100,000.
(small solid bullet) For
Money Line transfers to your
bank account; minimum: $10;
maximum: up to $100,000.
(small solid bullet) You may
exchange to other Fidelity
funds if both accounts are
registered with the same
name(s), address, and
taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) (small solid bullet) The
letter of instruction must
be signed by all persons
required to sign for
transactions, exactly as
their names appear on the
account.
(small solid bullet) The
account owner should
complete a retirement
distribution form. Call
1-800-544-6666 to request one.
(small solid bullet) The
trustee must sign the letter
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
(small solid bullet) At least
one person authorized by
corporate resolution to act
on the account must sign the
letter.
(small solid bullet) Include
a corporate resolution with
corporate seal or a
signature guarantee.
(small solid bullet) Call
1-800-544-6666 for
instructions.
Wire (wire_graphic) (small solid bullet) You must
sign up for the wire feature
before using it. To verify
that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your
wire redemption request must
be received in proper form
by Fidelity before 4:00 p.m.
Eastern time for money to be
wired on the next business
day.
Check (check_graphic) (small solid bullet) Minimum
check: $500.
(small solid bullet) All
account owners must sign a
signature card to receive a
checkbook.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
FIDELITY'S WEB SITE at www.fidelity.com offers product and servicing
information, customer education, planning tools, and the ability to
make certain transactions in your account.
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
(checkmark)24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
WEB SITE
www.fidelity.com
AUTOMATED SERVICE
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through Fidelity's
Web site.
Note that exchanges out of a fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page 86.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE enables you to transfer money by phone between
your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 or visit Fidelity's Web site
at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or quarterly (small solid bullet) For a
new account, complete the
appropriate section on the
fund application.
(small solid bullet) For
existing accounts, call
1-800-544-6666 or visit
Fidelity's Web site at
www.fidelity.com for an
application.
(small solid bullet) To
change the amount or
frequency of your
investment, call
1-800-544-6666 at least
three business days prior to
your next scheduled
investment date.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay period (small solid bullet) Check
the appropriate box on the
fund application, or call
1-800-544-6666 or visit
Fidelity's Web site at
www.fidelity.com for an
authorization form.
(small solid bullet) Changes
require a new authorization
form.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, bimonthly, (small solid bullet) To
quarterly, or annually establish, call
1-800-544-6666 after both
accounts are opened.
(small solid bullet) To
change the amount or
frequency of your
investment, call
1-800-544-6666.
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains are normally
distributed in September and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on
the application, call 1-800-544-6666 for instructions. Each fund
offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
If you select distribution option 2 or 3 and the U.S. Postal Service
does not deliver your checks, your election may be converted to the
Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of
the date the fund deducts the distribution from its NAV. The mailing
of distribution checks will begin within seven days.
(checkmark)UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings along
to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
TAXES
As with any investment, you should consider how your investment in a
fund will be taxed. If your account is not a tax-advantaged retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, each fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains. Every
January, Fidelity will send you and the IRS a statement showing the
tax characterization of distributions paid to you in the previous
year.
Mutual fund dividends from U.S. Government securities are generally
free from state and local income taxes. However, particular states may
limit this benefit, and some types of securities, such as repurchase
agreements and some agency-backed securities, may not qualify for the
benefit. Ginnie Mae securities and other mortgage-backed securities
are notable exceptions in most states. In addition, some states may
impose intangible property taxes. You should consult your own tax
adviser for details and up-to-date information on the tax laws in your
state.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a
confirmation statement showing how many shares you sold and at what
price. You will also receive a consolidated transaction statement
every January. However, it is up to you or your tax preparer to
determine whether this sale resulted in a capital gain and, if so, the
amount of tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but
not yet distributed capital gains, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
a fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
Each fund's assets are valued on the basis of information furnished by
a pricing service or market quotations, if available, or by another
method that the Board of Trustees believes accurately reflects fair
value. Short-term securities with remaining maturities of sixty days
or less for which quotations and information furnished by a pricing
service are not readily available are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to redeem and
exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in proper
form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on the first
business day following the day of purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when a fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form.
Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the
amount of the check is greater than the value of your account, your
check will be returned to you and you may be subject to additional
charges.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000 you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, each fund reserves the right to
temporarily or permanently terminate the exchange privilege of any
investor who makes more than four exchanges out of the fund per
calendar year. Accounts under common ownership or control, including
accounts with the same taxpayer identification number, will be counted
together for purposes of the four exchange limit.
(small solid bullet) The exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges
that coincides with a "market timing" strategy may be disruptive to a
fund.
Although the funds will attempt to give you prior notice whenever they
are reasonably able to do so, they may impose these restrictions at
any time. The funds reserve the right to terminate or modify the
exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, TouchTone Xpress, Fidelity Automatic
Account Builder, Directed Dividends, and Spartan are registered
trademarks of FMR Corp.
Portfolio Advisory Services and Fidelity GoalPlanner are service marks
of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
This prospectus is printed on recycled paper using soy-based inks.
