SPARTAN(registered trademark) SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF
FIDELITY FIXED-INCOME TRUST
AND
FIDELITY SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF
FIDELITY CHARLES STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING S OF SHAREHOLDERS
To the Shareholders of Spartan Short-Intermediate Government Fund
(Spartan Short-Intermediate) and Fidelity Short-Intermediate
Government Fund (Fidelity Short-Intermediate):
NOTICE IS HEREBY GIVEN that Special Meetings of Shareholders (the
Meetings) of Spartan Short-Intermediate and Fidelity
Short-Intermediate (the funds) will be held at the office of Fidelity
Fixed-Income Trust and Fidelity Charles Street Trust (the trusts), 82
Devonshire Street, Boston, Massachusetts 02109 on April 14, 1999, at
9:00 a.m. Eastern time. The purpose of the Meetings is to consider and
act upon the following proposals, and to transact such other business
as may properly come before the Meetings or any adjournments thereof.
Approval of each proposal will be determined solely by approval of the
shareholders of the individual fund affected. It will not be necessary
for both reorganizations to be approved for either of them to take
place.
(A) To approve an Agreement and Plan of Reorganization between
Spartan Short-Intermediate and Fidelity Intermediate Government Income
Fund (Intermediate Government), a fund of Fidelity Income Fund,
providing for the transfer of all of the assets of Spartan
Short-Intermediate to Intermediate Government in exchange solely for
shares of beneficial interest of Intermediate Government and the
assumption by Intermediate Government of Spartan Short-Intermediate's
liabilities, followed by the distribution of Intermediate Government
shares to shareholders of Spartan Short-Intermediate in liquidation of
Spartan Short-Intermediate.
(B) To approve an Agreement and Plan of Reorganization between
Fidelity Short-Intermediate and Fidelity Intermediate Government
Income Fund (Intermediate Government) , a fund of Fidelity Income
Fund, providing for the transfer of all of the assets of Fidelity
Short-Intermediate to Intermediate Government in exchange solely for
shares of beneficial interest of Intermediate Government and the
assumption by Intermediate Government of Fidelity Short-Intermediate's
liabilities, followed by the distribution of Intermediate Government
shares to shareholders of Fidelity Short-Intermediate in liquidation
of Fidelity Short-Intermediate.
The Boards of Trustees have fixed the close of business on February
16, 1999 as the record date for the determination of the shareholders
of each of Spartan Short-Intermediate and Fidelity Short-Intermediate
entitled to notice of, and to vote at, such Meetings and any
adjournments thereof.
By order of the Boards of Trustees,
ERIC D. ROITER, Secretary
February 16, 1999
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND A MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins, Trustee
2) ABC Trust Ann B. Collins, Trustee
3) Ann B. Collins, Trustee Ann B. Collins, Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
SPARTAN(registered trademark) SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF
FIDELITY FIXED-INCOME TRUST
AND
FIDELITY SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF
FIDELITY CHARLES STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
PROXY STATEMENT AND PROSPECTUS
FEBRUARY 16, 1999
This Proxy Statement and Prospectus (Proxy Statement) is being
furnished to shareholders of Spartan Short-Intermediate Government
Fund (Spartan Short-Intermediate), a fund of Fidelity Fixed-Income
Trust, and Fidelity Short-Intermediate Government Fund (Fidelity
Short-Intermediate), a fund of Fidelity Charles Street Trust (the
funds), in connection with the solicitation of proxies by the trusts'
Boards of Trustees for use at the Special Meetings of Shareholders of
Spartan Short-Intermediate and Fidelity Short-Intermediate and at any
adjournments thereof (the Meetings).
The Meetings will be held on Wednesday, April 14, 1999 at 9:00 a.m.
Eastern time at 82 Devonshire Street, Boston, Massachusetts 02109, the
principal executive office of the trusts.
As more fully described in the Proxy Statement, the purpose of each
Meeting is to vote on a proposed reorganization (a Reorganization).
Pursuant to each Agreement and Plan of Reorganization (the
Agreements), each of Spartan Short-Intermediate and Fidelity
Short-Intermediate would transfer all of its assets to Intermediate
Government in exchange solely for shares of beneficial interest of
Intermediate Government and the assumption by Intermediate Government
of Spartan Short-Intermediate's and Fidelity Short-Intermediate's
liabilities. The number of shares to be issued in each proposed
Reorganization will be based upon each fund's net asset value relative
to the net asset value per share of Intermediate Government at the
time of the exchange. As provided in the Agreements, Spartan
Short-Intermediate and Fidelity Short-Intermediate will distribute
shares of Intermediate Government to their shareholders in liquidation
of Spartan Short-Intermediate and Fidelity Short-Intermediate on April
22, 1999 and April 29, 1999, respectively, or such other dates as the
parties may agree (the Closing Dates). Approval of each Reorganization
will be determined solely by approval of the shareholders of the
individual fund affected. It will not be necessary for both
Reorganizations to be approved for either of them to take place.
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.
Intermediate Government 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 .
Intermediate Government's investment objective is to seek a high level
of current income with preservation of capital by investing 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.
This Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Reorganizations and
Intermediate Government that a shareholder should know before voting
on a proposed Reorganization. The Statement of Additional Information
dated February 16, 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 on
January 1, 1999, which offers shares of Intermediate Government.
The Statement of Additional Information for Intermediate Government,
dated September 21, 1998 and supplemented on October 8, 1998, is
available upon request. Attachment 1 contains excerpts from the Annual
Report of Intermediate Government dated July 31, 1998. The Prospectus
and Statement of Additional Information for Intermediate Government
have been filed with the SEC and are incorporated herein by reference.
A Prospectus and Statement of Additional Information for Spartan
Short-Intermediate, dated June 26, 1998 and a supplement to the
Prospectus dated December 7, 1998, and a Prospectus and Statement of
Additional Information for Fidelity Short-Intermediate, dated November
24, 1998 and a supplement to the Prospectus dated December 7, 1998,
have been filed with the SEC and are incorporated herein by reference.
Copies of these documents may be obtained without charge by contacting
Fidelity Fixed-Income Trust, Fidelity Charles Street Trust, or
Fidelity Income Fund at Fidelity Distributors Corporation, 82
Devonshire Street, Boston, Massachusetts 02109 or by calling
1-800-544-8888.
TABLE OF CONTENTS
Voting Information 1
Synopsis 3
Comparison Of Other Policies Of The Funds 13
Comparison Of Principal Risk Factors 17
The Proposed Transactions 18
Additional Information About Fidelity Intermediate
Government Income Fund 28
Miscellaneous 30
Attachment 1. Excerpts From The Annual Report Of Fidelity
Intermediate Government Income Fund Dated July 31, 1998 31
Attachment 2. Annual Fund Operating Expenses and Examples of Fund
Expenses for Certain Reorganizations 37
Exhibit 1. Form Of Agreement and Plan of Reorganization between
Fidelity Intermediate Government Income Fund and Spartan
Short-Intermediate Government Fund 19
Exhibit 2. Form Of Agreement and Plan of Reorganization between
Fidelity Intermediate Government Income Fund and Fidelity
Short-Intermediate Government Fund 52
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETINGS OF SHAREHOLDERS OF
SPARTAN SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF
FIDELITY FIXED-INCOME TRUST
AND
FIDELITY SHORT-INTERMEDIATE GOVERNMENT FUND
A FUND OF
FIDELITY CHARLES STREET TRUST
TO BE HELD ON APRIL 14, 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 Boards of Trustees of Fidelity Fixed-Income Trust and Fidelity
Charles Street Trust (the trusts) to be used at the Special Meetings
of Shareholders of Spartan Short-Intermediate Government Fund (Spartan
Short-Intermediate) and Fidelity Short-Intermediate Government Fund
(Fidelity Short-Intermediate) (the funds) and at any adjournments
thereof (the Meetings), each to be held on April 14, 1999, at 9:00
a.m. Eastern time at 82 Devonshire Street, Boston, Massachusetts
02109, the principal executive office of the trusts and Fidelity
Management & Research Company (FMR), the funds' investment adviser.
The purpose of the Meetings 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 February 16,
1999. Supplementary solicitations may be made by mail, telephone,
telegraph, facsimile, electronic means or by personal interview by
representatives of the trusts. 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 funds at an anticipated
cost of approximately $2,000 and $3,000, for Spartan
Short-Intermediate and Fidelity Short-Intermediate, respectively. For
Spartan Short-Intermediate, the expenses incurred 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 incurred in forwarding
solicitation material to the beneficial owners of shares. For Fidelity
Short-Intermediate, the expenses incurred in connection with preparing
this Proxy Statement and its enclosures and of all solicitations will
be paid by the fund. The fund will reimburse brokerage firms and
others for their reasonable expenses incurred in forwarding
solicitation material to the beneficial owners of shares.
If the enclosed proxy card for the applicable Meeting is executed and
returned, it may nevertheless be revoked at any time prior to its use
by written notification received by the applicable trust, by the
execution of a later-dated proxy card, or by attending the applicable
Meeting and voting in person.
All proxy cards solicited by the Boards of Trustees that are properly
executed and received by the Secretary prior to the applicable
Meeting, and which are not revoked, will be voted at the applicable
Meeting. Shares represented by such proxies will be voted in
accordance with the instructions thereon. If no specification is made
on a proxy card, it will be voted FOR the matters specified on the
proxy card. Only proxies that are voted will be counted toward
establishing a quorum. Broker non-votes are not considered voted for
this purpose. Shareholders should note that while votes to ABSTAIN
will count toward establishing a quorum, passage of any proposal being
considered at a 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 a
proposal is approved.
Spartan Short-Intermediate and Fidelity Short-Intermediate 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 Spartan Short-Intermediate and Fidelity Short-Intermediate at an
anticipated cost of approximately $3,000 and $4,000, respectively. For
Spartan Short-Intermediate, the expenses incurred in connection with
telephone voting will be borne by FMR. For Fidelity
Short-Intermediate, the expenses incurred in connection with telephone
voting will be paid by the fund. If a 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 a Meeting, or if a quorum is present at
a Meeting but sufficient votes to approve a 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 a Meeting to permit the further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those
shares present at the Meeting or represented by proxy. When voting on
a proposed adjournment, the persons named as proxy agents will vote
FOR the proposed adjournment all shares that they are entitled to vote
with respect to each item, unless directed to vote AGAINST the item,
in which case such shares will be voted against the proposed
adjournment with respect to that item. A shareholder vote may be taken
on an item in this Proxy Statement or on any other business properly
presented at a Meeting prior to such adjournment if sufficient votes
have been received and it is otherwise appropriate.
Shares of each fund and of Fidelity Intermediate Government Income
Fund (Intermediate Government) issued and outstanding on November 30,
1998 are listed below.
Spartan Short-Intermediate 7,958,442
Fidelity Short-Intermediate 14,046,947
Intermediate Government 76,572,674
Shareholders of record of Spartan Short-Intermediate and Fidelity
Short-Intermediate at the close of business on February 16, 1999 will
be entitled to vote at the applicable 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. As of November 30, 1998, the
Bank of New York, New York, NY owned of record or beneficially
6.24% of Fidelity Short-Intermediate's outstanding shares.
To the knowledge of each trust and each fund, no other shareholder
owned of record or beneficially 5% or more of the outstanding shares
of its respective fund on that date. If both Reorganizations became
effective on November 30, 1998, there would have been no shareholder
who owned of record 5% or more of the outstanding shares of the
combined fund as a result of the Reorganizations. If only the Spartan
Short-Intermediate Reorganization became effective on November 30,
1998, there would have been no shareholder who owned of record 5% or
more of the outstanding shares of the combined fund as a result of the
Reorganization. If only the Fidelity Short-Intermediate Reorganization
became effective on November 30, 1998, there would have been no
shareholder who owned of record 5% or more of the outstanding shares
of the combined fund as a result of the Reorganization.
VOTE REQUIRED: APPROVAL OF EACH REORGANIZATION REQUIRES THE
AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES"
OF SPARTAN SHORT-INTERMEDIATE OR FIDELITY SHORT-INTERMEDIATE, AS
APPLICABLE. 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 A 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 Agreements, and in the Prospectuses of
Spartan Short-Intermediate, Fidelity Short-Intermediate, and
Intermediate Government, which are incorporated herein by this
reference. Shareholders should read the entire Proxy Statement and the
Prospectus of Intermediate Government for more complete information.
The proposed reorganizations (the Reorganizations) would merge
Spartan Short-Intermediate and Fidelity Short-Intermediate into
Intermediate Government, a bond fund also managed by FMR. If the
Reorganizations are approved, Spartan Short-Intermediate and Fidelity
Short-Intermediate will cease to exist and current shareholders of
each fund will become shareholders of Intermediate Government instead.
Approval of each Reorganization will be determined solely by approval
of the shareholders of the individual fund affected. It will not be
necessary for both of the Reorganizations to be approved for either
one of them to take place.
INVESTMENT OBJECTIVES AND POLICIES
The following paragraphs summarize the investment objectives and
policy differences between Spartan Short-Intermediate, Fidelity
Short-Intermediate, and Intermediate Government.
Spartan Short-Intermediate, Fidelity Short-Intermediate, and
Intermediate Government have substantially similar investment
objectives: to seek a high level of current income as is consistent
with the preservation of capital.
The funds invest only in U.S. Government securities, repurchase
agreements and other instruments related to U.S. Government securities
under normal conditions. FMR, the funds' investment adviser, normally
invests at least 65% of each fund's total assets in U.S. Government
securities and in repurchase agreements for U.S. Government
securities.
The main differences among the funds are their average maturity and
their interest rate risk. Both Fidelity Short-Intermediate and Spartan
Short-Intermediate seek to maintain an average maturity between two
and five years and are managed to have similar overall interest rate
risk to an index of U.S. Government bonds with maturities between one
and five years. Intermediate Government, by contrast, seeks to
maintain an average maturity between three and ten years and is
managed to have similar overall interest rate risk to an index of U.S.
Government bonds with maturities between one and ten years.
Intermediate Government, therefore, has a longer average maturity and
greater interest rate risk than both Spartan Short-Intermediate and
Fidelity Short-Intermediate.
EXPENSE STRUCTURES
Spartan Short-Intermediate and Intermediate Government have similar
contractual expense structures. Fidelity Short-Intermediate and
Intermediate Government differ with respect to their contractual
expense structures. Each of the three funds pays a monthly management
fee to FMR. Spartan Short-Intermediate and Intermediate Government
each pays an all-inclusive management fee to FMR (at an annual rate of
0.65% of average net assets) which covers substantially all of each
fund's expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses). Fidelity Short-Intermediate, by contrast,
pays its management fee and other expenses separately. Its management
fee and other expenses, as a percentage of its average net assets,
vary from year to year. Fidelity Short-Intermediate's total operating
expenses (the sum of its management fee and other expenses) were 0.79%
of its average net assets for the 12 months ended July 31, 1998. If
one or both of the Reorganizations are 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 Spartan Short-Intermediate merger would provide
Spartan Short-Intermediate shareholders with the opportunity to
participate in a larger, similar fund with greater interest rate risk
and expenses guaranteed to be lower than Spartan Short-Intermediate's
for more than two years. Greater interest rate risk would likely
result in better relative performance during periods of falling
interest rates and worse relative performance during periods of rising
interest rates. Intermediate Government has had better historical
performance and greater interest rate risk than Spartan
Short-Intermediate.
In sum, the proposed Fidelity Short-Intermediate merger would provide
Fidelity Short-Intermediate shareholders with the opportunity to
participate in a larger, similar fund with greater interest rate risk
and expenses guaranteed to be lower than Fidelity Short-Intermediate's
for more than two years. Greater interest rate risk would likely
result in better relative performance during periods of falling
interest rates and worse relative performance during periods of rising
interest rates. Intermediate Government has had better historical
performance and greater interest rate risk than Fidelity
Short-Intermediate.
The Boards of Trustees believe that each Reorganization would benefit
Spartan Short-Intermediate and Fidelity Short-Intermediate
shareholders, as applicable, and recommend that shareholders vote in
favor of the applicable Reorganization.
THE PROPOSED REORGANIZATIONS
Shareholders of Spartan Short-Intermediate and Fidelity
Short-Intermediate will be asked at the Meetings to vote upon and
approve a Reorganization and an Agreement, which provides for the
acquisition by Intermediate Government of all of the assets of Spartan
Short-Intermediate or Fidelity Short-Intermediate, as applicable, in
exchange solely for shares of Intermediate Government and the
assumption by Intermediate Government of the liabilities of Spartan
Short-Intermediate or Fidelity Short-Intermediate, as
applicable . Spartan Short-Intermediate and Fidelity
Short-Intermediate will each then distribute the shares of
Intermediate Government to its respective shareholders, so that each
shareholder will receive the number of full and fractional shares of
Intermediate Government equal in value to the aggregate net asset
value of the shareholder's shares of Spartan Short-Intermediate or
Fidelity Short-Intermediate on the applicable Closing Date (defined
below). The exchange of Spartan Short-Intermediate's and Fidelity
Short-Intermediate's assets for Intermediate Government's shares will
occur as of the close of business of the New York Stock Exchange
(NYSE) on April 22, 1999 and April 29, 1999, respectively, or such
other time and date as the parties may agree (the Closing Dates).
Spartan Short-Intermediate and Fidelity Short-Intermediate will then
be liquidated as soon as practicable thereafter. Approval of each
Reorganization will be determined solely by approval of the
shareholders of the individual fund affected.
Each fund has received an opinion of counsel that the applicable
Reorganization will not result in any gain or loss for federal income
tax purposes either to Spartan Short-Intermediate or Fidelity
Short-Intermediate, or to the shareholders of each fund. The rights
and privileges of the former shareholders of Spartan
Short-Intermediate and Fidelity Short-Intermediate will be effectively
unchanged by the Reorganizations, except as described on page 11 under
the heading "Forms of Organization."
COMPARATIVE FEE TABLES
Each fund pays a management fee to FMR for managing its investments
and business affairs which is calculated and paid to FMR every month.
Spartan Short-Intermediate and Intermediate Government each pays FMR
a management fee at an annual rate of 0.65% of its respective average
net assets. FMR not only provides each fund with investment advisory
and research services, but also pays all of each fund's expenses, with
the exception of fees and expenses of the non-interested Trustees,
interest, taxes, brokerage commissions (if any), and such
non-recurring expenses as may arise, including costs of any litigation
to which a fund may be a party, and any obligation it may have to
indemnify its officers and Trustees with respect to litigation. The
management fee that each fund pays FMR is reduced by an amount equal
to the fees and expenses paid by that fund to the non-interested
Trustees.
In contrast, Fidelity Short-Intermediate pays a management fee and
other expenses separately. Fidelity Short-Intermediate'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. The individual fund fee rate is
0.30% of the fund's average net assets. In addition to the management
fee payable by the fund, Fidelity Short-Intermediate 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 Short-Intermediate's management
fee was 0.44% of its average net assets and its total operating
expenses were 0.79% of its average net assets.
If shareholders approve one or both of the Reorganizations, the
combined fund will retain Intermediate Government's expense structure,
requiring payment of an all-inclusive management fee. FMR has agreed
to 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. The
expense limitation would lower Spartan Short-Intermediate's total
operating expenses from 0.65% to 0.63% of its average net assets. The
expense limitation would lower Fidelity Short-Intermediate's total
operating expenses from 0.79% (for the 12 months ended July 31, 1998)
to 0.63% of the fund's average net assets. The expense limitation
would begin on the first business day after the Closing Date of
the first Reorganization. After June 30, 2001, the combined fund's
expenses could increase. If a proposed Reorganization is not approved,
that fund will maintain its current fee structure. For more
information about the funds' current fees, refer to their
Prospectuses.
The table on the following page shows the fees and expenses for each
fund for the 12 months ended July 31, 1998, adjusted to reflect
current fees, and pro forma fees for the combined fund based on the
same time period after giving effect to the Reorganizations, 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 to reflect current
fees, of each fund and are calculated as a percentage of average net
assets of each fund. Attachment 2 provides expense information for the
combined fund if either one of the Reorganizations is not approved.
IF BOTH REORGANIZATIONS ARE APPROVED:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Spartan Short- Intermediate Fidelity Short- Intermediate Intermediate Government
Management Fee 0.65% 0.44% 0.65%
12b-1 Fee None None None
Other Expenses 0.00% 0.35% 0.00%
Total Operating Expenses 0.65% 0.79% 0.65%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Pro Forma Expenses* -
Combined Fund
Management Fee 0.63% (after reimbursement)
12b-1 Fee None
Other Expenses 0.00%
Total Operating Expenses 0.63% (after reimbursement)
</TABLE>
* If one or both of the Reorganizations are approved, FMR has agreed
to limit the total operating expenses of the combined fund to 0.63% of
its average net assets (excluding interest, taxes, brokerage
commissions, and extraordinary expenses) through June 30, 2001. If
this agreement were not in effect, the combined fund's management fee,
other expenses, and total operating expenses would be 0.65%, 0.00%,
and 0.65%, 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 (after reimbursement effective through June 30,
2001 for the combined fund) calculated at the rates stated above,
assuming a 5% annual return. Attachment 2 provides examples of the
effect of fund expenses for the combined fund if either one of the
Reorganizations is not approved.
IF BOTH REORGANIZATIONS ARE APPROVED:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Spartan Short-Intermediate Fidelity Short-Intermediate Intermediate Government Combined Fund (Pro Forma)
1 year $ 7 $ 8 $ 7 $ 6
3 years $ 21 $ 25 $ 21 $ 20
5 years $ 36 $ 44 $ 36 $ 35
10 years $ 81 $ 98 $ 81 $ 79
</TABLE>
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.
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 both Reorganizations.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net Assets Net Asset Value Per Share Shares Outstanding
Spartan Short-Intermediate $ 75,535,644 $ 9.38 8,053,544
Fidelity Short-Intermediate $ 127,761,710 $ 9.37 13,639,898
Intermediate Government $ 703,830,764 $ 9.78 71,942,356
Pro Forma Combined Fund $ 907,128,118 $ 9.78 92,729,407
</TABLE>
FORMS OF ORGANIZATION
Spartan Short-Intermediate and Fidelity Short-Intermediate are
diversified funds of Fidelity Fixed-Income Trust and Fidelity Charles
Street Trust, respectively, both open-end management investment
companies. Fidelity Fixed-Income Trust and Fidelity Charles Street
Trust were organized as Massachusetts business trusts on September
5, 1984 and July 7, 1981, respectively. Intermediate Government 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 Declarations of Trust
under which Spartan Short-Intermediate and Fidelity Short-Intermediate
are organized require shareholder approval to reorganize or terminate
the trust or any of its series and to amend the Declaration of Trust.
The Declaration of Trust under which Intermediate Government 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. Therefore, if shareholders
approve the Reorganization of their fund , they 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 each fund's Statement of
Additional Information called "Description of the Trust."
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of Spartan Short-Intermediate and Fidelity
Short-Intermediate, to seek as high a level of current income as is
consistent with the preservation of capital, is substantially the same
as the investment objective of Intermediate Government, which seeks a
high level of current income as is consistent with the preservation of
capital. Each fund attempts to achieve its objective by investing in
U.S. Government securities, repurchase agreements, and other
instruments related to U.S. Government securities under normal
conditions.
INVESTMENT POLICIES AND CHARACTERISTICS
The following table summarizes the funds' investment policies and
characteristics.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Overall Interest Rate Risk Average Maturity Policy Average Maturity as of
November 30, 1998
Spartan Short-Intermediate 1-5 years 2-5 years 3.3 years
Fidelity Short-Intermediate 1-5 years 2-5 years 3.4 years
Intermediate Government 1-10 years 3-10 years 4.7 years
</TABLE>
SPARTAN SHORT-INTERMEDIATE
Spartan Short-Intermediate maintains a shorter average maturity than
Intermediate Government. Spartan Short-Intermediate normally maintains
an average maturity between two and five years. FMR manages Spartan
Short-Intermediate to have similar overall interest rate risk to the
Lehman Brothers 1-5 Year U.S. Government Bond Index, an index of U.S.
Government fixed-rate debt issues with maturities between one and five
years. By contrast, Intermediate Government normally maintains an
average maturity between three and ten years. FMR manages Intermediate
Government to have similar overall interest rate risk to the Lehman
Brothers Intermediate Government Bond Index, an index of U.S.
Government fixed-rate debt issues with maturities between one and ten
years. On November 30, 1998, Spartan Short-Intermediate's average
maturity was 3.3 years, and Intermediate Government's average maturity
was 4.7 years.
If Spartan Short-Intermediate shareholders approve the
Reorganization, FMR may sell shorter-term securities held by Spartan
Short-Intermediate in the period between shareholder approval and the
Closing Date. Such selling could cause the average maturity of Spartan
Short-Intermediate to rise above five years during this period. Any
transaction costs associated with such portfolio adjustments will be
borne by Spartan Short-Intermediate.
FIDELITY SHORT-INTERMEDIATE
Fidelity Short-Intermediate maintains a shorter average maturity than
Intermediate Government. Fidelity Short-Intermediate normally
maintains an average maturity between two and five years. FMR manages
Fidelity Short-Intermediate to have similar overall interest rate risk
to the Lehman Brothers 1-5 Year U.S. Government Bond Index, an index
of U.S. Government fixed-rate debt issues with maturities between one
and five years. By contrast, Intermediate Government normally
maintains an average maturity between three and ten years. FMR manages
Intermediate Government to have similar overall interest rate risk to
the Lehman Brothers Intermediate Government Bond Index, an index of
U.S. Government fixed-rate debt issues with maturities between one and
ten years. On November 30, 1998, Fidelity Short-Intermediate's average
maturity was 3.4 years, and Intermediate Government's average maturity
was 4.7 years.
If Fidelity Short-Intermediate shareholders approve the
Reorganization, FMR may sell shorter-term securities held by Fidelity
Short-Intermediate in the period between shareholder approval and the
Closing Date. Such selling could cause the average maturity of
Fidelity Short-Intermediate to rise above five years during this
period. Any transaction costs associated with such portfolio
adjustments will be borne by Fidelity Short-Intermediate.
The investment objectives of Spartan Short-Intermediate, Fidelity
Short-Intermediate, and Intermediate Government are fundamental and
may not be changed without the approval of a vote of at least a
majority of the outstanding voting securities of the applicable fund.
There can be no assurance that any fund will achieve its objective.
With the exception of fundamental policies, investment policies of the
funds can be changed without shareholder approval.
PERFORMANCE COMPARISONS OF THE FUNDS
The following table compares the funds' average 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year-By-Year Total Returns
(periods ended December 31)
1994 1995 1996 1997 1998*
Spartan Short-Intermediate** (0.52)% 12.29% 4.27% 6.61% 6.05%
Fidelity Short-Intermediate (1.38)% 11.86% 4.06% 6.61% 5.94%
Intermediate Government** (0.95%) 13.93% 4.14% 7.70% 7.37%
</TABLE>
* Through September 30, 1998
** If the fund had not been in reimbursement during the periods shown,
total returns would have been lower.
The following table compares each fund's individual cumulative total
returns for the periods indicated. Please note that cumulative total
returns are based on past results and are not an indication of future
performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Cumulative Total Returns
(periods ended September 30,
1998)
1 Year 3 Year
Spartan Short-Intermediate* 7.97% 21.26%
Fidelity Short-Intermediate 7.82% 20.64%
Intermediate Government* 9.64% 24.71%
</TABLE>
* If the fund had not been in reimbursement during the periods shown,
total returns would have been lower.
The tables above show that the funds have experienced relatively
similar performance over the time periods shown, with Intermediate
Government slightly outperforming Spartan Short-Intermediate and
Fidelity Short-Intermediate. Differences in performance may be
attributed, in part , to the funds' different reimbursement
arrangements and Intermediate Government's longer average
maturity.
The following graphs show the value of a hypothetical $10,000
investment in Spartan Short-Intermediate and Fidelity
Short-Intermediate made on December 31, 1995, assuming all
distributions are reinvested. The graphs compare the cumulative total
returns, on a monthly basis from December 31, 1995 through September
30, 1998, of the funds to the total returns of Intermediate Government
for the same period.
Spartan Sht-Int Govt. Intermediate Govt Income
00474 00452
1995/12/31 10000.00 10000.00
1996/01/31 10081.75 10085.02
1996/02/29 10023.44 9987.35
1996/03/31 9989.61 9931.75
1996/04/30 9974.91 9903.63
1996/05/31 9972.76 9898.01
1996/06/30 10052.63 9993.35
1996/07/31 10091.45 10027.84
1996/08/31 10116.08 10040.28
1996/09/30 10217.04 10168.40
1996/10/31 10352.81 10340.46
1996/11/30 10454.60 10471.14
1996/12/31 10426.86 10413.80
1997/01/31 10464.89 10451.77
1997/02/28 10485.31 10473.05
1997/03/31 10453.27 10405.45
1997/04/30 10530.98 10518.28
1997/05/31 10597.71 10600.54
1997/06/30 10685.04 10693.18
1997/07/31 10832.94 10886.25
1997/08/31 10829.55 10857.47
1997/09/30 10918.58 10982.90
1997/10/31 11009.39 11098.46
1997/11/30 11037.91 11133.10
1997/12/31 11116.14 11215.22
1998/01/31 11228.66 11354.75
1998/02/28 11240.32 11351.52
1998/03/31 11267.83 11386.66
1998/04/30 11305.46 11443.92
1998/05/31 11372.64 11515.70
1998/06/30 11417.26 11586.98
1998/07/31 11463.75 11624.11
1998/08/31 11607.16 11791.10
1998/09/30 11788.99 12042.19
IMATRL PRASUN SHR__CHT 19981031 19981202 161107 R00000000000074
Short-Intermediate Govt. Intermediate Govt. Income
00464 00452
1995/12/31 10000.00 10000.00
1996/01/31 10089.30 10085.02
1996/02/29 10026.44 9987.35
1996/03/31 9986.37 9931.75
1996/04/30 9969.17 9903.63
1996/05/31 9968.99 9898.01
1996/06/30 10037.31 9993.35
1996/07/31 10075.91 10027.84
1996/08/31 10103.65 10040.28
1996/09/30 10196.79 10168.40
1996/10/31 10335.11 10340.46
1996/11/30 10430.89 10471.14
1996/12/31 10406.16 10413.80
1997/01/31 10447.28 10451.77
1997/02/28 10474.38 10473.05
1997/03/31 10428.04 10405.45
1997/04/30 10517.05 10518.28
1997/05/31 10585.61 10600.54
1997/06/30 10663.67 10693.18
1997/07/31 10810.91 10886.25
1997/08/31 10809.07 10857.47
1997/09/30 10900.04 10982.90
1997/10/31 10990.79 11098.46
1997/11/30 11017.79 11133.10
1997/12/31 11093.60 11215.22
1998/01/31 11216.49 11354.75
1998/02/28 11217.65 11351.52
1998/03/31 11248.77 11386.66
1998/04/30 11288.27 11443.92
1998/05/31 11345.50 11515.70
1998/06/30 11394.83 11586.98
1998/07/31 11446.19 11624.11
1998/08/31 11581.48 11791.10
1998/09/30 11752.25 12042.19
IMATRL PRASUN SHR__CHT 19980930 19981202 172232 R00000000000088
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION. Spartan Short-Intermediate, Fidelity
Short-Intermediate and Intermediate Government are diversified funds.
As a matter of fundamental policy, with respect to 75% of each fund's
total assets, the fund may not invest more than 5% of its total assets
in the securities of a single issuer, and the fund may not hold more
than 10% of the outstanding voting securities of a single issuer.
These limitations do not apply to U.S. Government securities. For
Intermediate Government, these limitations also do not apply to
securities of other investment companies.
BORROWING. Each fund may borrow money from banks or from other funds
advised by FMR, or through reverse repurchase agreements. As a matter
of fundamental policy, each fund may borrow money for temporary or
emergency purposes, but not in an amount exceeding 33 1/3% of its
total assets.
LENDING. Each fund does not currently intend to lend assets, other
than securities, to other parties, except by lending money (up to 7.5%
of the fund's net assets) to other funds or portfolios advised by FMR
or an affiliate, or by acquiring loans, loan participations, or other
forms of direct debt instruments. As a matter of fundamental policy,
each fund may not lend more than 33 1/3% of its total assets to other
parties, but this limitation does not apply to purchases of debt
securities or to repurchase agreements.
TEMPORARY DEFENSIVE POLICIES. FMR normally invests each fund's assets
according to the fund's investment strategy. Each fund also reserves
the right to invest without limitation in investment-grade money
market instruments or short-term debt instruments for temporary
defensive purposes.
For more information about the risks and restrictions associated with
these policies, see each fund's Prospectus, and for a more detailed
discussion of the funds' investments, see their Statements of
Additional Information, which are incorporated herein by reference.
OPERATIONS OF INTERMEDIATE GOVERNMENT FOLLOWING A REORGANIZATION
FMR does not expect Intermediate Government to revise its investment
policies as a result of a 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, investment adviser, distributor, and other agents will
continue to serve Intermediate Government in their current capacities.
Andrew Dudley is currently responsible for portfolio management of
each fund and is expected to continue to be responsible for portfolio
management of Intermediate Government after a Reorganization.
All of the current investments of Spartan Short-Intermediate and
Fidelity Short-Intermediate are permissible investments for
Intermediate Government. FMR may sell up to 50% of the securities held
by each of Spartan Short-Intermediate and Fidelity Short-Intermediate
between shareholder approval and the Closing Date of the applicable
Reorganization. Transaction costs associated with such adjustments
that occur between shareholder approval and the fund's applicable
Closing Date will be borne by the fund that incurred them. Transaction
costs associated with such adjustments that occur after the fund's
applicable Closing Date will be borne by Intermediate Government.
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. Your shares are 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. Refer
to each fund's Prospectus for more information regarding how to buy
shares.
The redemption policies for each fund are identical. 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.
For Spartan Short-Intermediate, the minimum initial investment amount
is $10,000, the minimum additional investment amount is $1,000, and
the minimum account balance is $5,000. For Fidelity Short-Intermediate
and Intermediate Government, the minimum initial investment amount is
$2,500, the minimum additional investment amount is $250, and the
minimum account balance is $2,000.
If shareholders of Spartan Short-Intermediate approve their
Reorganization, they would become shareholders of a fund with lower
minimum investment and balance requirements than Spartan
Short-Intermediate. The minimum investment and balance requirements
for shareholders of Fidelity Short-Intermediate would be unchanged by
that fund's Reorganization.
On June 26, 1998, Spartan Short-Intermediate and Fidelity
Short-Intermediate closed to new accounts pending the Reorganizations.
Spartan Short-Intermediate and Fidelity Short-Intermediate
shareholders on or prior to that date can continue to purchase
and redeem shares of their respective fund through the Closing Date of
that fund's Reorganization. If one or both of the Reorganizations are
approved, the purchase and redemption policies of the combined fund
will be the same as the current policies of Intermediate Government.
EXCHANGES
The exchange privilege currently offered by each fund is the same and
is not expected to change after the Reorganizations. 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. Capital gains for Spartan
Short-Intermediate are normally distributed in June and December.
Capital gains for Fidelity Short-Intermediate are normally distributed
in December. Capital gains for Intermediate Government are normally
distributed in September and December. On or before the Closing Date,
Spartan Short-Intermediate and Fidelity Short-Intermediate may declare
additional dividends or other distributions in order to distribute
substantially all of their investment company taxable income and net
realized capital gain.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATIONS
Each fund has received an opinion of its counsel, Kirkpatrick &
Lockhart LLP, that the applicable Reorganization will constitute a
tax-free reorganization within the meaning of section 368(a)(1)(C) of
the Internal Revenue Code of 1986, as amended (the Code). Accordingly,
no gain or loss will be recognized by the funds or their shareholders
as a result of a Reorganization. Please see the section entitled
"Federal Income Tax Considerations" for more information.
As of August 31, 1998, Spartan Short-Intermediate, Fidelity
Short-Intermediate, and Intermediate Government had net
unrealized gains of approximately $613,390, $717,837, and
$12,484,982 , respectively. During the period between shareholder
approval and the applicable Closing Date, FMR may sell certain
securities to make portfolio adjustments in connection with the
Reorganizations . Selling these securities may result in
realization of capital gains, which, when distributed, would be
taxable to the selling fund 's shareholders.
As of April 30, 1998, Spartan Short-Intermediate has capital loss
carryforwards for federal tax purposes of approximately $4,460,000. As
of September 30, 1998, Fidelity Short-Intermediate has capital loss
carryforwards for federal tax purposes of approximately $10,705,000.
As of July 31, 1998, Intermediate Government has capital loss
carryforwards for federal tax purposes of approximately $55,907,000.
Under current federal income tax law, Intermediate Government may be
limited to using only a portion, if any, of its capital loss
carryforwards or the capital loss carryforwards transferred by
Fidelity Short-Intermediate and Spartan Short-Intermediate at the time
of the applicable Reorganization. There is no assurance that
Intermediate Government will be able to realize sufficient capital
gains to use the capital loss carryforwards before they expire. The
capital loss carryforwards attributable to Spartan Short-Intermediate
will expire between July 31, 2001 and July 31, 2005. The capital loss
carryforwards attributable to Fidelity Short-Intermediate will expire
between July 31, 2000 and July 31, 2004. The capital loss
carryforwards attributable to Intermediate Government will expire
between July 31, 2003 and July 31, 2005.
COMPARISON OF PRINCIPAL RISK FACTORS
Each fund is subject to the risks normally associated with bond
funds. As described more fully above, the funds have similar
investment objectives, policies, and permissible investments.
INVESTMENT STRATEGY. SPARTAN SHORT-INTERMEDIATE and Intermediate
Government have substantially similar investment strategies.
Because each fund invests only in short-term or intermediate-term
U.S. Government securities and related instruments, the funds have
substantially similar levels of risk. However, Intermediate Government
may present a slightly greater risk than Spartan Short-Intermediate
because it maintains a longer average maturity than Spartan
Short-Intermediate and is managed to have greater interest rate risk
than Spartan Short-Intermediate.
Interest rate risk refers to the degree to which a fund is affected
by changes in interest rates. Typically, bond prices rise when
interest rates fall and fall when interest rates rise. Longer-term
bonds are usually more sensitive to interest rate changes, that is,
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. Mutual funds
that invest in longer-term bonds, therefore, are usually more
sensitive to changes in interest rates than funds that invest in
shorter-term bonds. Therefore, Intermediate Government may have better
performance than Spartan Short-Intermediate during periods of falling
interest rates, but poorer performance during periods of rising
interest rates.
For a more complete discussion of the risks associated with bond
funds, please refer to the Investment Principles and Risks section of
each fund's prospectus.
INVESTMENT STRATEGY. FIDELITY SHORT-INTERMEDIATE and Intermediate
Government have substantially similar investment strategies.
Because each fund invests only in short-term or intermediate-term
U.S. Government securities and related instruments, the funds have
substantially similar levels of risk. However, Intermediate Government
may present a slightly greater risk than Fidelity Short-Intermediate
because it maintains a longer average maturity than Fidelity
Short-Intermediate and is managed to have greater interest rate risk
than Fidelity Short-Intermediate.
Interest rate risk refers to the degree to which a fund is affected
by changes in interest rates. Typically, bond prices rise when
interest rates fall and fall when interest rates rise. Longer-term
bonds are usually more sensitive to interest rate changes, that is,
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. Mutual funds
that invest in longer-term bonds, therefore, are usually more
sensitive to changes in interest rates than funds that invest in
shorter-term bonds. Therefore, Intermediate Government may have better
performance than Fidelity Short-Intermediate during periods of falling
interest rates, but poorer performance during periods of rising
interest rates.
For a more complete discussion of the risks associated with bond
funds, please refer to the Investment Principles and Risks section of
each fund's prospectus.
SPARTAN SHORT-INTERMEDIATE AND FIDELITY SHORT-INTERMEDIATE
If shareholders approve one or both Reorganizations, FMR may sell up
to 50% of Spartan Short-Intermediate's or Fidelity
Short-Intermediate's securities, as applicable, which may cause that
fund's average maturity to rise above five years during the period
from the meeting date to the applicable Closing Date. This would
increase the fund's interest rate risk as well as its potential for
earning higher income.
In addition, depending on market conditions during that period, it
may be necessary to sell some of Intermediate Government's
shorter-term securities as well. FMR expects that the impact of
portfolio adjustments to Intermediate Government will be minimal.
THE PROPOSED TRANSACTIONS
A. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
SHORT-INTERMEDIATE GOVERNMENT FUND AND FIDELITY INTERMEDIATE
GOVERNMENT INCOME FUND.
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) Intermediate Government acquiring as
of the Closing Date all of the assets of Spartan Short-Intermediate in
exchange solely for shares of Intermediate Government and the
assumption by Intermediate Government of Spartan Short-Intermediate's
liabilities; and (b) the distribution of shares of Intermediate
Government to the shareholders of Spartan Short-Intermediate as
provided for in the Agreement.
The assets of Spartan Short-Intermediate to be acquired by
Intermediate Government include all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by Spartan
Short-Intermediate, and any deferred or prepaid expenses shown as an
asset on the books of Spartan Short-Intermediate on the Closing Date.
Intermediate Government will assume from Spartan Short-Intermediate
all liabilities, debts, obligations, and duties of Spartan
Short-Intermediate of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable on the
Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Spartan Short-Intermediate 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. Intermediate Government
also will deliver to Spartan Short-Intermediate the number of full and
fractional shares of Intermediate Government having an aggregate net
asset value equal to the value of the assets of Spartan
Short-Intermediate less the liabilities of Spartan Short-Intermediate
as of the Closing Date. Spartan Short-Intermediate shall then
distribute the Intermediate Government shares pro rata to its
shareholders.
The value of Spartan Short-Intermediate's assets to be acquired by
Intermediate Government and the amount of its liabilities to be
assumed by Intermediate Government will be determined as of the close
of business of the NYSE on the Closing Date, using the valuation
procedures set forth in Spartan Short-Intermediate's then-current
Prospectus and Statement of Additional Information. The net asset
value of a share of Intermediate Government will be determined as of
the same time using the valuation procedures set forth in its
then-current Prospectus and Statement of Additional Information.
As of the Closing Date, Spartan Short-Intermediate will distribute to
its shareholders of record the shares of Intermediate Government it
received, so that each Spartan Short-Intermediate shareholder will
receive the number of full and fractional shares of Intermediate
Government equal in value to the aggregate net asset value of shares
of Spartan Short-Intermediate held by such shareholder on the Closing
Date; Spartan Short-Intermediate will be liquidated as soon as
practicable thereafter. Such distribution will be accomplished by
opening accounts on the books of Intermediate Government in the names
of the Spartan Short-Intermediate shareholders and by transferring
thereto shares of Intermediate Government. Each Spartan
Short-Intermediate shareholder's account shall be credited with the
respective pro rata number of full and fractional shares (rounded to
the third decimal place) of Intermediate Government due that
shareholder. Intermediate Government shall not issue certificates
representing its shares in connection with such exchange.
Accordingly, immediately after the Reorganization, each former
Spartan Short-Intermediate shareholder will own shares of Intermediate
Government equal in value to the aggregate net asset value of that
shareholder's shares of Spartan Short-Intermediate immediately prior
to the Reorganization. The net asset value per share of Intermediate
Government 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 Intermediate
Government in a name other than that of the registered holder of the
shares on the books of Spartan Short-Intermediate as of that time
shall be paid by the person to whom such shares are to be issued as a
condition of such transfer. Any reporting responsibility of Spartan
Short-Intermediate 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
Short-Intermediate, FMR will bear the cost of Spartan
Short-Intermediate's Reorganization. Reorganization costs include
professional fees, expenses associated with the filing of registration
statements, and the cost of soliciting proxies for the Meeting, which
will consist principally of printing and mailing prospectuses and
proxy statements, together with the cost of any supplementary
solicitation. However, there may be some transaction costs associated
with portfolio adjustments to Spartan Short-Intermediate due to the
Reorganization prior to the Closing Date which will be borne by
Spartan Short-Intermediate. Any transaction costs associated with
portfolio adjustments due to the Reorganization which occur after the
Closing Date will be borne by Intermediate Government. Any additional
reorganization-related costs attributable to Intermediate Government
which occur after the Closing Date will be borne by FMR, pursuant to
its all-inclusive management contract with Intermediate Government.
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 the 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 October 15, 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 the average
maturities of their investments and their initial and additional
investment and account balance minimums.
The Boards considered that the proposed merger would provide
shareholders of Spartan Short-Intermediate with a fund that has higher
historical returns because of, among other reasons, Intermediate
Government's longer average maturity.
In addition, the Boards also considered that if the Reorganization is
approved, FMR will limit the combined fund's total operating expenses
to 0.63% of its average net assets (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) through June 30,
2001. This expense limitation would lower the total operating expenses
for shareholders of Spartan Short-Intermediate Government 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 Securities
and Exchange Commission (the Commission) 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.
Intermediate Government is one of three funds of the trust. Each share
of Intermediate Government represents an equal proportionate interest
with each other share of the fund, and each such share of Intermediate
Government 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 Intermediate Government 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 Short-Intermediate's assets for Intermediate
Government shares and the assumption of the liabilities of Spartan
Short-Intermediate by Intermediate Government is intended to qualify
for federal income tax purposes as a tax-free reorganization under the
Code. With respect to the Reorganization, the participating funds have
received an opinion from Kirkpatrick & Lockhart LLP, counsel to
Spartan Short-Intermediate and Intermediate Government, substantially
to the effect that:
(i) The acquisition by Intermediate Government of all of the assets
of Spartan Short-Intermediate solely in exchange for Intermediate
Government shares and the assumption by Intermediate Government of
Spartan Short-Intermediate's liabilities, followed by the distribution
by Spartan Short-Intermediate of Intermediate Government shares to the
shareholders of Spartan Short-Intermediate pursuant to the liquidation
of Spartan Short-Intermediate and constructively in exchange for their
Spartan Short-Intermediate shares, will constitute a reorganization
within the meaning of section 368(a)(1)(C) of the Code, and Spartan
Short-Intermediate and Intermediate Government will each be "a party
to a reorganization" within the meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Short-Intermediate
upon the transfer of all of its assets to Intermediate Government in
exchange solely for Intermediate Government shares and Intermediate
Government's assumption of Spartan Short-Intermediate's liabilities,
followed by Spartan Short-Intermediate's subsequent distribution of
those shares to its shareholders in liquidation of Spartan
Short-Intermediate;
(iii) No gain or loss will be recognized by Intermediate Government
upon the receipt of the assets of Spartan Short-Intermediate in
exchange solely for Intermediate Government shares and its assumption
of Spartan Short-Intermediate's liabilities;
(iv) The shareholders of Spartan Short-Intermediate will recognize no
gain or loss upon the exchange of their Spartan Short-Intermediate
shares solely for Intermediate Government shares;
(v) The basis of Spartan Short-Intermediate's assets in the hands of
Intermediate Government will be the same as the basis of those assets
in the hands of Spartan Short-Intermediate immediately prior to the
Reorganization, and the holding period of those assets in the hands of
Intermediate Government will include the holding period of those
assets in the hands of Spartan Short-Intermediate;
(vi) The basis of Spartan Short-Intermediate shareholders in
Intermediate Government shares will be the same as their basis in
Spartan Short-Intermediate shares to be surrendered in exchange
therefor; and
(vii) The holding period of the Intermediate Government shares to be
received by the Spartan Short-Intermediate shareholders will include
the period during which the Spartan Short-Intermediate shares to be
surrendered in exchange therefor were held, provided such Spartan
Short-Intermediate shares were held as capital assets by those
shareholders on the date of the Reorganization.
Shareholders of Spartan Short-Intermediate should consult their tax
advisers regarding the effect, if any, of the proposed Reorganization
in light of their individual circumstances. Because the foregoing
discussion relates only to the federal income tax consequences of the
Reorganization, those shareholders also should consult their tax
advisers as to state and local tax consequences, if any, of the
Reorganization.
CAPITALIZATION
The following table shows the capitalization of Spartan
Short-Intermediate and Intermediate Government 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 Short-Intermediate $ 75,535,644 $ 9.38 8,053,544
Intermediate Government $ 703,830,764 $ 9.78 71,942,356
Pro Forma Combined Fund $ 779,366,408 $ 9.78 79,665,837
CONCLUSION
The Agreement and Plan of Reorganization and the transactions
provided for therein were approved by the Boards at a meeting held on
October 15, 1998. The Boards of Trustees of Fidelity Fixed-Income
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 Spartan Short-Intermediate shareholders
would not be diluted as a result of the Reorganization. In the event
that the Reorganization is not consummated, Spartan Short-Intermediate
will continue to engage in business as a fund of a registered
investment company and the Board of Fidelity Fixed-Income Trust will
consider other proposals for the reorganization or liquidation of the
fund.
B. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN FIDELITY
SHORT-INTERMEDIATE GOVERNMENT FUND AND FIDELITY INTERMEDIATE
GOVERNMENT INCOME FUND.
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 2 to this Proxy Statement.
The Agreement contemplates (a) Intermediate Government acquiring as
of the Closing Date all of the assets of Fidelity Short-Intermediate
in exchange solely for shares of Intermediate Government and the
assumption by Intermediate Government of Fidelity Short-Intermediate's
liabilities; and (b) the distribution of shares of Intermediate
Government to the shareholders of Fidelity Short-Intermediate as
provided for in the Agreement.
The assets of Fidelity Short-Intermediate to be acquired by
Intermediate Government include all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by Fidelity
Short-Intermediate, and any deferred or prepaid expenses shown as an
asset on the books of Fidelity Short-Intermediate on the Closing Date.
Intermediate Government will assume from Fidelity Short-Intermediate
all liabilities, debts, obligations, and duties of Fidelity
Short-Intermediate 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 Fidelity Short-Intermediate 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. Intermediate
Government also will deliver to Fidelity Short-Intermediate the number
of full and fractional shares of Intermediate Government having an
aggregate net asset value equal to the value of the assets of Fidelity
Short-Intermediate less the liabilities of Fidelity Short-Intermediate
as of the Closing Date. Fidelity Short-Intermediate shall then
distribute the Intermediate Government shares pro rata to its
shareholders.
The value of Fidelity Short-Intermediate's assets to be acquired by
Intermediate Government and the amount of its liabilities to be
assumed by Intermediate Government will be determined as of the close
of business of the NYSE on the Closing Date, using the valuation
procedures set forth in Fidelity Short-Intermediate's then-current
Prospectus and Statement of Additional Information. The net asset
value of a share of Intermediate Government 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, Fidelity Short-Intermediate will distribute
to its shareholders of record the shares of Intermediate Government it
received, so that each Fidelity Short-Intermediate shareholder will
receive the number of full and fractional shares of Intermediate
Government equal in value to the aggregate net asset value of shares
of Fidelity Short-Intermediate held by such shareholder on the Closing
Date; Fidelity Short-Intermediate will be liquidated as soon as
practicable thereafter. Such distribution will be accomplished by
opening accounts on the books of Intermediate Government in the names
of the Fidelity Short-Intermediate shareholders and by transferring
thereto shares of Intermediate Government. Each Fidelity
Short-Intermediate shareholder's account shall be credited with the
respective pro rata number of full and fractional shares (rounded to
the third decimal place) of Intermediate Government due that
shareholder. Intermediate Government shall not issue certificates
representing its shares in connection with such exchange.
Accordingly, immediately after the Reorganization, each former
Fidelity Short-Intermediate shareholder will own shares of
Intermediate Government equal in value to the aggregate net asset
value of that shareholder's shares of Fidelity Short-Intermediate
immediately prior to the Reorganization. The net asset value per share
of Intermediate Government 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 Intermediate
Government in a name other than that of the registered holder of the
shares on the books of Fidelity Short-Intermediate 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 Fidelity
Short-Intermediate is and will continue to be its responsibility up to
and including the date on which it is terminated.
Fidelity Short-Intermediate will bear the cost of the Reorganization.
Reorganization costs include professional fees, expenses associated
with the filing of registration statements, and the cost of soliciting
proxies for the Meeting, which will consist principally of printing
and mailing prospectuses and proxy statements, together with the cost
of any supplementary solicitation. There may also be some transaction
costs associated with portfolio adjustments to Fidelity
Short-Intermediate due to the Reorganization prior to the Closing Date
which will be borne by Fidelity Short-Intermediate. Any transaction
costs associated with portfolio adjustments due to the Reorganization
which occur after the Closing Date will be borne by Intermediate
Government. Any additional reorganization-related costs attributable
to Intermediate Government which occur after the Closing Date will be
borne by FMR, pursuant to its all-inclusive management contract with
Intermediate Government. 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 the 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 October 15, 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 the average
maturities of their investments and their expense structures.
The Boards considered that the proposed merger would provide
shareholders of Fidelity Short-Intermediate with a fund that has
higher historical returns because of, among other things, Intermediate
Government's longer average maturity.
In addition, the Boards also considered that if the Reorganization is
approved, FMR will limit the combined fund's total operating expenses
to 0.63% of its average net assets (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) through June 30,
2001. This expense limitation would lower the total operating expenses
for shareholders of Fidelity Short-Intermediate from 0.79% (the
fund's total operating expenses for the 12 months ended July 31, 1998)
to 0.63% of the fund's 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 Securities
and Exchange Commission (the Commission) 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.
Intermediate Government is one of three funds of the trust. Each share
of Intermediate Government represents an equal proportionate interest
with each other share of the fund, and each such share of Intermediate
Government 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 Intermediate Government 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 Fidelity Short-Intermediate's assets for Intermediate
Government shares and the assumption of the liabilities of Fidelity
Short-Intermediate by Intermediate Government 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
Fidelity Short-Intermediate and Intermediate Government, substantially
to the effect that:
(i) The acquisition by Intermediate Government of all of the assets
of Fidelity Short-Intermediate solely in exchange for Intermediate
Government shares and the assumption by Intermediate Government of
Fidelity Short-Intermediate's liabilities, followed by the
distribution by Fidelity Short-Intermediate of Intermediate Government
shares to the shareholders of Fidelity Short-Intermediate pursuant to
the liquidation of Fidelity Short-Intermediate and constructively in
exchange for their Fidelity Short-Intermediate shares, will constitute
a reorganization within the meaning of section 368(a)(1)(C) of the
Code, and Fidelity Short-Intermediate and Intermediate Government 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 Fidelity
Short-Intermediate upon the transfer of all of its assets to
Intermediate Government in exchange solely for Intermediate Government
shares and Intermediate Government's assumption of Fidelity
Short-Intermediate's liabilities, followed by Fidelity
Short-Intermediate's subsequent distribution of those shares to its
shareholders in liquidation of Fidelity Short-Intermediate;
(iii) No gain or loss will be recognized by Intermediate Government
upon the receipt of the assets of Fidelity Short-Intermediate in
exchange solely for Intermediate Government shares and its assumption
of Fidelity Short-Intermediate's liabilities;
(iv) The shareholders of Fidelity Short-Intermediate will recognize
no gain or loss upon the exchange of their Fidelity Short-Intermediate
shares solely for Intermediate Government shares;
(v) The basis of Fidelity Short-Intermediate's assets in the hands of
Intermediate Government will be the same as the basis of those assets
in the hands of Fidelity Short-Intermediate immediately prior to the
Reorganization, and the holding period of those assets in the hands of
Intermediate Government will include the holding period of those
assets in the hands of Fidelity Short-Intermediate;
(vi) The basis of Fidelity Short-Intermediate shareholders in
Intermediate Government shares will be the same as their basis in
Fidelity Short-Intermediate shares to be surrendered in exchange
therefor; and
(vii) The holding period of the Intermediate Government shares to be
received by the Fidelity Short-Intermediate shareholders will include
the period during which the Fidelity Short-Intermediate shares to be
surrendered in exchange therefor were held, provided such Fidelity
Short-Intermediate shares were held as capital assets by those
shareholders on the date of the Reorganization.
Shareholders of Fidelity Short-Intermediate should consult their tax
advisers regarding the effect, if any, of the proposed Reorganization
in light of their individual circumstances. Because the foregoing
discussion relates only to the federal income tax consequences of the
Reorganization, those shareholders also should consult their tax
advisers as to state and local tax consequences, if any, of the
Reorganization.
CAPITALIZATION
The following table shows the capitalization of Fidelity
Short-Intermediate and Intermediate Government 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
Fidelity Short-Intermediate $ 127,761,710 $ 9.37 13,639,898
Intermediate Government $ 703,830,764 $ 9.78 71,942,356
Pro Forma Combined Fund $ 831,592,474 $ 9.78 85,005,926
CONCLUSION
The Agreement and Plan of Reorganization and the transactions
provided for therein were approved by the Boards at a meeting held on
October 15, 1998. The Boards of Trustees of Fidelity Charles 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 Fidelity Short-Intermediate shareholders
would not be diluted as a result of the Reorganization. In the event
that the Reorganization is not consummated, Fidelity
Short-Intermediate will continue to engage in business as a fund of a
registered investment company and the Board of Fidelity Charles Street
Trust will consider other proposals for the reorganization or
liquidation of the fund.
ADDITIONAL INFORMATION ABOUT
FIDELITY INTERMEDIATE GOVERNMENT INCOME FUND
The Prospectus for Intermediate Government, 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 Intermediate
Government's financial highlights for the fiscal year ended July 31,
1998, as shown on the following page .
FINANCIAL HIGHLIGHTS
FIDELITY INTERMEDIATE GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and
Ratios
Years ended July 31 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Net asset value, beginning $ 9.790 $ 9.650 $ 9.760 $ 9.610 $ 10.310 $ 10.180 $ 10.060 $ 9.930 $ 10.030 $ 9.880
of period
Income from Investment .652C .675C .678 .610 .470 .872 .836 .853 .816 .806
Operations Net investment
income
Net realized and (.008) .124 (.150) .143 (.410) (.087) .021 .142 (.100) .150
unrealized gain (loss)
Total from investment .644 .799 .528 .753 .060 .785 .857 .995 .716 .956
operations
Less Distributions From (.654) (.659) (.638) (.603) (.540) (.605) (.677) (.845) (.816) (.806)
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) (.806)
Net asset value, end of $ 9.780 $ 9.790 $ 9.650 $ 9.760 $ 9.610 $ 10.310 $ 10.180 $ 10.060 $ 9.930 $ 10.030
period
Total returnA,B 6.78% 8.56% 5.49% 8.16% .57% 7.96% 8.78% 10.43% 7.49% 10.14%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 704 $ 704 $ 740 $ 817 $ 1,018 $ 1,529 $ 1,770 $ 880 $ 132 $ 125
(In millions)
Ratio of expenses to .38%E .54%E .63%E .65% .65% .65% .61%E .50%E .83% .68%E
average net assets
Ratio of expenses to .38% .54% .62%D .65% .65% .65% .61% .50% .83% .68%
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% 8.20%
income to average net assets
Portfolio turnover rate 188% 105% 105% 210% 391% 324% 330% 288% 270% 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.
MISCELLANEOUS
LEGAL MATTERS. Certain legal matters in connection with the issuance
of Intermediate Government shares have been passed upon by Kirkpatrick
& Lockhart LLP, counsel to Fidelity Income Fund.
EXPERTS. The audited financial statements of Spartan
Short-Intermediate, Fidelity Short-Intermediate, and Intermediate
Government, incorporated by reference into the Statement of Additional
Information, have been examined by PricewaterhouseCoopers LLP,
independent accountants, whose reports thereon are included in the
Annual Report to Shareholders for the fiscal years ended on April 30,
September 30, and July 31, 1998, respectively. Unaudited financial
statements for Spartan Short-Intermediate for the six-month period
ended October 31, 1998 are also incorporated by reference into the
Statement of Additional Information. 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 Fixed-Income Trust, Fidelity Charles
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 Fixed-Income Trust and Fidelity
Charles Street Trust, in care of Fidelity Service Company, Inc.,
P.O. Box 789, Boston Massachusetts, 02109, 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 THE ANNUAL REPORT OF FIDELITY INTERMEDIATE GOVERNMENT
INCOME FUND DATED JULY 31, 1998
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Intermediate Government 6.78% 5.87% 7.40%
Lehman Brothers Intermediate 6.83% 5.95% 8.12%
Government Bond Index
Lipper Short-Intermediate 5.67% 5.00% 7.38%
U.S. Government Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Intermediate Govt Income
00452
1988/07/31 10000.00
1988/08/31 10022.26
1988/09/30 10129.89
1988/10/31 10228.54
1988/11/30 10224.54
1988/12/31 10263.19
1989/01/31 10345.52
1989/02/28 10349.51
1989/03/31 10402.59
1989/04/30 10539.87
1989/05/31 10688.35
1989/06/30 10878.99
1989/07/31 11014.39
1989/08/31 10947.78
1989/09/30 11003.53
1989/10/31 11177.94
1989/11/30 11268.22
1989/12/31 11325.69
1990/01/31 11311.71
1990/02/28 11374.27
1990/03/31 11400.99
1990/04/30 11417.83
1990/05/31 11589.15
1990/06/30 11699.92
1990/07/31 11839.04
1990/08/31 11887.20
1990/09/30 11982.27
1990/10/31 12106.43
1990/11/30 12248.30
1990/12/31 12360.09
1991/01/31 12497.95
1991/02/28 12595.40
1991/03/31 12699.24
1991/04/30 12808.56
1991/05/31 12874.77
1991/06/30 12925.80
1991/07/31 13073.79
1991/08/31 13236.31
1991/09/30 13370.71
1991/10/31 13537.85
1991/11/30 13587.03
1991/12/31 13832.30
1992/01/31 13765.19
1992/02/29 13846.73
1992/03/31 13830.12
1992/04/30 13932.84
1992/05/31 14072.08
1992/06/30 14180.82
1992/07/31 14221.74
1992/08/31 14392.88
1992/09/30 14492.06
1992/10/31 14432.58
1992/11/30 14499.38
1992/12/31 14629.63
1993/01/31 14755.19
1993/02/28 14917.19
1993/03/31 14995.80
1993/04/30 15092.83
1993/05/31 15142.65
1993/06/30 15301.47
1993/07/31 15353.49
1993/08/31 15468.38
1993/09/30 15521.52
1993/10/31 15556.99
1993/11/30 15453.85
1993/12/31 15568.66
1994/01/31 15730.72
1994/02/28 15583.03
1994/03/31 15382.89
1994/04/30 15308.09
1994/05/31 15292.25
1994/06/30 15286.87
1994/07/31 15441.39
1994/08/31 15486.94
1994/09/30 15453.40
1994/10/31 15471.54
1994/11/30 15435.95
1994/12/31 15420.86
1995/01/31 15653.87
1995/02/28 15881.21
1995/03/31 15956.79
1995/04/30 16145.24
1995/05/31 16563.40
1995/06/30 16664.26
1995/07/31 16700.76
1995/08/31 16841.36
1995/09/30 16964.54
1995/10/31 17194.09
1995/11/30 17388.35
1995/12/31 17569.14
1996/01/31 17718.51
1996/02/29 17546.91
1996/03/31 17449.23
1996/04/30 17399.83
1996/05/31 17389.95
1996/06/30 17557.46
1996/07/31 17618.04
1996/08/31 17639.91
1996/09/30 17865.00
1996/10/31 18167.29
1996/11/30 18396.89
1996/12/31 18296.14
1997/01/31 18362.86
1997/02/28 18400.25
1997/03/31 18281.47
1997/04/30 18479.72
1997/05/31 18624.23
1997/06/30 18786.99
1997/07/31 19126.20
1997/08/31 19075.64
1997/09/30 19296.01
1997/10/31 19499.03
1997/11/30 19559.89
1997/12/31 19704.17
1998/01/31 19949.31
1998/02/28 19943.63
1998/03/31 20005.39
1998/04/30 20105.98
1998/05/31 20232.10
1998/06/30 20357.32
1998/07/31 20422.57
IMATRL PRASUN SHR__CHT 19980731 19981217 161108 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Intermediate Government Income Fund on July 31,
1988. As the chart shows, by July 31, 1998, the value of the
investment would have grown to $20,423 - a 104.23% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Intermediate Government Bond Index, which reflects the performance of
U.S. Government debt securities with maturities between one and ten
years, did over the same period. With dividends reinvested, the same
$10,000 would have grown to $21,839 - a 118.39% increase.
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.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Intermediate Government Income 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 6.78%. To get a sense of how the fund did relative to
its competitors, the short-intermediate U.S. government funds average
returned 5.67% for the same one-year period, according to Lipper
Analytical Services. Additionally, the Lehman Brothers Intermediate
Government Bond Index - which tracks the types of securities in which
the fund invests - returned 6.83%.
Q. ALTHOUGH IT CONTINUED TO POST GOOD RETURNS, THE INTERMEDIATE
GOVERNMENT MARKET DIDN'T PERFORM AS WELL IN THE MOST RECENT SIX-MONTH
PERIOD AS IT DID IN THE PRIOR SIX. WHY WAS THAT?
A. Returns were smaller in the second half of the period because bond
yields, which move in the opposite direction of bond prices, didn't
fall as much in the second half as they did in the first. The yield on
the 10-year Treasury bond - which serves as a good proxy for the
intermediate market - dropped by 52 basis points (0.52%) in the first
six months, when inflation fears were waning. In the second half of
the period, however, the 10-year bond yield fell by only about 9 basis
points. Intermediate bond prices saw larger gains in response to the
more emphatic decline in yields in the first half.
Q. WHY DID THE FUND OUTPACE THE SHORT-INTERMEDIATE U.S. GOVERNMENT
FUNDS AVERAGE?
A. The fund had a larger weighting in both agency and mortgage
securities, and a smaller exposure to U.S. Treasuries throughout the
period than the Lipper average. In large part due to their higher
yields, agency and mortgage securities generally outpaced Treasuries
during much of the past year and helped the fund to outpace its Lipper
peer group. That said, agency and mortgage securities lagged the
Treasury market during the final months of the period and, while they
helped the fund's performance for the year, they modestly detracted
from its more recent performance. Treasuries' strong performance was
largely due to heavy buying from domestic and international investors
seeking a haven from the economic turmoil in Southeast Asia. Agency
securities, on the other hand, didn't enjoy the same demand and lagged
Treasuries as a result.
Q. WHY DID MORTGAGE-BACKED SECURITIES STRUGGLE DURING THE PAST FEW
MONTHS?
A. As interest rates moved lower - to their lowest levels since 1993 -
homeowners rushed to replace old high-rate mortgages with cheaper
loans. That caused the rate of home mortgage refinancings, and the
prepayment of mortgage loans, to rise substantially. Although
refinancings are good for mortgage holders, they can be difficult for
investors in mortgage securities. As the refinancings occur and
mortgage securities are prepaid, investors must find a new place to
put their money, usually at a lower interest rate. Generally speaking,
I focus on finding those mortgage securities that I think are less
susceptible to a pick-up or slowdown in the pace of refinancings.
However, in periods of interest-rate volatility - whether rates move
substantially up or down - prepayment patterns become more difficult
to predict and mortgage security prices can suffer as a result.
Q. WHAT WAS YOUR APPROACH TO SELECTING VARIOUS AGENCY SECURITIES?
A. While the majority of the fund's agency holdings were well-known
securities such as Fannie Mae and Freddie Mac, I looked for
opportunities among agencies that received less attention from market
participants. Because of a lack of attention, I was able to buy many
of these securities - including Government Trust Certificates and
Government Loan Trusts Notes - at cheap prices relative to comparable,
better-known securities.
Q. WHAT'S YOUR OUTLOOK?
A. The direction of interest rates, as always, will be the prime
determinant of bond performance, and I'm not willing to speculate on
where interest rates will be six months or a year from now. I will
say, however, that I believe that interest rates could remain volatile
as investors struggle with the dueling forces of a strong U.S. economy
and an ever-weakening Asia. I'll try to identify those securities that
I believe will offer the best total-return potential in any type of
interest-rate environment.
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, ANDREW DUDLEY IS THE FUND'S
PORTFOLIO MANAGER.
ATTACHMENT 2
ANNUAL FUND OPERATING EXPENSES AND EXAMPLES OF FUND EXPENSES FOR
CERTAIN REORGANIZATIONS
THE TABLES BELOW SHOW THE ANNUAL FUND OPERATING EXPENSES AND
EXAMPLES OF FUND EXPENSES FOR THE 12 MONTHS ENDED JULY 31, 1998 IF
ONLY THE SPARTAN SHORT-INTERMEDIATE REORGANIZATION IS APPROVED.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Spartan Short-Intermediate Intermediate Government Pro Forma Expenses Combined
Fund*
Management Fee 0.65% 0.65% 0.63% (after reimbursement)
12b-1 Fee None None None
Other Expenses 0.00% 0.00% 0.00%
Total Operating Expenses 0.65% 0.65% 0.63% (after reimbursement)
</TABLE>
* 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 (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) through June 30, 2001. If this agreement were
not in effect, the combined fund's management fee, other expenses, and
total operating expenses would be 0.65%, 0.00%, and 0.65%,
respectively.
EXAMPLE:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
After 1 Year After 3 Years After 5 Years After 10 Years
Spartan Short-Intermediate $7 $21 $36 $81
Intermediate Government $7 $21 $36 $81
Combined Fund (Pro Forma) $6 $20 $35 $79
</TABLE>
THE TABLES BELOW SHOW THE ANNUAL FUND OPERATING EXPENSES AND
EXAMPLES OF FUND EXPENSES FOR THE 12 MONTHS ENDED JULY 31, 1998 IF
ONLY THE FIDELITY SHORT-INTERMEDIATE REORGANIZATION IS APPROVED.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fidelity Short-Intermediate Intermediate Government Pro Forma Expenses Combined
Fund*
Management Fee 0.44% 0.65% 0.63% (after reimbursement)
12b-1 Fee None None None
Other Expenses 0.35% 0.00% 0.00%
Total Operating Expenses 0.79% 0.65% 0.63% (after reimbursement)
</TABLE>
* 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 (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) through June 30, 2001. If this agreement were
not in effect, the combined fund's management fee, other expenses, and
total operating expenses would be 0.65%, 0.00%, and 0.65%,
respectively.
EXAMPLE:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
After 1 Year After 3 Years After 5 Years After 10 Years
Fidelity Short-Intermediate $8 $25 $44 $98
Intermediate Government $7 $21 $36 $81
Combined Fund (Pro Forma) $6 $20 $35 $79
</TABLE>
EXHIBIT 1
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of February 16, 1999 by and between Fidelity Fixed-Income Trust, a
Massachusetts business trust, on behalf of its series Spartan
Short-Intermediate Government Fund (Spartan Short-Intermediate), and
Fidelity Income Fund, a Massachusetts business trust, on behalf of its
series Fidelity Intermediate Government Income Fund (Intermediate
Government). Fidelity Fixed-Income 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. Intermediate Government and Spartan
Short-Intermediate may be referred to herein collectively as the
"Funds" or each individually as the "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise: (a) the transfer of all of the assets of
Spartan Short-Intermediate to Intermediate Government solely in
exchange for shares of beneficial interest in Intermediate Government
(the Intermediate Government Shares) and the assumption by
Intermediate Government of Spartan Short-Intermediate's liabilities;
and (b) the constructive distribution of such shares by Spartan
Short-Intermediate PRO RATA to its shareholders in complete
liquidation and termination of Spartan Short-Intermediate in exchange
for all of Spartan Short-Intermediate's outstanding shares. Spartan
Short-Intermediate shall receive shares of Intermediate Government
having an aggregate net asset value equal to the value of the assets
of Spartan Short-Intermediate on the Closing Date (as defined in
Section 6), which Spartan Short-Intermediate shall then distribute PRO
RATA to its shareholders. The foregoing transactions are referred to
herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN SHORT-INTERMEDIATE.
Spartan Short-Intermediate represents and warrants to and agrees with
Intermediate Government that:
(a) Spartan Short-Intermediate is a series of Fidelity Fixed-Income
Trust, a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts, and has
the power to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state,
and local authorizations to carry on its business as now being
conducted and to carry out this Agreement;
(b) Fidelity Fixed-Income Trust is an open-end, management investment
company duly registered under the Investment Company Act of 1940, as
amended (the 1940 Act), and such registration is in full force and
effect;
(c) The Prospectus and Statement of Additional Information of Spartan
Short-Intermediate dated June 26, 1998, and the supplement to the
Prospectus dated December 7, 1998, previously furnished to
Intermediate Government, did not and do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan Short-Intermediate, threatened
against Spartan Short-Intermediate which assert liability on the part
of Spartan Short-Intermediate. Spartan Short-Intermediate knows of no
facts which might form the basis for the institution of such
proceedings;
(e) Spartan Short-Intermediate is not in, and the execution,
delivery, and performance of this Agreement will not result in,
violation of any provision of its Amended and Restated Declaration of
Trust or By-laws, or, to the knowledge of Spartan Short-Intermediate,
of any agreement, indenture, instrument, contract, lease, or other
undertaking to which Spartan Short-Intermediate is a party or by which
Spartan Short-Intermediate is bound or result in the acceleration of
any obligation or the imposition of any penalty under any agreement,
judgment or decree to which Spartan Short-Intermediate is a party or
is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Spartan Short-Intermediate at April 30, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, and have been
furnished to Intermediate Government together with such unaudited
financial statements and schedule of investments (including market
values) for the six month period ended October 31, 1998. Said
Statements of Assets and Liabilities and Schedule of Investments
fairly present the Fund's financial position as of such date and said
Statement of Operations, Statement of Changes in Net Assets, and
Financial Highlights fairly reflect its results of operations, changes
in financial position, and financial highlights for the periods
covered thereby in conformity with generally accepted accounting
principles consistently applied;
(g) Spartan Short-Intermediate has no known liabilities of a material
nature, contingent or otherwise, other than those shown as belonging
to it on its statement of assets and liabilities as of April 30, 1998
and those incurred in the ordinary course of Spartan
Short-Intermediate's business as an investment company since April 30,
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 Intermediate Government
issuable hereunder and the proxy statement of Spartan
Short-Intermediate included therein (Proxy Statement), on the
effective date of the Registration Statement and insofar as they
relate to Spartan Short-Intermediate (i) comply in all material
respects with the provisions of the Securities Act of 1933, as amended
(the 1933 Act), the Securities Exchange Act of 1934, as amended (the
1934 Act), and the 1940 Act, and the rules and regulations thereunder,
and (ii) do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the
time of the shareholders' meeting referred to in Section 7 and on the
Closing Date, the prospectus contained in the Registration Statement
of which the Proxy Statement is a part (the Prospectus), as amended or
supplemented, insofar as it relates to Spartan Short-Intermediate,
does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(i) All material contracts and commitments of Spartan
Short-Intermediate (other than this Agreement) will be terminated
without liability to Spartan Short-Intermediate prior to the Closing
Date (other than those made in connection with redemptions of shares
and the purchase and sale of portfolio securities made in the ordinary
course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan
Short-Intermediate of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, and state securities or blue sky laws (which term as
used herein shall include the District of Columbia and Puerto Rico);
(k) Spartan Short-Intermediate has filed or will file all federal and
state tax returns which, to the knowledge of Spartan
Short-Intermediate's officers, are required to be filed by Spartan
Short-Intermediate and has paid or will pay all federal and state
taxes shown to be due on said returns or provision shall have been
made for the payment thereof, and, to the best of Spartan
Short-Intermediate's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(l) Spartan Short-Intermediate has met the requirements of Subchapter
M of the Code for qualification and treatment as a regulated
investment company for all prior taxable years and intends to meet
such requirements for its current taxable year ending on the Closing
Date;
(m) All of the issued and outstanding shares of Spartan
Short-Intermediate are, and at the Closing Date will be, duly and
validly issued and outstanding and fully paid and nonassessable as a
matter of Massachusetts law (except as disclosed in the Fund's
Statement of Additional Information), and have been offered for sale
and in conformity with all applicable federal securities laws. All of
the issued and outstanding shares of Spartan Short-Intermediate will,
at the Closing Date, be held by the persons and in the amounts set
forth in the list of shareholders submitted to Intermediate Government
in accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan Short-Intermediate will have the full right,
power, and authority to sell, assign, transfer, and deliver its
portfolio securities and any other assets of Spartan
Short-Intermediate to be transferred to Intermediate Government
pursuant to this Agreement. As of the Closing Date, subject only to
the delivery of Spartan Short-Intermediate's portfolio securities and
any such other assets as contemplated by this Agreement, Intermediate
Government will acquire Spartan Short-Intermediate'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 Intermediate Government) and
without any restrictions upon the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Spartan Short-Intermediate, and this
Agreement constitutes a valid and binding obligation of Spartan
Short-Intermediate enforceable in accordance with its terms, subject
to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF INTERMEDIATE GOVERNMENT.
Intermediate Government represents and warrants to and agrees with
Spartan Short-Intermediate that:
(a) Intermediate Government 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
Intermediate Government, dated September 21, 1998, the supplement to
the Prospectus dated January 1, 1999 , and the supplement to the
Statement of Additional Information dated October 8, 1998, previously
furnished to Spartan Short-Intermediate 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 Intermediate Government, threatened
against Intermediate Government which assert liability on the part of
Intermediate Government. Intermediate Government knows of no facts
which might form the basis for the institution of such proceedings;
(e) Intermediate Government 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 Intermediate Government, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Intermediate Government is a party or by which Intermediate Government
is bound or result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree to
which Intermediate Government 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 Intermediate Government at July 31, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, and have been
furnished to Spartan Short-Intermediate. Said Statement 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) Intermediate Government 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 Intermediate Government'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
Intermediate Government 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) Intermediate Government has filed or will file all federal and
state tax returns which, to the knowledge of Intermediate Government's
officers, are required to be filed by Intermediate Government 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 Intermediate Government's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to such returns;
(j) Intermediate Government 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
Intermediate Government to be issued to Spartan Short-Intermediate
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 as a matter of Massachusetts law (except
as disclosed in the Fund's Statement of Additional Information) by
Intermediate Government, and no shareholder of Intermediate Government
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 Intermediate Government, and this
Agreement constitutes a valid and binding obligation of Intermediate
Government enforceable in accordance with its terms, subject to
approval by the shareholders of Spartan Short-Intermediate;
(m) The Registration Statement and the Proxy Statement, on the
effective date of the Registration Statement and insofar as they
relate to Intermediate Government, (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 Intermediate Government, 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 Intermediate Government 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 Intermediate Government have been offered for sale and sold in
conformity with the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan
Short-Intermediate and to the other terms and conditions contained
herein, Spartan Short-Intermediate agrees to assign, sell, convey,
transfer, and deliver to Intermediate Government as of the Closing
Date all of the assets of Spartan Short-Intermediate of every kind and
nature existing on the Closing Date. Intermediate Government agrees in
exchange therefor: (i) to assume all of Spartan Short-Intermediate's
liabilities existing on or after the Closing Date, whether or not
determinable on the Closing Date, and (ii) to issue and deliver to
Spartan Short-Intermediate the number of full and fractional shares of
Intermediate Government having an aggregate net asset value equal to
the value of the assets of Spartan Short-Intermediate transferred
hereunder, less the value of the liabilities of Spartan
Short-Intermediate, determined as provided for under Section 4.
(b) The assets of Spartan Short-Intermediate to be acquired by
Intermediate Government shall include, without limitation, all cash,
cash equivalents, securities, receivables (including interest or
dividends receivables), claims, choses in action, and other property
owned by Spartan Short-Intermediate, and any deferred or prepaid
expenses shown as an asset on the books of Spartan Short-Intermediate
on the Closing Date. Spartan Short-Intermediate will pay or cause to
be paid to Intermediate Government any dividend or interest payments
received by it on or after the Closing Date with respect to the assets
transferred to Intermediate Government hereunder, and Intermediate
Government will retain any dividend or interest payments received by
it after the Valuation Time with respect to the assets transferred
hereunder without regard to the payment date thereof.
(c) The liabilities of Spartan Short-Intermediate to be assumed by
Intermediate Government shall include (except as otherwise provided
for herein) all of Spartan Short-Intermediate's liabilities, debts,
obligations, and duties, of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable on the
Closing Date, and whether or not specifically referred to in this
Agreement. Notwithstanding the foregoing, Spartan Short-Intermediate
agrees to use its best efforts to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred
in the ordinary course of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable, Spartan Short-Intermediate will
constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the
Intermediate Government Shares in exchange for such shareholders'
shares of beneficial interest in Spartan Short-Intermediate and
Spartan Short-Intermediate will be liquidated in accordance with
Spartan Short-Intermediate's Amended and Restated Declaration of
Trust. Such distribution shall be accomplished by the Funds' transfer
agent opening accounts on Intermediate Government's share transfer
books in the names of the Spartan Short-Intermediate shareholders and
transferring the Intermediate Government Shares thereto. Each Spartan
Short-Intermediate shareholder's account shall be credited with the
respective PRO RATA number of full and fractional (rounded to the
third decimal place) Intermediate Government Shares due that
shareholder. All outstanding Spartan Short-Intermediate shares,
including any represented by certificates, shall simultaneously be
canceled on Spartan Short-Intermediate's share transfer records.
Intermediate Government shall not issue certificates representing the
Intermediate Government Shares in connection with the Reorganization.
(e) Any reporting responsibility of Spartan Short-Intermediate 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 Intermediate
Government Shares in a name other than that of the registered holder
on Spartan Short-Intermediate's books of the Spartan
Short-Intermediate shares constructively exchanged for the
Intermediate Government Shares shall be paid by the person to whom
such Intermediate Government 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, Intermediate Government will deliver to
Spartan Short-Intermediate the number of Intermediate Government
Shares having an aggregate net asset value equal to the value of the
assets of Spartan Short-Intermediate transferred hereunder less the
liabilities of Spartan Short-Intermediate, determined as provided in
this Section 4.
(c) The net asset value per share of the Intermediate Government
Shares to be delivered to Spartan Short-Intermediate, the value of the
assets of Spartan Short-Intermediate transferred hereunder, and the
value of the liabilities of Spartan Short-Intermediate to be assumed
hereunder shall in each case be determined as of the Valuation Time.
(d) The net asset value per share of the Intermediate Government
Shares shall be computed in the manner set forth in the then-current
Intermediate Government Prospectus and Statement of Additional
Information, and the value of the assets and liabilities of Spartan
Short-Intermediate shall be computed in the manner set forth in the
then-current Spartan Short-Intermediate Prospectus and Statement of
Additional Information.
(e) All computations pursuant to this Section shall be made by or
under the direction of Fidelity Service Company, Inc., a wholly-owned
subsidiary of FMR Corp., in accordance with its regular practice as
pricing agent for Spartan Short-Intermediate and Intermediate
Government.
5. FEES; EXPENSES.
(a) Pursuant to Spartan Short-Intermediate'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
Intermediate Government will be borne by FMR.
(b) Each of Intermediate Government and Spartan Short-Intermediate
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 April 22,
1999, or at some other time, date, and place agreed to by Spartan
Short-Intermediate and Intermediate Government (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the Funds is closed to trading, or (ii) trading
thereon is restricted, or (iii) trading or the reporting of trading on
said market or elsewhere is disrupted, all so that accurate appraisal
of the total net asset value of Spartan Short-Intermediate and the net
asset value per share of Intermediate Government is impracticable, the
Valuation Time and the Closing Date shall be postponed until the first
business day after the day when such trading shall have been fully
resumed and such reporting shall have been restored, or such other
date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN SHORT-INTERMEDIATE.
(a) Spartan Short-Intermediate agrees to call a meeting of its
shareholders after the effective date of the Registration Statement,
to consider transferring its assets to Intermediate Government as
herein provided, adopting this Agreement, and authorizing the
liquidation of Spartan Short-Intermediate.
(b) Spartan Short-Intermediate agrees that as soon as reasonably
practicable after distribution of the Intermediate Government Shares,
Spartan Short-Intermediate shall be terminated as a series of Fidelity
Fixed-Income Trust pursuant to its Amended and Restated Declaration of
Trust, any further actions shall be taken in connection therewith as
required by applicable law, and on and after the Closing Date Spartan
Short-Intermediate shall not conduct any business except in connection
with its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF INTERMEDIATE GOVERNMENT.
(a) That Spartan Short-Intermediate furnishes to Intermediate
Government a statement, dated as of the Closing Date, signed by an
officer of Fidelity Fixed-Income Trust, certifying that as of the
Valuation Time and the Closing Date all representations and warranties
of Spartan Short-Intermediate made in this Agreement are true and
correct in all material respects and that Spartan Short-Intermediate
has complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to such dates;
(b) That Spartan Short-Intermediate furnishes Intermediate Government
with copies of the resolutions, certified by an officer of Fidelity
Fixed-Income Trust, evidencing the adoption of this Agreement and the
approval of the transactions contemplated herein by the requisite vote
of the holders of the outstanding shares of beneficial interest of
Spartan Short-Intermediate;
(c) That, on or prior to the Closing Date, Spartan Short-Intermediate
will declare one or more dividends or distributions which, together
with all previous such dividends or distributions attributable to its
current taxable year, shall have the effect of distributing to the
shareholders of Spartan Short-Intermediate substantially all of
Spartan Short-Intermediate's investment company taxable income and all
of its net realized capital gain, if any, as of the Closing Date;
(d) That Spartan Short-Intermediate shall deliver to Intermediate
Government at the Closing a statement of its assets and liabilities,
together with a list of its portfolio securities showing each such
security's adjusted tax basis and holding period by lot, with values
determined as provided in Section 4 of this Agreement, all as of the
Valuation Time, certified on Spartan Short-Intermediate's behalf by
its Treasurer or Assistant Treasurer;
(e) That Spartan Short-Intermediate's custodian shall deliver to
Intermediate Government a certificate identifying the assets of
Spartan Short-Intermediate 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
Intermediate Government; (ii) Spartan Short-Intermediate's assets have
been duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the
custodian's knowledge, all necessary taxes in conjunction with the
delivery of the assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment
has been made;
(f) That Spartan Short-Intermediate's transfer agent shall deliver to
Intermediate Government at the Closing a certificate setting forth the
number of shares of Spartan Short-Intermediate outstanding as of the
Valuation Time and the name and address of each holder of record of
any such shares and the number of shares held of record by each such
shareholder;
(g) That Spartan Short-Intermediate calls a meeting of its
shareholders to be held after the effective date of the Registration
Statement, to consider transferring its assets to Intermediate
Government as herein provided, adopting this Agreement, and
authorizing the liquidation and termination of Spartan
Short-Intermediate;
(h) That Spartan Short-Intermediate delivers to Intermediate
Government a certificate of an officer of Fidelity Fixed-Income Trust,
dated as of the Closing Date, that there has been no material adverse
change in Spartan Short-Intermediate's financial position since April
30, 1998, other than changes in the market value of its portfolio
securities, or changes due to net redemptions of its shares, dividends
paid, or losses from operations; and
(i) That all of the issued and outstanding shares of beneficial
interest of Spartan Short-Intermediate shall have been offered for
sale and sold in conformity with all applicable state securities laws
and, to the extent that any audit of the records of Spartan
Short-Intermediate or its transfer agent by Intermediate Government or
its agents shall have revealed otherwise, Spartan Short-Intermediate
shall have taken all actions that in the opinion of Intermediate
Government are necessary to remedy any prior failure on the part of
Spartan Short-Intermediate to have offered for sale and sold such
shares in conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN SHORT-INTERMEDIATE.
(a) That Intermediate Government shall have executed and delivered to
Spartan Short-Intermediate an Assumption of Liabilities, certified by
an officer of Fidelity Income Fund, dated as of the Closing Date
pursuant to which Intermediate Government will assume all of the
liabilities of Spartan Short-Intermediate existing at the Valuation
Time in connection with the transactions contemplated by this
Agreement;
(b) That Intermediate Government furnishes to Spartan
Short-Intermediate 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 Intermediate Government made in this Agreement are true and correct
in all material respects, and Intermediate Government has complied
with all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to such dates; and
(c) That Spartan Short-Intermediate shall have received an opinion of
Kirkpatrick & Lockhart LLP, counsel to Spartan Short-Intermediate and
Intermediate Government, to the effect that the Intermediate
Government Shares are duly authorized and upon delivery to Spartan
Short-Intermediate as provided in this Agreement will be validly
issued and will be fully paid and nonassessable by Intermediate
Government (except as disclosed in Intermediate Government's Statement
of Additional Information) and no shareholder of Intermediate
Government has any preemptive right of subscription or purchase in
respect thereof.
10. CONDITIONS TO OBLIGATIONS OF INTERMEDIATE GOVERNMENT AND SPARTAN
SHORT-INTERMEDIATE.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of
the holders of the outstanding shares of beneficial interest of
Spartan Short-Intermediate;
(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
Intermediate Government or Spartan Short-Intermediate 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 Intermediate
Government or Spartan Short-Intermediate, 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 Intermediate Government
and Spartan Short-Intermediate, threatened by the Commission; and
(f) That Intermediate Government and Spartan Short-Intermediate shall
have received an opinion of Kirkpatrick & Lockhart LLP satisfactory to
Intermediate Government and Spartan Short-Intermediate that for
federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan Short-Intermediate and
Intermediate Government will each be parties to the Reorganization
under section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan
Short-Intermediate upon the transfer of all of its assets to
Intermediate Government in exchange solely for the Intermediate
Government Shares and the assumption of Spartan Short-Intermediate's
liabilities followed by the distribution of those Intermediate
Government Shares to the shareholders of Spartan Short-Intermediate in
liquidation of Spartan Short-Intermediate;
(iii) No gain or loss will be recognized by Intermediate Government
on the receipt of Spartan Short-Intermediate's assets in exchange
solely for the Intermediate Government Shares and the assumption of
Spartan Short-Intermediate's liabilities;
(iv) The basis of Spartan Short-Intermediate's assets in the hands
of Intermediate Government will be the same as the basis of such
assets in Spartan Short-Intermediate's hands immediately prior to the
Reorganization;
(v) Intermediate Government's holding period in the assets to be
received from Spartan Short-Intermediate will include Spartan
Short-Intermediate's holding period in such assets;
(vi) A Spartan Short-Intermediate shareholder will recognize no gain
or loss on the exchange of his or her shares of beneficial interest in
Spartan Short-Intermediate for the Intermediate Government Shares in
the Reorganization;
(vii) A Spartan Short-Intermediate shareholder's basis in the
Intermediate Government Shares to be received by him or her will be
the same as his or her basis in the Spartan Short-Intermediate shares
exchanged therefor;
(viii) A Spartan Short-Intermediate shareholder's holding period for
his or her Intermediate Government Shares will include the holding
period of Spartan Short-Intermediate shares exchanged, provided that
those Spartan Short-Intermediate shares were held as capital assets on
the date of the Reorganization.
Notwithstanding anything herein to the contrary, neither Spartan
Short-Intermediate nor Intermediate Government may waive the
conditions set forth in this subsection 10(f).
11. COVENANTS OF INTERMEDIATE GOVERNMENT AND SPARTAN
SHORT-INTERMEDIATE.
(a) Intermediate Government and Spartan Short-Intermediate each
covenants to operate its respective business in the ordinary course
between the date hereof and the Closing Date, it being understood that
such ordinary course of business will include the payment of customary
dividends and distributions;
(b) Spartan Short-Intermediate covenants that it is not acquiring the
Intermediate Government Shares for the purpose of making any
distribution other than in accordance with the terms of this
Agreement;
(c) Spartan Short-Intermediate covenants that it will assist
Intermediate Government in obtaining such information as Intermediate
Government reasonably requests concerning the beneficial ownership of
Spartan Short-Intermediate's shares; and
(d) Spartan Short-Intermediate covenants that its liquidation and
termination will be effected in the manner provided in its Amended and
Restated Declaration of Trust in accordance with applicable law and
after the Closing Date, Spartan Short-Intermediate will not conduct
any business except in connection with its liquidation and
termination.
12. TERMINATION; WAIVER.
Intermediate Government and Spartan Short-Intermediate may terminate
this Agreement by mutual agreement. In addition, either Intermediate
Government or Spartan Short-Intermediate may at its option terminate
this Agreement at or prior to the Closing Date because:
(i) of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
(ii) a condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan Short-Intermediate or Intermediate
Government, 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 Intermediate Government
or Spartan Short-Intermediate; provided, however, that following the
shareholders' meeting called by Spartan Short-Intermediate pursuant to
Section 7 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Intermediate
Government Shares to be paid to Spartan Short-Intermediate
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]
EXHIBIT 2
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of February 16, 1999 by and between Fidelity Charles Street Trust, a
Massachusetts business trust, on behalf of its series Fidelity
Short-Intermediate Government Fund (Fidelity Short-Intermediate), and
Fidelity Income Fund, a Massachusetts business trust, on behalf of its
series Fidelity Intermediate Government Income Fund (Intermediate
Government). Fidelity Charles 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. Intermediate Government and Fidelity
Short-Intermediate may be referred to herein collectively as the
"Funds" or each individually as the "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise: (a) the transfer of all of the assets of
Fidelity Short-Intermediate to Intermediate Government solely in
exchange for shares of beneficial interest in Intermediate Government
(the Intermediate Government Shares) and the assumption by
Intermediate Government of Fidelity Short-Intermediate's liabilities;
and (b) the constructive distribution of such shares by Fidelity
Short-Intermediate PRO RATA to its shareholders in complete
liquidation and termination of Fidelity Short-Intermediate in exchange
for all of Fidelity Short-Intermediate's outstanding shares. Fidelity
Short-Intermediate shall receive shares of Intermediate Government
having an aggregate net asset value equal to the value of the assets
of Fidelity Short-Intermediate on the Closing Date (as defined in
Section 6), which Fidelity Short-Intermediate 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 FIDELITY SHORT-INTERMEDIATE.
Fidelity Short-Intermediate represents and warrants to and agrees with
Intermediate Government that:
(a) Fidelity Short-Intermediate is a series of Fidelity Charles
Street Trust, a business trust duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Massachusetts,
and has the power to own all of its properties and assets and to carry
out its obligations under this Agreement. It has all necessary
federal, state, and local authorizations to carry on its business as
now being conducted and to carry out this Agreement;
(b) Fidelity Charles Street Trust is an open-end, management
investment company duly registered under the Investment Company Act of
1940, as amended (the 1940 Act), and such registration is in full
force and effect;
(c) The Prospectus and Statement of Additional Information of
Fidelity Short-Intermediate dated November 24, 1998 and the supplement
to the Prospectus dated December 7, 1998, previously furnished to
Intermediate Government, did not and do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity Short-Intermediate,
threatened against Fidelity Short-Intermediate which assert liability
on the part of Fidelity Short-Intermediate. Fidelity
Short-Intermediate knows of no facts which might form the basis for
the institution of such proceedings;
(e) Fidelity Short-Intermediate is not in, and the execution,
delivery, and performance of this Agreement will not result in,
violation of any provision of its Amended and Restated Declaration of
Trust or By-laws, or, to the knowledge of Fidelity Short-Intermediate,
of any agreement, indenture, instrument, contract, lease, or other
undertaking to which Fidelity Short-Intermediate is a party or by
which Fidelity Short-Intermediate is bound or result in the
acceleration of any obligation or the imposition of any penalty under
any agreement, judgment or decree to which Fidelity Short-Intermediate
is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Fidelity Short-Intermediate at September 30, 1998, have been
audited by PricewaterhouseCoopers LLP, independent accountants, and
have been furnished to Intermediate Government. Said Statement of
Assets and Liabilities and Schedule of Investments fairly present the
Fund's financial position as of such date and said Statement of
Operations, Statement of Changes in Net Assets, and Financial
Highlights fairly reflect its results of operations, changes in
financial position, and financial highlights for the periods covered
thereby in conformity with generally accepted accounting principles
consistently applied;
(g) Fidelity Short-Intermediate has no known liabilities of a
material nature, contingent or otherwise, other than those shown as
belonging to it on its statement of assets and liabilities as of
September 30, 1998 and those incurred in the ordinary course of
Fidelity Short-Intermediate's business as an investment company since
September 30, 1998;
(h) The registration statement (Registration Statement) filed with
the Securities and Exchange Commission (Commission) by Fidelity Income
Fund on Form N-14 relating to the shares of Intermediate Government
issuable hereunder and the proxy statement of Fidelity
Short-Intermediate included therein (Proxy Statement), on the
effective date of the Registration Statement and insofar as they
relate to Fidelity Short-Intermediate (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 Fidelity Short-Intermediate,
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 Fidelity
Short-Intermediate (other than this Agreement) will be terminated
without liability to Fidelity Short-Intermediate 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 Fidelity
Short-Intermediate 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) Fidelity Short-Intermediate has filed or will file all federal
and state tax returns which, to the knowledge of Fidelity
Short-Intermediate's officers, are required to be filed by Fidelity
Short-Intermediate and has paid or will pay all federal and state
taxes shown to be due on said returns or provision shall have been
made for the payment thereof, and, to the best of Fidelity
Short-Intermediate's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(l) Fidelity Short-Intermediate 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 Fidelity
Short-Intermediate are, and at the Closing Date will be, duly and
validly issued and outstanding and fully paid and nonassessable as a
matter of Massachusetts law (except as disclosed in the Fund's
Statement of Additional Information), and have been offered for sale
and in conformity with all applicable federal securities laws. All of
the issued and outstanding shares of Fidelity Short-Intermediate will,
at the Closing Date, be held by the persons and in the amounts set
forth in the list of shareholders submitted to Intermediate Government
in accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Fidelity Short-Intermediate will have the full right,
power, and authority to sell, assign, transfer, and deliver its
portfolio securities and any other assets of Fidelity
Short-Intermediate to be transferred to Intermediate Government
pursuant to this Agreement. As of the Closing Date, subject only to
the delivery of Fidelity Short-Intermediate's portfolio securities and
any such other assets as contemplated by this Agreement, Intermediate
Government will acquire Fidelity Short-Intermediate'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 Intermediate Government) 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 Fidelity Short-Intermediate, and this
Agreement constitutes a valid and binding obligation of Fidelity
Short-Intermediate enforceable in accordance with its terms, subject
to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF INTERMEDIATE GOVERNMENT.
Intermediate Government represents and warrants to and agrees with
Fidelity Short-Intermediate that:
(a) Intermediate Government 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
Intermediate Government, dated September 21, 1998, the supplement to
the Prospectus dated January 1, 1999 , and the supplement to the
Statement of Additional Information dated October 8, 1998, previously
furnished to Fidelity Short-Intermediate 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 Intermediate Government, threatened
against Intermediate Government which assert liability on the part of
Intermediate Government. Intermediate Government knows of no facts
which might form the basis for the institution of such proceedings;
(e) Intermediate Government 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 Intermediate Government, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Intermediate Government is a party or by which Intermediate Government
is bound or result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree to
which Intermediate Government 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 Intermediate Government at July 31, 1998, have been audited by
PricewaterhouseCoopers LLP, independent accountants, and have been
furnished to Fidelity Short-Intermediate. Said Statement 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) Intermediate Government 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 Intermediate Government'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
Intermediate Government 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) Intermediate Government has filed or will file all federal and
state tax returns which, to the knowledge of Intermediate Government's
officers, are required to be filed by Intermediate Government 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 Intermediate Government's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to such returns;
(j) Intermediate Government 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
Intermediate Government to be issued to Fidelity Short-Intermediate
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 as a matter of Massachusetts law (except
as disclosed in the Fund's Statement of Additional Information) by
Intermediate Government, and no shareholder of Intermediate Government
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 Intermediate Government, and this
Agreement constitutes a valid and binding obligation of Intermediate
Government enforceable in accordance with its terms, subject to
approval by the shareholders of Fidelity Short-Intermediate;
(m) The Registration Statement and the Proxy Statement, on the
effective date of the Registration Statement and insofar as they
relate to Intermediate Government, (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 Intermediate Government, 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 Intermediate Government 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 Intermediate Government 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 Fidelity
Short-Intermediate and to the other terms and conditions contained
herein, Fidelity Short-Intermediate agrees to assign, sell, convey,
transfer, and deliver to Intermediate Government as of the Closing
Date all of the assets of Fidelity Short-Intermediate of every kind
and nature existing on the Closing Date. Intermediate Government
agrees in exchange therefor: (i) to assume all of Fidelity
Short-Intermediate's liabilities existing on or after the Closing
Date, whether or not determinable on the Closing Date, and (ii) to
issue and deliver to Fidelity Short-Intermediate the number of full
and fractional shares of Intermediate Government having an aggregate
net asset value equal to the value of the assets of Fidelity
Short-Intermediate transferred hereunder, less the value of the
liabilities of Fidelity Short-Intermediate, determined as provided for
under Section 4.
(b) The assets of Fidelity Short-Intermediate to be acquired by
Intermediate Government shall include, without limitation, all cash,
cash equivalents, securities, receivables (including interest or
dividends receivables), claims, choses in action, and other property
owned by Fidelity Short-Intermediate, and any deferred or prepaid
expenses shown as an asset on the books of Fidelity Short-Intermediate
on the Closing Date. Fidelity Short-Intermediate will pay or cause to
be paid to Intermediate Government any dividend or interest payments
received by it on or after the Closing Date with respect to the assets
transferred to Intermediate Government hereunder, and Intermediate
Government 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 Fidelity Short-Intermediate to be assumed by
Intermediate Government shall include (except as otherwise provided
for herein) all of Fidelity Short-Intermediate'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, Fidelity Short-Intermediate
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, Fidelity Short-Intermediate will
constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the
Intermediate Government Shares in exchange for such shareholders'
shares of beneficial interest in Fidelity Short-Intermediate and
Fidelity Short-Intermediate will be liquidated in accordance with
Fidelity Short-Intermediate's Amended and Restated Declaration of
Trust. Such distribution shall be accomplished by the Funds' transfer
agent opening accounts on Intermediate Government's share transfer
books in the names of the Fidelity Short-Intermediate shareholders and
transferring the Intermediate Government Shares thereto. Each Fidelity
Short-Intermediate shareholder's account shall be credited with the
respective PRO RATA number of full and fractional (rounded to the
third decimal place) Intermediate Government Shares due that
shareholder. All outstanding Fidelity Short-Intermediate shares,
including any represented by certificates, shall simultaneously be
canceled on Fidelity Short-Intermediate's share transfer records.
Intermediate Government shall not issue certificates representing the
Intermediate Government Shares in connection with the Reorganization.
(e) Any reporting responsibility of Fidelity Short-Intermediate 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 Intermediate
Government Shares in a name other than that of the registered holder
on Fidelity Short-Intermediate's books of the Fidelity
Short-Intermediate shares constructively exchanged for the
Intermediate Government Shares shall be paid by the person to whom
such Intermediate Government 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, Intermediate Government will deliver to
Fidelity Short-Intermediate the number of Intermediate Government
Shares having an aggregate net asset value equal to the value of the
assets of Fidelity Short-Intermediate transferred hereunder less the
liabilities of Fidelity Short-Intermediate, determined as provided in
this Section 4.
(c) The net asset value per share of the Intermediate Government
Shares to be delivered to Fidelity Short-Intermediate, the value of
the assets of Fidelity Short-Intermediate transferred hereunder, and
the value of the liabilities of Fidelity Short-Intermediate to be
assumed hereunder shall in each case be determined as of the Valuation
Time.
(d) The net asset value per share of the Intermediate Government
Shares shall be computed in the manner set forth in the then-current
Intermediate Government Prospectus and Statement of Additional
Information, and the value of the assets and liabilities of Fidelity
Short-Intermediate shall be computed in the manner set forth in the
then-current Fidelity Short-Intermediate 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 Fidelity Short-Intermediate and Intermediate
Government.
5. FEES; EXPENSES.
(a) Fidelity Short-Intermediate shall be responsible for all
expenses, fees and other charges in connection with the transactions
contemplated by this Agreement. Any expenses incurred in connection
with the transactions contemplated by this Agreement which may be
attributable to Intermediate Government will be borne by FMR.
(b) Each of Intermediate Government and Fidelity Short-Intermediate
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 April 29,
1999 , or at some other time, date, and place agreed to by
Fidelity Short-Intermediate and Intermediate Government (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 Fidelity Short-Intermediate and the
net asset value per share of Intermediate Government 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 FIDELITY SHORT-INTERMEDIATE.
(a) Fidelity Short-Intermediate agrees to call a meeting of its
shareholders after the effective date of the Registration Statement,
to consider transferring its assets to Intermediate Government as
herein provided, adopting this Agreement, and authorizing the
liquidation of Fidelity Short-Intermediate.
(b) Fidelity Short-Intermediate agrees that as soon as reasonably
practicable after distribution of the Intermediate Government Shares,
Fidelity Short-Intermediate shall be terminated as a series of
Fidelity Charles Street Trust pursuant to its Amended and Restated
Declaration of Trust, any further actions shall be taken in connection
therewith as required by applicable law, and on and after the Closing
Date Fidelity Short-Intermediate shall not conduct any business except
in connection with its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF INTERMEDIATE GOVERNMENT.
(a) That Fidelity Short-Intermediate furnishes to Intermediate
Government a statement, dated as of the Closing Date, signed by an
officer of Fidelity Charles Street Trust, certifying that as of the
Valuation Time and the Closing Date all representations and warranties
of Fidelity Short-Intermediate made in this Agreement are true and
correct in all material respects and that Fidelity Short-Intermediate
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 Fidelity Short-Intermediate furnishes Intermediate
Government with copies of the resolutions, certified by an officer of
Fidelity Charles Street Trust, evidencing the adoption of this
Agreement and the approval of the transactions contemplated herein by
the requisite vote of the holders of the outstanding shares of
beneficial interest of Fidelity Short-Intermediate;
(c) That, on or prior to the Closing Date, Fidelity
Short-Intermediate 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 Fidelity Short-Intermediate
substantially all of Fidelity Short-Intermediate's investment company
taxable income and all of its net realized capital gain, if any, as of
the Closing Date;
(d) That Fidelity Short-Intermediate shall deliver to Intermediate
Government 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 Fidelity Short-Intermediate's behalf by
its Treasurer or Assistant Treasurer;
(e) That Fidelity Short-Intermediate's custodian shall deliver to
Intermediate Government a certificate identifying the assets of
Fidelity Short-Intermediate 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
Intermediate Government; (ii) Fidelity Short-Intermediate'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 Fidelity Short-Intermediate's transfer agent shall deliver
to Intermediate Government at the Closing a certificate setting forth
the number of shares of Fidelity Short-Intermediate 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 Fidelity Short-Intermediate calls a meeting of its
shareholders to be held after the effective date of the Registration
Statement, to consider transferring its assets to Intermediate
Government as herein provided, adopting this Agreement, and
authorizing the liquidation and termination of Fidelity
Short-Intermediate;
(h) That Fidelity Short-Intermediate delivers to Intermediate
Government a certificate of an officer of Fidelity Charles Street
Trust, dated as of the Closing Date, that there has been no material
adverse change in Fidelity Short-Intermediate's financial position
since September 30,1998, other than changes in the market value of its
portfolio securities, or changes due to net redemptions of its shares,
dividends paid, or losses from operations; and
(i) That all of the issued and outstanding shares of beneficial
interest of Fidelity Short-Intermediate 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 Fidelity
Short-Intermediate or its transfer agent by Intermediate Government or
its agents shall have revealed otherwise, Fidelity Short-Intermediate
shall have taken all actions that in the opinion of Intermediate
Government are necessary to remedy any prior failure on the part of
Fidelity Short-Intermediate to have offered for sale and sold such
shares in conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF FIDELITY SHORT-INTERMEDIATE.
(a) That Intermediate Government shall have executed and delivered to
Fidelity Short-Intermediate an Assumption of Liabilities, certified by
an officer of Fidelity Income Fund, dated as of the Closing Date
pursuant to which Intermediate Government will assume all of the
liabilities of Fidelity Short-Intermediate existing at the Valuation
Time in connection with the transactions contemplated by this
Agreement;
(b) That Intermediate Government furnishes to Fidelity
Short-Intermediate 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 Intermediate Government made in this Agreement are true and correct
in all material respects, and Intermediate Government 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 Fidelity Short-Intermediate shall have received an opinion
of Kirkpatrick & Lockhart LLP, counsel to Fidelity Short-Intermediate
and Intermediate Government, to the effect that the Intermediate
Government Shares are duly authorized and upon delivery to Fidelity
Short-Intermediate as provided in this Agreement will be validly
issued and will be fully paid and nonassessable by Intermediate
Government (except as disclosed in Intermediate Government's Statement
of Additional Information) and no shareholder of Intermediate
Government has any preemptive right of subscription or purchase in
respect thereof.
10. CONDITIONS TO OBLIGATIONS OF INTERMEDIATE GOVERNMENT AND FIDELITY
SHORT-INTERMEDIATE.
(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
Fidelity Short-Intermediate;
(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
Intermediate Government or Fidelity Short-Intermediate 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 Intermediate
Government or Fidelity Short-Intermediate, 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 Intermediate Government
and Fidelity Short-Intermediate, threatened by the Commission; and
(f) That Intermediate Government and Fidelity Short-Intermediate
shall have received an opinion of Kirkpatrick & Lockhart LLP
satisfactory to Intermediate Government and Fidelity
Short-Intermediate that for federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Fidelity Short-Intermediate and
Intermediate Government will each be parties to the Reorganization
under section 368(b) of the Code;
(ii) No gain or loss will be recognized by Fidelity
Short-Intermediate upon the transfer of all of its assets to
Intermediate Government in exchange solely for the Intermediate
Government Shares and the assumption of Fidelity Short-Intermediate's
liabilities followed by the distribution of those Intermediate
Government Shares to the shareholders of Fidelity Short-Intermediate
in liquidation of Fidelity Short-Intermediate;
(iii) No gain or loss will be recognized by Intermediate Government
on the receipt of Fidelity Short-Intermediate's assets in exchange
solely for the Intermediate Government Shares and the assumption of
Fidelity Short-Intermediate's liabilities;
(iv) The basis of Fidelity Short-Intermediate's assets in the hands
of Intermediate Government will be the same as the basis of such
assets in Fidelity Short-Intermediate's hands immediately prior to the
Reorganization;
(v) Intermediate Government's holding period in the assets to be
received from Fidelity Short-Intermediate will include Fidelity
Short-Intermediate's holding period in such assets;
(vi) A Fidelity Short-Intermediate shareholder will recognize no
gain or loss on the exchange of his or her shares of beneficial
interest in Fidelity Short-Intermediate for the Intermediate
Government Shares in the Reorganization;
(vii) A Fidelity Short-Intermediate shareholder's basis in the
Intermediate Government Shares to be received by him or her will be
the same as his or her basis in the Fidelity Short-Intermediate shares
exchanged therefor;
(viii) A Fidelity Short-Intermediate shareholder's holding period
for his or her Intermediate Government Shares will include the holding
period of Fidelity Short-Intermediate shares exchanged, provided that
those Fidelity Short-Intermediate shares were held as capital assets
on the date of the Reorganization.
Notwithstanding anything herein to the contrary, neither Fidelity
Short-Intermediate nor Intermediate Government may waive the
conditions set forth in this subsection 10(f).
11. COVENANTS OF INTERMEDIATE GOVERNMENT AND FIDELITY
SHORT-INTERMEDIATE.
(a) Intermediate Government and Fidelity Short-Intermediate 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) Fidelity Short-Intermediate covenants that it is not acquiring
the Intermediate Government Shares for the purpose of making any
distribution other than in accordance with the terms of this
Agreement;
(c) Fidelity Short-Intermediate covenants that it will assist
Intermediate Government in obtaining such information as Intermediate
Government reasonably requests concerning the beneficial ownership of
Fidelity Short-Intermediate's shares; and
(d) Fidelity Short-Intermediate covenants that its liquidation and
termination will be effected in the manner provided in its Amended and
Restated Declaration of Trust in accordance with applicable law and
after the Closing Date, Fidelity Short-Intermediate will not conduct
any business except in connection with its liquidation and
termination.
12. TERMINATION; WAIVER.
Intermediate Government and Fidelity Short-Intermediate may terminate
this Agreement by mutual agreement. In addition, either Intermediate
Government or Fidelity Short-Intermediate 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 Fidelity Short-Intermediate or Intermediate
Government, 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 Intermediate Government
or Fidelity Short-Intermediate; provided, however, that following the
shareholders' meeting called by Fidelity Short-Intermediate pursuant
to Section 7 of this Agreement, no such amendment may have the effect
of changing the provisions for determining the number of Intermediate
Government Shares to be paid to Fidelity Short-Intermediate
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]
SSG/FSG-pxs-0299 CUSIP#316146505/FUND#474
1.713848.100 CUSIP#316069202/FUND#464
IMPORTANT PROXY MATERIALS
PLEASE CAST YOUR VOTE NOW!
Dear Shareholder:
I am writing to let you know that a Special Meeting of
Shareholders of Spartan(Registered trademark)
Short-Intermediate Government Fund will be held on April 14, 1999.
The purpose of the meeting is to vote on important proposals that
affect the fund and your investment in it, including a proposal to
merge Spartan Short-Intermediate Government Fund into Fidelity
Intermediate Government Income Fund. As a shareholder, you have the
opportunity to voice your opinion on the matters that affect your
fund. This package contains information about the proposals and the
materials to use when voting by mail.
The enclosed materials include two proxy statements. One provides
information pertaining to the merger proposal. The other proxy
statement provides information regarding several proposals pertaining
to the Fidelity Fixed-Income Trust, which is the current trust for
your fund. Both proxy statements relate to your investment in the
fund, so please make sure you read both proxy statements and cast your
vote on the enclosed proxy card(s) for both the merger proposal and
the trust proposals. PLEASE VOTE AND RETURN YOUR CARD(S) PROMPTLY.
YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
All of the proposals have been carefully reviewed by the Board of
Trustees. The Trustees, most of whom are not affiliated with
Fidelity, are responsible for protecting your interests as a
shareholder. The Trustees believe these proposals are in the best
interest of shareholders. They recommend that you vote for each
proposal.
The following Q&A is provided to assist you in understanding the
proposals. Each of the proposals is described in greater detail in
the enclosed proxy statements.
VOTING IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. To cast
your vote, simply complete the proxy card(s) enclosed in this package.
Be sure to sign the card(s) before mailing it in the postage-paid
envelope.
If you have any questions before you vote, please call Fidelity at
1-800-544-8888. We'll be glad to help you get your vote in quickly.
Thank you for your participation in this important initiative.
Sincerely,
Edward C. Johnson 3d
Chairman and Chief Executive Officer
Important information to help you understand and vote on the proposals
Please read the full text of both enclosed proxy statements. Below is
a brief overview of the proposals 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 PROPOSALS AM I BEING ASKED TO VOTE ON?
You are being asked to vote on the following proposals:
(solid bullet) To approve a merger of Spartan Short-Intermediate
Government Fund into Fidelity Intermediate Government Income Fund.
(solid bullet) To elect a Board of Trustees.
(solid bullet) To ratify the selection of PricewaterhouseCoopers LLP
as independent accountants of the fund.
(solid bullet) To authorize the Trustees to adopt an amended and
restated Declaration of Trust.
(solid bullet) To adopt a new fundamental investment policy for
your fund permitting your fund to invest all of its assets in another
open-end investment company managed by FMR or an affiliate with
substantially the same investment objective and policies.
(solid bullet) To amend the fundamental investment limitation
concerning diversification to exclude "securities of other investment
companies" from the limitation for your fund.
WHY AM I RECEIVING TWO PROXY STATEMENTS?
One proxy statement provides information pertaining to the merger of
Spartan Short-Intermediate Government Fund into Fidelity Intermediate
Government Income Fund. The other proxy statement provides
information on proposals for the Fidelity Fixed-Income Trust, which is
the current trust for your fund. Both proxy statements relate to your
investment in the fund.
MERGER PROPOSAL PROXY STATEMENT
WHAT IS THE REASON FOR AND ADVANTAGES OF THE MERGER OF SPARTAN
SHORT-INTERMEDIATE GOVERNMENT FUND (SHORT-INTERMEDIATE) INTO FIDELITY
INTERMEDIATE GOVERNMENT INCOME FUND (INTERMEDIATE GOVERNMENT)?
The proposed merger is part of a wider strategy by Fidelity to reduce
the number of 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 consistent
with the preservation of capital by investing in U.S. Government
securities, repurchase agreements, and other instruments related to
U.S. Government securities. The funds differ primarily with respect
to their average maturity and duration. Short-Intermediate seeks to
maintain an average maturity of between two and five years, while
Intermediate Government seeks to maintain an average maturity of
between three and ten years.
WHO IS THE FUND MANAGER FOR THESE FUNDS?
Andrew Dudley currently manages both funds and is expected to manage
the combined fund.
HOW DO THE EXPENSE STRUCTURES OF THE FUNDS COMPARE?
Short-Intermediate has a similar contractual expense structure to
Intermediate Government. Both funds pay an all-inclusive management
fee of 0.65% of average net assets to Fidelity Management & Research
Company (FMR). If the Reorganization is approved, 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
Intermediate Government management contract.
WHAT WILL BE THE NAME OF THE COMBINED FUND AFTER THE MERGER IS
COMPLETED?
If shareholders of Short-Intermediate approve the merger of their fund
into Intermediate Government, the combined fund's name will remain
Fidelity Intermediate Government Income 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 INTERMEDIATE GOVERNMENT AFTER THE MERGER AND
HOW HAS THE FUND PERFORMED?
If the proposal is approved, the combined fund is anticipated to have
over $800 million in assets.
The table below shows average annual total returns for both
Intermediate Government 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 Intermediate 7.45% 6.42% 6.34% 7.51%
Government Income Fund
Lipper Short-Inter. U.S. Govt 6.58% 5.64% 5.34% 7.48%
Funds Average**
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF INTERMEDIATE GOVERNMENT
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 Intermediate Government that is equal in
value to the net asset value of their shares of Short-Intermediate on
that date. The anticipated closing date is April 22, 1999.
FIDELITY FIXED-INCOME TRUST PROXY STATEMENT
WHAT ROLE DOES THE BOARD PLAY? (PROPOSAL 1)
The Trustees oversee the investment policies of each fund. Members of
the Board are fiduciaries and have an obligation to serve the best
interests of shareholders, including approving policy changes such as
those proposed in the proxy statement. In addition, the Trustees
review fund performance, oversee fund activities, and review
contractual arrangements with companies that provide services to the
funds.
WHAT IS THE ROLE OF THE INDEPENDENT ACCOUNTANTS? (PROPOSAL 2)
The independent accountants examine annual financial statements for
the fund and provide other audit and tax-related services. They
also sign or certify any financial statements of the fund
that is required by law to be independently certified and filed
with the Securities and Exchange Commission (SEC).
WHY IS THE FUND PROPOSING TO ADOPT AN AMENDED AND RESTATED DECLARATION
OF TRUST? (PROPOSAL 3)
The new Declaration of Trust is a more modern form of trust instrument
for a Massachusetts business trust. It gives the Trustees more
flexibility, and, subject to the applicable requirements of federal
and state law, broader authority to act. This increased flexibility
may allow the Trustees to react more quickly to changes in competitive
and regulatory conditions.
Adoption of the new Declaration of Trust will not alter the Trustees'
existing fiduciary obligations to act in the best interests of the
funds' shareholders. Before utilizing any new flexibility that
the new Declaration of Trust may afford, the Trustees must first
consider the shareholders' interests and act in accordance with such
interests. The new Declaration of Trust amends the current
Declaration of Trust in a number of significant ways. Please review
the proxy statement for specific details. Of course, if
shareholders approve the merger, the new Declaration of Trust for
Fidelity Fixed-Income Trust applies to your fund only until the
closing date of the merger.
WHAT ARE THE BENEFITS OF PERMITTING THE FUND TO INVEST ITS ASSETS
IN ANOTHER OPEN-END INVESTMENT COMPANY MANAGED BY FIDELITY MANAGEMENT
& RESEARCH COMPANY (FMR) OR AN AFFILIATE WITH SUBSTANTIALLY THE SAME
INVESTMENT OBJECTIVE AND POLICIES? (PROPOSALS 3 AND 4)
FMR and the Board of Trustees continually review methods of
structuring mutual funds to take maximum advantage of potential
efficiencies. A number of mutual fund companies have developed
"master-feeder" fund structures under which several "feeder" funds
invest all of their assets in a single pooled investment, or "master"
fund. The purpose of the master-feeder fund structure is to achieve
operational efficiencies by consolidating portfolio management while
maintaining different distribution and servicing structures. An
example would be funds with the same investment objective but
different minimum investments due to the servicing of individual
shareholders versus institutional clients.
These proposals would enable the fund to invest all of its assets
in another open-end investment company, managed by FMR or an
affiliate, with substantially the same investment objective and
policies. In order to implement the master-feeder structure, both the
Declaration of Trust and the fund's policies must permit the
structure. Proposal 3 would amend the Declaration of Trust to permit
the structure and Proposal 4 would amend the policy at the fund
level.
The Trustees would only allow a master-feeder structure in the
future if they determined that it would be in the best interest of the
fund and its shareholders.
WHAT IS THE BENEFIT OF AMENDING THE FUNDAMENTAL INVESTMENT
LIMITATION CONCERNING DIVERSIFICATION TO EXCLUDE SECURITIES OF OTHER
INVESTMENT COMPANIES FROM THE LIMITATION FOR THE FUND? (PROPOSAL
14)
This proposal would permit the fund, subject to the requirements of
the Investment Company Act of 1940, to invest without limit in the
securities of other investment companies. As a result of an exemption
granted by the SEC, the fund may invest up to 25% of its total assets
in non-publicly offered money market and short-term bond funds (the
Central Funds) managed by FMR or an affiliate of FMR. FMR anticipates
that making use of the Central Funds will benefit the fund by
enhancing the efficiency of cash management and by providing increased
short-term investment opportunities.
GENERAL INFORMATION
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 (April 14, 1999), the meeting may be
adjourned to permit further solicitation of proxy votes.
HAS THE FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSALS?
Yes. The Board of Trustees has unanimously approved the proposals in
each proxy statement and recommends that you vote to approve them.
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 a fund on the record date. The record date is
February 16, 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 regis tration 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 Analytical Services, Inc. is a nationally recognized
organization that reports on mutual fund total return performance and
calculates fund rankings. Lipper averages are based on universes of
funds with the same investment objective. Peer group averages include
reinvested dividends and capital gains, if any, and exclude sales
charges.
Fidelity Distributors Corporation
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 Fidelity Short-Intermediate Government Fund (SHORT-INTERMEDIATE)
into Fidelity Intermediate Government Income Fund (INTERMEDIATE
GOVERNMENT). A shareholder meeting is scheduled for April 14, 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 Short-Intermediate 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 (February 16, 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 Fidelity Short-Intermediate
Government Fund into Fidelity Intermediate Government Income 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 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 consistent
with the preservation of capital by investing in U.S. Government
securities, repurchase agreements, and other instruments related to
U.S. Government securities. The funds differ primarily with respect
to their average maturity and duration. Short-Intermediate seeks to
maintain an average maturity of between two and five years, while
Intermediate Government seeks to maintain an average maturity of
between three and ten years.
WHO IS THE FUND MANAGER FOR THESE FUNDS?
Andrew Dudley currently manages both funds and is expected to manage
the combined fund.
HOW DO THE EXPENSE STRUCTURES OF THE FUNDS COMPARE?
Short-Intermediate and Intermediate Government have different
contractual expense structures. Short-Intermediate pays its management
fees and other expenses separately, while Intermediate Government pays
an all-inclusive management fee to Fidelity Management & Research
Company (FMR). If the Reorganization is approved, 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
Intermediate Government management contract.
WHAT WILL BE THE NAME OF THE COMBINED FUND AFTER THE MERGER IS
COMPLETED?
If shareholders of Short-Intermediate approve the merger of their fund
into Intermediate Government, the combined fund's name will remain
Fidelity Intermediate Government Income 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 INTERMEDIATE GOVERNMENT AFTER THE MERGER AND
HOW HAS THE FUND PERFORMED?
If the proposal is approved, the combined fund is anticipated to have
over $900 million in assets.
The table below shows average annual total returns for both
Intermediate Government 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 Intermediate 7.45% 6.42% 6.34% 7.51%
Government Income Fund
Lipper Short-Inter. U.S. Govt 6.58% 5.64% 5.34% 7.48%
Funds Average**
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF INTERMEDIATE GOVERNMENT
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 Intermediate Government that is equal in
value to the net asset value of their shares of Short-Intermediate on
that date. The anticipated closing date is April 29, 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 (April 14, 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 a fund on the record date. The record date is
February 16, 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 Analytical Services, Inc. is a nationally recognized
organization that reports on mutual fund total return performance and
calculates fund rankings. Lipper averages are based on universes of
funds with the same investment objective. Peer group averages include
reinvested dividends and capital gains, if any, and exclude sales
charges.
Fidelity Distributors Corporation
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE OR MAIL TO:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- ---------------------------------------------------------------------
FIDELITY FIXED-INCOME TRUST: SPARTAN (Registered trademark)
SHORT-INTERMEDIATE GOVERNMENT FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and William O. McCoy, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of Fidelity Fixed-Income Trust: Spartan Short-Intermediate
Government 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 April 14, 1999
at 9:00 a.m. Eastern time and at any adjournments thereof. All powers
may be exercised by a majority of said proxy holders or substitutes
voting or acting or, if only one votes and acts, then by that one.
This Proxy shall be voted on the proposals described in the Proxy
Statement/Prospectus and in the Proxy Statement as specified on
the reverse side. Receipt of the Notice of the Meeting and the
accompanying Proxy Statement/Prospectus and 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 #316146505/fund #474
Please refer to the Proxy Statement/Prospectus discussion for
matter A. Please refer to the Proxy Statement discussion for
matters 1, 2, 3, 4, and 14.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSAL S.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE
FOLLOWING:
Please detach at perforation before mailing.
PLEASE VOTE BY FILLING IN THE BOXES BELOW.
PROXY STATEMENT/PROSPECTUS PROPOSAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
A. To approve an Agreement and FOR [ ] AGAINST [ ] ABSTAIN [ ] A.
Plan of Reorganization
between Spartan
Short-Intermediate
Government Fund and Fidelity
Intermediate Government
Income Fund, a fund of
Fidelity Income Fund,
providing for the transfer
of all of the assets of
Spartan Short-Intermediate
Government Fund to Fidelity
Intermediate Government
Income Fund in exchange
solely for shares of
beneficial interest in
Fidelity Intermediate
Government Income Fund and
the assumption by Fidelity
Intermediate Government
Income Fund of Spartan
Short-Intermediate
Government Fund's
liabilities, followed by the
distribution of shares of
Fidelity Intermediate
Government Income Fund to
shareholders of Spartan
Short-Intermediate
Government Fund in
liquidation of Spartan
Short-Intermediate
Government Fund.
</TABLE>
PROXY STATEMENT PROPOSALS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To elect the twelve nominees FOR all nominees listed WITHHOLD authority to vote 1.
specified below as Trustees: (except as marked to the for all nominees
(01)Ralph F. Cox, contrary at left) [ ]
(02)Phyllis Burke Davis, [ ]
(03)Robert M. Gates,
(04)Edward C. Johnson 3d,
(05)E. Bradley Jones,
(06)Donald J. Kirk,
(07)Peter S. Lynch,
(08)William O. McCoy,
(09)Gerald C. McDonough,
(10)Marvin L. Mann,
(11)Robert C. Pozen, and
(12)Thomas R. Williams.
(INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE
THE NAME(S) OF THE
NOMINEE(S) ON THE LINE
BELOW.)
</TABLE>
---------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
PricewaterhouseCoopers LLP
as independent accountants
of the fund.
3. To authorize the Trustees to FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
adopt an amended and
restated Declaration of Trust.
4. To adopt a new fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
investment policy for the
fund permitting the fund to
invest all of its assets in
another open-end investment
company managed by FMR or an
affiliate with substantially
the same investment
objective and policies.
14. To amend the fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
investment limitation
concerning diversification
to exclude "securities of
other investment companies"
from the limitation for the
fund.
</TABLE>
SSG-PXC-0299 (PLEASE SIGN ON REVERSE SIDE)
cusip #316146505/fund #474
Vote this proxy card TODAY! Your prompt response will
save your fund the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------
FIDELITY CHARLES STREET TRUST: FIDELITY SHORT-INTERMEDIATE GOVERNMENT
FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter, and William O. McCoy, or any one or
more of them, attorneys, with full power of substitution, to vote all
shares of Fidelity Charles Street Trust: Fidelity Short-Intermediate
Government 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 April 14, 1999
at 9:00 a.m. Eastern time and at any adjournments thereof. All powers
may be exercised by a majority of said proxy holders or substitutes
voting or acting or, if only one votes and acts, then by that one.
This Proxy shall be voted on the proposal described in the Proxy
Statement as specified on the reverse side. Receipt of the Notice of
the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign exactly as your name appears on
this Proxy. When signing in a fiduciary
capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so
indicate. Corporate and partnership proxies
should be signed by an authorized person
indicating the person's title.
Date _____________, 1999
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip #316069202/fund #464
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------
Please vote by filling in a box below.
____________________________________________________________________
B. To approve an Agreement and FOR [ ] AGAINST [ ] ABSTAIN [ ] B.
Plan of Reorganization
between Fidelity
Short-Intermediate
Government Fund and Fidelity
Income Fund: Fidelity
Intermediate Government
Income Fund, providing for
the transfer of all of the
assets of Fidelity
Short-Intermediate
Government Fund to Fidelity
Intermediate Government
Income Fund in exchange
solely for shares of
beneficial interest in
Fidelity Intermediate
Government Income Fund and
the assumption by Fidelity
Intermediate Government
Income Fund of Fidelity
Short-Intermediate
Government Fund's
liabilities, followed by the
distribution of Fidelity
Intermediate Government
Income Fund shares to
shareholders of Fidelity
Short-Intermediate
Government Fund in
liquidation of Fidelity
Short-Intermediate
Government Fund.
(PLEASE SIGN ON REVERSE SIDE)
FSG-PXC-299 cusip #316069202/fund #464
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 5 THE FUNDS AT A GLANCE
5 WHO MAY WANT TO INVEST
7 EXPENSES Each fund's yearly
operating expenses.
9 FINANCIAL HIGHLIGHTS A
summary of each fund's
financial data.
13 PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL 17 CHARTER How each fund is
organized.
18 INVESTMENT PRINCIPLES AND
RISKS Each fund's overall
approach to investing.
24 BREAKDOWN OF EXPENSES How
operating costs are
calculated and what they
include.
YOUR ACCOUNT 27 DOING BUSINESS WITH FIDELITY
27 TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-advantaged
retirement plans.
31 HOW TO BUY SHARES Opening an
account and making
additional investments.
33 HOW TO SELL SHARES Taking
money out and closing your
account.
35 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND ACCOUNT 37 DIVIDENDS, CAPITAL GAINS,
POLICIES AND TAXES
38 TRANSACTION DETAILS Share
price calculations and the
timing of purchases and
redemptions.
41 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 112, 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 99).
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.
FIDELITY GINNIE MAE FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
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>
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
G NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
H 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.
I FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
FIDELITY GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 (.469) (.660) (.641) (.609) (.631) (.679) (.554) (.801) (.832) (.784)
net investment income
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>
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.
FIDELITY INTERMEDIATE GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
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.
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%
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
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%
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
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%
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 103.
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 118. 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 116.
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 TO ADD TO AN ACCOUNT
Phone 1-800-544-7777 (phone_graphic) (small solid (small solid
bullet) Exchange bullet) Exchange
from another from another
Fidelity fund Fidelity fund
account with the account with the
same registration, same registration,
including name, including name,
address, and address, and
taxpayer ID number. 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 (small solid
bullet) Complete bullet) Exchange
and sign the from another
application. Make Fidelity fund
your check payable account with the
to the complete same registration,
name of the fund. including name,
Mail to the address, and
address indicated taxpayer ID number.
on the application. (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 (small solid
bullet) Complete bullet) Make your
and sign the check payable to
application. Make the complete name
your check payable of the fund.
to the complete Indicate your fund
name of the fund. account number on
Mail to the your check and
address indicated mail to the
on the application. 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 (small solid
bullet) Bring your bullet) Bring your
application and check to a
check to a Fidelity Investor
Fidelity Investor Center. Call
Center. Call 1-800-544-9797 for
1-800-544-9797 for the center nearest
the center nearest you.
you.
Wire (wire_graphic) (small solid (small solid
bullet) Call bullet) Not
1-800-544-7777 to available for
set up your retirement accounts.
account and to (small solid
arrange a wire bullet) Wire to:
transaction. Not Bankers Trust
available for Company, Bank
retirement accounts. Routing
(small solid #021001033,
bullet) Wire Account #00163053.
within 24 hours Specify the
to: Bankers Trust complete name of
Company, Bank the fund and
Routing include your
#021001033, account number and
Account #00163053. your name.
Specify the
complete name of
the fund and
include your new
account number and
your name.
Automatically (automatic_graphic) (small solid (small solid
bullet) Not bullet) Use
available. 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 SPECIAL REQUIREMENTS
Phone 1-800-544-7777 (phone_graphic) All account types (small solid
except retirement bullet) Maximum
check request:
All account types $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) Individual, Joint (small solid
Tenant, Sole bullet) The letter
Proprietorship, of instruction
UGMA, UTMA must be signed by
Retirement account all persons
Trust required to sign
Business or for transactions,
Organization exactly as their
names appear on
Executor, the account.
Administrator, (small solid
Conservator, bullet) The
Guardian 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) All account types (small solid
except retirement 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) All account types (small solid
bullet) Minimum
check: $500.
(small solid
bullet) All
account owners
must sign a
signature card to
receive a checkbook.
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
(checkmark)24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESS SM(automated graphic)
1-800-544-5555
WEB SITE
www.fidelity.com
(automated graphic) AUTOMATED SERVICE
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)
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 .
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
$100 Monthly or quarterly CHANGING
(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
$100 Every pay period CHANGING
(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
$100 Monthly, bimonthly, CHANGING
quarterly, or (small solid
annually bullet) To
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.
(recycle logo) This prospectus is printed on recycled paper using
soy-based inks.
