SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(e) or Sec. 240.14a-12
Fidelity Income Trust
Arthur S. Loring, Secretary
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(ii), 14a-6(j) (1), or 14a-6(j) (2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(j) (3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(j) (4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SPARTAN(registered trademark) LIMITED MATURITY GOVERNMENT FUND
FIDELITY MORTGAGE SECURITIES PORTFOLIO
FIDELITY GINNIE MAE PORTFOLIO
FUNDS OF
FIDELITY INCOME FUND
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of the above funds:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan Limited Maturity Government Fund, Fidelity Mortgage
Securities Portfolio, and Fidelity Ginnie Mae Portfolio (the funds), will
be held at the office of Fidelity Income Trust (the trust), 82 Devonshire
Street, Boston, Massachusetts 02109 on July 15, 1994 at 10:45 a.m. The
purpose of the Meeting is to consider and act upon the following proposals,
and to transact such other business as may properly come before the Meeting
or any adjournments thereof.
1. To elect a Board of Trustees.
2. To ratify the selection of Price Waterhouse as independent accountants
of the trust.
3. To amend the Declaration of Trust to provide dollar-based voting rights
for shareholders of the trust.
4. To amend the Declaration of Trust regarding shareholder notification of
appointment of Trustees.
5. To amend the Declaration of Trust to provide each fund with the ability
to invest all of its assets in another open-end investment company with
substantially the same investment objective and policies.
6. To adopt a new fundamental investment policy for each fund permitting a
fund to invest all of its assets in another open-end investment company
with substantially the same investment objective and policies.
7. To approve an amended management contract for Fidelity Mortgage
Securities Portfolio and Fidelity Ginnie Mae Portfolio.
8. To approve a Sub-Advisory Agreement with FMR Far East East for each of
the funds.
9. To approve a Sub-Advisory Agreement with FMR U.K. for each of the
funds.
10. To eliminate the fundamental investment policy concerning repurchase
agreements for Fidelity Mortgage Securities Portfolio.
11. To eliminate certain fundamental investment policies and replace
certain others with non-fundamental investment policies for Fidelity
Mortgage Securities Portfolio.
12.To adopt a fundamental investment limitation concerning commodities for
Fidelity Mortgage Securities Portfolio.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
13.To amend the fundamental investment limitation concerning
diversification for Spartan Limited Maturity Government Fund.
14.To amend the fundamental investment limitation concerning
diversification for Fidelity Mortgage Securities Portfolio.
15. To amend the fundamental investment limitation concerning senior
securities for Spartan Limited Maturity Government Fund and Fidelity
Mortgage Securities Portfolio.
16. To eliminate the fundamental investment limitation concerning short
sales for Spartan Limited Maturity Government Fund and Fidelity Mortgage
Securities Portfolio.
17. To eliminate the fundamental investment limitation concerning margin
purchases for Spartan Limited Maturity Government Fund and Fidelity
Mortgage Securities Portfolio.
18. To amend the fundamental investment limitation concerning borrowing for
Spartan Limited Maturity Government Fund and Fidelity Mortgage Securities
Portfolio.
19. To amend the fundamental investment limitation concerning underwriting
for Fidelity Mortgage Securities Portfolio.
20. To amend the fundamental investment limitation concerning concentration
of its investments in a single industry for Spartan Limited Maturity
Government Fund.
21. To amend the fundamental investment limitation concerning real estate
for Spartan Limited Maturity Government Fund and Fidelity Mortgage
Securities Portfolio.
22. To amend the fundamental investment limitation concerning commodities
for Spartan Limited Maturity Government Fund.
23. To amend the fundamental investment limitation concerning lending for
Spartan Limited Maturity Government Fund and Fidelity Mortgage Securities
Portfolio.
24. To eliminate the fundamental investment limitation concerning
investment in other investment companies for Fidelity Mortgage Securities
Portfolio.
25. To eliminate the fundamental investment limitation concerning investing
in oil, gas, and mineral exploration programs for Fidelity Mortgage
Securities Portfolio.
The Board of Trustees has fixed the close of business on May 18, 1994 as
the record date for the determination of the shareholders of each of the
funds entitled to notice of, and to vote at, such Meeting and any
adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
May 18, 1994
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER
WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN
MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of assistance
to you and help you avoid the time and expense involved in validating your
vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears in
the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual signing.
This can be shown either in the form of the account registration itself or
by the individual executing the proxy card. For example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins, Trustee
2) ABC Trust Ann B. Collins, Trustee
3) Ann B. Collins, Trustee Ann B. Collins, Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
SPARTAN LIMITED MATURITY GOVERNMENT FUND
FIDELITY MORTGAGE SECURITIES PORTFOLIO
FIDELITY GINNIE MAE PORTFOLIO
TO BE HELD JULY 15, 1994
This Proxy Statement is furnished in connection with a solicitation of
proxies made by, and on behalf of, the Board of Trustees of Fidelity Income
Fund (the trust) to be used at the Special Meeting of Shareholders of
Spartan Limited Maturity Government Fund, Fidelity Mortgage Securities
Portfolio, and Fidelity Ginnie Mae Portfolio (the funds) and at any
adjournments thereof (the Meeting), to be held July 15, 1994 at 10:45 a.m.
at 82 Devonshire Street, Boston, Massachusetts 02109, the principal
executive office of the trust. The purpose of the Meeting is set forth in
the accompanying Notice. The solicitation is made primarily by the mailing
of this Proxy Statement and the accompanying proxy card on or about May 18,
1994. Supplementary solicitations may be made by mail, telephone,
telegraph, or by personal interview by representatives of the trust. The
expenses in connection with preparing this Proxy Statement and its
enclosures and of all solicitations will be paid by the funds (except for
Spartan Limited Maturity Government Fund whose expenses will be borne by
Fidelity Management and Research Company (FMR)). The funds (FMR for Spartan
Limited Maturity Government Fund), will reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may nevertheless
be revoked at any time prior to its use by written notification received by
the trust, by the execution of a later-dated proxy card, or by attending
the Meeting and voting in person. All proxy cards solicited by the Board of
Trustees that are properly executed and received by the Secretary prior to
the Meeting, and which are not revoked, will be voted at the Meeting.
Shares represented by such proxies will be voted in accordance with the
instructions thereon. If no specification is made on a proxy card, it will
be voted FOR the matters specified on the proxy card. All proxies not
voted, including broker non-votes, will not be counted toward establishing
a quorum. Shareholders should note that while votes to ABSTAIN will count
toward establishing a quorum, passage of any proposal being considered at
the Meeting will occur only if a sufficient number of votes are cast FOR
the proposal. Accordingly, votes to ABSTAIN and votes AGAINST will have the
same effect in determining whether the proposal is approved.
If a quorum is present at the Meeting, but sufficient votes to approve one
or more of the proposed items are not received, or if other matters arise
requiring shareholder attention, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares present at the Meeting or represented by proxy.
When voting on a proposed adjournment, the persons named as proxies will
vote for the proposed adjournment all shares that they are entitled to vote
with respect to each item, unless directed to vote AGAINST the item, in
which case such shares will be voted against the proposed adjournment with
respect to that item. A shareholder vote may be taken on one or more of the
items in this Proxy Statement prior to such adjournment if sufficient votes
have been received and it is otherwise appropriate. A copy of each fund's
annual report for the fiscal year ended July 31, 1993 has been mailed or
delivered to shareholders of each respective fund entitled to vote at the
meeting.
Shares of each fund issued and outstanding as of March 31, 1994 are
indicated in the following table:
Spartan Limited Maturity Government Fund _______
Fidelity Mortgage Securities Portfolio _______
Fidelity Ginnie Mae Portfolio _______
As of March 31, 1994, [Beneficial ownership language to be added].
Shareholders of record at the close of business on May 18, 1994 will be
entitled to vote at the Meeting. Each such shareholder will be entitled to
one vote for each share held on that date.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING IS SUFFICIENT
TO APPROVE PROPOSALS 1 AND 2. APPROVAL OF PROPOSALS 3 THROUGH 21 REQUIRES
THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES''
OF THE APPROPRIATE FUNDS. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE
1940 ACT), A "MAJORITY VOTE OF THE OUTSTANDING VOTING SECURITIES'' MEANS
THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF THE SHARES OF THE
FUND PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE
THAN 50% OF THE OUTSTANDING SHARES ARE PRESENT OR REPRESENTED BY PROXY OR
(B) MORE THAN 50% OF THE OUTSTANDING SHARES.
1. TO ELECT A BOARD OF TRUSTEES.
Pursuant to the provisions of the Declaration of Trust of Fidelity Income
Fund, the Trustees have determined that the number of Trustees shall be
fixed at twelve. It is intended that the enclosed proxy card will be voted
for the election as Trustees of the twelve nominees listed below, unless
such authority has been withheld in the proxy card.
Except for Mrs. Davis and Mr. Mann, all nominees named below are currently
Trustees of Fidelity Income Fund and have served in that capacity
continuously since originally elected or appointed. Mr. Cox, Mr. Jones, Mr.
Lynch, and Mr. McDonough were selected by the trust's Nominating and
Administration Committee (see page __ ) and were appointed to the Board in
November 1991, May 1990, April 1990, and August 1989, respectively. None of
the nominees is related to one another. Those nominees indicated by an
asterisk (*) are "interested persons" of the trust by virtue of, among
other things, their affiliation with either the trust, the funds'
investment adviser, Fidelity Management & Research Company (FMR, or the
Adviser), or the funds' distribution agent, Fidelity Distributors
Corporation (FDC). Each of the nominees is currently a Trustee or General
Partner, as the case may be, of other funds advised by FMR.
In the election of Trustees, those twelve nominees receiving the highest
number of votes cast at the Meeting, providing a quorum is present, shall
be elected.
Nominee Principal Occupation ** Year of
(Age) Election or
Appointment
*J. Gary Burkhead Senior Vice President, is President 1986
82 Devonshire Street of FMR; and President and a
Boston, MA Director of FMR Texas Inc. (1989),
(53) Fidelity Management &
Research (U.K.) Inc., and Fidelity
Management & Research (Far
East) Inc.
Ralph F. Cox President of Greenhill Petroleum 1991
200 Rivercrest Drive Corporation (petroleum exploration
Forth Worth, TX and production, 1990). Prior to his
(62) retirement in March 1990, Mr. Cox
was President and Chief Operating
Officer of Union Pacific Resources
Company (exploration and
production). He is a Director of
Bonneville Pacific Corporation
(independent power, 1989) and
CH2M Hill Companies
(engineering). In addition, he
served on the Board of Directors of
the Norton Company (
manufacturer of industrial devices,
1983-1990) and continues to serve
on the Board of Directors of the
Texas State Chamber of
Commerce, and is a member of
advisory boards of Texas
A&M University and the
University of Texas at Austin.
Phyllis Burke Davis Prior to her retirement in ____
340 E. 6th Street #22C September 1991, Mrs. Davis was
New York, NY the Senior Vice President of
(62) Corporate Affairs of Avon
Products, Inc. She is currently a
Director of BellSouth Corporation
(telecommunications), Eaton
Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail
stores, 1990), and previously
served as a Director of Hallmark
Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition,
she serves as a Director of the New
York City Chapter of the National
Multiple Sclerosis Society, and is a
member of the Advisory Council of
the International Executive Service
Corps. and the President's
Advisory Council of The
University of Vermont School of
Business Administration.
Richard J. Flynn Financial consultant. Prior to 1982
77 Fiske Hill September 1986, Mr. Flynn was
Sturbridge, MA Vice Chairman and a Director of
(70) the Norton Company (manufacturer
of industrial devices). He is
currently a Director of Mechanics
Bank and a Trustee of College of
the Holy Cross and Old Sturbridge
Village, Inc.
*Edward C. Johnson 3d President, is Chairman, Chief 1968
82 Devonshire Street Executive Officer and a Director of
Boston, MA FMR Corp.; a Director and
(64) Chairman of the Board and of the
Executive Committee of FMR;
Chairman and a Director of FMR
Texas Inc. (1989), Fidelity
Management & Research
(U.K.) Inc., and Fidelity
Management & Research (Far
East) Inc.
E. Bradley Jones Prior to his retirement in 1984, Mr. 1990
3881-2 Lander Road Jones was Chairman and Chief
Chagrin Falls, OH Executive Officer of LTV Steel
(66) Company. Prior to May 1990, he
was a Director of National City
Corporation (a bank holding
company) and National City Bank
of Cleveland. He is a Director of
TRW Inc. (original equipment and
replacement products),
Cleveland-Cliffs Inc (mining),
NACCO Industries, Inc. (mining
and marketing), Consolidated Rail
Corporation, Birmingham Steel
Corporation, Hyster-Yale Materials
Handling, Inc. (1989) and RPM
Inc. (manufacturer of chemical
products, 1990). In addition, he
serves as a Trustee of First Union
Real Estate Investments, Chairman
of the Board of Trustees and a
member of the Executive
Committee of the Cleveland Clinic
Foundation, a Trustee and a
member of the Executive
Committee of University School
(Cleveland), and a Trustee of
Cleveland Clinic Florida.
Donald J. Kirk Professor at Columbia University 1987
680 Steamboat Road Graduate School of Business and a
Apartment #1 - North financial consultant. Prior to 1987,
Greenwich, CT he was Chairman of the Financial
(61) Accounting Standards Board. Mr.
Kirk is a Director of General Re
Corporation (reinsurance) and
Valuation Research Corp.
(appraisals and valuations, 1993).
In addition, he serves as Vice
Chairman of the Board of Directors
of the National Arts Stabilization
Fund and Vice Chairman of the
Board of Trustees of the Greenwich
Hospital Association.
*Peter S. Lynch Vice Chairman of FMR (1992). 1990
82 Devonshire Street Prior to his retirement on May 31,
Boston, MA 1990, he was a Director of FMR
(51) (1989) and Executive Vice
President of FMR (a position he
held until March 31, 1991); Vice
President of Fidelity Magellan
Fund and FMR Growth Group
Leader; and a Managing Director
of FMR Corp. Mr. Lynch was also
Vice President of Fidelity
Investments Corporate Services
(1991-1992). He is a Director of
W.R. Grace & Co. (chemicals,
1989) and Morrison Knudsen
Corporation (engineering and
construction). In addition, he
serves as a Trustee of Boston
College, Massachusetts Eye &
Ear Infirmary, Historic Deerfield
(1989) and Society for the
Preservation of New England
Antiquities, and as an Overseer of
the Museum of Fine Arts of Boston
(1990).
Gerald C. McDonough Chairman of G.M. Management 1989
135 Aspenwood Drive Group (strategic advisory services).
Cleveland, OH Prior to his retirement in July 1988,
(65) he was Chairman and Chief
Executive Officer of Leaseway
Transportation Corp. (physical
distribution services). Mr.
McDonough is a Director of
ACME-Cleveland Corp. (metal
working, telecommunications and
electronic products),
Brush-Wellman Inc. (metal
refining), York International Corp.
(air conditioning and refrigeration,
1989), Commercial Intertech Corp.
(water treatment equipment, 1992),
and Associated Estates Realty
Corporation (a real estate
investment trust, 1993).
Edward H. Malone Prior to his retirement in 1985, Mr. 1989
5601 Turtle Bay Drive Malone was Chairman, General
#2104 Electric Investment Corporation
Naples, FL and a Vice President of General
(69) Electric Company. He is a Director
of Allegheny Power Systems, Inc.
(electric utility), General Re
Corporation (reinsurance), and
Mattel Inc. (toy manufacturer). He
is also a Trustee of Rensselaer
Polytechnic Institute and of
Corporate Property Investors and a
member of the Advisory Boards of
Butler Capital Corporation Funds
and Warburg, Pincus Partnership
Funds.
Marvin L. Mann Chairman of the Board, President, ____
55 Railroad Avenue and Chief Executive Officer of
Greenwich,CT Lexmark International, Inc. (office
(61) machines, 1991). Prior to 1991, he
held positions of Vice President of
International Business Machines
Corporation ("IBM") and President
and General Manager of various
IBM divisions and subsidiaries. Mr.
Mann is a Director of M.A. Hanna
Company (chemicals, 1993) and
Infomart (marketing services,
1991), a Trammell Crow Co. In
addition, he serves as the
Campaign Vice Chairman of the
Tri-State United Way (1993) and is
a member of the University of
Alabama President's Cabinet
(1990).
Thomas R. Williams President of The Wales Group, Inc. 1989
21st Floor (management and financial
191 Peachtree Street, advisory services). Prior to retiring
N.E. in 1987, Mr. Williams served as
Atlanta, GA Chairman of the Board of First
(65) Wachovia Corporation (bank
holding company), and Chairman
and Chief Executive Officer of The
First National Bank of Atlanta and
First Atlanta Corporation (bank
holding company). He is currently
a Director of BellSouth
Corporation (telecommunications),
ConAgra, Inc. (agricultural
products), Fisher Business Systems,
Inc. (computer software), Georgia
Power Company (electric utility),
Gerber Alley & Associates,
Inc. (computer software), National
Life Insurance Company of
Vermont, American Software, Inc.
(1989), and AppleSouth, Inc.
(restaurants, 1992).
** Except as otherwise indicated, each individual has held the office shown
or other offices in the same company for the last five years.
[insert beneficial ownership]
If elected, the Trustees will hold office without limit in time except
that (a) any Trustee may resign; (b) any Trustee may be removed by written
instrument, signed by at least two-thirds of the number of Trustees prior
to such removal; (c) any Trustee who requests to be retired or who has
become incapacitated by illness or injury may be retired by written
instrument signed by a majority of the other Trustees; and (d) a Trustee
may be removed at any Special Meeting of shareholders by a two-thirds vote
of the outstanding voting securities of the trust. In case a vacancy shall
for any reason exist, the remaining Trustees will fill such vacancy by
appointing another Trustee, so long as, immediately after such appointment,
at least two-thirds of the Trustees have been elected by shareholders. If,
at any time, less than a majority of the Trustees holding office has been
elected by the shareholders, the Trustees then in office will promptly call
a shareholders' meeting for the purpose of electing a Board of Trustees.
Otherwise, there will normally be no meeting of shareholders for the
purpose of electing Trustees.
The trust's Board, which is currently composed of three interested and
seven non-interested Trustees, met eleven times during the twelve months
ended July 31, 1993. It is expected that the Trustees will meet at least
ten times a year at regularly scheduled meetings.
As a group, the non-interested Trustees received fees and expenses of
$_____ from the trust in their capacities as Trustees of the funds for the
fiscal year ended July 31, 1993. The non-interested Trustees also served in
similar capacities for other funds advised by FMR (see page __ ), and
received additional compensation for such services.
The Board of Trustees has adopted a policy whereby non-interested
Trustees, upon reaching their 72nd birthday will resign. Under a defined
benefit retirement program, non-interested Trustees, upon reaching age 72,
are entitled to payments during their lifetime based on their basic Trustee
fees and their length of service.
The trust's Audit Committee is composed entirely of Trustees who are not
interested persons of the trust, of FMR or its affiliates and normally
meets four times a year, or as required, prior to meetings of the Board of
Trustees. Currently, Messrs. Kirk (Chairman), Flynn, and Williams are
members of the Committee. This Committee oversees and monitors the
financial reporting process, including recommending to the Board the
independent accountants to be selected for the trust (see Proposal 2),
reviewing internal controls and the auditing function (both internal and
external), reviewing the qualifications of key personnel performing audit
work, and overseeing compliance procedures. During the twelve months ended
July 31, 1993, the Committee held five meetings.
The trust's Nominating and Administration Committee is currently composed
of Messrs. Flynn (Chairman), McDonough, and Williams. The Committee members
confer periodically and hold meetings as required. The Committee is charged
with the duties of reviewing the composition and compensation of the Board
of Trustees, proposing additional non-interested Trustees, monitoring the
performance of legal counsel employed by the funds and the non-interested
Trustees, and acting as administrative committee under the Retirement Plan
for non-interested Trustees. During the twelve months ended July 31, 1993
the committee held four meetings. The Nominating and Administration
Committee will consider nominees recommended by shareholders.
Recommendations should be submitted to the Committee in care of the
Secretary of the Trust. The trust does not have a compensation committee;
such matters are considered by the Nominating and Administration Committee.
2. TO RATIFY THE SELECTION OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS
OF THE TRUST.
By a vote of the non-interested Trustees, the firm of Price Waterhouse has
been selected as independent accountants for the trust to sign or certify
any financial statements of the trust required by any law or regulation to
be certified by an independent accountant and filed with the Securities and
Exchange Commission (SEC) or any state. Pursuant to the 1940 Act, such
selection requires the ratification of shareholders. In addition, as
required by the 1940 Act, the vote of the Trustees is subject to the right
of the trust, by vote of a majority of its outstanding voting securities at
any meeting called for the purpose of voting on such action, to terminate
such employment without penalty. Price Waterhouse has advised the trust
that it has no direct or material indirect ownership interest in the trust.
The services provided to the trust include (1) audit of annual financial
statements and, if requested, limited review of unaudited semiannual
financial statements; (2) assistance and consultation in connection with
SEC filings; and (3) review of the federal income tax returns filed on
behalf of the trust. In recommending the selection of the trust's
accountants, the Audit Committee reviewed the nature and scope of the
services to be provided (including non-audit services) and whether the
performance of such services would affect the accountant's independence.
Representatives of Price Waterhouse are not expected to be present at the
Meeting, but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their
presence.
3. TO AMEND THE DECLARATION OF TRUST TO PROVIDE DOLLAR-BASED VOTING RIGHTS
FOR SHAREHOLDERS OF THE TRUST.
The Board of Trustees has approved, and recommends that shareholders of
the trust approve a proposal to amend Article VIII, Section 1 of the
Declaration of Trust. The amendment would provide voting rights based on a
shareholder's total dollar interest in a fund (dollar-based voting), rather
than on the number of shares owned, for all shareholder votes for a fund.
As a result, voting power would be allocated in proportion to the value of
each shareholder's investment.
BACKGROUND. Spartan Limited Maturity Government Fund, Fidelity Mortgage
Securities Portfolio, and Fidelity Ginnie Mae Portfolio are funds of
Fidelity Income Fund, an open-end management investment company organized
as a Massachusetts business trust. Currently, there are three funds in the
trust. Each fund votes separately on matters concerning only that fund and
votes on a trust-wide basis on matters that effect the trust as a whole,
such as electing trustees or amending the Declaration of Trust. Currently,
under the Declaration of Trust, each share is entitled to one vote,
regardless of the relative value of the shares of each fund in the trust.
The original intent of the one share, one-vote provision was to provide
equitable voting rights as required by the Investment Company Act of 1940
(1940 Act). In the case where a trust has several series or funds, such as
Fidelity Income Fund, voting rights may have become disproportionate since
the net asset value per share (NAV) of the separate funds diverge over
time. The Securities and Exchange Commission (SEC) has issued a
"no-action" letter permitting a trust to seek shareholder approval of a
dollar-based voting system. The proposed amendment will comply with the
conditions stated in the no-action letter.
REASON FOR PROPOSAL. If approved, the amendment would provide a more
equitable distribution of voting rights than the one-share, one-vote system
currently in effect for certain votes. The voting power of shareholders
would be commensurate with the value of the shareholder's dollar investment
rather than with the number of shares held.
Under the current voting provisions, an investment in a fund with a lower
NAV may have significantly greater voting power than the same dollar amount
invested in a fund with a higher NAV. The table below shows each fund's net
asset value.
Net Asset Value as of $1,000 investment in
March 31, 1994 terms of shares on
March 31, 1994
Spartan Limited Maturity Government Fund $_______ ________
Fidelity Mortgage Securities Portfolio $_______ ________
Fidelity Ginnie Mae Portfolio $_______ ________
For example, Fidelity Mortgage Securities Portfolio shareholders would
have approximately ______% greater voting power than Spartan Limited
Maturity Government Fund shareholders because at current NAVs, a $1,000
investment in Fidelity Mortgage Securities Portfolio would equal ---
whereas a $1,000 investment in Spartan Limited Maturity Government Fund
would equal _____ shares. Accordingly, a one share, one-vote system may
provide certain shareholders with a disproportionate ability to affect the
vote relative to shareholders of other funds in the trust. If dollar-based
voting had been in effect, each shareholder would have had 1,000 voting
shares. Their voting power would be proportionate to their economic
interest which FMR believes is a more equitable result, and is the result
in a typical corporation where each voting share has an equal market price.
On matters requiring trust-wide votes where all funds are required to
vote, shareholders who own shares with a lower NAV than other funds in the
trust would be giving other shareholders in the trust more voting "power"
than they currently have. On matters affecting only one fund, only
shareholders of that fund vote on the issue. In this instance, under both
the current Declaration of Trust and an amended Declaration of Trust, all
shareholders of the fund would have the same voting rights, since the NAV
is the same for all shares in a single fund.
AMENDMENT TO THE DECLARATION OF TRUST. Article VIII, Section 1 determines
the method of calculating voting rights for all shareholder votes for a
fund. If approved Article VIII, Section 1 will be amended as follows
(material to be added is underlined and material to be deleted is
[bracketed]):
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote... On any matter
submitted to a vote of the Shareholders, all shares shall be voted by
individual Series, except (i) when required by the 1940 Act, Shares shall
be voted in the aggregate and not by individual Series; and (ii) when the
Trustees have determined that the matter affects only the interests of one
or more Series, then only the Shareholders of such Series shall be entitled
to vote thereon. [Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote.] A shareholder of each series
shall be entitled to one vote for each dollar of net asset value (number of
shares owned times net asset value per share) per share of such series, on
any matter on which such shareholder is entitled to vote and each
fractional dollar amount shall be entitled to a proportionate fractional
vote. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Declaration of Trust or any Bylaws of
Trust to be taken by Shareholders.
CONCLUSION. If approved, the amendment will take effect immediately after
the shareholder meeting or after any adjournments thereof. The Trustees
believe the proposed amendment will benefit the trust by bringing greater
equality in voting rights amongst all shareholders of the trust. The
Trustees recommend that shareholders vote FOR the proposed amendment to the
Declaration of Trust. If the amendment is not approved, the Declaration of
Trust will remain unchanged.
4. TO AMEND THE DECLARATION OF TRUST REGARDING SHAREHOLDER NOTIFICATION OF
APPOINTMENT OF TRUSTEES.
The trust's Declaration of Trust provides that in the case of a vacancy on
the Board of Trustees, the remaining Trustees shall fill the vacancy by
appointing a person they, in their discretion see fit, consistent with the
limitations of the 1940 Act. Section 16 of the 1940 Act states that a
vacancy may be filled by the Trustees, if after filling the vacancy, at
least two-thirds of the Trustees then holding office were elected by the
outstanding shareholders of the trust. It also states that if at any time
less than 50% of the Trustees were elected by shareholders, a shareholder
meeting must be called within 60 days for the purposes of electing Trustees
to fill the existing vacancies.
The Declaration of Trust currently requires that within three months of a
Trustee appointment, notification of such be mailed to each shareholder of
the trust. Trustees also may appoint a Trustee in anticipation of a current
Trustee's retirement or resignation, or in the event of an increase in the
number of Trustees. An appointment in this case would also require
shareholder notification within three months of the appointment under the
current Declaration of Trust.
Subject to shareholder approval, the Trustees intend to eliminate the
notification requirement from the Trust's Declaration of Trust. The
language to be deleted from the Declaration of Trust is [bracketed].
ARTICLE IV
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, or in case a
vacancy shall, by reason of an increase in number, or for any other reason,
exist, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the Investment Company Act of 1940. Such appointment
shall be evidenced by a written instrument signed by a majority of the
Trustees in office or by recording in the records of the Trust, whereupon
the appointment shall take effect. [Within three months of such appointment
the Trustees shall cause notice of such appointment to be mailed to each
Shareholder at his address as recorded on the books of the trust.] An
appointment of a Trustee may be made by the Trustees then in office [and
notice thereof mailed to Shareholders as aforesaid] in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number
of Trustees effective at a later date, provided that said appointment shall
become effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this trust, the trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
The power of appointment is subject to the provisions of Section 16 (a) of
the 1940 Act.
Notifying a trust's shareholders in the event of an appointment of a
Trustee is not required by any federal or state law. Such notification to
all shareholders of a trust would be costly to the funds of the trust. If
the proposal is approved, shareholders will be notified of Trustee
appointments in the next financial report for the fund. Other than
eliminating the notification requirement, this proposal does not amend any
other aspect of Trustee resignation or appointment.
CONCLUSION. The Board of Trustees has concluded that the proposed
elimination of the Declaration of Trust's shareholder notification
requirement in the event of an appointment of a Trustee is in the best
interests of the trust's shareholders. The Trustees recommend voting FOR
the proposed amendment. If the proposal is not approved, the Declaration
of Trust's current section entitled "Resignation and Appointment of
Trustees" will remain unchanged.
5. TO AMEND THE DECLARATION OF TRUST TO PROVIDE EACH FUND WITH THE ABILITY
TO INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY WITH
SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND POLICIES.
The Board of Trustees has approved, and recommends that shareholders of
the funds approve, a proposal to amend Article V, Section 1 of the
Declaration of Trust to clarify that the Trustees may authorize the
investment of all of a fund's assets in another open-end investment company
with substantially the same investment objective and policies ("Pooled Fund
Structure"). The purpose of the Pooled Fund Structure is to achieve
operational efficiencies by consolidating portfolio management while
maintaining different distribution and servicing structures. In order to
implement a Pooled Fund Structure, both the Declaration of Trust and the
funds' policies must permit the structure. Currently, each fund's policies
do not allow for such investments. Proposal 6 on page __ seeks each fund's
shareholder approval to adopt a fundamental investment policy to permit
investment in another open-end investment company. This proposal, which
amends the Declaration of Trust, clarifies the Board's ability to implement
the Pooled Fund Structure if a fund's policies permit it.
BACKGROUND. A number of mutual funds have developed structures under which
several funds invest all of their assets in a single pooled investment.
For example, an institutional equity fund with a high initial minimum
investment amount for large investors might pool its investments with a
retail equity fund designed for investors with lower minimums. This
structure allows several funds with substantially the same objective but
different distribution and servicing features to combine their investments
and manage them as one pool instead of managing them separately. The funds
combine their investments by investing all of their assets in one pooled
fund which would be organized as an open-end management investment company
(mutual fund). (Each fund invested in a single pooled investment retains
its own characteristics, but is able to achieve operational efficiencies
through investing together with the other funds in the Pooled Fund
Structure.) The current Declaration of Trust does not specifically provide
the Trustees the ability to authorize the Pooled Fund Structure.
REASON FOR THE PROPOSAL. FMR and the Board of Trustees continually
reviews methods of structuring mutual funds to take maximum advantage of
potential efficiencies. While neither FMR nor the Trustees has determined
that a fund should invest in a Pooled Fund, the Trustees believe it could
be in the best interest of each fund to adopt such a structure at a future
date. If this proposal is approved, the Declaration of Trust amendment
would provide the Trustees with the power to authorize the fund to invest
all of its assets in a single open-end investment company. The Trustees
will authorize such a transaction only if a Pooled Fund Structure is
permitted under the fund's investment policies (see Proposal 6) and if they
determine that a Pooled Fund Structure is in the best interest of a fund
and if, upon advice of counsel, they determine that the investment will not
have material adverse tax consequences to the fund or its shareholders.
Although the current Declaration of Trust does not contain any explicit
prohibition against implementing a Pooled Fund Structure, the specific
authority is being sought in the event the Trustees deem it appropriate to
adopt a Pooled Fund Structure in the future.
AMENDMENT TO THE DECLARATION OF TRUST. If the proposal is approved,
Article V, Section 1 of the Declaration of Trust will be amended as
follows: (material to be added is underlined):
"Subject to any applicable limitation in the Declaration of Trust or the
Bylaws of the Trust, the Trustees shall have the power and authority:
(t) Notwithstanding any other provision hereof, to invest all of the
assets of any series in a single open-end investment company, including
investment by means of transfer of such assets in exchange for an interest
or interests in such investment company;"
CONCLUSION. The Trustees believe the proposed amendment will benefit the
funds by providing the Trustees with the flexibility to adopt a Pooled Fund
Structure in the future if permitted by a fund's investment policies and if
the Trustees determine it to be in the best interest of the fund. The
Trustees recommend that shareholders vote FOR the proposed amendment to the
Declaration of Trust. If approved, the amendment to the Declaration of
Trust will take effect immediately after the shareholder meeting or any
adjournments thereof. If the proposal is not approved, Article V, Section 1
of the Declaration of Trust will remain unchanged.
6. TO ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY FOR EACH FUND PERMITTING
A FUND TO INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY
WITH SUBSTANTIALLY THE SAME OBJECTIVE AND INVESTMENT POLICIES.
The Board of Trustees has approved, subject to a shareholder vote, the
adoption of a new fundamental investment policy that would permit each fund
to invest all of its assets in another open-end investment company with
substantially the same investment objective and policies ("Pooled Fund
Structure"). The purpose of pooling would be to achieve operational
efficiencies by consolidating portfolio management while maintaining
different distribution and servicing structures.
BACKGROUND. A number of mutual funds have developed structures under
which several funds invest all of their assets in a single pooled
investment. In order to implement a Pooled Fund Structure, both the
Declaration of Trust and a fund's policies must permit the structure.
Proposal 5, which proposes to amend the Declaration of Trust, if approved,
would allow the Trustees to authorize the conversion to a Pooled Fund
Structure if permitted by a fund's policies. This proposal would add a
fundamental policy for each fund that permits a Pooled Fund Structure.
PURPOSE OF THE PROPOSAL. FMR and the Board of Trustees continually review
methods of structuring mutual funds to take advantage of potential
efficiencies. While neither the Board nor FMR has determined that a fund
should invest in a Pooled Fund, the Trustees believe it could be in the
best interests of each fund to adopt such a structure at a future date.
At present, certain of each fund's fundamental investment policies and
limitations would prevent a fund from investing all of its assets in
another investment company, and would require a vote of shareholders before
such a structure could be adopted. To avoid the costs associated with a
subsequent shareholder meeting, the Trustees recommend that shareholders
vote to permit each fund's assets to be invested in a single Pooled Fund,
without a further vote of shareholders, if the Trustees determine that
action to be in the best interests of a fund and its shareholders.
Approval of Proposal 5 provides the Trustees with explicit authority to
approve a Pooled Fund Structure. If shareholders approve this proposal,
certain fundamental and non-fundamental policies and limitations of each
fund that currently prohibit investment in shares of one investment company
would be modified to permit the investment in a Pooled Fund. These policies
include each fund's limitations on investing more than 25% of total assets
in one issuer or more than 25% of total assets in one industry, and on
acting as an underwriter.
DISCUSSION. FMR may manage a number of mutual funds with similar
investment objectives, policies, and limitations but with different
features and services (Comparable Funds). Were these Comparable Funds to
pool their assets, operational efficiencies could be achieved, offering the
opportunity to reduce costs. Similarly, FMR anticipates that a Pooled Fund
Structure would facilitate the introduction of new Fidelity mutual funds,
increasing the investment options available to shareholders.
Each fund's method of operation and shareholder services would not be
materially affected by its investment in a Pooled Fund, except that the
assets of a fund would be managed as part of a larger pool. Were a fund to
invest all of its assets in a Pooled Fund, it would hold only a single
investment security, and the Pooled Fund would directly invest in
individual securities pursuant to its investment objective. The Pooled
Fund would be managed by FMR or an affiliate, such as FMR Texas in the case
of a money market fund. The Trustees would retain the right to withdraw a
fund's investments from a Pooled Fund at any time and would do so if the
Pooled Fund's investment objective and policies were no longer appropriate
for the fund. The fund would then resume investing directly in individual
securities as it does currently.
Whenever a fund is asked to vote at a shareholder meeting of the Pooled
Fund, the fund will hold a meeting of its shareholders if required by
applicable law or the fund's policies. The fund will cast its votes at the
Pooled Fund meeting in the same proportion as the fund's shareholders voted
at theirs. The fund would otherwise continue its normal operations.
At present, the Trustees have not considered any specific proposal to
authorize pooling of assets. The Trustees will authorize investing each
fund's assets in a Pooled Fund only if they determine that pooling is in
the best interests of the fund and if, upon advice of counsel, they
determine that the investment will not have material adverse tax
consequences to the fund or its shareholders. In determining whether to
invest in a Pooled Fund, the Trustees will consider, among other things,
the opportunity to reduce costs and to achieve operational efficiencies.
The Trustees will not authorize investment in a Pooled Fund if doing so
would materially increase costs to shareholders.
FMR is presently seeking federal and state regulatory approval in order to
allow the Fidelity funds to invest in Pooled Funds. There is, of course,
no assurance that all necessary regulatory approvals will be obtained, or
that cost reductions or increased efficiencies will be achieved.
FMR may benefit from the use of a Pooled Fund if overall assets are
increased (since FMR's fees are based on assets). Also, FMR's expenses of
providing investment and other services to each fund may be reduced. If a
fund's investment in a Pooled Fund were to reduce FMR's expenses
materially, the Trustees would consider whether a reduction in FMR's
management fee would be appropriate if and when a Pooled Fund structure is
implemented.
PROPOSED FUNDAMENTAL POLICY. To allow each fund to invest in a Pooled
Fund at a future date, the Trustees recommend that each fund adopt the
following fundamental policy:
"The fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objective, policies, and limitations as the fund."
If the proposal is adopted, the Trustees intend to adopt a non-fundamental
investment limitation for each fund which states:
"The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund."
CONCLUSION. The Board of Trustees recommends that each fund's
shareholders vote to adopt a new fundamental policy that would permit each
fund, subject to future review by the Board of Trustees as described above,
to invest all of its assets in an open-end investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund. If the proposal is not adopted each fund's current
fundamental investment policies will remain unchanged with respect to
potential investment in Pooled Funds.
7. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR FIDELITY MORTGAGE
SECURITIES PORTFOLIO AND FIDELITY GINNIE MAE PORTFOLIO.
The Board of Trustees has approved, and recommends that shareholders of
each fund approve, a proposal to amend each fund's management contract with
FMR (the Amended Contract). The proposal would modify the management fee
that FMR receives from each fund to provide for lower fees when FMR's
assets under management exceed certain levels. THE AMENDED CONTRACT WILL
RESULT IN A MANAGEMENT FEE WHICH IS THE SAME AS, OR LOWER THAN, THE FEE
PAYABLE UNDER THE PRESENT MANAGEMENT CONTRACT (THE PRESENT CONTRACT) FOR
EACH FUND.
PROPOSED AMENDMENT TO THE PRESENT MANAGEMENT CONTRACTS. Copies of the
Amended Contracts, marked to indicate the proposed amendment, are supplied
as Exhibits 1 and 2 on pages __ and __, respectively. Except for the
amendment to the management fee and the addition of item 1(c) for Fidelity
Mortgage Securities Portfolio, which discusses FMR's ability to use
broker-dealers on behalf of the fund, as discussed in this proposal, they
are substantially identical to the Present Contracts. (For a detailed
discussion of each fund's Present Contract, refer to the section entitled
"Present Management Contracts" of Fidelity Mortgage Securities Portfolio
and Fidelity Ginnie Mae Portfolio beginning on page .) If approved by
shareholders, the Amended Contracts will take effect on August 1, 1994 (or,
if later, the first day of the first month following approval) and will
remain in effect through June 30, 1995 and thereafter subject to
continuation by each fund's Board of Trustees. If the Amended Contract is
not approved, the Present Contract will continue in effect through June 30,
1995, and thereafter subject to continuation by the funds' Board of
Trustees.
The management fee is an annual percentage of each fund's average net
assets, calculated and paid monthly. The percentage is the sum of two
components: a group fee rate, which varies according to FMR's assets under
management, and a fixed individual fund fee rate. The proposal would modify
the group fee by providing for lower fee rates if FMR's assets under
management remain above $84 billion and $174 billion for Fidelity Mortgage
Securities Portfolio and Fidelity Ginnie Mae Portfolio, respectively.
MODIFICATION TO GROUP FEE RATE. The group fee rate varies based on the
aggregate net assets of all registered investment companies having
management contracts with FMR. As group net assets increase, the group fee
rate declines. The Amended Contract would not change the group fee
calculation for group net assets of $84 billion or less and $174 billion or
less for Fidelity Mortgage Securities Portfolio and Fidelity Ginnie Mae
Portfolio, respectively. Above $84 billion and $174 billion in group net
assets, for Fidelity Mortgage Securities Portfolio and Fidelity Ginnie Mae
Portfolio, respectively, the group fee rate does not decline under the
Present Contracts, but under the Amended Contracts, it declines as
indicated in the table below. These lower fee rates were voluntarily
implemented by FMR on January 1, 1992 and November 1, 1993.
The group fee rate is calculated according to a graduated fee schedule
providing for different rates for different levels of group net assets. The
rate at which the fee declines is determined by fee "breakpoints" that
provide for lower fees when assets increase. The Amended Contract would add
six new fee breakpoints for group asset levels above $84 billion and would
add four new breakpoints for group asset levels above $174 billion, as
illustrated in the following tables. (For an explanation of how these
breakpoints are factored into the fee calculation, see the section entitled
"Present Management Contracts" of Fidelity Mortgage Securities Portfolio
and Fidelity Ginnie Mae Portfolio beginning on page ___.)
FOR FIDELITY MORTGAGE SECURITIES PORTFOLIO:
GROUP FEE RATE SCHEDULE
Average Group
Assets Present Amended
($ billions) Contract Contract
84-120 .1500% .1450%
120-174 .1500% .1450%
174-228 .1500% .1400%
228-282 .1500% .1375%
282-336 .1500% .1350%
Over 336 .1500% .1325%
FOR FIDELITY GINNIE MAE PORTFOLIO:
GROUP FEE RATE SCHEDULE
Average Group
Assets Present Amended
($ billions) Contract Contract
84-120 .1500% .1450%
120-174 .1450% .1450%
174-228 .1400% .1400%
228-282 .1400% .1375%
282-336 .1400% .1350%
Over 336 .1400% .1325%
The result for both funds at various levels of group net assets is
illustrated by the table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net
Assets Present Amended
($ billions) Contract* Contract
215 .1646% .1646%
250 .1606% .1604%
300 .1572% .1565%
350 .1547% .1533%
400 .1529% .1507%
* Does not reflect voluntary adoption of extended group fee rate schedules
by FMR on January 1, 1992 and November 1,1993.
Average group net assets for March 1994 were approximately $___ billion.
Each fund's annual individual fund fee rate is .30%. The sum of the group
fee rate and the individual fund fee rate is referred to as a fund's
management fee rate. One-twelfth (1/12) of this annual management fee rate
is applied to the fund's average net assets for the current month,
resulting in a dollar amount which is the management fee for that month.
COMPARISON OF MANAGEMENT FEES AND TOTAL EXPENSES. For March 1994
average group net assets of $___ billion, each fund's management fee rate
under the Amended Contract would have been __%, compared to __% for
Fidelity Mortgage Securities Portfolio and __% for Fidelity Ginnie Mae
Portfolio under their Present Contract. The management fee rate will
remain the same under both the Present Contract and the Amended Contract
until group net assets exceed $84 billion and $174 billion for Fidelity
Mortgage Securities Portfolio and Fidelity Ginnie Mae Portfolio,
respectively, at which point the management fee rate under the Amended
Contract begins to decline. The following chart compares the fund's
management fee and total expense ratio under the terms of the Present
Contract for the fiscal year ended July 31, 1994 to the fees and expenses
the fund would have incurred if the Amended Contract had been in effect.
FIDELITY MORTGAGE SECURITIES PORTFOLIO
Present Contract* Amended Contract
Management Total Expense Management Total Expense
Fee Ratio Fee Ratio
$_________ __% $________ 1.00%
FIDELITY GINNIE MAE PORTFOLIO
Present Contract* Amended Contract
Management Total Expense Management Total Expense
Fee Ratio Fee Ratio
$_________ __% $________ 1.00%
* Does not reflect voluntary adoption of extended group fee rate schedules.
TRANSACTIONS WITH BROKERS-DEALERS. Each fund may execute portfolio
transactions with broker-dealers who provide research and execution
services to the fund or other accounts over which FMR or its affiliates
exercise investment discretion. The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of the research and brokerage
services.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds and to its other clients, and conversely, such
research provided by broker-dealers who execute transaction orders on
behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the funds. The receipt of such research has not reduced
FMR's normal independent research activities; however, it enables FMR to
avoid additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the funds to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
The funds have been already been authorized by the Board of Trustees,
consistent with the federal securities laws and the rules and regulations
of the Securities and Exchange Commission, to place portfolio transactions
through broker-dealers who are affiliated with FMR and through
broker-dealers who provide research. Fidelity Mortgage Securities
Portfolio's Amended Management Contract and Fidelity Ginnie Mae Portfolio's
Present Management Contract expressly recognize this authority.
MATTERS CONSIDERED BY THE BOARD OF TRUSTEES. The non-interested Trustees
recommended in 1991, and again in 1993, that the existing group fee be
reconsidered in light of the significant growth in the assets of funds
advised by FMR.
FMR provided substantial information to the Trustees to assist it in its
deliberations. In addition, the Committee requested and reviewed additional
data, including analyses prepared by independent counsel to both the funds
and the non-interested Trustees. In unanimously approving the proposed
contract and recommending its approval by shareholders, the Trustees of the
fund, including the Independent Trustees, considering the best interests of
shareholders of the fund, took into account all factors they deemed
relevant. The factors considered by the Independent Trustees included the
nature, quality, and extent of the services furnished by FMR to the fund;
the necessity of FMR maintaining and enhancing its ability to retain and
attract high caliber personnel to serve the fund; the increased complexity
of the domestic and international securities markets; the investment record
of FMR in managing the fund; extensive financial, personnel, and structural
information as to the Fidelity organization, including the revenues and
expenses of FMR, and Fidelity Service Co. (FSC, the funds' transfer,
shareholder servicing, and pricing and bookkeeping agent) relating to their
mutual fund activities; whether economies of scale were demonstrated in
connection with FMR's provision of investment management and shareholder
services as assets increased; data on investment performance, management
fees and expense ratios of competitive funds and other Fidelity funds;
FMR's expenditures in developing enhanced shareholder services for the
fund; enhancements in the quality and scope of the shareholder services
provided to the fund's shareholders; the fees charged and services offered
by an affiliate of FMR for providing investment management services to
non-investment company accounts; and possible "spin-off" benefits to FMR
from serving as manager and from affiliates of FMR serving as principal
underwriter and transfer agent of the fund.
With regard to the section of the proposed contract describing the changes
to portfolio transactions, which pertains to Fidelity Mortgage Securities
Portfolio (Fidelity Ginnie Mae Portfolio's current Contract already
includes this provision), the Trustees considered the value of research
provided by the broker-dealers, the quality of the execution services
provided, and the level of commissions paid. While the fund does not
generally purchase securities through a broker-dealer by paying commissions
the Board of Trustees determined that amending the management contract to
expressly recognize the authority of FMR to use affiliated broker-dealers
and broker-dealers who provide research services furthers the goal of
standardizing management contracts for Fidelity funds, and that explicitly
permitting all Fidelity funds to utilize certain broker-dealers is
beneficial to the fund.
CONCLUSION, ACTION OF THE BOARD OF TRUSTEES, AND RECOMMENDED SHAREHOLDER
ACTION. Based on its evaluation of the extensive materials presented and
assisted by the advice of independent counsel, the Board of Trustees
concluded (i) that the existing management fee rate structure was fair and
reasonable and (ii) that the proposed reduction in the group fee rate
structure was in the best interest of each fund's shareholders. The Board
of Trustees voted to approve the submission of the Amended Contract to
shareholders of each fund and recommends that shareholders of each fund
vote FOR the Amended Contract.
8. TO APPROVE A SUB-ADVISORY AGREEMENT WITH FMR FAR EAST FOR EACH OF THE
FUNDS.
In conjunction with its portfolio management responsibilities on behalf of
Spartan Limited Maturity Government Fund, Fidelity Mortgage Securities
Portfolio, and Fidelity Ginnie Mae Portfolio, FMR proposes to enter into
sub-advisory agreements with affiliates whose offices are geographically
dispersed around the world. To strengthen and coordinate these
relationships, the Board of Trustees proposes that shareholders of each
fund approve a sub-advisory agreement (the proposed agreement) between
Fidelity Management & Research Far East Inc. (FMR Far East) and FMR on
behalf of each fund. The proposed agreement would allow FMR not only to
receive investment advice and research services from FMR Far East, but also
would permit FMR to grant FMR Far East investment management authority, as
well as the authority to buy and sell securities if FMR believes it would
be beneficial to each fund and its shareholders. Because FMR pays all of
FMR Far East's fees, the proposed agreement would not affect the fees paid
by each fund to FMR.
On March 17, 1994, the Board of Trustees agreed to submit the proposed
agreement to shareholders of each fund pursuant to a unanimous vote of both
the full Board of Trustees and those Trustees who were not "interested
persons" of the trust or FMR. A copy of the proposed agreement is attached
to this proxy statement as Exhibit 3.
FMR Far East, with its principal office in Tokyo, is a wholly-owned
subsidiary of FMR established in 1986 to provide investment research to FMR
with respect to foreign securities. This research complements other
research on foreign securities produced by FMR's U.S.-based research
analysts and portfolio managers, or obtained from broker-dealers or other
sources.
FMR Far East may also provide investment advisory services to FMR with
respect to other investment companies for which FMR serves as investment
adviser, and to other clients. Currently, FMR Far East's only client other
than FMR is Fidelity International Limited (FIL), an affiliate of FMR
organized under the laws of Bermuda. FIL provides investment advisory
services to non-U.S. investment companies and institutional investors
investing in securities of issuers throughout the world. Edward C. Johnson
3d, President and a Trustee of the trust, is Chairman and a Director of FMR
Far East, Chairman and a Director of FIL, and a principal stockholder of
both FIL and FMR. For more information on FMR Far East, see the section
entitled "Activities and Management of FMR U.K. and FMR Far East" on
page__.
Under the proposed agreement, FMR Far East would act as an investment
consultant to FMR and would supply FMR with investment research information
and portfolio management advice as FMR reasonably requests on behalf of
each fund. FMR Far East would provide investment advice and research
services with respect to issuers located outside of the United States
focusing primarily on companies based in the Far East. Under the proposed
agreement with FMR Far East, FMR, NOT EACH FUND, would pay FMR Far East's
fee equal to 105% of its costs incurred in connection with the agreement.
Under the proposed agreement, FMR could also grant investment management
authority with respect to all or a portion of each fund's assets to FMR Far
East. If FMR Far East were to exercise investment management authority on
behalf of a fund, it would be required, subject to the supervision of FMR,
to direct the investments of the fund in accordance with the fund's
investment objective, policies, and limitations as provided in each fund's
prospectus or other governing instruments and such other limitations as
each fund may impose by notice in writing to FMR or FMR Far East. If FMR
grants investment management authority to FMR Far East with respect to all
or a portion of a fund's assets, FMR Far East would be authorized to buy or
sell stocks, bonds, and other securities for the fund subject to the
overall supervision of FMR and the Board of Trustees. In addition, the
proposed agreement would authorize FMR to delegate other investment
management services to FMR Far East, including, but not limited to,
currency management services (including buying and selling currency options
and entering into currency forward and futures contracts on behalf of each
fund), other transactions in futures contracts and options, and borrowing
or lending portfolio securities. If any of these investment management
services were delegated, FMR Far East would continue to be subject to the
control and direction of FMR and the Board of Trustees and to be bound by
the investment objective, policies, and limitations of each fund. If
granted investment management authority, FMR Far East would also execute
orders to purchase and sell securities as described in the "Portfolio
Transactions" section on page ___.
Allowing FMR to grant investment management authority to FMR Far East
would provide FMR increased flexibility in the assignment of portfolio
managers and give each fund access to managers located abroad who may have
more specialized expertise with respect to local companies and markets.
Additionally, the Trustees believe that each fund and its shareholders may
benefit from giving FMR, through FMR Far East, the ability to execute
portfolio transactions from points in the Far East that are physically
closer to foreign issuers and the primary markets in which their securities
are traded. Increasing FMR's proximity to foreign markets should enable
each fund to participate more readily in full trading sessions on foreign
exchanges, and to react more quickly to changing market conditions.
THE PROPOSED AGREEMENT WOULD NOT INCREASE THE FEES PAID TO FMR BY EACH
FUND. To the extent that FMR granted investment management authority to
FMR Far East, FMR would pay FMR Far East 50% of its monthly management fee
with respect to the average net assets managed on a discretionary basis by
FMR Far East for investment management and portfolio execution services.
If approved by shareholders, the proposed agreement would take affect on
August 1, 1994 (or, if later, the first day of the first month following
approval) and would continue in force until June 30, 1995 and from year to
year thereafter, but only as long as its continuance was approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of those Trustees who are not "interested persons"
of the trust or FMR and (ii) the vote of either a majority of the Trustees
or by the vote of a majority of the outstanding shares of each fund.
The proposed agreement could be transferred to a successor of FMR Far East
without resulting in termination and without shareholder approval, as long
as the transfer did not constitute an assignment under applicable
securities regulations. The proposed agreement would be terminable on 60
days' written notice by either party to the agreement and the proposed
agreement would terminate automatically in the event of its assignment.
CONCLUSION. The Board of Trustees unanimously recommends that shareholders
of each fund vote FOR the proposed agreement. If the proposed agreement is
not approved by shareholders of a fund, the Board and FMR will consider
alternative means of obtaining the investment services provided under the
Sub-Advisory Agreement.
9. TO APPROVE A SUB-ADVISORY AGREEMENT WITH FMR U.K. FOR EACH OF THE
FUNDS.
In conjunction with its portfolio management responsibilities on behalf of
Spartan Limited Maturity Government Fund, Fidelity Mortgage Securities
Portfolio, and Fidelity Ginnie Mae Portfolio, FMR proposes to enter into
sub-advisory agreements with affiliates whose offices are geographically
dispersed around the world. To strengthen and coordinate these
relationships, the Board of Trustees proposes that shareholders of each
fund approve a sub-advisory agreement (the proposed agreement) between
Fidelity Management & Research U.K. Inc. (FMR U.K.) and FMR on behalf
of each fund. The proposed agreement would allow FMR not only to receive
investment advice and research services from FMR U.K., but also would
permit FMR to grant FMR U.K. investment management authority, as well as
the authority to buy and sell securities if FMR believes it would be
beneficial to each fund and its shareholders. Because FMR pays all of FMR
U.K.'s fees, the proposed agreement would not affect the fees paid by each
fund to FMR.
On March 17, 1994, the Board of Trustees agreed to submit the proposed
agreement to shareholders of each fund pursuant to a unanimous vote of both
the full Board of Trustees and those Trustees who were not "interested
persons" of the trust or FMR. A copy of the proposed agreement is attached
to this proxy statement as Exhibit 4.
FMR U.K., with its principal office in London, is a wholly-owned
subsidiary of FMR established in 1986 to provide investment research to FMR
with respect to foreign securities. This research complements other
research on foreign securities produced by FMR's U.S.-based research
analysts and portfolio managers, or obtained from broker-dealers or other
sources.
FMR U.K. may also provide investment advisory services to FMR with respect
to other investment companies for which FMR serves as investment adviser,
and to other clients. Currently, FMR U.K.'s only client other than FMR is
Fidelity International Limited (FIL), an affiliate of FMR organized under
the laws of Bermuda. FIL provides investment advisory services to non-U.S.
investment companies and institutional investors investing in securities of
issuers throughout the world. Edward C. Johnson 3d, President and a Trustee
of the trust, is Chairman and a Director of FMR U.K., Chairman, and a
Director of FIL, and a principal stockholder of both FIL and FMR. For more
information on FMR U.K., see the section entitled "Activities and
Management of FMR U.K. and FMR Far East" on page __.
Under the proposed agreement, FMR U.K. would act as an investment
consultant to FMR and would supply FMR with investment research information
and portfolio management advice as FMR reasonably requests on behalf of
each fund. FMR U.K. would provide investment advice and research services
with respect to issuers located outside of the United States focusing
primarily on companies based in Europe. Under the proposed agreement with
FMR U.K., FMR, NOT EACH FUND, would pay FMR U.K.'s fee equal to 110% of
its costs incurred in connection with the agreement.
Under the proposed agreement, could also grant investment management
authority with respect to all or a portion of each fund's assets to FMR
U.K. If FMR U.K. were to exercise investment management authority on behalf
of a fund, it would be required, subject to the supervision of FMR, to
direct the investments of the fund in accordance with the fund's investment
objective, policies, and limitations as provided in each fund's prospectus
or other governing instruments and such other limitations as each fund may
impose by notice in writing to FMR or FMR Far East. If FMR grants
investment management authority to FMR U.K. with respect to all or a
portion of a fund's assets, FMR U.K. would be authorized to buy or sell
stocks, bonds, and other securities for the fund subject to the overall
supervision of FMR and the Board of Trustees. In addition, the proposed
agreement would authorize FMR to delegate other investment management
services to FMR U.K., including, but not limited to, currency management
services (including buying and selling currency options and entering into
currency forward and futures contracts on behalf of each fund), other
transactions in futures contracts and options, and borrowing or lending
portfolio securities. If any of these investment management services were
delegated, FMR U.K. would continue to be subject to the control and
direction of FMR and the Board of Trustees and to be bound by the
investment objective, policies, and limitations of each fund. If granted
investment management authority, FMR U.K. would also execute orders to
purchase and sell securities as described in the "Portfolio Transactions"
section on page ___.
Allowing FMR to grant investment management authority to FMR U.K. would
provide FMR increased flexibility in the assignment of portfolio managers
and give each fund access to managers located abroad who may have more
specialized expertise with respect to local companies and markets.
Additionally, the Trustees believe that each fund and its shareholders may
benefit from giving FMR, through FMR U.K., the ability to execute portfolio
transactions from points in Europe that are physically closer to foreign
issuers and the primary markets in which their securities are traded.
Increasing FMR's proximity to foreign markets should enable each fund to
participate more readily in full trading sessions on foreign exchanges, and
to react more quickly to changing market conditions.
THE PROPOSED AGREEMENT WOULD NOT INCREASE THE FEES PAID TO FMR BY EACH
FUND. To the extent that FMR granted investment management authority to
FMR U.K., FMR would pay FMR U.K. 50% of its monthly management fee with
respect to the average net assets managed on a discretionary basis by FMR
U.K. for investment management and portfolio execution services.
If approved by shareholders, the proposed agreement would take affect on
August 1, 1994 (or, if later, the first day of the first month following
approval) and would continue in force until June 30, 1995 and from year to
year thereafter, but only as long as its continuance was approved at least
annually by (i) the vote, cast in person at a meeting called for the
purpose, of a majority of those Trustees who are not "interested persons"
of the trust or FMR and (ii) the vote of either a majority of the Trustees
or by the vote of a majority of the outstanding shares of each fund.
The proposed agreement could be transferred to a successor of FMR U.K.
without resulting in termination and without shareholder approval, as long
as the transfer did not constitute an assignment under applicable
securities regulations. The proposed agreement would be terminable on 60
days' written notice by either party to the agreement and the proposed
agreement would terminate automatically in the event of its assignment.
CONCLUSION. The Board of Trustees unanimously recommends that shareholders
of each fund vote FOR the proposed agreement. If the proposed agreement is
not approved by shareholders of a fund, the Board and FMR will consider
alternative means of obtaining the investment services provided under the
Sub-Advisory Agreement.
10. TO ELIMINATE THE FUNDAMENTAL INVESTMENT POLICY CONCERNING REPURCHASE
AGREEMENTS FOR FIDELITY MORTGAGE SECURITIES PORTFOLIO.
The fund, as a matter of fundamental policy, may engage in repurchase
agreements with only member banks of the Federal Reserve System and primary
dealers in U.S. government securities. Other investment companies managed
by FMR may enter into such transactions with banks, such as U.S. branches
of foreign banks that may not be members of the Federal Reserve system and
with dealers that are not primary dealers, but which are deemed by FMR to
be creditworthy and otherwise qualified to engage in these transactions.
The Trustees recommend eliminating this fundamental policy and replacing it
with a non-fundamental policy with respect to the specific parties with
which the fund may enter into repurchase agreements as follows:
"It is the policy of the Portfolio to limit repurchase agreements to those
parties whose creditworthiness has been reviewed and found satisfactory by
FMR."
This policy would enable the fund to have broader flexibility when
engaging in repurchase agreements. The criteria used by FMR to evaluate
the creditworthiness of counter-parties will remain unchanged. However,
you should note that by expanding the type of institutions with which the
fund may engage in a repurchase agreement, additional risks may be
incurred. For example, the risks of transacting with U.S. branches of
foreign banks include future unfavorable political and economic
developments and possible withholding taxes, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions
which might affect the payment of principal or interest.
CONCLUSION. The Board of Trustees believes that this Proposal will
benefit the fund by eliminating restrictions on engaging in repurchase
agreements only with specific parties. The Trustees recommend that
shareholders vote FOR the proposed changes to the fund's policy regarding
repurchase agreements. If shareholders approve the Proposal, it will be
implemented on the effective date of the next prospectus. If the Proposal
is not approved the fund's current policies will remain unchanged.
11. TO ELIMINATE CERTAIN FUNDAMENTAL INVESTMENT POLICIES AND REPLACE
CERTAIN OTHERS WITH NON-FUNDAMENTAL INVESTMENT POLICIES FOR MORTGAGE
SECURITIES PORTFOLIO.
The Board of Trustees has approved a proposal that would replace certain
of the fund's fundamental investment policies with non-fundamental
investment policies and eliminate certain others. The main purpose of this
proposal is to give the fund greater flexibility in the choice and
management of its investments in pursuing its objective of seeking a high
level of current income, consistent with prudent investment risk, by
investing primarily in mortgage-related securities. While it is not
currently anticipated that these changes would have any material impact on
the way the fund is managed, approval of this proposal would permit the
fund to change its policies regarding the types of securities it purchases,
consistent with its investment objective, subject only to the supervision
of the Trustees and applicable regulatory requirements, without seeking
additional approval from shareholders. The fund's fundamental investment
objectiv
e - to seek a high level of current income, consistent with prudent
investment risk, by investing primarily in mortgage-related securities -
will remain the same, and will not be changed in the future without
shareholder approval.
The primary effect of the proposal is to permit the fund to invest a
greater amount of its total assets in securities that have a lower credit
quality. Currently, the fund has a fundamental investment policy that
requires the fund's investments in mortgage-related securities to be
substantially in high grade and upper-medium grade securities (equivalent
to A or better by Moody's Investors Service, Inc. (Moody's) or Standard
& Poor's Corporation (S&P) ). The fund can invest in
mortgage-related securities that do not meet these quality standards if the
securities are consistent with the fund's objective; however, at no time
can such investments exceed 20% of the fund's total assets. If the proposal
is approved, the fund would have greater latitude to invest in securities
which are rated lower than high or upper-medium grade by Moody's or
S&P, including securities which are considered to be of medium grade
quality and lower quality (equivalent to a rating of Baa or lower by
Moody's or BBB or lower by S&P). In addition, it is proposed that
several of the fund's fundamental investment policies be replaced with
non-fundamental policies.
The policy changes discussed in this proposal will allow FMR to expand the
range of income producing securities it may choose from in pursuing the
fund's investment objective. FMR believes that the potential for enhanced
fund performance offered by a broader range of mortgage-related securities
will outweigh the risks arising from permitting the fund to increase its
investments in securities with lower-quality ratings. The specific changes
to the fund's investment policies are outlined in more detail in Exhibit 3.
Fundamental policies can be changed or eliminated only with shareholder
approval. Changes in non-fundamental investment policies can be changed
without shareholder approval but are subject to the supervision of the
Board of Trustees, and to appropriate disclosure to fund shareholders and
prospective investors.
QUALITY OF SECURITIES. Currently, the fund must invest substantially all
of its assets in mortgage-related securities that are high grade or
upper-medium grade (those rated A or better by major rating agencies). The
fund may invest no more than 20% of its assets in securities rated below A.
If the proposal is approved, the fund will invest primarily in
investment-grade securities, which include securities considered medium
grade (equivalent to a rating of Baa by Moody's or BBB by S&P). In
addition, the fund will be able to invest up to 35% of its assets in lower
quality securities (equivalent to a rating of Ba or lower by Moody's or BB
or lower by S&P). However, the fund will limit its lower-quality
investments to those rated B or better by Moody's or S&P.
Lower-quality debt securities (sometimes called "junk bonds") may have
speculative characteristics, and involve greater risk of default or price
changes due to changes in the issuer's credit-worthiness. The market
prices of these securities may fluctuate more than higher-quality
securities and may decline significantly in periods of general or regional
economic difficulty.
FMR believes that permitting the fund to invest in lower-quality mortgage
securities will allow the fund to take advantage of opportunities that have
developed in the mortgage securities marketplace, such as investing in
commercial mortgages, multi-family mortgages, and non-U.S. government
agency residential mortgages.
NAME TEST. The fund's name test is currently fundamental and it states
that "under normal circumstances, the fund will have at least 65% of its
total assets invested in mortgage-related securities." If this proposal is
approved, the name test will remain the same but it will become a
non-fundamental policy.
LISTING OF PERMITTED INVESTMENTS. The fund's current fundamental investment
policies include a listing of certain specific investments that the fund
may make. (The complete listing is provided in Exhibit 3.) It is proposed
that this listing be eliminated from the fund's policies, and that the fund
instead be permitted to invest in fixed-income obligations of all types,
consistent with its investment objective and policies.
The last item in the list of permitted investments states that the fund may
invest in mortgage-related securities such as, "various instruments and
transactions used to hedge against fluctuations in the value of our
investments, including put and call options, interest rate futures
contracts, and forward commitments." In effect, this policy only allows the
fund to use derivative investment strategies designed to hedge the fund's
portfolio. If this proposal is approved, this fundamental policy will be
eliminated, and only the fund's non-fundamental policies regarding futures
and options would remain. These policies have been adopted by the fund's
board of trustees and are standard for mortgage-related funds managed by
FMR. The non-fundamental policies would allow the fund's manager to use
strategies in addition to hedging. For example, the fund could increase
its market exposure as follows: if short-term mortgage securities were
yielding higher than much longer term securities, the fund could invest
mostly in these shorter term instruments but also extend the fund's
duration (i.e., the extent to which its share price would change as
interest rates move up or down) by buying 30-year Treasury futures. As
another example, the fund could use futures and options for cash management
purposes, i.e., while the fund was waiting for a mortgage-related security
transaction to settle, the fund could gain immediate exposure to interest
rates by buying 10-year T-bill futures. These strategies of increasing or
decreasing market exposure and using options and futures as a substitute
for direct purchases and sales of securities, may at times increase the
fund's sensitivity to interest rates and may make the fund's share price
more volatile.
The following are the fund's non-fundamental policies regarding futures and
options:
"The fund will not: (a) sell futures contracts, purchase put options, or
write call options if, as a result, more than 50% of the fund's total
assets would be hedged with futures and options under normal conditions;
(b) purchase futures contracts or write put options if, as a result, the
fund's total obligations upon settlement or exercise of purchased futures
contracts and written put options would exceed 25% of its total assets; (c)
purchase call options if, as a result, the current value of option premiums
for call options purchased by the fund would exceed 5% of the fund's total
assets; or (d) write call options on securities if, as a result, the
aggregate value of the securities underlying the calls would exceed 25% of
the fund's net assets. These limitations do not apply to options attached
to or acquired or traded together with their underlying securities, and do
not apply to securities that incorporate features similar to options."
TEMPORARY DEFENSIVE POLICY. The fund's temporary defensive policy is
currently fundamental and states, "when market conditions warrant, we may
invest without limit in short-term debt obligations such as repurchase
agreements, bank obligations and commercial paper for temporary defensive
purposes." Although the fund wants to retain the ability to invest
according to a temporary defensive policy, it proposes to replace this
fundamental policy with the following non-fundamental investment policy:
"FMR normally invests the fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes,
however, it may temporarily invest substantially in short-term,
high-quality instruments."
This change is not expected to have any significant effect on the fund's
management.
CONCLUSION. The Board of Trustees has considered this proposal and
believes that replacing certain of the fund's fundamental policies with
non-fundamental policies and eliminating certain others is in the best
interests of the fund and its shareholders. The Trustees recommend that
shareholders vote FOR the proposed changes to the fund's investment
policies.
12. TO ADOPT A FUNDAMENTAL INVESTMENT LIMITATION CONCERNING COMMODITIES FOR
FIDELITY MORTGAGE SECURITIES FUND.
Currently, the fund does not have a fundamental investment limitation
describing its policy regarding the purchase and sale of commodities.
Pursuant to Section 8(b) of the 1940 Act, a mutual fund must state its
policy relating to, among other things, the purchase and sale of
commodities. In general, the fund does not anticipate any future investment
activity with respect to physical commodities, but pursuant to securities
regulation, must adopt a stated policy.
The following proposed fundamental investment limitation concerning the
purchase or sale of commodities is the standard one for all funds managed
by FMR and has been recommended by the Board of Trustees:
"The fund may not purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities)."
The proposed fundamental policy conforms to a limitation that is expected
to become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page__). The fund does not expect
to purchase or sell commodities. However, the proposed limitation would
permit the fund to invest in securities backed by commodities and to sell
commodities acquired as a result of ownership of other investments. In
addition, the proposed limitation does not prevent the fund from engaging
in options and futures contracts.
CONCLUSION. The Board of Trustees recommends voting FOR the proposal to
adopt a fundamental investment limitation concerning commodities. The
proposed limitation, upon shareholder approval, will become effective
immediately. If the proposal is not approved, the fund will continue its
current practice of not purchasing or selling commodities, but will remain
without a fundamental investment limitation regarding commodities.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
The primary purpose of Proposals 13 through 25 is to revise several of the
fund's investment limitations to conform to limitations which are the
standards for similar types of funds managed by FMR. The Board of Trustees
asked FMR to analyze the various fundamental and non-fundamental investment
limitations of the Fidelity funds, and, where practical and appropriate to
a fund's investment objective and policies, propose to shareholders
adoption of standard fundamental limitations and elimination of certain
other fundamental limitations. Generally, when fundamental limitations are
eliminated, Fidelity's standard non-fundamental limitations replace them.
By making these limitations non-fundamental, the Board of Trustees may
amend a limitation as they deem appropriate, without seeking shareholder
vote. The Board of Trustees would amend the limitations to respond, for
instance, to developments in the marketplace, or changes in federal or
state law. The costs of shareholder meetings if called for these purposes
are generally borne by the fund and its shareholders.
It is not anticipated that these proposals will substantially affect the
way a fund is currently managed. However, FMR is presenting them to you
for your approval because, FMR believes that increased standardization will
help to promote operational efficiencies and facilitate monitoring of
compliance with fundamental and non-fundamental investment limitations.
Although adoption of a new or revised limitation is not likely to have any
impact on the current investment techniques employed by a fund, it will
contribute to the overall objectives of standardization.
13. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION FOR SPARTAN LIMITED MATURITY GOVERNMENT FUND.
The fund's current fundamental investment limitation concerning
diversification states:
"The fund may not purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States or
its agencies or instrumentalities) if, as a result, (a) more than 25% of
the value of its total assets would be invested in the securities of a
single issuer, or (b) with respect to 75% of its total assets, more than 5%
of the value of its total assets would be invested in the securities of a
single issuer."
The Trustees recommend that shareholders vote to replace the fund's
fundamental investment limitation with the following fundamental investment
limitation governing diversification:
"The fund may not, with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities) if, as a
result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer."
The primary purpose of the proposal is to revise the fund's fundamental
diversification limitation to conform to a limitation that is expected to
become the standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page _.) The standard more closely
tracks the language of the diversification limitation required under the
Investment Company Act of 1940. If the proposal is approved, the amended
fundamental diversification limitation cannot be changed without a future
vote of shareholders. Adoption of the proposed limitation concerning
diversification is not expected to affect the way in which the fund is
managed, the investment performance of a fund, or the securities or
instruments in which the fund invests.
In addition, the amended limitation would limit the fund, with respect to
75% of the fund's total assets, to holding no more than 10% of a single
issuer's voting securities. Currently, the fund does not have a limitation
that specifically restricts or limits the amount of a single issuer's
voting securities that the fund can hold.
CONCLUSION. The Board of Trustees recommends voting FOR the proposed
amendment. The amended limitation, upon shareholder approval, will become
effective immediately. With respect to the fund, if the proposal is not
approved by shareholders, the fund's current limitation will remain
unchanged.
14. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
DIVERSIFICATION FOR FIDELITY MORTGAGE SECURITIES FUND.
The fund's current fundamental investment limitation regarding
diversification states:
"The fund may not purchase any security if, as a result, (a) more than 5%
of the value of its assets would be invested in the securities of one
issuer (except that up to 25% of the value of the fund's total assets may
be invested in one or more issuers without regard to this limitation), or
(b) it would hold more than 10% of the voting securities of any one issuer
(these limitations do not apply to securities issued or guaranteed by the
United States government, its agencies or instrumentalities)."
Subject to shareholder approval, the Trustees intend to replace this
limitation with the following fundamental investment limitation regarding
diversification:
"The fund may not with respect to 75% of the fund's total assets, purchase
the securities of any issuer (other than securities issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities) if, as a
result, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer."
The Trustees recommend that shareholders approve an amendment to the
fund's fundamental investment limitation regarding diversification that
will permit the fund to hold more than 10% of the voting securities of one
or more issuers. Subject to certain statutory exceptions for securities of
the U.S. government and its agencies and instrumentalities, this increased
investment flexibility will be confined to 25% of the fund's total assets.
The current 10% limitation applicable to purchases of voting securities of
a single issuer will remain in effect with respect to 75% of the fund's
total assets.
State securities regulations (Blue Sky regulations) at one time prohibited
a fund from registering shares for sale if the fund intended to hold more
than 10% of the voting securities of a single issuer. The fund has a
fundamental restriction that incorporates this Blue Sky restriction.
Because the Blue Sky regulations regarding this limitation has been
eliminated, shareholder approval is sought to permit the fund to hold a
higher proportion of voting securities of a single issuer. In addition, the
proposed limit is expected to become the standard for all funds managed by
FMR. (See "Adoption of Standardized Investment Limitations" on page _.) The
standard more closely tracks the language of the diversification limitation
required under the Investment Company Act of 1940.
FMR does not currently expect that approval will materially affect the way
in which the fund is managed with regard to the fund holding more than 10%
of the voting securities of an issuer. If the proposal is approved, the new
fundamental diversification limitation could not be changed without a
future vote of shareholders.
CONCLUSION. The Board of Trustees recommends voting FOR the proposed
amendment. The amended limitation, upon shareholder approval, will become
effective immediately. With respect to the fund, if the proposal is not
approved by shareholders, the fund's current limitation will remain
unchanged.
15. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE ISSUANCE
OF SENIOR SECURITIES FOR SPARTAN LIMITED MATURITY GOVERNMENT FUND AND
FIDELITY MORTGAGE SECURITIES FUND.
Spartan Limited Maturity Government Fund's current fundamental investment
limitation regarding the issuance of senior securities states:
"The fund may not issue bonds or any other class of securities preferred
over shares of the fund in respect of the fund's assets or earnings,
provided that Fidelity Income Fund may establish additional series of
shares in accordance with its Declaration of Trust."
Fidelity Mortgage Securities Portfolio's current fundamental investment
limitation regarding the issuance of senior securities states:
"The fund may not issue senior securities."
The Trustees recommend that shareholders vote to replace this limitation
with the following fundamental investment limitation governing the issuance
of senior securities:
"The fund may not issue senior securities, except as permitted under the
Investment Company Act of 1940."
The primary purpose of the proposal is to revise the funds' fundamental
senior securities limitation to conform to a limitation that is expected to
become the standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page _.) If the proposal is
approved, the new fundamental senior securities limitation cannot be
changed without a future vote of the funds' shareholders.
Adoption of the proposed limitation on senior securities is not expected
to affect the way in which the funds are managed, the investment
performance of the funds, or the securities or instruments in which the
funds invest. However, the proposed limitation clarifies that the funds
may issue senior securities to the extent permitted under the 1940 Act.
Although the definition of a "senior security" involves complex statutory
and regulatory concepts, a senior security is generally thought of as an
obligation of a fund which has a claim to the fund's assets or earnings
that takes precedence over the claims of the fund's shareholders. The
1940 Act generally prohibits mutual funds from issuing senior securities;
however, mutual funds are permitted to engage in certain types of
transactions that might be considered "senior securities" as long as
certain conditions are satisfied. For example, a transaction which
obligates a fund to pay money at a future date (e.g., the purchase of
securities to be settled on a date that is further away than the normal
settlement period) may be considered a "senior security." A mutual fund
is permitted to enter into this type of transaction if it maintains a
segregated account containing liquid securities in amount equal to its
obligation to pay cash for the securities at a future date. The funds
utilize transactions that may be considered "senior securities" only in
accordance with applicable regulatory requirements under the 1940 Act.
CONCLUSION. The Board of Trustees recommends voting FOR the proposed
amendment. The amended limitation, upon shareholder approval, will become
effective immediately. If the proposal is not approved, each fund's
current limitation will remain unchanged.
16. TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING SHORT
SALES OF SECURITIES FOR SPARTAN LIMITED MATURITY GOVERNMENT FUND AND
FIDELITY MORTGAGE SECURITIES PORTFOLIO.
Spartan Limited Maturity Government Fund's current fundamental limitation
on selling securities short states:
"The fund may not sell securities short, unless it owns, or by virtue of
ownership of other securities has the right to obtain, securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in futures contracts are not deemed to constitute short
sales."
Fidelity Mortgage Securities Portfolio's current fundamental limitation
on selling securities short states:
"The fund may not sell securities short, unless it owns, or by virtue of
ownership of other securities has the right to obtain, securities
equivalent in kind and amount to the securities sold (a short position in a
futures contract is not considered a short sale for this purpose)."
The Trustees of each fund recommend that shareholders vote to eliminate
the above fundamental investment limitations. If the proposal is approved,
the Trustees intend to replace the current fundamental limitations with a
non-fundamental limitation that could be changed without a vote of
shareholders. The proposed non-fundamental limitation is set forth below,
with a brief analysis of the substantive differences between it and the
current limitations.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security.
In an investment technique known as a short sale "against the box," an
investor sells securities short while owning the same securities in the
same amount, or having the right to obtain equivalent securities. The
investor could have the right to obtain equivalent securities, for example,
through its ownership of warrants, options, or convertible bonds. If the
proposal is approved by shareholders of each respective fund, the Trustees
intend to adopt the following non-fundamental investment limitation on
short selling, which would permit short sales against the box:
"The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short."
The proposed non-fundamental limitation would clarify that transactions in
options are not deemed to constitute selling securities short.
Certain state regulations currently prohibit mutual funds from entering
into any short sales, other than short sales against the box. If the
proposal is approved, however, the Board of Trustees would be able to
change the proposed non-fundamental limitation in the future, without a
vote of shareholders, if state regulations were to change to permit other
types of short sales, or if waivers from existing requirements were
available, subject to appropriate disclosure to investors.
Neither fund currently anticipates entering into any short sales including
short sales against the box. If the proposal is approved, however, either
fund would be able to change that policy in the future, without a vote of
shareholders, subject to the supervision of the Trustees and appropriate
disclosure to existing and prospective investors.
Although elimination of the funds' fundamental limitations on short
selling is unlikely to affect each fund's investment techniques at this
time, in the event of a change in state regulatory requirements, each fund
may alter its investment practices in the future. The Board of Trustees
believes that efforts to standardize each fund's investment limitations
will facilitate FMR's investment compliance efforts (see "Adoption of
Standardized Investment Limitations" on page __) and are in the best
interests of shareholders.
CONCLUSION. The Board of Trustees recommends voting FOR the proposal to
eliminate each fund's fundamental investment limitations regarding short
sales of securities. If approved, the proposal will take effect
immediately. If the proposal is not approved by the shareholders of each
fund, that fund's current limitation will remain unchanged.
17. TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING MARGIN
PURCHASES FOR SPARTAN LIMITED MATURITY GOVERNMENT FUND AND FIDELITY
MORTGAGE SECURITIES PORTFOLIO.
Spartan Limited Maturity Government Fund's current fundamental investment
limitation concerning purchasing securities on margin states:
"The fund may not purchase securities on margin, except that the fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that the fund may make initial and variation
margin payments in connection with transactions in futures contracts and
options on futures contracts."
Fidelity Mortgage Securities Portfolio's current fundamental limitation
concerning purchasing securities on margin states:
"The fund may not purchase securities on margin, except for such
short-term credits as are necessary for the clearance of transactions
(initial and variation margin payments in connection with positions in
futures contracts and related options are not considered purchases on
margin)."
The Trustees recommend that shareholders of each fund vote to eliminate
the above fundamental investment limitations. If the proposal is approved,
the Trustees intend to adopt a non-fundamental limitation for each fund
that could be changed without a vote of shareholders. The proposed
non-fundamental limitation is set forth below, with a brief analysis of the
substantive differences between it and the current limitations.
Margin purchases involve the purchase of securities with money borrowed
from a broker. "Margin" is the cash or eligible securities that the
borrower places with a broker as collateral against the loan. Each fund's
current fundamental limitation prohibits the fund from purchasing
securities on margin, except to obtain short-term credits as may be
necessary for the clearance of transactions and for initial and variation
margin payments made in connection with the purchase and sale of futures
contracts and options on futures contracts (Spartan Limited Maturity
Government Fund) or related options (Fidelity Mortgage Securities
Portfolio). With these exceptions, mutual funds are prohibited from
entering into most types of margin purchases by applicable SEC policies.
The proposed non-fundamental limitation includes these exceptions.
If the proposal is approved by shareholders, the Trustees intend to adopt
the following non-fundamental investment limitation, which would prohibit
margin purchases except as permitted under the conditions referred to
above:
"The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin."
Although elimination of each fund's fundamental limitation on margin
purchases is unlikely to affect the fund's investment techniques at this
time, in the event of a change in federal regulatory requirements, the
funds may alter their investment practices in the future. The Board of
Trustees believes that efforts to standardize investment limitations will
facilitate FMR's investment compliance efforts (see "Adoption of
Standardized Investment Limitations" on page __.) and are in the best
interests of shareholders.
CONCLUSION. The Trustees recommend voting FOR the proposal to eliminate
each fund's fundamental investment limitation regarding margin purchases.
If approved, the new non-fundamental limitation will become effective
immediately. If the proposal is not approved by the shareholders of each
fund, that fund's current limitation will remain unchanged.
18. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING BORROWING FOR
SPARTAN LIMITED MATURITY GOVERNMENT FUND AND FIDELITY MORTGAGE SECURITIES
PORTFOLIO.
Spartan Limited Maturity Government Fund's current fundamental investment
limitation concerning borrowing states:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (less
liabilities other than borrowings). Any borrowings that come to exceed 33
1/3% of the value of the fund's total assets by reason of a decline in net
assets will be reduced within three days to the extent necessary to comply
with the 33 1/3% limitation."
Fidelity Mortgage Securities Portfolio's current fundamental investment
limitation concerning borrowings states:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) or
engage in reverse repurchase agreements in an amount not exceeding 33 1/3%
of its total assets (including the amount borrowed) less liabilities (other
than borrowings). Any borrowings that come to exceed 33 1/3% of the value
of the fund's total assets by reason of a decline in net assets will be
reduced within three days to the extent necessary to comply with the 33
1/3% limitation."
Subject to shareholder approval, the Trustees intend to replace each
fund's current fundamental investment limitation with the following amended
fundamental investment limitation governing borrowing:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation."
The primary purpose of the proposal is to revise each fund's fundamental
borrowing limitation to conform to a limitation that is expected to become
the standard for all funds managed by FMR. (See "Adoption of Standardized
Investment Limitations" on page __.) If the proposal is approved, the
amended fundamental borrowing limitation cannot be changed without a future
vote of shareholders.
Adoption of the proposed limitation concerning borrowing is not expected to
affect the way in which the fund is managed, the investment performance of
the fund, or the securities or instruments in which the fund invests.
However, the proposal would clarify two points. First, under the current
limitations, each fund must reduce borrowings that come to exceed 33 1/3%
of total assets only when there is a decline in net assets. Second, the
proposed limitation differs from that of each fund because it specifically
defines "three days" to exclude Sundays and holidays, while the funds'
current limitation simply states, "within three days."
In addition, Mortgage Securities Portfolio's fundamental limit regarding
reverse repurchase agreements will be replaced with the following similar
non-fundamental limit:
"The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (5)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets."
The proposed non-fundamental limit states the fund's policy that reverse
repurchase agreements would be considered as borrowings for purposes of the
fundamental limitation on borrowing. In a reverse repurchase agreement, a
fund sells a security and enters into an agreement to repurchase that
security at a specified future date and price. Deletion of the specific
reference in the fundamental limitation to reverse repurchase agreements
will not affect the way in which Mortgage Securities Portfolio is currently
managed. Non-fundamental limits can be changed by the Board of Trustees
without a shareholder vote.
CONCLUSION. The Board of Trustees has concluded that the proposed amendment
will benefit each fund. Accordingly, the Trustees recommend that
shareholders of the funds vote FOR the proposed amendment. The amended
limitation, upon shareholder approval, will become effective immediately.
With respect to each fund, if the proposal is not approved, the fund's
current limitation will remain unchanged.
19. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING UNDERWRITING
FOR FIDELITY MORTGAGE SECURITIES PORTFOLIO.
Fidelity Mortgage Securities Portfolio's current fundamental investment
limitation concerning underwriting states:
"The fund may not underwrite securities issued by others."
Subject to shareholder approval, the trustees intend to replace this
limitation with the following fundamental limitation governing
underwriting:
"The fund may not underwrite securities issued by others, except to the
extent that the fund may be considered an underwriter within the meaning of
the Securities Act of 1933 in the disposition of restricted securities."
The primary purpose of the proposed amendment is to clarify that Fidelity
Mortgage Securities Portfolio is not prohibited from selling restricted
securities if, as a result of such sale, the fund is considered an
underwriter under federal securities laws. The proposal also serves to
conform the fund's fundamental investment limitation concerning
underwriting to a limitation which is expected to become the standard for
all funds managed by FMR. (See "Adoption of Standardized Investment
Limitations on page __.) If the proposal is approved, the new limitation
may not be changed without a future vote of shareholders.
Adoption of the proposed limitation concerning underwriting is not
expected to affect the way in which the fund is managed, the investment
performance of the fund, or the securities or instruments in which the fund
invests.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund. Accordingly, the trustees recommend that
shareholders vote FOR the proposed amendment. The amended limitation, upon
shareholder approval, will become effective immediately. If the proposal
is not approved by the shareholders of the fund, the fund's current
limitation will remain unchanged.
20. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
CONCENTRATION OF ITS INVESTMENTS IN A SINGLE INDUSTRY FOR SPARTAN LIMITED
MATURITY GOVERNMENT FUND.
Spartan Limited Maturity Government Fund's current fundamental investment
limitation concerning the concentration of its investments within a single
industry states:
"The fund may not purchase the securities of any issuer (other than
obligations issued or guaranteed by the government of the United States or
its agencies or instrumentalities) if, as a result, more than 25% of the
fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the
same industry."
Subject to shareholder approval, the Trustees of the fund intend to
replace this fundamental investment limitation with the following amended
fundamental investment limitation governing concentration:
"The fund may not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the fund's
total assets would be invested in the securities of companies whose
principal business activities are in the same industry."
The primary purpose of the proposal is to revise the fund's fundamental
concentration limitation to conform to a limitation which is expected to
become the standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page __.) Adoption of the proposed
concentration limitation is not expected to affect the way in which Spartan
Limited Maturity Government Fund is managed, its investment performance, or
the securities or instruments in which it invests. However, the proposed
limitation would clarify that the fund cannot invest more than 25% of its
total assets in companies, as opposed to issuers, whose principal business
activities are in the same industry. If the proposal is approved, the new
fundamental concentration limitation cannot be changed without a future
vote of shareholders.
Adoption of the proposed limitation on concentration is not expected to
affect the way the fund is managed, the investment performance of the fund,
or the securities or instruments in which the fund invests.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund. The Trustees recommend voting FOR the
proposed amendment. The new limitation, upon shareholder approval, will
become effective immediately. If the proposal is not approved, the fund's
current fundamental investment limitation will remain unchanged.
21. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING REAL ESTATE
FOR SPARTAN LIMITED MATURITY GOVERNMENT FUND AND FIDELITY MORTGAGE
SECURITIES PORTFOLIO.
Spartan Limited Maturity Government Fund's current fundamental investment
limitation concerning real estate states:
"The fund may not purchase or sell real estate unless acquired as a result
of ownership of securities (but this shall not prevent the fund from
purchasing and selling marketable securities issued by companies or other
entities or investment vehicles that deal in real estate or interests
therein, nor shall this prevent the fund from purchasing interests in pools
of real estate mortgage loans)."
Fidelity Mortgage Securities Portfolio's current fundamental investment
limitation concerning real estate states:
"The fund may not purchase or sell real estate (except the fund may
purchase and sell mortgage-related securities, direct mortgage investments,
and securities of companies that deal in real estate or interests therein,
and may liquidate real estate acquired as a result of default on a
mortgage)."
Subject to shareholder approval, the Trustees intend to replace this
fundamental investment limitation with the following fundamental investment
limitation governing purchases and sales of real estate.
"The fund may not purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent
the fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business)."
The primary purpose of the proposed amendment is to clarify the types of
securities in which the funds are authorized to invest and to conform each
fund's fundamental real estate limitation to a limitation that is expected
to become the standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page __.) If the proposal is
approved, the new fundamental real estate limitation may not be changed
without a future vote of shareholders.
Adoption of the proposed limitation concerning real estate is not expected
to affect the way in which the funds are managed, the investment
performance of the funds, or the securities or instruments in which the
funds invest. The funds do not expect to acquire real estate. However, the
proposed limitation would clarify two points. First, the proposed
limitation would make it explicit that the funds may acquire a security or
other instrument, of which the payments of interest and principal may be
secured by a mortgage or other right to foreclose on real estate, in the
event of default. Second, the proposed limitation would clarify the fact
that the funds may invest without limitation in securities issued or
guaranteed by companies engaged in acquiring, constructing, financing,
developing, or operating real estate projects (e.g., securities of issuers
that develop various industrial, commercial, or residential real estate
projects such as factories, office buildings, or apartments). Any
investments in these securities are, of course, subject to each fund's
investment objective and policies and to other limitations regarding
diversification and concentration. Also, the proposed limitation
specifically permits Fidelity Mortgage Securities Portfolio to sell real
estate acquired as a result of ownership of securities or other
instruments. However, in light of the types of securities in which the fund
regularly invests, FMR considers this to be a remote possibility.
CONCLUSION. The Board of Trustees has concluded that the adoption of the
proposed amendment will benefit the fund and its shareholders. The Trustees
recommend that shareholders of the fund vote FOR the proposed amendment.
The amended limitation, upon shareholder approval, will become effective
immediately. If the proposal is not approved, the fund's current limitation
will remain unchanged.
22. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
COMMODITIES FOR SPARTAN LIMITED MATURITY GOVERNMENT FUND.
The fund's current fundamental investment limitation concerning
commodities states:
"The fund may not purchase or sell physical commodities unless acquired as
a result of ownership of securities (but this shall not prevent the fund
from purchasing and selling futures contracts)."
Subject to shareholder approval, the Trustees intend to replace this
fundamental investment limitation with the following fundamental investment
limitation governing commodities.
"The fund may not purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities)."
The primary purpose of this proposal is to implement a fundamental
investment limitation on commodities that conforms to a limitation that is
expected to become the standard for all funds managed by FMR. (See
"Adoption of Standardized Investment Limitations" on page _.) If the
proposal is approved, the new fundamental commodities limitation cannot be
changed without a future vote of shareholders.
Adoption of the proposed limitation on commodities is not expected to
affect the way in which the fund is managed, the investment performance of
the fund, or the securities or instruments in which the fund invests.
However, the proposed limitation would clarify two points. First, the
proposed limitation would make it explicit that the fund may acquire
physical commodities as the result of ownership of securities or other
instruments. Second, the proposed limitation would clarify that the fund
may invest without limit in securities or other instruments backed by
physical commodities. Any investments of this type are, of course, subject
to the fund's investment objective, policies, and other limitations.
CONCLUSION. The Board of Trustees has concluded that the adoption of the
proposed amendment will benefit the fund and its shareholders. The
Trustees recommend that shareholders of the fund vote FOR the proposed
amendment. The amended limitation, upon shareholder approval, will become
effective immediately. If the proposal is not approved, the fund's current
limitation will remain unchanged.
23. TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING LENDING FOR
SPARTAN LIMITED MATURITY GOVERNMENT FUND AND FIDELITY MORTGAGE SECURITIES
PORTFOLIO.
Spartan Limited Maturity Government Fund's current fundamental investment
limitation concerning lending states:
"The fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of the value of its total assets would be lent to
other parties, except (a) through the purchase of a portion of an issue of
debt securities in accordance with its investment objective, policies, and
limitations, or (b) by engaging in repurchase agreements with respect to
portfolio securities."
Fidelity Mortgage Securities Portfolio's current fundamental investment
limitation concerning lending states:
"The fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of its total assets would be lent to other
parties, except (i) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations, (ii) by investing in mortgage-related securities, (iii) by
investing in direct mortgage investments, or (iv) by engaging in repurchase
agreements with respect to portfolio securities."
Subject to shareholder approval, the Trustees intend to replace each
fund's limitation with the following fundamental investment limitation
governing lending:
"The fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of its total assets would be lent to other
parties, but this limitation does not apply to purchases of debt securities
or to repurchase agreements."
The primary purpose of this proposal is to revise each fund's fundamental
lending limitation to conform to a limitation expected to become the
standard for all funds managed by FMR. (See "Adoption of Standardized
Investment Limitations" on page__.) If the proposal is approved, the new
fundamental lending limitations cannot be changed without a future vote of
shareholders.
Adoption of the proposed limitation on lending is not expected to affect
the way in which each fund is managed, the investment performance of each
fund, or the instruments in which each fund invests. However, the proposed
limitation would clarify several points. First, the proposed limitation
provides specific authority for the fund to acquire the entire portion of
an issue of debt securities. Ordinarily, if a fund purchases an entire
issue of debt securities, there may be greater risks of illiquidity and
unavailability of public information if the issuer has no other issue of
securities outstanding, and it may be more difficult to obtain pricing
information to be used in establishing the fund's daily share price.
Second, the proposed amendment eliminates the reference to "portfolio
securities" in the exception for repurchase agreements. Finally, for
Fidelity Mortgage Securities Portfolio, the proposed amendment eliminates
the lending exceptions regarding investing in "mortgage-related securities"
and "direct mortgage investments," thereby clarifying that the fund may buy
any debt securities that are suitable investments for the fund according to
its investment objective, policies, and limitations.
The Trustees may change non-fundamental limitations in response to
regulatory, market, legal or other developments without further approval by
shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit each fund and is in the best interest of
shareholders. The Trustees recommend voting FOR the proposed amendment. The
amended limitation, upon shareholder approval, will become effective
immediately. If the proposal is not approved by shareholders of each fund,
each fund's current limitation will remain unchanged.
24. TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENT IN OTHER INVESTMENT COMPANIES FOR FIDELITY MORTGAGE SECURITIES
PORTFOLIO.
The fund's current fundamental investment limitation concerning investment
in other investment companies states:
"The fund may not purchase securities of other investment companies if, as
a result, more than 10% of its total assets would be invested in such
securities (the fund may acquire securities of other investment companies
only as part of a merger or consolidation, or by purchase in the open
market where no commission except the ordinary broker's commission is
paid)."
The Trustees recommend that shareholders of the fund vote to eliminate the
above referenced fundamental investment limitation. If the proposal is
approved, the Trustees intend to replace the current fundamental investment
limitation with the following non-fundamental limitation, which could be
changed without a vote of shareholders:
"The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger."
The ability of mutual funds to invest in other investment companies is
restricted by rules under the 1940 Act and by some state regulations. The
fund's current fundamental investment limitation recites certain of the
applicable federal and former state restrictions. The federal restrictions
will remain applicable to the fund whether or not they are recited in a
fundamental limitation. As a result, elimination of the above fundamental
limitation is not expected to have any impact on the fund's investment
practices, except to the extent that regulatory requirements may change in
the future.
CONCLUSION. The Board of Trustees believes that the efforts to standardize
the fund's investment limitations will facilitate FMR's investment
compliance efforts (see "Adoption of Standardized Investment Limitations"
on page __) and are in the best interests of the shareholders. Accordingly,
the Board of Trustees recommends voting FOR the proposal to eliminate the
fund's fundamental investment limitation regarding investments in other
investment companies. If approved, the new non-fundamental investment
limitation will become effective immediately. If the proposal is not
approved, the fund's current investment limitation will remain unchanged.
25. TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING INVESTING
IN OIL, GAS, AND OTHER MINERAL EXPLORATION PROGRAMS FOR FIDELITY MORTGAGE
SECURITIES PORTFOLIO.
Currently, the fund maintains a fundamental investment limitation
specifying that the fund may not "invest in oil, gas, or other mineral
exploration or development programs." Investment in oil, gas, or other
mineral exploration programs is permitted under federal standards for
mutual funds, but currently is prohibited by some state regulations.
The Trustees recommend that shareholders vote to eliminate the above
fundamental investment limitation. If the proposal is approved, the
Trustees of the fund intend to adopt the following non-fundamental
investment limitation, which could be changed without a shareholder vote:
"The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases."
The proposal will have no current impact on the fund. However, adoption of
a standardized non-fundamental investment limitation will facilitate FMR's
investment compliance efforts (see "Adoption of Standardized Investment
Limitations" on page __), and will enable the fund to respond more promptly
if applicable state laws change in the future. In addition, the fund's new
limitation will, for the first time, specifically refer to leases.
CONCLUSION. The Board of Trustees recommends voting FOR the proposal to
eliminate the fund's fundamental investment limitation concerning
investment in oil, gas, and other mineral exploration programs. If
approved, the proposal will take effect immediately. If the proposal is not
approved, the fund's current limitation will remain unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the
contrary will be voted on such matters in accordance with the judgment of
the persons therein designated.
PRESENT MANAGEMENT CONTRACT
OF
SPARTAN LIMITED MATURITY GOVERNMENT FUND
The fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with the fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities. In addition, FMR or its affiliates, subject to the supervision
of the Board of Trustees, provide the management and administrative
services necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the fund's records and the registration of the fund's shares
under federal and state law; developing management and shareholder services
for the fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the Board of Trustees.
FMR is responsible for the payment of all expenses of the fund with certain
exceptions. Specific expenses payable by FMR include, without limitation,
the fees and expenses of registering and qualifying the trust, the fund,
and its shares for distribution under federal and state securities laws;
expenses of typesetting for printing the Prospectus and Statement of
Additional Information; custodian charges, audit and legal expenses;
insurance expense; association membership dues; and the expenses of mailing
reports to shareholders, shareholder meetings, and proxy solicitations.
FMR also provides for transfer agent and dividend disbursing services and
portfolio and general accounting record maintenance through Fidelity
Service Co. (FSC).
FMR pays all other expenses of the fund with the following exceptions:
fees and expenses of all trustees who are not "interested persons" of the
trust or of FMR (the non-interested Trustees); interest on borrowings;
taxes; brokerage commissions (if any); and such non-recurring expenses as
may arise, including costs of any litigation to which the fund may be a
party, and any obligation it may have to indemnify the officers and
Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated December
1, 1990, which was approved by the fund's shareholders on November 14,
1990. For the services of FMR under the current contract, the fund pays
FMR a monthly management fee at the annual rate of .65% of the fund's
average net assets throughout the month. FMR reduces its fee by an amount
equal to the fees and expenses of the non-interested Trustees.
Prior to December 1, 1990, FMR was the fund's manager pursuant to a
management contract, dated November 28, 1988. For the services of FMR
under that contract, the fund paid FMR a monthly management fee composed of
two elements: a group fee rate and an individual fund fee rate. The group
fee rate was based on the average monthly net assets of all the registered
investment companies with which FMR had management contracts and was
calculated on a cumulative basis pursuant to the graduated schedule that
ranged from .15% to .37%. The individual fund fee rate was .30%.
FMR may, from time to time, voluntarily reimburse all or a portion of the
fund's operating expenses (excluding interest, taxes, brokerage
commissions, and extraordinary expenses). Expense limitations in effect
since July 15, 1990 are indicated in the table on the following page. Also
indicated on the following page are the gross management fees incurred by
the fund and the amounts reimbursed by FMR during the fiscal years ended
July 31, 1993, 1992, and 1991.
From To Expense Limitation
July 15, 1990 November 30, 1990 .65%
January 1, 1991 February 28, 1991 .30%
March 1, 1991 June 30, 1991 .45%
July 1, 1991 September 18, 1991 .55%
September 19, 1991 October 22, 1991 .00%
Management Fees Amount of
Fiscal Period Ended Before Reimbursement Reimbursement
1993 $10,736,279 $0
1992 $11,091,392 $790,282
1991 $1,842,630 $565,650
To defray shareholder service costs, effective December 1, 1990, FMR or its
affiliates also collect the Fund's $5.00 exchange fee, $5.00 account
closeout fee, and $5.00 fee for wire purchases and redemptions and $2.00
checkwriting charge. Shareholder transaction fees and charges collected for
the fiscal years ended July 31 are indicated in the table on the following
page.
Fiscal Period Exchange Account Wire Checkwriting
Ended Fee Closeout Fee Fees Charges
1993 $121,718 $6,181 $11,852 $613
1992 $169,380 $5,035 $12,380 N/A
1991 $24,841 $989 $2,215 N/A
PRESENT MANAGEMENT CONTRACTS
OF
FIDELITY MORTGAGE SECURITIES PORTFOLIO
FIDELITY GINNIE MAE PORTFOLIO
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the funds. These services include providing
facilities for maintaining the funds' organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters,
and other persons dealing with the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining the funds'
records and the registration of the funds' shares under federal and state
law; developing management and shareholder services for the funds; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, each fund pays all of its expenses, without limitation, that are not
assumed by those parties. Each fund pays for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although each fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to existing shareholders, the trust has entered into a
revised transfer agent agreement with FSC, pursuant to which FSC bears the
cost of providing these services to existing shareholders. Other expenses
paid by each fund include interest, taxes, brokerage commissions, each
fund's proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal and state
securities laws. Each fund is also liable for such nonrecurring expenses
as may arise, including costs of any litigation to which the fund may be a
party and any obligation it may have to indemnify the trust's officers and
Trustees with respect to litigation.
FMR is each fund's manager pursuant to contracts dated September 29, 1989
(Mortgage Securities) and December 1, 1992 (Ginnie Mae), which were
approved by the funds' shareholders on August 24, 1989 and November 18,
1992, respectively. For the services of FMR under the contracts, each fund
pays FMR a monthly management fee composed of the sum of two elements: a
group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left On the right, the effective fee rate schedule
are the result of cumulatively applying the annualized rates at varying
asset levels.. Also shown in following table is the effective annual fee
rate at various levels of group net assets. For example, the effective
annual fee rate at $203 billion of group net assets -- their approximate
level for July 1993 -- was .1653%, which was the weighted average of the
respective fee rates for each level of group net assets up to that level.
GROUP FEE RATE SCHEDULE* EFFECTIVE ANNUAL FEE RATES
AVERAGE GROUP EFFECTIVE
GROUP ANNUALIZED NET ANNUAL
ASSETS RATE ASSETS FEE RATE
0 - $ 3 billion .370% $ 0.5 billion .3700%
3 - 6 .340 10 .3340
6 - 9 .310 20 .2855
9 - 12 .280 30 .2520
12 - 15 .250 40 .2323
15 - 18 .220 50 .2188
18 - 21 .200 60 .2090
21 - 24 .190 70 .2017
24 - 30 .180 80 .1959
30 - 36 .175 90 .1910
36 - 42 .170 100 .1869
42 - 48 .165 110 .1835
48 - 66 .160 120 .1808
66 - 84 .155 130 .1780
84 - 120 .150 140 .1756
120 - 174 .145 150 .1736
Over 174 .140 160 .1718
170 .1702
180 .1687
190 .1672
200 .1658
Each fund's individual fund fee rate is .30%. Based on the average net
assets of funds advised by FMR for July 1993, each fund's annual management
fee rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.1653% + .30% = .4653%
One twelfth (1/12) of this annual management fee rate is then applied to
each fund's average net assets for the current month, giving a dollar
amount which is the fee for that month.
*The rates shown above for average group assets in excess of $120 billion
were adopted by FMR on a voluntary basis on January 1, 1992 pending
shareholder approval of a new management contract reflecting the extended
schedule. Ginnie Mae shareholders approved the new management contract at
their November 18, 1992 shareholder meeting. The extended schedule
provides for lower management fees as total assets under management
increase. Prior to January 1, 1992, each fund's group fee rate was based
on a schedule with breakpoints ending at .15% for average group assets in
excess of $84 billion as reflected in each fund's management contract dated
September 29, 1989. Management fees paid to FMR for the fiscal years ended
July 31, 1993, 1992, and 1991 are indicated in the following table.
1993 1992 1991
Ginnie Mae Portfolio $4,466,000 $4,147,000 $3,472,000
Mortgage Securities Portfolio $2,010,000 $2,043,000 $1,908,000
To comply with the California Code of Regulations, FMR will reimburse each
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating a fund's expenses for purposes of this regulation, each
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses and
custodian fees attributable to investments in foreign securities.
ACTIVITIES AND MANAGEMENT OF FMR [TO BE UPDATED]
FMR, a corporation organized in 1946, serves as investment adviser to a
number of investment companies whose net assets as of July 31, 1993, were
in excess of $200 billion. The Fidelity family of funds currently includes
a number of funds with a broad range of investment objectives and
permissible portfolio compositions. The Boards of these funds are
substantially identical to that of this trust. In addition, FMR serves as
investment adviser to certain other funds which are generally offered to
limited groups of investors. Information concerning the advisory fees, net
assets, and total expenses of the funds advised by FMR is contained in the
Table of Average Net Assets and Expense Ratios in Exhibit __.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc.
(FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far
East), both wholly owned subsidiaries of FMR formed in 1986, supply
investment research information, and may supply portfolio management
services to FMR in connection with certain funds advised by FMR. FMR Texas
Inc., a wholly owned subsidiary of FMR formed in 1989, supplies portfolio
management and research services in connection with certain money market
funds advised by FMR.
FMR, its officers and directors, its affiliated companies and personnel,
and the Trustees, from time to time have transactions with various banks,
including the custodian banks for certain of the funds advised by FMR.
Those transactions which have occurred to date have included mortgages and
personal and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
The Consolidated Statement of Financial Condition of Fidelity Management
& Research Company and Subsidiaries as of December 31, 1993 is shown
beginning on page __.
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board; and
J. Gary Burkhead, President. Each of the Directors is also a Trustee of the
trust. Messrs. Johnson 3d, Burkhead, John H. Costello, Alan Leifer, Gary L.
French, and Arthur S. Loring, are currently officers of the fund and
officers or employees of FMR or FMR Corp. With the exception of Messrs.
Costello and French, all of these persons are stockholders of FMR Corp.
FMR's address is 82 Devonshire Street, Boston, Massachusetts 02109, which
is also the address of the Directors of FMR.
All of the stock of FMR is owned by a parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. At present, the principal operating activities of FMR
Corp. are those conducted by three of its divisions, Fidelity Service Co.,
which is the transfer, shareholder servicing, and pricing and bookkeeping
agent for certain of the retail funds advised by FMR, Fidelity Investments
Institutional Operations Company, which performs shareholder servicing
functions for certain institutional customers, and Fidelity Investments
Retail Services Company, which provides marketing services to various
companies within the Fidelity organization. Messrs. Johnson 3d, Burkhead,
William L. Byrnes, James C. Curvey, and Caleb Loring, Jr. are the Directors
of FMR Corp. On August 31, 1993, Messrs. Johnson 3d, Burkhead, Curvey, and
Loring, Jr., and Ms. Abigail Johnson owned approximately 34%, 3%, 3%, 11%,
and 11%, respectively, of the voting common stock of FMR Corp. In addition,
various Johnson family members and various trusts for the benefit of
Johnson family members, for which Messrs. Burkhead, Curvey, or Loring, Jr.
are Trustees, owned in the aggregate 32% of the voting common stock of FMR
Corp. Messrs. Johnson 3d, Burkhead, and Curvey owned approximately 2%, 3%,
and 1%, respectively, of the non-voting common stock of FMR Corp. In
addition, various trusts for the benefit of members of the Johnson family,
for which Mr. Loring, Jr. is the sole Trustee, and other trusts for the
benefit of Johnson family members, through limited partnership interests in
a partnership the corporate general partner of which is controlled by Mr.
Johnson 3d, Mr. Loring, Jr., and other Johnson family members, together
owned approximately 44% of the non-voting common stock of FMR Corp. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the trust), Johnson family members, and various trusts for the
benefit of the Johnson family form a controlling group with respect to FMR
Corp.
During the period December 1, 1991 through August 31, 1993, the following
transactions were entered into by officers and/or Trustees of the funds or
of FMR Corp. involving more than 1% of the voting common, non-voting common
or preferred stock of FMR Corp. Mr. William L. Byrnes redeemed 410 shares
of voting common stock for a cash payment of approximately $44,000. Mr.
John J. Cook Jr. redeemed 10,000 shares of non-voting common stock for a
cash payment of approximately $1.1 million. Mr. C. Bruce Johnstone sold an
aggregate of 12,920 shares of preferred stock at a net price below their
net asset value to Harvard & Co. for a cash payment of approximately
$5.3 million and redeemed an aggregate of 25,500 shares of non-voting
common stock for an aggregate cash payment of approximately $3.4 million.
Mr. Morris J. Smith redeemed 15,000 shares of non-voting common stock for a
cash payment of approximately $1.8 million.
ACTIVITIES AND MANAGEMENT OF FMR U.K. AND FMR FAR EAST [TO BE UPDATED]
FMR U.K. and FMR Far East are wholly-owned subsidiaries of FMR formed in
1986 to provide investment research information with respect to certain
funds for which FMR acts as investment adviser. Under sub-advisory
agreements with FMR U.K. and FMR Far East, FMR pays fees equal to 110% of
FMR U.K.'s costs and 105% of FMR Far East's costs, respectively, in
connection with research services and 50% of the management fee for
discretionary management provided for the benefit of certain Fidelity
funds.
The Statements of Financial Condition of FMR U.K. and FMR Far East as of
December 31, 1993 are shown on pages __and __ respectively. Funds managed
by FMR with respect to which FMR currently has sub-advisory agreements with
either FMR U.K. or FMR Far East, and the net assets of each of these funds,
are indicated in the Table of Average Net Assets and Expense Ratios in
Exhibit 6.
The Directors of FMR U.K. and FMR Far East are Edward C. Johnson 3d,
Chairman, and J. Gary Burkhead, President. Each of the Directors is also a
Trustee of the trust. Messrs. Johnson 3d and Burkhead are currently
officers of the trust and officers or employees of FMR U.K. and FMR Far
East. Messrs. Johnson 3d and Burkhead are stockholders of FMR Corp. The
affiliations of Messrs. Johnson 3d and Burkhead are described in Proposal
1. The principal business address of the Directors and FMR U.K. and FMR Far
East is 82 Devonshire Street, Boston, Massachusetts.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in its
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR will
consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions. Commissions for foreign investments
traded on foreign exchanges generally will be higher than for U.S.
investments traded on domestic exchanges and may not be subject to
negotiation.
Each fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
funds and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Brokerage Services. Ltd. (FBSL), subsidiaries of
FMR Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except in accordance with
SEC regulations. Pursuant to such regulations, the Board of Trustees has
approved a written agreement that permits FBSI to effect portfolio
transactions on national securities exchanges and to retain compensation in
connection with such transactions. For the fiscal years ended July 31,
1993, 1992, and 1991, the funds paid no brokerage commissions.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
funds and review the commissions paid by each fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to that fund.
Each fund's annual portfolio turnover rate for the fiscal years ended July
31, 1993 and 1992 are represented in the table below.
Annual Portfolio Turnover Rates
1993 1992
Spartan Limited Maturity Government Fund 324% 330%
Fidelity Mortgage Securities Portfolio 278% 146%
Fidelity Ginnie Mae Portfolio 259% 114%
For Spartan Limited Maturity Government Fund, the fund's turnover rates
were high due to a large volume of shareholder purchase orders, short-term
interest rate volatility, and other special market conditions. FMR expects
the turnover rate to be substantially lower under more stable conditions.
However, FMR anticipates that the fund's turnover rate may be in excess of
100% in future years, which is greater than that of most other investment
companies, including those that emphasize current income as a basic policy.
For Fidelity Mortgage Securities Portfolio and Fidelity Ginnie Mae
Portfolio, the investment activities described herein are likely to result
in the funds engaging in a considerable amount of trading of securities
held for less than one year. Accordingly, it can be expected that the funds
will have a higher turnover rate, and thus a higher incidence of short-term
capital gains taxable as ordinary income, than might be expected from
investment companies that invest substantially all of their funds on a
long-term basis.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by each fund on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine, in the exercise of their business
judgment, whether it would be advisable for a fund to seek such recapture.
Although the Trustees and officers of the funds are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases, this system could have a detrimental
effect on the price or value of a security as far as the funds are
concerned. In other cases, however, the ability of the funds to participate
in volume transactions will produce better executions and prices for each
fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the funds outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
(SPARTAN LIMITED MATURITY GOVERNMENT FUND)
Fidelity Service Co. (FSC) performs transfer agency, dividend disbursing,
and shareholder servicing functions for the fund, the cost s of which are
borne by FMR pursuant to its management contract with the fund. FSC also
calculates the fund's net asset value (NAV) and dividends, maintains its
general accounting records, and administers the fund's securities lending
program. The cost of these services also borne by FMR pursuant to its
management contract with the fund.
Prior to December 1, 1990 ( the effective date of the current management
contract), the trust maintained an agreement with FSC on behalf of the fund
for transfer agent and pricing and bookkeeping services. Pursuant to the
trust's contract with FSC effective June 1, 1989, the fund paid FSC an
annual fee of $25.08 per basic retail account with a balance of $2,000 or
more, $7.69 per basic retail account with a balance of less than $2,000,
and a supplemental activity charge of $5.49 for monetary transactions.
These fees and charges were subject to annual cost escalation based on
postal rate changes and changes in wage and price levels as measured by the
National Consumer Price Index for Urban Areas. With respect to certain
institutional client master accounts, the fund paid FSC a per-account and
monetary transaction charges of $65 and $14,respectively, depending on the
nature of services provided. Fees for certain institutional retirement plan
accounts are based on the net assets of all such accounts in the fund.
The transfer agent fees paid by the fund to FSC for the fiscal period
ended July 31, 1991 was $94,871.
The June 1, 1989 contract also provided that FSC would perform the
calculations necessary to determine the fund's NAV and dividends and
maintain the fund's accounting records. The fee arrangement provided for an
annual base rate (ranging from $40,000 to $200,000), based on the fund's
average net assets; transaction fees charged for various portfolio
transactions; and reimbursements for related out-of-pocket expenses.
Transaction fees ranged from $5 to $40 for each portfolio transaction,
depending on the type of transaction, and were adjusted to reflect labor
cost increases. For the fiscal year ended July 31, 1991 FSC received
$30,706 from the fund for pricing and bookkeeping services (including
reimbursements for related out-of-pocket expenses).
The fund has a distribution agreement with Fidelity Distributors
Corporation (FDC), a Massachusetts corporation organized on July 18, 1960.
FDC is a broker-dealer registered under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers, Inc. The
distribution agreement calls for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of each
fund, which are continuously offered at net asset value. Promotional and
administrative expenses in connection with the offer and sale of shares are
paid by FMR.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
(FIDELITY MORTGAGE SECURITIES PORTFOLIO
AND FIDELITY GINNIE MAE PORTFOLIO)
FSC is transfer, dividend disbursing, and shareholders' servicing agent
for the funds. Under each fund's contract with FSC, the fund pays an annual
fee of $25.50 per basic retail account with a balance of $5,000 or more,
$15.00 per basic retail account with a balance of less than $5,000, and a
supplemental activity charge of $5.61 for monetary transactions. These fees
and charges are subject to annual cost escalation based on postal rate
changes and changes in wage and price levels as measured by the National
Consumer Price Index for Urban Areas. With respect to certain institutional
client master accounts, each fund pays FSC a per-account fee of $95.00 and
monetary transaction charges of $20.00 and $17.50, depending on the nature
of services provided. With respect to certain broker-dealer master
accounts, each fund pays FSC a per account fee of $30 and a charge of $6
for monetary transactions. Fees for certain institutional retirement plan
accounts are based on the net assets of all such accounts in a fund.
Under each fund's contract, FSC pays out-of-pocket expenses associated
with providing transfer agent services. In addition, FSC bears the expense
of typesetting, printing, and mailing prospectuses, statements of
additional information, and all other reports, notices, and statements to
shareholders, with the exception of proxy statements.
The transfer agent fees paid to FSC by each fund for the fiscal periods
ended July 31, 1993, 1992, and 1991 are shown in the table below.
1993 1992 1991
Fidelity Mortgage Securities Portfolio $ 935,000 $ 943,000 $ 860,000
Fidelity Ginnie Mae Portfolio 2,313,000 2,165,000 1,721,000
The trust's contract with FSC also provides that FSC will perform the
calculations necessary to determine each fund's net asset value per share
and dividends and maintain each fund's accounting records. Prior to July 1,
1991, the annual fee for these pricing and bookkeeping services was based
on two schedules: one pertaining to each fund's average net assets, and one
pertaining to the type and number of transactions the funds made. The fee
rates in effect as of July 1, 1991 are based on each fund's average net
assets, specifically, .04% for the first $500 million of average net assets
and .02% for average net assets in excess of $500 million. The fee is
limited to a minimum of $45,000 and a maximum of $750,000 per year.
For fiscal 1993, 1992, and 1991, the fees paid by to FSC for pricing and
bookkeeping services (including related out-of-pocket expenses) are shown
in the following table.
1993 1992 1991
Fidelity Mortgage Securities Portfolio $ 192,000 $ 185,000 $ 227,000
Fidelity Ginnie Mae Portfolio 346,000 310,000 343,000
FSC also receives fees for administering each fund's securities lending
program. There were no fees paid by either fund during fiscal 1993, 1992,
and 1991.
Each fund has a distribution agreement with Fidelity Distributors
Corporation (FDC), a Massachusetts corporation organized on July 18, 1960.
FDC is a broker-dealer registered under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers, Inc. The
distribution agreement calls for FDC to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of each
fund, which are continuously offered at net asset value. Promotional and
administrative expenses in connection with the offer and sale of shares are
paid by FMR.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The trust does not hold annual shareholder meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent
shareholder meeting should send their written proposals to the Secretary of
the Trust, 82 Devonshire Street, Boston, Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the trust, in care of Fidelity Service Co., P.O. Box 789,
Boston, Massachusetts 02102, whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of
copies of the Proxy Statement and Annual Reports you wish to receive in
order to supply copies to the beneficial owners of the respective shares.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
[TO BE UPDATED]
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1993
(UNAUDITED)
(IN THOUSANDS)
________
ASSETS
Cash and cash equivalents $ 117
Management fees receivable 94,523
Managed funds (market value $78,836) 69,808
Property and equipment, net 112,898
Deferred income taxes 15,389
Other investments 3,209
Prepaid expenses and other assets 5,741
Prepaid income taxes 177
Total Assets $ 301,862
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to mutual funds $ 10,946
Accounts payable and accrued expenses 83,481
Payable to parent company 116,832
Other liabilities 2,571
Total Liabilities 213,830
Stockholder's equity:
Common stock, $.30 par value;
authorized 50,000 shares;
issued and outstanding
26,500 shares 8
Additional paid-in capital 38,824
Retained earnings 49,200
Total Stockholder's Equity 88,032
Total Liabilities and Stockholder's Equity $ 301,862
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(UNAUDITED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fidelity Management & Research Company and Subsidiaries (the Company)
provide investment management and advisory services and other services
principally for the Fidelity Investments Family of Funds. The Company also
provides computer support and systems development services to affiliated
companies.
PRINCIPLES OF CONSOLIDATION
The consolidated statement of financial condition includes the accounts of
Fidelity Management & Research Company and its wholly-owned
subsidiaries. All intercompany accounts have been eliminated.
INVESTED ASSETS
Managed funds investments (consisting primarily of Fidelity Mutual Funds)
are carried at the lower of aggregate cost or market. Other invested assets
consist primarily of an investment in a limited partnership which is
carried at cost. Certain restrictions exist with respect to the sale or
transfer of this investment to third parties. For managed funds investments
and other securities, fair value is determined by the quoted market price
except in the case of restricted investments which are valued based on
management's assessment of fair value. When the Company has determined that
an impairment, which is deemed other than temporary, in the market or fair
value of an invested asset has occurred, the carrying value of the
investment is reduced to its net realizable value.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp. Deferred income taxes are allocated to the Company by
FMR Corp. as a direct charge (credit) and arise due to the differences in
the timing of recognition of certain items of income and expense for tax
and financial reporting purposes.
In 1993, the Company adopted the Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (the Statement). The principles of the Statement were applied
retroactively, and did not have a material affect on the Company's
consolidated financial position.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(UNAUDITED)
(CONTINUED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of furniture and equipment is computed over the
estimated useful lives of the related assets, which are principally three
to five years, using the straight-line method. Leasehold improvements are
amortized over the lesser of their economic useful lives or the period of
the lease. Maintenance and repairs are charged to operations when incurred.
Renewals and betterments of a nature considered to materially extend the
useful life of the assets are capitalized.
PENSION AND PROFIT SHARING PLANS
The Company participates in FMR Corp.'s noncontributory defined benefit
pension plan covering all of its eligible employees. There are no
statistics available for the actuarial data of this separate company.
The Company also participates in FMR Corp.'s defined contribution profit
sharing and retirement plans covering substantially all eligible employees.
B. PROPERTY AND EQUIPMENT, NET
At September 30, 1993, property and equipment, at cost, consists of (in
thousands):
Furniture $ 1,853
Equipment (principally computer related) 276,647
Leasehold improvements 5,859
284,359
Less: Accumulated depreciation and amortization 171,461
$ 112,898
C. TRANSACTIONS WITH AFFILIATED COMPANIES
In connection with its operations, the Company provides services to and
obtains services from affiliated companies. Transactions related to these
services are settled, in the normal course of business, through an
intercompany account with the Company's parent, FMR Corp. The terms of
these transactions may not be the same as those which would otherwise exist
or result from agreements and transactions among unrelated parties.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(UNAUDITED)
(CONTINUED)
________
D. TRANSFER OF SUBSIDIARY
On March 1, 1993, a significant subsidiary of the Company, Fidelity
Investments Institutional Services Company, Inc. was transferred to the
Company's parent. As of March 1, 1993, this subsidiary had net worth and
total assets of approximately $53,000,000, and $70,000,000, respectively.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
[TO BE UPDATED]
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1993
(UNAUDITED)
ASSETS
Cash $ 19,146
Investments (market value $603,714) 555,702
Furniture and equipment, net of
accumulated depreciation of $10,582 764
Prepaid expenses and other assets 143,499
Receivable from parent company 30,491
Total Assets $ 749,602
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Payable to affiliate $ 50,700
Income taxes payable 109,967
Total Liabilities 160,667
Stockholder's equity:
Common stock, $1, par value;
authorized 300,000 shares;
issued and outstanding 100 shares 100
Additional paid-in capital 900
Retained earnings 587,935
Total Stockholder's Equity 588,935
Total Liabilities and Stockholder's Equity $ 749,602
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
Fidelity Management & Research (Far East) Inc. (the Company) is a
wholly-owned subsidiary of Fidelity Management & Research Company (the
parent). The Company provides investment research advice under a
subadvisory agreement with its parent.
The Company is a registered investment advisor and receives fees from its
parent for the services provided. Intercompany transactions are settled
during the normal course of business.
INVESTMENTS
Investments consist of shares held in a Fidelity mutual fund and are
carried at the lower of cost or market. The fair value of investments is
equal to the quoted market price.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives of the related
assets, which vary from three to five years, using the straight-line
method. Maintenance and repairs are charged to operations when incurred.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp., the parent company of Fidelity Management &
Research Company. The Company is assessed a charge by FMR Corp. at the
higher of the U.S. statutory income tax rate or the applicable foreign
statutory income tax rates based upon its pretax accounting income adjusted
for permanent book/tax differences, if any.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1993
(UNAUDITED)
________
ASSETS
Investments at lower of cost or market
(market value $3,023,991) $ 2,482,897
Equipment, net of accumulated depreciation of $693,466 713,873
Accounts receivable from parent 3,129,092
Total Assets $ 6,325,862
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Subordinated loan $ 1,608,100
Accounts payable to affiliate 1,923,816
Income taxes payable 181,225
Other Liabilities 130
Total Liabilities 3,713,271
Stockholder's Equity:
Common stock, $1, par value;
authorized 300,000 shares;
issued and outstanding 100 shares 100
Additional paid-in capital 900
Retained earnings 2,611,591
Total Stockholder's Equity 2,612,591
Total Liabilities and Stockholder's Equity $ 6,325,862
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF REPORTING
The financial statements are presented in accordance with United States
generally accepted accounting principles. The functional and reporting
currency for Fidelity Management & Research (U.K.) Inc. (the Company)
is the U.S. dollar.
BUSINESS
The Company is a wholly-owned subsidiary of Fidelity Management &
Research Company (the parent). The Company is a registered investment
advisor and provides research and investment advisory services under
subadvisory agreements with its parent. The Company also provides research
advice to the parent and an affiliate pursuant to a research joint venture
agreement.
REVENUE RECOGNITION
Fees earned from management and investment advisory services provided to
mutual funds are recognized as earned and shared equally with the parent.
Research joint venture fees are charged to the parent and an affiliate
based on a cost plus fee arrangement. Intercompany transactions are settled
during the normal course of business. Gains and losses from the sale of
invested assets are computed on a specific identified cost basis.
INVESTMENTS
Investments consist of shares held in Fidelity mutual funds and are carried
at the lower of aggregate cost or market. The fair value of investments is
equal to the quoted market price.
EQUIPMENT
Equipment is stated at cost less accumulated depreciation. Depreciation is
computed over the estimated useful lives of the related assets, which vary
from three to five years, using the straight-line method. Maintenance and
repairs are charged to operations when incurred.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
[TO BE UPDATED]
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
SUBORDINATED LOAN
The Company has a subordinated loan payable to its parent and due on March
31, 1994. The loan is subordinated in all respects to the rights of senior
creditors. Interest is payable annually at a rate equal to LIBOR on the
date of the agreement. Repayment or modification of this loan is subject to
regulatory approval.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp., the parent company of Fidelity Management &
Research Company. The Company is assessed a charge by FMR Corp. at the
higher of the U.S. statutory income tax rate or the applicable foreign
statutory income tax rate based upon its pretax accounting income adjusted
for permanent book/tax differences, if any.
B. NET CAPITAL REQUIREMENT:
The Company is subject to certain financial regulatory resource rules which
require the Company to maintain a certain level of net capital (as
defined). At September 30, 1993, the minimum net capital requirement of
approximately $425,000 has been satisfied by the Company.
The language to be added to the current contract is underlined; the
language to be deleted is set forth in [brackets].
EXHIBIT 1
FORM OF MANAGEMENT CONTRACT
MANAGEMENT CONTRACT
between
FIDELITY INCOME FUND:
FIDELITY MORTGAGE SECURITIES PORTFOLIO
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
[AGREEMENT] MODIFICATION made this [29th day of September 1989] 1st day
of ______ 1994, by and between Fidelity Income Fund, a Massachusetts
business trust which may issue one or more series of shares of beneficial
interest (hereinafter called the "Fund"), on behalf of Fidelity Mortgage
Securities Portfolio (hereinafter called the "Portfolio"), and Fidelity
Management & Research Company, a Massachusetts corporation (hereinafter
called the "Adviser").
Required authorization and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby
consent, pursuant to Paragraph 6 of the existing Management Contract dated
September 29, 1989, to a modification of said Contract in the manner set
forth below. The Modified Management Contract shall when executed by duly
authorized officers of the Fund and the Adviser, take effect on the later
of August 1, 1994 or the first day of the month following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the
other accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Trustees of
the Fund shall periodically review the commissions paid by the Portfolio to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee [Rate] and an Individual
Fund Fee [Rate].
(a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the [charter of each investment company] fund's
Declaration of Trust or other organizational document) determined as of the
close of business on each business day throughout the month. The Group Fee
Rate shall be determined on a cumulative basis pursuant to the following
schedule:
Average Net Assets Annualized Fee Rate (for each level)
$0 - 3 billion .3700%
3 - 6 .3400
6 - 9 .3100
9 - 12 .2800
12 - 15 .2500
15 - 18 .2200
18 - 21 .2000
21 - 24 .1900
24 - 30 .1800
30 - 36 .1750
36 - 42 .1700
42 - 48 .1650
48 - 66 .1600
66 - 84 .1550
[Over 84] [.15]
84-120 .1500
120-174 .1450
174-228 .1400
228-282 .1375
282-336 .1350
Over 336 .1325
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be .30%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute the
Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate
shall be applied to the average of the net assets of the Portfolio
(computed in the manner set forth in the Fund's Declaration of Trust or
other organizational document [of the Fund]) determined as of the close of
business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
business days during which it is in effect and the fee is computed upon the
average net assets for business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses [other
than those expressly stated to be payable by the Adviser hereunder,] which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until [May 31,
1990] June 30, 1995 and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
[SIGNATURE LINES OMITTED]
The language to be added to the current contract is underlined; the
language to be deleted is set forth in [brackets].
EXHIBIT 2
FORM OF MANAGEMENT CONTRACT
MANAGEMENT CONTRACT
between
FIDELITY INCOME FUND:
FIDELITY GINNIE MAE PORTFOLIO
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of [December, 1992] ______, 1994, by and
between Fidelity Income Fund, a Massachusetts business trust which may
issue one or more series of shares of beneficial interest (hereinafter
called the "Fund"), on behalf of Fidelity Ginnie Mae Portfolio
(hereinafter called the "Portfolio"), and Fidelity Management &
Research Company, a Massachusetts corporation (hereinafter called the
"Adviser").
Required authorization and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and [Fidelity
Management & Research Company] the Adviser hereby consent, pursuant to
Paragraph 6 of the existing Management Contract dated [September 29, 1989]
Modified December 1, 1992, to a modification of said Contract in the manner
set forth below. The Modified Management Contract shall when executed by
duly authorized officers of the Fund and the Adviser, take effect on the
later of [December 1, 1992] August 1, 1994 or the first day of the month
following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser [, at its own expense,] shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable
in relation to the benefits received. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Adviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee [Rate] and an Individual
Fund Fee [Rate].
(a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the [Charter of each investment company] fund's
Declaration of Trust or other organizational document) determined as of the
close of business on each business day throughout the month. The Group Fee
Rate shall be determined on a cumulative basis pursuant to the following
schedule:
Average Net Assets Annualized Fee Rate (for each level)
$0 - 3 billion .3700%
3 - 6 .3400
6 - 9 .3100
9 - 12 .2800
12 - 15 .2500
15 - 18 .2200
18 - 21 .2000
21 - 24 .1900
24 - 30 .1800
30 - 36 .1750
36 - 42 .1700
42 - 48 .1650
48 - 66 .1600
66 - 84 .1550
84-120 .1500
120-174 .1450
[Over 174] [.140]
174-228 .1400
228-282 .1375
282-336 .1350
Over 336 .1325
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.30%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute the
Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate
shall be applied to the average of the net assets of the Portfolio
(computed in the manner set forth in the Fund's Declaration of Trust or
other organizational document [of the Fund]) determined as of the close of
business on each business day throughout the month.
(c) In case of termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
business days during which it is in effect and the fee is computed upon the
average net assets for business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses [other
than those expressly stated to be payable by the Adviser hereunder,] which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until [May 31,
1993]) June 30, 1995 and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
[SIGNATURE LINES OMITTED]
EXHIBIT 3
The proper name of each fund - Spartan Limited Maturity Government Fund,
Fidelity Mortgage Securities Portfolio, and Fidelity Ginnie Mae Portfolio -
will be inserted in each respective fund's Contract where indicated by
(Name of Portfolio).
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
FIDELITY INCOME FUND ON BEHALF OF (NAME OF PORTFOLIO)
AGREEMENT made this 1st day of August 1, 1994, by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor"); Fidelity Management & Research (Far
East) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity Income
Fund, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on behalf of
(Name of Portfolio) (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor shall
place all orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Advisor determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Sub-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 105% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until June 30, 1995 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 4
The proper name of each fund - Spartan Limited Maturity Government Fund,
Fidelity Mortgage Securities Portfolio, and Fidelity Ginnie Mae Portfolio -
will be inserted in each respective fund's Contract where indicated by
(Name of Portfolio).
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
FIDELITY INCOME FUND ON BEHALF OF (NAME OF PORTFOLIO)
AGREEMENT made this1st day of August, 1994, by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor"); Fidelity Management & Research
(U.K.) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity Income
Fund, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on behalf
of (Name of Portfolio) (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor shall
place all orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Advisor determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Sub-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 110% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until June 30, 1995 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
[SIGNATURE LINES OMITTED]
EXHIBIT 5
The following table illustrates the effect that approval of proposal 11
will have on Fidelity Mortgage Securities Portfolio's investment policies.
Fundamental policies can be changed only with the consent of shareholders,
while non-fundamental policies can be changed or eliminated without
shareholder approval. Please refer to the proposal itself for the details
of these changes.
Current Fundamental Policies Proposed Non-Fundamental
Investment Policies
1. Under normal circumstances, the fund Same
will have at least 65% of its total assets
invested in mortgage-related securities.
2. Under normal circumstances, the fund The fund currently intends to
will invest substantially all of its assets in invest 65% of its assets in
mortgage-related securities rated A or securities rated equal to
better by Moody's or S&P and unrated Baa/BBB or better by Moody's
mortgage-related securities that are or S&P or, if unrated,
determined by FMR to be of equivalent determined by FMR to be of
quality. equivalent quality.
3. At times the fund may invest in The fund may invest up to 35%
mortgage-related securities that do not of its assets in securities rated B
meet the fund's quality standards if they are or better by Moody's or
consistent with the fund's investment S&P or, if unrated,
objective and policies, but at no time can determined by FMR to be of
the value of such instruments exceed 20% equivalent quality.
of its total assets.
4. When market conditions warrant, we FMR normally invests the
may invest without limit in short-term debt fund's assets according to its
obligations such as repurchase investment strategy. When FMR
agreemeents, bank obligations and considers it appropriate for
commercial paper for temporary defensive defensive purposes, however, it
purposes. may temporarily invest
substantially in short-term,
high-quality instruments.
5. FMR will seek high current income by Listing of specific security types
investing primarily in mortgage-related are eliminated. The fund will
securities such as: have the ability to invest in these
-Ginnie Maes securities, as well as futures and
-Fannie Maes options, and securities of all
-Freddie Macs types.
-CMO's
-Mortgage-Backed Securities
-Debt obligations secured by
mortgages on commercial real estate or
residential properties.
The fund may also invest in:
-Securities issued or guaranteed by the
U.S. government, its agencies or
instrumentalities
-Short-term debt obligations including
repurchase agreements, certificates of
deposit, bankers' acceptances, and
commercial paper
-Various instruments and transactions
used to hedge against fluctuations in the
value of our investments, including put and
call options, interest rate futures contracts,
and forward commitments.
FMR may also invest in new types of
mortgage-related securities if it determines
that they are consistent with the fund's
objective and policies.
These fundamental investment policies are supplemented by the fund's
fundamental investment limitations, which discuss such matters as portfolio
diversification and the fund's capabilities with respect to borrowing and
lending money and securities. Proposed changes to certain of the fund's
fundamental investment limitations are discussed in proposals 12, 14
through 19, 21, and 23 through 25.
EXHIBIT 6
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS (A)
[TO BE UPDATED]
RATIO OF RATIO OF NET
ADVISORY FEES ADVISORY FEES
TO AVERAGE TO AVERAGE RATIO OF
AVERAGE NET ASSETS NET ASSETS EXPENSES TO
INVESTMENT FISCAL NET ASSETS PURSUANT TO PAID AVERAGE NET
OBJECTIVE AND FUND YEAR END (A) (MILLIONS) ADVISORY CONTRACT TO FMR
(B) ASSETS (B)
GROWTH AND INCOME
Advisor Equity
Portfolio Income (3) 11/30/92**$ 0.5 0.50%(dagger) 0.50%(dagger)
1.55%(dagger)
Advisor Institutional
Equity Portfolio
Income(3) 11/30/92 147.1 0.50 0.42 0.71
Convertible Securities (3) 11/30/92 254.1 0.54 0.54 0.96
Equity Income II (3) 11/30/92 1,045.7 0.53 0.53 1.01
Variable Insurance
Products:
Equity-Income 12/31/92 408.0 0.53 0.53 0.65
Equity-Income (3) 1/31/93 4,656.2 0.37 0.37 0.67
Real Estate (3) 1/31/93 98.3 0.64 0.64 1.16
Utilities Income (3) 1/31/93 787.5 0.53 0.53 0.87
U.S. Equity Index 2/28/93# 1,482.3 0.28(dagger) -- 0.28(dagger)
Market Index 4/30/93 265.2 0.45 0.44 0.44
Fidelity Fund (3) 6/30/93# 1,398.0 0.42(dagger) 0.42(dagger) 0.66(dagger)
Balanced (3) 7/31/93 2,154.5 0.53 0.53 0.93
Dividend Growth (3) 7/31/93** 9.2 0.62(dagger) -- 2.50(dagger)
Global Balanced (1) 7/31/93** 35.7 0.77(dagger) 0.77(dagger) 2.12(dagger)
Growth & Income 7/31/93 5,195.4 0.53 0.53 0.83
Puritan (3) 7/31/93 6,319.2 0.47 0.47 0.74
Advisor Income &
Growth 10/31/93 870.1 0.53 0.53 1.51
International Growth
& Income (2) 10/31/93 301.5 0.77 0.77 1.52
ASSET ALLOCATION
Variable Insurance
Products II:
Asset Manager (3) 12/31/92 418.2 0.73 0.73 0.91
Index 500 12/31/92** 12.3 0.28(dagger) -- 0.28(dagger)
Asset Manager 9/30/93 4,704.2 0.72 0.72 1.09
Asset Manager: Growth(3) 9/30/93 566.0 0.73 0.63 1.19
Asset Manager: Income(3) 9/30/93 79.1 0.44 -- 0.65
GROWTH
RATIO OF RATIO OF NET
ADVISORY FEES ADVISORY FEES
TO AVERAGE TO AVERAGE RATIO OF
AVERAGE NET ASSETS NET ASSETS EXPENSES
TO
INVESTMENT FISCAL NET ASSETS PURSUANT TO PAID AVERAGE
NET
OBJECTIVE AND FUND YEAR END (A) (MILLIONS) ADVISORY CONTRACT TO FMR
(B)
ASSETS (B)
Advisor Equity
Portfolio Growth(3) 11/30/92** 8.5 0.74(dagger) 0.74(dagger)
1.64(dagger)
Advisor Institutional
Equity Portfolio
Growth(3) 11/30/92 $ 129.3 0.67% 0.67% 0.98%
Emerging Growth (3) 11/30/92 595.4 0.70 0.70 1.09
Growth Company (3) 11/30/92 1,436.5 0.74 0.74 1.09
Retirement Growth (3) 11/30/92 1,918.0 0.71 0.71 1.02
Congress Street 12/31/92 64.4 0.45 0.45 0.62
Contrafund (3) 12/31/92 1,339.1 0.51 0.51 0.87
Exchange 12/31/92 185.7 0.54 0.54 0.58
Trend (3) 12/31/92 920.0 0.32 0.32 0.56
Variable Insurance
Products:
Growth 12/31/92 520.9 0.63 0.63 0.75
Overseas (2) 12/31/92 157.0 0.78 0.78 1.14
Select Portfolios:
Air Transportation (3) 2/28/93# 11.3 0.64(dagger) 0.48(dagger)
2.48(dagger)
American Gold 2/28/93# 160.2 0.64(dagger) 0.64(dagger) 1.59(dagger)
Automotive (3) 2/28/93# 106.1 0.64(dagger) 0.64(dagger) 1.57(dagger)
Biotechnology (3) 2/28/93# 752.3 0.64(dagger) 0.64(dagger) 1.50(dagger)
Broadcast and Media (3) 2/28/93# 13.9 0.64(dagger) 0.59(dagger)
2.49(dagger)
Brokerage and Investment
Management (3) 2/28/93# 18.0 0.64(dagger) 0.64(dagger) 2.21(dagger)
Chemicals (3) 2/28/93# 35.1 0.64(dagger) 0.64(dagger) 1.89(dagger)
Computers (3) 2/28/93# 38.3 0.64(dagger) 0.64(dagger) 1.81(dagger)
Construction and
Housing (3) 2/28/93# 22.1 0.64(dagger) 0.64(dagger) 2.02(dagger)
Consumer Products (3) 2/28/93# 7.5 0.64(dagger) -- 2.47(dagger)
Defense and
Aerospace (3) 2/28/93# 1.3 0.64(dagger) -- 2.48(dagger)
Developing
Communications (3) 2/28/93# 51.3 0.64(dagger) 0.64(dagger) 1.88(dagger)
Electric Utilities (3) 2/28/93# 30.6 0.64(dagger) 0.64(dagger)
1.70(dagger)
Electronics (3) 2/28/93# 47.1 0.64(dagger) 0.64(dagger) 1.69(dagger)
Energy (3) 2/28/93# 78.7 0.64(dagger) 0.64(dagger) 1.71(dagger)
Energy Service (3) 2/28/93# 52.3 0.64(dagger) 0.64(dagger) 1.76(dagger)
Environmental
Services (3) 2/28/93# 62.5 0.64(dagger) 0.64(dagger) 1.99(dagger)
Financial Services (3) 2/28/93# 119.9 0.64(dagger) 0.64(dagger)
1.54(dagger)
Food and Agriculture (3) 2/28/93# 109.1 0.64(dagger) 0.64(dagger)
1.67(dagger)
Health Care (3) 2/28/93# 782.6 0.64(dagger) 0.64(dagger) 1.46(dagger)
Home Finance (3) 2/28/93# 138.3 0.64(dagger) 0.64(dagger) 1.55(dagger)
Industrial Equipment (3) 2/28/93# 6.1 0.64(dagger) -- 2.49(dagger)
Industrial Materials (3) 2/28/93# $ 25.0 0.64%(dagger) 0.64%(dagger)
2.02%(dagger)
Insurance (3) 2/28/93# 12.3 0.64(dagger) 0.61(dagger) 2.49(dagger)
Leisure (3) 2/28/93# 39.5 0.64(dagger) 0.64(dagger) 1.90(dagger)
Medical Delivery (3) 2/28/93# 126.4 0.64(dagger) 0.64(dagger)
1.77(dagger)
Natural Gas (3) 2/28/94** 9.1 0.64(dagger) -- 2.42(dagger)
Paper and Forest
Products (3) 2/28/93# 17.5 0.64(dagger) 0.64(dagger) 2.21(dagger)
Precious Metals and
Minerals (3) 2/28/93# 127.8 0.64(dagger) 0.64(dagger) 1.73(dagger)
Regional Banks (3) 2/28/93# 193.5 0.64(dagger) 0.64(dagger) 1.49(dagger)
Retailing (3) 2/28/93# 63.1 0.64(dagger) 0.64(dagger) 1.77(dagger)
Software and Computer
Services (3) 2/28/93# 113.6 0.64(dagger) 0.64(dagger) 1.64(dagger)
Technology (3) 2/28/93# 115.2 0.64(dagger) 0.64(dagger) 1.64(dagger)
Telecommunications (3) 2/28/93# 95.0 0.64(dagger) 0.64(dagger)
1.74(dagger)
Transportation (3) 2/28/93# 4.4 0.64(dagger) -- 2.48(dagger)
Utilities (3) 2/28/93# 243.9 0.64(dagger) 0.64(dagger) 1.42(dagger)
Magellan (3) 3/31/93 21,506.4 0.75 0.75 1.00
Small Cap Stock 4/30/94** 461.9 0.67(dagger) 0.65(dagger) 1.40
Fidelity Fifty (3) 6/30/94** 18,106.2 0.69(dagger) 0.00(dagger)
2.49(dagger)
Blue Chip Growth 7/31/93 589.5 0.72 0.72 1.25
Low-Priced Stock (3) 7/31/93 2,048.8 0.76 0.76 1.12
OTC Portfolio 7/31/93 1,202.7 0.74 0.74 1.08
Advisor Strategic
Opportunities (3) 9/30/93 219.2 0.54 0.54 1.57
Destiny I 9/30/93# 2,920.5 0.60(dagger) 0.60(dagger) 0.65(dagger)
Destiny II 9/30/93# 1,100.8 0.71(dagger) 0.71(dagger) 0.84(dagger)
Strategic
Opportunities (3) 9/30/93 19.2 0.54 0.54 0.89
Advisor Global
Resources (3) 10/31/93 14.4 0.77 0.77 2.62
Advisor Growth
Opportunities 10/31/93 1,204.5 0.68 0.68 1.64
Advisor Overseas (2) 10/31/93 65.5 0.77 0.77 2.3
Canada (1) 10/31/93 61.1 0.86 0.86 2.00
Capital Appreciation (3) 10/31/93 1,139.1 0.48 0.48 0.86
Disciplined Equity (3) 10/31/93 622.1 0.70 0.70 1.09
Diversified
International (2) 10/31/93 119.1 0.73 0.73 1.47
Emerging Markets (2) 10/31/93 144.4 0.77 0.77 1.91
Europe (1) 10/31/93 488.3 0.64 0.64 1.25
Japan (1) 10/31/93 98.4 0.77 0.77 1.71
Latin America (2) 10/31/93** $ 114.6 0.77%(dagger) 0.77%(dagger)
1.94%(dagger)
Overseas (2) 10/31/93 1,025.1 0.77 0.77 1.27
Pacific Basin (1) 10/31/93 251.2 0.80 0.80 1.59
Southeast Asia (1) 10/31/93** 139.3 0.77(dagger) 0.71(dagger) 2.00(dagger)
Stock Selector (3) 10/31/93 459.7 0.71 0.69 1.10
Value (3) 10/31/93 1,100.8 0.72 0.71 1.11
Worldwide (2) 10/31/93 148.9 0.78 0.78 1.40
New Millennium 11/30/93** 181.1 0.68(dagger) 0.68(dagger) 1.25(dagger)
CURRENCY PORTFOLIOS
Deutsche Mark
Peformance, L.P. 12/31/92 18.6 0.50 0.50 1.29
Sterling
Performance, L.P. 12/31/92 7.3 0.50 -- 1.50
Yen Performance, L.P. 12/31/92 3.9 0.50 -- 1.50
INCOME
Advisor Institutional
Limited Term Bond 11/30/92 227.6 0.42 0.42 0.57
Advisor Limited
Term Bond 11/30/92** 1.0 0.42(dagger) 0.42(dagger) 0.82(dagger)
Institutional Short-
Intermediate
Government 11/30/92 189.3 0.45 0.45 0.45
Global Bond (2) 12/31/92# 300.5 0.72(dagger) 0.72(dagger) 1.37(dagger)
New Markets Income (2) 12/31/93** 54.1 0.71(dagger) 0.24(dagger)
1.25(dagger)
Short-Term World
Income (2) 12/31/92# 563.2 0.62(dagger) 0.59(dagger) 1.20(dagger)
Spartan Bond Strategist 12/31/93** 11.0 .70(dagger) .70(dagger)
.70(dagger)
Variable Insurance
Products:
High Income 12/31/92 150.7 0.52 0.52 0.67
Variable Insurance
Products II:
Investment Grade
Bond 12/31/92 57.8 0.47 0.47 0.76
Spartan Long-Term
Government Bond 1/31/93 78.3 0.65 0.65 0.65
U.S. Bond Index 2/28/93# 104.8 0.32(dagger) -- 0.32(dagger)
Capital & Income (3) 4/30/93 1,771.1 0.54 0.54 0.91
Intermediate Bond (3) 4/30/93 1,434.0 0.32 0.27 0.61
Investment Grade Bond (3) 4/30/93 1,049.6 0.37 0.37 0.68
Short-Term Bond (3) 4/30/93 1,634.8 0.47 0.47 0.77
Spartan Government
Income 4/30/93 $ 491.8 0.65% 0.65% 0.65%
Spartan High Income 4/30/93 470.8 0.70 0.70 0.70
Spartan Short-Intermediate
Government 4/30/93 23.5 0.65 0.02 0.02
The North Carolina Capital
Management Trust:
Term Portfolio 6/30/93 83.4 0.41 0.41 0.41
Ginnie Mae 7/31/93 953.2 0.47 0.47 0.80
Mortgage Securities 7/31/93 428.9 0.47 0.47 0.76
Spartan Limited Maturity
Government 7/31/93 1,653.7 0.65 0.65 0.65
Spartan Ginnie Mae 8/31/93 766.9 0.65 0.41 0.41
Government Securities 9/30/93** 616.6 0.47(dagger) 0.47(dagger)
0.69(dagger)
Short-Intermediate
Government 9/30/93 167.6 0.47 0.18 0.61
Spartan Investment
Grade Bond 9/30/93 59.1 0.65 0.65 0.65
Spartan Short-Term Bond 9/30/93 547.0 0.65 0.20 0.20
Advisor Government
Investment 10/31/93 40.8 0.46 -- 0.68
Advisor High Yield 10/31/93 299.1 0.51 0.51 1.11
Advisor Short Fixed
Income 10/31/93 359.6 0.47 0.47 0.95
MONEY MARKET
Cash Reserves (4) 11/30/92 10,249.7 0.17 0.17 0.48
State and Local Asset
Management Series:
Government Money
Market (4) 11/30/92 1,046.4 0.43 0.43 0.43
Variable Insurance
Products:
Money Market (4) 12/31/92 295.1 0.17 0.17 0.24
Select-Money Market (4) 2/28/93# 492.5 0.14(dagger) 0.14(dagger)
0.56(dagger)
Institutional Cash:
Domestic Money
Market (4) 3/31/93 768.4 0.20 0.12 0.18
Money Market (4) 3/31/93 5,033.1 0.20 0.15 0.18
U.S. Government (4) 3/31/93 6,305.4 0.20 0.14 0.18
U.S. Treasury (4) 3/31/93 2,683.0 0.20 0.15 0.18
U.S. Treasury II (4) 3/31/93 7,014.6 0.20 0.15 0.18
Spartan Money Market (4) 4/30/93 4,841.1 0.30 0.30 0.30
Spartan U.S. Government
Money Market (4) 4/30/93 $ 1,204.8 0.55% 0.45% 0.45%
The North Carolina
Capital Management Trust:
Cash Portfolio (4) 6/30/93 1,538.3 0.38 0.38 0.39
Daily Money Fund:
Capital Reserves:
Money Market (4) 7/31/93 443.3 0.50 0.31 0.95
U.S. Government
Money Market (4) 7/31/93 269.5 0.50 0.38 0.95
Money Market (4) 7/31/93 1,554.7 0.50 0.50 0.61
U.S. Treasury (4) 7/31/93 2,841.7 0.50 0.50 0.57
U.S. Treasury
Income (4) 7/31/93 1,166.9 0.42 0.20 0.20
Spartan U.S. Treasury
Money Market (4) 7/31/93 2,138.9 0.55 0.42 0.42
Daily Income Trust (4) 8/31/93 2,302.8 0.30 0.30 0.57
Money Market Trust:
Domestic Money
Market (4) 8/31/93 690.3 0.42 0.42 0.42
Retirement Government
Money Market (4) 8/31/93 1,338.8 0.42 0.42 0.42
Retirement Money
Market (4) 8/31/93 1,661.1 0.42 0.42 0.42
U.S. Government (4) 8/31/93 297.5 0.42 0.42 0.42
U.S. Treasury (4) 8/31/93 181.5 0.42 0.42 0.42
U.S. Government
Reserves (4) 9/30/93 1,139.5 0.43 0.43 0.73
TAX-EXEMPT INCOME
Advisor Institutional
Limited Term
Tax-Exempt 11/30/92 63.5 0.42 0.41 0.66
Advisor Limited
Term Tax-Exempt 11/30/92** 1.1 0.42(dagger) 0.40(dagger) 1.04(dagger)
Connecticut Municipal
Money Market (4) 11/30/92 379.8 0.42 0.26 0.43
High Yield Tax-Free 11/30/92 2,036.2 0.42 0.42 0.57
New Jersey Tax-Free
Money Market (4) 11/30/92 360.5 0.42 0.42 0.64
Spartan Connecticut
Municipal:
High Yield 11/30/92 389.8 0.55 0.55 0.55
Money Market (4) 11/30/92 48.7 0.50 0.02 0.02
Spartan Florida Municipal:
Income 11/30/92** $ 118.4 0.55%(dagger) 0.03%(dagger) 0.03%(dagger)
Money Market (4) 11/30/92** 15.8 0.50(dagger) -- --
Spartan New Jersey
Municipal High Yield 11/30/92 324.6 0.55 0.49 0.51
Aggressive Tax-Free 12/31/92 711.1 0.47 0.47 0.64
Insured Tax-Free 12/31/92 335.7 0.42 0.40 0.63
Limited Term
Municipals 12/31/92 827.3 0.47 0.47 0.64
Michigan Tax-Free:
High Yield 12/31/92 419.6 0.42 0.42 0.61
Money Market (4) 12/31/92 170.1 0.42 0.30 0.49
Minnesota Tax-Free 12/31/92 255.1 0.42 0.42 0.67
Municipal Bond 12/31/92 1,178.4 0.37 0.37 0.49
Ohio Tax-Free:
High Yield 12/31/92 359.3 0.42 0.42 0.61
Money Market (4) 12/31/92 257.0 0.42 0.41 0.58
Spartan Pennsylvania
Municipal:
High Yield 12/31/92 218.9 0.55 0.55 0.55
Money Market (4) 12/31/92 249.3 0.50 0.47 0.47
Massachusetts Tax-Free:
High Yield 1/31/93# 1,215.5 0.42(dagger) 0.42(dagger) 0.55(dagger)
Money Market (4) 1/31/93# 592.0 0.42(dagger) 0.42(dagger) 0.64(dagger)
New York Tax-Free:
High Yield 1/31/93# 429.2 0.42(dagger) 0.42(dagger) 0.61(dagger)
Insured 1/31/93# 338.7 0.42(dagger) 0.42(dagger) 0.61(dagger)
Money Market (4) 1/31/93# 536.3 0.42(dagger) 0.42(dagger) 0.62(dagger)
Spartan Massachusetts
Municipal Money
Market (4) 1/31/93# 316.1 0.50(dagger) 0.17(dagger) 0.17(dagger)
Spartan New York
Municipal:
High Yield 1/31/93# 332.3 0.55(dagger) 0.48(dagger) 0.48(dagger)
Money Market (4) 1/31/93# 454.3 0.50(dagger) 0.50(dagger) 0.50(dagger)
California Tax-Free:
High Yield 2/28/93# 543.5 0.42(dagger) 0.42(dagger) 0.60(dagger)
Insured 2/28/93# 213.4 0.42(dagger) 0.42(dagger) 0.63(dagger)
Money Market (4) 2/28/93# 548.7 0.42(dagger) 0.42(dagger) 0.62(dagger)
Spartan California
Municipal:
High Yield 2/28/93# $ 514.4 0.55%(dagger) 0.40%(dagger) 0.40%(dagger)
Money Market (4) 2/28/93# 894.4 0.50(dagger) 0.30(dagger) 0.30(dagger)
Institutional Tax-
Exempt Cash (4) 5/31/93 2,517.7 0.20 0.14 0.18
Daily Money Fund:
Capital Reserves:
Municipal Money
Market (4) 7/31/93 91.7 0.50 0.22 0.95
Spartan Aggressive
Municipal 8/31/93** 6.4 0.60(dagger) 0.60(dagger) 0.60(dagger)
Spartan Intermediate
Municipal 8/31/93** 82.6 0.55(dagger) - -
Spartan Maryland Municipal
Income 8/31/93** 13.4 0.55(dagger) -- --
Spartan Municipal
Income 8/31/93 869.8 0.55 0.47 0.47
Spartan Municipal
Money Market (4) 8/31/93 1,561.2 0.50 0.27 0.27
Spartan Short-
Intermediate
Municipal 8/31/93# 819.9 0.55(dagger) 0.55(dagger) 0.55(dagger)
Advisor High Income
Municipal 10/31/93 316.4 0.42 0.42 0.92
Daily Tax-Exempt
Money (4) 10/31/93 504.9 0.50 0.50 0.61
Spartan New Jersey
Municipal Money
Market (4) 10/31/93 329.1 0.50 0.44 0.44
Tax-Exempt Money
Market Trust (4) 10/31/93 2,789.6 0.27 0.27 0.49
(a) All fund data are as of the fiscal year end noted in the chart or as of
October 31, 1993, if fiscal year end figures are not yet available. Average
net assets are computed on the basis of average net assets of each fund at
the close of business on each business day throughout its fiscal period.
(b) Reflects reductions for any expense reimbursement paid by or due from
FMR pursuant to voluntary or state expense limitations.
(dagger) Annualized
# Year end changed
** Less than a complete fiscal year
(1) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: Fidelity Management
& Research (U.K.) Inc. (FMR U.K.), Fidelity Management & Research
(Far East) Inc. (FMR Far East), Fidelity Investments Japan Ltd. (FIJ),
Fidelity International Investment Advisors (FIIA), and Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.), with respect
to the fund.
(2) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: FMR U.K., FMR Far
East, FIJ (New Markets Income only), FIIA, and FIIAL U.K., with respect to
the fund.
(3) Fidelity Management & Research Company has entered into
sub-advisory agreements with FMR U.K. and FMR Far East, with respect to the
fund.
(4) Fidelity Management & Research Company has entered into a
sub-advisory agreement with FMR Texas Inc., with respect to the fund.
INC-PXS-594 CUSIP #31617K303 / FUND #452
CUSIP #31617K204 / FUND #040
CUSIP #31617K105 / FUND #015
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 INCOME FUND: SPARTAN LIMITED MATURITY GOVERNMENT FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and _______, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of FIDELITY
INCOME FUND which the undersigned is entitled to vote at the Special
Meeting of Shareholders of the fund to be held at the office of the trust
at 82 Devonshire St., Boston, MA 02109, on July 15, 1994 at 10:45 a.m. and
at any adjournments thereof. All powers may be exercised by a majority of
said proxy holders or substitutes voting or acting or, if only one votes
and acts, then by that one. This Proxy shall be voted on the proposals
described in the Proxy Statement as specified on the reverse side. Receipt
of the Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1993
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
(015, 452, 040 HH)
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To elect the twelve nominees specified below as Trustees: [ ] FOR all nominees [ ] 1.
J. Gary Burkhead, Ralph F. Cox, Phyllis Burke Davis, listed (except as WITHHOLD
Richard J. Flynn, Edward C. Johnson 3d, E. Bradley marked to the contrary authority to
Jones, Donald J. Kirk, Peter S. Lynch, Gerald C. below). vote for all
McDonough, Edward H. Malone, Marvin L. Mann, and nominees.
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).
2. To ratify the selection of Price Waterhouse as FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
independent accountants of the trust.
3. To amend the Declaration of Trust to provide FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
dollar-based voting rights for shareholders of
the trust.
4. To amend the Declaration of Trust regarding FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
shareholder notification of appointment of
Trustees.
5. To amend the Declaration of Trust to provide FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
the fund with the ability to invest all of its assets
in another open-end investment company with
substantially the same investment objective
and policies.
6. To adopt a new fundamental investment policy FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
for the fund permitting it to invest all of its
assets in another open-end investment
company with substantially the same
investment objective and policies.
8. To approve a Sub-Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
FMR Far East for the fund.
9. To approve a Sub-Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ] 9.
FMR U.K. for the fund.
13. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 13.
limitation concerning diversification.
15. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 15.
limitation concerning senior securities.
16. To eliminate the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 16.
investment limitation concerning short sales.
17. To eliminate the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 17.
investment limitation concerning margin
purchases.
18. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 18.
limitation concerning borrowing.
20. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 20.
limitation concerning concentration of its
investments in a single industry.
21. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 21.
limitation concerning real estate.
22. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 22.
limitation concerning commodities.
23. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 23.
limitation concerning lending.
INC-PXC-594 cusip#31617K303/fund#452H
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 INCOME FUND: FIDELITY MORTGAGE SECURITIES PORTFOLIO
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and _______, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of FIDELITY
INCOME FUND which the undersigned is entitled to vote at the Special
Meeting of Shareholders of the fund to be held at the office of the trust
at 82 Devonshire St., Boston, MA 02109, on July 15, 1994 at 10:45 a.m. and
at any adjournments thereof. All powers may be exercised by a majority of
said proxy holders or substitutes voting or acting or, if only one votes
and acts, then by that one. This Proxy shall be voted on the proposals
described in the Proxy Statement as specified on the reverse side. Receipt
of the Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1993
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
(015, 452, 040 HH)
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To elect the twelve nominees specified below as Trustees: [ ] FOR all nominees [ ] 1.
J. Gary Burkhead, Ralph F. Cox, Phyllis Burke Davis, listed (except as WITHHOLD
Richard J. Flynn, Edward C. Johnson 3d, E. Bradley marked to the contrary authority to
Jones, Donald J. Kirk, Peter S. Lynch, Gerald C. below). vote for all
McDonough, Edward H. Malone, Marvin L. Mann, and nominees.
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).
2. To ratify the selection of Price Waterhouse as FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
independent accountants of the trust.
3. To amend the Declaration of Trust to provide FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
dollar-based voting rights for shareholders of
the trust.
4. To amend the Declaration of Trust regarding FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
shareholder notification of appointment of
Trustees.
5. To amend the Declaration of Trust to provide FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
the fund with the ability to invest all of its assets
in another open-end investment company with
substantially the same investment objective
and policies.
6. To adopt a new fundamental investment policy FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
for the fund permitting it to invest all of its
assets in another open-end investment
company with substantially the same
investment objective and policies.
7. To approve an amended management contract FOR [ ] AGAINST [ ] ABSTAIN [ ] 7.
for the fund.
8. To approve a Sub-Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
FMR Far East for the fund.
9. To approve a Sub-Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ] 9.
FMR U.K. for the fund.
10. To eliminate the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 10.
investment policy concerning repurchase
agreements.
11. To eliminate certain of the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 11.
investment policies and replace certain others
with non-fundamental investment policies
12. To adopt a fundamental investment limitation FOR [ ] AGAINST [ ] ABSTAIN [ ] 12.
concerning commodities for the fund.
14. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 14.
limitation concerning diversification.
15. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 15.
limitation concerning senior securities.
16. To eliminate the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 16.
investment limitation concerning short sales.
17. To eliminate the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 17.
investment limitation concerning margin
purchases.
18. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 18.
limitation concerning borrowing.
19. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 19.
limitation concerning underwriting.
21. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 21.
limitation concerning real estate.
23. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 23.
limitation concerning lending.
24. To eliminate the fund's fundamental FOR [ ] AGAINST [ ] ABSTAIN [ ] 24.
investment limitation concerning investment in
other investment companies.
25. To eliminate the fund's fundamental limitation FOR [ ] AGAINST [ ] ABSTAIN [ ] 25.
concerning investing in oil, gas, and mineral
exploration programs.
INC-PXC-594 cusip#31617K204/fund#040H
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 INCOME FUND: FIDELITY GINNIE MAE PORTFOLIO
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and _______, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of FIDELITY
INCOME FUND which the undersigned is entitled to vote at the Special
Meeting of Shareholders of the fund to be held at the office of the trust
at 82 Devonshire St., Boston, MA 02109, on July 15, 1994 at 10:45 a.m. and
at any adjournments thereof. All powers may be exercised by a majority of
said proxy holders or substitutes voting or acting or, if only one votes
and acts, then by that one. This Proxy shall be voted on the proposals
described in the Proxy Statement as specified on the reverse side. Receipt
of the Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1993
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
(015, 452, 040 HH)
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To elect the twelve nominees specified below as Trustees: [ ] FOR all nominees [ ] 1.
J. Gary Burkhead, Ralph F. Cox, Phyllis Burke Davis, listed (except as WITHHOLD
Richard J. Flynn, Edward C. Johnson 3d, E. Bradley marked to the contrary authority to
Jones, Donald J. Kirk, Peter S. Lynch, Gerald C. below). vote for all
McDonough, Edward H. Malone, Marvin L. Mann, and nominees.
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).
2. To ratify the selection of Price Waterhouse as FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
independent accountants of the trust.
3. To amend the Declaration of Trust to provide FOR [ ] AGAINST [ ] ABSTAIN [ ] 3.
dollar-based voting rights for shareholders of
the trust.
4. To amend the Declaration of Trust regarding FOR [ ] AGAINST [ ] ABSTAIN [ ] 4.
shareholder notification of appointment of
Trustees.
5. To amend the Declaration of Trust to provide FOR [ ] AGAINST [ ] ABSTAIN [ ] 5.
the fund with the ability to invest all of its assets
in another open-end investment company with
substantially the same investment objective
and policies.
6. To adopt a new fundamental investment policy FOR [ ] AGAINST [ ] ABSTAIN [ ] 6.
for the fund permitting it to invest all of its
assets in another open-end investment
company with substantially the same
investment objective and policies.
7. To approve an amended management contract FOR [ ] AGAINST [ ] ABSTAIN [ ] 7.
for the fund.
8. To approve a Sub-Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ] 8.
FMR Far East for the fund.
9. To approve a Sub-Advisory Agreement with FOR [ ] AGAINST [ ] ABSTAIN [ ] 9.
FMR U.K. for the fund.
INC-PXC-594 cusip#31617K105/fund#015H