SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-57167)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 45 [x]
and
REGISTRATION STATEMENT (No. 811-2676)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
REGISTRATION STATEMENT
[x]
Amendment No. [ ]
<TABLE>
<CAPTION>
<S> <C>
Fidelity School Street Trust (formerly Fidelity Limited Term Municipals) ______________________
(Exact Name of Registrant as Specified in Charter)
</TABLE>
82 Devonshire St., Boston, MA
02109__________________________________________________
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
617-570-7000__________________________
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, MA
02109_________________________________________________________________
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b)
(x) on February 19, 1995 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 and intends to file the notice required by such Rule on or
before February 28, 1995.
FIDELITY SCHOOL STREET TRUST:
FIDELITY LIMITED TERM MUNICIPALS
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page: The Funds at a Glance; Charter;
Doing Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
ii............................ *
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. *
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Cover Page; Charter
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Description of the Trusts
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i........................... FMR, Portfolio Transactions
ii.......................... Trustees and Officers
iii......................... Management Contracts
b ............................ Management Contracts
c, d ............................ Interest of FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trusts
i ............................ Interest of FMR Affiliates
17 a - c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trusts
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interest of FMR Affiliates
c ............................ *
22 a ............................ *
b ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how each fund invests
and the services available to shareholders.
To learn more about the funds and their investments, you can obtain a copy of
each fund's most recent financial report and portfolio listing, and a copy of
the funds' Statement of Additional Information (SAI) dated February 19, 1995.
The SAI has been filed with the Securities and Exchange Commission (SEC) and are
incorporated herein by reference (legally form a part of the prospectus). For a
free copy of any of these documents, call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, the Federal Reserve
Board, or any other agency, and are subject to investment risk, including the
possible loss of principal.
Aggressive Tax-Free may invest without limitation in lower-quality debt
securities, sometimes called "municipal junk bonds." Investors should consider
that these securities carry greater risks, such as the risk of default, than
other debt securities. Refer to "Investment Principles and Risks" on page for
further information.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
MUB-pro-295
Each of these funds seeks a high level of current income free from federal
income tax.
FIDELITY'S
TAX-FREE BOND
FUNDS
FIDELITY LIMITED TERM
MUNICIPALS stresses preservation of capital by investing mainly in investment
grade municipal securities.
FIDELITY HIGH YIELD TAX-FREE PORTFOLIO focuses on long-term, medium-quality
municipal securities.
FIDELITY AGGRESSIVE TAX-FREE PORTFOLIO invests mainly in medium- and
lower-quality municipal securities.
PROSPECTUS
FEBRUARY 19, 1995
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management arm
of Fidelity Investments, which was established in 1946 and is now America's
largest mutual fund manager.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
LIMITED TERM MUNICIPALS
GOAL: High current income free from federal income tax with preservation of
capital.
STRATEGY: Invests in investment-grade quality municipal securities while
maintaining an average maturity of 12 years or less.
HIGH YIELD TAX-FREE
GOAL: High current income free from federal income tax.
STRATEGY: Invests mainly in long-term, medium-quality municipal securities.
SHORT FUND NAME:3
GOAL: High current income free from federal income tax.
STRATEGY: Invests mainly in medium- and lower-quality municipal securities,
normally with maturities over 20 years.
WHO MAY WANT TO INVEST
Any of the funds may be appropriate for investors in higher tax brackets who
seek high current income that is free from federal income tax. Each fund's level
of risk and potential reward depend on the quality and maturity of its
investments. Lower-quality, longer-term investments typically carry the most
risk and the highest yield potential. You should consider your investment
objective and tolerance for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary from
day, to day and generally reflect interest rates, market conditions, and other
economic and political news. When you sell your shares, they may be worth more
or less than what you paid for them. By themselves, the funds do not constitute
a balanced investment plan.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. The
funds in this prospectus are
in the INCOME category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy ,
sell or hold shares of a fund. See page for more information about these
fees.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Redemption fee (as a % of amount redeemed on
shares held less than 180 days) for Limited Term
Municipals and High Yield Tax-Free None
for Aggressive Tax-Free 1%
Exchange fee None
Annual account maintenance fee
(for accounts under $2,500) $12.00
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each fund
pays a management fee to FMR. It also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder statements and
financial reports. A fund's expenses are factored into its share price or
dividends and are not charged directly to shareholder accounts (see page ).
The following are projections based on historical expenses, adjusted to reflect
current fees, and are calculated as a percentage of average net assets.
LIMITED TERM MUNICIPALS
Management fee .40 %
12b-1 fee None
Other expenses .16 %
Total fund operating expenses .56 %
HIGH YIELD TAX-FREE
Management fee .41 %
12b-1 fee None
Other expenses .15 %
Total fund operating expenses .56 %
LONG FUND NAME:3
Management fee .46 %
12b-1 fee None
Other expenses .17 %
Total fund operating expenses .63 %
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000 you
invested, here's how much you would pay in total expenses if you close your
account after the number of years indicated:
After 1 After 3 After 5 After 10
year years years years
Limited Term Municipals $ 6 $ 18 $ 31 $ 70
High Yield Tax-Free $ 6 $ 18 $ 31 $ 70
Aggressive Tax-Free $ 6 $ 20 $ 35 $ 79
These examples illustrate the effect of expenses, but are not meant to suggest
actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow are included in each fund's Annual Report and have been
audited by Coopers & Lybrand L.L.P., independent accountants. Their reports on
the financial statements and financial highlights are included in the Annual
Report s . The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the funds' Statement of
Additional Information.
FIDELITY LIMITED TERM MUNICIPALS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Selected Per-Share
Data and Ratios
2.Year ended 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
December 31
3.Net asset value, $ 8.15 $ 8.88 $ 9.58 $ 9.10 $ 9.23 $ 9.31 $ 9.27 $ 9.52 $ 9.60 $ 9.99
beginning 0 0 0 0 0 0 0 0 0 0
of period
4.Income from .634 .615 .582 .600 .617 .615 .603 .573 .516 .512
Investment
Operations
Net interest income
5. Net realized and .730 .700 (.480 .130 .080 .010 .400 .180 .630 (.980
unrealized
) )
gain (loss) on
investments
6. Total from 1.364 1.315 .102 .730 .697 .625 1.003 .753 1.146 (.468
investment operations )
7.Less Distributions (.634 (.615 (.582 (.600 (.617 (.615 (.603 (.573 (.516 (.512
From net interest ) ) ) ) ) ) ) ) ) )
income
8. From net realized -- -- -- -- -- (.050 (.150 (.100 (.220 (.010
gain ) ) ) ) )
on investments
9. In excess on net -- -- -- -- -- -- -- -- (.020
(.010
realized
) )
gain on investments
10. Total (.634 (.615 (.582 (.600 (.617 (.665 (.753 (.673 (.756 (.532
distributions ) ) ) ) ) ) ) ) ) )
11.Net asset value, $ 8.88 $ 9.58 $ 9.10 $ 9.23 $ 9.31 $ 9.27 $ 9.52 $ 9.60 $ 9.99 $ 8.99
end of period 0 0 0 0 0 0 0 0 0 0
12.Total returnA 17.31 15.19 1.14 8.22 7.83 6.97 11.19 8.17 12.24 (4.76)
% % % % % % % % % %
13.Net assets, end of $ 316 $ 580 $ 459 $ 441 $ 442 $ 468 $ 696 $ 976 $ 1,19 $ 878
period
9
(in millions)
14.Ratio of expenses .71 .68 .74 .67 .66 .67 .68 .64 .57 .56
to average % % % % % % % % % %
net assets
15.Ratio of expenses .71 .68 .74 .67 .68 .67 .68 .64 .57 .56
to average net assets % % % % % % % % % %
before expense
reductions
16.Ratio of net 7.41 6.55 6.29 6.51 6.70 6.63 6.41 5.94 5.19 5.42
interest income % % % % % % % % % %
to average net assets
17.Portfolio turnover 73 30 59 30 55 72 42 50 111 30
rate % % % % % % % % % %
</TABLE>
A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
FIDELITY HIGH YIELD TAX-FREE PORTFOLIO
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18.Selected Per-Share Data
and Ratios
19.Years 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Ended
November 30
20.Net asset $ 11.0 $ 12.2 $ 13.7 $ 11.7 $ 12.2 $ 12.8 $ 12.6 $ 12.6 $ 12.7 $ 13.2
value, 00 90 70 50 10 00 10 90 20 30
beginning of
period
21.Income 1.038 .999 .936 .901 .893 .857 .845 .811 .764 .755
from
Investment
Operations
Net interest
income
22. Net 1.290 1.520 (1.500 .460 .600 .200 .310 .190 .700 (1.690
realized and ) )
unrealized
gain (loss)
on
investments
23. Total from 2.328 2.519 (.564) 1.361 1.493 1.057 1.155 1.001 1.464 (.935)
investment
operations
24.Less (1.038 (.999) (.936) (.901) (.893) (.857) (.845) (.811) (.764) (.755)
Distributions )
From net
interest
income
25. From net -- (.040) (.520) -- (.010) (.390) (.230) (.160) (.190) (.500)
realized gain
on
investments
26. Total (1.038 (1.039 (1.456 (.901) (.903) (1.247 (1.075 (.971) (.954) (1.255
distributions ) ) ) ) ) )
27.Net asset $ 12.2 $ 13.7 $ 11.7 $ 12.2 $ 12.8 $ 12.6 $ 12.6 $ 12.7 $ 13.2 $ 11.0
value, 90 70 50 10 00 10 90 20 30 40
end of period
28.Total return 22.01 21.21 (4.45) 11.93 12.60 8.91% 9.62% 8.21% 11.92 (7.74)
% % % % % % %
29.Net assets, $ 1,66 $ 2,44 $ 1,61 $ 1,57 $ 1,73 $ 1,78 $ 1,99 $ 2,07 $ 2,12 $ 1,69
end of period 1 9 0 4 8 4 7 5 8, 3
(000 omitted)
30.Ratio of .56% .57% .71% .60% .58% .57% .56% .57% .56% .56%
expenses to
average net
assets
31.Ratio of .56% .57% .71% .60% .58% .57% .56% .57% .56% .56%
expenses to
average net
assets before
expense
reductions
32.Ratio of net 8.83% 7.63% 7.38% 7.48% 7.10% 6.96% 6.72% 6.40% 5.85% 6.21%
interest income
to average net
assets
33.Portfolio 57% 49% 80% 47% 71% 58% 44% 47% 53% 48%
turnover rate
</TABLE>
FIDELITY AGGRESSIVE TAX-FREE PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
34.Selected Per-Share
Data and Ratios
35.Years Ended 1985C 1986 1987 1988 1989 1990 1991 1992 1993 1994
December 31
36.Net asset $ 10.0 $ 10.6 $ 11.5 $ 10.8 $ 11.3 $ 11.4 $ 11.4 $ 11.8 $ 11.8 $ 12.3
value, beginning of 00 60 60 20 30 90 30 00 80 30
period
37.Income from .310 .933 .902 .894 .881 .886 .863 .834 .783 .770
Investment
Operations
Net interest
income
38. Net realized .660 .900 (.740) .510 .160 (.060) .429 .208 .788 (1.47
and unrealized 3)
gain (loss) on
investments
39. Total from .970 1.833 .162 1.404 1.041 .826 1.292 1.042 1.571 (.703)
investment
operations
40.Less (.310) (.933) (.902) (.894) (.881) (.886) (.863) (.834) (.783) (.770)
Distributions
From net interest
income
41. From net -- -- -- -- -- -- (.060) (.130) (.340) (.050)
realized gain on
investments
42. Total (.310) (.933) (.902) (.894) (.881) (.886) (.923) (.964) (1.12 (.820)
distributions 3)
43. Redemption -- -- -- -- -- -- .001 .002 .002 .003
fees added to
paid in capital
44.Net asset $ 10.6 $ 11.5 $ 10.8 $ 11.3 $ 11.4 $ 11.4 $ 11.8 $ 11.8 $ 12.3 $ 10.8
value, end of 60 60 20 30 90 30 00 80 30 10
period
45.Total returnB 9.84 17.74 1.42 13.40 9.50 7.48 11.77 9.17 13.63 -5.82
% % % % % % % % % %
46.Net assets, end $ 101 $ 394 $ 353 $ 456 $ 546 $ 551 $ 654 $ 762 $ 952 $ 796
of period (000
omitted)
47.Ratio of .60% .65% .74% .73% .69% .66% .69% .64% .64% .63%
expenses to A
average net assets
48.Ratio of 1.21 .84% .78% .73% .69% .66% .69% .64% .64% .63%
expenses to %A
average net assets
before expense
reductions
49.Ratio of net 10.17 8.17 8.06 7.98 7.68 7.79 7.46 7.01 6.37 6.69
interest income
to %A % % % % % % % % %
average net assets
50.Portfolio 4%A 17% 68% 46% 46% 46% 30% 43% 54% 40%
turnover rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIODS SHOWN.
C FROM SEPTEMBER 13, 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1985.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results.
High Yield Tax-Free's fiscal year runs from December 1 through November 30. The
fiscal year for Limited Term Municipals and Aggressive Tax-Free runs from
January 1 through December 31. The tables below show each fund's performance
over past fiscal years compared to a measure of inflation. The charts on page 10
help you compare the yields of these funds to those of their competitors.
LIMITED TERM MUNICIPALS
Fiscal periods Pas Past Past
ended t 1 5 10
December yea year year
31, 1994 r s s
Average -4.76 6.58 8.17
annual % % %
total return
Cumulative -4.76 37.52 119.32
total return % % %
Consumer 2.67 18.72 42.17
Price % % %
Index
HIGH YIELD TAX-FREE
Fiscal periods Pas Past Past
ended t 1 5 10
November 30, yea year year
1994 r s s
Average -7.74 5.93 9.04
annual % % %
total return
Cumulative -7.74 33.38 137.57
total return % % %
Consumer 2.81 19.06 42.36
Price % % %
Index
LONG FUND NAME:3
Fiscal periods ended Past 1 Past 5 Life of
December 31, 1994 year years fundA
Average annual
total return -5.82 % 7.02 % 9.29 %
Cumulative
total return -5.82 % 40.36 % 128.62 %
Consumer Price
Index 2.67 % 18.72 % 38.61 %
A FROM SEPTEMBER 13, 1985. THE PERIODS COVERED BY THE CONSUMER PRICE INDEX
ARE THE CLOSEST AVAILABLE MATCH TO THOSE COVERED BY THE FUND.
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions and
any change in a fund's share
price.
(checkmark)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
LIMITED TERM MUNICIPALS
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 5.26
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 4.71
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 4.85
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 4.9
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 4.88
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 4.8
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 4.84
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 4.77
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 4.6
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 4.609999999999999
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 4.79
Row: 11, Col: 2, Value: 0.0
Row: 12, Col: 1, Value: 4.7
Row: 12, Col: 2, Value: 0.0
Row: 13, Col: 1, Value: 4.609999999999999
Row: 13, Col: 2, Value: 0.0
Row: 14, Col: 1, Value: 4.67
Row: 14, Col: 2, Value: 0.0
Row: 15, Col: 1, Value: 5.24
Row: 15, Col: 2, Value: 0.0
Row: 16, Col: 1, Value: 5.4
Row: 16, Col: 2, Value: 0.0
Row: 17, Col: 1, Value: 5.4
Row: 17, Col: 2, Value: 0.0
Row: 18, Col: 1, Value: 5.35
Row: 18, Col: 2, Value: 0.0
Row: 19, Col: 1, Value: 5.37
Row: 19, Col: 2, Value: 0.0
Row: 20, Col: 1, Value: 5.3
Row: 20, Col: 2, Value: 0.0
Row: 21, Col: 1, Value: 5.45
Row: 21, Col: 2, Value: 0.0
Row: 22, Col: 1, Value: 5.649999999999999
Row: 22, Col: 2, Value: 0.0
Row: 23, Col: 1, Value: 6.01
Row: 23, Col: 2, Value: 0.0
Row: 24, Col: 1, Value: 5.85
Row: 24, Col: 2, Value: 0.0
Limited Term
Municipals
1993
1994
HIGH YIELD TAX-FREE
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 6.2
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 6.49
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 6.45
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 6.3
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 5.95
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 5.619999999999999
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 5.7
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 5.7
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 6.1
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 5.87
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 5.95
Row: 11, Col: 2, Value: 0.0
Row: 12, Col: 1, Value: 5.819999999999999
Row: 12, Col: 2, Value: 0.0
Row: 13, Col: 1, Value: 5.27
Row: 13, Col: 2, Value: 0.0
Row: 14, Col: 1, Value: 5.4
Row: 14, Col: 2, Value: 0.0
Row: 15, Col: 1, Value: 5.41
Row: 15, Col: 2, Value: 0.0
Row: 16, Col: 1, Value: 5.470000000000001
Row: 16, Col: 2, Value: 0.0
Row: 17, Col: 1, Value: 5.3
Row: 17, Col: 2, Value: 0.0
Row: 18, Col: 1, Value: 5.359999999999999
Row: 18, Col: 2, Value: 0.0
Row: 19, Col: 1, Value: 5.29
Row: 19, Col: 2, Value: 0.0
Row: 20, Col: 1, Value: 5.14
Row: 20, Col: 2, Value: 0.0
Row: 21, Col: 1, Value: 5.13
Row: 21, Col: 2, Value: 0.0
Row: 22, Col: 1, Value: 5.34
Row: 22, Col: 2, Value: 0.0
Row: 23, Col: 1, Value: 5.319999999999999
Row: 23, Col: 2, Value: 0.0
Row: 24, Col: 1, Value: 5.149999999999999
Row: 24, Col: 2, Value: 0.0
Row: 25, Col: 1, Value: 5.430000000000001
Row: 25, Col: 2, Value: 0.0
Row: 26, Col: 1, Value: 6.03
Row: 26, Col: 2, Value: 0.0
Row: 27, Col: 1, Value: 6.119999999999999
Row: 27, Col: 2, Value: 0.0
Row: 28, Col: 1, Value: 6.18
Row: 28, Col: 2, Value: 0.0
Row: 29, Col: 1, Value: 6.18
Row: 29, Col: 2, Value: 0.0
Row: 30, Col: 1, Value: 6.13
Row: 30, Col: 2, Value: 0.0
Row: 31, Col: 1, Value: 6.13
Row: 31, Col: 2, Value: 0.0
Row: 32, Col: 1, Value: 6.29
Row: 32, Col: 2, Value: 0.0
Row: 33, Col: 1, Value: 6.54
Row: 33, Col: 2, Value: 0.0
Row: 34, Col: 1, Value: 6.94
Row: 34, Col: 2, Value: 0.0
Row: 35, Col: 1, Value: 6.78
Row: 35, Col: 2, Value: 0.0
High Yield
Tax-Free
1993
1992
1994
SHORT FUND NAME:3
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 6.35
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 5.91
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 5.9
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 6.06
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 5.970000000000001
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 5.76
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 5.85
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 5.74
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 5.55
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 5.45
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 5.649999999999999
Row: 11, Col: 2, Value: 0.0
Row: 12, Col: 1, Value: 5.63
Row: 12, Col: 2, Value: 0.0
Row: 13, Col: 1, Value: 5.44
Row: 13, Col: 2, Value: 0.0
Row: 14, Col: 1, Value: 5.68
Row: 14, Col: 2, Value: 0.0
Row: 15, Col: 1, Value: 6.26
Row: 15, Col: 2, Value: 0.0
Row: 16, Col: 1, Value: 6.44
Row: 16, Col: 2, Value: 0.0
Row: 17, Col: 1, Value: 6.4
Row: 17, Col: 2, Value: 0.0
Row: 18, Col: 1, Value: 6.37
Row: 18, Col: 2, Value: 0.0
Row: 19, Col: 1, Value: 6.31
Row: 19, Col: 2, Value: 0.0
Row: 20, Col: 1, Value: 6.319999999999999
Row: 20, Col: 2, Value: 0.0
Row: 21, Col: 1, Value: 6.53
Row: 21, Col: 2, Value: 0.0
Row: 22, Col: 1, Value: 6.79
Row: 22, Col: 2, Value: 0.0
Row: 23, Col: 1, Value: 7.27
Row: 23, Col: 2, Value: 0.0
Row: 24, Col: 1, Value: 7.149999999999999
Row: 24, Col: 2, Value: 0.0
Short Fund
Name:3
1993
1994
THE CHART FOR HIGH YIELD TAX-FREE SHOWS 30-DAY ANNUALIZED NET YIELDS
FOR THE FUND AS OF THE LAST DAY OF EACH MONTH FROM JANUARY 1992 THROUGH
NOVEMBER 1994. THE CHARTS FOR LIMITED TERM MUNICIPALS AND
AGGRESSIVE TAX-FREE SHOW 30-DAY ANNUALIZED NET YIELDS FOR THE FUNDS
AS OF THE LAST DAY OF EACH MONTH FROM JANUARY 199 3 THROUGH
DECEMBER
1994.
YIELD refers to the income generated by an investment in a fund over a given
period of time, expressed as an annual percentage rate. A TAX-EQUIVALENT YIELD
shows what an investor would have to earn before taxes to equal a tax-free
yield. Yields are calculated according to a standard that is required for all
stock and bond funds. Because this differs from other accounting methods, the
quoted yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation calculated
by the U.S. government.
The funds' recent strategies, performance, and holdings are detailed twice a
year in financial reports, which are sent to all shareholders. For current
performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money and
invests it toward a specified goal. In technical terms, Limited Term Municipals
is currently a diversified fund of Fidelity School Street Trust, High Yield
Tax-Free is currently a diversified fund of Fidelity Court Street Trust, and
Aggressive Tax-Free is currently a diversified fund of Fidelity Municipal Trust.
Each trust is an open-end management investment company. Fidelity School Street
Trust was organized as a Massachusetts business trust on September 10, 1976.
Fidelity Court Street Trust was organized as a Massachusetts business trust on
April 21, 1977. Fidelity Municipal Trust was organized as a Massachusetts
business trust on June 22, 1984. There is a remote possibility that one fund
might become liable for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities, review
contractual arrangements with companies that provide services to the funds, and
review performance. The majority of trustees are not otherwise affiliated with
Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings may
be called to elect or remove trustees, change fundamental policies, approve a
management contract, or for other purposes. Shareholders not attending these
meetings are encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals to be voted
on. The number of votes you are entitled to is based upon the dollar value of
your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 200
(solid bullet) Assets in Fidelity mutual
funds: over $ 250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The funds are managed by FMR, which chooses their investments and handles their
business affairs.
David Murphy is manager and Vice President of Limited Term Municipals, which he
has managed since December 1989. Mr. Murphy also manages Spartan California
Intermediate Municipal, Spartan Intermediate Municipal, Spartan New Jersey
Municipal High Yield, Spartan New York Intermediate Municipal, and Spartan
Short-Intermediate Municipal. Mr. Murphy joined Fidelity in 1989.
Anne Punzak is manager and Vice President of Aggressive Tax-Free and High Yield
Tax-Free, which she has managed since January 1986 and October 1993,
respectively. She also manages Spartan Florida Municipal Income. Previously, she
managed Insured Tax-Free. Ms. Punzak joined Fidelity in 1984.
Fidelity investment personnel may invest in securities for their own account
pursuant to a code of ethics that establishes procedures for personal investing
and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's funds
and services. Fidelity Service Co. (FSC) performs transfer agent servicing
functions for the funds.
FMR Corp. is the parent company of FMR. Through ownership of voting common
stock, members of the Edward C. Johnson 3d family form a controlling group with
respect to FMR Corp. Changes may occur in the Johnson family group, through
death or disability, which would result in changes in each individual family
member's holding of stock. Such changes could result in one or more family
members becoming holders of over 25% of the stock. FMR Corp. has received an
opinion of counsel that changes in the composition of the Johnson family group
under these circumstances would not result in the termination of the fund's
management or distribution contracts and , accordingly, would not require
a shareholder vote to continue operation under those contracts.
United Missouri Bank, N.A., is each fund's transfer agent, although it employs
FSC to perform these functions for the funds. It is located at 1010 Grand
Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer affiliates
and other firms that sell fund shares, provided that a fund receives services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
LIMITED TERM MUNICIPALS seeks high current income that is free from federal
income tax, and preservation of capital, by focusing on municipal securities
rated at least Baa by Moody's or BBB by S&P, or, if unrated, judged by FMR to be
of equivalent quality. The fund will maintain a dollar-weighted average maturity
of 12 years or less. FMR normally invests at least 80% of the fund's assets in
federally tax-free municipal securities.
HIGH YIELD TAX-FREE seeks high current income that is free from federal income
tax by investing at least 65% of its total assets in high yielding municipal
securities, focusing on municipal bonds rated A or Baa by Moody's, A or BBB by
S&P, or, if unrated, judged by FMR to be of equivalent quality. The fund often
invests in long-term bonds, but may shorten the average maturity and improve
quality as economic or market conditions change. FMR normally invests so that at
least 80% of the fund's income is free from federal income tax.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest up to 20% of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
AGGRESSIVE TAX-FREE seeks high current income that is free from federal income
tax by normally investing at least 65% of its total assets in securities rated A
or lower by Moody's or S&P or, if unrated, judged by FMR to be of equivalent
quality. Since the fund can emphasize lower-quality securities, FMR's research
and analysis are an integral part of choosing the fund's investments. The fund
typically purchases securities with remaining maturities of 20 years or longer.
FMR normally invests at least 80% of the fund's assets in federally tax-free
municipal securities.
If you are subject to the federal alternative minimum tax, you should note that
the fund may invest up to 20% of its assets in municipal securities issued to
finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
EACH FUND'S yield and share price change daily and are based on interest rates,
market conditions, other economic and political news, and on the quality and
maturity of its investments. In general, bond prices rise when interest rates
fall, and vice versa. This effect is usually more pronounced for longer-term
securities. Lower-quality securities offer higher yields but also carry more
risk. FMR may use various investment techniques to hedge a fund's risks, but
there is no guarantee that these strategies will work as intended. When you sell
your shares, they may be worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment strategy and
does not expect to invest in federally taxable obligations. Each fund also
reserves the right to invest without limitation in short-term instruments, to
hold a substantial amount of uninvested cash, or to invest more than normally
permitted in federally taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which a fund may invest, and strategies FMR may employ in pursuit of a fund's
investment objective. A summary of risks and restrictions associated with these
instrument types and investment practices is included as well. A complete
listing of each fund's policies and limitations and more detailed information
about the funds' investments is contained in the funds' SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments is
not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to the
full extent permitted unless it believes that doing so will help the funds
achieve their goals. Current holdings and recent investment strategies are
described in the funds' financial reports which are sent to shareholders twice a
year. For a free SAI or financial report, call 1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. In general, bond prices rise when interest
rates fall, and vice versa. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk bonds")
often have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness, or
they may already be in default. 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.
The tables on page 16 provide a summary of ratings assigned to debt
holdings (not including money market instruments) in High Yield Tax-Free's and
Aggressive Tax-Free's portfolios. These figures are dollar-weighted averages of
month-end portfolio holdings during fiscal 1994, and are presented as a
percentage of total security investments. These percentages are historical and
do not necessarily indicate a fund's current or future debt holdings.
RESTRICTIONS: Purchase of a debt security is consistent with a fund's debt
quality policy if it is rated at or above the stated level by Moody's or rated
in the equivalent categories by S&P, or is unrated but judged to be of
equivalent quality by FMR. Limited Term Municipals currently intends to limit
its investments in debt securities of Baa-quality to 25% of its assets. High
Yield Tax-Free currently intends to limit its investments in lower than
Baa-quality debt securities to 25% of its total assets and in lower than
Ba-quality debt securities to 10% of its total assets. Aggressive Tax-Free does
not currently intend to invest more than 10% of its total assets in bonds that
are in default.
MUNICIPAL SECURITIES are issued to raise money for a variety of public purposes,
including general financing for state and local governments, or financing for
specific projects or public facilities. Municipal securities may be issued in
anticipation of future revenues, and may be backed by the full taxing power of a
municipality, the revenues from a specific project, or the credit of a private
organization. A security's credit may be enhanced by a bank, insurance company,
or other financial institution. A fund may own a municipal security directly or
through a participation interest.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or transfers
its obligations to a private entity, the obligation could lose value or become
taxable.
HIGH YIELD TAX-FREE
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
e A
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 52.1% AA 57.4%
Upper-medium grade A A
Medium grade Baa 14.7% BBB 13.2%
LOWER QUALITY
Moderately speculative Ba 6.7% BB 5.1%
Speculative B 2.0% B 2.3%
Highly speculative Caa 0% CCC 0%
Poor quality Ca 0% CC 0%
Lowest quality, no interest C C
In default, in arrears -- D 0%
75.5% 78.0%
AGGRESSIVE TAX-FREE
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
e A
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 30.7% AA 32.5%
Upper-medium grade A A
Medium grade Baa 21.1% BBB 17.1%
LOWER QUALITY
Moderately speculative Ba 8.0% BB 5.8%
Speculative B 2.9% B 1.6%
Highly speculative Caa 0.0% CCC 0.4%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
62.7% 57.4%
ATHE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO 11.7% FOR HIGH YIELD TAX-FREE AND 29.6% FOR AGGRESSIVE
TAX-FREE. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED
RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS DETERMINED THAT
UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT FOR 8.5% OF HIGH YIELD
TAX-FREE'S AND 26.6% OF AGGRESSIVE TAX-FREE'S TOTAL SECURITIES
INVESTMENTS. REFER TO THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION FOR A
MORE COMPLETE DISCUSSION OF THESE RATINGS.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations. The economy of Puerto Rico is
closely linked to the U.S. economy, and will be affected by the strength of the
U.S. dollar, interest rates, the price stability of oil imports, and the
continued existence of favorable tax incentives. Recent legislation revised
these incentives, but the government of Puerto Rico anticipates only a slight
reduction in the average real growth rates for the economy.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource recovery
bonds often involve private corporations. The viability of a project or tax
incentives could affect the value and credit quality of these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These securities
usually rely on continued payments by a municipality, and may also be subject to
prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse floaters
have interest rates that move in the opposite direction from the benchmark,
making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the issuer
or a financial intermediary. In exchange for this benefit, a fund may pay
periodic fees or accept a lower interest rate. Demand features and standby
commitments are types of put features.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to increase or
decrease its exposure to changing security prices, interest rates, or other
factors that affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts, and
purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics of a
fund's portfolio of investments. If FMR judges market conditions incorrectly or
employs a strategy that does not correlate well with the fund's investments,
these techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
the fund and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in which
payment and delivery for the securities take place at a future date. The market
value of a security could change during this period, which could affect a fund's
yield.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by FMR,
under the supervision of the Board of Trustees, to be illiquid, which means that
they may be difficult to sell promptly at an acceptable price. The sale of other
securities, including illiquid securities, may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to a
fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than 10%
of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the risks
of investing. This may include limiting the amount of money invested in any one
issuer or, on a broader scale, in any one industry or type of project. Economic,
business, or political changes can affect all securities of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, a fund may not invest
more than 5% of its total assets in any one issuer. These limitations do not
apply to U.S. government securities. A fund may invest more than 25% of its
total assets in tax-free securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR, or
through reverse repurchase agreements. If a fund borrows money, its share price
may be subject to greater fluctuation until the borrowing is paid off. If the
fund makes additional investments while borrowings are outstanding, this may be
considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes, but
not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies stated
throughout this prospectus, other than those identified in the following
paragraphs, can be changed without shareholder approval.
LIMITED TERM MUNICIPALS seeks the highest level of income exempt from federal
income tax that can be obtained, consistent with the preservation of capital,
from a diversified portfolio of investment-grade obligations. The fund will
normally invest so that at least 80% of its assets are invested in municipal
securities whose interest is free from federal income tax.
HIGH YIELD TAX-FREE seeks to provide a high current yield exempt from federal
income tax. The fund will normally invest so that at least 80% of its income is
exempt from federal income tax.
AGGRESSIVE TAX-FREE seeks to provide a high current yield, exempt from federal
income tax, by investing primarily in medium and lower quality municipal bonds.
The fund will normally invest at least 80% of its assets in municipal securities
whose interest is exempt from federal tax.
EACH FUND, with respect to 75% of total assets, may not invest more than 5% of
its total assets in any one issuer. The funds may not invest more than 25% of
its total assets in any one industry. The funds may borrow only for temporary or
emergency purposes, but not in an amount exceeding 33% of its total assets.
Loans, in the aggregate, may not exceed 33% of a fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily operations.
Expenses paid out of a fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and business
affairs. Each fund also pays OTHER EXPENSES, which are explained at right.
FMR may, from time to time, agree to reimburse the funds for management fees and
other expenses above a specified limit. FMR retains the ability to be repaid by
a fund if expenses fall below the specified limit prior to the end of the fiscal
year. Reimbursement arrangements, which may be terminated at any time without
notice, can decrease a fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month.
LIMITED TERM MUNICIPALS' management fee is calculated at an annual rate
of .10% of the fund's average net assets plus 5% of gross income.
In fiscal 1994, FMR voluntarily agreed to temporarily limit the fund's
management fee to that described above, until shareholders approved the current
contract at the December 14, 1994 shareholder meeting. The total management
fee for fiscal 1994 was . 40 %.
HIGH YIELD TAX-FREE'S AND AGGRESSIVE TAX-FREE'S management fee is calculated by
adding a group fee rate to an individual fund fee rate, and multiplying the
result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual funds
advised by FMR. This rate cannot rise above .37%, and it drops as total assets
under management increase.
For December 1994, the group fee rate was .1563 %. The individual fund fee
rate is .25% for High Yield Tax-Free and .30% for Aggressive Tax-Free. The total
management fee rates for fiscal 1994 for High Yield Tax-Free and Aggressive
Tax-Free were .41 % and .46 %, respectively.
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
FSC performs many transaction and accounting functions. These services include
processing shareholder transactions, valuing each fund's investments, and
handling securities loans. In fiscal 1994, FSC received fees equal to
.14 %, .12 %, and .14 %, respectively, of Limited Term
Municipals', High Yield Tax-Free's, and Aggressive Tax-Free's average net
assets.
The funds also pay other expenses, such as legal, audit, and custodian fees;
proxy solicitation costs; and the compensation of trustees who are not
affiliated with Fidelity.
Each fund has adopted a Distribution and Service Plan. These plans recognize
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to note,
however, that the funds do not pay FMR any separate fees for this service.
For fiscal 1994, the portfolio turnover rates for Limited Term Municipals, High
Yield Tax-Free, and Aggressive Tax-Free were 30 %, 48 %, and
40 %, respectively. These rates vary from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's first
mutual funds. Today, Fidelity is the largest mutual fund company in the country,
and is known as an innovative provider of high-quality financial services to
individuals and institutions.
In addition to its mutual fund business, the company operates one of America's
leading discount brokerage firms, Fidelity Brokerage Services, Inc. (FBSI).
Fidelity is also a leader in providing tax-sheltered retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical information to make
investment decisions. Based in Boston, Fidelity provides customers with complete
service 24 hours a day, 365 days a year, through a network of telephone service
centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has over
75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio, you
may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or investment
professional, refer to its program materials for any special provisions
regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are listed
below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your investment is
received and accepted. Share price is normally calculated at 4 p.m. Eastern
time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and mail it
along with your check. You may also open your account in person or by wire as
described on page . If there is no application accompanying this prospectus,
call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity fund.
If you buy shares by check or Fidelity Money Line(registered trademark), and
then sell those shares by any method other than by exchange to another Fidelity
fund, the payment may be delayed for up to seven business days to ensure that
your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
TO ADD TO AN ACCOUNT $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
These minimums may vary for a Fidelity Payroll Deduction Program account in
Limited Term Municipals. Refer to the program materials for details.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
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Wire (wire_graphic) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
share price calculated after your order is received and accepted. Share price is
normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000 worth
of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign up for
these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect
you and Fidelity from fraud. Your request must be made in writing and include a
signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last 30
days,
(small solid bullet) The check is being mailed to a different address than the
one on your account (record address),
(small solid bullet) The check is being made payable to someone other than the
account owner, or
(small solid bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized under
state law), securities exchange or association, clearing agency, or savings
association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed, and
(small solid bullet) Any other applicable requirements listed in the table at
right.
Unless otherwise instructed, Fidelity will send a check to the record address.
Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account in Limited Term Municipals or High
Yield Tax-Free, you may write an unlimited number of checks. Do not, however,
try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF AGGRESSIVE TAX-FREE AFTER HOLDING THEM LESS THAN 180 DAYS, THE
FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO 1% OF THE VALUE OF THOSE SHARES.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (small solid bullet) Minimum check: $500.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
<TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days a
year. Whenever you call, you can speak with someone equipped to provide the
information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
To reduce expenses, only one copy of most financial reports will be mailed to
your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical account
information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year, and
that they may have tax consequences for you. For details on policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by phone
between your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your fund
account, or between fund accounts, automatically. While regular investment plans
do not guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for a home, educational expenses,
and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE THEIR SHARE PRICES FLUCTUATE, THESE FUNDS MAY NOT BE APPROPRIATE
CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and capital
gains to shareholders each year. Income dividends are declared daily and paid
monthly. Capital gains are normally distributed in January and December for High
Yield Tax-Free and in February and December for Limited Term Municipals and
Aggressive Tax-Free.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If the option you prefer is not listed on the application,
call 1-800-544-6666 for instructions. Each fund offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and capital
gain distributions will be automatically invested in another identically
registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the month.
Capital gain distributions will be reinvested at the NAV as of the date the fund
deducts the distribution from its NAV. The mailing of distribution checks will
begin within seven days, or longer for a December ex-dividend date.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free fund
could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free remains
tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable distributions.
Short-term capital gains and a portion of the gain on bonds purchased at a
discount are taxed as dividends. Long-term capital gain distributions are taxed
as long-term capital gains. These distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions declared
in December and paid in January are taxable as if they were paid on December 31.
Fidelity will send you and the IRS a statement showing the tax status of the
distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Limited Term Municipals do es not currently
intend to purchase these securities. Aggressive Tax-Free and High Yield
Tax-Free may invest up to 20% of its assets in these securities. Individuals
who are subject to the tax must report this interest on their tax returns.
A portion of a fund's dividends may be free from state or local taxes. Income
from investments in your state is often tax-free to you. Each year, Fidelity
will send you a breakdown of your fund's income from each state to help you
calculate your taxes.
During fiscal 1994 100% of each fund's income dividends were free from
federal income tax. 2.4 % and 13.1% of High Yield Tax-Free's and
Aggressive Tax-Free's income dividends were subject to the federal alternative
minimum tax.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other Fidelity
funds - are subject to capital gains tax. A capital gain or loss is the
difference between the cost of your shares and the price you receive when you
sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is up to
you or your tax preparer to determine whether this sale resulted in a capital
gain and, if so, the amount of tax to be paid. Be sure to keep your regular
account statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital gain
distribution from its NAV, you will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is
open. Fidelity normally calculates each fund's NAV as of the close of business
of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by adding
the value of the fund's investments, cash, and other assets, subtracting its
liabilities, and then dividing the result by the number of shares outstanding.
Each fund's assets are valued primarily on the basis of market quotations, if
available. Since market quotations are often unavailable, assets are usually
valued by a method that the Board of Trustees believes accurately reflects fair
value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price
to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to 31% backup withholding for failing to report income to the IRS.
If you violate IRS regulations, the IRS can require a fund to withhold 31% of
your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be liable for
losses resulting from unauthorized transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. Fidelity will request
personalized security codes or other information, and may also record calls. You
should verify the accuracy of your confirmation statements immediately after you
receive them. If you do not want the ability to redeem and exchange by
telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods of
unusual market activity), consider placing your order by mail or by visiting a
Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. Each fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange Restrictions" on page .
Purchase orders may be refused if, in FMR's opinion, they would disrupt
management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the next
offering price calculated after your order is received and accepted. Note the
following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each check
must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of checks
processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its transfer
agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line purchases,
consider buying shares by bank wire, U.S. Postal money order, U.S. Treasury
check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge you a
fee for this service. If you invest through a broker or other institution, read
its program materials for any additional service features or fees that may
apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with FDC
may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when a fund is priced on the following
business day. If payment is not received by that time, the financial institution
could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next NAV
calculated after your request is received and accepted. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on the
next business day, but if making immediate payment could adversely affect a
fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be credited
to your bank account on the second or third business day after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line have
been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates postponed
when the NYSE is closed (other than weekends or holidays), when trading on the
NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount of the
check is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
THE REDEMPTION FEE for Aggressive Tax-Free, if applicable, will be deducted from
the amount of your redemption. This fee is paid to the fund rather than FMR, and
it does not apply to shares that were acquired through reinvestment of
distributions. If shares you are redeeming were not all held for the same length
of time, those shares you held longest will be redeemed first for purposes of
determining whether the fee applies.
Fidelity reserves the right to deduct an annual maintenance fee of $12.00
from accounts with a value of less than $2,500, subject to an annual maximum
charge of $60.00 per shareholder. It is expected that accounts will be valued on
the second Friday in November of each year. Accounts opened after September 30
will not be subject to the fee for that year. The fee, which is payable to the
transfer agent, is designed to offset in part the relatively higher costs of
servicing smaller accounts. The fee will not be deducted from retirement
accounts, accounts using regular investment plans, or if total assets in
Fidelity funds exceed $50,000. Eligibility for the $50,000 waiver is determined
by aggregating Fidelity mutual fund accounts maintained by FSC or FBSI which are
registered under the same social security number or which list the same social
security number for the custodian of a Uniform Gifts/Transfers to Minors Act
account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance, Fidelity
reserves the right to close your account and send the proceeds to you. Your
shares will be redeemed at the NAV on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing historical
account documents, that are beyond the normal scope of its services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without reimbursement
from the funds. Qualified recipients are securities dealers who have sold fund
shares or others, including banks and other financial institutions, under
special arrangements in connection with FDC's sales activities. In some
instances, these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered for
sale in your state.
(small solid bullet) You may only exchange between accounts that are registered
in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you pay
the percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on your
shares and you exchange them into a fund with a 3% sales charge, you would pay
an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance and
shareholders, each fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common ownership or
control, including accounts with the same taxpayer identification number, will
be counted together for purposes of the four exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange purchases
by any person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and policies,
or would otherwise potentially be adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions of
the fund's assets. In particular, a pattern of exchanges that coincides with a
"market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time. The
funds reserve the right to terminate or modify the exchange privilege in the
future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY'S TAX-FREE BOND FUNDS
FIDELITY LIMITED TERM MUNICIPALS
A FUND OF FIDELITY SCHOOL STREET TRUST
FIDELITY HIGH YIELD TAX-FREE PORTFOLIO
A FUND OF FIDELITY COURT STREET TRUST
FIDELITY AGGRESSIVE TAX-FREE PORTFOLIO
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19, 1995
This Statement is not a prospectus but should be read in conjunction with the
funds' current Prospectus (dated February 19, 1995). Please retain this document
for future reference. The funds' financial statements and financial highlights
included in the Annual Reports, for the fiscal years ended November 30, 1994
(Fidelity High Yield Tax-Free Portfolio), and December 31, 1994 (Fidelity
Aggressive Tax-Free Portfolio and Fidelity Limited Term Municipals), are
incorporated herein by reference. To obtain additional copies of the Prospectus
or an Annual Report, please call Fidelity Distributors Corporation at
1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENTS
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
MUB-ptb-295
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of a fund's assets that may be invested in any
security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the fund's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with a
fund's investment policies and limitations.
Each fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940) of the fund. However, with
respect to Aggressive Tax-Free and High Yield, except for the fundamental
investment limitations set forth below, the investment policies and limitations
described in this Statement of Additional Information are not fundamental and
may be changed without shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY LIMITED TERM MUNICIPALS
(LIMITED TERM)
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN
THEIR ENTIRETY. THE FUND MAY NOT:
(1) 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;
(2) issue senior securities, except as permitted under the Investment Company
Act of 1940;
(3) 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;
(4) 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;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities,
or tax-exempt obligations issued or guaranteed by a U.S. territory or possession
or a state or local government, or a political subdivision of any of the
foregoing) if, as a result, more than 25% of the fund's total assets would be
invested in securities of companies whose principal business activities are in
the same industry;
(6) 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);
(7) 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); or
(8) 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 .
(9) 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.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) 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 (3)). 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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) The fund does not currently intend to engage in repurchase agreements or
make loans, but this limitation does not apply to purchases of debt securities.
(vi) The fund does not currently intend to invest more than 25% of its total
assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to invest in interests of real
estate investment trusts that are not readily marketable, or to invest in
interests of real estate limited partnerships that are not listed on the New
York Stock Exchange or the American Stock Exchange or traded on the NASDAQ
National Market System.
(vi i i) 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.
(i x ) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation.
(x) The fund does not currently intend to invest in oil, gas, or other mineral
exploration or development programs or leases.
(x i ) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities of
such issuer together own more than 5% of such issuer's securities.
(xi i ) 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.
For purposes of limitations (1) and (5) FMR identifies the issuer of a security
depending on its terms and conditions. In identifying the issuer, FMR will
consider the entity or entities responsible for payment of interest and
repayment of principal and the source of such payments; the way in which assets
and revenues of an issuing political subdivision are separated from those of
other political entities; and whether a governmental body is guaranteeing the
security.
For the fund's limitations on futures and options transactions, see the section
entitled "Limitations on Futures and Options Transactions" on page 9.
Limited Term will treat municipal obligations which have the option to require
the issuer to redeem within its portfolio maturity limitation of 12 years as
having remaining maturities within said limitation, even if the periods to the
stated maturity dates of such obligations are greater than the maturity
limitation of the fund.
INVESTMENT LIMITATIONS OF FIDELITY HIGH YIELD TAX-FREE PORTFOLIO
(HIGH YIELD)
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN
THEIR ENTIRETY. THE FUND MAY NOT:
(1) 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;
(2) issue senior securities, except as permitted under the Investment Company
Act of 1940;
(3) 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;
(4) 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;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities,
or tax-exempt obligations issued or guaranteed by a U.S. territory or possession
or a state or local government, or a political subdivision of any of the
foregoing) if, as a result, more than 25% of the fund's total assets would be
invested the securities of companies whose principal business activities are in
the same industry;
(6) 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);
(7) 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); or
(8) 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.
(9) 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.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) 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 (3)). 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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) The fund does not currently intend to invest more than 25% of its total
assets in industrial revenue bonds related to a single industry.
(vi) The fund does not currently intend to invest in interests of real estate
investment trusts that are not readily marketable, or to invest in interests in
real estate limited partnerships that are not listed on the New York Stock
Exchange or the American Stock Exchange or traded on the NASDAQ National Market
System.
(vii) The fund does not currently intend to engage in repurchase agreements or
make loans, but this limitation does not apply to purchases of debt securities.
(viii) 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.
(ix) The fund does not currently intend to purchase the securities of any issuer
(other than securities issued or guaranteed by domestic or foreign governments
or political subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of continuous
operation.
(x) The fund does not currently intend to invest in oil, gas, or other mineral
exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any issuer
if those officers and Trustees of the trust and those officers and directors of
FMR who individually own more than 1/2 of 1% of the securities of such issuer
together own more than 5% of such issuer's securities.
(xii) 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.
For purposes of limitations (1) and (5), FMR identifies the issuer of a security
depending on its terms and conditions. In identifying the issuer, FMR will
consider the entity or entities responsible for payment of interest and
repayment of principal and the source of such payments; the way in which assets
and revenues of an issuing political subdivision are separated from those of
other political entities; and whether a governmental body is guaranteeing the
security.
For the fund's limitations on futures and options transactions, see the section
entitled "Limitations on Futures and Options Transactions" on page .
INVESTMENT LIMITATIONS OF FIDELITY AGGRESSIVE TAX-FREE PORTFOLIO
(AGGRESSIVE TAX-FREE)
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN
THEIR ENTIRETY. THE FUND MAY NOT:
(1) 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;
(2) issue senior securities, except as permitted under the Investment Company
Act of 1940;
(3) 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;
(4) 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;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities,
or tax-exempt obligations issued or guaranteed by a U.S. territory or possession
or a state or local government, or a political subdivision of any of the
foregoing) if, as a result, more than 25% of the fund's total assets would be
invested the securities of companies whose principal business activities are in
the same industry;
(6) 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);
(7) 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); or
(8) 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 FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) 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.
(ii) 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.
(iii) 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 (3)). 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.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) The fund does not currently intend to invest more than 25% of its total
assets in industrial revenue bonds related to a single industry.
(vi) The fund does not currently intend to invest in interests of real estate
investment trusts that are not readily marketable, or to invest in interests in
real estate limited partnerships that are not listed on the New York Stock
Exchange or the American Stock Exchange or traded on the NASDAQ National Market
System.
(vii) The fund does not currently intend to engage in repurchase agreements or
make loans, but this limitation does not apply to purchases of debt securities.
(viii) 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.
(ix) The fund does not currently intend to purchase the securities of any issuer
(other than securities issued or guaranteed by domestic or foreign governments
or political subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of continuous
operation.
(x) The fund does not currently intend to invest in oil, gas, or other mineral
exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any issuer
if those officers and Trustees of the trust and those officers and directors of
FMR who individually own more than 1/2 of 1% of the securities of such issuer
together own more than 5% of such issuer's securities.
For purposes of limitations (1) and (5), FMR identifies the issuer of a security
depending on its terms and conditions. In identifying the issuer, FMR will
consider the entity or entities responsible for payment of interest and
repayment of principal and the source of such payments; the way in which assets
and revenues of an issuing political subdivision are separated from those of
other political entities; and whether a governmental body is guaranteeing the
security.
For the fund's limitations on futures and options transactions, see the section
entitled "Limitations on Futures and Options Transactions" on page .
Each fund's investments must be consistent with its investment objective and
policies. Accordingly, not all of the security types and investment techniques
discussed below are eligible investments for each of the funds.
AFFILIATED BANK TRANSACTIONS . A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks; short-term
obligations of, and repurchase agreements with, the 50 largest U.S. banks
(measured by deposits); municipal securities; U.S. government securities with
affiliated financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance with
exemptive orders issued by the Securities and Exchange Commission, the Board of
Trustees has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a commitment
by a fund to purchase or sell specific securities at a predetermined price or
yield, with payment and delivery taking place after the customary settlement
period for that type of security (and more than seven days in the future).
Typically, no interest accrues to the purchaser until the security is delivered.
The funds may receive fees for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until the
delivery date, these risks are in addition to the risks associated with the
fund's other investments. If a fund remains substantially fully invested at a
time when delayed-delivery purchases are outstanding, the delayed-delivery
purchases may result in a form of leverage. When delayed-delivery purchases are
outstanding, the fund will set aside appropriate liquid assets in a segregated
custodial account to cover its purchase obligations. When a fund has sold a
security on a delayed-delivery basis, the fund does not participate in further
gains or losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities, the
fund could miss a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are entered
into, and may sell underlying securities before they are delivered, which may
result in capital gains or losses.
REFUNDING CONTRACTS. The funds may purchase securities on a when-issued basis in
connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts require the issuer to sell and the fund to buy refunded
municipal obligations at a stated price and yield on a settlement date that may
be several months or several years in the future. The funds generally will not
be obligated to pay the full purchase price if they fail to perform under a
refunding contract. Instead, refunding contracts generally provide for payment
of liquidated damages to the issuer (currently 15-20% of the purchase price). A
fund may secure its obligations under a refunding contract by depositing
collateral or a letter of credit equal to the liquidated damages provisions of
the refunding contract. When required by SEC guidelines, each fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an index.
Changes in the interest rate on the other security or index inversely affect the
residual interest rate paid on the inverse floater, with the result that the
inverse floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond. The
interest rate on one instrument reflects short-term interest rates, while the
interest rate on the other instrument (the inverse floater) reflects the
approximate rate the issuer would have paid on a fixed-rate bond, multiplied by
two, minus the interest rate paid on the short-term instrument. Depending on
market availability, the two portions may be recombined to form a fixed-rate
municipal bond. The market for inverse floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation interests
in municipal instruments, have interest rate adjustment formulas that help
stabilize their market values. Many variable and floating rate instruments also
carry demand features that permit a fund to sell them at par value plus accrued
interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount thereof. A
fund considers variable rate instruments structured in this way (Participating
VRDOs) to be essentially equivalent to other VRDOs it purchases. The IRS has not
ruled whether the interest on Participating VRDOs is tax-exempt and,
accordingly, a fund intends to purchase these instruments based on opinions of
bond counsel. A fund may also invest in fixed-rate bonds that are subject to
third party puts and in participation interests in such bonds held by a bank in
trust or otherwise.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial arrangement)
with a tender agreement that gives the holder the option to tender the bond at
its face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate (determined by a remarketing or similar agent) that would cause the
bond, coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, a fund effectively holds
a demand obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and the
third party provider of the tender option. In certain instances, a sponsor may
terminate a tender option if, for example, the issuer of the underlying bond
defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are sold
at a deep discount from their face value and are redeemed at face value when
they mature. Because zero coupon bonds do not pay current income, their prices
can be very volatile when interest rates change. In calculating its daily
dividend, a fund takes into account as income a portion of the difference
between a zero coupon bond's purchase price and its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. Each fund may acquire standby
commitments to enhance the liquidity of portfolio securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party at any
time. A fund may purchase standby commitments separate from or in conjunction
with the purchase of securities subject to such commitments. In the latter case,
the fund would pay a higher price for the securities acquired, thus reducing
their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may rely
upon its evaluation of a bank's credit in determining whether to support an
instrument supported by a letter of credit. In evaluating a foreign bank's
credit, FMR will consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political or
economic developments, currency controls, or other governmental restrictions
that might affect the bank's ability to honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the commitments
are exercised; the fact that standby commitments are not marketable by the
funds; and the possibility that the maturities of the underlying securities may
be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations, which
may take the form of a lease, an installment purchase, or a conditional sale
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities. Generally, the funds will
not hold such obligations directly as a lessor of the property, but will
purchase a participation interest in a municipal obligation from a bank or other
third party. A participation interest gives a fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the total
amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states or municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt. Many leases and contracts include "non-appropriation clauses" providing
that the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in securities
whose interest is federally taxable; however, from time to time, each fund may
invest a portion of its assets on a temporary basis in fixed-income obligations
whose interest is subject to federal income tax. For example, each fund may
invest in obligations whose interest is federally taxable pending the investment
or reinvestment in municipal securities of proceeds from the sale of its shares
or sales of portfolio securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase agreements. The
funds' standards for high-quality taxable obligations are essentially the same
as those described by Moody's Investors Service, Inc. (Moody's) in rating
corporate obligations within its two highest ratings of Prime-1 and Prime-2, and
those described by Standard & Poor's Corporation (S&P) in rating corporate
obligations within its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax exemption for interest
on municipal obligations are introduced before Congress from time to time.
Proposals also may be introduced before state legislatures that would affect the
state tax treatment of the funds' distributions. If such proposals were enacted,
the availability of municipal obligations and the value of the funds' holdings
would be affected and the Trustees would reevaluate the funds' investment
objectives and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities of
portfolio securities, sales of fund shares, or in order to meet redemption
requests, a fund may hold cash that is not earning income. In addition, there
may be occasions when, in order to raise cash to meet redemptions, a fund may be
required to sell securities at a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a security
and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed-upon resale price, which
obligation is in effect secured by the value (at least equal to the amount of
the agreed-upon resale price and marked to market daily) of the underlying
security. A fund may engage in repurchase agreements with respect to any type of
security in which it is authorized to invest. While it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility that the value of the underlying securit y will be less
than the resale price , as well as delays and costs to a fund in connection
with bankruptcy proceedings), it is each fund's current policy to engage
in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund sells a
portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, a fund will
maintain appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreement. Each fund will enter into reverse repurchase
agreements only with parties whose creditworthiness has been found satisfactory
by FMR. Such transactions may increase fluctuations in the market value of a
fund's assets and may be viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, FMR determines the
liquidity of a fund's investments and, through reports from FMR, the Board
monitors investments in illiquid instruments. In determining the liquidity of a
fund's investments, FMR may consider various factors, including (1) the
frequency of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and (5) the
nature of the marketplace for trades (including the ability to assign or offset
the fund's rights and obligations relating to the investment).
Investments currently considered by a fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted securities and
municipal lease obligations to be illiquid. However, with respect to
over-the-counter options a fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover the
option and the nature and terms of any agreement the fund may have to close out
the option before expiration.
In the absence of market quotations, illiquid investments are priced at fair
value as determined in good faith by a committee appointed by the Board of
Trustees. If through a change in values, net assets, or other circumstances, a
fund were in a position where more than 10% its net assets were invested in
illiquid securities, it would seek to take appropriate steps to protect
liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
a fund may be obligated to pay all or part of the registration expense and a
considerable period may elapse between the time it decides to seek registration
and the time the fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a fund might obtain a less favorable price than prevailed when it
decided to seek registration of the security.
LOWER-QUALITY MUNICIPAL SECURITIES. Aggressive Tax-Free and High Yield may
invest a portion of their assets in lower-quality municipal securities as
described in the Prospectus.
While the market for municipals is considered to be adequate, adverse publicity
and changing investor perceptions may affect the ability of outside pricing
services used by a fund to value its portfolio securities, and the funds'
ability to dispose of lower-quality bonds. The outside pricing services are
monitored by FMR and reported to the Board to determine whether the services are
furnishing prices accurately reflect fair value. The impact of changing investor
perceptions may be especially pronounced in markets where municipal securities
are thinly traded.
Each fund may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the fund's shareholders.
INDEXED SECURITIES. Each fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, or other financial
indicators. Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference to a
specific instrument or statistic. Indexed securities may have principal payments
as well as coupon payments that depend on the performance of one or more
interest rates. Their coupon rates or principal payments may change by several
percentage points for every 1% interest rate change. One example of indexed
securities is inverse floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed, and
may also be influenced by interest rate changes. At the same time, indexed
securities are subject to the credit risks associated with the issuer of the
security, and their values may decline substantially if the issuer's
creditworthiness deteriorates. Indexed securities may be more volatile than the
underlying instruments.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each fund has filed a notice of
eligibility for exclusion from the definition of the term "commodity pool
operator" with the Commodity Futures Trading Commission (CFTC) and the National
Futures Association, which regulate trading in the futures markets. The funds
intend to comply with Rule 4.5 under the Commodity Exchange Act, which limits
the extent to which the funds can commit assets to initial margin deposits and
option premiums.
In addition, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% 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; or (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. 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.
The above limitations on the funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When a
fund sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take place
is fixed when the fund enters into the contract. Some currently available
futures contracts are based on specific securities, such as U.S. Treasury bonds
or notes, and some are based on indices of securities prices, such as the Bond
Buyer Municipal Bond Index. Futures can be held until their delivery dates, or
can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem with
the value of its underlying instrument. Therefore, purchasing futures contracts
will tend to increase a fund's exposure to positive and negative price
fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When a fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is not
required to deliver or pay for the underlying instrument unless the contract is
held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant (FCM), when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value. If the
value of either party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value on a daily
basis. The party that has a gain may be entitled to receive all or a portion of
this amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of a fund's investment limitations. In the
event of the bankruptcy of an FCM that holds margin on behalf of a fund, the
fund may be entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains the
right (but not the obligation) to sell the option's underlying instrument at a
fixed strike price. In return for this right, the fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of securities
prices, and futures contracts. The fund may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option. If
the option is allowed to expire, the fund will lose the entire premium it paid.
If the fund exercises the option, it completes the sale of the underlying
instrument at the strike price. A fund may also terminate a put option position
by closing it out in the secondary market at its current price, if a liquid
secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price. A call buyer
typically attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer can expect to suffer a loss if security prices do
not rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract, a fund will be
required to make margin payments to an FCM as described above for futures
contracts. A fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for a put option a fund has
written, however, the fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit, although
its gain would be limited to the amount of the premium it received. If security
prices remain the same over time, it is likely that the writer will also profit,
because it should be able to close out the option at a lower price. If security
prices fall, the put writer would expect to suffer a loss. This loss should be
less than the loss from purchasing the underlying instrument directly, however,
because the premium received for writing the option should mitigate the effects
of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. A fund may purchase and write options in combination with
each other, or in combination with futures or forward contracts, to adjust the
risk and return characteristics of the overall position. For example, a fund may
purchase a put option and write a call option on the same underlying instrument,
in order to construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined position
would involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in the
event of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or anticipated
investments exactly. The funds may invest in options and futures contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which they typically invest, which involves a risk that the
options or futures position will not track the performance of a fund's other
investments.
Options and futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments match a fund's investments well.
Options and futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instrument, and the time remaining until expiration of the contract, which may
not affect security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and the
securities markets, from structural differences in how options and futures and
securities are traded, or from imposition of daily price fluctuation limits or
trading halts. A fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases. If price changes in a fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular option or futures contract at any
particular time. Options may have relatively low trading volume and liquidity if
their strike prices are not close to the underlying instrument's current price.
In addition, exchanges may establish daily price fluctuation limits for options
and futures contracts, and may halt trading if a contract's price moves upward
or downward more than the limit in a given day. On volatile trading days when
the price fluctuation limit is reached or a trading halt is imposed, it may be
impossible for a fund to enter into new positions or close out existing
positions. If the secondary market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require a fund to continue to hold
a position until delivery or expiration regardless of changes in its value. As a
result, the fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of over-the-counter options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the funds greater flexibility to
tailor an option to their needs, OTC options generally involve greater credit
risk than exchange-traded options, which are guaranteed by the clearing
organization of the exchanges where they are traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will comply with
guidelines established by the Securities and Exchange Commission with respect to
coverage of options and futures strategies by mutual funds, and if the
guidelines so require will set aside appropriate liquid assets in a segregated
custodial account in the amount prescribed. Securities held in a segregated
account cannot be sold while the futures or option strategy is outstanding,
unless they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of a fund's assets could
impede portfolio management or the fund's ability to meet redemption requests or
other current obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive pressures.
Federal legislation in the last two years will open transmission access to any
electricity supplier, although it is not presently known to what extent
competition will evolve. Other risks include: (a) the availability and cost of
fuel, (b) the availability and cost of capital, (c) the effects of conservation
on energy demand, (d) the effects of rapidly changing environmental, safety, and
licensing requirements, and other federal, state, and local regulations, (e)
timely and sufficient rate increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory action
by a number of private and governmental agencies, including federal, state, and
local governmental agencies. A major source of revenues for the health care
industry is payments from the Medicare and Medicaid programs. As a result, the
industry is sensitive to legislative changes and reductions in governmental
spending for such programs. Numerous other factors may affect the industry, such
as general and local economic conditions; demand for services; expenses
(including malpractice insurance premiums); and competition among health care
providers. In the future, the following elements may adversely affect health
care facility operations: adoption of legislation proposing a national health
insurance program; other state and local health care reform measures; medical
and technological advances which dramatically alter the need for health services
or the way in which such services are delivered; changes in medical coverage
which alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of health
insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county, city,
local housing authority, or other public agency. They are secured by the
revenues derived from mortgages purchased with the proceeds of the bond issue.
It is extremely difficult to predict the supply of available mortgages to be
purchased with the proceeds of an issue or the future cash flow from the
underlying mortgages. Consequently, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner repayments
will create an irregular cash flow. Many factors may affect the financing of
multi-family housing projects, including acceptable completion of construction,
proper management, occupancy and rent levels, economic conditions, and changes
to current laws and regulations.
EDUCATION. In general, there are two types of education-related bonds; those
issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans. Bonds
issued to supply educational institutions with funds are subject to the risk of
unanticipated revenue decline, primarily the result of decreasing student
enrollment or decreasing state and federal funding . Among the factors
that may lead to declining or insufficient revenues are restrictions on
students' ability to pay tuition, availability of state and federal funding, and
general economic conditions. Student loan revenue bonds are generally offered by
state (or substate) authorities or commissions and are backed by pools of
student loans. Underlying student loans may be guaranteed by state guarantee
agencies and may be subject to reimbursement by the United States Department of
Education through its guaranteed student loan program. Others may be private,
uninsured loans made to parents or students which are supported by reserves or
other forms of credit enhancement. recoveries of principal due to loan defaults
may be applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of student
loan defaults, seasoning of the loan portfolio, and student repayment deferral
periods of forbearance. Other risks associated with student loan revenue bonds
include potential changes in federal legislation regarding student loan revenue
bonds, state guarantee agency reimbursement and continued federal interest and
other program subsidies currently in effect.
WATER AND SEWER. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack of
water supply due to insufficient rain, run-off, or snow pack is a concern that
has led to past defaults. Further, costly environmental litigation and Federal
environmental mandates are challenges faced by issuers of water and sewer
bonds.
TRANSPORTATION. Transportation debt may be issued to finance the construction
of airports, toll roads, or highways. Airport bonds are dependent on the general
stability of the airline industry and on the stability of a specific carrier who
uses the airport as a hub. Air traffic generally tracks broader economic trends
and is also affected by the price and availability of fuel. Toll road bonds are
also affected by the cost and availability of fuel as well as toll levels, the
presence of competing roads, and the general economic health of the area. Fuel
costs and availability also affect other transportation-related securities, as
does the presence of alternate forms of transportation, such as public
transportation.
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 each fund's
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 considers 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.
The funds 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 generally is made by FMR (to the extent
possible consistent with execution considerations) 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 each 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), a subsidiary
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, unless certain requirements are
satisfied. Pursuant to such requirements, the Board of Trustees has authorized
FBSI to execute portfolio transactions on national securities exchanges in
accordance with approved procedures and applicable SEC rules.
Each fund's 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 the fund.
For the fiscal years ended November 30, 1994 and 1993 (High Yield) and December
31, 1994 and 1993 (Aggressive Tax-Free and Limited Term), the portfolio turnover
rates were as follows:
1994 1993
Limited Term 30 % 111 %
High Yield 48 % 53 %
Aggressive Tax-Free 40 % 54 %
For fiscal 1994, 1993, and 1992, the funds paid no brokerage commissions.
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 the funds 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
each fund to seek such recapture.
Although the Trustees and officers of each fund 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 and accounts are managed by the same
investment adviser, particularly when the same security is suitable for the
investment objective of more than one fund or account.
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
procedures believed to be appropriate and equitable for each fund. In some cases
this system could have a detrimental effect on the price or value of the
security as far as each fund is concerned. In other cases, however, the ability
of the funds to participate in volume transactions will produce better
executions and prices for the funds. It is the current opinion of the Trustees
that the desirability of retaining FMR as investment adviser to each fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Valuations of portfolio securities furnished by the pricing service employed by
the funds are based upon a computerized matrix system or appraisals by the
pricing service, in each case in reliance upon information concerning market
transactions and quotations from recognized municipal securities dealers. The
methods used by the pricing service and the quality of valuations so established
are reviewed by officers of the funds and FSC under the general supervision of
the Trustees. There are a number of pricing services available and the Trustees,
on the basis of on-going evaluation of these services, may use other pricing
services or discontinue the use of any pricing service in whole or in part.
PERFORMANCE
The funds may quote performance in various ways. All performance information
supplied by the funds in advertising is historical and is not intended to
indicate future returns. Each fund's share price, yield, and total return
fluctuate in response to market conditions and other factors, and the value of
fund shares when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for a fund are computed by dividing the fund's
interest income for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive distributions during the period,
dividing this figure by the fund's net asset value (NAV) at the end of the
period, and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Yields for Aggressive Tax-Free do not
reflect the fund's 1% redemption fee, which applies to shares held less than 180
days. Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. In general,
interest income is reduced with respect to bonds trading at a premium over their
par value by subtracting a portion of the premium from income on a daily basis,
and is increased with respect to bonds trading at a discount by adding a portion
of the discount to daily income. Capital gains and losses generally are excluded
from the calculation.
Income calculated for the purposes of calculating a fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding of income assumed in
yield calculations, a fund's yield may not equal its distribution rate, the
income paid to your account, or the income reported in the fund's financial
statements.
In calculating a fund's yield, the fund may from time to time use a portfolio
security's coupon rate instead of its yield to maturity in order to reflect the
risk premium on that security. This practice will have the effect of reducing
the fund's yield.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives. However,
each fund's yield fluctuates, unlike investments that pay a fixed interest rate
over a stated period of time. When comparing investment alternatives, investors
should also note the quality and maturity of the portfolio securities of
respective investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates a fund's
yield will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the fund's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to a
fund from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the fund's holdings,
thereby reducing the fund's current yield. In periods of rising interest rates,
the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn from a
fully taxable investment after taxes to equal the fund's tax-free yield.
Tax-equivalent yields are calculated by dividing a fund's yield by the result of
one minus a stated federal or combined federal and state tax rate. If only a
portion of a fund's yield is tax-exempt, only that portion is adjusted in the
calculation.
The following table shows the effect of a shareholder's tax status on effective
yield under federal income tax laws for 1994. It shows the approximate yield a
taxable security must provide at various income brackets to produce after-tax
yields equivalent to those of hypothetical tax-exempt obligations yielding from
4% to 8 %. Of course, no assurance can be given that a fund will achieve
any specific tax-exempt yield. While the funds invest principally in obligations
whose interest is exempt from federal income tax, other income received by the
funds may be taxable.
199 5 TAX RATES AND TAX-EQUIVALENT YIELDS
Federal If individual tax-exempt yield is:
Taxable Income* Tax 4% 5% 6% 7% 8%
Single Return Joint Return Bracket** Then taxable-equivalent yield is:
1 $ 23,351 - $ 56,550 $ 39,001 - $ 94,250 28% 5.56% 6.94% 8.33% 9.72%
11.11%
2 $ 56,551 - $117,950 $ 94,251 - $143,600 31% 5.80 7.25 8.70 10.14 11.59
3 $117,951 - $256,500 $143,601 - $256,500 36% 6.25 7.81 9.38 10.94 12.50
4 $256,501 + above $256,501 + above 39.6% 6.62 8.28 9.93 11.59 13.25
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitation on
itemized deductions, and other credits, exclusions, and adjustments which may
increase a taxpayer's marginal tax rate. An increase in a shareholder's marginal
tax rate would increase that shareholder's tax-equivalent yield.
A fund may invest a portion of its assets in obligations that are subject to
federal income tax. When a fund invests in these obligations, its tax-equivalent
yields will be lower. In the table above, tax-equivalent yields are calculated
assuming investments are 100% federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the fund's NAV over a stated
period. Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in a fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative total return of 100% over
ten years would produce an average annual total return of 7.18%, which is the
steady annual rate of return that would equal 100% growth on a compounded basis
in ten years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that a fund's performance is
not constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, or a series of redemptions, over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before-tax or after-tax basis. Total
returns quoted for Aggressive Tax-Free may or may not include the effect of the
fund's 1% redemption fee on shares held less than 180 days. Excluding the fund's
redemption fee from a total return calculation produces a higher total return
figure. Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUES. Charts and graphs using a fund's net asset values, adjusted
net asset values, and benchmark indices may be used to exhibit performance. An
adjusted NAV includes any distributions paid by a fund and reflects all elements
of its return. Unless otherwise indicated, a fund's adjusted NAVs are not
adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table shows each fund's yields,
tax-equivalent yields, and total returns for periods ended November 30, 1994
(High Yield) and December 31, 1994 (Aggressive Tax-Free and Limited Term). Total
return figures for Aggressive Tax-Free do not include the effect of the fund's
1% redemption fee on shares held less than 180 days.
The tax-equivalent yield is based on a 36% federal income tax rate. Note that
each fund may invest in securities whose income is subject to the federal
alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Day Tax One Five Ten One Five Ten
Equivalent
Yield Yield Year Years Years Year Years Years
Limited Term 5.85% 9.14% -4.76% 6.58% 8.17% -4.76% 37.52% 119.32%
High Yield 6.94 10.84 -7.74 5.93 9.04 -7.74 33.38 137.57
Aggressive
Tax-Free* 7.15 11.17 -5.82 7.02 9.29 -5.82 40.36 128.62
</TABLE>
* Ten-year figures for this fund actually represent life of fund figures, from
September 13, 1985 (commencement of operations) through December 31, 1994.
Note: If FMR had not reimbursed certain fund expenses during these periods,
Aggressive Tax-Free's and Limited Term's total returns would have been lower.
The following tables show the income and capital elements of each fund's
cumulative total return. The tables compare each fund's return to the record of
the Standard & Poor's Composite Index of 500 Stocks (S&P 500(registered
trademark)), the Dow Jones Industrial Average (DJIA), and the cost of living
(measured by the Consumer Price Index, or CPI) over the same period. The CPI
information is as of the month end closest to the initial investment date for
each fund. The S&P 500 and DJIA comparisons are provided to show how each fund's
total return compared to the record of a broad average of common stocks and a
narrower set of stocks of major industrial companies, respectively, over the
same period. Of course, since each fund invests in fixed-income securities,
common stocks represent a different type of investment from the fund. Common
stocks generally offer greater growth potential than the funds, but generally
experience greater price volatility, which means greater potential for loss. In
addition, common stocks generally provide lower income than a fixed-income
investment such as the funds. Figures for the S&P 500 and DJIA are based on the
prices of unmanaged groups of stocks and, unlike the funds' returns, do not
include the effect of paying brokerage commissions or other costs of investing.
LIMITED TERM. During the ten year period ended December 31, 1994, a hypothetical
$10,000 investment in Limited Term would have grown to $21,932 , assuming
all distributions were reinvested. This was a period of fluctuating interest
rates and bond prices and the figures below should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
LIMITED TERM INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total S&P of
December 31 Investment Distributions Distributions Value 500 DJIA Living
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 11,031 $ 9,809 $ 1,092 $ 21,932 $ 38,358 $ 44,527 $ 14,217
1993 12,258 9,603 1,167 23,028 37,859 42,418 13,846
1992 11,779 8,136 602 20,517 34,393 36,257 13,476
1991 11,681 6,900 387 18,968 31,951 33,791 13,096
1990 11,374 5,594 91 17,059 24,486 27,176 12,707
1989 11,423 4,525 0 15,948 25,274 27,323 11,975
1988 11,325 3,466 0 14,791 19,193 20,737 11,443
1987 11,166 2,502 0 13,668 16,459 17,889 10,959
1986 11,755 1,759 0 13,513 15,636 16,967 10,494
1985 10,8 96 836 0 11,732 13,175 13,356 10,380
</TABLE>
Explanatory Notes: With an initial investment of $10,000 made on December 31,
1984, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested), amounted to $ 21,365 . If
distributions had not been reinvested, the amount of distributions earned from
the fund over time would have been smaller, and cash payments for the period
would have amounted to $ 7,200 for dividends and $ 687 for capital
gains distributions. Tax consequences of different investments have not been
factored into the above figures.
HIGH YIELD. During the ten year period ended November 30, 1994, a hypothetical
$10,000 investment in High Yield would have grown to $ 23,757 , assuming
all distributions were reinvested. This was a period of fluctuating interest
rates and bond prices and the figures below should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
HIGH YIELD INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total S&P of
November 30 Investment Distributions Distributions Value 500 DJIA Living
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 10,036 $11,043 $ 2,678 $ 23,757 $ 38,795 $ 44,332 $ 14,236
1993 12,027 11,511 2,212 25,751 38,394 42,501 13,846
1992 11,564 9,667 1,779 23,009 34,872 37,054 13,485
1991 11,536 8,223 1,503 21,263 29,428 31,509 13,086
1990 11,464 6,800 1,134 19,398 24,451 26,939 12,707
1989 11,636 5,582 593 17,811 25,333 27,398 11,956
1988 11,100 4,165 553 15,818 19,361 20,628 11,425
1987 10,682 2,918 532 14,131 15,699 17,258 10,959
1986 12,518 2,228 43 14,789 16,469 17,477 10,484
1985 11,173 1,029 0 12,201 12,899 12,966 10,351
</TABLE>
Explanatory Notes: With an initial investment of $10,000 made on November 30,
1984, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested), amounted to $ 25,577 . If
distributions had not been reinvested, the amount of distributions earned from
the fund over time would have been smaller, and cash payments for the period
would have amounted to $ 7,988 for dividends and $ 1,855 for capital
gains distributions. Tax consequences of different investments have not been
factored into the above figures.
AGGRESSIVE TAX-FREE. During the period from September 13, 1985 (commencement of
operations) to December 31, 1994, a hypothetical $10,000 investment in
Aggressive Tax-Free would have grown to $ 22,862 , assuming all
distributions were reinvested. This was a period of fluctuating interest rates
and bond prices and the figures below should not be considered representative of
the dividend income or capital gain or loss that could be realized from an
investment in the fund today.
AGGRESSIVE TAX-FREE INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Period Ended $10,000 Dividend Capital Gain Total S&P of
December 31 Investment Distributions Distributions Value 500 DJIA
Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 10,810 $ 11,094 $ 958 $ 22,862 $ 33,897 $ 39,775 $ 13,861
1993 12,330 10,951 994 24,275 33,456 37,891 13,500
1992 11,880 9,152 330 21,362 30,393 32,388 13,139
1991 11,800 7,669 99 19,568 28,234 30,185 12,769
1990 11,430 6,077 0 17,507 21,638 24,276 12,389
1989 11,490 4,798 0 16,288 22,334 24,407 11,676
1988 11,330 3,544 0 14,874 16,961 18,524 11,157
1987 10,820 2,296 0 13,116 14,545 15,979 10,685
1986 11,560 1,373 0 12,933 13,818 15,156 10,231
1985* 10,660 324 0 10,984 11,643 11,931 10,120
</TABLE>
* From commencement of operations, September 13, 1985.
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on September 13,
1985, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested), amounted to $ 22,882 . If
distributions had not been reinvested, the amount of distributions earned from
the fund over time would have been smaller, and cash payments for the period
would have amounted to $ 8,057 for income dividends and $ 580 for
capital gain distributions. Tax consequences of different investments have not
been factored into the above figures. The figures shown above do not reflect the
fund's 1% redemption fee applicable to shares held less than 180 days.
A fund's performance may be compared to the performance of other mutual funds in
general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service located in Summit,
New Jersey that monitors the performance of mutual funds. Lipper generally ranks
funds on the basis of total return, assuming reinvestment of distributions, but
does not take sales charges or redemption fees into consideration, and is
prepared without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, a fund's performance may be
compared to stock, bond, and money market mutual fund performance indices
prepared by Lipper or other organizations . When comparing these indices, it is
important to remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher potential
returns, they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally do
not offer the higher potential returns from stock mutual funds.
From time to time, a fund's performance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of
Fidelity funds to one another in appropriate categories over specific periods of
time may also be quoted in advertising.
A fund may be compared to advertising to Certificates of Deposit (CDs) or other
investments issued by banks or other depository institutions. Mutual funds
differ from bank investments in several respects. For example, a fund may offer
greater liquidity or higher potential returns than CDs, a fund does not
guarantee your principal or your return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals understand their
investment goals and explore various financial strategies. Such information may
include information about current economic, market, and political conditions;
materials that describe general principles of investing, such as asset
allocation, diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used to project
savings needs based on assumed rates of inflation and hypothetical rates of
return; and action plans offering investment alternatives. Materials may also
include discussions of Fidelity's asset allocation funds and other Fidelity
funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the funds.
Ibbotson calculates total returns in the same method as the funds. The funds may
also compare performance to that of other compilations or indices that may be
developed and made available in the future.
A fund may compare its performance or the performance of securities in which it
may invest to averages published by IBC USA (Publications), Inc. of Ashland,
Massachusetts. These averages assume reinvestment of distributions. The Bond
Fund Report AverageS(trademark)/Municipal, which is reported in the BOND FUND
REPORT(registered trademark), covers over 432 tax-free bond funds. When
evaluating comparisons to money market funds, investors should consider the
relevant differences in investment objectives and policies. Specifically, money
market funds invest in short-term, high-quality instruments and seek to maintain
a stable $1.00 share price. The funds, however, invest in longer-term
instruments and their share prices change daily in response to a variety of
factors.
A fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike tax-free
mutual funds, individual municipal bonds offer a stated rate of interest and, if
held to maturity, repayment of principal. Although some individual municipal
bonds might offer a higher return, they do not offer the reduced risk of a
mutual fund that invests in many different securities. The initial investment
requirements and sales charges of many tax-free mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally issued in
$5,000 denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products and
services, which may include: other Fidelity funds; retirement investing;
brokerage products and services; the effects of periodic investment plans and
dollar cost averaging; saving for college or other goals; charitable giving; and
the Fidelity credit card. In addition, Fidelity may quote financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability of
owning a particular mutual fund, and Fidelity services and products. Fidelity
may also reprint, and use as advertising and sales literature, articles from
Fidelity Focus, a quarterly magazine provided free of charge to Fidelity fund
shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP number,
and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these measures to
those of other funds. Measures of volatility seek to compare the fund's
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. All measures of volatility and correlation are calculated using averages of
historical data. In advertising, a fund may also discuss or illustrate examples
of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific periods of
time. Each point on the momentum indicator represents the fund's percentage
change in price movements over that period.
A fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
As of December 31, 1994, FMR advised over $ 25 billion in tax-free fund
assets, $ 65 billion in money market fund assets, $ 165 billion in
equity fund assets, $ 35 billion in international fund assets, and
$ 20 billion in Spartan fund assets. The funds may reference the growth
and variety of money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management figure
represents the largest amount of equity fund assets under management by a mutual
fund investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain a
worldwide information and communications network for the purpose of researching
and managing investments abroad.
In addition to performance rankings, each fund may compare its total expense
ratio to the average total expense ratio of similar funds tracked by Lipper
Analytical fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading. The
NYSE has designated the following holiday closings for 1995: New Year's Day
(observed), President's Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Although FMR expects the same holiday schedule to be observed in the future, the
NYSE may modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE (normally
4:00 p.m. Eastern time). However, NAV may be calculated earlier if trading on
the NYSE is restricted or as permitted by the Securities and Exchange Commission
(SEC). To the extent that portfolio securities are traded in other markets on
days when the NYSE is closed, a fund's NAV may be affected on days when
investors do not have access to the fund to purchase or redeem shares. In
addition, trading in some of a fund's portfolio securities may not occur on days
when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in securities
or other property, valued for this purpose as they are valued in computing a
fund's NAV. Shareholders receiving securities or other property on redemption
may realize a gain or loss for tax purposes, and will incur any costs of sale,
as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may be
waived if (i) the only effect of a modification would be to reduce or eliminate
an administrative fee, redemption fee, or deferred sales charge ordinarily
payable at the time of an exchange, or (ii) the fund suspends the redemption of
the shares to be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of its
shares because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the U.S.
Postal Service cannot deliver your checks, or if your checks remain uncashed for
six months, Fidelity may reinvest your distributions at the then-current NAV.
All subsequent distributions will then be reinvested until you provide Fidelity
with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also federally
tax-exempt. Short-term capital gains are distributed as dividend income, but do
not qualify for the dividends-received deduction. These gains will be taxed as
ordinary income. Each fund will send each shareholder a notice in January
describing the tax status of dividends and capital gain distributions (if any)
for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security benefits,
may be subject to federal income tax on up to 85% of such benefits to the extent
that their income, including tax-exempt income, exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation fails
to comply with its covenant at any time, interest on the obligation could become
federally taxable retroactive to the date the obligation was issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for other tax
purposes. Interest from private activity securities will be considered
tax-exempt for purposes of the funds' policies of investing so that at least 80%
of its assets are invested in federally tax-exempt municipal securities (Limited
Term and Aggressive Tax-Free), and at least 80% of its income is free from
federal income tax (High Yield). Interest from private activity securities is a
tax-preference item for the purposes of determining whether a taxpayer is
subject to the AMT and the amount of AMT to be paid, if any. Private activity
securities issued after August 7, 1986 to benefit a private or industrial user
or to finance a private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April 30,
1993 and short-term capital gains distributed by each fund are taxable to
shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds purchased
with market discount after April 30, 1993 are not considered income for purposes
of High Yield's policy of investing so that at least 80% of its income is free
from federal income tax.
It is the current position of the staff of the Securities and Exchange
Commission that a fund which uses the word "tax-free" in its name may not derive
more than 20% of its income from municipal obligations that pay interest that is
a preference item for purposes of the AMT. According to this position, at least
80% of Aggressive Tax-Free and High Yield's income distributions would have to
be exempt from the AMT as well as exempt from federal income taxes.
Corporate investors should note that a tax preference item for purposes of the
corporate AMT is 75% of the amount by which adjusted current earnings (which
includes tax-exempt interest) exceeds the alternative minimum taxable income of
the corporation. If a shareholder receives an exempt-interest dividend and sells
shares at a loss after holding them for a period of six months or less, the loss
will be disallowed to the extent of the amount of exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each fund on the
sale of securities and distributed to shareholders are federally taxable as
long-term capital gains, regardless of the length of time shareholders have held
their shares. If a shareholder receives a long-term capital gain distribution on
shares of a fund, and such shares are held six months or less and are sold at a
loss, the portion of the loss equal to the amount of the long-term capital gain
distribution will be considered a long-term loss for tax purposes. Short-term
capital gains distributed by each fund are taxable to shareholders as dividends,
not as capital gains.
For the year ended December 31, 1994, Aggressive Tax-Free and Limited Term
had a capital loss carry over of approximately $1,443,700 and $4,136,000,
respectively, each of which will expire on December 31, 2002. For the year ended
November 30, 1994 High Yield Tax-Free had a capital loss carryover of
approximately $5,114,000 which will expire on November 30, 2002. To the extent
that capital loss carryovers are used to offset any future capital gains, it is
unlikely that the gains so offset will be distributed to shareholders since any
such distributions may be taxable to shareholders as ordinary income.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a "regulated
investment company" for tax purposes so that it will not be liable for federal
tax on income and capital gains distributed to shareholders. In order to qualify
as a regulated investment company and avoid being subject to federal income or
excise taxes at the fund level, each fund intends to distribute substantially
all of its net investment income and net realized capital gains within each
calendar year as well as on a fiscal year basis. Each fund intends to comply
with other tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than three
months constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some futures contracts and options are included in this 30%
calculation, which may limit the fund's investment in such instruments.
Limited Term is treated as a separate entity from the other funds of Fidelity
School Street Trust for tax purposes. High Yield is treated as a separate entity
from the other funds of Fidelity Court Street Trust for tax purposes. Aggressive
Tax-Free is treated as a separate entity from the other funds of Fidelity
Municipal Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of the
tax consequences generally affecting each fund and its shareholders, and no
attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on
fund distributions, and shares may be subject to state and local personal
property taxes. Investors should consult their tax advisers to determine whether
a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the execution of
a shareholders' voting agreement, Edward C. Johnson 3d, Johnson family members,
and various trusts for the benefit of the Johnson family form a controlling
group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those conducted
by three of its divisions as follows: FSC, which is the transfer and shareholder
servicing agent for certain of the funds advised by FMR; Fidelity Investments
Institutional Operations Company, which performs shareholder servicing functions
for institutional customers and funds sold through intermediaries; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own account
pursuant to a code of ethics that sets forth all employees' fiduciary
responsibilities regarding the funds, establishes procedures for personal
investing and restricts certain transactions. For example, all personal
trades in most securities require pre-clearance, and participation in
initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trusts are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. All persons named as Trustees and officers
also serve in similar capacity for other funds advised by FMR. Unless otherwise
noted, the business address of each Trustee and officer is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. Those Trustees
who are "interested persons" (as defined by the 1940 Act) by virtue of their
affiliation with either a trust of FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board and of
the Executive Committee of FMR; Chairman and a Director of FMR Texas Inc.
(1989), Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR; and
President and a Director of FMR Texas Inc. (1989), Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he was
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief Operating
Officer of Union Pacific Resources Company (exploration and production). He is a
Director of Sanifill Corporation (non-hazardous waste, 1993) 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, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior to
her retirement in September 1991, Mrs. Davis was the Senior Vice President of
Corporate Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing,
1991), and the TJX Companies, Inc. (retail stores, 1990), and previously served
as a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The University
of Vermont School of Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a Director
of 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.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990). Prior
to his retirement in 1984, Mr. Jones was Chairman and Chief Executive Officer of
LTV Steel Company. Prior to May 1990, he was 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, a Trustee and member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT, Trustee,
is a Professor at Columbia University Graduate School of Business and a
financial consultant. Prior to 1987, he was Chairman of the Financial 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, Trustee (1990) is Vice Chairman of FMR (1992). Prior to his
retirement on May 31, 1990, he was a Director of FMR (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 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, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to his
retirement in July 1988, 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, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior to his
retirement in 1985, Mr. Malone was Chairman, General Electric Investment
Corporation and a Vice President of General Electric Company. He is a Director
of Allegheny Power Systems, Inc. (electric utility), General Re Corporation
(reinsurance) and Mattel Inc. (toy manufacturer). In addition, he serves as a
Trustee of Corporate Property Investors, the EPS Foundation at Trinity College,
the Naples Philharmonic Center for the Arts, and Rensselaer Polytechnic
Institute, and he is a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is Chairman of
the Board, President, and Chief Executive Officer of Lexmark International, Inc.
(office machines, 1991). Prior to 1991, he held the positions of Vice President
of International Business Machines Corporation ("IBM") and President and General
Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of
M.A. Hanna Company (chemicals, 1993) 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, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as Chairman
of the Board of First Wachovia Corporation (bank holding company), and Chairman
and Chief Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a 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).
ANNE PUNZAK, is manager and Vice President of Aggressive Tax-Free and High Yield
Tax-Free, which she has managed since January 1986 and October 1993,
respectively. She also manages Spartan Florida Municipal Income. Previously, she
managed Insured Tax-Free. Ms. Punzak joined Fidelity in 1984.
DAVID MURPHY, is manager and Vice President of Limited Term Municipals, which he
has managed since December 1989. Mr. Murphy also manages Spartan California
Intermediate Municipal, Spartan Intermediate Municipal, Spartan New Jersey
Municipal High Yield, Spartan New York Intermediate Municipal, and Spartan
Short-Intermediate Municipal. Mr. Murphy joined Fidelity in 1989.
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the Fidelity
funds, Mr. French was Senior Vice President, Fund Accounting - Fidelity
Accounting & Custody Services Co. (1991); Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1990); and Senior Vice President,
Chief Financial and Operations Officer - Huntington Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of FDC.
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994). Prior
to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was Chief
Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer of Fidelity
Brokerage Services, Inc. (1990-1993); and Vice President, Assistant Controller,
and Director of the Accounting Department - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current non-interested trustee of each fund for his or her services as
trustee for the fiscal year ended December 31, 1994 (Limited Term and Aggressive
Tax-Free) and November 30, 1994 (High Yield).
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Phyllis Richard E. Donald Gerald C. Edward Marvin Thomas
Cox Burke J. Flynn Bradley J. Kirk McDonough H. L. Mann R.
Davis Jones Malone Williams
Limited Term $ 521 $ 513 $ 643 $ 515 $ 517 $ 523 $ 534 $ 523 $ 528
High Yield 989 968 1,188 964 976 988 999 987 973
Aggressive 440 432 543 435 436 441 451 441 446
Tax-Free
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
from the Fund the Fund Complex*
Complex* Complex*
Ralph F. Cox $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABLE>
* Information is as December 31, 1994 for the 206 funds in the complex.
Under a retirement program adopted in July 1988, the non-interested Trustees,
upon reaching age 72, become eligible to participate in a retirement program
under which they receive payments during their lifetime from a fund based on
their basic trustee fees and length of service. The obligation of a fund to make
such payments are not secured or funded. Trustees become eligible if, at the
time of retirement, they have served on the Board for at least five years.
Currently, Messrs. Ralph S. Saul, William R. Spaulding, Bertram H. Witham, and
David L. Yunich, all former non-interested Trustees, receive retirement benefits
under the program
As of December 31, 1994, the Trustees and officers of the funds owned, in the
aggregate, less than 1 % of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
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 each fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel of each
fund or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of each fund. These services include providing
facilities for maintaining each fund's organizati on; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with each fund ; preparing all
general shareholder communications and conducting shareholder relations;
maintaining each fund's records and the registration of each fund's
shares under federal and state laws ; developing management and
shareholder services for each fund; and furnishing reports, evaluations,
and analyses on a variety of subjects to the Trustees.
In addition to the management fee payable to FMR and the fees payable to United
Missouri, 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 s to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although each fund's current
management contract provides that each fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to shareholders, each trust, on behalf its
respective fund has entered into a revised sub-transfer agent agreement with
United Missouri , pursuant to which United Missouri bears the
costs of providing these services to existing shareholders. Other
expenses paid by each fund include interest, taxes, brokerage
commissions, and each fund's proportionate share of insurance premiums
and Investment Company Institute dues . Each fund is also liable for such
nonrecurring expenses as may arise, including costs of any litigation to which
each fund may be a party and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
FMR is Limited Term's manager pursuant to a management contract dated January 1,
1995, which was approved by shareholders on December 14, 1994. FMR is High
Yield's manager pursuant to a management contract dated December 1, 1994, which
was approved by shareholders on November 16, 1994. FMR is Aggressive Tax-Free's
manager pursuant to a management contract dated March 1, 1993, which was
approved by shareholders on February 17, 1993.
For the services of FMR under its management contract, Limited Term pays a
monthly management fee to FMR at the annual rate of .10% of the fund's average
net assets throughout the month plus 5% of the fund's gross income throughout
the month. For this purpose, gross income includes interest accrued on portfolio
obligations, adjusted for amortization of purchase premium, but excludes
adjustments for purchase discount on portfolio obligations. Prior to January 1,
1995, the date of the contract, Limited Term paid FMR a monthly management fee
at an annual rate of .15% of its average net assets throughout the month plus 5%
of its gross income throughout the month. Effective July 1, 1993, FMR
voluntarily agreed to limit the management fee of Limited Term to that reflected
in its current management contract.
For the services of FMR under the contract, Aggressive Tax-Free and High
Yield each pays FMR a monthly management fee composed of the sum of two
elements: a group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated fee rate schedule
shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels which is the result of
cumulatively applying the annualized rates on the left. For example, the
effective annual fee rate at $ 271.8 billion of group net assets - their
approximate level for December 1994 - was .1563 %, which is the weighted
average of the respective fee rates for each level of group net assets up to
$ 271.8 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 0 - 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
Prior to December 1, 1994 for High Yield and under Aggressive Tax-Free's current
management contract with FMR, the group fee rate is based on a schedule with
breakpoints ending at .1400% for average group assets in excess of $174 billion.
The group fee rate breakpoints shown above for average group assets in excess of
$120 billion and under $228 billion were voluntarily adopted by FMR , and went
into effect on January 1, 1992. The additional breakpoints shown above for
average group assets in excess of $228 billion were voluntarily adopted by FMR
on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the group fee
rate schedule, and added new breakpoints. The revised group fee rate schedule
provides for lower management fee rates as FMR's assets under management
increase. High Yield's current management contract and the revised group fee
rate schedule for Aggressive Tax-Free is identical to the above group fee rate
schedule for average group assets under $156 billion and to the group fee rate
schedule shown on page for average group assets in excess of $156
billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
120 - $156 billion .1450% $150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
Over 372 .1200 325 .1514
350 .1494
375 .1476
400 .1459
The individual fund fee rate is .30% for Aggressive Tax-Free and .25% for High
Yield. Based on the average net assets of the funds advised by FMR for
December 1994, the annual management fee rate would be calculated as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
High Yield .1563% + .25% = .4063%
Aggressive Tax-Free .1563% + .30% = .4563%
</TABLE>
One twelfth of this annual management fee rate is then applied to each fund's
average net assets for the most recent month, giving a dollar amount
which is the fee for that month.
The tables below show the management fees paid to FMR by each fund for the
last three fiscal years:
<TABLE>
<CAPTION>
<S> <C> <C>
Limited Term Management Fees as a
Years Ended, December 31 Management Fees % of Average Net Assets
1994 $ 4,081,000 .3985
1993 $ 4,805,000 .4090
1992 $ 3,921,000 .4739
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
High Yield Management Fees as a
Years Ended, November 30 Management Fees % of Average Net Assets
1994 $ 7,976,000 .4093
1993 $ 8,997,000 .4162
1992 $ 8,600,000 .4224
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Aggressive Tax-Free Management Fees as a
Years Ended, December 31 Management Fees % of Average Net Assets
1994 $ 4,042,000 .4589
1993 $ 4,149,000 .4652
1992 $ 3,354,000 .4716
</TABLE>
FMR may, from time to time, voluntarily reimburse all or a portion of each
fund's operating expenses (exclusive of interest, taxes, brokerage commissions,
and extraordinary expenses). FMR retains the ability to be repaid for these
expense reimbursements in the amount that expenses fall below the limit prior to
the end of the fiscal year. Expense reimbursements by FMR will increase each
fund's total returns and yield and repayment of the reimbursement by each fund
will lower its total returns and yield.
To comply with the California Code of Regulations, FMR will reimburse each fund
if and to the extent that the fund's aggregate 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, the fund may exclude interest, taxes, brokerage
commissions, and extraordinary expenses, as well as a portion of its
distribution plan expenses.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a distribution and service plan (the plan) under Rule
12b-1 under the Investment Company Act of 1940 (the Rule). The Rule provides in
substance that a mutual fund may not engage directly or indirectly in financing
any activity that is primarily intended to result in the sale of shares of the
fund except pursuant to a plan adopted by the fund under the Rule. Each fund's
Board of Trustees has adopted the plan to allow the funds and FMR to
incur certain expenses that might be considered to constitute indirect payment
by the fund of distribution expenses. Under the plan, if payment of management
fees by a fund to FMR is deemed to be indirect financing by the fund of
the distribution of its shares, such payment is authorized by the plan.
Each plan specifically recognizes that FMR, either directly or through FDC, may
use its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection with
the offer and sale of shares of the fund. In addition, each plan provides that
FMR may use its resources, including its management fee revenues, to make
payments to third parties that provide assistance in selling shares of the fund,
or to third parties, including banks, that render shareholder support services.
Payments made by FMR to third parties during the fiscal year ended November 30,
1994 for High Yield and December 31, 1994 for Aggressive Tax-Free and Limited
Term, amounted to $ 16,000 , $ 5,060 , and $ 44,467 ,
respectively.
Each fund's plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to the
implementation of each plan prior to its approval, and have determined that
there is a reasonable likelihood that the plan will benefit the fund and its
shareholders. In particular, the Trustees noted that each plan does not
authorize payments by the fund other than those made to FMR under its management
contract with the fund. To the extent that each plan gives FMR and FDC greater
flexibility in connection with the distribution of shares of the fund,
additional sales of the fund's shares may result. Additionally, certain
shareholder support services may be provided more effectively under each plan by
local entities with whom shareholders have other relationships.
Each plan was approved by shareholders on December 30, 1986 ( Aggressive
Tax-Free ) , January 20, 1987 ( High Yield ) , and February 24,
1987 ( Limited Term ) .
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or appropriate
regulatory agencies, FDC believes that the Glass-Steagall Act should not
preclude a bank from performing shareholder support services or servicing and
recordkeeping functions. FDC intends to engage banks only to perform such
functions. However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates or
subsidiaries, as well as further judicial or administrative decisions or
interpretations, could prevent a bank from continuing to perform all or a part
of the contemplated services. If a bank were prohibited from so acting, the
Trustees would consider what actions, if any, would be necessary to continue to
provide efficient and effective shareholder services. In such event, changes in
the operation of the funds might occur, including possible termination of any
automatic investment or redemption or other services then provided by the bank.
It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
Each fund may execute portfolio transactions with and purchase securities issued
by depository institutions that receive payments under the plan. No preference
for the instruments of such depository institutions will be shown in the
selection of investments. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks and
financial institutions may be required to register as dealers pursuant to state
law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United Missouri has
entered into sub-contracts with FSC, an affiliate of FMR, under the terms of
which FSC performs the processing activities associated with providing transfer
agent and shareholder servicing functions for each fund. Under the
sub-contracts, FSC bears the expense of typesetting, printing, and mailing
prospectuses, statements of additional information, and all other reports,
notices, and statements to shareholders, except proxy statements. FSC also pays
all out-of-pocket expenses associated with transfer agent services.
United Missouri pays FSC an annual fee of $26.03 per regular account with a
balance of $5,000 or more, $15.31 per regular account with a balance of less
than $5,000, and a supplemental activity charge of $2.25 for standing order
transactions and $6.11 for other 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 institutional client master accounts, United
Missouri pays FSC per account fees of $95 and monetary transaction charges of
$20 or $17.50, depending on the nature of services provided. With respect to
certain institutional broker-dealer accounts, the funds pay FSC a per-account
fee of $30 and a charge of $6 for monetary transactions.
Prior to March 26, 1992, State Street Bank and Trust Company (State Street)
served as each fund's custodian and transfer agent and also sub-contracted with
FSC to perform the processing activities associated with providing transfer
agent and shareholder servicing functions for the funds. FSC was compensated by
State Street on the same basis as it is currently compensated by United Missouri
(although fee rates and charges were adjusted periodically to reflect postal
rate changes and changes in wage and price levels as measured by the National
Consumer Price Index for Urban Areas).
Transfer agent fees, including reimbursement for out-of-pocket expenses, paid to
FSC for the fiscal years ended November 30 (High Yield) and December 31
(Aggressive Tax-Free and Limited Term), 1994, 1993, and 1992 for the instruments
of such depository institution are indicated in the following table.
1994 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Limited Term 1,079,000 1,289,000 831,000
High Yield 1,858,000 1,960,000 1,846,000
Aggressive Tax-Free $ 948,907 $ 891,729 $ 696,000
</TABLE>
United Missouri has an additional sub-contract with FSC, pursuant to which FSC
performs the calculations necessary to determine each fund's net asset value per
share and dividends and maintains each fund's accounting records. The annual fee
rates for these pricing and bookkeeping services are based on the 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.
Prior to March 26, 1992, State Street subcontracted with FSC for pricing and
bookkeeping services. FSC was compensated for these services by State Street on
the same basis as it is currently compensated by United Missouri.
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid to FSC for fiscal 1994, 1993, and 1992 are indicated in the table
below.
1994 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Limited Term 338,000 380,000 304,000
High Yield 495,000 537,000 656,000
Aggressive Tax-Free $ 305,727 $ 281,712 $ 303,000
</TABLE>
The transfer agent fees and pricing and bookkeeping fees described above are
paid to FSC by United Missouri, which is entitled to reimbursement from the
funds for these expenses.
Each fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure purchasers for
shares of the funds, 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.
FDC also collects Aggressive Tax-Free's 1% redemption fee for shares held less
than 180 days. When redeemed, shares acquired through the reinvestment of
dividends and capital gains are exempt from the redemption fee. For
fiscal 1994, 1993, and 1992, FDC collected redemption fees totaling
$255,161 , $ 161,376 , and $117,685 , respectively.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Aggressive Tax-Free is a fund of Fidelity Municipal Trust,
an open-end management investment company originally organized as a Maryland
corporation on November 22, 1976 and reorganized as a Massachusetts business
trust on June 22, 1984, at which time its name changed from Fidelity Municipal
Bond Fund, Inc. to Fidelity Municipal Bond Fund. On March 1, 1986, the trust's
name was changed to Fidelity Municipal Trust. Currently, there are seven funds
of Fidelity Municipal Trust: Fidelity Municipal Bond Portfolio; Fidelity
Aggressive Tax-Free Portfolio; Fidelity Insured Tax-Free Portfolio; Fidelity
Ohio Tax-Free High Yield Fund; Fidelity Michigan Tax-Free High Yield Fund;
Fidelity Minnesota Tax-Free Portfolio; and Spartan Pennsylvania Municipal High
Yield Portfolio.
High Yield is a fund of Fidelity Court Street Trust, an open-end management
investment company organized as a Massachusetts business trust on April 21,
1977. On August 1, 1987, the trust's name was changed from Fidelity High Yield
Municipals to Fidelity Court Street Trust. Currently, there are four funds of
the trust: Fidelity High Yield Tax-Free Portfolio, Spartan Connecticut Municipal
High Yield Portfolio, Spartan New Jersey Municipal High Yield Portfolio, and
Spartan Florida Municipal Income Portfolio.
Limited Term is a fund of Fidelity School Street Trust, an open-end management
investment company organized as a Massachusetts business trust on September 10,
1976 under the name Fidelity Municipal Bond Fund. On June 17, 1993, the trust's
name was changed from Fidelity Limited Term Municipals to Fidelity School Street
Trust. Currently, there are two funds of the trust: Fidelity Limited Term
Municipals and Spartan Bond Strategist.
The Declarations of Trust permit the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to a trust or a fund,
the right of the trust or fund to use the identifying names "Fidelity" or
"Spartan" may be withdrawn. There is a remote possibility that one fund might
become liable for any misstatement in its prospectus or statement of additional
information about another fund.
The assets of each trust received for the issue or sale of shares of each of its
funds and all income, earnings, profits, and proceeds thereof, subject only to
the rights of creditors, are especially allocated to such fund, and constitute
the underlying assets of such fund. The underlying assets of each fund are
segregated on the books of account, and are to be charged with the liabilities
with respect to such fund and with a share of the general expenses of their
respective trusts. Expenses with respect to each trust are to be allocated in
proportion to the asset value of their respective funds, except where
allocations of direct expense can otherwise be fairly made. The officers of each
trust, subject to the general supervision of the Board of Trustees, have
the power to determine which expenses are allocable to a given fund, or which
are general or allocable to all of the funds of a certain trust. In the event of
the dissolution or liquidation of a trust, shareholders of each fund of that
trust are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. Each trust is an entity of the type commonly
known as a "Massachusetts business trust." Under Massachusetts law, shareholders
of such a trust may, under certain circumstances, be held personally liable for
the obligations of the trust. Each Declaration of Trust provides that the trust
shall not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or its Trustees shall include a
provision limiting the obligations created thereby to the trust and its assets.
Each Declaration of Trust provides for indemnification out of each fund's
property of any shareholder held personally liable for the obligations of the
fund. Each Declaration of Trust also provides that its funds shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
Each Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declarations of Trust protects Trustees against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial interest. As
a shareholder, you receive one vote for each dollar value of net asset value you
own. The shares have no preemptive or conversion rights; the voting and dividend
rights, the right of redemption, and the privilege of exchange are described in
the Prospectus. Shares are fully paid and nonassessable, except as set forth
under the heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of a trust or fund may, as set forth in the
Declarations of Trust, call meetings of a trust or fund for any purpose related
to the trust or fund, as the case may be, including, in the case of a meeting of
an entire trust, the purpose of voting on removal of one or more Trustees. Each
trust or fund may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of its
assets, if approved by vote of the holders of a majority of the trust or the
fund, as determined by the current value of each shareholder's investment in the
fund or trust. If not so terminated, each trust or fund will continue
indefinitely. Each fund of Fidelity Court Street Trust and Fidelity School
Street Trust may invest all of its assets in another investment company.
CUSTODIAN. United Missouri, 1010 Grand Avenue, Kansas City, Missouri is
custodian of the assets of the funds. The custodian is responsible for the
safekeeping of the funds' assets and the appointment of subcustodian banks and
clearing agencies. The custodian takes no part in determining the investment
policies of the funds or in deciding which securities are purchased or sold by a
fund. A fund may, however, invest in obligations of the custodian and may
purchase securities from or sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trusts'
Trustees may from time to time have transactions with various banks, including
banks serving as custodian for certain of the funds advised by FMR. Transactions
that have occurred to date include 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.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, serves as each trust's independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
Each funds' financial statements and financial highlights for the fiscal
years ended November 30, 1994 (High Yield) and December 31, 1994 (Aggressive
Tax-Free and Limited Term) are included in the fund's Annual Report,
which are separate reports supplied with this Statement of Additional
Information. The funds' financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of each
investment by the number of days remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's portfolio.
An obligation's maturity is typically determined on a stated final maturity
basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be called,
refunded, or redeemed may be considered to be its maturity date. When a
municipal bond issuer has committed to call an issue of bonds and has
established an independent escrow account that is sufficient to, and is pledged
to, refund that issue, the number of days to maturity for the prerefunded bond
is considered to be the number of days to the announced call date of the bonds.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards. Together
with Aaa group they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times in the future. Uncertainty of position characterizes bonds in this
class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other terms of
the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest-rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes possess
the strongest investment attributes are designated by the symbols Aa1, A1, Baa1,
Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt which
is assigned on actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.
FIDELITY SCHOOL STREET TRUST:
SPARTAN BOND STRATEGIST
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Fund at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment Principles and
Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page: The Fund at a Glance; Charter; Doing
Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
ii............................ *
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Cover Page; Charter
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ Trustees and Officers
c ............................ Trustees and Officers
16 a i........................... FMR, Portfolio Transactions
ii.......................... Trustees and Officers
iii......................... Management Contract
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated with FMR
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated with FMR
17 a - c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated with FMR
c ............................ *
22 a ............................ *
b ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how the fund invests and
the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of the
fund's most recent financial report and portfolio listing, or a copy of the
Statement of Additional Information (SAI) dated February 19, 1995. The SAI has
been filed with the Securities and Exchange Commission (SEC) and is incorporated
herein by reference (legally forms a part of the prospectus). For a free copy of
either document, call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, the Federal Reserve
Board, or any other agency, and are subject to investment risk, including the
possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
SBS-pro-295
Spartan Bond Strategist seeks maximum total return , after federal income
tax , by investing in a combination of taxable and tax-exempt debt
securities.
SPARTAN(REGISTERED TRADEMARK)
BOND STRATEGIST(trademark)
PROSPECTUS
FEBRUARY 19, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL 8 CHARTER How the fund is
organized.
9 INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: Maximum total investment return after the effect of federal income tax
(after-tax total return). As with any mutual fund, there is no assurance that
the fund will achieve its goal.
STRATEGY: Invests in a combination of taxable and tax-free debt securities,
focusing on medium and long-term bonds.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management arm
of Fidelity Investments, which was established in 1946 and is now America's
largest mutual fund manager. Foreign affiliates of FMR may help choose
investments for the fund.
SIZE: As of December 30, 1994, the fund had over $ 17 million in assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors in higher tax
brackets who want to maximize after-tax total return. The fund is designed for
those who want to pursue this goal through an investment in both taxable and
tax-exempt debt securities. Because the fund seeks to maximize total return
after the effect of federal income tax, it may not be appropriate for those who
are looking for an investment that focuses on high current taxable or tax-exempt
income.
The value of the fund's investments and the income they generate will
vary from day to day, and generally reflect i nterest rates,
market conditions, and other political and economic news. When you sell your
shares, they may be worth more or less than what you paid for them. By
itself, the fund does not constitute a balanced investment plan.
The Spartan family of funds is designed for cost-conscious investors looking for
higher yields through lower costs. The Spartan Approach(registered trademark)
requires investors to make high minimum investments and, in some cases, to pay
for individual transactions.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Spartan
Bond Strategist is in the
INCOME category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy ,
sell , or hold shares of a fund. See page for more
information.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Redemption fee (as a % of amount redeemed
on shares held less than 180 days) .50%
Exchange and wire transaction fees $5.00
Account closeout fee $5.00
Annual account maintenance fee
(for accounts under $2,500) $12.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account balance at
the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund pays
a management fee to FMR. Expenses are factored into the fund's share price or
dividends and are not charged directly to shareholder accounts (see page ).
The following are projections based on historical expenses, and are calculated
as a percentage of average net assets.
Management fee .70%
12b-1 fee None
Other expenses .00%
Total fund operating expenses .70%
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000 you
invested, here's how much you would pay in total expenses after the number of
years indicated, first assuming that you leave your account open, and then
assuming that you close your account at the end of the period:
Account Account
open closed
After 1 year $ 7 $ 12
After 3 years $ 22 $ 27
After 5 years $ 39 $ 44
After 10 years $ 87 $ 92
These examples illustrate the effect of expenses, but are not meant to suggest
actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
These costs are paid from the
fund's assets; their effect is
already factored into any
quoted share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows is included in the fund's Annual Report and has been
audited by Coopers & Lybrand L.L.P. , independent accountants.
Their report on the financial statements and financial highlights is included in
the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the fund's Statement of
Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C>
51.Year Ended December 31 1993A 1994
52.Net asset value, beginning of period $ 10.000 $ 9.980
53.Income from Investment Operations .130 .481
Net investment income
54. Net realized and unrealized gain (loss) on investments (.011) (1.244)
55. Total from investment operations .119 (.763)
56.Less Distributions (.130) (.486)
From net investment income
57. In excess of net investment income (.011)D --
58. Total distributions (.141) (.486)
59. Redemption fees added to paid in capital .002 .009
60.Net asset value, end of period $ 9.980 $ 8.740
61.Total returnC 1.23% (7.65)
%
62.RATIOS AND SUPPLEMENTAL DATA
63.Net assets, end of period (000 omitted) $ 21,080 $ 17,722
64.Ratio of expenses to average net assets .70% .70%
B
65.Ratio of net investment income to average net assets 4.44% 5.26%
B
66.Portfolio turnover rate 275% 168%
B
</TABLE>
A FOR THE PERIOD SEPTEMBER 9, 1993 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1993.
B ANNUALIZED
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do not
reflect the effect of any transaction fees you may have paid. The figures would
be lower if fees were taken into account.
The fund's fiscal year runs from January 1 through December 30. The tables below
show the fund's performance over the past fiscal periods compared to a measure
of inflation.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods Past Life
ended 1 of
December 30, year fund
1994 A
Sp. Bond -7.65 -5.01
Strategist % %
Consumer 2.67 2.53
Price % %
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods Past Life
ended 1 of
December 30, year fund
1994 A
Sp. Bond -7.65 -6.52
Strategist % %
Consumer 2.67 3.38
Price % %
Index
A FROM SEPTEMBER 9, 1993
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a given
period, assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time. An
AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results. Total returns may be quoted on a before-tax or after-tax basis.
YIELD refers to the income generated by an investment in the fund over a given
period of time, expressed as an annual percentage rate. A TAX-EQUIVALENT YIELD
shows what an investor would have to earn before taxes to equal a tax-free
yield. Yields are calculated according to a standard that is required for all
stock and bond funds. Because this differs from other accounting methods, the
quoted yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation calculated
by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper General Municipal Bond Fund
Average which currently reflects the performance of over 210 mutual
funds with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
The fund's recent strategies, performance, and holdings are detailed twice a
year in financial reports, which are sent to all shareholders. For current
performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
SPARTAN BOND STRATEGIST IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. In technical terms, the fund is
currently a non-diversified fund of Fidelity School Street Trust, an open-end
management investment company organized as a Massachusetts business trust on
September 10, 1976.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for protecting
the interests of shareholders. The trustees are experienced executives who meet
throughout the year to oversee the fund's activities, review contractual
arrangements with companies that provide services to the fund, and review
performance. The majority of trustees are not otherwise affiliated with
Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings may
be called to elect or remove trustees, change fundamental policies, approve a
management contract, or for other purposes. Shareholders not attending these
meetings are encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals to be voted
on. The number of votes you are entitled to is based upon the dollar value of
your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $ 250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The fund is managed by FMR, which chooses the fund's investments and handles its
business affairs. Fidelity Management & Research (U.K.) Inc. (FMR U.K.), in
London, England, and Fidelity Management & Research (Far East) Inc. (FMR Far
East), in Tokyo, Japan, assist FMR with foreign investments.
George Fischer is manager and Vice President of Spartan Bond Strategist,
which he has managed since September 1993. He also manages various institutional
portfolios. Mr. Fischer joined Fidelity in 1989, after receiving an M.B.A. from
the University of Pennsylvania.
Fidelity investment personnel may invest in securities for their own account
pursuant to a code of ethics that establishes procedures for personal investing
and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's funds
and services. Fidelity Service Co. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the parent company of FMR, FMR Far East, and FMR U.K. Through
ownership of voting common stock, members of the Edward C. Johnson 3d family
form a controlling group with respect to FMR Corp. Changes may occur in the
Johnson family group, through death or disability, which would result in changes
in each individual family member's holding of stock. Such changes could result
in one or more family members becoming holders of over 25% of the stock. FMR
Corp. has received an opinion of counsel that changes in the composition of the
Johnson family group under these circumstances would not result in the
termination of the fund's management or distribution contracts and, accordingly,
would not require a shareholder vote to continue operation under those
contracts.
As of December 31, 1994, approximately 36.9% of the fund's total outstanding
shares were held by an FMR affiliate of which Mr. Edward C. Johnson 3d,
President and Trustee of the fund, by virtue of his controlling interest in FMR
Corp., may be considered a beneficial owner of these shares.
To carry out the fund's transactions, FMR may use its broker-dealer affiliates
and other firms that sell fund shares, provided that the fund receives services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS MAXIMUM TOTAL INVESTMENT RETURN AFTER THE EFFECT OF FEDERAL
INCOME TAX by investing primarily in taxable and tax-exempt debt instruments.
FMR normally invests at least 65% of the fund's total assets in these
securities .
Most bond funds focus on yield, which is one component of total return,
and invest in either taxable or tax-free bonds. Spartan Bond Strategist has the
flexibility to invest in a combination of these securities, which have varying
maturities and levels of credit quality. The fund varies its proportion in each
bond market to pursue high after-tax total return, which is the combination of
income and changes in value after the effect of federal income tax. When
choosing the fund's investments, FMR looks at expected federal tax rates on
income and capital gains and considers the potential effect of taxes, assuming a
high tax bracket. The federal alternative minimum tax and state and local taxes
are not considered.
FMR studies interest rates, credit conditions, and other factors, and may use a
variety of techniques to adjust the fund's exposure to the taxable and
tax-exempt bond markets. FMR relies on fundamental research to select domestic
and foreign investments, and may also use computer-aided analysis. The fund's
strategy does not restrict its ability to invest in either bond market.
However, in order to distribute its tax free income to shareholders on a
tax-free basis, the fund must invest at least 50% of its total assets in
municipal securities at the end of each calendar quarter. This requirement may
mean missing an investment opportunity in the taxable bond market.
The fund's level of risk and potential reward depend on the quality and maturity
of its investments. Lower-quality, longer-term investments typically carry the
most risk and the highest performance potential. The fund focuses on
investment-grade securities, but may also invest in lower-quality securities.
The fund has no restrictions on maturity, but it generally invests in medium and
long-term bonds.
The value of the fund's domestic and foreign investments varies in response to
many factors. The fund's yield and share price fluctuate based on changes in
interest rates, market conditions, other political and economic news, and
the credit quality of the issuer. Investments in foreign securities may
involve risks in addition to those of U.S. investments, including increased
political and economic risk, as well as exposure to currency fluctuations.
In general, bond prices rise when interest rates fall, and vice versa. This
effect is usually pronounced for longer-term securities. FMR may use various
investment techniques to hedge the fund's risks, but there is no guarantee that
these strategies will work as intended. When you sell your shares, they may be
worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note that
the fund may invest all of its assets in municipal securities issued to finance
private activities. The interest from these investments is a tax-preference item
for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy. The
fund also reserves the right to invest without limitation in short-term
instruments and hold a substantial amount of uninvested cash for temporary,
defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which the fund may invest, and strategies FMR may employ in pursuit of the
fund's investment objective. A summary of risks and restrictions associated with
these instrument types and investment practices is included as well. A complete
listing of the fund's policies and limitations and more detailed information
about the fund's investments is contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments is
not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to the
full extent permitted unless it believes that doing so will help the fund
achieve its goal. Current holdings and recent investment strategies are
described in the fund's financial reports which are sent to shareholders twice a
year. For a free SAI or financial report, call 1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. In general, bond prices rise when interest
rates fall, and vice versa. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative, and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may already be
in default. 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.
The table below provides a summary of ratings assigned to debt holdings (not
including money market instruments) in the fund's portfolio. These figures are
dollar-weighted averages of month-end portfolio holdings during fiscal 1994, and
are presented as a percentage of total security investments. These percentages
are historical and do not necessarily indicate the fund's current or future debt
holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
e A
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 62.42 % AA 64.74 %
Upper-medium grade A A
Medium grade Baa 11.71 % BBB 10.75 %
LOWER QUALITY
Moderately speculative Ba 5.53 % BB 4.25 %
Speculative B 0.49 % B 0.71 %
Highly speculative Caa -- CCC --
Poor quality Ca -- CC --
Lowest quality, no interest C C
In default, in arrears -- D
80.15 % 80.45 %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED DIRECTLY OR
INDIRECTLY BY MOODY'S OR S&P AMOUNTED TO 6.52 %. THIS MAY INCLUDE
SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS
UNRATED SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE
LOWER QUALITY ACCOUNT FOR 2.66 % OF THE FUND'S SECURITY INVESTMENTS.
REFER
TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's debt
quality policy if it is rated at or above the stated level by Moody's or rated
in the equivalent categories by S&P, or is unrated but judged to be of
equivalent quality by FMR. The fund currently intends to limit its investments
in lower than Baa-quality debt securities to 35% of its assets. In addition, the
fund currently intends to limit its investments in corporate or municipal debt
securities to those of B-quality or above and does not intend to limit the
quality of its foreign government securities investments.
MUNICIPAL SECURITIES are issued to raise money for a variety of public purposes,
including general financing for state and local governments, or financing for
specific projects or public facilities. Municipal securities may be issued in
anticipation of future revenues, and may be backed by the full taxing power of a
municipality, the revenues from a specific project, or the credit of a private
organization. A security's credit may be enhanced by a bank, insurance company,
or other financial institution. The fund may own a municipal security directly
or through a participation interest.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or transfers
its obligations to a private entity, the obligation could lose value or become
taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations. The economy of Puerto Rico is
closely linked to the U.S. economy, and will be affected by the strength of the
U.S. dollar, interest rates, the price stability of oil imports, and the
continued existence of favorable tax incentives. Recent legislation revised
these incentives, but the government of Puerto Rico anticipates only a slight
reduction in the average real growth rates for the economy.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource recovery
bonds often involve private corporations. The viability of a project or tax
incentives could affect the value and credit quality of these securities.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or guaranteed
by the U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by the Financing Corporation are
supported only by the credit of the entity that issued them.
FOREIGN SECURITIES and foreign currencies may involve additional risks. These
include currency fluctuations, risks relating to political or economic
conditions in the foreign country, and the potentially less stringent investor
protection and disclosure standards of foreign markets. In addition to the
political and economic factors that can affect foreign securities, a
governmental issuer may be unwilling to repay principal and interest when due,
and may require that the conditions for payment be renegotiated. These factors
could make foreign investments, especially those in developing countries, more
volatile.
ASSET-BACKED AND MORTGAGE SECURITIES include interests in pools of lower-rated
debt securities, or consumer loans or mortgages, or complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed securities. The
value of these securities may be significantly affected by changes in interest
rates, the market's perception of the issuers, and the creditworthiness of the
parties involved. Some securities may have a structure that makes their reaction
to interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.
MONEY MARKET INSTRUMENTS are high-quality instruments that present minimal
credit risk. They may include U.S. government obligations, commercial paper and
other short-term corporate obligations, and certificates of deposit, bankers'
acceptances, bank deposits, and other financial institution obligations. These
instruments may carry fixed or variable interest rates.
STRIPPED SECURITIES are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile and certain stripped securities
move in the same direction as interest rates.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move in
tandem with a benchmark, helping to stabilize their prices. Inverse floaters
have interest rates that move in the opposite direction from the benchmark,
making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the issuer
or a financial intermediary. In exchange for this benefit, the fund may pay
periodic fees or accept a lower interest rate. Demand features and standby
commitments are types of put features.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to increase
or decrease its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect security values.
These techniques may involve derivative transactions such as buying and selling
options and futures contracts, entering into currency exchange contracts or swap
agreements, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics of the
fund's portfolio of investments. If FMR judges market conditions incorrectly or
employs a strategy that does not correlate well with the fund's investments,
these techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
the fund and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in amounts
owed to another party by a company, government, or other borrower. They have
additional risks beyond conventional debt securities because they may entail
less legal protection for the fund, or there may be a requirement that a fund
supply additional cash to a borrower on demand.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in which
payment and delivery for the securities take place at a future date. The market
value of a security could change during this period, which could affect the
fund's yield.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security at
one price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
FOREIGN REPURCHASE AGREEMENTS may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may involve
greater risk of loss if the counterparty defaults. Some counterparties in these
transactions may be less creditworthy than those in U.S. markets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by FMR,
under the supervision of the Board of Trustees, to be illiquid, which means that
they may be difficult to sell promptly at an acceptable price. The sale of other
securities, including illiquid securities, may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to the
fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
OTHER INSTRUMENTS may include convertible bonds, preferred stocks, and warrants.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the risks
of investing. This may include limiting the amount of money invested in any one
issuer or, on a broader scale, in any one industry or type of project. Economic,
business, or political changes can affect all securities of a similar type. A
fund that is not diversified may be more sensitive to these changes, and also to
changes in the market value of a single issuer or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to meet federal
tax requirements at the close of each quarter, the fund does not invest more
than 25% of its total assets in any one issuer and, with respect to 50% of total
assets, does not invest more than 5% of its total assets in any one issuer.
These limitations do not apply to U.S. government securities. The fund may not
invest more than 25% of its total assets in any one industry. This limitation
does not apply to U.S. government securities or municipal securities.
BORROWING. The fund may borrow from banks or from other funds advised by FMR, or
through reverse repurchase agreements. If the fund borrows money, its share
price may be subject to greater fluctuation until the borrowing is paid off. If
the fund makes additional investments while borrowings are outstanding, this may
be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes, but
not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including FBSI,
an affiliate of FMR, is a means of earning income. This practice could result in
a loss or a delay in recovering a fund's securities. The fund may also lend
money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's total
assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies stated
throughout this prospectus, other than those identified in the following
paragraph, can be changed without shareholder approval.
The fund seeks maximum total investment return after the effect of federal
income taxes, by investing primarily in taxable and tax-exempt debt instruments.
The fund may not invest more than 25% of its total assets in any one industry.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 33% of its total assets. Loans, in the aggregate, may not
exceed 33% of the fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and business
affairs. FMR in turn may pay fees to affiliates who provide assistance with
these services.
FMR may, from time to time, agree to reimburse the fund for management fees
above a specified limit. FMR retains the ability to be repaid by the fund if
expenses fall below the specified limit prior to the end of the fiscal year.
Reimbursement arrangements, which may be terminated at any time without notice,
can decrease the fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fund pays the
fee at the annual rate of .70% of its average net assets.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on issuers based
outside the United States. Under the sub-advisory agreements, FMR pays FMR U.K.
and FMR Far East fees equal to 110% and 105%, respectively, of the costs of
providing these services.
The sub-advisers may also provide investment management services. In return, FMR
pays FMR U.K. and FMR Far East a fee equal to 50% of its management fee rate
with respect to the fund's investments that the sub-adviser manages on a
discretionary basis.
FSC performs many transaction and accounting functions for the fund. These
services include processing shareholder transactions and calculating the fund's
share price. FMR, and not the fund, pays for these services.
To offset shareholder service costs, 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. For fiscal 1994, these fees amounted to $740,
$175, and $40 , respectively.
The fund has adopted a Distribution and Service Plan. This plan recognizes that
FMR may use its resources, including management fees, to pay expenses associated
with the sale of fund shares. This may include payments to third parties, such
as banks or broker-dealers, that provide shareholder support services or engage
in the sale of the fund's shares. It is important to note, however, that the
fund does not pay FMR any separate fees for this service.
The fund's portfolio turnover rate for fiscal 1994 was 168 %. This rate
varies from year to year. High turnover rates increase transaction costs and may
increase taxable capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's first
mutual funds. Today, Fidelity is the largest mutual fund company in the country,
and is known as an innovative provider of high-quality financial services to
individuals and institutions.
In addition to its mutual fund business, the company operates one of America's
leading discount brokerage firms, Fidelity Brokerage Services, Inc. (FBSI).
Fidelity is also a leader in providing tax-sheltered retirement plans for
individuals investing on their own or through their employer.
Fidelity is committed to providing investors with practical information to make
investment decisions. Based in Boston, Fidelity provides customers with complete
service 24 hours a day, 365 days a year, through a network of telephone service
centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has over
75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio, you
may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or investment
professional, refer to its program materials for any special provisions
regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are listed
below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called Net Asset Value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your investment is
received and accepted. Share price is normally calculated at 4 p.m. Eastern
time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and mail it
along with your check. You may also open your account in person or by wire as
described on page . If there is no application accompanying this prospectus,
call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity fund.
If you buy shares by check or Fidelity Money Line(registered trademark), and
then sell those shares by any method other than by exchange to another Fidelity
fund, the payment may be delayed for up to seven business days to ensure that
your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
(checkmark)
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to "Spartan
check payable to Bond Strategist."
"Spartan Bond Indicate your fund
Strategist." Mail to the account number on
address indicated on your check and mail to
the application. the address printed on
your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Spartan Bond
Bank Routing Strategist" and include
#021001033, your account number
Account #00163053. and your name.
Specify "Spartan Bond
Strategist" and include
your new account
number and your
name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
share price calculated after your order is received and accepted. Share price is
normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000 worth
of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign up for
these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect
you and Fidelity from fraud. Your request must be made in writing and include a
signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last 30
days,
(small solid bullet) The check is being mailed to a different address than the
one on your account (record address),
(small solid bullet) The check is being made payable to someone other than the
account owner, or
(small solid bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized under
state law), securities exchange or association, clearing agency, or savings
association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed, and
(small solid bullet) Any other applicable requirements listed in the table at
right.
Unless otherwise instructed, Fidelity will send a check to the record address.
Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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<S> <C> <C>
IF YOU SELL SHARES OF THE FUND AFTER HOLDING THEM LESS THAN 180 DAYS, THE FUND WILL
DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE VALUE OF THOSE SHARES. IF YOUR ACCOUNT
BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION TRANSACTIONS:
$5.00 FOR EACH EXCHANGE, BANK WIRE, AND ACCOUNT CLOSEOUT.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days a
year. Whenever you call, you can speak with someone equipped to provide the
information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed to
your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical account
information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for each
exchange out of the fund, unless you place your transaction on Fidelity's
automated exchange services.
Note that exchanges out of the fund are limited to four per calendar year, and
that they may have tax consequences for you. For details on policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by phone
between your bank account and your fund account. Most transfers are complete
within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your fund
account, or between fund accounts, automatically. While regular investment plans
do not guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for a home, educational expenses,
and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
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A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE CHOICE
FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and capital
gains to shareholders each year. Income dividends are declared daily and paid
monthly. Capital gains are normally distributed in February and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If the option you prefer is not listed on the application,
call 1-800-544-6666 for instructions. The fund offers four options:
5. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
6. INCOME-EARNED OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
8. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and capital
gain distributions will be automatically invested in another identically
registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the month.
Capital gain distributions will be reinvested at the NAV as of the date the fund
deducts the distribution from its NAV. The mailing of distribution checks will
begin within seven days or longer for a December ex-dividend date.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
The fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how an investment in the fund will
be taxed. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free remains
tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable distributions.
Short-term capital gains and a portion of the gain on bonds purchased at a
discount are taxed as dividends. Long-term capital gain distributions are taxed
as long-term capital gains. These distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions declared
in December and paid in January are taxable as if they were paid on December 31.
Fidelity will send you and the IRS a statement showing the tax status of the
distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 100% of its assets in these
securities. Individuals who are subject to the tax must report this interest on
their tax returns.
A portion of the fund's dividends may be free from state or local taxes. Income
from investments in your state are often tax-free to you. Each year, Fidelity
will send you a breakdown of the fund's income from each state to help you
calculate your taxes.
During fiscal 1994, 79.2 % of the fund's income dividends was free from
federal income tax. 5.73 % of the fund's income dividends was subject to
the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other Fidelity
funds - are subject to capital gains tax. A capital gain or loss is the
difference between the cost of your shares and the price you receive when you
sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is up to
you or your tax preparer to determine whether this sale resulted in a capital
gain and, if so, the amount of tax to be paid. Be sure to keep your regular
account statements; the information they contain will be essential in
calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a capital
gain distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable distribution.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments and these taxes generally will reduce the fund's
distributions.
There are tax requirements that all funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, the fund may have to
limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is
open. Fidelity normally calculates the fund's NAV as of the close of business of
the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by adding the
value of the fund's investments, cash, and other assets, subtracting its
liabilities, and then dividing the result by the number of shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. If quotations are not readily available,
or if the values have been materially affected by events occurring after the
closing of a foreign market, assets are valued by a method that the Board of
Trustees believes accurately reflects fair value.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price
to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to 31% backup withholding for failing to report income to the IRS.
If you violate IRS regulations, the IRS can require the fund to withhold 31% of
your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be liable for
losses resulting from unauthorized transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. Fidelity will request
personalized security codes or other information, and may also record calls. You
should verify the accuracy of your confirmation statements immediately after you
receive them. If you do not want the ability to redeem and exchange by
telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods of
unusual market activity), consider placing your order by mail or by visiting a
Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. The fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange Restrictions" on page .
Purchase orders may be refused if, in FMR's opinion, they would disrupt
management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the next
offering price calculated after your order is received and accepted. Note the
following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each check
must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of checks
processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees the fund or its
transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line purchases,
consider buying shares by bank wire, U.S. Postal money order, U.S. Treasury
check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you a
fee for this service. If you invest through a broker or other institution, read
its program materials for any additional service features or fees that may
apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with FDC
may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when the fund is priced on the
following business day. If payment is not received by that time, the financial
institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next NAV
calculated after your request is received and accepted. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on the
next business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be credited
to your bank account on the second or third business day after your phone call.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line have
been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates postponed
when the NYSE is closed (other than weekends or holidays), when trading on the
NYSE is restricted, or as permitted by the SEC.
THE REDEMPTION FEE, if applicable, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR, and it does not apply
to shares that were acquired through reinvestment of distributions. If shares
you are redeeming were not all held for the same length of time, those shares
you held longest will be redeemed first for purposes of determining whether the
fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at the
time of the transaction is $50,000 or more. Otherwise, you should note the
following:
(small solid bullet) The $5.00 exchange fee will be deducted from the amount of
your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of your
wire.
(small solid bullet) The $5.00 account closeout fee does not apply to exchanges
or wires.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual maximum
charge of $60.00 per shareholder. It is expected that accounts will be valued on
the second Friday in November of each year. Accounts opened after September 30
will not be subject to the fee for that year. The fee, which is payable to the
transfer agent, is designed to offset in part the relatively higher costs of
servicing smaller accounts. The fee will not be deducted from retirement
accounts, accounts using regular investment plans, or if total assets in
Fidelity funds exceed $50,000. Eligibility for the $50,000 waiver is determined
by aggregating Fidelity mutual fund accounts maintained by FSC or FBSI which are
registered under the same social security number or which list the same social
security number for the custodian of a Uniform Gifts/Transfers to Minors Act
account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance, Fidelity
reserves the right to close your account and send the proceeds to you. Your
shares will be redeemed at the NAV on the day your account is closed and the
$5.00 account closeout fee will be charged.
1.FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing historical
account documents, that are beyond the normal scope of its services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered for
sale in your state.
(small solid bullet) You may only exchange between accounts that are registered
in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you pay
the percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on your
shares and you exchange them into a fund with a 3% sales charge, you would pay
an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common ownership or
control, including accounts with the same taxpayer identification number, will
be counted together for purposes of the four exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and policies,
or would otherwise potentially be adversely affected.
(small solid bullet) Your exchanges may be restricted or refused if the fund
receives or anticipates simultaneous orders affecting significant portions of
the fund's assets. In particular, a pattern of exchanges that coincides with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The fund
reserves the right to terminate or modify the exchange privilege in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(Registered trademark) BOND STRATEGIST(trademark)
A FUND OF FIDELITY SCHOOL STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19, 1995
This Statement is not a prospectus but should be read in conjunction with the
fund's current Prospectus (dated February 19, 1995). Please retain this document
for future reference. The fund's financial statements and financial highlights,
included in the Annual Report, for the fiscal year ended December 31, 1994, are
incorporated herein by reference. To obtain an additional copy of the Prospectus
or the Annual Report, please call Fidelity Distributors Corporation at
1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Distribution and Service Plan
Contracts with Companies Affiliated with FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
SBS-ptb-295
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of the fund's assets that may be invested in any
security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the fund's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with the
fund's investment policies and limitations.
The fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940) of the fund. However, except for
the fundamental investment limitations set forth below, the investment policies
and limitations described in this Statement of Additional Information are not
fundamental and may be changed without shareholder approval. THE FOLLOWING ARE
THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE
FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment Company
Act of 1940;
(2) 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;
(3) 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;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities,
or tax-exempt obligations issued or guaranteed by a U.S. territory or possession
or a state or local government, or a political subdivision of any of the
foregoing) if, as a result, more than 25% of the fund's total assets would be
invested in securities of companies whose principal business activities are in
the same industry;
(5) 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);
(6) 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); or
(7) 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.
(8) 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.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close of
each quarter of its taxable year: (a) with regard to at least 50% of total
assets, no more than 5% of total assets are invested in the securities of a
single issuer, and (b) no more than 25% of total assets are invested in the
securities of a single issuer. Limitations (a) and (b) do not apply to
"Government securities" as defined for federal tax purposes.
(ii) 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.
(iii) 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.
(iv) 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 (2)). 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.
(v) The fund does not currently intend to purchase any security if, as a result,
more than 10% of its net assets would be invested in securities that are deemed
to be illiquid because they are subject to legal or contractual restrictions on
resale or because they cannot be sold or disposed of in the ordinary course of
business at approximately the prices at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its total
assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to invest in interests in real estate
investment trusts that are not readily marketable, or to invest in interests in
real estate limited partnerships that are not listed on the New York Stock
Exchange or the American Stock Exchange or traded on the NASDAQ National Market
System.
(viii) The fund does not currently intend to lend assets other than securities
to other parties, except by (a) lending money (up to 7.5% of the fund's net
assets) to a registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and, in connection
therewith, assuming any associated unfunded commitments of the sellers. (This
limitation does not apply to purchases of debt securities or to repurchase
agreements.)
(ix) 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.
(x) The fund does not currently intend to purchase the securities of any issuer
(other than securities issued or guaranteed by domestic or foreign governments
or political subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of continuous
operation.
(xi) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included in
that amount, but not to exceed 2% of the fund's net assets, may be warrants that
are not listed on the New York Stock Exchange or the American Stock Exchange.
Warrants acquired by the fund in units or attached to securities are not subject
to these restrictions.
(xii) The fund does not currently intend to invest in oil, gas, or other mineral
exploration or development programs or leases.
(xiii) 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.
For the fund's limitations on futures and options transactions, see the section
entitled "Limitations on Futures and Options Transactions" beginning on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with financial
institutions that are, or may be considered to be, "affiliated persons" of the
fund under the Investment Company Act of 1940 (the 1940 Act). These transactions
may include repurchase agreements with custodian banks; short-term obligations
of, and repurchase agreements with, the 50 largest U.S. banks (measured by
deposits); municipal securities; U.S. government securities with affiliated
financial institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. In accordance with exemptive
orders issued by the Securities and Exchange Commission (SEC), the Board of
Trustees has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a commitment
by the fund to purchase or sell specific securities at a predetermined price or
yield, with payment and delivery taking place after the customary settlement
period for that type of security (and more than seven days in the future).
Typically, no interest accrues to the purchaser until the security is delivered.
The fund may receive fees for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until the
delivery date, these risks are in addition to the risks associated with the
fund's other investments. If the fund remains substantially fully invested at a
time when delayed-delivery purchases are outstanding, the delayed-delivery
purchases may result in a form of leverage. When delayed-delivery purchases are
outstanding, the fund will set aside appropriate liquid assets in a segregated
custodial account to cover its purchase obligations. When the fund has sold a
security on a delayed-delivery basis, the fund does not participate in further
gains or losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities, the
fund could miss a favorable price or yield opportunity, or could suffer a loss.
The fund may renegotiate delayed-delivery transactions after they are entered
into, and may sell underlying securities before they are delivered, which may
result in capital gains or losses.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued basis in
connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts require the issuer to sell and the fund to buy refunded
municipal obligations at a stated price and yield on a settlement date that may
be several months or several years in the future. The fund generally will not be
obligated to pay the full purchase price if it fails to perform under a
refunding contract. Instead, refunding contracts generally provide for payment
of liquidated damages to the issuer (currently 15-20% of the purchase price).
The fund may secure its obligations under a refunding contract by depositing
collateral or a letter of credit equal to the liquidated damages provisions of
the refunding contract. When required by SEC guidelines, the fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an index.
Changes in the interest rate on the other security or index inversely affect the
residual interest rate paid on the inverse floater, with the result that the
inverse floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond. The
interest rate on one instrument reflects short-term interest rates, while the
interest rate on the other instrument (the inverse floater) reflects the
approximate rate the issuer would have paid on a fixed-rate bond, multiplied by
two, minus the interest rate paid on the short-term instrument. Depending on
market availability, the two portions may be recombined to form a fixed-rate
municipal bond. The market for inverse floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation interests
in municipal instruments, have interest rate adjustment formulas that help
stabilize their market values. Many variable and floating rate instruments also
carry demand features that permit the fund to sell them at par value plus
accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount thereof.
The fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it purchases.
The IRS has not ruled whether the interest on Participating VRDOs is tax-exempt
and, accordingly, the fund intends to purchase these instruments based on
opinions of bond counsel. The fund may also invest in fixed-rate bonds that are
subject to third party puts and in participation interests in such bonds held by
a bank in trust or otherwise.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial arrangement)
with a tender agreement that gives the holder the option to tender the bond at
its face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate (determined by a remarketing or similar agent) that would cause the
bond, coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, the fund effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. In selecting tender option bonds for the fund, FMR will
consider the creditworthiness of the issuer of the underlying bond, the
custodian, and the third party provider of the tender option. In certain
instances, a sponsor may terminate a tender option if, for example, the issuer
of the underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are sold
at a deep discount from their face value and are redeemed at face value when
they mature. Because zero coupon bonds do not pay current income, their prices
can be very volatile when interest rates change. In calculating its daily
dividend, the fund takes into account as income a portion of the difference
between a zero coupon bond's purchase price and its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The fund may acquire standby
commitments to enhance the liquidity of portfolio securities.
Ordinarily the fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party at any
time. The fund may purchase standby commitments separate from or in conjunction
with the purchase of securities subject to such commitments. In the latter case,
the fund would pay a higher price for the securities acquired, thus reducing
their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may rely
upon its evaluation of a bank's credit in determining whether to support an
instrument supported by a letter of credit. In evaluating a foreign bank's
credit, FMR will consider whether adequate public information about the bank is
available and whether the bank may be subject to unfavorable political or
economic developments, currency controls, or other governmental restrictions
that might affect the bank's ability to honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the commitments
are exercised; the fact that standby commitments are not marketable by the fund;
and the possibility that the maturities of the underlying securities may be
different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. The fund may invest a portion of its assets in
municipal leases and participation interests therein. These obligations, which
may take the form of a lease, an installment purchase, or a conditional sale
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities. Generally, the fund will
not hold such obligations directly as a lessor of the property, but will
purchase a participation interest in a municipal obligation from a bank or other
third party. A participation interest gives the fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the total
amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states or municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt. Many leases and contracts include "non-appropriation clauses" providing
that the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance limitations.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to the
coupon rate or maturity of the purchased security. While it does not presently
appear possible to eliminate all risks from these transactions (particularly the
possibility that the value of the underlying securit y , as well as
delays and costs to the fund in connection with bankruptcy proceedings), it is
the fund's current policy to engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may include
agreements to purchase and sell foreign securities in exchange for fixed U.S.
dollar amounts, or in exchange for specified amounts of foreign currency. Unlike
typical U.S. repurchase agreements, foreign repurchase agreements may not be
fully collateralized at all times: i.e., the value of the security purchased by
the fund may be more or less than the price at which the counterparty has agreed
to repurchase the security. In the event of a default by the counterparty, the
fund may suffer a loss if the value of the security purchased is less than the
agreed-upon repurchase price, or if the fund is unable to successfully assert a
claim to the collateral under foreign laws. As a result, foreign repurchase
agreements may involve higher credit risks than repurchase agreements in U.S.
markets, as well as risks associated with currency fluctuations. In addition, as
with other emerging market investments, repurchase agreements with
counterparties located in emerging markets or relating to emerging market
securities may involve issuers or counterparties with lower credit ratings than
typical U.S. repurchase agreements.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund sells
a portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, the fund will
maintain appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreement. The fund will enter into reverse repurchase
agreements only with parties whose creditworthiness has been found satisfactory
by FMR. Such transactions may increase fluctuations in the market value of the
fund's assets and may be viewed as a form of leverage.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed securities
issued by government and non-government entities, such as banks, mortgage
lenders, or other financial institutions. A mortgage-backed security may be an
obligation of the issuer backed by a mortgage or pool of mortgages or a direct
interest in an underlying pool of mortgages. Some mortgage-backed securities,
such as collateralized mortgage obligations or CMOs, make payments of both
principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage-backed securities are based on different types of
mortgages including those on commercial real estate or residential properties.
Other types of mortgage-backed securities will likely be developed in the
future, and the fund may invest in them if FMR determines they are consistent
with the fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the market's
perception of issuers. In addition, regulatory or tax changes may adversely
affect the mortgage securities market as a whole. Non-government mortgage-backed
securities may offer higher yields than those issued by government entities, but
also may be subject to greater price changes than government issues.
Mortgage-backed securities are subject to prepayment risk. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
total returns.
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. government agency or
a financial institution separates the interest and principal components of a
mortgage-backed security and sells them as individual securities. The holder of
the "principal-only" security (PO) receives the principal payments made by the
underlying mortgage-backed security, while the holder of the "interest-only"
security (IO) receives interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly affected
by changes in interest rates. As interest rates fall, prepayment rates tend to
increase, which tends to reduce prices of IOs and increase prices of POs. Rising
interest rates can have the opposite effect.
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in pools of
consumer loans (generally unrelated to mortgage loans) and most often are
structured as pass-through securities. Interest and principal payments
ultimately depend on payment of the underlying loans by individuals, although
the securities may be supported by letters of credit or other credit
enhancements. The value of asset-backed securities may also depend on the
creditworthiness of the servicing agent for the loan pool, the originator of the
loans, or the financial institution providing the credit enhancement.
INTERFUND BORROWING PROGRAM. The fund has received permission from the SEC to
lend money to and borrow money from other funds advised my FMR or its
affiliates. Interfund loans and borrowings normally will extend overnight, but
can have a maximum duration of seven days. Loans may be called on one day's
notice. The fund will lend through the program only when the returns are higher
than those available at the same time from other short-term instruments (such as
repurchase agreements), and will borrow through the program only when the costs
are equal to or lower than the cost of bank loans. The fund may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional borrowing costs.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and a
subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities loaned
and, at the same time, to earn additional income. Since there may be delays in
the recovery of loaned securities, or even a loss of rights in collateral
supplied should the borrower fail financially, loans will be made only to
parties deemed by FMR to be of good standing. Furthermore, they will only be
made if, in FMR's judgment, the consideration to be earned from such loans would
justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund may
engage in loan transactions only under the following conditions: (1) the fund
must receive 100% collateral in the form of cash or cash equivalents (e.g., U.S.
Treasury bills or notes) from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities loaned (determined on a
daily basis) rises above the value of the collateral; (3) after giving notice,
the fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the borrower, as well
as amounts equivalent to any dividends, interest, or other distributions on the
securities loaned and to any increase in market value; (5) the fund may pay only
reasonable custodian fees in connection with the loan; and (6) the Board of
Trustees must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with the
borrower.
Cash received through loan transactions may be invested in any security in which
the fund is authorized to invest. Investing this cash subjects that investment,
as well as the security loaned, to market forces (i.e., capital appreciation or
depreciation).
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, FMR determines the
liquidity of the fund's investments and, through reports from FMR, the Board
monitors investments in illiquid instruments. In determining the liquidity of
the fund's investments, FMR may consider various factors, including (1) the
frequency of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and (5) the
nature of the marketplace for trades (including the ability to assign or offset
the fund's rights and obligations relating to the investment).
Investments currently considered by the fund to be illiquid include repurchase
agreements not entitling the holder to payment of principal and interest within
seven days, non-government stripped fixed-rate mortgage-backed securities, and
over-the-counter options. Also, FMR may determine some restricted securities,
municipal lease obligations, government-stripped fixed-rate mortgage-backed
securities, loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund writes, all
or a portion of the value of the underlying instrument may be illiquid depending
on the assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at fair
value as determined in good faith by a committee appointed by the Board of
Trustees. If through a change in values, net assets, or other circumstances, the
fund were in a position where more than 10% of its net assets were invested in
illiquid securities, it would seek to take appropriate steps to protect
liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
the fund may be obligated to pay all or part of the registration expense and a
considerable period may elapse between the time it decides to seek registration
and the time the fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the fund might obtain a less favorable price than prevailed when it
decided to seek registration of the security.
LOWER-QUALITY DEBT SECURITIES. While the market for high-yield corporate debt
securities has been in existence for many years and has weathered previous
economic downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and restructurings.
Past experience may not provide an accurate indication of the future performance
of the high-yield bond market, especially during periods of economic recession.
In fact, from 1989 to 1991, the percentage of lower-quality securities that
defaulted rose significantly above prior levels, although the default rate
decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less active than
that for higher-quality debt securities, which can adversely affect the prices
at which the former are sold. If market quotations are not available,
lower-quality debt securities will be valued in accordance with procedures
established by the Board of Trustees, including the use of outside pricing
services. Judgment plays a greater role in valuing high-yield corporate debt
securities than is the case for securities for which more external sources for
quotations and last-sale information are available. Adverse publicity and
changing investor perceptions may affect the ability of outside pricing services
to value lower-quality debt securities and the fund's ability to dispose of
these securities.
Since the risk of default is higher for lower-quality debt securities, FMR's
research and credit analysis are an especially important part of managing
securities of this type held by the fund. In considering investments for the
fund, FMR will attempt to identify those issuers of high-yielding securities
whose financial condition is adequate to meet future obligations, has improved,
or is expected to improve in the future. FMR's analysis focuses on relative
values based on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the issuer.
The fund may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise to exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the fund's shareholders.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are interests
in amounts owed by a corporate, governmental, or other borrower to lenders or
lending syndicates (loans and loan participations), to suppliers of goods or
services (trade claims or other receivables), or to other parties. Direct debt
instruments are subject to the fund's policies regarding the quality of debt
securities.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the fund does not receive scheduled interest or principal payments
on such indebtedness, the fund's share price and yield could be adversely
affected. Loans that are fully secured offer the fund more protections than an
unsecured loan in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks and may be highly speculative. Borrowers that are in
bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of developing
countries also involves a risk that the governmental entities responsible for
the repayment of the debt may be unable, or unwilling, to pay interest and repay
principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the fund. For
example, if a loan is foreclosed, the fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, the fund could be held liable as a
co-lender. Direct debt instruments may also involve a risk of insolvency of the
lending bank or other intermediary. Direct debt instruments that are not in the
form of securities may offer less legal protection to the fund in the event of
fraud or misrepresentation. In the absence of definitive regulatory guidance,
the fund relies on FMR's research in an attempt to avoid situations where fraud
or misrepresentation could adversely affect the fund.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, the fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the fund were determined to be
subject to the claims of the agent's general creditors, the fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the fund to pay additional cash on demand. These commitments may have the effect
of requiring the fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. The fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
potential obligations under standby financing commitments.
The fund limits the amount of total assets that it will invest in any one issuer
or in issuers within the same industry (see limitation (4)). For purposes of
these limitations, the fund generally will treat the borrower as the "issuer" of
indebtedness held by the fund. In the case of loan participations where a bank
or other lending institution serves as financial intermediary between the fund
and the borrower, if the participation does not shift to the fund the direct
debtor-creditor relationship with the borrower, SEC interpretations require the
fund, in appropriate circumstances, to treat both the lending bank or other
lending institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict the fund's
ability to invest in indebtedness related to a single financial intermediary, or
a group of intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and structured
to include exposure to a variety of different types of investments or market
factors. Depending on their structure, swap agreements may increase or decrease
the fund's exposure to long- or short-term interest rates (in the U.S. or
abroad), foreign currency values, mortgage securities, corporate borrowing
rates, or other factors such as security prices or inflation rates. Swap
agreements can take many different forms and are known by a variety of names.
The fund is not limited to any particular form of swap agreement if FMR
determines it is consistent with the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one type
of investment to another. For example, if the fund agreed to exchange payments
in dollars for payments in foreign currency, the swap agreement would tend to
decrease the fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of the fund's investments and its
share price.
The most significant factor in the performance of swap agreements is the change
in the specific interest rate, currency, or other factors that determine the
amounts of payments due to and from the fund. If a swap agreement calls for
payments by the fund, the fund must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declined, the value of a
swap agreement would be likely to decline, potentially resulting in losses. The
fund expects to be able to eliminate its exposure under swap agreements either
by assignment or other disposition, or by entering into an offsetting swap
agreement with the same party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the fund
enters into a swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If the fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value equal
to the full amount of the fund's accrued obligations under the agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are indexed to
the prices of other securities, securities indices, currencies, precious metals
or other commodities, or other financial indicators. Indexed securities
typically, but not always, are debt securities or deposits whose value at
maturity or coupon rate is determined by reference to a specific instrument or
statistic. Gold-indexed securities, for example, typically provide for a
maturity value that depends on the price of gold, resulting in a security whose
price tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt securities whose
maturity values or interest rates are determined by reference to the values of
one or more specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign-denominated instrument, or their maturity
value may decline when foreign currencies increase, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S. and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent issuers of
indexed securities have included banks, corporations, and certain U.S.
government agencies. Indexed securities may be more volatile than the underlying
instruments.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in foreign currencies and of dividends and
interest paid with respect to such securities will fluctuate based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about foreign issuers' financial condition and
operations, particularly those not subject to the disclosure and reporting
requirements of the U.S. securities laws. Foreign issuers are generally not
bound by uniform accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to U.S. issuers. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States.
Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that FMR will be able to
anticipate these potential events or counter their effects. The considerations
noted above generally are intensified for investments in developing countries.
Developing countries may have relatively unstable governments, economies based
on only a few industries, and securities markets that trade a small number of
securities.
Foreign markets may offer less protection to investors than U.S. markets. It is
anticipated that in most cases the best available market for foreign securities
will be on exchanges or in over-the-counter markets located outside of the
United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
U.S. issuers. Foreign security trading practices, including those involving
securities settlement where fund assets may be released prior to receipt of
payment, may expose the fund to increased risk in the event of a failed trade or
the insolvency of a foreign broker-dealer, and may involve substantial delays.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than for U.S.
investors. In general, there is less overall governmental supervision and
regulation of securities exchanges, brokers, and listed companies than in the
United States. It may also be difficult to enforce legal rights in foreign
countries.
The fund may invest in foreign securities that impose restrictions on transfer
within the United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less liquid than
foreign securities of the same class that are not subject to such restrictions.
The fund may invest in American Depository Receipts and European Depository
Receipts (ADRs and EDRs), which are certificates evidencing ownership of shares
of a foreign-based issuer held in trust by a bank or similar financial
institution. Designed for use in the U.S. and European securities markets,
respectively, ADRs and EDRs are alternatives to the purchase of the underlying
securities in their national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may conduct foreign currency
transactions on a spot (i.e., cash) basis or by entering into forward contracts
to purchase or sell foreign currencies at a future date and price. The fund will
convert currency on a spot basis from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers
generally do not charge a fee for conversion, they do realize a profit based on
the difference between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the fund at
one rate, while offering a lesser rate of exchange should the fund desire to
resell that currency to the dealer. Forward contracts are generally traded in an
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. The parties to a forward contract may
agree to offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The fund may use currency forward contracts for any purpose consistent with its
investment objective. The following discussion summarizes the principal currency
management strategies involving forward contracts that could be used by the
fund. The fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same purposes.
When the fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
U.S. dollars, of the amount of foreign currency involved in the underlying
security transaction, the fund will be able to protect itself against an adverse
change in foreign currency values between the date the security is purchased or
sold and the date on which payment is made or received. This technique is
sometimes referred to as a "settlement hedge" or "transaction hedge." The fund
may also enter into forward contracts to purchase or sell a foreign currency in
anticipation of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in the value
of existing investments denominated in foreign currency. For example, if the
fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge, sometimes referred
to as a "position hedge," would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
other factors. The fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling - for example, by
entering into a forward contract to sell Deutschemarks or European Currency
Units in return for U.S. dollars. This type of hedge, sometimes referred to as a
"proxy hedge," could offer advantages in terms of cost, yield, or efficiency,
but generally would not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
The fund may enter into forward contracts to shift its investment exposure from
one currency into another. This may include shifting exposure from U.S. dollars
to a foreign currency, or from one foreign currency to another foreign currency.
For example, if the fund held investments denominated in Deutschemarks, the fund
could enter into forward contracts to sell Deutschemarks and purchase Swiss
Francs. This type of strategy, sometimes known as a "cross-hedge," will tend to
reduce or eliminate exposure to the currency that is sold, and increase exposure
to the currency that is purchased, much as if the fund had sold a security
denominated in one currency and purchased an equivalent security denominated in
another. Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause the fund to assume the risk of fluctuations in
the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover currency
forward contracts. As required by SEC guidelines, the fund will segregate assets
to cover currency forward contracts, if any, whose purpose is essentially
speculative. The fund will not segregate assets to cover forward contracts
entered into for hedging purposes, including settlement hedges, position hedges,
and proxy hedges.
Successful use of currency management strategies will depend on FMR's skill in
analyzing and predicting currency values. Currency management strategies may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a time
when FMR had hedged the fund by selling that currency in exchange for dollars,
the fund would be unable to participate in the currency's appreciation. If FMR
hedges currency exposure through proxy hedges, the fund could realize currency
losses from the hedge and the security position at the same time if the two
currencies do not move in tandem. Similarly, if FMR increases the fund's
exposure to a foreign currency, and that currency's value declines, the fund
will realize a loss. There is no assurance that FMR's use of currency management
strategies will be advantageous to the fund or that it will hedge at an
appropriate time.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a notice of
eligibility for exclusion from the definition of the term "commodity pool
operator" with the Commodity Futures Trading Commission (CFTC) and the National
Futures Association, which regulate trading in the futures markets. The fund
intends to comply with Rule 4.5 under the Commodity Exchange Act, which limits
the extent to which the fund can commit assets to initial margin deposits and
option premiums.
In addition, 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) write put options if, as a result, the fund's total obligations upon
settlement or exercise of written put options would exceed 25% of its total
assets; (c) 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 50% of its total assets; or (d)
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.
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.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be changed
as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When the
fund sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take place
is fixed when the fund enters into the contract. Some currently available
futures contracts are based on specific securities, such as U.S. Treasury bonds
or notes, and some are based on indices of securities prices, such as the Bond
Buyer Municipal Bond Index. Futures can be held until their delivery dates, or
can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem with
the value of its underlying instrument. Therefore, purchasing futures contracts
will tend to increase the fund's exposure to positive and negative price
fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When the fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is not
required to deliver or pay for the underlying instrument unless the contract is
held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant (FCM), when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value. If the
value of either party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value on a daily
basis. The party that has a gain may be entitled to receive all or a portion of
this amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of the fund's investment limitations. In the
event of the bankruptcy of an FCM that holds margin on behalf of the fund, the
fund may be entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund obtains
the right (but not the obligation) to sell the option's underlying instrument at
a fixed strike price. In return for this right, the fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of securities
prices, and futures contracts. The fund may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option. If
the option is allowed to expire, the fund will lose the entire premium it paid.
If the fund exercises the option, it completes the sale of the underlying
instrument at the strike price. The fund may also terminate a put option
position by closing it out in the secondary market at its current price, if a
liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price. A call buyer
typically attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer can expect to suffer a loss if security prices do
not rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract the fund will be
required to make margin payments to an FCM as described above for futures
contracts. The fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for a put option the fund has
written, however, the fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit, although
its gain would be limited to the amount of the premium it received. If security
prices remain the same over time, it is likely that the writer will also profit,
because it should be able to close out the option at a lower price. If security
prices fall, the put writer would expect to suffer a loss. This loss should be
less than the loss from purchasing the underlying instrument directly, however,
because the premium received for writing the option should mitigate the effects
of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination with
each other, or in combination with futures or forward contracts, to adjust the
risk and return characteristics of the overall position. For example, the fund
may purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments match the fund's investments
well. Options and futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instrument, and the time remaining until expiration of the contract, which may
not affect security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and the
securities markets, from structural differences in how options and futures and
securities are traded, or from imposition of daily price fluctuation limits or
trading halts. The fund may purchase or sell options and futures contracts with
a greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases. If price changes in the fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract at
any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying instrument's
current price. In addition, exchanges may establish daily price fluctuation
limits for options and futures contracts, and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for the fund to enter into new positions or close
out existing positions. If the secondary market for a contract is not liquid
because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the fund to
continue to hold a position until delivery or expiration regardless of changes
in its value. As a result, the fund's access to other assets held to cover its
options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of over-the-counter options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the fund greater flexibility to
tailor an option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing organization
of the exchanges where they are traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures contracts
are similar to forward currency exchange contracts, except that they are traded
on exchanges (and have margin requirements) and are standardized as to contract
size and delivery date. Most currency futures contracts call for payment or
delivery in U.S. dollars. The underlying instrument of a currency option may be
a foreign currency, which generally is purchased or delivered in exchange for
U.S. dollars, or may be a futures contract. The purchaser of a currency call
obtains the right to purchase the underlying currency, and the purchaser of a
currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options and
futures relating to securities or indices, as discussed above. The fund may
purchase and sell currency futures and may purchase and write currency options
to increase or decrease its exposure to different foreign currencies. The fund
may also purchase and write currency options in conjunction with each other or
with currency futures or forward contracts. Currency futures and options values
can be expected to correlate with exchange rates, but may not reflect other
factors that affect the value of the fund's investments. A currency hedge, for
example, should protect a Yen-denominated security from a decline in the Yen,
but will not protect the fund against a price decline resulting from
deterioration in the issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other than
exchange rates, it may not be possible to match the amount of currency options
and futures to the value of the fund's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures or option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a large
percentage of the fund's assets could impede portfolio management or the fund's
ability to meet redemption requests or other current obligations.
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth" or
"Puerto Rico"), and is based on information drawn from official statements and
prospectuses relating to the securities offerings of Puerto Rico and its
agencies and instrumentalities, as available on the date of this Statement of
Additional Information. FMR has not independently verified any of the
information contained in such official statements, prospectuses, and other
publicly available documents, but is not aware of any fact which would render
such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United States,
and in fiscal 1993 trade with the United States accounted for approximately 86%
of Puerto Rico's exports and approximately 69% of its imports. In this regard,
in fiscal 1993 Puerto Rico experienced a $2.5 billion positive adjusted
merchandise trade balance. Since fiscal 1987, personal income, both aggregate
and per capita, has increased consistently each year. In fiscal 1993 aggregate
personal income was $24.1 billion and personal per capita income was $6,760.
Gross domestic product in fiscal 1991, 1992, and 1993 was $22.8 billion, $23.5
billion, and $25 billion, respectively. For fiscal 1994, an increase in gross
domestic product of 2.9% over fiscal 1993 is forecasted. However, actual growth
in the Puerto Rico economy will depend on several factors, including the
condition of the U.S. economy, the exchange rate for the U.S. dollar and the
price stability of oil imports and interest rates. Due to these factors there is
no assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico economy
generally follow those of the United States, Puerto Rico did not experience a
recession primarily because of its strong manufacturing base, which has a large
component of non-cyclical industries. Other factors behind the continued
expansion included Commonwealth-sponsored economic development programs, stable
prices of oil imports, low exchange rates for the U.S. dollar, and the
relatively low cost of borrowing funds during the period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it still
remains significantly above the U.S. average and has been increasing in recent
years. Despite long-term improvements the unemployment rate rose from 16.5% to
17.5% from fiscal 1992 to fiscal 1993. However, by the end of January 1994, the
unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by the
manufacturing and service industries. Manufacturing is the cornerstone of Puerto
Rico's economy, accounting for $14.1 billion or 39.4% of gross domestic product
in fiscal 1993. However, manufacturing has experienced a basic change over the
years as a result of the influx of higher wages, high technology industries such
as the pharmaceutical industry, electronics, computers, micro-processors,
scientific instruments and high technology machinery. The service sector, which
employs the largest number of people, includes wholesale and retail trade,
finance and real estate, and ranks second in its contribution to gross domestic
product. In fiscal 1993, the service sector generated $14.0 billion in gross
domestic product or 39.1% of the total and employed over 467,000 workers
providing 46.7% of total employment. The government sector of the Commonwealth
plays an important role in Puerto Rico's economy. In fiscal year 1993, the
government accounted for $3.9 billion of Puerto Rico's gross domestic product
and provided 21.7% of the total employment. Tourism also contributes
significantly to the island economy, accounting for $1.6 billion of gross
domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program to
be implemented in the next few years. This program is based on the premise that
the private sector will be the primary vehicle for economic development and
growth. The program promotes changing the role of the government from one of
being a provider of most basic services to one of being a facilitator for
private sector initiatives and will encourage private sector investment by
reducing regulatory restraints. The program contemplates the development of
initiatives that will foster private investment, both eternal and internal, in
areas that are served more efficiently and effectively by the private sector.
The program also contemplates a general revision of the tax system to expand the
tax base, reduce top personal and corporate tax rates, and simplify a highly
complex system. Other important goals for the new program are to reduce the size
of the government's direct contribution to gross domestic product and, to
facilitate private development and growth which would be realized through a
reduction in government consumption and an increase in government investment in
order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of Puerto
Rico is attributable to federal and Commonwealth tax incentives, most notably
section 936 of the Internal Revenue Code of 1986, as amended ("Section 936") and
the Commonwealth's Industrial Incentives Program. Section 936 currently grants
U.S. corporations that meet certain criteria and elect its application, a credit
against their U.S. corporate income tax on the portion of the tax attributable
to (i) income derived from the active conduct of a trade or business in Puerto
Rico ("active income"), or from the sale or exchange of substantially all the
assets used in the active conduct of such trade or business, and (ii) qualified
possession sources investment income ("passive income"). The Industrial
Incentives Program, through the 1987 Industrial Incentives Act, grants
corporations engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code (the
"Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business income
and sale of assets as previously described. The first option will limit the
credit against such income to 40% of the credit allowed under current law, with
a five-year phase-in period starting at 60% of the current credit. The second
option will limit the allowable credit to the sum of (i) 60% of qualified
compensation paid to employees (as defined in the Code); (ii) a specified
percentage of depreciation deductions; and (iii) a portion of the Puerto Rico
income taxes paid by the Section 936 corporation, up to a 9% effective tax
rate.
At present, it is difficult to forecast what the short- and long-term effects
of the new limitations to the Section 936 credit will be on the economy of
Puerto Rico. However, preliminary econometric studies by the government of
Puerto Rico and private sector economists (assuming no enhancements to the
existing Industrial Incentives Program) project only a slight reduction in
average real growth rates for the economy of Puerto Rico. These studies also
show that particular industry groups will be affected differently. For example,
manufacturers of pharmaceuticals and beverages may suffer a larger reduction in
tax benefits due to their relatively higher profit margins. In addition, the
above limitations are not expected to reduce the tax credit currently enjoyed by
labor-intensive, lower profit margin industries, which represent approximately
40% of the total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on behalf
of the fund by FMR pursuant to authority contained in the management contract.
If FMR grants investment management authority to the sub-advisers (see the
section entitled "Management Contract"), the sub-advisers are authorized to
place orders for the purchase and sale of portfolio securities, and will do so
in accordance with the policies described below. 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 considers 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 and may not
be subject to negotiation.
The 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. 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 generally is made by FMR (to the extent
possible consistent with execution considerations) based upon the quality of
research and execution services provided.
The receipt of research from broker-dealers that execute transactions on behalf
of the fund may be useful to FMR in rendering investment management services to
the fund 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 fund. 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 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.
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 fund, 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, unless certain requirements are
satisfied. Pursuant to such requirements, the Board of Trustees has authorized
FBSI to execute portfolio transactions on national securities exchanges in
accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities in
connection with the placement of portfolio transactions on behalf of the fund
and review the commissions paid by the fund over representative periods of time
to determine if they are reasonable in relation to the benefits to the fund.
For the fiscal periods ended December 31, 1994 and 1993, the fund's portfolio
turnover rates were 168 % and 275% (annualized) , respectively.
Because a high turnover rate increases transaction costs and may increase
taxable gains, FMR carefully weighs the anticipated benefits of short-term
investing against these consequences. An increased turnover rate is due to a
greater volume of shareholder purchase orders, short-term interest rate
volatility and other special market conditions.
From time to time the Trustees will review whether the recapture for the benefit
of the fund of some portion of the brokerage commissions or similar fees paid by
the fund on portfolio transactions is legally permissible and advisable. The
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 the fund to seek
such recapture.
Although the Trustees and officers of the fund are substantially the same as
those of other funds managed by FMR, investment decisions for the 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 and accounts are managed by the same
investment adviser, particularly when the same security is suitable for the
investment objective of more than one fund or account.
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
procedures believed to be appropriate and equitable for each fund. In some cases
this system could have a detrimental effect on the price or value of the
security as far as the fund is concerned. In other cases, however, the ability
of the fund to participate in volume transactions will produce better executions
and prices for the fund. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to the fund outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
VALUATION OF PORTFOLIO SECURITIES
Securities owned by the fund are appraised by various methods depending on the
market or exchange on which they trade. Securities traded on the New York Stock
Exchange or the American Stock Exchange are appraised at the last sale price, or
if no sale has occurred, at the closing bid price. Securities traded on other
exchanges are appraised as nearly as possible in the same manner. Securities and
other assets for which exchange quotations are not readily available are valued
on the basis of closing over-the-counter bid prices, if available, or at their
fair value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees.
Foreign securities are valued at the last sale price in the principal market
where they are traded, or, if last sale prices are unavailable, at the last bid
price available prior to the time the fund's net asset value per share (NAV) is
determined. Foreign security prices are furnished by quotation services who
express the value of securities in their local currency. FSC translates the
value of foreign securities from the local currency into U.S. dollars at current
exchange rates. Any changes in the value of forward contracts due to exchange
rate fluctuations are included in the determination of NAV.
The fund's bond investments are valued primarily on the basis of valuations
furnished by a pricing service that uses both dealer-supplied valuations and
electronic data processing techniques that take into account appropriate factors
such as institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon quoted prices or exchanges or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Use of the pricing service has
been approved by the Board of Trustees.
The fund's portfolio securities with remaining maturities of less than 60 days
are valued on the basis of amortized cost. This technique involves valuing an
instrument at its cost as adjusted for amortization of premium or accretion of
discount rather than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost value of
an instrument may be higher or lower than the price the fund would receive if it
sold the instrument.
PERFORMANCE
The fund may quote performance in various ways. All performance information
supplied by the fund in advertising is historical and is not intended to
indicate future returns. The fund's share price, yield, and total return
fluctuate in response to market conditions and other factors, and the value of
fund shares when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for the fund are computed by dividing the fund's
interest and dividend income for a given 30-day or one-month period, net of
expenses, by the average number of shares entitled to receive distributions
during the period, dividing this figure by the fund's net asset value (NAV).
Yields do not reflect the fund's .50% redemption fee, which applies to shares
held less than 180 days. Income is calculated for purposes of yield quotations
in accordance with standardized methods applicable to all stock and bond funds.
Dividends from equity investments are treated as if they were accrued on a daily
basis, solely for the purposes of yield calculations. In general, interest
income is reduced with respect to bonds trading at a premium over their par
value by subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a portion of
the discount to daily income. For the fund's investments denominated in foreign
currencies, income and expenses are calculated first in their respective
currencies, and are then converted to U.S. dollars, either when they are
actually converted or at the end of the 30-day or one month period, whichever is
earlier. Capital gains and losses generally are excluded from the calculation as
are gains and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating the fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding of income assumed in
yield calculations, the fund's yield may not equal its distribution rate, the
income paid to your account, or the income reported in the fund's financial
statements.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives. However,
the fund's yield fluctuates, unlike investments that pay a fixed interest rate
over a stated period of time. When comparing investment alternatives, investors
should also note the quality and maturity of the portfolio securities of
respective investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates the fund's yield will tend to be somewhat
lower. Also, when interest rates are falling, the inflow of net new money to the
fund from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the fund's holdings,
thereby reducing the fund's current yield. In periods of rising interest rates,
the opposite can be expected to occur.
The fund's tax-equivalent yield is the rate an investor would have to earn from
a fully taxable investment after taxes to equal the fund's tax-free yield.
Tax-equivalent yields are calculated by dividing the fund's yield by the result
of one minus a stated federal or combined federal and state tax rate. If only a
portion of the fund's yield is tax-exempt, only that portion is adjusted in the
calculation.
The table below shows the effect of a shareholder's tax status on effective
yield under federal income tax laws for 1995. It shows the approximate yield a
taxable security must provide at various income brackets to produce after-tax
yields equivalent to those of hypothetical tax-exempt obligations yielding from
4% to 8%. Of course, no assurance can be given that the fund will achieve any
specific tax-exempt yield. While the fund intends to invest at least 50% of its
assets in obligations whose interest is exempt from federal income tax, other
income received by the fund may be taxable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 TAX RATES AND TAX-EQUIVALENT YIELDS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
</TABLE>
Taxable Income* Tax 4% 5% 6% 7% 8%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket** Then Taxable equivalent yield is
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
$ 22,751 - $ 55,100 $ 38,001 - $ 91,850 28% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 55,101 - $ 115,000 $ 91,851 - $ 140,000 31% 5.80% 7.25% 8.70% 10.14% 11.59%
$ 155,001 - $ 250,000 $ 140,001 - $ 250,000 36% 6.25% 7.81% 9.38% 10.94% 12.50%
$ 250,001 - $ 250,001 - 39.6% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations on
itemized deductions, and other credits, exclusions, and adjustments which may
increase a taxpayer's marginal tax rate. An increase in a shareholder's marginal
tax rate would increase that shareholder's tax-equivalent yield.
The fund may invest a portion of its assets in obligations that are subject to
federal income tax. When the fund invests in these obligations, its
tax-equivalent yields will be lower. In the table above, tax-equivalent yields
are calculated assuming investments are 100% federally tax-free. During
fiscal 1994 79.2% of the fund's income was free from federal income tax.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the fund's NAV over a stated
period. Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the fund over a
stated period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. For example, a cumulative total return of
100% over ten years would produce an average annual return of 7.18%, which is
the steady annual rate of return that would equal 100% growth on a compounded
basis in ten years. While average annual returns are a convenient means of
comparing investment alternatives, investors should realize that the fund's
performance is not constant over time, but changes from year to year, and that
average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, or a series of redemptions, over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before-tax or after-tax basis and may
or may not include the effect of the fund's .50% redemption fee on shares held
less than 180 days. After-tax total returns reflect the total return of a
hypothetical account after payment of federal and/or state taxes using assumed
tax rates. After-tax total returns may assume that taxes are paid at the time of
distribution or once each year or are paid in cash or by redeeming shares, that
shares are held through the entire period or redeemed on the last day of the
period, and that distributions are reinvested or paid in cash. Excluding the
fund's redemption fee from a total return calculation produces a higher total
return figure. Total returns, yields, and other performance information may be
quoted numerically or in a table, graph, or similar illustration, and may omit
or include the effect of the $5.00 account closeout fee.
NET ASSET VALUE. Charts and graphs using the fund's net asset values, adjusted
net asset values, and benchmark indices may be used to exhibit performance. An
adjusted NAV includes any distributions paid by the fund and reflects all
elements of its return. Unless otherwise indicated, the fund's adjusted NAVs are
not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The table below shows the fund's yields, tax-equivalent
yields, and total returns for periods ended December 31, 1994. Total return
figures include the effect of the $5.00 account closeout fee based on an average
size account, but not the fund's .50% redemption fee, applicable to shares held
less than 180 days. The tax-equivalent yield is based on a 36% federal income
tax rate. Note that the fund may invest in securities whose income is subject to
federal and state income taxes and to the federal alternative minimum
tax.
SPARTAN BOND STRATEGIST
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Cumulative
Total Returns Total Returns Average Annual Cumulative
After-Tax After-Tax
Total Returns** Total Returns**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Day Tax-Equivalent One Life of One Life of One Life of One Life of
Yield Yield Year Fund* Year Fund* Year Fund* Year Fund*
6.92 10.43 -7.67 -5.02 -7.67 -6.54 -3.48 -2.53 -3.48 -3.31
</TABLE>
* From September 9, 1993 (commencement of operations).
** After-tax total returns reflect what you would have after taxes (at the
36% federal tax rate for income and short-term gains and 28% federal tax rate
for long-term gains). They assume that money was withdrawn from the fund to pay
for taxes in the year that the distributions, if any, were taxable, and that you
closed the account at the end of the period. If you did not close your account,
the after-tax return would have been -8.01% for the past year and -6.98% for the
life of the fund. These returns are lower because they do not include the tax
benefit of realizing a capital loss upon closing your account.
The table below shows the income and capital elements of the fund's cumulative
total return. The table compares the fund's return to the record of the Standard
& Poor's Composite Index of 500 Stocks (S&P 500), the Dow Jones Industrial
Average (DJIA), and the cost of living (measured by the Consumer Price Index, or
CPI) over the same period. The CPI information is as of the month end closest to
the initial investment date. The S&P 500 and DJIA comparisons are provided to
show how the fund's total return compared to the record of a broad average of
common stocks and a narrower set of stocks of major industrial companies,
respectively, over the same period. Of course, since the fund invests in
fixed-income securities, common stocks represent a different type of investment
from the fund. Common stocks generally offer greater growth potential than the
fund, but generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower income
than a fixed-income investment such as the fund. Figures for the S&P 500 and
DJIA are based on the prices of unmanaged groups of stocks and, unlike the
fund's returns, do not include the effect of paying brokerage commissions or
other costs of investing.
During the period from September 9, 1993 (commencement of operations) to
December 31, 1994, a hypothetical $10,000 investment in Spartan Bond Strategist
would have grown to $ 9,349 , assuming all distributions were reinvested.
This was a period of fluctuating interest rates and bond prices and the
following figures should not be considered representative of the dividend income
or capital gain or loss that could be realized from an investment in the fund
today.
SPARTAN BOND STRATEGIST INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Period Ended $10,000 Dividend Capital Gain Total S&P of
December 31 Investment Distributions Distributions Value 500 DJIA Living**
1994 $8,740 $609 $0 $9,349 $10,437 $11,073 $10,338
1993* 9,980 143 0 10,123 10,301 10,548 10,069
</TABLE>
* From September 9, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on September 9,
1993, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their cash
value at the time they were reinvested), amounted to $ 10,647 . If
distributions had not been reinvested, the amount of distributions earned from
the fund over time would have been smaller, and cash payments for the period
would have amounted to $ 627 for dividends . No capital gains were paid
during the period. Tax consequences of different investments have not been
factored into the above figures. The figures in the table do not reflect the
effect of the fund's $5.00 account closeout fee or the fund's .50% redemption
fee applicable to shares held less than 180 days.
The fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service located in Summit,
New Jersey that monitors the performance of mutual funds. Lipper generally ranks
funds on the basis of total return, assuming reinvestment of distributions, but
does not take sales charges or redemption fees into consideration, and is
prepared without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, the fund's performance may be
compared to stock, bond, and money market mutual fund performance indices
prepared by Lipper or other organizations. When comparing these indices, it is
important to remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher potential
returns, they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally do
not offer the higher potential returns from stock mutual funds.
From time to time, the fund's performance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of
Fidelity funds to one another in appropriate categories over specific periods of
time may also be quoted in advertising.
The fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual funds
differ from bank investments in several respects. For example, the fund may
offer greater liquidity or higher potential returns than CDs, the fund does not
guarantee your principal or your return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals understand their
investment goals and explore various financial strategies. Such information may
include information about current economic, market, and political conditions;
materials that describe general principles of investing, such as asset
allocation, diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used to project
savings needs based on assumed rates of inflation and hypothetical rates of
return; and action plans offering investment alternatives. Materials may also
include discussions of Fidelity's asset allocation funds and other Fidelity
funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the funds.
Ibbotson calculates total returns in the same method as the funds. The funds may
also compare performance to that of other compilations or indices that may be
developed and made available in the future.
The fund may compare its performance or the performance of securities in which
it may invest to averages published by IBC USA (Publications), Inc. of Ashland,
Massachusetts. These averages assume reinvestment of distributions. The
IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All Tax-Free, which is reported in
the MONEY FUND REPORT(registered trademark), covers over 370 tax-free
money market funds and the IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Taxable covers over 690 taxable money market funds. The Bond Fund Report
AverageS(trademark)/All Tax-Free, which is reported in the BOND FUND
REPORT(registered trademark), covers over 430 tax-free bond funds and the
Bond Fund Report AverageS(trademark)/All Taxable covers over 440 taxable
bond funds. When evaluating comparisons to money market funds, investors should
consider the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality instruments
and seek to maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike tax-free
mutual funds, individual municipal bonds offer a stated rate of interest and, if
held to maturity, repayment of principal. Although some individual municipal
bonds might offer a higher return, they do not offer the reduced risk of a
mutual fund that invests in many different securities. The initial investment
requirements and sales charges of many tax-free mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally issued in
$5,000 denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products and
services, which may include: other Fidelity funds; retirement investing;
brokerage products and services; the effects of periodic investment plans and
dollar cost averaging; saving for college or other goals; charitable giving; and
the Fidelity credit card. In addition, Fidelity may quote or reprint financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to current economic and political conditions, fund
management, portfolio composition, investment philosophy, investment techniques,
the desirability of owning a particular mutual fund, and Fidelity services and
products. Fidelity may also reprint, and use as advertising and sales
literature, articles from Fidelity Focus, a quarterly magazine provided free of
charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these measures to
those of other funds. Measures of volatility seek to compare the fund's
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. All measures of volatility and correlation are calculated using averages of
historical data. In advertising, the fund may also discuss or illustrate
examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the fund's price movements over specific periods of
time. Each point on the momentum indicator represents the fund's percentage
change in price movements over that period.
The fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
As of December 31, 1994, FMR advised over $ 25 billion in tax-free fund
assets, $ 65 billion in money market fund assets, $165 billion in
equity fund assets, $ 35 billion in international fund assets, and
$ 20 billion in Spartan fund assets. The fund may reference the growth and
variety of money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management figure
represents the largest amount of equity fund assets under management by a mutual
fund investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain a
worldwide information and communications network for the purpose of researching
and managing investments abroad.
In addition to performance rankings, each fund may compare its total expense
ratio to the average total expense ratio of similar funds tracked by Lipper. A
fund's total expense ratio is a significant factor in comparing bond and money
market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its NAV is calculated each day the New York
Stock Exchange (NYSE) is open for trading. The NYSE has designated the following
holiday closings for 1995: New Year's Day (observed), Washington's Birthday
(observed), Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Although FMR expects the same holiday
schedule to be observed in the future, the NYSE may modify its holiday schedule
at any time.
FSC normally determines the fund's NAV as of the close of the NYSE (normally
4:00 p.m. Eastern time). However, NAV may be calculated earlier if trading on
the NYSE is restricted or as permitted by the SEC. To the extent that portfolio
securities are traded in other markets on days when the NYSE is closed, the
fund's NAV may be affected on days when investors do not have access to the fund
to purchase or redeem shares. In addition, trading in some of the fund's
portfolio securities may not occur on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in securities
or other property, valued for this purpose as they are valued in computing the
fund's NAV. Shareholders receiving securities or other property on redemption
may realize a gain or loss for tax purposes, and will incur any costs of sale,
as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may be
waived if (i) the only effect of a modification would be to reduce or eliminate
an administrative fee, redemption fee, or deferred sales charge ordinarily
payable at the time of an exchange, or (ii) the fund suspends the redemption of
the shares to be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of its
shares because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the prospectus, the fund has notified shareholders that it reserves the right
at any time, without prior notice, to refuse exchange purchases by any person or
group if, in FMR's judgment, the fund would be unable to invest effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the U.S.
Postal Service cannot deliver your checks, or if your checks remain uncashed for
six months, Fidelity may reinvest your distributions at the then-current NAV.
All subsequent distributions will then be reinvested until you provide Fidelity
with alternate instructions.
DIVIDENDS. Because the fund's income is primarily derived from interest,
dividends from the fund generally will not qualify for the dividends-received
deduction available to corporate shareholders. To the extent that the fund's
income is designated as federally tax-exempt interest, the daily dividends
declared by the fund are also federally tax-exempt. Short-term capital gains are
distributed as dividend income, but do not qualify for the dividends-received
deduction. These gains will be taxed as ordinary income. A portion of the fund's
dividends derived from certain U.S. government obligations may be exempt from
state and local taxation. Gains (losses) attributable to foreign currency
fluctuations are generally taxable as ordinary income, and therefore will
increase (decrease) dividend distributions. As a consequence, FMR may adjust the
fund's income distributions to reflect the effect of currency fluctuations.
However, if foreign currency losses exceed the fund's net investment income
during a taxable year, all or a portion of the distributions made in the same
taxable year would be recharacterized as a return of capital to shareholders,
thereby reducing each shareholder's cost basis in his or her fund. The fund will
send each shareholder a notice in January describing the tax status of dividend
and capital gain distributions for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security benefits,
may be subject to federal income tax on up to 85% of such benefits to the extent
that their income, including tax-exempt income, exceeds certain base amounts.
The fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation fails
to comply with its covenant at any time, interest on the obligation could become
federally taxable retroactive to the date the obligation was issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for other tax
purposes. Interest from private activity securities is a tax preference item for
the purposes of determining whether a taxpayer is subject to the AMT and the
amount of AMT to be paid, if any. Private activity securities issued after
August 7, 1986 to benefit a private or industrial user or to finance a private
facility are affected by this rule.
A portion of the gain on bonds purchased with market discount and short-term
capital gains distributed by the fund are taxable to shareholders as dividends,
not as capital gains.
Corporate investors should note that a tax preference item for purposes of the
corporate AMT is 75% of the amount by which adjusted current earnings (which
includes tax-exempt interest) exceeds the alternative minimum taxable income of
the corporation. If a shareholder receives an exempt-interest dividend and sells
shares at a loss after holding them for a period of six months or less, the loss
will be disallowed to the extent of the amount of exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on the
sale of securities and distributed to shareholders are federally taxable as
long-term capital gains, regardless of the length of time shareholders have held
their shares. If a shareholder receives a long-term capital gain distribution on
shares of the fund, and such shares are held six months or less and are sold at
a loss, the portion of the loss equal to the amount of the long-term capital
gain distribution will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to shareholders as
dividends, not as capital gains.
As of December 31, 1994, the fund had a capital loss carryforward aggregating
approximately $ 1,296,373 . This loss carryforward, of which $ 25,951
and $ 1,270,422 will expire on December 31, 2001 and 2002 ,
respectively, is available to offset future capital gains.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may also
impose taxes on other payments or gains with respect to foreign securities.
Because the fund does not currently anticipate that securities of foreign
issuers will constitute more than 50% of its total assets at the end of its
fiscal year, shareholders should not expect to claim a foreign tax credit or
deduction on their federal income tax returns with respect to foreign taxes
withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a "regulated
investment company" for tax purposes so that it will not be liable for federal
tax on income and capital gains distributed to shareholders. In order to qualify
as a regulated investment company and avoid being subject to federal income or
excise taxes at the fund level, the fund intends to distribute substantially all
of its net investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis. The fund intends to comply with other
tax rules applicable to regulated investment companies, including a requirement
that capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year. Gains
from some forward currency contracts, futures contracts, and options are
included in this 30% calculation, which may limit the fund's investments in such
instruments.
If the fund purchases shares in certain foreign investment entities, defined as
passive foreign investment companies (PFICs) in the Internal Revenue Code, it
may be subject to U.S. federal income tax on a portion of any excess
distribution or gain from the disposition of such shares. Interest charges may
also be imposed on the fund with respect to deferred taxes arising from such
distributions or gains. Generally, the fund will elect to mark-to-market any
PFIC shares. Unrealized gains will be recognized as income for tax purposes and
must be distributed to shareholders as dividends.
The fund is treated as a separate entity from the other funds of Fidelity School
Street Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of the
tax consequences generally affecting the fund and its shareholders, and no
attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on
fund distributions, and shares may be subject to state and local personal
property taxes. Investors should consult their tax advisers to determine whether
the fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized in
1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family members,
and various trusts for the benefit of the Johnson family form a controlling
group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those conducted
by three of its divisions as follows: FSC, which is the transfer and shareholder
servicing agent for certain of the funds advised by FMR; Fidelity Investments
Institutional Operations Company, which performs shareholder servicing functions
for institutional customers and funds sold through intermediaries; and Fidelity
Investments Retail Marketing Company, which provides marketing services to
various companies within the Fidelity organization.
Fidelity investment personnel may invest in securities for their own account
pursuant to a code of ethics that sets forth all employees' fiduciary
responsibilities regarding the funds, establishes procedures for personal
investing and restricts certain transactions. For example, personal
trades in most securities require pre-clearance, and participation in initial
public offerings is prohibited. In addition, restrictions on the timing of
personal investing in relation to trades by Fidelity funds and on short-term
trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. All persons named as Trustees also serve
in similar capacities for other funds advised by FMR. Unless otherwise noted,
the business address of each Trustee and officer is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. Those Trustees
who are "interested persons" (as defined in the Investment Company Act of 1940)
by virtue of their affiliation with either the trust or FMR, are indicated by an
asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board and of
the Executive Committee of FMR; Chairman and a Director of FMR Texas Inc.
(1989), Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR; and
President and a Director of FMR Texas Inc. (1989), Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he was
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief Operating
Officer of Union Pacific Resources Company (exploration and production). He is a
Director of Sanifill Corporation (non-hazardous waste, 1993) 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, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior to
her retirement in September 1991, Mrs. Davis was the Senior Vice President of
Corporate Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing,
1991), and the TJX Companies, Inc. (retail stores, 1990), and previously served
as a Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The University
of Vermont School of Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a Director
of 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.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990). Prior
to his retirement in 1984, Mr. Jones was Chairman and Chief Executive Officer of
LTV Steel Company. Prior to May 1990, he was 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, a Trustee and member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT, Trustee,
is a Professor at Columbia University Graduate School of Business and a
financial consultant. Prior to 1987, he was Chairman of the Financial 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, Trustee (1990) is Vice Chairman of FMR (1992). Prior to his
retirement on May 31, 1990, he was a Director of FMR (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 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, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to his
retirement in July 1988, 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, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior to his
retirement in 1985, Mr. Malone was Chairman, General Electric Investment
Corporation and a Vice President of General Electric Company. He is a Director
of Allegheny Power Systems, Inc. (electric utility), General Re Corporation
(reinsurance) and Mattel Inc. (toy manufacturer). In addition, he serves as a
Trustee of Corporate Property Investors, the EPS Foundation at Trinity College,
the Naples Philharmonic Center for the Arts, and Rensselaer Polytechnic
Institute, and he is a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is Chairman of
the Board, President, and Chief Executive Officer of Lexmark International, Inc.
(office machines, 1991). Prior to 1991, he held the positions of Vice President
of International Business Machines Corporation ("IBM") and President and General
Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of
M.A. Hanna Company (chemicals, 1993) 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, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as Chairman
of the Board of First Wachovia Corporation (bank holding company), and Chairman
and Chief Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a 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).
GEORGE FISCHER is manager and Vice President of Spartan Bond Strategist, which
he has managed since September 1993. He also manages various institutional
portfolios. Mr. Fischer joined Fidelity in 1989, after receiving an M.B.A. from
the University of Pennsylvania.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of FDC.
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the Fidelity
funds, Mr. French was Senior Vice President, Fund Accounting - Fidelity
Accounting & Custody Services Co. (1991); Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1990); and Senior Vice President,
Chief Financial and Operations Officer - Huntington Advisers, Inc. (1985-1990).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994). Prior
to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was Chief
Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer of Fidelity
Brokerage Services, Inc. (1990-1993); and Vice President, Assistant Controller,
and Director of the Accounting Department - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current non-interested trustee of the fund for his or her services as
trustee for the fiscal year ended December 31, 1994.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund from the Fund the Fund Complex*
Complex* Complex*
Ralph F. Cox $ 11 $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 10 5,200 52,000 122,000
Richard J. Flynn 13 0 52,000 154,500
E. Bradley Jones 11 5,200 49,400 123,500
Donald J. Kirk 11 5,200 52,000 125,000
Gerald C. McDonough 11 5,200 52,000 125,000
Edward H. Malone 11 5,200 44,200 128,000
Marvin L. Mann 11 5,200 52,000 125,000
Thomas R. Williams 11 5,200 52,000 126,500
</TABLE>
* Information is as of December 31, 1994 for the 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a retirement
program under which they receive payments during their lifetime from a fund
based on their basic trustee fees and length of service. The obligation of a
fund to make such payments are not secured or funded. Trustees become eligible
if, at the time of retirement, they have served on the Board for at least five
years. Currently, Messrs. Ralph S. Saul, William R. Spaulding, Bertram H.
Witham, and David L. Yunich, participate in the program.
As of December 31, 1994, approximately 36.9% of the fund's total outstanding
shares were held by an FMR affiliate of which Mr. Edward C. Johnson 3d,
President and Trustee of the fund, by virtue of his controlling interest in FMR
Corp., may be considered a beneficial owner of these shares. With the
exception of Mr. Johnson 3d, the other Trustees and officers of the fund
owned, in the aggregate, less than 1% of the fund's total outstanding shares.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services. Under
its management contract with the fund, FMR acts as investment adviser and,
subject to the supervision of the Board of Trustees, directs the investments of
the fund in accordance with its investment objective, policies, and limitations.
FMR also provides the fund with all necessary office facilities and personnel
for servicing the fund's investments, 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 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 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 FSC.
FMR pays all other expenses of the fund with the following exceptions: fees and
expenses of the 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 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 officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated July 15, 1993,
which was approved by FMR, the then sole shareholder of the fund on August 30,
1993. For the services of FMR under the management contract, the fund pays FMR a
monthly management fee at the annual rate of .70% 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. For the fiscal year ended
December 31, 1994, the fund paid $ 150,625 to FMR in management fees.
FMR may, from time to time, voluntarily reimburse all or a portion of the fund's
operating expenses (exclusive of interest, taxes, brokerage commissions, and
extraordinary expenses).
To defray shareholder service costs, 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.
SUB-ADVISERS. FMR has entered into sub-advisory agreements with FMR U.K. and FMR
Far East . Pursuant to the sub-advisory agreements, FMR may receive
investment advice and research services outside the United States from the
sub-advisers. FMR may also grant the sub-advisers investment management
authority as well as the authority to buy and sell securities if FMR believes it
would be beneficial to the fund.
Currently, FMR U.K. and FMR Far East each focus on issuers in countries other
than the United States such as those in Europe, Asia, and the Pacific Basin.
FMR U.K. and FMR Far East are wholly owned subsidiaries of FMR. Under the
sub-advisory agreements FMR pays the fees of FMR U.K. and FMR Far East. For
providing non-discretionary investment advice and research services, FMR pays
FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively, of FMR
U.K.'s and FMR Far East's costs incurred in connection with providing investment
advice and research services.
For providing discretionary investment management and executing portfolio
transactions, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
monthly management fee with respect to the fund's average net assets managed by
the sub-adviser on a discretionary basis.
For the fiscal years ended December 31, 1994 and 1993, no fees were paid by FMR
to FMR U.K. and FMR Far East on behalf of the fund.
DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the plan) under Rule 12b-1
of the Investment Company Act of 1940 (the Rule). The Rule provides in substance
that a mutual fund may not engage directly or indirectly in financing any
activity that is primarily intended to result in the sale of shares of the fund
except pursuant to a plan adopted by the fund under the Rule. The fund's Board
of Trustees has adopted the plan to allow the fund and FMR to incur certain
expenses that might be considered to constitute indirect payment by the fund of
distribution expenses. Under the plan, if the payment of management fees by the
fund to FMR is deemed to be indirect financing by the fund of the distribution
of its shares, such payment is authorized by the plan.
The plan also specifically recognizes that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection with
the offer and sale of shares of the fund. In addition, the plan provides that
FMR may use its resources, including its management fee revenues, to make
payments to third parties that provide assistance in selling shares of the fund,
or to third parties, including banks, that render shareholder support services.
The Trustees have not authorized such payments to date.
The fund's plan has been approved by the Trustees. As required by the Rule, the
Trustees carefully considered all pertinent factors relating to the
implementation of the plan prior to its approval, and have determined that there
is a reasonable likelihood that the plan will benefit the fund and its
shareholders. In particular, the Trustees noted that the plan does not authorize
payments by the fund other than those made to FMR under its management contract
with the fund. To the extent that the plan gives FMR and FDC greater flexibility
in connection with the distribution of shares of the fund, additional sales of
the fund's shares may result. Additionally, certain shareholder support services
may be provided more effectively under the plan by local entities with whom
shareholders have other relationships.
The plan was approved by FMR, the then sole shareholder of the fund, on August
30, 1993.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or appropriate
regulatory agencies, FDC believes that the Glass-Steagall Act should not
preclude a bank from performing shareholder support services, or servicing and
recordkeeping functions. FDC intends to engage banks only to perform such
functions. However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates or
subsidiaries, as well as further judicial or administrative decisions or
interpretations, could prevent a bank from continuing to perform all or a part
of the contemplated services. If a bank were prohibited from so acting, the
Trustees would consider what actions, if any, would be necessary to continue to
provide efficient and effective shareholder services. In such event, changes in
the operation of the fund might occur, including possible termination of any
automatic investment or redemption or other services then provided by the bank.
It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
The fund may execute portfolio transactions with and purchase securities issued
by depository institutions that receive payments under the plan. No preference
for the instruments of such depository institutions will be shown in the
selection of investments. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks and
financial institutions may be required to register as dealers pursuant to state
law.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC performs transfer agency, dividend disbursing, and shareholder servicing
functions for the fund. The costs of these services are borne by FMR pursuant to
its management contract with the fund. FSC also calculates the fund's NAV and
dividends, maintains the fund's general accounting records, and administers the
fund's securities lending program. The costs of these services are also borne by
FMR pursuant to its management contract with the fund.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities and Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use all
reasonable efforts, consistent with its other business, to secure purchasers for
shares of the fund, which are continuously offered at net asset value.
Promotional and administrative expenses in connection with the offer and sale of
shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan Bond Strategist is a fund of Fidelity School Street
Trust, an open-end management investment company originally organized as a
Massachusetts business trust on September 10, 1976 as Fidelity Limited Term
Municipals. The trust's name was changed to Fidelity School Street Trust on July
1, 1993. Currently, there are two funds of the trust: Fidelity Limited Term
Municipals and Spartan Bond Strategist. The Declaration of Trust permits the
Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names "Fidelity" and
"Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each fund
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, are especially allocated to such fund, and constitute the
underlying assets of such fund. The underlying assets of each fund are
segregated on the books of account, and are to be charged with the liabilities
with respect to such fund and with a share of the general expenses of the trust.
Expenses with respect to the trust are to be allocated in proportion to the
asset value of the respective funds, except where allocations of direct expense
can otherwise be fairly made. The officers of the trust, subject to the general
supervision of the Board of Trustees, have the power to determine which expenses
are allocable to a given fund, or which are general or allocable to all of the
funds. In the event of the dissolution or liquidation of the trust, shareholders
of each fund are entitled to receive as a class the underlying assets of such
fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type commonly
known as a "Massachusetts business trust." Under Massachusetts law, shareholders
of such a trust may, under certain circumstances, be held personally liable for
the obligations of the trust. The Declaration of Trust provides that the trust
shall not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or the Trustees include a
provision limiting the obligations created thereby to the trust and its assets.
The Declaration of Trust provides for indemnification out of each fund's
property of any shareholder held personally liable for the obligations of the
fund. The Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declaration of Trust protects Trustees against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial interest. As
a shareholder, you receive one vote for each dollar value of net asset value you
own. The shares have no preemptive or conversion rights; the voting and dividend
rights, the right of redemption, and the privilege of exchange are described in
the Prospectus. Shares are fully paid and nonassessable, except as set forth
under the heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of the trust or a fund may, as set forth in the
Declaration of Trust, call meetings of the trust or a fund for any purpose
related to the trust or fund, as the case may be, including, in the case of a
meeting of the entire trust, the purpose of voting on removal of one or more
Trustees. The trust or any fund may be terminated upon the sale of its assets to
another open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a majority of
the trust or the fund, as determined by the current value of each shareholder's
investment in the fund or trust. If not so terminated, the trust and its funds
will continue indefinitely. Each fund may invest all of its assets in another
investment company.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, N.Y. is
custodian of the assets of the fund. The custodian is responsible for the
safekeeping of the fund's assets and the appointment of subcustodian banks and
clearing agencies. The custodian takes no part in determining the investment
policies of the fund or in deciding which securities are purchased or sold by
the fund. The fund may, however, invest in obligations of the custodian and may
purchase securities from or sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks, including
banks serving as custodians for certain of the funds advised by FMR.
Transactions that have occurred to date include 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.
AUDITOR. Coopers & Lybrand L.L.P. , One Post Office Square, Boston,
Massachusetts, serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the fiscal year
ended December 31, 1994 are included in the fund's Annual Report, which is a
separate report supplied with this Statement of Additional Information. The
fund's financial statements and financial highlights are incorporated herein by
reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of each
investment by the number of days remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's portfolio.
An obligation's maturity is typically determined on a stated final maturity
basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be called,
refunded, or redeemed may be considered to be its maturity date. When a
municipal bond issuer has committed to call an issue of bonds and has
established an independent escrow account that is sufficient to, and is pledged
to, refund that issue, the number of days to maturity for the prerefunded bond
is considered to be the number of days to the announced call date of the bonds.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on a
weighted average life basis, which is the average time for principal to be
repaid. For a mortgage security, this average time is calculated by estimating
the expected principal payments during the life of the mortgage. The weighted
average life of these securities is likely to be substantially shorter than
their stated final maturity.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards. Together
with Aaa group they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times in the future. Uncertainty of position characterizes bonds in this
class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other terms of
the contract over any long period of time may be small.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes possess
the strongest investment attributes are designated by the symbols Aa1, A1, Baa1,
Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
The ratings from AA to B may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.
The ratings from AA to B may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not applicable.
1. Financial statements for Spartan Bond Strategist for the fiscal year ended
December 31, 1994 are incorporated herein by reference to the fund's Statement
of Additional Information and were filed on February 10, 1995 for Fidelity
School Street Trust (File No.2-57167) pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporated herein by reference.
2. Financial statements for Fidelity Limited Term Municipals for the fiscal
year ended December 31, 1994 are incorporated herein by reference to the fund's
Statement of Additional Information and were filed on February 10, 1995 for
Fidelity School Street Trust (File No.2-57167) pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporated herein by reference.
(b) Exhibits:
1. (a) Amended and Restated Declaration of Trust, dated January 19, 1995, is
filed herein as Exhibit 1(a).
2. (a) Bylaws of the Trust are incorporated herein by reference to Exhibit 2(a)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective Amendment No.
87.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract between Fidelity Limited Term Municipals and
Fidelity Management & Research Company dated January 1, 1995 is filed herein as
Exhibit 5(a).
(b) Management Contract between Spartan Bond Strategist and Fidelity
Management & Research Company, dated July 15, 1993, is incorporated herein by
reference to Exhibit 5(b) to Post-Effective Amendment No. 44.
(c) Sub-Advisory Agreement between Fidelity Management & Research Company and
Fidelity Management & Research (U.K.) Inc., dated July 15, 1993, on behalf of
Spartan Bond Strategist is filed herein as Exhibit 5(c).
(d) Sub-Advisory Agreement between Fidelity Management & Research Company and
Fidelity Management & Research (Far East) Inc., dated July 15, 1993, on behalf
of Spartan Bond Strategist is filed herein as Exhibit 5(d).
6. (a) General Distribution Agreement between Fidelity Limited Term Municipals
and Fidelity Distributors Corporation, dated April 1, 1987, is filed herein as
Exhibit 6(a).
(b) Amendment, dated January 1, 1988, to the General Distribution Agreement
between Fidelity Limited Term Municipals and Fidelity Distributors Corporation,
is filed herein as Exhibit 6(b).
(c) General Distribution Agreement between Spartan Bond Strategist and
Fidelity Distributors Corporation, dated July 15, 1993, is filed herein as
Exhibit 6(c).
7. Retirement Plan for Non-Interested Person Trustees, Directors or General
Partners is incorporated herein by reference to Exhibit 7 to Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
8. (a) Custodian Agreement, dated July 18, 1991, between Fidelity Limited Term
Municipals and United Missouri Bank, N.A. is filed herein as Exhibit 8(a).
(b) Custodian Agreement, dated July 15, 1993, between Fidelity School Street
Trust and The Bank of New York is filed herein as Exhibit 8(b).
9. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand L.L.P. is filed herein as Exhibit 11.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(a) to Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial Agreement
and Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(d) to Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(c) Fidelity 403(b)(7) Custodial Account Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(e) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(d) National Financial Services Corporation Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(h) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(e) Fidelity Portfolio Advisory Services Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(i) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(f) Fidelity Investments Section 403(b)(7) Individual Custodial Account
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(j) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(g) National Financial Services Corporation Defined Contribution Retirement
Plan and Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(k) to Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as currently in
effect, is incorporated herein by reference to Exhibit 14(l) to Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(j) The CORPORATEplan for Retirement Money Purchase Pension Plan, as currently
in effect, is incorporated herein by reference to Exhibit 14(m) to Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Limited Term Municipals is filed herein as Exhibit 15(a).
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan Bond
Strategist is filed herein as Exhibit 15(b).
16. (a) A schedule for computation of total return is filed herein as Exhibit
16(a).
(b) A schedule for the computation of adjusted net asset value is filed herein
as Exhibit 16(b).
(c) A revised schedule for the computation of after-tax total return is
incorporated herein by reference to Exhibit 16(c) to Post-Effective Amendment
No. 43.
(d) A schedule for the computation of moving averages is filed herein as
Exhibit 16(c).
17. Financial Data Schedules for the funds are filed herein as Exhibit 27.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of Registrant is the same as the boards of other funds
advised by FMR, each of which has Fidelity Management & Research Company as its
investment adviser. In addition, the officers of these funds are substantially
identical. Nonetheless, the Registrant takes the position that it is not under
common control with these other funds since the power residing in the respective
boards and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities
December 31, 1994
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Limited Term Municipals 37,221
Spartan Bond Strategist 796
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the reasonable and
fair means for determining whether indemnification shall be provided to any past
or present Trustee or officer. It states that the Registrant shall indemnify
any present or past Trustee or officer to the fullest extent permitted by law
against liability and all expenses reasonably incurred by him in connection with
any claim, action, suit or proceeding in which he is involved by virtue of his
service as a trustee, an officer, or both. Additionally, amounts paid or
incurred in settlement of such matters are covered by this indemnification.
Indemnification will not be provided in certain circumstances, however. These
include instances of willful misfeasance, bad faith, gross negligence, and
reckless disregard of the duties involved in the conduct of the particular
office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment companies.
The directors and officers of the Adviser have held, during the past two fiscal
years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen Jonas Treasurer and Vice President of FMR (1993); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. McNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a substantial
nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management & Research
(Far East) Inc.; President and Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director of
Worldwide Research of FMR.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
Treasurer and Vice President of FMR (1993).
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management & Research
(Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management &
Research Company and Fidelity Management Trust Company. The directors and
officers of the Sub-Adviser have held the following positions of a substantial
nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management &
Research (U.K.) Inc.; Senior Vice President and Trustee
of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research (U.K.)
Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Stephen Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993).
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management &
Research (U.K.) Inc.; Secretary of FMR Texas Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most funds
advised by FMR and the following other funds:
CrestFunds, Inc.
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by Section
31a of the 1940 Act and the Rules promulgated thereunder are maintained by
Fidelity Management & Research Company or Fidelity Service Co., 82 Devonshire
Street, Boston, MA 02109, or the funds' respective custodian, The Bank of New
York, 110 Washington Street, New York, N.Y. and United Missouri Bank, N.A., 1010
Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant on behalf of Fidelity Limited Term Municipals and Spartan Bond
Strategist provided the information required by Item 5A is contained in the
annual report, undertakes to furnish each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the Registrant's
latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for the effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 45 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston,
and Commonwealth of Massachusetts, on the 15th day of February 1995.
FIDELITY SCHOOL STREET TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee February 15, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer February 15, 1995
Gary L. French
/s/J. Gary Burkhead Trustee February 15, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee February 15, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee February 15, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee February 15, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee February 15, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee February 15, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee February 15, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee February 15, 1995
Edward H. Malone
/s/Marvin L. Mann_____* Trustee February 15, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee February 15, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee February 15, 1995
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney dated
December 15, 1994 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individuals
serve as Board Members (collectively, the "Funds"), hereby severally constitute
and appoint Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Richard M.
Phillips, Dana L. Platt and Stephanie A. Djinis, each of them singly, our true
and lawful attorneys-in-fact, with full power of substitution, and with full
power to each of them, to sign for us and in our names in the appropriate
capacities, all Pre-Effective Amendments to any Registration Statements of the
Funds, any and all subsequent Post-Effective Amendments to said Registration
Statements, any Registration Statements on Form N-14, and any supplements or
other instruments in connection therewith, and generally to do all such things
in our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities Act of
1933 and Investment Company Act of 1940, and all related requirements of the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Exchange Fund Fund
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to sign
for me and in my name in the appropriate capacity, all Pre-Effective Amendments
to any Registration Statements of the Funds, any and all subsequent
Post-Effective Amendments to said Registration Statements, any Registration
Statements on Form N-14, and any supplements or other instruments in connection
therewith, and generally to do all such things in my name and behalf in
connection therewith as said attorney-in-fact deem necessary or appropriate, to
comply with the provisions of the Securities Act of 1933 and Investment Company
Act of 1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994
Edward C. Johnson 3d
Exhibit 1(a)
AMENDED AND RESTATED DECLARATION OF TRUST
DATED JANUARY 19, 1995
AMENDED AND RESTATED DECLARATION OF TRUST, made January 19, 1995 by each of the
Trustees whose signature is affixed hereto (the "Trustees")
WHEREAS, the Trustees desire to amend and restate this Declaration of Trust for
the sole purpose of supplementing the Declaration to incorporate amendments duly
adopted; and
WHEREAS, this Trust was initially made on September 10, 1976 by Edward C.
Johnson 3d, Caleb Loring, Jr., William L. Byrnes, Dwight L. Allison, Jr., Eugene
A. Clapp 2nd, Robert L. Johnson, George K. McKenzie and William R. Spalding in
order to establish a trust fund for the investment and reinvestment of funds
contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property contributed to
the trust fund hereunder shall be held and managed in Trust under this Amended
and Restated Declaration of Trust as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Fidelity School Street Trust".
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the context or
specifically provided:
(a) The Terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the 1940 Act, as
amended from time to time;
(b) The "Trust" refers to Fidelity School Street Trust and reference to the
Trust when applicable to one or more series of the Trust, shall refer to any
such series;
(c) "Net Asset Value" means the net asset value of each Series of the Trust
determined in the manner provided in Article X, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refer to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the time
being in office as such trustee or trustees;
(f) "Shares" means the equal proportionate transferable units of interest into
which the beneficial interest of the Trust or each Series shall be divided from
time to time, including such class or classes of shares as the Trustees may from
time to time create and establish including fractions of Shares as well as whole
Shares consistent with the requirements of Federal and/or state securities laws;
(g) The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time; and
(h) "Series" refers to series of Shares of the Trust established in accordance
with the provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source of
managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series or classes as
the Trustees shall from time to time create and establish. The number of Shares
is unlimited and each Share shall be without par value and shall be fully paid
and nonassessable. The Trustees shall have full power and authority, in their
sole discretion and without obtaining any prior authorization or vote of the
Shareholders or any Series or class of Shareholders of the Trust, to create and
establish (and to change in any manner) Shares or any Series or classes thereof
with such preferences, voting powers, rights and privileges as the Trustees may
from time to time determine, to divide or combine the Shares or any Series or
classes thereof into a greater or lesser number, to classify or reclassify any
issued Shares into one or more Series of Shares, to abolish any one or more
Series or classes of Shares, and to take such other action with respect to the
Shares as the Trustees may deem desirable.
ESTABLISHMENT OF SERIES
Section 2. The establishment of any Series shall be effective upon the adoption
of a resolution by a majority of the then Trustees setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series. At any time that there are no Shares outstanding of any
particular Series previously established and designated, the Trustees may by a
majority vote abolish that Series and the establishment and designation thereof.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of the Trust.
The Trustees may make such rules as they consider appropriate for the transfer
of Shares and similar matters. The record books of the Trust shall be conclusive
as to who are the holders of Shares and as to the number of Shares held from
time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such persons
and on such terms as they may from time to time authorize. Such investments may
be in the form of cash or securities in which the appropriate Series is
authorized to invest, valued as provided in Article X, Section 3. After the date
of the initial contribution of capital, the number of Shares to represent the
initial contribution may in the Trustees' discretion be considered as
outstanding and the amount received by the Trustees on the account of the
contribution shall be treated as an asset of the Trust. Subsequent investments
in the Trust shall be credited to each Shareholder's account in the form of full
Shares at the Net Asset Value per Share next determined after the investment is
received; provided, however, that the Trustees may, in their sole discretion,
(a) impose a sales charge upon investments in the Trust and (b) issue fractional
Shares.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as they, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and shall be referred to as assets belonging to that Series.
The assets belonging to a particular Series shall be so recorded upon the books
of the Trust, and shall be held by the Trustees in trust for the benefit of the
holders of Shares of that Series. The assets belonging to each particular Series
shall be charged with the liabilities of that Series and all expenses, costs,
charges and reserves attributable to that Series. Any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees between or among any one or more of the Series in such
manner as the Trustees in their sole discretion deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Any creditor of any Series may look only to the assets
of that Series to satisfy such creditor's debt.
NO PREEMPTIVE RIGHTS
Section 6. The Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust or
the Trustees.
LIMITATION OF PERSONAL LIABILITY
Section 7. The Trustees shall have no power to bind any Shareholder personally
or to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription for any Shares or otherwise.
Every note, bond, contract or other undertaking issued by or on behalf of the
Trust or the Trustees relating to the Trust shall include a recitation limiting
the obligation represented thereby to the Trust and its assets (but the omission
of such a recitation shall not operate to bind any Shareholder).
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry out
that responsibility.
ELECTION: INITIAL TRUSTEES
Section 2. On or before December 31, 1977, on a date fixed by the Trustees, the
Shareholders shall elect not less than three Trustees. A Trustee shall not be
required to be a Shareholder of the Trust. The initial Trustees who shall serve
until such election and until their successors are elcted and qualified shall be
Edward C. Johnson 3d, Caleb Loring, Jr., William L. Byrnes, Dwight L. Allison,
Jr., Eugene A. Clapp 2nd, Robert L. Johnson, George K. McKenzie and William R.
Spalding and such other individuals as the Board of Trustees shall appoint
pursuant to Section 4 of the Article IV.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this Trust,
and until its termination as hereinafter provided; except (a) that any Trustee
may resign his trust by written instrument signed by him and delivered to the
other Trustees, which shall take effect upon such delivery or upon such later
date as is specified therein; (b) that any Trustee may be removed at any time by
written instrument, signed by at least two-thirds of the number of Trustees
prior to such removal, specifying the date when such removal shall become
effective; (c) that any Trustee who requests in writing to be retired or who has
become incapacitated by illness or injury may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; and (d) a Trustee may be removed at any Special Meeting of the Trust
by a vote of two-thirds of the outstanding Shares.
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. An
appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee so appointed shall have accepted this 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.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more than twelve
(12), serving hereunder at any time shall be determined by the Trustees
themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled, or while any Trustee is absent from the Commonwealth of Massachusetts
or, if not a domiciliary of Massachusetts, is absent from his state of domicile,
or is physically or mentally incapacitated by reason of disease or otherwise,
the other Trustees shall have all the powers hereunder and the certificate of
the other Trustees of such vacancy, absence or incapacity, shall be conclusive,
provided, however, that no vacancy shall remain unfilled for a period longer
than six calendar months.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee hereunder by
the Trustees or any successor Trustees. All of the assets of the Trust shall at
all times be considered as vested in the Trustees. No Shareholder shall be
deemed to have a severable ownership in any individual asset of the Trust or any
right of partition or possession thereof, but each Shareholder shall have a
proportionate undivided beneficial interest in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and are and
shall be free from the control of the Shareholders. The Trustees shall have full
power and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Subject to any applicable limitation in
the Declaration of Trust or the Bylaws of the Trust, the Trustees shall have
power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or other
property uninvested, without in any event being bound or limited by any present
or future law or custom in regard to investments by Trustees, and to sell,
exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or
all of the assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the Shareholders.
(c) To elect and remove such officers and appoint and terminate such agents as
they consider appropriate.
(d) To employ a bank or trust company as custodian of any assets of the Trust
subject to any conditions set forth in this Declaration of Trust or in the
Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or both.
(f) To provide for the distribution of interests of the Trust either through a
principal underwriter in the manner hereinafter provided for or by the Trust
itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any officers of
the Trust and to any agent, custodian or underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject to the
provisions of Article XII, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with respect
to stock or other securities or property; and to execute and deliver powers of
attorney to such person or persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion with relation to securities
or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its own
name or in the name of a custodian or a nominee or nominees, subject in either
case to proper safeguards according to the usual practice of Massachusetts trust
companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III.
(n) To allocate assets, liabilities and expenses of the Trust to a particular
Series or to apportion the same between or among two or more Series, provided
that any liabilities or expenses incurred by a particular Series shall be
payable solely out of the assets belonging to that Series as provided for in
Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
(q) To make distributions of income and of capital gains to Shareholders in
the manner hereinafter provided for.
(r) To borrow money, and to pledge, mortgage or hypothecate the assets of the
Trust, subject to applicable limitations of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder.
(t) 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.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the Trust may acquire, own
and dispose of Shares to the same extent as if he were not a Trustee, officer or
agent; and the Trustees may issue and sell or cause to be issued and sold Shares
to and buy such Shares from any such person of any firm or company in which he
is interested, subject only to the general limitations herein contained as to
the sale and purchase of such Shares; and all subject to any restrictions which
may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly called or
by unanimous written consent without a meeting or by telephone consent provided
a quorum of Trustees participate in any such telephonic meeting, unless the 1940
Act requires that a particular action be taken only at a meeting of the
Trustees. At any meeting of the Trustees, a majority of the Trustees shall
constitute a quorum. Meetings of the Trustees may be called orally or in writing
by the Chairman of the Trustees or by any two other Trustees. Notice of the
time, date and place of all meetings of the Trustees shall be given by the party
calling the meeting to each Trustee by telephone or telegram sent to his home or
business address at least twenty-four hours in advance of the meeting or by
written notice mailed to his home or business address at least seventy-two hours
in advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a written
waiver of notice with respect to the meeting. Subject to the requirements of the
1940 Act, the Trustees by majority vote may delegate to any one of their number
their authority to approve particular matters or take particular actions on
behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman of the
Board of Trustees. The Chairman shall preside at all meetings of the Trustees,
shall be responsible for the execution of policies established by the Trustees
and the administration of the Trust, and may be the chief executive, financial
and accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the Trustees
shall be reimbursed from the trust estate or the assets belonging to the
appropriate Series for their expenses and disbursements, including, without
limitation, fees and expenses of Trustees who are not Interested Persons of the
Trust, interest expense, taxes, fees and commissions of every kind, expenses of
pricing Trust portfolio securities, expenses of issue, repurchase and redemption
of shares including expenses attributable to a program of periodic repurchases
or redemptions, expenses of registering and qualifying the Trust and its Shares
under Federal and State laws and regulations, charges of custodians, transfer
agents, and registrars, expenses of preparing and setting up in type
prospectuses and Statements of Additional Information, expenses of printing and
distributing prospectuses sent to existing Shareholders, auditing and legal
expenses, reports to Shareholders, expenses of meetings of Shareholders and
proxy solicitations therefor, insurance expense, association membership dues and
for such non-recurring items as may arise, including litigation to which the
Trust is a party, and for all losses and liabilities by them incurred in
administering the Trust, and for the payment of such expenses, disbursements,
losses and liabilities the Trustees shall have a lien on the assets belonging to
the appropriate Series prior to any rights or interests of the Shareholders
thereto. This section shall not preclude the Trust from directly paying any of
the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in their
discretion from time to time enter into an investment advisory or management
contract(s) with respect to the Trust or any Series thereof whereby the other
party(ies) to such contract(s) shall undertake to furnish the Trustees such
management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions, as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the Trustees may
authorize the investment adviser(s) (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities and other investment instruments of
the Trust on behalf of the Trustees or may authorize any officer, agent, or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act, including
those relating to Shareholder approval, authorize the investment adviser to
employ one or more sub-advisers from time to time to perform such of the acts
and services of the investment adviser, and upon such terms and conditions, as
may be agreed upon between the investment adviser and sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter into
(a) contract(s) providing for the sale of the Shares, whereby the Trust may
either agree to sell the Shares to the other party to the contract or appoint
such other party its sales agent for such Shares. In either case, the contract
shall be on such terms and conditions as may be prescribed in the Bylaws, if
any, and such further terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article VII,
or of the Bylaws, if any; and such contract may also provide for the repurchase
or sale of Shares by such other party as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter into a
transfer agency and Shareholder service contract whereby the other party shall
undertake to furnish the Trustees with transfer agency and Shareholder services.
The contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Declaration of
Trust or of the Bylaws, if any. Such services may be provided by one or more
entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and 3 of
this Article VII or in Article IX hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article VII
or the Bylaws, if any. The same person (including a firm, corporation,
partnership, trust, or association) may be the other party to contracts entered
into pursuant to Sections 1, 2 and 3 above or Article IX, and any individual may
be financially interested or otherwise affiliated with persons who are parties
to any or all of the contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of this
Article VII shall be consistent with and subject to the requirements of Section
15 of the 1940 Act (including any amendments thereof or other applicable Act of
Congress hereafter enacted) with respect to its continuance in effect, its
termination, and the method of authorization and approval of such contract or
renewal thereof, and no amendment to any contract, entered into pursuant to
Section 1 shall be effective unless assented to by a Majority Shareholder Vote.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the election of
Trustees as provided in Article IV, Section 2, (ii) for the removal of Trustees
as provided in Article IV, Section 3(d), (iii) with respect to any investment
advisory or management contract as provided in Article VII, Section 1, (iv) with
respect to the amendment of this Declaration of Trust as provided in Article
XII, Section 7, (v) to the same extent as the shareholders of a Massachusetts
business corporation, as to whether or not a court action, proceeding or claim
should be brought or maintained derivatively or as a class action on behalf of
the Trust or the Shareholders, provided, however, that a Shareholder of a
particular Series shall not be entitled to bring any derivative or class action
on behalf of any other Series of the Trust, and (vi) with respect to such
additional matters relating to the Trust as may be required or authorized by
law, by this Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any State, as the Trustees may consider desirable. On any
matter submitted to a vote of the Shareholders, all shares shall be voted by
individual Series, except (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. 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) 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.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other place
as the Trustees may designate. Special meetings of the Shareholders of any
Series may be called by the Trustees and shall be called by the Trustees upon
the written request of Shareholders owning at least one-tenth of the outstanding
Shares entitled to vote. Whenever ten or more Shareholders meeting the
qualifications set forth in Section 16(c) of the 1940 Act, as the same may be
amended from time to time, seek the opportunity of furnishing materials to the
other Shareholders with a view to obtaining signatures on such a request for a
meeting, the Trustees shall comply with the provisions of said Section 16(c)
with respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials to such
Shareholders of record. Shareholders shall be entitled to at least fifteen days'
notice of any meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by proxy shall be
a quorum for the transaction of business at a Shareholders' meeting, except that
where any provision of law or of this Declaration of Trust permits or requires
that holders of any Series shall vote as a Series, then a majority of the
aggregate number of Shares of that Series entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that Series. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the Bylaws, a majority
of the Shares voted in person or by proxy shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law or of
this Declaration of Trust permits or requires that the holders of any Series
shall vote as a Series, then a majority of the Shares of that Series voted on
the matter shall decide that matter insofar as that Series is concerned.
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank or trust company
having capital, surplus and undivided profits of at least two million dollars
($2,000,000), or such other amount or such other entity as shall be allowed by
the Commission or by the 1940 Act, as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon written
order or oral order, if confirmed in writing, or by such electro-mechanical or
electronic devices as are agreed to by the Trust and the custodian, if such
procedures have been authorized in writing by the Trust;
(2) to receive and receipt for any moneys due to the Trust and deposit the same
in its own banking department or elsewhere as the Trustees may direct; and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset Value of
any Series in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital
and surplus and undivided profits of at least two million dollars ($2,000,000)
or such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act as from time to time amended.
CENTRAL CERTIFICATE SYSTEM
Section 2. Subject to such rules, regulations and orders as the Commission may
adopt, the Trustees may direct the custodian to deposit all or any part of the
securities owned by the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange Act of
1934, or such other person as may be permitted by the Commission, or otherwise
in accordance with the 1940 Act as from time to time amended, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends. The amount of
such dividends and the payment of them shall be wholly in the discretion of the
Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by the laws
of Massachusetts, at any time to declare and cause to be paid dividends on
Shares of a particular Series, from the assets belonging to that Series, which
dividends, at the election of the Trustees, may be paid daily or otherwise
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, and may be payable in Shares of that
Series at the election of each Shareholder of that Series.
(c) Anything in this instrument to the contrary notwithstanding, the Trustees
may at any time declare and distribute pro rata among the Shareholders of a
particular Series as of the record date of that Series fixed as provided in
Article XII, Section 3 hereof a "stock dividend".
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular Series
desires to dispose of his Shares, he may deposit at the office of the transfer
agent or other authorized agent of that Series a written request or such other
form of request as the Trustees may from time to time authorize, requesting that
the Series purchase the Shares in accordance with this Section 2; and the
Shareholder so requesting shall be entitled to require the Series to purchase,
and the Series or the principal underwriter of the Series shall purchase his
said Shares, but only at the Net Asset Value thereof (as described in Section 3
hereof). The Series shall make payment for any such Shares to be redeemed, as
aforesaid, in cash from the assets of that Series and payment for such Shares
shall be made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective.
DETERMINATION OF NET ASSET VALUE
AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that amount by
which the assets of that Series, exceed its liabilities, all as determined by or
under the direction of the Trustees. Such value per Share shall be determined
separately for each Series of Shares and shall be determined on such days and at
such times as the Trustees may determine. Such determination shall be made with
respect to securities for which market quotations are readily available, at the
market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees, provided,
however, that the Trustees, without Shareholder approval, may alter the method
of appraising portfolio securities insofar as permitted under the 1940 Act and
the rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any Order of the Commission applicable to
the Series. The Trustees may delegate any of its powers and duties under this
Section 3 with respect to appraisal of assets and liabilities. At any time the
Trustees may cause the value par Share last determined to be determined again in
similar manner and may fix the time when such redetermined value shall become
effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the right of redemption or
postpone the date of payment as permitted under the 1940 Act. Such suspension
shall take effect at such time as the Trustees shall specify but not later than
the close of business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption or payment
until the Trustees shall declare the suspension at an end. In the case of a
suspension of the right of redemption, a Shareholder may either withdraw his
request for redemption or receive payment based on the Net Asset Value per Share
existing after the termination of the suspension.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Provided they have exercised reasonable care and have acted under
the reasonable belief that their actions are in the best interest of the Trust,
the Trustees shall not be responsible for or liable in any event for neglect or
wrongdoing of them or any officer, agent, employee or investment adviser of the
Trust, but nothing contained herein shall protect any Trustee against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained in Section (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened while in office or thereafter, and the words
"liability" and "expense" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither interested persons
of the Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a defense
to any claim, action, suit or proceeding of the character described in paragraph
(a) of this Section 2 may be paid by the applicable Series from time to time
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section 2; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither interested persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to indemnification
under this Section 2.
SHAREHOLDERS
Section 3. In case any Shareholder or former Shareholder of any Series of the
Trust shall be held to be personally liable solely by reason of his being or
having been a Shareholder and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Series
shall, upon request by the Shareholder, assume the defense of any claim made
against the Shareholder for any act or obligation of the Series and satisfy any
judgment thereon.
ARTICLE XII
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a partnership
is created hereby. No Trustee hereunder shall have any power to bind personally
either the Trust's officers or any Shareholder. All persons extending credit to,
contracting with or having any claim against the Trust or the Trustees shall
look only to the assets of the appropriate Series for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of
their agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect a Trustee against
any liability to which the Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of Section 1 of this Article XII and to Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice counsel or other experts with respect to the meaning and operation this
Declaration of Trust, and subject to the provisions of Section 1 of this Article
XII and to Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust for a
period not exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for payment of
any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend,
or to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such record date
fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to the
provisions of sub-section (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell and convey the assets of the Trust or any affected Series to another
trust, partnership, association or corporation organized under the laws of any
state which is a diversified open-end management investment company as defined
in the 1940 Act, for adequate consideration which may include the assumption of
all outstanding obligations, taxes and other liabilities, accrued or contingent,
of the Trust or any affected Series, and which may include shares of beneficial
interest or stock of such trust, partnership, association or corporation; or
(ii) at any time sell and convert into money all of the assets of the Trust or
any affected Series.
Upon making provision for the payment of all such liabilities in either (i) or
(ii), by such assumption or otherwise, the Trustees shall distribute the
remaining proceeds or assets (as the case may be) ratably among the holders of
the Shares of the Trust or any affected Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest of
all parties shall be cancelled and discharged.
FILING OF COPIES, REFERENCES, AND HEADINGS
Section 5. The original or a copy of this instrument and of each declaration of
trust supplemental hereto shall be kept at the office of the Trust where it may
be inspected by any Shareholder. A copy of this instrument and of each
supplemental declaration of trust shall be filed by the Trustees with the
Secretary of the Commonwealth of Massachusetts and the Boston City Clerk, as
well as any other governmental office where such filing may from time to time be
required. Anyone dealing with the Trust may rely on a certificate by an officer
or Trustee of the Trust as to whether or not any such supplemental declarations
of trust have been made and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the original, may rely on a
copy certified by an officer or Trustee of the Trust to be a copy of this
instrument or of any such supplemental declaration of trust. In this instrument
or in any such supplemental declaration of trust, references to this instrument
and all expressions like "herein," "hereof" and "hereunder," shall be deemed to
refer to this instrument as amended or affected by any such supplemental
declaration of trust. Headings are placed herein for convenience of reference
only and in case of any conflict, the text of this instrument, rather than the
headings, shall control. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The trust set forth in this instrument is made in the Commonwealth
of Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth. The Trust shall be
of the type commonly called a Massachusetts business trust, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
AMENDMENTS
Section 7. If authorized by votes of the Trustees and a Majority Shareholder
Vote, or by any larger vote which may be required by applicable law or this
Declaration of Trust in any particular case, the Trustees shall amend or
otherwise supplement this instrument, by making a declaration of trust
supplemental hereto, which thereafter shall form a part hereof, except that an
amendment which shall affect the Shareholders of one or more Series but not the
Shareholders of all outstanding Series shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of each Series
affected and no vote of Shareholders of a Series not affected shall be
required.
Amendments having the purpose of changing the name of the Trust or of supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote. Copies of the supplemental declaration of
trust shall be filed as specified in Section 5 of this Article XII.
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date as set
forth in the Bylaws, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 9. Fidelity Management & Research Company ("FMR") has consented to the
use by any Series of the Trust of the identifying word "Fidelity" in the name of
any Series of the Trust at some future date. Such consent is conditioned upon
the employment of FMR as investment adviser of each Series of the Trust. As
between the Trust and itself, FMR controls the use of the name of the Trust
insofar as such name contains the identifying word "Fidelity". FMR may from time
to time use the identifying word "Fidelity" in other connections and for other
purposes, including, without limitation, in the names of other investment
companies, corporations or businesses which it may manage, advise, sponsor or
own or in which it may have a financial interest. FMR may require the Trust or
any Series thereof to cease using the identifying word "Fidelity" in the name of
the Trust or any Series thereof if the Trust or any Series thereof ceases to
employ FMR or a subsidiary or affiliate thereof as investment adviser.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust,
have executed this instrument this 19th day of January, 1995.
/s/Edward C. Johnson 3d /s/Donald S. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Gerald C. McDonough
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Marvin L. Mann
Richard J. Flynn Marvin L. Mann
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
The business address of the
members of the Board of
Trustees is:
82 Devonshire Street
Boston, MA 02109
Exhibit 5(a)
MANAGEMENT CONTRACT
BETWEEN
FIDELITY SCHOOL STREET TRUST:
FIDELITY LIMITED TERM MUNICIPALS
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of January, 1995, by and between Fidelity
School Street Trust, a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Fidelity Limited Term Municipals (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 modified March 1,
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 January 1, 1995 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. For the services and facilities to be furnished hereunder, the Adviser shall
receive a monthly management fee at the annual rate of 10/100ths of 1% of the
average daily net assets of the Portfolio throughout the month, plus 5% of the
gross income of the Portfolio throughout the month. Gross income, for this
purpose includes interest accrued on portfolio obligations, adjusted for
amortization of purchase premium, but excludes adjustment for purchase discount
on portfolio obligations provided that in the case of initiation or termination
of this Contract during any month, the fee for that month shall be reduced
proportionately on the basis of the number of business days during which it is
in effect and the fee computed upon the average net assets for the business days
it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in connection
with the purchase or sale of securities and other investment instruments; (iii)
fees and expenses of the Fund's Trustees other than those who are "interested
persons" of the Fund or the Adviser; (iv) legal and audit expenses; (v)
custodian, registrar and transfer agent fees and expenses; (vi) fees and
expenses related to the registration and qualification of the Fund and the
Portfolio's shares for distribution under state and federal securities laws;
(vii) expenses of printing and mailing reports and notices and proxy material to
shareholders of the Portfolio; (viii) all other expenses incidental to holding
meetings of the Portfolio's shareholders, including proxy solicitations
therefor; (ix) a pro rata share, based on relative net assets of the Portfolio
and other registered investment companies having Advisory and Service or
Management Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association membership dues;
(xi) expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and supplements
thereto sent to existing shareholders; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Portfolio is a party and the legal obligation which
the Portfolio may have to indemnify the Fund's Trustees and officers with
respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed exclusive,
the Adviser being free to render services to others and engage in other
activities, provided, however, that such other services and activities do not,
during the term of this Contract, interfere, in a material manner, with the
Adviser's ability to meet all of its obligations with respect to rendering
services to the Portfolio hereunder. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Adviser, the Adviser shall not be subject to liability to the
Portfolio or to any shareholder of the Portfolio for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security or other
investment instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of this
paragraph 6, this Contract shall continue in force until June 30, 1995 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.
FIDELITY SCHOOL STREET TRUST
on behalf of Fidelity Limited Term Municipals
By /s/ J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
EXHIBIT 5(C)
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
FIDELITY SCHOOL STREET TRUST ON BEHALF OF SPARTAN BOND STRATEGIST
AGREEMENT made this 15 day of July, 1993, by 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 School Street Trust, a Massachusetts business trust which may issue one
or more series of shares of beneficial interest (hereinafter called the
"Trust") on behalf of Spartan Bond Strategist (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 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
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 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, 1994 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.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
BY:/s/Stephen Jonas
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY:/s/J. Gary Burkhead
President
FIDELITY SCHOOL STREET TRUST ON BEHALF OF
SPARTAN BOND STRATEGIST
BY: /s/J. Gary Burkhead
Senior Vice President
EXHIBIT 5(D)
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
FIDELITY SCHOOL STREET TRUST ON BEHALF OF SPARTAN BOND STRATEGIST
AGREEMENT made this 15 day of July, 1993, by 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 School Street Trust, a Massachusetts business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Trust") on behalf of Spartan Bond Strategist (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, 1994 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.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
BY:/s/Stephen Jonas
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY:/s/J. Gary Burkhead
President
FIDELITY SCHOOL STREET TRUST ON BEHALF OF
SPARTAN BOND STRATEGIST
BY:/s/J. Gary Burkhead
Senior Vice President
Exhibit 6(a)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY LIMITED TERM MUNICIPALS
and
FIDELITY DISTRIBUTORS CORPORATION
Required authorizations and approvals having been obtained, Fidelity Limited
Term Municipals, a Massachusetts business trust which may issue one or more
series of beneficial interest ("Issuer"), and Fidelity Distributors Corporation,
a Massachusetts corporation having its principal place of business in Boston,
Massachusetts ("Distributors"), hereby consent pursuant to the existing General
Distribution Agreement dated June 1, 1986, to an amendment in its entirety of
said Agreement as of April 1, 1987, as set forth below.
In consideration of the mutual promises and undertakings herein contained, the
parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and subject to
the registration requirements of the Securities Act of 1933, as amended ("1933
Act"), and of the laws governing the sale of securities in the various states
("Blue Sky Laws") under the following terms and conditions: the Distributor (i)
shall have the right to sell, as agent on behalf of the Issuer, shares
authorized for issue and registered under the 1933 Act, and (ii) may sell shares
under offers of exchange, if available, between and among the funds advised by
Fidelity Management & Research Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor shall be
nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further, the
Issuer reserves the right to issue shares in connection with the merger or
consolidation, or acquisition by the Issuer through purchase or otherwise, with
any other investment company, trust, or personal holding company.
3. Shares Covered by this Agreement - This Agreement shall apply to unissued
shares of the Issuer, shares of the Issuer held in its treasury in the event
that in the discretion of the Issuer treasury shares shall be sold, and shares
of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's current
Prospectus and/or Statement of Additional Information, all shares sold to
investors by the Distributor or the Issuer will be sold at the public offering
price. The public offering price for all accepted subscriptions will be the net
asset value per share, as determined in the manner described in the Issuer's
current Prospectus and/or Statement of Additional Information, plus a sales
charge (if any) described in the Issuer's current Prospectus and/or Statement of
Additional Information. The Issuer shall in all cases receive the net asset
value per share on all sales. If a sales charge is in effect, the Distributor
shall have the right subject to such rules or regulations of the Securities and
Exchange Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to dealers
who have sold shares of the Issuer. If a fee in connection with shareholder
redemptions is in effect, the Issuer shall collect the fee on behalf of
Distributors and, unless otherwise agreed upon by the Issuer and Distributors,
Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset value is
suspended and until such suspension is terminated, no further orders for shares
shall be processed by the Distributor except such unconditional orders as may
have been placed with the Distributor before it had knowledge of the
suspension.
In addition, the Issuer reserves the right to suspend sales and the
Distributor's authority to process orders for shares on behalf of the Issuer if,
in the judgment of the Issuer, it is in the best interests of the Issuer to do
so. Suspension will continue for such period as may be determined by the
Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of the Issuer. This
shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other issuers. This does not obligate the Distributor to register as a broker
or dealer under the Blue Sky Laws of any jurisdiction in which it is not now
registered or to maintain its registration in any jurisdiction in which it is
now registered. If a sales charge is in effect, the Distributor shall have the
right to enter into sales agreements with dealers of its choice for the sale of
shares of the Issuer to the public at the public offering price only and fix in
such agreements the portion of the sales charge which may be retained by
dealers, provided that the Issuer shall approve the form of the dealer agreement
and the dealer discounts set forth therein and shall evidence such approval by
filing said form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the Issuer
to give any information or to make any representations other than those
contained in the appropriate registration statements or Prospectuses and
Statements of Additional Information filed with the Securities and Exchange
Commission under the 1933 Act (as these registration statements, Prospectuses
and Statements of Additional Information may be amended from time to time), or
contained in shareholder reports or other material that may be prepared by or on
behalf of the Issuer for the Distributor's use. This shall not be construed to
prevent the Distributor from preparing and distributing sales literature or
other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought or
sold by or through the Distributor, and the Distributor may participate directly
or indirectly in brokerage commissions or "spreads" for transactions in
portfolio securities of the Issuer. However, all sums of money received by the
Distributor as a result of such purchases and sales or as a result of such
participation must, after reimbursement of actual expenses of the Distributor in
connection with such activity, be paid over by the Distributor for the benefit
of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The Issuer
shall make available to the Distributor such number of copies of its currently
effective Prospectus and Statement of Additional Information as the Distributor
may reasonably request. The Issuer shall furnish to the Distributor copies of
all information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of shares of the
Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection with
the preparation, setting in type and filing of any registration statement,
Prospectus and Statement of Additional Information under the 1933 Act and
amendments for the issue of its shares, (b) in connection with the registration
and qualification of shares for sale in the various states in which the Board of
Trustees of the Issuer shall determine it advisable to qualify such shares for
sale (including registering the Issuer as a broker or dealer or any officer of
the Issuer as agent or salesman in any state), (c) of preparing, setting in
type, printing and mailing any report or other communication to shareholders of
the Issuer in their capacity as such, and (d) of preparing, setting in type,
printing and mailing Prospectuses, Statements of Additional Information and any
supplements thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it is
recognized by the Issuer that FMR may reimburse the Distributor for any direct
expenses incurred in the distribution of shares of the Issuer from any source
available to it, including advisory and service or management fees paid to it by
the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees incurred in connection therewith) arising
by reason of any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, Statement of Additional Information,
shareholder reports or other information filed or made public by the Issuer (as
from time to time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order to
make the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the Distributor
or hold it harmless to the extent that the statement or omission was made in
reliance upon, and in conformity with, information furnished to the Issuer by or
on behalf of the Distributor. In no case (i) is the indemnity of the Issuer in
favor of the Distributor or any person indemnified to be deemed to protect the
Distributor or any person against any liability to the Issuer or its security
holders to which the Distributor or such person would otherwise be subject by
reason of wilful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Issuer to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or such
person shall have received notice of service on any designated agent). However,
failure to notify the Issuer of any claim shall not relieve the Issuer from any
liability which it may have to the Distributor or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Issuer shall be entitled to participate at its own
expense in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any claims, but if the Issuer elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or person or persons, defendant or defendants in the suit. In the
event the Issuer elects to assume the defense of any suit and retain counsel,
the Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Issuer does not elect to assume the
defense of any suit, it will reimburse the Distributor, officers or directors or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Issuer agrees
to notify the Distributor promptly of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of any of the shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each person,
if any, who controls the Issuer within the meaning of Section 15 of the 1933
Act, against any loss, liability, damages, claim or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any person acquiring any shares, based upon the
1933 Act or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration statement,
Prospectus, Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements not
misleading, insofar as the statement or omission was made in reliance upon, and
in conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor of the
Issuer or any person indemnified to be deemed to protect the Issuer or any
person against any liability to which the Issuer or such person would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Distributor to be
liable under its indemnity agreement contained in this paragraph with respect to
any claim made against the Issuer or any person indemnified unless the Issuer or
person, as the case may be, shall have notified the Distributor in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Issuer or any such person (or after the Issuer or such person
shall have received notice of service on any designated agent). However,
failure to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against whom
the action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. In the case of any notice to the Distributor, it
shall be entitled to participate, at its own expense, in the defense or, if it
so elects, to assume the defense of any suit brought to enforce the claim, but
if the Distributor elects to assume the defense, the defense shall be conducted
by counsel chosen by it and satisfactory to the Issuer, to its officers and
Board and to any controlling person or persons, defendant or defendants in the
suit. In the event that the Distributor elects to assume the defense of any
suit and retain counsel, the Issuer or controlling persons, defendant or
defendants in the suit, shall bear the fees and expense of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Issuer, officers and Board or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Distributor
agrees to notify the Issuer promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
shares.
12. Effective Date - This agreement shall be effective upon its execution, and
unless terminated as provided, shall continue in force until January 31, 1988
and thereafter from year to year, provided continuance is approved annually by
the vote of a majority of the Board members of the Issuer, and by the vote of
those Board members of the Issuer who are not "interested persons" of the Issuer
and, if a plan under Rule 12b-1 under the Investment Company Act of 1940 is in
effect, by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and who are not parties to the Distribution and Service
Plan or this Agreement and have no financial interest in the operation of the
Distribution and Service Plan or in any agreements related to the Distribution
and Service Plan, cast in person at a meeting called for the purpose of voting
on the approval. This Agreement shall automatically terminate in the event of
its assignment. As used in this paragraph, the terms "assignment" and
"interested persons" shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended. In
addition to termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than sixty
days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party to the
other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
last address furnished by the other party to the party giving notice: if to the
Issuer, at 82 Devonshire Street, Boston, Massachusetts, and if to the
Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of Trust of
the Issuer and agrees that the obligations assumed by the Issuer under this
contract shall be limited in all cases to the Issuer and its assets. The
Distributor shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Issuer. Nor shall the Distributor seek
satisfaction of any such obligation from the Trustees or any individual Trustee
of the Issuer. The Distributor understands that the rights and obligations of
each series of shares of the Issuer under the Issuer's Declaration of Trust are
separate and distinct from those of any and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name and
behalf, and its seal affixed, by one of its officers duly authorized, and the
Distributor has executed this instrument in its name and behalf, and its
corporate seal affixed, by one of its officers duly authorized, as of the day
and year first above written.
FIDELITY LIMITED TERM MUNICIPALS
Attest: /s/Arthur S. Loring By /s/J. Gary Burkhead
Secretary
FIDELITY DISTRIBUTORS CORPORATION
Attest:/s/Arthur S. Loring By /s/John F. O'Brien
Clerk
Exhibit 6(b)
AMENDMENT TO GENERAL DISTRIBUTION AGREEMENT
Effective January 1, 1988, Paragraph 8 of the General Distribution Agreement
between each of the funds or portfolios indicated on the attached Schedule A
shall be amended to read in full as follows:
8. Portfolio Securities - Portfolio securities of the Issuer may be bought or
sold by
or through the Distributor, and the Distributor may participate directly or
indirectly
in brokerage commissions or "spreads" for transactions in portfolio securities
of the
Issuer.
Signed on behalf of each of the funds or portfolios identified on Schedule A.
On Behalf of Each of the Funds
or Portfolios
Attest: /s/ Arthur S. Loring By: /s/ J. Gary Burkhead
Secretary
FIDELITY DISTRIBUTORS CORPORATION:
Attest: /s/ Arthur S. Loring By: /s/ John F. O'Brien
Secretary
SCHEDULE A
California Tax-Free Fund:
High Yield Portfolio
Money Market Portfolio
Insured Portfolio
Fidelity Capital Trust:
Fidelity Capital Appreciation Fund
Fidelity Value Fund
Fidelity Cash Reserves
Fidelity Charles Street Trust:
Fidelity U.S. Government Reserves
Fidelity Stock Index Fund
Fidelity Contrafund
Fidelity Corporate Trust:
ARP (Adjustable-Rate Preferred Portfolio)
APP (Auction Preferred Portfolio)
Fidelity Court Street Trust:
Fidelity High Yield Municipals
Fidelity Connecticut Tax-Free Portfolio
Fidelity New Jersey Tax-Free High Yield Portfolio
Fidelity New Jersey Tax-Free Money Market Portfolio
Fidelity Colorado Tax-Free Portfolio
Fidelity Virginia Tax-Free Portfolio
Fidelity Georgia Tax-Free Portfolio
Fidelity Maryland Tax-Free Portfolio
Fidelity Missouri Tax-Free Portfolio
Fidelity Daily Income Trust
Daily Money Fund:
Money Market Portfolio
U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
Fidelity Devonshire Trust:
Fidelity Equity-Income Fund
Fidelity Real Estate Investment Portfolio
Fidelity Utilities Income Fund
Equity Portfolio: Growth
Equity Portfolio: Income
Fidelity Fund
Fidelity Financial Trust:
Fidelity Convertible Securities
Fidelity Freedom Fund
Financial Reserves Fund
Fidelity Fixed-Income Trust:
Fidelity Flexible Bond Portfolio
Fidelity Short-Term Bond Portfolio
Fidelity Government Securities Fund (a limited partnership)
Fidelity Growth Company Fund
Fidelity High Income Fund
Fidelity Income Fund:
Fidelity Ginnie Mae Portfolio
Fidelity Mortgage Securities Portfolio
Income Portfolios:
GNMA Series
Limited Term Series
Short Fixed-Income Series
Short Government Series
Short-Intermediate Fixed-Income Series
Variable Rate Series
Yield Plus Series
Liquid Assets Series
State and Local Asset Management Series:
Government Money Market Portfolio
Government Bond Portfolio
The California Portfolio
Fidelity Institutional Cash Portfolios:
Money Market Portfolio
U.S. Government Portfolio
U.S. Treasury Portfolio
U.S. Treasury Portfolio II
Domestic Money Market Portfolio
Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Institutional Trust
Fidelity U.S. Equity Index Portfolio
Fidelity U.S. Bond Index Portfolio
Fidelity Intermediate Bond Fund
Fidelity Investment Trust:
Fidelity Europe Fund
Fidelity Global Bond Fund
Fidelity International Growth & Income Fund
Fidelity Overseas Fund
Fidelity Pacific Basin Fund
Fidelity Canada Fund
Fidelity United Kingdom Fund
Fidelity Limited Term Municipals
Fidelity Magellan Fund
Fidelity Massachusetts Tax-Free:
Money Market Portfolio
High Yield Portfolio
Fidelity Money Market Trust:
Domestic Money Market Portfolio
U.S. Government Portfolio
U.S. Treasury Portfolio
Fidelity Municipal Trust:
Fidelity Aggressive Tax-Free Portfolio
Fidelity Insured Tax-Free Portfolio
Fidelity Municipal Bond Portfolio
Fidelity Pennsylvania Tax-Free High Yield Portfolio
Fidelity Pennsylvania Tax-Free Money Market Portfolio
Fidelity Ohio Tax-Free Portfolio
Fidelity Michigan Tax-Free Portfolio
Fidelity Minnesota Tax-Free Portfolio
Fidelity Short-Term Tax-Free Portfolio
Fidelity Texas Tax-Free Portfolio
The North Carolina Cash Management Trust:
Cash Portfolio
Term Portfolio
Fidelity New York Tax-Free Fund:
High Yield Portfolio
Insured Portfolio
Money Market Portfolio
Short-Term Portfolio
Fidelity New Jersey Tax-Free Portfolio, L.P.
Plymouth Fund:
Plymouth Aggressive Income Portfolio
Plymouth Government Securities Portfolio
Plymouth Growth Opportunities Portfolio
Plymouth Income & Growth Portfolio
Plymouth Short-Term Bond Portfolio
Plymouth Investment Series:
Plymouth High Income Municipal Portfolio
Plymouth Global Natural Resources Portfolio
Plymouth Securities Trust:
Plymouth Market Access Plus:
Bull Value Portfolio
Plymouth Market Access Plus:
Bear Value Portfolio
Fidelity Puritan Trust:
Fidelity Balanced Fund
Fidelity Puritan Fund
Fidelity Qualified Dividend Fund
Fidelity Securities Fund:
Fidelity Growth & Income Portfolio
Fidelity OTC Portfolio
Fidelity Blue Chip Fund
Fidelity Select Portfolios:
Air Transportation Portfolio
American Gold Portfolio
Automation and Machinery Portfolio
Automotive Portfolio
Biotechnology Portfolio
Broadcast and Media Portfolio
Brokerage and Investment Management Portfolio
Capital Goods Portfolio
Chemicals Portfolio
Computers Portfolio
Defense and Aerospace Portfolio
Electric Utilities Portfolio
Electronics Portfolio
Energy Portfolio
Energy Service Portfolio
Financial Services Portfolio
Food and Agriculture Portfolio
Health Care Portfolio
Health Care Delivery Portfolio (name changed to Medical Delivery Portfolio on
7/10/87)
Housing Portfolio
Industrial Materials Portfolio
Leisure Portfolio
Life Insurance Portfolio
Money Market Portfolio
Paper and Forest Products Portfolio
Precious Metals and Minerals Portfolio
Property and Casualty Insurance Portfolio
Regional Banks Portfolio
Restaurant Industry Portfolio
Retailing Portfolio
Savings and Loan Portfolio
Software and Computer Services Portfolio
Technology Portfolio
Telecommunications Portfolio
Transportation Portfolio
Utilities Portfolio
Fidelity Special Situations Fund
Tax-Exempt Portfolios:
Limited Term Series
Short-Term Intermediate Series
Fidelity Tax-Exempt Money Market Trust
Fidelity Trend Fund
Fidelity U.S. Treasury Money Market Fund, L.P.
Variable Insurance Products Fund:
Equity-Income Portfolio
Growth Portfolio
High Income portfolio
Money Market Portfolio
Overseas Portfolio
Fidelity U.S. Investments -
Government Securities Fund, L.P.
Bond Fund, L.P.
Zero Coupon Bond Fund:
The 1993 Portfolio
The 1998 Portfolio
The 2003 Portfolio
SECFIL2
Exhibit 6(c)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY SCHOOL STREET TRUST
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 15 day of July, 1993, between Fidelity School Street Trust,
a Massachusetts business trust having its principal place of business in Boston,
Massachusetts and which may issue one or more series of beneficial interest
("Issuer"), with respect to shares of Spartan Bond Strategist, a series of the
Issuer, and Fidelity Distributors Corporation, a Massachusetts corporation
having its principal place of business in Boston, Massachusetts
("Distributors").
In consideration of the mutual promises and undertakings herein contained, the
parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and subject to
the registration requirements of the Securities Act of 1933, as amended ("1933
Act"), and of the laws governing the sale of securities in the various states
("Blue Sky Laws") under the following terms and conditions: the Distributor (i)
shall have the right to sell, as agent on behalf of the Issuer, shares
authorized for issue and registered under the 1933 Act, and (ii) may sell shares
under offers of exchange, if available, between and among the funds advised by
Fidelity Management & Research Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor shall be
nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further, the
Issuer reserves the right to issue shares in connection with the merger or
consolidation, or acquisition by the Issuer through purchase or otherwise, with
any other investment company, trust, or personal holding company.
3. Shares Covered by this Agreement - This Agreement shall apply to unissued
shares of the Issuer, shares of the Issuer held in its treasury in the event
that in the discretion of the Issuer treasury shares shall be sold, and shares
of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's current
Prospectus and/or Statement of Additional Information, all shares sold to
investors by the Distributor or the Issuer will be sold at the public offering
price. The public offering price for all accepted subscriptions will be the net
asset value per share, as determined in the manner described in the Issuer's
current Prospectus and/or Statement of Additional Information, plus a sales
charge (if any) described in the Issuer's current Prospectus and/or Statement of
Additional Information. The Issuer shall in all cases receive the net asset
value per share on all sales. If a sales charge is in effect, the Distributor
shall have the right subject to such rules or regulations of the Securities and
Exchange Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to dealers
who have sold shares of the Issuer. If a fee in connection with shareholder
redemptions is in effect, the Issuer shall collect the fee on behalf of
Distributors and, unless otherwise agreed upon by the Issuer and Distributors,
Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset value is
suspended and until such suspension is terminated, no further orders for shares
shall be processed by the Distributor except such unconditional orders as may
have been placed with the Distributor before it had knowledge of the
suspension.
In addition, the Issuer reserves the right to suspend sales and the
Distributor's authority to process orders for shares on behalf of the Issuer if,
in the judgment of the Issuer, it is in the best interests of the Issuer to do
so. Suspension will continue for such period as may be determined by the
Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of the Issuer. This
shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other issuers. This does not obligate the Distributor to register as a broker
or dealer under the Blue Sky Laws of any jurisdiction in which it is not now
registered or to maintain its registration in any jurisdiction in which it is
now registered. If a sales charge is in effect, the Distributor shall have the
right to enter into sales agreements with dealers of its choice for the sale of
shares of the Issuer to the public at the public offering price only and fix in
such agreements the portion of the sales charge which may be retained by
dealers, provided that the Issuer shall approve the form of the dealer agreement
and the dealer discounts set forth therein and shall evidence such approval by
filing said form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the Issuer
to give any information or to make any representations other than those
contained in the appropriate registration statements or Prospectuses and
Statements of Additional Information filed with the Securities and Exchange
Commission under the 1933 Act (as these registration statements, Prospectuses
and Statements of Additional Information may be amended from time to time), or
contained in shareholder reports or other material that may be prepared by or on
behalf of the Issuer for the Distributor's use. This shall not be construed to
prevent the Distributor from preparing and distributing sales literature or
other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought or
sold by or through the Distributor, and the Distributor may participate directly
or indirectly in brokerage commissions or "spreads" for transactions in
portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The Issuer
shall make available to the Distributor such number of copies of its currently
effective Prospectus and Statement of Additional Information as the Distributor
may reasonably request. The Issuer shall furnish to the Distributor copies of
all information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of shares of the
Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection with
the preparation, setting in type and filing of any registration statement,
Prospectus and Statement of Additional Information under the 1933 Act and
amendments for the issue of its shares, (b) in connection with the registration
and qualification of shares for sale in the various states in which the Board of
Trustees of the Issuer shall determine it advisable to qualify such shares for
sale (including registering the Issuer as a broker or dealer or any officer of
the Issuer as agent or salesman in any state), (c) of preparing, setting in
type, printing and mailing any report or other communication to shareholders of
the Issuer in their capacity as such, and (d) of preparing, setting in type,
printing and mailing Prospectuses, Statements of Additional Information and any
supplements thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it is
recognized by the Issuer that FMR may reimburse the Distributor for any direct
expenses incurred in the distribution of shares of the Issuer from any source
available to it, including advisory and service or management fees paid to it by
the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees incurred in connection therewith) arising
by reason of any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, Statement of Additional Information,
shareholder reports or other information filed or made public by the Issuer (as
from time to time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order to
make the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the Distributor
or hold it harmless to the extent that the statement or omission was made in
reliance upon, and in conformity with, information furnished to the Issuer by or
on behalf of the Distributor. In no case (i) is the indemnity of the Issuer in
favor of the Distributor or any person indemnified to be deemed to protect the
Distributor or any person against any liability to the Issuer or its security
holders to which the Distributor or such person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Issuer to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or such
person shall have received notice of service on any designated agent). However,
failure to notify the Issuer of any claim shall not relieve the Issuer from any
liability which it may have to the Distributor or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Issuer shall be entitled to participate at its own
expense in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any claims, but if the Issuer elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or person or persons, defendant or defendants in the suit. In the
event the Issuer elects to assume the defense of any suit and retain counsel,
the Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Issuer does not elect to assume the
defense of any suit, it will reimburse the Distributor, officers or directors or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Issuer agrees
to notify the Distributor promptly of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of any of the shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each person,
if any, who controls the Issuer within the meaning of Section 15 of the 1933
Act, against any loss, liability, damages, claim or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any person acquiring any shares, based upon the
1933 Act or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration statement,
Prospectus, Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements not
misleading, insofar as the statement or omission was made in reliance upon, and
in conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor of the
Issuer or any person indemnified to be deemed to protect the Issuer or any
person against any liability to which the Issuer or such person would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Distributor to be
liable under its indemnity agreement contained in this paragraph with respect to
any claim made against the Issuer or any person indemnified unless the Issuer or
person, as the case may be, shall have notified the Distributor in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Issuer or any such person (or after the Issuer or such person
shall have received notice of service on any designated agent). However,
failure to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against whom
the action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. In the case of any notice to the Distributor, it
shall be entitled to participate, at its own expense, in the defense or, if it
so elects, to assume the defense of any suit brought to enforce the claim, but
if the Distributor elects to assume the defense, the defense shall be conducted
by counsel chosen by it and satisfactory to the Issuer, to its officers and
Board and to any controlling person or persons, defendant or defendants in the
suit. In the event that the Distributor elects to assume the defense of any
suit and retain counsel, the Issuer or controlling persons, defendant or
defendants in the suit, shall bear the fees and expense of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Issuer, officers and Board or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Distributor
agrees to notify the Issuer promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
shares.
12. Effective Date - This agreement shall be effective upon its execution, and
unless terminated as provided, shall continue in force until January 31, 1994
and thereafter from year to year, provided continuance is approved annually by
the vote of a majority of the Board members of the Issuer, and by the vote of
those Board members of the Issuer who are not "interested persons" of the Issuer
and, if a plan under Rule 12b-1 under the Investment Company Act of 1940 is in
effect, by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and who are not parties to the Distribution and Service
Plan or this Agreement and have no financial interest in the operation of the
Distribution and Service Plan or in any agreements related to the Distribution
and Service Plan, cast in person at a meeting called for the purpose of voting
on the approval. This Agreement shall automatically terminate in the event of
its assignment. As used in this paragraph, the terms "assignment" and
"interested persons" shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended. In
addition to termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than sixty
days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party to the
other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
last address furnished by the other party to the party giving notice: if to the
Issuer, at 82 Devonshire Street, Boston, Massachusetts, and if to the
Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of Trust or
other organization document of the Issuer and agrees that the obligations
assumed by the Issuer under this contract shall be limited in all cases to the
Issuer and its assets. The Distributor shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Issuer. Nor shall
the Distributor seek satisfaction of any such obligation from the Trustees or
any individual Trustee of the Issuer. The Distributor understands that the
rights and obligations of each series of shares of the Issuer under the Issuer's
Declaration of Trust or other organizational document are separate and distinct
from those of any and all other series.
15. This agreement shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name and
behalf, and its seal affixed, by one of its officers duly authorized, and the
Distributor has executed this instrument in its name and behalf by one of its
officers duly authorized, as of the day and year first above written.
FIDELITY SCHOOL STREET TRUST
By /s/J. Gary Burkhead
FIDELITY DISTRIBUTORS CORPORATION
By /s/Kurt A. Lange
EXHIBIT 8(A)
CUSTODIAN AGREEMENT
Dated as of: July 18, 1991
Between
FIDELITY LIMITED TERM MUNICIPALS
and
UNITED MISSOURI BANK, N.A.
TABLE OF CONTENTS
ARTICLE
Page
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping 1
2.02 Manner of Holding Securities 1
2.03 Security Purchases 2
2.04 Exchanges of Securities 2
2.05 Sales of Securities 2
2.06 Depositary Receipts 3
2.07 Exercise of Rights; Tender Offers 3
2.08 Stock Dividends, Rights, Etc. 3
2.09 Options 3
2.10 Futures Contracts 4
2.11 Borrowing 4
2.12 Interest Bearing Deposits 4
2.13 Foreign Exchange Transactions 4
2.14 Securities Loans 5
2.15 Collections 5
2.16 Dividends, Distributions and Redemptions 5
2.17 Proceeds from Shares Sold 6
2.18 Proxies, Notices, Etc. 6
2.19 Bills and Other Disbursements 6
2.20 Nondiscretionary Functions 6
2.21 Bank Accounts 6
2.22 Deposit of Fund Assets in Securities Systems 7
2.23 Other Transfers 8
2.24 Establishment of Segregated Account 8
2.25 Custodian's Books and Records 8
2.26 Opinion of Fund's Independent Certified Public
Accountants 9
2.27 Reports of Independent Certified Public Accountants 9
2.28 Overdraft Facility 9
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 9
3.01 Proper Instructions and Special Instructions 9
3.02 Authorized Persons 10
3.03 Persons Having Access to Assets of the Portfolios 10
3.04 Actions of the Custodian Based on Proper Instructions
and Special Instructions 11
IV. SUBCUSTODIANS 11
4.01 Domestic Subcustodians 11
4.02 Foreign Subcustodians and Interim Subcustodians 11
4.03 Special Subcustodians 12
4.04 Termination of a Subcustodian 12
4.05 Certification Regarding Foreign Subcustodians 13
V. STANDARD OF CARE; INDEMNIFICATION 13
5.01 Standard of Care 13
5.02 Liability of Custodian for Actions of Other Persons 14
5.03 Indemnification 15
5.04 Investment Limitations 15
5.05 Fund's Right to Proceed 15
VI. COMPENSATION 16
VII. TERMINATION 16
7.01 Termination of Agreement in Full 16
7.02 Termination as to One or More Portfolios 17
VIII. DEFINED TERMS 17
IX. MISCELLANEOUS 18
9.01 Execution of Documents, Etc 18
9.02 Representative Capacity; Nonrecourse Obligations 18
9.03 Several Obligations of the Portfolios 18
9.04 Representations and Warranties 18
9.05 Entire Agreement 19
9.06 Waivers and Amendments 19
9.07 Interpretation 19
9.08 Captions 19
9.09 Governing Law 19
9.10 Notices 20
9.11 Assignment 20
9.12 Counterparts 20
9.13 Confidentiality; Survival of Obligations 20
APPENDICES
Appendix "A" - List of Portfolios
Appendix "B" - List of Foreign Subcustodians
and Special Subcustodians
Appendix "C" - Procedures Relating to
Custodian's Security Interest
CUSTODIAN AGREEMENT
AGREEMENT made as of the 18th day of July, 1991 between Fidelity Limited Term
Municipals (the "Fund") and United Missouri Bank, N.A. (the "Custodian").
W I T N E S S E T H
WHEREAS, the Fund may, from time to time organize one or more series of shares,
in addition to the series set forth in Appendix "A" attached hereto, each of
which shall represent an interest in a separate portfolio of cash, securities
and other assets (all such existing and additional series now or hereafter
listed on Appendix "A" being hereinafter referred to individually, as a
"Portfolio," and collectively, as the "Portfolios"); and
WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf of
the Portfolios in accordance with the provisions of the Investment Company Act
of 1940 (the "1940 Act") and the rules and regulations thereunder, under the
terms and conditions set forth in this Agreement, and the Custodian has agreed
so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of the Portfolios, the Fund hereby employs and appoints the Custodian
as a custodian, subject to the terms and provisions of this Agreement. The Fund
shall deliver to the Custodian, or shall cause to be delivered to the Custodian,
cash, securities and other assets owned by the Portfolios from time to time
during the term of this Agreement and shall specify the Portfolio to which such
cash, securities and other assets are to be specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties set
forth in this Article II. Pursuant to and in accordance with Article IV hereof,
the Custodian may appoint one or more Subcustodians (as hereinafter defined) to
exercise the powers and perform the duties of the Custodian set forth in this
Article II and references to the Custodian in this Article II shall include any
Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash, securities
and other assets of the Portfolios delivered to the Custodian and, on behalf of
the Portfolios, the Custodian shall, from time to time, accept delivery of cash,
securities and other assets for safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Portfolios
either:
(i) by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of each
Portfolio in the name of the Custodian, the Portfolio or a nominee of either of
them, unless specifically directed by Proper Instructions to hold such
registered securities in so-called street name; provided that, in any event, all
such securities and other assets shall be held in an account of the Custodian
containing only assets of a Portfolio, or only assets held by Custodian as a
fiduciary or custodian for customers, and provided further, that the records of
the Custodian shall indicate at all times the Portfolio or other customer for
which such securities and other assets are held in such account and the
respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions (as
hereinafter defined), the Custodian shall pay for and receive securities
purchased for the account of a Portfolio, provided that payment shall be made by
Custodian only upon receipt of the securities: (a) by the Custodian; (b) by a
clearing corporation of a national securities exchange of which the Custodian is
a member; or (c) by a Securities System. Notwithstanding the foregoing, upon
receipt of Proper Instructions: (i) in the case of a repurchase agreement, the
Custodian may release funds to a Securities System prior to the receipt of
advice from the Securities System that the securities underlying such repurchase
agreement have been transferred by book-entry into the Account (as hereinafter
defined) maintained with such Securities System by the Custodian, provided that
the Custodian's instructions to the Securities System require that the
Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of time
deposits, call account deposits, currency deposits, and other deposits, foreign
exchange transactions, futures contracts or options, pursuant to Sections 2.09,
2.10, 2.12 and 2.13 hereof, the Custodian may make payment therefor before
receipt of an advice or confirmation evidencing said deposit or entry into such
transaction; (iii) in the case of the purchase of securities, the settlement of
which occurs outside of the United States of America, the Custodian may make
payment therefor and receive delivery of such securities in accordance with
local custom and practice generally accepted by Institutional Clients (as
hereinafter defined) in the country in which the settlement occurs, but in all
events subject to the standard of care set forth in Article V hereof. For
purposes of this Agreement, an "Institutional Client" shall mean a major
commercial bank, corporation, insurance company, or substantially similar
institution, which, as a substantial part of its business operations, purchases
or sells securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper Instructions, the
Custodian shall exchange securities held by it for the account of a Portfolio
for other securities in connection with any reorganization, recapitalization,
split-up of shares, change of par value, conversion or other event relating to
the securities or the issuer of such securities, and shall deposit any such
securities in accordance with the terms of any reorganization or protective
plan. The Custodian shall, without receiving Proper Instructions: surrender
securities in temporary form for definitive securities; surrender securities for
transfer into the name of the Custodian, a Portfolio or a nominee of either of
them, as permitted by Section 2.02(b); and surrender securities for a different
number of certificates or instruments representing the same number of shares or
same principal amount of indebtedness, provided that the securities to be issued
will be delivered to the Custodian or a nominee of the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions, the
Custodian shall make delivery of securities which have been sold for the account
of a Portfolio, but only against payment therefor in the form of: (a) cash,
certified check, bank cashier's check, bank credit, or bank wire transfer; (b)
credit to the account of the custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c) credit to the
Account of the Custodian with a Securities System, in accordance with the
provisions of Section 2.22 hereof. Notwithstanding the foregoing: (i) in the
case of the sale of securities, the settlement of which occurs outside of the
United States of America, such securities shall be delivered and paid for in
accordance with local custom and practice generally accepted by Institutional
Clients in the country in which the settlement occurs, but in all events subject
to the standard of care set forth in Article V hereof; (ii) in the case of
securities held in physical form, such securities shall be delivered and paid
for in accordance with "street delivery custom" to a broker or its clearing
agent, against delivery to the Custodian of a receipt for such securities,
provided that the Custodian shall have taken reasonable steps to ensure prompt
collection of the payment for, or the return of, such securities by the broker
or its clearing agent, and provided further that the Custodian shall not be
responsible for the selection of or the failure or inability to perform of such
broker or its clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions, the
Custodian shall surrender securities to the depositary used for such securities
by an issuer of American Depositary Receipts or International Depositary
Receipts (hereinafter referred to, collectively, as "ADRs"), against a written
receipt therefor adequately describing such securities and written evidence
satisfactory to the Custodian that the depositary has acknowledged receipt of
instructions to issue ADRs with respect to such securities in the name of the
Custodian or a nominee of the Custodian, for delivery to the Custodian at such
place as the Custodian may from time to time designate. Upon receipt of Proper
Instructions, the Custodian shall surrender ADRs to the issuer thereof, against
a written receipt therefor adequately describing the ADRs surrendered and
written evidence satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights or
similar securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale, provided that the new
securities, cash or other assets, if any, acquired as a result of such actions
are to be delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the consideration for such
securities is to be paid or delivered to the Custodian, or the tendered
securities are to be returned to the Custodian. Notwithstanding any provision of
this Agreement to the contrary, the Custodian shall take all necessary action,
unless otherwise directed to the contrary in Proper Instructions, to comply with
the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions,
or similar rights of security ownership, and shall promptly notify the Fund of
such action in writing by facsimile transmission or in such other manner as the
Fund and Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive and
collect all stock dividends, rights and other items of like nature and, upon
receipt of Proper Instructions, take action with respect to the same as directed
in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in accordance
with the provisions of any agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund relating to compliance with the rules
of the Options Clearing Corporation or of any registered national securities
exchange or similar organization(s), the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of an option on a security or securities index by a Portfolio; (b)
deposit and maintain in a segregated account, securities (either physically or
by book-entry in a Securities System), cash or other assets; and (c) pay,
release and/or transfer such securities, cash or other assets in accordance with
notices or other communications evidencing the expiration, termination or
exercise of such options furnished by the Options Clearing Corporation, the
securities or options exchange on which such options are traded, or such other
organization as may be responsible for handling such option transactions. The
Fund and the broker-dealer shall be responsible for the sufficiency of assets
held in any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among the
Fund, on behalf of any Portfolio, the Custodian and any futures commission
merchant (a "Procedural Agreement"), the Custodian shall: (a) receive and
retain confirmations, if any, evidencing the purchase or sale of a futures
contract or an option on a futures contract by a Portfolio; (b) deposit and
maintain in a segregated account, cash, securities and other assets designated
as initial, maintenance or variation "margin" deposits intended to secure the
Portfolio's performance of its obligations under any futures contracts purchased
or sold or any options on futures contracts written by the Portfolio, in
accordance with the provisions of any Procedural Agreement designed to comply
with the rules of the Commodity Futures Trading Commission and/or any commodity
exchange or contract market (such as the Chicago Board of Trade), or any similar
organization(s), regarding such margin deposits; and (c) release assets from
and/or transfer assets into such margin accounts only in accordance with any
such Procedural Agreements. The Fund and such futures commission merchant shall
be responsible for the sufficiency of assets held in the segregated account in
compliance with applicable margin maintenance requirements and the performance
of any futures contract or option on a futures contract in accordance with its
terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the Custodian
shall deliver securities of a Portfolio to lenders or their agents, or otherwise
establish a segregated account as agreed to by the Fund and the Custodian, as
collateral for borrowings effected by the Fund on behalf of a Portfolio,
provided that such borrowed money is payable by the lender (a) to or upon the
Custodian's order, as Custodian for such Portfolio, and (b) concurrently with
delivery of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of a Portfolio,
the Custodian shall purchase such Interest Bearing Deposits in the name of a
Portfolio with such banks or trust companies (including the Custodian, any
Subcustodian or any subsidiary or affiliate of the Custodian) (hereinafter
referred to as "Banking Institutions") and in such amounts as the Fund may
direct pursuant to Proper Instructions. Such Interest Bearing Deposits may be
denominated in U.S. Dollars or other currencies, as the Fund may determine and
direct pursuant to Proper Instructions. The Custodian shall include in its
records with respect to the assets of each Portfolio appropriate notation as to
the amount and currency of each such Interest Bearing Bank Deposit, the
accepting Banking Institution and all other appropriate details, and shall
retain such forms of advice or receipt evidencing such account, if any, as may
be forwarded to the Custodian by the Banking Institution. The responsibilities
of the Custodian to the Fund for Interest Bearing Deposits accepted on the
Custodian's books in the United States shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
accepted on the Custodian's books, (a) the Custodian shall be responsible for
the collection of income as set forth in Section 2.15 and the transmission of
cash and instructions to and from such accounts; and (b) the Custodian shall
have no duty with respect to the selection of the Banking Institution or, so
long as the Custodian acts in accordance with Proper Instructions, for the
failure of such Banking Institution to pay upon demand. Upon receipt of Proper
Instructions, the Custodian shall take such reasonable actions as the Fund deems
necessary or appropriate to cause each such Interest Bearing Deposit Account to
be insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other than as Principal. Upon receipt of
Proper Instructions, the Custodian shall settle foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of a Portfolio with such currency brokers or
Banking Institutions as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall be responsible for the transmission of cash
and instructions to and from the currency broker or Banking Institution with
which the contract or option is made, the safekeeping of all certificates and
other documents and agreements evidencing or relating to such foreign exchange
transactions and the maintenance of proper records as set forth in Section 2.25.
The Custodian shall have no duty with respect to the selection of the currency
brokers or Banking Institutions with which the Fund deals or, so long as the
Custodian acts in accordance with Proper Instructions, for the failure of such
brokers or Banking Institutions to comply with the terms of any contract or
option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal. However, if
the Custodian has made available to the Fund its services as a principal in
foreign exchange transactions, upon receipt of Proper Instructions, the
Custodian shall enter into foreign exchange contracts or options to purchase and
sell foreign currencies for spot and future delivery on behalf of and for the
account of a Portfolio with the Custodian as principal. The Custodian shall be
responsible for the selection of the currency brokers or Banking Institutions
and the failure of such currency brokers or Banking Institutions to comply with
the terms of any contract or option.
(c) Payments. Notwithstanding anything to the contrary contained herein, upon
receipt of Proper Instructions the Custodian may, in connection with a foreign
exchange contract, make free outgoing payments of cash in the form of U.S.
Dollars or foreign currency prior to receipt of confirmation of such foreign
exchange contract or confirmation that the countervalue currency completing such
contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by a Portfolio, deliver
securities of such Portfolio to the borrower thereof prior to receipt of the
collateral, if any, for such borrowing; provided that, in cases of loans of
securities secured by cash collateral, the Custodian's instructions to the
Securities System shall require that the Securities System deliver the
securities of the Portfolio to the borrower thereof only upon receipt of the
collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to the Fund with respect
to portfolio securities and other assets of each Portfolio; (b) promptly credit
to the account of each Portfolio all income and other payments relating to
portfolio securities and other assets held by the Custodian hereunder upon
Custodian's receipt of such income or payments or as otherwise agreed in writing
by the Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collections; and (d) promptly execute ownership and
other certificates and affidavits for all federal, state and foreign tax
purposes in connection with receipt of income or other payments with respect to
portfolio securities and other assets of each Portfolio, or in connection with
the transfer of such securities or other assets; provided, however, that with
respect to portfolio securities registered in so-called street name, the
Custodian shall use its best efforts to collect amounts due and payable to the
Fund. The Custodian shall promptly notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing if any amount payable with respect to portfolio securities or other
assets of the Portfolios is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and payable
with respect to portfolio securities or other assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian shall
promptly release funds or securities: (a) upon receipt of Proper Instructions,
to one or more Distribution Accounts designated by the Fund in such Proper
Instructions; or (b) upon receipt of Special Instructions, as otherwise directed
by the Fund, for the purpose of the payment of dividends or other distributions
to shareholders of the Portfolios, and payment to shareholders who have
requested repurchase or redemption of their shares of the Portfolio(s)
(collectively, the "Shares"). For purposes of this Agreement, a "Distribution
Account" shall mean an account established at a Banking Institution designated
by the Fund in Special Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive funds
representing cash payments received for Shares issued or sold from time to time
by the Fund, and shall promptly credit such funds to the account(s) of the
applicable Portfolio(s). The Custodian shall promptly notify the Fund of
Custodian's receipt of cash in payment for Shares issued by the Fund by
facsimile transmission or in such other manner as the Fund and Custodian may
agree in writing. Upon receipt of Proper Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for Shares in
payment for such investments as may be set forth in such Proper Instructions and
at a time agreed upon between the Custodian and the Fund; and (b) make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the Custodian, in the amount of checks received in payment for
Shares which are deposited to the accounts of the Portfolios.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to the Fund,
in the most expeditious manner practicable, all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or relating to
securities owned by the Portfolios that are received by the Custodian, any
Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any Subcustodian or nominee shall vote
upon any such securities, or execute any proxy to vote thereon, or give any
consent or take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Portfolios.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to all
nondiscretionary details in connection with the sale, exchange, substitution,
purchase, transfer or other dealings with securities or other assets of the
Portfolios held by the Custodian, except as otherwise directed from time to time
pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall open
and operate a bank account or accounts (hereinafter referred to collectively, as
"Bank Accounts") on the books of the Custodian or any Subcustodian provided that
such account(s) shall be in the name of the Custodian or a nominee of the
Custodian, for the account of a Portfolio, and shall be subject only to the
draft or order of the Custodian; provided however, that such Bank Accounts in
countries other than the United States may be held in an account of the
Custodian containing only assets held by the Custodian as a fiduciary or
custodian for customers, and provided further, that the records of the Custodian
shall indicate at all times the Portfolio or other customer for which such
securities and other assets are held in such account and the respective
interests therein. Such Bank Accounts may be denominated in either U.S. Dollars
or other currencies. The responsibilities of the Custodian to the Fund for
deposits accepted on the Custodian's books in the United States shall be that of
a U.S. bank for a similar deposit. The responsibilities of the Custodian to the
Fund for deposits accepted on any Subcustodian's books shall be governed by the
provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of a Portfolio, in the name of the Custodian or
a nominee of the Custodian, at a Banking Institution other than the Custodian or
any Subcustodian, provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of a Portfolio, and
shall be subject only to the draft or order of the Custodian; provided however,
that such Bank Accounts may be held in an account of the Custodian containing
only assets held by the Custodian as a fiduciary or custodian for customers, and
provided further, that the records of the Custodian shall indicate at all times
the Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein. Such Bank Accounts
may be denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian shall
take such reasonable actions as the Fund deems necessary or appropriate to cause
each deposit account established by the Custodian pursuant to this Section 2.21
to be insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Portfolios in: (a) The
Depository Trust Company; (b) the Participants Trust Company; (c) any book-entry
system as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR
306.115, (ii) Subpart B of Treasury Circular Public Debt Series No. 27-76, 31
CFR 350.2, or (iii) the book-entry regulations of federal agencies substantially
in the form of 31 CFR 306.115; or (d) any other domestic clearing agency
registered with the Securities and Exchange Commission ("SEC") under Section 17A
of the Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository or
clearing agent for the securities or other assets of investment companies) which
acts as a securities depository and the use of which the Fund has previously
approved by Special Instructions (as hereinafter defined) (each of the foregoing
being referred to in this Agreement as a "Securities System"). Use of a
Securities System shall be in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder in a
Securities System, provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which Account shall not
contain any assets of the Custodian other than assets held as a fiduciary,
custodian, or otherwise for customers.
(B) The books and records of the Custodian shall at all times identify those
securities belonging to each Portfolio which are maintained in a Securities
System.
(C) The Custodian shall pay for securities purchased for the account of a
Portfolio only upon (w) receipt of advice from the Securities System that such
securities have been transferred to the Account of the Custodian, and (x) the
making of an entry on the records of the Custodian to reflect such payment and
transfer for the account of such Portfolio. The Custodian shall transfer
securities sold for the account of a Portfolio only upon (y) receipt of advice
from the Securities System that payment for such securities has been transferred
to the Account of the Custodian, and (z) the making of an entry on the records
of the Custodian to reflect such transfer and payment for the account of such
Portfolio. Copies of all advices from the Securities System relating to
transfers of securities for the account of a Portfolio shall identify such
Portfolio, shall be maintained for the Portfolio by the Custodian. The Custodian
shall deliver to the Fund on the next succeeding business day daily transaction
reports which shall include each day's transactions in the Securities System for
the account of each Portfolio. Such transaction reports shall be delivered to
the Fund or any agent designated by the Fund pursuant to Proper Instructions, by
computer or in such other manner as the Fund and Custodian may agree in writing.
(D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
(E) Upon receipt of Special Instructions, the Custodian shall terminate the
use of any Securities System (except the federal book-entry system) on behalf of
any Portfolio as promptly as practicable and shall take all actions reasonably
practicable to safeguard the securities of the Portfolios maintained with such
Securities System.
Section 2.23. Other Transfers. Upon receipt of Special Instructions, the
Custodian shall make such other dispositions of securities, funds or other
property of the Portfolios in a manner or for purposes other than as expressly
set forth in this Agreement, provided that the Special Instructions relating to
such disposition shall include a statement of the purpose for which the delivery
is to be made, the amount of funds and/or securities to be delivered, and the
name of the person or persons to whom delivery is to be made, and shall
otherwise comply with the provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of Proper
Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of a Portfolio, into which
account or accounts may be transferred cash and/or securities or other assets of
such Portfolio, including securities maintained by the Custodian in a Securities
System pursuant to Section 2.22 hereof, said account or accounts to be
maintained: (a) for the purposes set forth in Sections 2.09, 2.10 and 2.11
hereof; (b) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent release
or releases of the SEC relating to the maintenance of segregated accounts by
registered investment companies; or (c) for such other purposes as set forth,
from time to time, in Special Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide any
assistance reasonably requested by the Fund in the preparation of reports to
Fund shareholders and others, audits of accounts, and other ministerial matters
of like nature. The Custodian shall maintain complete and accurate records with
respect to securities and other assets held for the accounts of the Portfolios
as required by the rules and regulations of the SEC applicable to investment
companies registered under the 1940 Act, including: (a) journals or other
records of original entry containing a detailed and itemized daily record of all
receipts and deliveries of securities (including certificate and transaction
identification numbers, if any), and all receipts and disbursements of cash; (b)
ledgers or other records reflecting (i) securities in transfer, (ii) securities
in physical possession, (iii) securities borrowed, loaned or collateralizing
obligations of the Portfolios, (iv) monies borrowed and monies loaned (together
with a record of the collateral therefor and substitutions of such collateral),
and (v) dividends and interest received; and (c) cancelled checks and bank
records related thereto. The Custodian shall keep such other books and records
of the Fund as the Fund shall reasonably request. All such books and records
maintained by the Custodian shall be maintained in a form acceptable to the Fund
and in compliance with the rules and regulations of the SEC, including, but not
limited to, books and records required to be maintained by Section 31(a) of the
1940 Act and the rules and regulations from time to time adopted thereunder. All
books and records maintained by the Custodian pursuant to this Agreement shall
at all times be the property of the Fund and shall be available during normal
business hours for inspection and use by the Fund and its agents, including,
without limitation, its independent certified public accountants.
Notwithstanding the preceding sentence, the Funds shall not take any actions or
cause the Custodian to take any actions which would cause, either directly or
indirectly, the Custodian to violate any applicable laws, regulations or orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants. The
Custodian shall take all reasonable action as the Fund may request to obtain
from year to year favorable opinions from the Fund's independent certified
public accountants with respect to the Custodian's activities hereunder in
connection with the preparation of the Fund's Form N-1A and the Fund's Form
N-SAR or other periodic reports to the SEC and with respect to any other
requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At the
request of the Fund, the Custodian shall deliver to the Fund a written report
prepared by the Custodian's independent certified public accountants with
respect to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system, internal
accounting control and procedures for safeguarding cash, securities and other
assets, including cash, securities and other assets deposited and/or maintained
in a Securities System or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund and as may reasonably be obtained by the Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is directed
by Proper Instructions to make any payment or transfer of funds on behalf of a
Portfolio for which there would be, at the close of business on the date of such
payment or transfer, insufficient funds held by the Custodian on behalf of such
Portfolio, the Custodian may, in its discretion, provide an overdraft (an
"Overdraft") to the Fund on behalf of such Portfolio, in an amount sufficient to
allow the completion of such payment. Any Overdraft provided hereunder: (a)
shall be payable on the next Business Day, unless otherwise agreed by the Fund
and the Custodian; and (b) shall accrue interest from the date of the Overdraft
to the date of payment in full by the Fund on behalf of the applicable Portfolio
at a rate agreed upon in writing, from time to time, by the Custodian and the
Fund. The Custodian and the Fund acknowledge that the purpose of such Overdrafts
is to temporarily finance the purchase or sale of securities for prompt delivery
in accordance with the terms hereof, or to meet emergency expenses not
reasonably foreseeable by the Fund. The Custodian shall promptly notify the Fund
in writing (an "Overdraft Notice") of any Overdraft by facsimile transmission or
in such other manner as the Fund and the Custodian may agree in writing. At the
request of the Custodian, the Fund, on behalf of a Portfolio, shall pledge,
assign and grant to the Custodian a security interest in certain specified
securities of the Portfolio, as security for Overdrafts provided to such
Portfolio, under the terms and conditions set forth in Appendix "C" attached
hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions" shall
mean: (i) a tested telex, a written (including, without limitation, facsimile
transmission) request, direction, instruction or certification signed or
initialed by or on behalf of the Fund by one or more Authorized Persons (as
hereinafter defined); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) by or on behalf of the Fund by one or more Authorized
Persons; provided, however, that communications of the types described in
clauses (ii) and (iii) above purporting to be given by an Authorized Person
shall be considered Proper Instructions only if the Custodian reasonably
believes such communications to have been given by an Authorized Person with
respect to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Fund by tested telex or in writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Custodian in reliance upon such
oral instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all telephonic or
other oral instructions communicated to the Custodian. Proper Instructions may
relate to specific transactions or to types or classes of transactions, and may
be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions" shall
mean Proper Instructions countersigned or confirmed in writing by the Treasurer
or any Assistant Treasurer of the Fund or any other person designated by the
Treasurer of the Fund in writing, which countersignature or confirmation shall
be (i)included on the same instrument containing the Proper Instructions or on a
separate instrument relating thereto, and (ii) delivered by hand, by facsimile
transmission, or in such other manner as the Fund and the Custodian agree in
writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian at the
address and/or telephone, telecopy or telex number agreed upon from time to time
by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of this
Agreement and from time to time thereafter, as appropriate, the Fund shall
deliver to the Custodian, duly certified as appropriate by a Treasurer or
Assistant Treasurer of the Fund, a certificate setting forth: (a) the names,
titles, signatures and scope of authority of all persons authorized to give
Proper Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund (collectively, the "Authorized
Persons" and individually, an "Authorized Person"); and (b) the names, titles
and signatures of those persons authorized to issue Special Instructions. Such
certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until delivery to the Custodian of a similar certificate to the
contrary. Upon delivery of a certificate which deletes the name(s) of a person
previously authorized to give Proper Instructions or to issue Special
Instructions, such persons shall no longer be considered an Authorized Person or
authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of the Fund shall have
physical access to the assets of any Portfolio held by the Custodian nor shall
the Custodian deliver any assets of a Portfolio for delivery to an account of
such person; provided, however, that nothing in this Section 3.03 shall prohibit
(a) any Authorized Person from giving Proper Instructions, or any person
authorized to issue Special Instructions from issuing Special Instructions, so
long as such action does not result in delivery of or access to assets of any
Portfolio prohibited by this Section 3.03; or (b) the Fund's independent
certified public accountants from examining or reviewing the assets of the
Portfolios held by the Custodian. The Fund shall deliver to the Custodian a
written certificate identifying such Authorized Persons, Trustees, officers,
employees and agents of the Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and Special
Instructions. So long as and to the extent that the Custodian acts in accordance
with (a) Proper Instructions or Special Instructions, as the case may be, and
(b) the terms of this Agreement, the Custodian shall not be responsible for the
title, validity or genuineness of any property, or evidence of title thereof,
received by it or delivered by it pursuant to this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to act on
behalf of a Portfolio. (For purposes of this Agreement, all duly appointed
Domestic Subcustodians, Foreign Subcustodians, Interim Subcustodians, and
Special Subcustodians are hereinafter referred to collectively, as
"Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and from
time to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act
meeting the requirements of a custodian under Section 17(f) of the 1940 Act and
the rules and regulations thereunder, to act on behalf of one or more Portfolios
as a subcustodian for purposes of holding cash, securities and other assets of
such Portfolios and performing other functions of the Custodian within the
United States (a "Domestic Subcustodian"); provided, that, the Custodian shall
notify the Fund in writing of the identity and qualifications of any proposed
Domestic Subcustodian at least thirty (30) days prior to appointment of such
Domestic Subcustodian, and the Fund may, in its sole discretion, by written
notice to the Custodian executed by an Authorized Person disapprove of the
appointment of such Domestic Subcustodian. If following notice by the Custodian
to the Fund regarding appointment of a Domestic Subcustodian and the expiration
of thirty (30) days after the date of such notice, the Fund shall have failed to
notify the Custodian of its disapproval thereof, the Custodian may, in its
discretion, appoint such proposed Domestic Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time to
time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the 1940
Act and the rules and regulations thereunder or by order of the Securities and
Exchange Commission exempted therefrom, or (ii) any bank as defined in Section
2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section
17(f) of the 1940 Act and the rules and regulations thereunder to act on behalf
of one or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other functions of
the Custodian in countries other than the United States of America (a "Foreign
Subcustodian"); provided, that, prior to the appointment of any Foreign
Subcustodian, the Custodian shall have obtained written confirmation of the
approval of the Board of Trustees or other governing body or entity of the Fund
on behalf of the applicable Portfolio(s) (which approval may be withheld in the
sole discretion of such Board of Trustees or other governing body or entity)
with respect to (i) the identity and qualifications of any proposed Foreign
Subcustodian, (ii) the country or countries in which, and the securities
depositories or clearing agencies, if any, through which, any proposed Foreign
Subcustodian is authorized to hold securities and other assets of the
Portfolio(s), and (iii) the form and terms of the subcustodian agreement to be
entered into between such proposed Foreign Subcustodian and the Custodian. Each
such duly approved Foreign Subcustodian and the countries where and the
securities depositories and clearing agencies through which they may hold
securities and other assets of the Funds shall be listed on Appendix "B"
attached hereto, as it may be amended, from time to time, in accordance with the
provisions of Section 9.05(c) hereof. The Fund shall be responsible for
informing the Custodian sufficiently in advance of a proposed investment which
is to be held in a country in which no Foreign Subcustodian is authorized to
act, in order that there shall be sufficient time for the Custodian to effect
the appropriate arrangements with a proposed foreign subcustodian, including
obtaining approval as provided in this Section 4.02(a). The Custodian shall not
amend any subcustodian agreement entered into with a Foreign Subcustodian, or
agree to change or permit any changes thereunder, or waive any rights under such
agreement, which materially affect the Fund's rights or the Foreign
Subcustodian's obligations or duties to the Fund under such agreement, except
upon prior approval pursuant to Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the event that a
Portfolio shall invest in a security or other asset to be held in a country in
which no Foreign Subcustodian is authorized to act, the Custodian shall promptly
notify the Fund in writing by facsimile transmission or in such other manner as
the Fund and Custodian shall agree in writing of the unavailability of an
approved Foreign Subcustodian in such country; and the Custodian shall, upon
receipt of Special Instructions, appoint any Person designated by the Fund in
such Special Instructions to hold such security or other asset. (Any Person
appointed as a subcustodian pursuant to this Section 4.02(b) is hereinafter
referred to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special Instructions, the
Custodian shall, on behalf of the Fund for one or more Portfolios, appoint one
or more banks, trust companies or other entities designated in such Special
Instructions to act as a subcustodian for purposes of: (i) effecting
third-party repurchase transactions with banks, brokers, dealers or other
entities through the use of a common custodian or subcustodian; (ii)
establishing a joint trading account for the Portfolios and other registered
open-end management investment companies for which Fidelity Management &
Research Company serves as investment adviser, through which the Portfolios and
such other investment companies shall collectively participate in certain
repurchase transactions; (iii) providing depository and clearing agency services
with respect to certain variable rate demand note securities; and (iv) effecting
any other transactions designated by the Fund in Special Instructions. (Each
such designated subcustodian is hereinafter referred to as a "Special
Subcustodian.") Each such duly appointed Special Subcustodian shall be listed
on Appendix "B" attached hereto, as it may be amended from time to time in
accordance with the provisions of Section 9.05(c) hereof. In connection with the
appointment of any Special Subcustodian, the Custodian shall enter into a
subcustodian agreement with the Special Subcustodian in form and substance
approved by the Fund, provided that such agreement shall in all events comply
with the provisions of the 1940 Act and the rules and regulations thereunder and
the terms and provisions of this Agreement. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or agree to
change or permit any changes thereunder, or waive any rights under such
agreement, except upon prior approval pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i) cause each
Domestic Subcustodian and Foreign Subcustodian to, and (ii) use its best efforts
to cause each Interim Subcustodian and Special Subcustodian to, perform all of
its obligations in accordance with the terms and conditions of the subcustodian
agreement between the Custodian and such Subcustodian. In the event that the
Custodian is unable to cause such Subcustodian to fully perform its obligations
thereunder, the Custodian shall forthwith, upon the receipt of Special
Instructions, terminate such Subcustodian with respect to the Fund and, if
necessary or desirable, appoint a replacement Subcustodian in accordance with
the provisions of Section 4.01 or Section 4.02, as the case may be. In addition
to the foregoing, the Custodian (A) may, at any time in its discretion, upon
written notification to the Fund, terminate any Domestic Subcustodian, Foreign
Subcustodian or Interim Subcustodian, and (B) shall, upon receipt of Special
Instructions, terminate any Subcustodian with respect to the Fund, in accordance
with the termination provisions under the applicable subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon request of
the Fund, the Custodian shall deliver to the Fund a certificate stating: (i)
the identity of each Foreign Subcustodian then acting on behalf of the
Custodian; (ii) the countries in which and the securities depositories and
clearing agents through which each such Foreign Subcustodian is then holding
cash, securities and other assets of any Portfolio; and (iii) such other
information as may be requested by the Fund to ensure compliance with Rule
17(f)-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable care and
diligence in carrying out all of its duties and obligations under this
Agreement, and shall be liable to the Fund for all loss, damage and expense
suffered or incurred by the Fund or the Portfolios resulting from the failure of
the Custodian to exercise such reasonable care and diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the Custodian
incur liability hereunder if the Custodian or any Subcustodian or Securities
System, or any subcustodian, securities depository or securities system utilized
by any such Subcustodian, or any nominee of the Custodian or any Subcustodian
(individually, a "Person") is prevented, forbidden or delayed from performing,
or omits to perform, any act or thing which this Agreement provides shall be
performed or omitted to be performed, by reason of: (i) any provision of any
present or future law or regulation or order of the United States of America, or
any state thereof, or of any foreign country, or political subdivision thereof
or of any court of competent jurisdiction; or (ii) any act of God or war or
other similar circumstance beyond the control of the Custodian, unless, in each
case, such delay or nonperformance is caused by (A) the negligence, misfeasance
or misconduct of the applicable Person, or (B) a malfunction or failure of
equipment operated or utilized by the applicable Person other than a malfunction
or failure beyond such Person's control and which could not reasonably be
anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which causes or
may cause any loss, damage or expense to the Fund or any Portfolio, (i) the
Custodian shall, (ii) the Custodian shall cause any applicable Domestic
Subcustodian or Foreign Subcustodian to, and (iii) the Custodian shall use its
best efforts to cause any applicable Interim Subcustodian or Special
Subcustodian to, use all commercially reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effects of such event and to avoid
continuing harm to the Fund and the Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act upon
advice of counsel on all matters. The Custodian shall be without liability for
any action reasonably taken or omitted in good faith pursuant to the advice of
(i) counsel for the Fund, or (ii) at the expense of the Custodian, such other
counsel as the Fund and the Custodian may agree upon; provided, however, with
respect to the performance of any action or omission of any action upon such
advice, the Custodian shall be required to conform to the standard of care set
forth in Section 5.01(a).
(e) Expenses of the Fund. In addition to the liability of the Custodian under
this Article V, the Custodian shall be liable to the Fund for all reasonable
costs and expenses incurred by the Fund in connection with any claim by the Fund
against the Custodian arising from the obligations of the Custodian hereunder
including, without limitation, all reasonable attorneys' fees and expenses
incurred by the Fund in asserting any such claim, and all expenses incurred by
the Fund in connection with any investigations, lawsuits or proceedings relating
to such claim; provided, that the Fund has recovered from the Custodian for such
claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian's duties
hereunder by reason of the Custodian's reliance upon records that were
maintained for the Fund by entities other than the Custodian prior to the
Custodian's employment hereunder.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall be
liable for the actions or omissions of any Domestic Subcustodian or any Foreign
Subcustodian to the same extent as if such action or omission were performed by
the Custodian itself. In the event of any loss, damage or expense suffered or
incurred by the Fund caused by or resulting from the actions or omissions of any
Domestic Subcustodian or Foreign Subcustodian for which the Custodian would
otherwise be liable, the Custodian shall promptly reimburse the Fund in the
amount of any such loss, damage or expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to the Fund for any loss, damage
or expense suffered or incurred by the Fund or any Portfolio resulting from the
actions or omissions of an Interim Subcustodian unless such loss, damage or
expense is caused by, or results from, the negligence, misfeasance or misconduct
of the Custodian; provided, however, in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights as
it may have against such Interim Subcustodian to protect the interests of the
Fund and the Portfolios.
(c) Special Subcustodians. Notwithstanding the provisions of Section 5.01 to
the contrary and except as otherwise provided in any subcustodian agreement to
which the Custodian, the Fund and any Special Subcustodian are parties, the
Custodian shall not be liable to the Fund for any loss, damage or expense
suffered or incurred by the Fund or any Portfolio resulting from the actions or
omissions of a Special Subcustodian, unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights as
it may have against any Special Subcustodian to protect the interests of the
Fund and the Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to the
contrary, the Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by the Fund or any Portfolio resulting from the use
by the Custodian of a Securities System, unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights as
it may have against the Securities System to protect the interests of the Fund
and the Portfolios.
(e) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian for
all reasonable out-of-pocket expenses incurred by the Custodian in connection
with the fulfillment of its obligations under this Section 5.02; provided,
however, that such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in this
Agreement, the Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all loss, damage and expense (including reasonable attorneys'
fees) suffered or incurred by the Custodian or its nominee caused by or arising
from actions taken by the Custodian in the performance of its duties and
obligations under this Agreement; provided, however, that such indemnity shall
not apply to loss, damage and expense occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian or its nominee. In
addition, the Fund agrees to indemnify any Person against any liability incurred
by reason of taxes assessed to such Person, or other loss, damage or expenses
incurred by such Person, resulting from the fact that securities and other
property of the Portfolios are registered in the name of such Person; provided,
however, that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any Person.
(b) Notice of Litigation, Right to Prosecute, Etc. The Fund shall not be liable
for indemnification under this Section 5.03 unless a Person shall have promptly
notified the Fund in writing of the commencement of any litigation or proceeding
brought against such Person in respect of which indemnity may be sought under
this Section 5.03. With respect to claims in such litigation or proceedings for
which indemnity by the Fund may be sought and subject to applicable law and the
ruling of any court of competent jurisdiction, the Fund shall be entitled to
participate in any such litigation or proceeding and, after written notice from
the Fund to any Person, the Fund may assume the defense of such litigation or
proceeding with counsel of its choice at its own expense in respect of that
portion of the litigation for which the Fund may be subject to an
indemnification obligation; provided, however, a Person shall be entitled to
participate in (but not control) at its own cost and expense, the defense of any
such litigation or proceeding if the Fund has not acknowledged in writing its
obligation to indemnify the Person with respect to such litigation or
proceeding. If the Fund is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, such Person shall reasonably prosecute such litigation
or proceeding. A Person shall not consent to the entry of any judgment or enter
into any settlement in any such litigation or proceeding without providing the
Fund with adequate notice of any such settlement or judgment, and without the
Fund's prior written consent. All Persons shall submit written evidence to the
Fund with respect to any cost or expense for which they are seeking
indemnification in such form and detail as the Fund may reasonably request.
Section 5.04. Investment Limitations. If the Custodian has otherwise complied
with the terms and conditions of this Agreement in performing its duties
generally, and more particularly in connection with the purchase, sale or
exchange of securities made by or for a Portfolio, the Custodian shall not be
liable to the Fund and the Fund agrees to indemnify the Custodian and its
nominees, for any loss, damage or expense suffered or incurred by the Custodian
and its nominees arising out of any violation of any investment or other
limitation to which the Fund is subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the contrary
contained herein, the Fund shall have, at its election upon reasonable notice to
the Custodian, the right to enforce, to the extent permitted by any applicable
agreement and applicable law, the Custodian's rights against any Subcustodian,
Securities System, or other Person for loss, damage or expense caused the Fund
by such Subcustodian, Securities System, or other Person, and shall be entitled
to enforce the rights of the Custodian with respect to any claim against such
Subcustodian, Securities System or other Person, which the Custodian may have as
a consequence of any such loss, damage or expense, if and to the extent that the
Fund has not been made whole for any such loss or damage. If the Custodian makes
the Fund whole for any such loss or damage, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian, Securities
System or other Person. Upon the Fund's election to enforce any rights of the
Custodian under this Section 5.05, the Fund shall reasonably prosecute all
actions and proceedings directly relating to the rights of the Custodian in
respect of the loss, damage or expense incurred by the Fund; provided that, so
long as the Fund has acknowledged in writing its obligation to indemnify the
Custodian under Section 5.03 hereof with respect to such claim, the Fund shall
retain the right to settle, compromise and/or terminate any action or proceeding
in respect of the loss, damage or expense incurred by the Fund without the
Custodian's consent and provided further, that if the Fund has not made an
acknowledgement of its obligation to indemnify, the Fund shall not settle,
compromise or terminate any such action or proceeding without the written
consent of the Custodian, which consent shall not be unreasonably withheld or
delayed. The Custodian agrees to cooperate with the Fund and take all actions
reasonably requested by the Fund in connection with the Fund's enforcement of
any rights of the Custodian. The Fund agrees to reimburse the Custodian for all
reasonable out-of-pocket expenses incurred by the Custodian in connection with
the fulfillment of its obligations under this Section 5.05; provided, however,
that such reimbursement shall not apply to expenses occasioned by or resulting
from the negligence, misfeasance or misconduct of the Custodian.
ARTICLE VI
COMPENSATION
On behalf of each Portfolio, the Fund shall compensate the Custodian in an
amount, and at such times, as may be agreed upon in writing, from time to time,
by the Custodian and the Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement in Full. This Agreement shall continue
in full force and effect until the first to occur of: (a) termination by the
Custodian by an instrument in writing delivered or mailed to the Fund, such
termination to take effect not sooner than ninety (90) days after the date of
such delivery; (b) termination by the Fund by an instrument in writing delivered
or mailed to the Custodian, such termination to take effect not sooner than
thirty (30) days after the date of such delivery; or (c) termination by the Fund
by written notice delivered to the Custodian, based upon the Fund's
determination that there is a reasonable basis to conclude that the Custodian is
insolvent or that the financial condition of the Custodian is deteriorating in
any material respect, in which case termination shall take effect upon the
Custodian's receipt of such notice or at such later time as the Fund shall
designate. In the event of termination pursuant to this Section 7.01, the Fund
shall make payment of all accrued fees and unreimbursed expenses within a
reasonable time following termination and delivery of a statement to the Fund
setting forth such fees and expenses. The Fund shall identify in any notice of
termination a successor custodian to which the cash, securities and other assets
of the Portfolios shall, upon termination of this Agreement, be delivered. In
the event that no written notice designating a successor custodian shall have
been delivered to the Custodian on or before the date when termination of this
Agreement shall become effective, the Custodian may deliver to a bank or trust
company doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities and other assets
held by the Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Agreement. In
the event that securities and other assets remain in the possession of the
Custodian after the date of termination hereof owing to failure of the Fund to
appoint a successor custodian, the Custodian shall be entitled to compensation
for its services in accordance with the fee schedule most recently in effect,
for such period as the Custodian retains possession of such securities and other
assets, and the provisions of this Agreement relating to the duties and
obligations of the Custodian and the Fund shall remain in full force and effect.
In the event of the appointment of a successor custodian, it is agreed that the
cash, securities and other property owned by the Fund and held by the Custodian,
any Subcustodian or nominee shall be delivered to the successor custodian; and
the Custodian agrees to cooperate with the Fund in the execution of documents
and performance of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
Section 7.02. Termination as to One or More Portfolios. This Agreement may be
terminated as to one or more Portfolios (but less than all of the Portfolios) by
delivery of an amended Appendix "A" deleting such Portfolios pursuant to Section
9.05(b) hereof, in which case termination as to such deleted Portfolios shall
take effect thirty (30) days after the date of such delivery. The execution and
delivery of an amended Appendix "A" which deletes one or more Portfolios shall
constitute a termination of this Agreement only with respect to such deleted
Portfolio(s), shall be governed by the preceding provisions of Section 7.01 as
to the identification of a successor custodian and the delivery of cash,
securities and other assets of the Portfolio(s) so deleted, and shall not affect
the obligations of the Custodian and the Fund hereunder with respect to the
other Portfolios set forth in Appendix "A," as amended from time to time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by the Fund. Upon request, the Fund shall execute and deliver to
the Custodian such proxies, powers of attorney or other instruments as may be
reasonable and necessary or desirable in connection with the performance by the
Custodian or any Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement, provided that the exercise
by the Custodian or any Subcustodian of any such rights shall in all events be
in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the Custodian
shall execute and deliver to the Fund or to such other parties as the Fund may
designate in such Proper Instructions, all such documents, instruments or
agreements as may be reasonable and necessary or desirable in order to
effectuate any of the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY OF THE
DECLARATION OF TRUST OF THE FUND IS ON FILE WITH THE SECRETARY OF THE STATE OF
THE FUND'S FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT
EXECUTED ON BEHALF OF THE TRUSTEES OF THE FUND AS INDIVIDUALS, AND THE
OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES,
OFFICERS, SHAREHOLDERS OR PARTNERS OF THE FUND INDIVIDUALLY, BUT ARE BINDING
ONLY UPON THE ASSETS AND PROPERTY OF THE PORTFOLIOS. THE CUSTODIAN AGREES THAT
NO SHAREHOLDER, TRUSTEE, OFFICER OR PARTNER OF THE FUND MAY BE HELD PERSONALLY
LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF THE FUND ARISING OUT OF THIS
AGREEMENT.
Section 9.03. Several Obligations of the Portfolios. WITH RESPECT TO ANY
OBLIGATIONS OF THE FUND ON BEHALF OF THE PORTFOLIOS ARISING OUT OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS ARISING UNDER SECTIONS
2.28, 5.03, 5.05 and ARTICLE VI HEREOF, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR
SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE
PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH THE FUND HAD SEPARATELY
CONTRACTED WITH THE CUSTODIAN BY SEPARATE WRITTEN INSTRUMENT WITH RESPECT TO
EACH PORTFOLIO.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby represents and
warrants that each of the following shall be true, correct and complete at all
times during the term of this Agreement: (i) the Fund is duly organized under
the laws of its jurisdiction of organization and is registered as an open-end
management investment company under the 1940 Act; and (ii) the execution,
delivery and performance by the Fund of this Agreement are (w) within its power,
(x) have been duly authorized by all necessary action, and (y) will not (A)
contribute to or result in a breach of or default under or conflict with any
existing law, order, regulation or ruling of any governmental or regulatory
agency or authority, or (B) violate any provision of the Fund's corporate
charter, Declaration of Trust or other organizational document, or bylaws, or
any amendment thereof or any provision of its most recent Prospectus or
Statement of Additional Information.
(b) Representations and Warranties of the Custodian. The Custodian hereby
represents and warrants that each of the following shall be true, correct and
complete at all times during the term of this Agreement: (i) the Custodian is
duly organized under the laws of its jurisdiction of organization and qualifies
to act as a custodian to open-end management investment companies under the
provisions of the 1940 Act; and (ii) the execution, delivery and performance by
the Custodian of this Agreement are (w) within its power, (x) have been duly
authorized by all necessary action, and (y) will not (A) contribute to or result
in a breach of or default under or conflict with any existing law, order,
regulation or ruling of any governmental or regulatory agency or authority, or
(B) violate any provision of the Custodian's corporate charter, or other
organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and accordingly, supercedes as of the effective date of this
Agreement any custodian agreement heretofore in effect between the Fund and the
Custodian, or any subcustodian agreement between the Fund, the Custodian and
Fidelity Management Trust Company pursuant to which the Custodian acts as
subcustodian of Fidelity Management Trust Company.
Section 9.06. Waivers and Amendments. No provision of this Agreement may be
waived, amended or terminated except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or termination is
sought; provided, however: (a) Appendix "A" listing the Portfolios for which
the Custodian serves as custodian may be amended from time to time to add one or
more Portfolios, by the Fund's execution and delivery to the Custodian of an
amended Appendix "A", and the execution of such amended Appendix by the
Custodian, in which case such amendment shall take effect immediately upon
execution by the Custodian; (b) Appendix "A" may be amended from time to time to
delete one or more Portfolios (but less than all of the Portfolios), by the
Fund's execution and delivery to the Custodian of an amended Appendix A", in
which case such amendment shall take effect thirty (30) days after such
delivery, unless otherwise agreed by the Custodian and the Fund in writing; (c)
Appendix "B" listing Foreign Subcustodians and Special Subcustodians approved by
the Fund may be amended from time to time to add or delete one or more Foreign
Subcustodians or Special Subcustodians by the Fund's execution and delivery to
the Custodian of an amended Appendix "B", in which case such amendment shall
take effect immediately upon execution by the Custodian; and (d) Appendix "C"
setting forth the procedures relating to the Custodian's security interest may
be amended only by an instrument in writing executed by the Fund and the
Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. No interpretative or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the parties
hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may arise in
connection with the custodianship of foreign securities pursuant to an agreement
with a Foreign Subcustodian that is governed by the laws of the State of New
York, the provisions of this Agreement shall be construed in accordance with and
governed by the laws of the State of New York, provided that in all other
instances this Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts, in each case without giving
effect to principles of conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or Special
Instructions, notices and other writings contemplated by this Agreement shall be
delivered by hand or by facsimile transmission; provided that in the case of
delivery by facsimile transmission, notice shall also be mailed postage prepaid
to the parties at the following addresses:
(a) If to the Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: John E. Ferris
Telephone: (617) 570-6556
Telefax: (617) 742-1231
(b) If to the Custodian:
928 Grand Avenue, 10th floor
Kansas City, Missouri 64106
Attn:Securities Administration
Telephone: (816) 860-7756
Telefax: (816) 860-4869
or to such other address as either party may have designated in writing to the
other party hereto.
Section 9.11. Assignment. This Agreement shall be binding on and shall inure to
the benefit of the Fund and the Custodian and their respective successors and
assigns, provided that, subject to the provisions of Section 7.01 hereof,
neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
Section 9.12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties.
Section 9.13. Confidentiality; Survival of Obligations. The parties hereto
agree that each shall treat confidentially the terms and conditions of this
Agreement and all information provided by each party to the other regarding its
business and operations. All confidential information provided by a party hereto
shall be used by any other party hereto solely for the purpose of rendering
services pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party without the prior
consent of such providing party. The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, or that is
required to be disclosed by any bank examiner of the Custodian or any
Subcustodian, any auditor of the parties hereto, by judicial or administrative
process or otherwise by applicable law or regulation. The provisions of this
Section 9.13 and Sections 9.01, 9.02, 9.03, 9.09, Section 2.28, Section 3.04,
Section 7.01, Article V and Article VI hereof and any other rights or
obligations incurred or accrued by any party hereto prior to termination of this
Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIDELITY LIMITED TERM MUNICIPALS UNITED MISSOURI BANK, N.A.
By: /s/John E. Ferris By: /s/E. Frank Ware
Name: John E. Ferris Name: E. Frank Ware
Title: Treasurer Title: Executive Vice President
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity Limited Term Municipals and United Missouri Bank, N.A.
Dated as of January 30, 1992
The following is a list of Portfolios for which the Custodian shall serve under
a Custodian Agreement dated as of July 18, 1991 (the "Agreement"):
Portfolio Name: Effective as of:
Fidelity Limited Term Municipals March 13, 1992
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be
executed in its name and behalf as of the day and year first set forth opposite
each such Portfolio.
"Fidelity Limited Term Municipals" "United Missouri Bank, N.A."
By: /s/Gary L. French By: /s/E. Frank Ware
Name: Gary L. French Name: E. Frank Ware
Title: Treasurer Title: Executive Vice President
APPENDIX "B"
TO
CUSTODIAN AGREEMENT
BETWEEN
FIDELITY LIMITED TERM MUNICIPALS AND UNITED MISSOURI BANK, N.A.
DATED AS OF [ ]
The following is a list of Foreign Subcustodians and Special Subcustodians
under the Custodian Agreement dated as of July 18, 1991:
A. Special Subcustodians:
Subcustodian Purpose
Morgan Guaranty Trust Company FICASH
of New York
Bankers Trust Company Variable Rate Demand Notes
Bank of New York Variable Rate Demand Notes
Chemical Bank, N.A. Variable Rate Demand Notes
Morgan Guaranty Trust Company Variable Rate Demand Notes
of New York
NCNB National Bank of North Carolina Variable Rate Demand Notes
Security Pacific National Bank Variable Rate Demand Notes
B. Foreign Subcustodians:
None
Fidelity Limited Term Municipals
By: /s/John E. Ferris
Name: John E. Ferris
Title: Treasurer
APPENDIX "C" TO THE
CUSTODIAN AGREEMENT BETWEEN
FIDELITY LIMITED TERM MUNICIPALS and UNITED MISSOURI BANK, N.A.
Dated as of July 18, 1991
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian Agreement) of any
Portfolio, the Fund, on behalf of such Portfolio, shall pledge, assign and grant
to the Custodian a security interest in Collateral (as hereinafter defined),
under the terms, circumstances and conditions set forth in this Appendix "C".
Section 1. Defined Terms. As used in this Appendix "C" the following terms
shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or a day
on which the Custodian is closed for business.
(b) "Collateral" shall mean, with respect to any Portfolio, the securities
having a fair market value (as determined in accordance with the procedures set
forth in the prospectus for the Portfolio) equal to the aggregate of all
Overdraft Obligations of such Portfolio: (i) identified in any Pledge
Certificate executed on behalf of such Portfolio; or (ii) designated by the
Custodian for such Portfolio pursuant to Section 3 of this Appendix C. Such
securities shall consist of marketable securities held by the Custodian on
behalf of such Portfolio or, if no such marketable securities are held by the
Custodian on behalf of such Portfolio, such other securities designated by the
Fund in the applicable Pledge Certificate or by the Custodian pursuant to
Section 3 of this Appendix C.
(c) "Overdraft Obligations" shall mean, with respect to any Portfolio, the
amount of any outstanding Overdraft(s) provided by the Custodian to such
Portfolio together with all accrued interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form attached
to this Appendix "C" as Schedule 1 executed by a duly authorized officer of the
Fund and delivered by the Fund to the Custodian by facsimile transmission or in
such other manner as the Fund and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form attached
to this Appendix "C" as Schedule 2 executed by a duly authorized officer of the
Custodian and delivered by the Custodian to the Fund by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly authorized
officer of the party delivering the notice and delivered by facsimile
transmission or in such other manner as the Fund and the Custodian shall agree
in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft Obligations
of any Portfolio are not satisfied within one (1) Business Day after receipt by
the Fund of a Written Notice requesting security for such Overdraft Obligation
and stating the amount of such Overdraft Obligation, the Fund, on behalf of such
Portfolio, shall pledge, assign and grant to the Custodian a first priority
security interest, by delivering to the Custodian, a Pledge Certificate executed
by the Fund on behalf of such Portfolio describing the applicable Collateral.
Such Written Notice may, in the discretion of the Custodian, be included within
or accompany the Overdraft Notice relating to the applicable Overdraft
Obligations.
Section 3. Failure to Pledge Collateral. In the event that the Fund shall
fail: (a) to pay, on behalf of the applicable Portfolio, the Overdraft
Obligation described in such Written Notice; (b) to deliver to the Custodian a
Pledge Certificate pursuant to Section 2; or (c) to identify substitute
securities pursuant to Section 6 upon the sale or maturity of any securities
identified as Collateral, the Custodian may, by Written Notice to the Fund
specify Collateral which shall secure the applicable Overdraft Obligation. The
Fund, on behalf of any applicable Portfolio, hereby pledges, assigns and grants
to the Custodian a first priority security interest in any and all Collateral
specified in such Written Notice; provided that such pledge, assignment and
grant of security shall be deemed to be effective only upon receipt by the Fund
of such Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the Custodian
shall notify the Fund by Written Notice that the fair market value of the
Collateral securing any Overdraft Obligation is less than the amount of such
Overdraft Obligation, the Fund, on behalf of the applicable Portfolio, shall
deliver to the Custodian, within one (1) Business Day following the Fund's
receipt of such Written Notice, an additional Pledge Certificate describing
additional Collateral. If the Fund shall fail to deliver such additional Pledge
Certificate, the Custodian may specify Collateral which shall secure the
unsecured amount of the applicable Overdraft Obligation in accordance with
Section 3 of this Appendix C.
Section 5. Release of Collateral. Upon payment by the Fund of any Overdraft
Obligation secured by the pledge of Collateral, the Custodian shall promptly
deliver to the Fund a Release Certificate pursuant to which the Custodian shall
release Collateral from the lien under the applicable Pledge Certificate or
Written Notice pursuant to Section 3 having a fair market value equal to the
amount paid by the Fund on account of such Overdraft Obligation. In addition,
if at any time the Fund shall notify the Custodian by Written Notice that the
Fund desires that specified Collateral be released and: (a) that the fair market
value of the Collateral securing any Overdraft Obligation shall exceed the
amount of such Overdraft Obligation; or (b) that the Fund has delivered a Pledge
Certificate substituting Collateral for such Overdraft Obligation, the Custodian
shall deliver to the Fund, within one (1) Business Day following the Custodian's
receipt of such Written Notice, a Release Certificate relating to the Collateral
specified in such Written Notice.
Section 6. Substitution of Collateral. The Fund may substitute securities for
any securities identified as Collateral by delivery to the Custodian of a Pledge
Certificate executed by the Fund on behalf of the applicable Portfolio,
indicating the securities pledged as Collateral.
Section 7. Security for Individual Portfolios' Overdraft Obligations. The
pledge of Collateral by the Fund on behalf of any individual Portfolio shall
secure only the Overdraft Obligations of such Portfolio. In no event shall the
pledge of Collateral by one Portfolio be deemed or considered to be security for
the Overdraft Obligations of any other Portfolio.
Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any
Overdraft Obligation of a Portfolio within thirty (30) days after receipt by the
Fund of a Written Notice demanding security therefore, and (b) one (1) Business
Day's prior Written Notice to the Fund, the Custodian may elect to enforce its
security interest in the Collateral securing such Overdraft Obligation, by
taking title to (at the then prevailing fair market value), or selling in a
commercially reasonable manner, so much of the Collateral as shall be required
to pay such Overdraft Obligation in full. Notwithstanding the provisions of any
applicable law, including, without limitation, the Uniform Commercial Code, the
remedy set forth in the preceding sentence shall be the only right or remedy to
which the Custodian is entitled with respect to the pledge and security interest
granted pursuant to any Pledge Certificate or Section 3, without limiting the
foregoing, the Custodian hereby waives and relinquishes all contractual and
common law rights of set off to which it may now or hereafter be or become
entitled with respect to any obligations of the Fund to the Custodian arising
under this Appendix C to the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to be executed
in its name and behalf on the day and year first above written.
FIDELITY LIMITED TERM MUNICIPALS UNITED MISSOURI BANK, N.A.
By: /s/John E. Ferris By: /s/E. Frank Ware
Name: John E. Ferris Name: E. Frank Ware
Title: Treasurer Title: Executive Vice President
SCHEDULE 1
TO
APPENDIX "C"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian Agreement dated
as of July 18, 1991 (the "Agreement"), between Fidelity Limited Term Municipals
(the "Fund") and United Missouri Bank, N.A. (the "Custodian"). Capitalized
terms used herein without definition shall have the respective meanings ascribed
to them in the Agreement. Pursuant to [Section 2 or Section 4] of Appendix "C"
attached to the Agreement, the Fund, on behalf of [ ] (the "Portfolio"),
hereby pledges, assigns and grants to the Custodian a first priority security
interest in the securities listed on Exhibit "A" attached to this Pledge
Certificate (collectively, the "Pledged Securities"). Upon delivery of this
Pledge Certificate, the Pledged Securities shall constitute Collateral, and
shall secure all Overdraft Obligations of the Portfolio described in that
certain Written Notice dated , 19 , delivered by the Custodian to the
Fund. The pledge, assignment and grant of security in the Pledged Securities
hereunder shall be subject in all respect to the terms and conditions of the
Agreement, including, without limitation, Sections 7 and 8 of Appendix "C"
attached thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be executed
in its name, on behalf of the Portfolio this day of 19 .
FIDELITY LIMITED TERM MUNICIPALS
By: /s/John E. Ferris
Name: John E. Ferris
Title: Treasurer
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
SCHEDULE 2
TO
APPENDIX "C"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian Agreement dated
as of July 18, 1991 (the "Agreement"), between Fidelity Limited Term Municipals
(the "Fund") and United Missouri Bank, N.A. (the "Custodian"). Capitalized
terms used herein without definition shall have the respective meanings ascribed
to them in the Agreement. Pursuant to Section 5 of Appendix "C" attached to the
Agreement, the Custodian hereby releases the securities listed on Exhibit "A"
attached to this Release Certificate from the lien under the [Pledge Certificate
dated __________, 19__ or the Written Notice delivered pursuant to Section 3 of
Appendix "C" dated __________, 19__ ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to be
executed in its name and on its behalf this day of 19 .
UNITED MISSOURI BANK, N.A.
By: _____________________
Name: _____________________
Title: _____________________
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
AMENDMENT NO. 1 TO THE CUSTODIAN AGREEMENT
DATED AS OF JULY 18, 1991
BETWEEN FIDELITY LIMITED TERM MUNICIPALS
AND UNITED MISSOURI BANK, N.A.
Reference is hereby made to a Custodian Agreement dated as of July 18, 1991
("the Agreement") between Fidelity Limited Term Municipals (the "Fund"), and
United Missouri Bank, N.A. (the "Custodian"), pursuant to which the Custodian
agreed to act as custodian of the assets of the Fund. By vote of its Board of
Trustees on July 15, 1993 the name of the Fund was changed to Fidelity School
Street Trust.
The first paragraph of the Agreement is hereby amended to read as follows:
"Agreement made as of July 18, 1991, as amended as of July 15, 1993 between
Fidelity School Street Trust whose name was changed from Fidelity Limited Term
Municipals on July 15, 1993 (the "Fund") and United Missouri Bank, N.A. (the
"Custodian").
IN WITNESS WHEREOF, the parties have executed this Amendment as of July 15,
1993.
FIDELITY SCHOOL STREET TRUST
By: /s/Gary L. French
Name: Gary L. French
Title: Treasurer
UNITED MISSOURI BANK, N.A.
By: /s/Duane E. Schemp
Name:Duane E. Schemp
Title: Vice President
Exhibit 8(b)
CUSTODIAN AGREEMENT
Dated as of: July 15, 1993
Between
FIDELITY SCHOOL STREET TRUST
and
THE BANK OF NEW YORK
TABLE OF CONTENTS
ARTICLE
Page
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping 1
2.02 Manner of Holding Securities 1
2.03 Security Purchases 2
2.04 Exchanges of Securities 2
2.05 Sales of Securities 2
2.06 Depositary Receipts 3
2.07 Exercise of Rights; Tender Offers 3
2.08 Stock Dividends, Rights, Etc. 3
2.09 Options 3
2.10 Futures Contracts 4
2.11 Borrowing 4
2.12 Interest Bearing Deposits 4
2.13 Foreign Exchange Transactions 5
2.14 Securities Loans 5
2.15 Collections 5
2.16 Dividends, Distributions and Redemptions 6
2.17 Proceeds from Shares Sold 6
2.18 Proxies, Notices, Etc. 6
2.19 Bills and Other Disbursements 6
2.20 Nondiscretionary Functions 6
2.21 Bank Accounts 7
2.22 Deposit of Fund Assets in Securities Systems 7
2.23 Other Transfers 8
2.24 Establishment of Segregated Account 8
2.25 Custodian's Books and Records . 8
2.26 Opinion of Fund's Independent Certified Public
Accountants 9
2.27 Reports of Independent Certified Public Accountants 9
2.28 Overdraft Facility 9
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 10
3.01 Proper Instructions and Special Instructions 10
3.02 Authorized Persons 10
3.03 Persons Having Access to Assets of the Portfolios 11
3.04 Actions of the Custodian Based on Proper Instructions and
Special Instructions 11
IV. SUBCUSTODIANS 11
4.01 Domestic Subcustodians 11
4.02 Foreign Subcustodians and Interim Subcustodians 11
4.03 Special Subcustodians 12
4.04 Termination of a Subcustodian 13
4.05 Certification Regarding Foreign Subcustodians 13
V. STANDARD OF CARE; INDEMNIFICATION 13
5.01 Standard of Care 13
5.02 Liability of Custodian for Actions of Other Persons 14
5.03 Indemnification 15
5.04 Investment Limitations 15
5.05 Fund's Right to Proceed 16
VI. COMPENSATION 16
VII. TERMINATION 16
7.01 Termination of Agreement in Full 16
7.02 Termination as to One or More Portfolios 17
VIII. DEFINED TERMS 17
IX. MISCELLANEOUS 18
9.01 Execution of Documents, Etc 18
9.02 Representative Capacity; Nonrecourse Obligations 18
9.03 Several Obligations of the Portfolios 18
9.04 Representations and Warranties 18
9.05 Entire Agreement 19
9.06 Waivers and Amendments 19
9.07 Interpretation 19
9.08 Captions 20
9.09 Governing Law 20
9.10 Notices 20
9.11 Assignment 20
9.12 Counterparts 20
9.13 Confidentiality; Survival of Obligations 20
APPENDICES
Appendix "A" - List of Portfolios
Appendix "B" - List of Foreign Subcustodians
and Special Subcustodians
Appendix "C" - Procedures Relating to
Custodian's Security Interest
CUSTODIAN AGREEMENT
AGREEMENT made as of the 15th day of July, 1993 between Fidelity School Street
Trust (the "Fund") and The Bank of New York (the "Custodian").
W I T N E S S E T H
WHEREAS, the Fund may, from time to time organize one or more series of shares,
in addition to the series set forth in Appendix "A" attached hereto, each of
which shall represent an interest in a separate portfolio of cash, securities
and other assets (all such existing and additional series now or hereafter
listed on Appendix "A" being hereinafter referred to individually, as a
"Portfolio," and collectively, as the "Portfolios"); and
WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf of
the Portfolios in accordance with the provisions of the Investment Company Act
of 1940 (the "1940 Act") and the rules and regulations thereunder, under the
terms and conditions set forth in this Agreement, and the Custodian has agreed
so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of the Portfolios, the Fund hereby employs and appoints the Custodian
as a custodian, subject to the terms and provisions of this Agreement. The Fund
shall deliver to the Custodian, or shall cause to be delivered to the Custodian,
cash, securities and other assets owned by the Portfolios from time to time
during the term of this Agreement and shall specify the Portfolio to which such
cash, securities and other assets are to be specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties set
forth in this Article II. Pursuant to and in accordance with Article IV hereof,
the Custodian may appoint one or more Subcustodians (as hereinafter defined) to
exercise the powers and perform the duties of the Custodian set forth in this
Article II and references to the Custodian in this Article II shall include any
Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash,
securities and other assets of the Portfolios delivered to the Custodian and, on
behalf of the Portfolios, the Custodian shall, from time to time, accept
delivery of cash, securities and other assets for safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Portfolios
either:
(i) by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of each
Portfolio in the name of the Custodian, the Portfolio or a nominee of either of
them, unless specifically directed by Proper Instructions to hold such
registered securities in so-called street name; provided that, in any event, all
such securities and other assets shall be held in an account of the Custodian
containing only assets of a Portfolio, or only assets held by Custodian as a
fiduciary or custodian for customers, and provided further, that the records of
the Custodian shall indicate at all times the Portfolio or other customer for
which such securities and other assets are held in such account and the
respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions (as
hereinafter defined), the Custodian shall pay for and receive securities
purchased for the account of a Portfolio, provided that payment shall be made by
Custodian only upon receipt of the securities: (a) by the Custodian; (b) by a
clearing corporation of a national securities exchange of which the Custodian is
a member; or (c) by a Securities System. Notwithstanding the foregoing, upon
receipt of Proper Instructions: (i) in the case of a repurchase agreement, the
Custodian may release funds to a Securities System prior to the receipt of
advice from the Securities System that the securities underlying such repurchase
agreement have been transferred by book-entry into the Account (as hereinafter
defined) maintained with such Securities System by the Custodian, provided that
the Custodian's instructions to the Securities system require that the
Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of time
deposits, call account deposits, currency deposits, and other deposits, foreign
exchange transactions, futures contracts or options, pursuant to Sections 2.09,
2.10, 2.12 and 2.13 hereof, the Custodian may make payment therefor before
receipt of an advice or confirmation evidencing said deposit or entry into such
transaction; (iii) in the case of the purchase of securities, the settlement of
which occurs outside of the United States of America, the Custodian may make
payment therefor and receive delivery of such securities in accordance with
local custom and practice generally accepted by Institutional Clients (as
hereinafter defined) in the country in which the settlement occurs, but in all
events subject to the standard of care set forth in Article V hereof; and (iv)
in the case of the purchase of securities in which, in accordance with standard
industry custom and practice generally accepted by Institutional Clients with
respect to such securities, the receipt of such securities and the payment
therefor take place in different countries, the Custodian may receive delivery
of such securities and make payment therefor in accordance with standard
industry custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of care set
forth in Article V hereof. For purposes of this Agreement, an "Institutional
Client" shall mean a major commercial bank, corporation, insurance company, or
substantially similar institution, which, as a substantial part of its business
operations, purchases or sells securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper Instructions,
the Custodian shall exchange securities held by it for the account of a
Portfolio for other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value, conversion or other
event relating to the securities or the issuer of such securities, and shall
deposit any such securities in accordance with the terms of any reorganization
or protective plan. The Custodian shall, without receiving Proper
Instructions:
surrender securities in temporary form for definitive securities; surrender
securities for transfer into the name of the Custodian, a Portfolio or a nominee
of either of them, as permitted by Section 2.02(b); and surrender securities for
a different number of certificates or instruments representing the same number
of shares or same principal amount of indebtedness, provided that the securities
to be issued will be delivered to the Custodian or a nominee of the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions, the
Custodian shall make delivery of securities which have been sold for the account
of a Portfolio, but only against payment therefor in the form of: (a) cash,
certified check, bank cashier's check, bank credit, or bank wire transfer; (b)
credit to the account of the custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c) credit to the
Account of the Custodian with a Securities System, in accordance with the
provisions of Section 2.22 hereof. Notwithstanding the foregoing: (i) in the
case of the sale of securities, the settlement of which occurs outside of the
United States of America, such securities shall be delivered and paid for in
accordance with local custom and practice generally accepted by Institutional
Clients in the country in which the settlement occurs, but in all events subject
to the standard of care set forth in Article V hereof; (ii) in the case of the
sale of securities in which, in accordance with standard industry custom and
practice generally accepted by Institutional Clients with respect to such
securities, the delivery of such securities and receipt of payment therefor take
place in different countries, the Custodian may deliver such securities and
receive payment therefor in accordance with standard industry custom and
practice for such securities generally accepted by Institutional Clients, but in
all events subject to the standard of care set forth in Article V hereof; and
(iii) in the case of securities held in physical form, such securities shall be
delivered and paid for in accordance with "street delivery custom" to a broker
or its clearing agent, against delivery to the Custodian of a receipt for such
securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or the return of, such securities
by the broker or its clearing agent, and provided further that the Custodian
shall not be responsible for the selection of or the failure or inability to
perform of such broker or its clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions, the
Custodian shall surrender securities to the depositary used for such securities
by an issuer of American Depositary Receipts or International Depositary
Receipts (hereinafter referred to, collectively, as "ADRs"), against a written
receipt therefor adequately describing such securities and written evidence
satisfactory to the Custodian that the depositary has acknowledged receipt of
instructions to issue ADRs with respect to such securities in the name of the
Custodian or a nominee of the Custodian, for delivery to the Custodian at such
place as the Custodian may from time to time designate. Upon receipt of Proper
Instructions, the Custodian shall surrender ADRs to the issuer thereof, against
a written receipt therefor adequately describing the ADRs surrendered and
written evidence satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights or
similar securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale, provided that the new
securities, cash or other assets, if any, acquired as a result of such actions
are to be delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the consideration for such
securities is to be paid or delivered to the Custodian, or the tendered
securities are to be returned to the Custodian. Notwithstanding any provision
of this Agreement to the contrary, the Custodian shall take all necessary
action, unless otherwise directed to the contrary in Proper Instructions, to
comply with the terms of all mandatory or compulsory exchanges, calls, tenders,
redemptions, or similar rights of security ownership, and shall promptly notify
the Fund of such action in writing by facsimile transmission or in such other
manner as the Fund and Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive and
collect all stock dividends, rights and other items of like nature and, upon
receipt of Proper Instructions, take action with respect to the same as directed
in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in accordance
with the provisions of any agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund relating to compliance with the rules
of the Options Clearing Corporation or of any registered national securities
exchange or similar organization(s), the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of an option on a security or securities index by a Portfolio; (b)
deposit and maintain in a segregated account, securities (either physically or
by book-entry in a Securities System), cash or other assets; and (c) pay,
release and/or transfer such securities, cash or other assets in accordance with
notices or other communications evidencing the expiration, termination or
exercise of such options furnished by the Options Clearing Corporation, the
securities or options exchange on which such options are traded, or such other
organization as may be responsible for handling such option transactions. The
Fund and the broker-dealer shall be responsible for the sufficiency of assets
held in any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among the
Fund, on behalf of any Portfolio, the Custodian and any futures commission
merchant (a "Procedural Agreement"), the Custodian shall: (a) receive and
retain confirmations, if any, evidencing the purchase or sale of a futures
contract or an option on a futures contract by a Portfolio; (b) deposit and
maintain in a segregated account, cash, securities and other assets designated
as initial, maintenance or variation "margin" deposits intended to secure the
Portfolio's performance of its obligations under any futures contracts purchased
or sold or any options on futures contracts written by the Portfolio, in
accordance with the provisions of any Procedural Agreement designed to comply
with the rules of the Commodity Futures Trading Commission and/or any commodity
exchange or contract market (such as the Chicago Board of Trade), or any similar
organization(s), regarding such margin deposits; and (c) release assets from
and/or transfer assets into such margin accounts only in accordance with any
such Procedural Agreements. The Fund and such futures commission merchant shall
be responsible for the sufficiency of assets held in the segregated account in
compliance with applicable margin maintenance requirements and the performance
of any futures contract or option on a futures contract in accordance with its
terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the Custodian
shall deliver securities of a Portfolio to lenders or their agents, or otherwise
establish a segregated account as agreed to by the Fund and the Custodian, as
collateral for borrowings effected by the Fund on behalf of a Portfolio,
provided that such borrowed money is payable by the lender (a) to or upon the
Custodian's order, as Custodian for such Portfolio, and (b) concurrently with
delivery of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of a Portfolio,
the Custodian shall purchase such Interest Bearing Deposits in the name of a
Portfolio with such banks or trust companies (including the Custodian, any
Subcustodian or any subsidiary or affiliate of the Custodian) (hereinafter
referred to as "Banking Institutions") and in such amounts as the Fund may
direct pursuant to Proper Instructions. Such Interest Bearing Deposits may be
denominated in U.S. Dollars or other currencies, as the Fund may determine and
direct pursuant to Proper Instructions. The Custodian shall include in its
records with respect to the assets of each Portfolio appropriate notation as to
the amount and currency of each such Interest Bearing Bank Deposit, the
accepting Banking Institution and all other appropriate details, and shall
retain such forms of advice or receipt evidencing such account, if any, as may
be forwarded to the Custodian by the Banking Institution. The responsibilities
of the Custodian to the Fund for Interest Bearing Deposits accepted on the
Custodian's books in the United States shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
accepted on the Custodian's books, (a) the Custodian shall be responsible for
the collection of income as set forth in Section 2.15 and the transmission of
cash and instructions to and from such accounts; and (b) the Custodian shall
have no duty with respect to the selection of the Banking Institution or, so
long as the Custodian acts in accordance with Proper Instructions, for the
failure of such Banking Institution to pay upon demand. Upon receipt of Proper
Instructions, the Custodian shall take such reasonable actions as the Fund deems
necessary or appropriate to cause each such Interest Bearing Deposit Account to
be insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other than as Principal. Upon receipt of
Proper Instructions, the Custodian shall settle foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of a Portfolio with such currency brokers or
Banking Institutions as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall be responsible for the transmission of cash
and instructions to and from the currency broker or Banking Institution with
which the contract or option is made, the safekeeping of all certificates and
other documents and agreements evidencing or relating to such foreign exchange
transactions and the maintenance of proper records as set forth in Section
2.25.
The Custodian shall have no duty with respect to the selection of the currency
brokers or Banking Institutions with which the Fund deals or, so long as the
Custodian acts in accordance with Proper Instructions, for the failure of such
brokers or Banking Institutions to comply with the terms of any contract or
option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal. However, if
the Custodian has made available to the Fund its services as a principal in
foreign exchange transactions, upon receipt of Proper Instructions, the
Custodian shall enter into foreign exchange contracts or options to purchase and
sell foreign currencies for spot and future delivery on behalf of and for the
account of a Portfolio with the Custodian as principal. The Custodian shall be
responsible for the selection of the currency brokers or Banking Institutions
and the failure of such currency brokers or Banking Institutions to comply with
the terms of any contract or option.
(c) Payments. Notwithstanding anything to the contrary contained herein, upon
receipt of Proper Instructions the Custodian may, in connection with a foreign
exchange contract, make free outgoing payments of cash in the form of U.S.
Dollars or foreign currency prior to receipt of confirmation of such foreign
exchange contract or confirmation that the countervalue currency completing such
contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by a Portfolio, deliver
securities of such Portfolio to the borrower thereof prior to receipt of the
collateral, if any, for such borrowing; provided that, in cases of loans of
securities secured by cash collateral, the Custodian's instructions to the
Securities System shall require that the Securities System deliver the
securities of the Portfolio to the borrower thereof only upon receipt of the
collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to the Fund with respect
to portfolio securities and other assets of each Portfolio; (b) promptly credit
to the account of each Portfolio all income and other payments relating to
portfolio securities and other assets held by the Custodian hereunder upon
Custodian's receipt of such income or payments or as otherwise agreed in writing
by the Custodian and the Fund; (c) promptly endorse and deliver any instruments
required to effect such collections; and (d) promptly execute ownership and
other certificates and affidavits for all federal, state and foreign tax
purposes in connection with receipt of income or other payments with respect to
portfolio securities and other assets of each Portfolio, or in connection with
the transfer of such securities or other assets; provided, however, that with
respect to portfolio securities registered in so-called street name, the
Custodian shall use its best efforts to collect amounts due and payable to the
Fund. The Custodian shall promptly notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing if any amount payable with respect to portfolio securities or other
assets of the Portfolios is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and payable
with respect to portfolio securities or other assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian shall
promptly release funds or securities: (a) upon receipt of Proper Instructions,
to one or more Distribution Accounts designated by the Fund in such Proper
Instructions; or (b) upon receipt of Special Instructions, as otherwise directed
by the Fund, for the purpose of the payment of dividends or other distributions
to shareholders of the Portfolios, and payment to shareholders who have
requested repurchase or redemption of their shares of the Portfolio(s)
(collectively, the "Shares"). For purposes of this Agreement, a "Distribution
Account" shall mean an account established at a Banking Institution designated
by the Fund in Special Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive funds
representing cash payments received for Shares issued or sold from time to time
by the Fund, and shall promptly credit such funds to the account(s) of the
applicable Portfolio(s). The Custodian shall promptly notify the Fund of
Custodian's receipt of cash in payment for Shares issued by the Fund by
facsimile transmission or in such other manner as the Fund and Custodian may
agree in writing. Upon receipt of Proper Instructions, the Custodian shall:
(a) deliver all federal funds received by the Custodian in payment for Shares in
payment for such investments as may be set forth in such Proper Instructions and
at a time agreed upon between the Custodian and the Fund; and (b) make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the Custodian, in the amount of checks received in payment for
Shares which are deposited to the accounts of the Portfolios.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to the Fund,
in the most expeditious manner practicable, all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or relating to
securities owned by the Portfolios that are received by the Custodian, any
Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any Subcustodian or nominee shall vote
upon any such securities, or execute any proxy to vote thereon, or give any
consent or take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Portfolios.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to all
nondiscretionary details in connection with the sale, exchange, substitution,
purchase, transfer or other dealings with securities or other assets of the
Portfolios held by the Custodian, except as otherwise directed from time to time
pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall open
and operate a bank account or accounts (hereinafter referred to collectively, as
"Bank Accounts") on the books of the Custodian or any Subcustodian provided that
such account(s) shall be in the name of the Custodian or a nominee of the
Custodian, for the account of a Portfolio, and shall be subject only to the
draft or order of the Custodian; provided however, that such Bank Accounts in
countries other than the United States may be held in an account of the
Custodian containing only assets held by the Custodian as a fiduciary or
custodian for customers, and provided further, that the records of the Custodian
shall indicate at all times the Portfolio or other customer for which such
securities and other assets are held in such account and the respective
interests therein. Such Bank Accounts may be denominated in either U.S. Dollars
or other currencies. The responsibilities of the Custodian to the Fund for
deposits accepted on the Custodian's books in the United States shall be that of
a U.S. bank for a similar deposit. The responsibilities of the Custodian to the
Fund for deposits accepted on any Subcustodian's books shall be governed by the
provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of a Portfolio, in the name of the Custodian or
a nominee of the Custodian, at a Banking Institution other than the Custodian or
any Subcustodian, provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of a Portfolio, and
shall be subject only to the draft or order of the Custodian; provided however,
that such Bank Accounts may be held in an account of the Custodian containing
only assets held by the Custodian as a fiduciary or custodian for customers, and
provided further, that the records of the Custodian shall indicate at all times
the Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein. Such Bank Accounts
may be denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian
shall take such reasonable actions as the Fund deems necessary or appropriate to
cause each deposit account established by the Custodian pursuant to this Section
2.21 to be insured to the maximum extent possible by all applicable deposit
insurers including, without limitation, the Federal Deposit Insurance
Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Portfolios in: (a) The
Depository Trust Company; (b) the Participants Trust Company; (c) any book-entry
system as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR
306.115, (ii) Subpart B of Treasury Circular Public Debt Series No. 27-76, 31
CFR 350.2, or (iii) the book-entry regulations of federal agencies substantially
in the form of 31 CFR 306.115; or (d) any other domestic clearing agency
registered with the Securities and Exchange Commission ("SEC") under Section 17A
of the Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository or
clearing agent for the securities or other assets of investment companies) which
acts as a securities depository and the use of which the Fund has previously
approved by Special Instructions (as hereinafter defined) (each of the foregoing
being referred to in this Agreement as a "Securities System"). Use of a
Securities System shall be in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder in a
Securities System, provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which Account shall not
contain any assets of the Custodian other than assets held as a fiduciary,
custodian, or otherwise for customers.
(B) The books and records of the Custodian shall at all times identify those
securities belonging to each Portfolio which are maintained in a Securities
System.
(C) The Custodian shall pay for securities purchased for the account of a
Portfolio only upon (w) receipt of advice from the Securities System that such
securities have been transferred to the Account of the Custodian, and (x) the
making of an entry on the records of the Custodian to reflect such payment and
transfer for the account of such Portfolio. The Custodian shall transfer
securities sold for the account of a Portfolio only upon (y) receipt of advice
from the Securities System that payment for such securities has been transferred
to the Account of the Custodian, and (z) the making of an entry on the records
of the Custodian to reflect such transfer and payment for the account of such
Portfolio. Copies of all advices from the Securities System relating to
transfers of securities for the account of a Portfolio shall identify such
Portfolio, shall be maintained for the Portfolio by the Custodian. The
Custodian shall deliver to the Fund on the next succeeding business day daily
transaction reports which shall include each day's transactions in the
Securities System for the account of each Portfolio. Such transaction reports
shall be delivered to the Fund or any agent designated by the Fund pursuant to
Proper Instructions, by computer or in such other manner as the Fund and
Custodian may agree in writing.
(D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
(E) Upon receipt of Special Instructions, the Custodian shall terminate the
use of any Securities System (except the federal book-entry system) on behalf of
any Portfolio as promptly as practicable and shall take all actions reasonably
practicable to safeguard the securities of the Portfolios maintained with such
Securities System.
Section 2.23. Other Transfers. Upon receipt of Special Instructions, the
Custodian shall make such other dispositions of securities, funds or other
property of the Portfolios in a manner or for purposes other than as expressly
set forth in this Agreement, provided that the Special Instructions relating to
such disposition shall include a statement of the purpose for which the delivery
is to be made, the amount of funds and/or securities to be delivered, and the
name of the person or persons to whom delivery is to be made, and shall
otherwise comply with the provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of Proper
Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of a Portfolio, into which
account or accounts may be transferred cash and/or securities or other assets of
such Portfolio, including securities maintained by the Custodian in a Securities
System pursuant to Section 2.22 hereof, said account or accounts to be
maintained: (a) for the purposes set forth in Sections 2.09, 2.10 and 2.11
hereof; (b) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent release
or releases of the SEC relating to the maintenance of segregated accounts by
registered investment companies; or (c) for such other purposes as set forth,
from time to time, in Special Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide any
assistance reasonably requested by the Fund in the preparation of reports to
Fund shareholders and others, audits of accounts, and other ministerial matters
of like nature. The Custodian shall maintain complete and accurate records with
respect to securities and other assets held for the accounts of the Portfolios
as required by the rules and regulations of the SEC applicable to investment
companies registered under the 1940 Act, including: (a) journals or other
records of original entry containing a detailed and itemized daily record of all
receipts and deliveries of securities (including certificate and transaction
identification numbers, if any), and all receipts and disbursements of cash; (b)
ledgers or other records reflecting (i) securities in transfer, (ii) securities
in physical possession, (iii) securities borrowed, loaned or collateralizing
obligations of the Portfolios, (iv) monies borrowed and monies loaned (together
with a record of the collateral therefor and substitutions of such collateral),
and (v) dividends and interest received; and (c) cancelled checks and bank
records related thereto. The Custodian shall keep such other books and records
of the Fund as the Fund shall reasonably request. All such books and records
maintained by the Custodian shall be maintained in a form acceptable to the Fund
and in compliance with the rules and regulations of the SEC, including, but not
limited to, books and records required to be maintained by Section 31(a) of the
1940 Act and the rules and regulations from time to time adopted thereunder.
All books and records maintained by the Custodian pursuant to this Agreement
shall at all times be the property of the Fund and shall be available during
normal business hours for inspection and use by the Fund and its agents,
including, without limitation, its independent certified public accountants.
Notwithstanding the preceding sentence, the Funds shall not take any actions or
cause the Custodian to take any actions which would cause, either directly or
indirectly, the Custodian to violate any applicable laws, regulations or orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants. The
Custodian shall take all reasonable action as the Fund may request to obtain
from year to year favorable opinions from the Fund's independent certified
public accountants with respect to the Custodian's activities hereunder in
connection with the preparation of the Fund's Form N-1A and the Fund's Form
N-SAR or other periodic reports to the SEC and with respect to any other
requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At the
request of the Fund, the Custodian shall deliver to the Fund a written report
prepared by the Custodian's independent certified public accountants with
respect to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system, internal
accounting control and procedures for safeguarding cash, securities and other
assets, including cash, securities and other assets deposited and/or maintained
in a Securities System or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund and as may reasonably be obtained by the Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is directed
by Proper Instructions to make any payment or transfer of funds on behalf of a
Portfolio for which there would be, at the close of business on the date of such
payment or transfer, insufficient funds held by the Custodian on behalf of such
Portfolio, the Custodian may, in its discretion, provide an overdraft (an
"Overdraft") to the Fund on behalf of such Portfolio, in an amount sufficient to
allow the completion of such payment. Any Overdraft provided hereunder: (a)
shall be payable on the next Business Day, unless otherwise agreed by the Fund
and the Custodian; and (b) shall accrue interest from the date of the Overdraft
to the date of payment in full by the Fund on behalf of the applicable Portfolio
at a rate agreed upon in writing, from time to time, by the Custodian and the
Fund. The Custodian and the Fund acknowledge that the purpose of such
Overdrafts is to temporarily finance the purchase or sale of securities for
prompt delivery in accordance with the terms hereof, or to meet emergency
expenses not reasonably foreseeable by the Fund. The Custodian shall promptly
notify the Fund in writing (an "Overdraft Notice") of any Overdraft by facsimile
transmission or in such other manner as the Fund and the Custodian may agree in
writing. At the request of the Custodian, the Fund, on behalf of a Portfolio,
shall pledge, assign and grant to the Custodian a security interest in certain
specified securities of the Portfolio, as security for Overdrafts provided to
such Portfolio, under the terms and conditions set forth in Appendix "C"
attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions" shall
mean: (i) a tested telex, a written (including, without limitation, facsimile
transmission) request, direction, instruction or certification signed or
initialed by or on behalf of the Fund by one or more Authorized Persons (as
hereinafter defined); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) by or on behalf of the Fund by one or more Authorized
Persons; provided, however, that communications of the types described in
clauses (ii) and (iii) above purporting to be given by an Authorized Person
shall be considered Proper Instructions only if the Custodian reasonably
believes such communications to have been given by an Authorized Person with
respect to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Fund by tested telex or in writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Custodian in reliance upon such
oral instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all telephonic or
other oral instructions communicated to the Custodian. Proper Instructions may
relate to specific transactions or to types or classes of transactions, and may
be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Fund or any other person designated
by the Treasurer of the Fund in writing, which countersignature or confirmation
shall be (i)included on the same instrument containing the Proper Instructions
or on a separate instrument relating thereto, and (ii) delivered by hand, by
facsimile transmission, or in such other manner as the Fund and the Custodian
agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian at the
address and/or telephone, telecopy or telex number agreed upon from time to time
by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of this
Agreement and from time to time thereafter, as appropriate, the Fund shall
deliver to the Custodian, duly certified as appropriate by a Treasurer or
Assistant Treasurer of the Fund, a certificate setting forth: (a) the names,
titles, signatures and scope of authority of all persons authorized to give
Proper Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund (collectively, the "Authorized
Persons" and individually, an "Authorized Person"); and (b) the names, titles
and signatures of those persons authorized to issue Special Instructions. Such
certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until delivery to the Custodian of a similar certificate to the
contrary. Upon delivery of a certificate which deletes the name(s) of a person
previously authorized to give Proper Instructions or to issue Special
Instructions, such persons shall no longer be considered an Authorized Person or
authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of the Fund shall have
physical access to the assets of any Portfolio held by the Custodian nor shall
the Custodian deliver any assets of a Portfolio for delivery to an account of
such person; provided, however, that nothing in this Section 3.03 shall prohibit
(a) any Authorized Person from giving Proper Instructions, or any person
authorized to issue Special Instructions from issuing Special Instructions, so
long as such action does not result in delivery of or access to assets of any
Portfolio prohibited by this Section 3.03; or (b) the Fund's independent
certified public accountants from examining or reviewing the assets of the
Portfolios held by the Custodian. The Fund shall deliver to the Custodian a
written certificate identifying such Authorized Persons, Trustees, officers,
employees and agents of the Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and Special
Instructions. So long as and to the extent that the Custodian acts in
accordance with (a) Proper Instructions or Special Instructions, as the case may
be, and (b) the terms of this Agreement, the Custodian shall not be responsible
for the title, validity or genuineness of any property, or evidence of title
thereof, received by it or delivered by it pursuant to this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to act on
behalf of a Portfolio. (For purposes of this Agreement, all duly appointed
Domestic Subcustodians, Foreign Subcustodians, Interim Subcustodians, and
Special Subcustodians are hereinafter referred to collectively, as
"Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and from
time to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act
meeting the requirements of a custodian under Section 17(f) of the 1940 Act and
the rules and regulations thereunder, to act on behalf of one or more Portfolios
as a subcustodian for purposes of holding cash, securities and other assets of
such Portfolios and performing other functions of the Custodian within the
United States (a "Domestic Subcustodian"); provided, that, the Custodian shall
notify the Fund in writing of the identity and qualifications of any proposed
Domestic Subcustodian at least thirty (30) days prior to appointment of such
Domestic Subcustodian, and the Fund may, in its sole discretion, by written
notice to the Custodian executed by an Authorized Person disapprove of the
appointment of such Domestic Subcustodian. If following notice by the Custodian
to the Fund regarding appointment of a Domestic Subcustodian and the expiration
of thirty (30) days after the date of such notice, the Fund shall have failed to
notify the Custodian of its disapproval thereof, the Custodian may, in its
discretion, appoint such proposed Domestic Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time to
time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the 1940
Act and the rules and regulations thereunder or by order of the Securities and
Exchange Commission exempted therefrom, or (ii) any bank as defined in Section
2(a)(5) of the 1940 Act meeting the requirements of a custodian under Section
17(f) of the 1940 Act and the rules and regulations thereunder to act on behalf
of one or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other functions of
the Custodian in countries other than the United States of America (a "Foreign
Subcustodian"); provided, that, prior to the appointment of any Foreign
Subcustodian, the Custodian shall have obtained written confirmation of the
approval of the Board of Trustees or other governing body or entity of the Fund
on behalf of the applicable Portfolio(s) (which approval may be withheld in the
sole discretion of such Board of Trustees or other governing body or entity)
with respect to (i) the identity and qualifications of any proposed Foreign
Subcustodian, (ii) the country or countries in which, and the securities
depositories or clearing agencies, if any, through which, any proposed Foreign
Subcustodian is authorized to hold securities and other assets of the
Portfolio(s), and (iii) the form and terms of the subcustodian agreement to be
entered into between such proposed Foreign Subcustodian and the Custodian. Each
such duly approved Foreign Subcustodian and the countries where and the
securities depositories and clearing agencies through which they may hold
securities and other assets of the Funds shall be listed on Appendix "B"
attached hereto, as it may be amended, from time to time, in accordance with the
provisions of Section 9.05(c) hereof. The Fund shall be responsible for
informing the Custodian sufficiently in advance of a proposed investment which
is to be held in a country in which no Foreign Subcustodian is authorized to
act, in order that there shall be sufficient time for the Custodian to effect
the appropriate arrangements with a proposed foreign subcustodian, including
obtaining approval as provided in this Section 4.02(a). The Custodian shall not
amend any subcustodian agreement entered into with a Foreign Subcustodian, or
agree to change or permit any changes thereunder, or waive any rights under such
agreement, which materially affect the Fund's rights or the Foreign
Subcustodian's obligations or duties to the Fund under such agreement, except
upon prior approval pursuant to Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the event that a
Portfolio shall invest in a security or other asset to be held in a country in
which no Foreign Subcustodian is authorized to act, the Custodian shall promptly
notify the Fund in writing by facsimile transmission or in such other manner as
the Fund and Custodian shall agree in writing of the unavailability of an
approved Foreign Subcustodian in such country; and the Custodian shall, upon
receipt of Special Instructions, appoint any Person designated by the Fund in
such Special Instructions to hold such security or other asset. (Any Person
appointed as a subcustodian pursuant to this Section 4.02(b) is hereinafter
referred to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special Instructions,
the Custodian shall, on behalf of the Fund for one or more Portfolios, appoint
one or more banks, trust companies or other entities designated in such Special
Instructions to act as a subcustodian for purposes of: (i) effecting
third-party repurchase transactions with banks, brokers, dealers or other
entities through the use of a common custodian or subcustodian; (ii)
establishing a joint trading account for the Portfolios and other registered
open-end management investment companies for which Fidelity Management &
Research Company serves as investment adviser, through which the Portfolios and
such other investment companies shall collectively participate in certain
repurchase transactions; (iii) providing depository and clearing agency services
with respect to certain variable rate demand note securities; and (iv) effecting
any other transactions designated by the Fund in Special Instructions. (Each
such designated subcustodian is hereinafter referred to as a "Special
Subcustodian.") Each such duly appointed Special Subcustodian shall be listed
on Appendix "B" attached hereto, as it may be amended from time to time in
accordance with the provisions of Section 9.05(c) hereof. In connection with
the appointment of any Special Subcustodian, the Custodian shall enter into a
subcustodian agreement with the Special Subcustodian in form and substance
approved by the Fund, provided that such agreement shall in all events comply
with the provisions of the 1940 Act and the rules and regulations thereunder and
the terms and provisions of this Agreement. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or agree to
change or permit any changes thereunder, or waive any rights under such
agreement, except upon prior approval pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i) cause
each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use its best
efforts to cause each Interim Subcustodian and Special Subcustodian to, perform
all of its obligations in accordance with the terms and conditions of the
subcustodian agreement between the Custodian and such Subcustodian. In the
event that the Custodian is unable to cause such Subcustodian to fully perform
its obligations thereunder, the Custodian shall forthwith, upon the receipt of
Special Instructions, terminate such Subcustodian with respect to the Fund and,
if necessary or desirable, appoint a replacement Subcustodian in accordance with
the provisions of Section 4.01 or Section 4.02, as the case may be. In addition
to the foregoing, the Custodian (A) may, at any time in its discretion, upon
written notification to the Fund, terminate any Domestic Subcustodian, Foreign
Subcustodian or Interim Subcustodian, and (B) shall, upon receipt of Special
Instructions, terminate any Subcustodian with respect to the Fund, in accordance
with the termination provisions under the applicable subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon request of
the Fund, the Custodian shall deliver to the Fund a certificate stating: (i)
the identity of each Foreign Subcustodian then acting on behalf of the
Custodian; (ii) the countries in which and the securities depositories and
clearing agents through which each such Foreign Subcustodian is then holding
cash, securities and other assets of any Portfolio; and (iii) such other
information as may be requested by the Fund to ensure compliance with Rule
17(f)-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable care and
diligence in carrying out all of its duties and obligations under this
Agreement, and shall be liable to the Fund for all loss, damage and expense
suffered or incurred by the Fund or the Portfolios resulting from the failure of
the Custodian to exercise such reasonable care and diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the Custodian
incur liability hereunder if the Custodian or any Subcustodian or Securities
System, or any subcustodian, securities depository or securities system utilized
by any such Subcustodian, or any nominee of the Custodian or any Subcustodian
(individually, a "Person") is prevented, forbidden or delayed from performing,
or omits to perform, any act or thing which this Agreement provides shall be
performed or omitted to be performed, by reason of: (i) any provision of any
present or future law or regulation or order of the United States of America, or
any state thereof, or of any foreign country, or political subdivision thereof
or of any court of competent jurisdiction; or (ii) any act of God or war or
other similar circumstance beyond the control of the Custodian, unless, in each
case, such delay or nonperformance is caused by (A) the negligence, misfeasance
or misconduct of the applicable Person, or (B) a malfunction or failure of
equipment operated or utilized by the applicable Person other than a malfunction
or failure beyond such Person's control and which could not reasonably be
anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which causes or
may cause any loss, damage or expense to the Fund or any Portfolio, (i) the
Custodian shall, (ii) the Custodian shall cause any applicable Domestic
Subcustodian or Foreign Subcustodian to, and (iii) the Custodian shall use its
best efforts to cause any applicable Interim Subcustodian or Special
Subcustodian to, use all commercially reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effects of such event and to avoid
continuing harm to the Fund and the Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act upon
advice of counsel on all matters. The Custodian shall be without liability for
any action reasonably taken or omitted in good faith pursuant to the advice of
(i) counsel for the Fund, or (ii) at the expense of the Custodian, such other
counsel as the Fund and the Custodian may agree upon; provided, however, with
respect to the performance of any action or omission of any action upon such
advice, the Custodian shall be required to conform to the standard of care set
forth in Section 5.01(a).
(e) Expenses of the Fund. In addition to the liability of the Custodian under
this Article V, the Custodian shall be liable to the Fund for all reasonable
costs and expenses incurred by the Fund in connection with any claim by the Fund
against the Custodian arising from the obligations of the Custodian hereunder
including, without limitation, all reasonable attorneys' fees and expenses
incurred by the Fund in asserting any such claim, and all expenses incurred by
the Fund in connection with any investigations, lawsuits or proceedings relating
to such claim; provided, that the Fund has recovered from the Custodian for such
claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian's duties
hereunder by reason of the Custodian's reliance upon records that were
maintained for the Fund by entities other than the Custodian prior to the
Custodian's employment hereunder.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall be
liable for the actions or omissions of any Domestic Subcustodian or any Foreign
Subcustodian to the same extent as if such action or omission were performed by
the Custodian itself. In the event of any loss, damage or expense suffered or
incurred by the Fund caused by or resulting from the actions or omissions of any
Domestic Subcustodian or Foreign Subcustodian for which the Custodian would
otherwise be liable, the Custodian shall promptly reimburse the Fund in the
amount of any such loss, damage or expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to the Fund for any loss, damage
or expense suffered or incurred by the Fund or any Portfolio resulting from the
actions or omissions of an Interim Subcustodian unless such loss, damage or
expense is caused by, or results from, the negligence, misfeasance or misconduct
of the Custodian; provided, however, in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights as
it may have against such Interim Subcustodian to protect the interests of the
Fund and the Portfolios.
(c) Special Subcustodians. Notwithstanding the provisions of Section 5.01 to
the contrary and except as otherwise provided in any subcustodian agreement to
which the Custodian, the Fund and any Special Subcustodian are parties, the
Custodian shall not be liable to the Fund for any loss, damage or expense
suffered or incurred by the Fund or any Portfolio resulting from the actions or
omissions of a Special Subcustodian, unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights as
it may have against any Special Subcustodian to protect the interests of the
Fund and the Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to the
contrary, the Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by the Fund or any Portfolio resulting from the use
by the Custodian of a Securities System, unless such loss, damage or expense is
caused by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such rights as
it may have against the Securities System to protect the interests of the Fund
and the Portfolios.
(e) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian for
all reasonable out-of-pocket expenses incurred by the Custodian in connection
with the fulfillment of its obligations under this Section 5.02; provided,
however, that such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in this
Agreement, the Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all loss, damage and expense (including reasonable attorneys'
fees) suffered or incurred by the Custodian or its nominee caused by or arising
from actions taken by the Custodian in the performance of its duties and
obligations under this Agreement; provided, however, that such indemnity shall
not apply to loss, damage and expense occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian or its nominee. In
addition, the Fund agrees to indemnify any Person against any liability incurred
by reason of taxes assessed to such Person, or other loss, damage or expenses
incurred by such Person, resulting from the fact that securities and other
property of the Portfolios are registered in the name of such Person; provided,
however, that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any Person.
(b) Notice of Litigation, Right to Prosecute, Etc. The Fund shall not be
liable for indemnification under this Section 5.03 unless a Person shall have
promptly notified the Fund in writing of the commencement of any litigation or
proceeding brought against such Person in respect of which indemnity may be
sought under this Section 5.03. With respect to claims in such litigation or
proceedings for which indemnity by the Fund may be sought and subject to
applicable law and the ruling of any court of competent jurisdiction, the Fund
shall be entitled to participate in any such litigation or proceeding and, after
written notice from the Fund to any Person, the Fund may assume the defense of
such litigation or proceeding with counsel of its choice at its own expense in
respect of that portion of the litigation for which the Fund may be subject to
an indemnification obligation; provided, however, a Person shall be entitled to
participate in (but not control) at its own cost and expense, the defense of any
such litigation or proceeding if the Fund has not acknowledged in writing its
obligation to indemnify the Person with respect to such litigation or
proceeding. If the Fund is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, such Person shall reasonably prosecute such litigation
or proceeding. A Person shall not consent to the entry of any judgment or enter
into any settlement in any such litigation or proceeding without providing the
Fund with adequate notice of any such settlement or judgment, and without the
Fund's prior written consent. All Persons shall submit written evidence to the
Fund with respect to any cost or expense for which they are seeking
indemnification in such form and detail as the Fund may reasonably request.
Section 5.04. Investment Limitations. If the Custodian has otherwise complied
with the terms and conditions of this Agreement in performing its duties
generally, and more particularly in connection with the purchase, sale or
exchange of securities made by or for a Portfolio, the Custodian shall not be
liable to the Fund and the Fund agrees to indemnify the Custodian and its
nominees, for any loss, damage or expense suffered or incurred by the Custodian
and its nominees arising out of any violation of any investment or other
limitation to which the Fund is subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon reasonable
notice to the Custodian, the right to enforce, to the extent permitted by any
applicable agreement and applicable law, the Custodian's rights against any
Subcustodian, Securities System, or other Person for loss, damage or expense
caused the Fund by such Subcustodian, Securities System, or other Person, and
shall be entitled to enforce the rights of the Custodian with respect to any
claim against such Subcustodian, Securities System or other Person, which the
Custodian may have as a consequence of any such loss, damage or expense, if and
to the extent that the Fund has not been made whole for any such loss or
damage.
If the Custodian makes the Fund whole for any such loss or damage, the Custodian
shall retain the ability to enforce its rights directly against such
Subcustodian, Securities System or other Person. Upon the Fund's election to
enforce any rights of the Custodian under this Section 5.05, the Fund shall
reasonably prosecute all actions and proceedings directly relating to the rights
of the Custodian in respect of the loss, damage or expense incurred by the Fund;
provided that, so long as the Fund has acknowledged in writing its obligation to
indemnify the Custodian under Section 5.03 hereof with respect to such claim,
the Fund shall retain the right to settle, compromise and/or terminate any
action or proceeding in respect of the loss, damage or expense incurred by the
Fund without the Custodian's consent and provided further, that if the Fund has
not made an acknowledgement of its obligation to indemnify, the Fund shall not
settle, compromise or terminate any such action or proceeding without the
written consent of the Custodian, which consent shall not be unreasonably
withheld or delayed. The Custodian agrees to cooperate with the Fund and take
all actions reasonably requested by the Fund in connection with the Fund's
enforcement of any rights of the Custodian. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under this Section 5.05;
provided, however, that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or misconduct of the
Custodian.
ARTICLE VI
COMPENSATION
On behalf of each Portfolio, the Fund shall compensate the Custodian in an
amount, and at such times, as may be agreed upon in writing, from time to time,
by the Custodian and the Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement in Full. This Agreement shall continue
in full force and effect until the first to occur of: (a) termination by the
Custodian by an instrument in writing delivered or mailed to the Fund, such
termination to take effect not sooner than ninety (90) days after the date of
such delivery; (b) termination by the Fund by an instrument in writing delivered
or mailed to the Custodian, such termination to take effect not sooner than
thirty (30) days after the date of such delivery; or (c) termination by the Fund
by written notice delivered to the Custodian, based upon the Fund's
determination that there is a reasonable basis to conclude that the Custodian is
insolvent or that the financial condition of the Custodian is deteriorating in
any material respect, in which case termination shall take effect upon the
Custodian's receipt of such notice or at such later time as the Fund shall
designate. In the event of termination pursuant to this Section 7.01, the Fund
shall make payment of all accrued fees and unreimbursed expenses within a
reasonable time following termination and delivery of a statement to the Fund
setting forth such fees and expenses. The Fund shall identify in any notice of
termination a successor custodian to which the cash, securities and other assets
of the Portfolios shall, upon termination of this Agreement, be delivered. In
the event that no written notice designating a successor custodian shall have
been delivered to the Custodian on or before the date when termination of this
Agreement shall become effective, the Custodian may deliver to a bank or trust
company doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities and other assets
held by the Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Agreement.
In the event that securities and other assets remain in the possession of the
Custodian after the date of termination hereof owing to failure of the Fund to
appoint a successor custodian, the Custodian shall be entitled to compensation
for its services in accordance with the fee schedule most recently in effect,
for such period as the Custodian retains possession of such securities and other
assets, and the provisions of this Agreement relating to the duties and
obligations of the Custodian and the Fund shall remain in full force and
effect.
In the event of the appointment of a successor custodian, it is agreed that the
cash, securities and other property owned by the Fund and held by the Custodian,
any Subcustodian or nominee shall be delivered to the successor custodian; and
the Custodian agrees to cooperate with the Fund in the execution of documents
and performance of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
Section 7.02. Termination as to One or More Portfolios. This Agreement may be
terminated as to one or more Portfolios (but less than all of the Portfolios) by
delivery of an amended Appendix "A" deleting such Portfolios pursuant to Section
9.05(b) hereof, in which case termination as to such deleted Portfolios shall
take effect thirty (30) days after the date of such delivery. The execution and
delivery of an amended Appendix "A" which deletes one or more Portfolios shall
constitute a termination of this Agreement only with respect to such deleted
Portfolio(s), shall be governed by the preceding provisions of Section 7.01 as
to the identification of a successor custodian and the delivery of cash,
securities and other assets of the Portfolio(s) so deleted, and shall not affect
the obligations of the Custodian and the Fund hereunder with respect to the
other Portfolios set forth in Appendix "A," as amended from time to time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by the Fund. Upon request, the Fund shall execute and deliver to
the Custodian such proxies, powers of attorney or other instruments as may be
reasonable and necessary or desirable in connection with the performance by the
Custodian or any Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement, provided that the exercise
by the Custodian or any Subcustodian of any such rights shall in all events be
in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the Custodian
shall execute and deliver to the Fund or to such other parties as the Fund may
designate in such Proper Instructions, all such documents, instruments or
agreements as may be reasonable and necessary or desirable in order to
effectuate any of the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY OF THE
DECLARATION OF TRUST OF THE FUND IS ON FILE WITH THE SECRETARY OF THE STATE OF
THE FUND'S FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT
EXECUTED ON BEHALF OF THE TRUSTEES OF THE FUND AS INDIVIDUALS, AND THE
OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE TRUSTEES,
OFFICERS, SHAREHOLDERS OR PARTNERS OF THE FUND INDIVIDUALLY, BUT ARE BINDING
ONLY UPON THE ASSETS AND PROPERTY OF THE PORTFOLIOS. THE CUSTODIAN AGREES THAT
NO SHAREHOLDER, TRUSTEE, OFFICER OR PARTNER OF THE FUND MAY BE HELD PERSONALLY
LIABLE OR RESPONSIBLE FOR ANY OBLIGATIONS OF THE FUND ARISING OUT OF THIS
AGREEMENT.
Section 9.03. Several Obligations of the Portfolios. WITH RESPECT TO ANY
OBLIGATIONS OF THE FUND ON BEHALF OF THE PORTFOLIOS ARISING OUT OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS ARISING UNDER SECTIONS
2.28, 5.03, 5.05 and ARTICLE VI HEREOF, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR
SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF THE
PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH THE FUND HAD SEPARATELY
CONTRACTED WITH THE CUSTODIAN BY SEPARATE WRITTEN INSTRUMENT WITH RESPECT TO
EACH PORTFOLIO.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby represents
and warrants that each of the following shall be true, correct and complete at
all times during the term of this Agreement: (i) the Fund is duly organized
under the laws of its jurisdiction of organization and is registered as an
open-end management investment company under the 1940 Act; and (ii) the
execution, delivery and performance by the Fund of this Agreement are (w) within
its power, (x) have been duly authorized by all necessary action, and (y) will
not (A) contribute to or result in a breach of or default under or conflict with
any existing law, order, regulation or ruling of any governmental or regulatory
agency or authority, or (B) violate any provision of the Fund's corporate
charter, Declaration of Trust or other organizational document, or bylaws, or
any amendment thereof or any provision of its most recent Prospectus or
Statement of Additional Information.
(b) Representations and Warranties of the Custodian. The Custodian hereby
represents and warrants that each of the following shall be true, correct and
complete at all times during the term of this Agreement: (i) the Custodian is
duly organized under the laws of its jurisdiction of organization and qualifies
to act as a custodian to open-end management investment companies under the
provisions of the 1940 Act; and (ii) the execution, delivery and performance by
the Custodian of this Agreement are (w) within its power, (x) have been duly
authorized by all necessary action, and (y) will not (A) contribute to or result
in a breach of or default under or conflict with any existing law, order,
regulation or ruling of any governmental or regulatory agency or authority, or
(B) violate any provision of the Custodian's corporate charter, or other
organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and accordingly, supersedes as of the effective date of this
Agreement any custodian agreement heretofore in effect between the Fund and the
Custodian.
Section 9.06. Waivers and Amendments. No provision of this Agreement may be
waived, amended or terminated except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or termination is
sought; provided, however: (a) Appendix "A" listing the Portfolios for which
the Custodian serves as custodian may be amended from time to time to add one or
more Portfolios, by the Fund's execution and delivery to the Custodian of an
amended Appendix "A", and the execution of such amended Appendix by the
Custodian, in which case such amendment shall take effect immediately upon
execution by the Custodian; (b) Appendix "A" may be amended from time to time to
delete one or more Portfolios (but less than all of the Portfolios), by the
Fund's execution and delivery to the Custodian of an amended Appendix A", in
which case such amendment shall take effect thirty (30) days after such
delivery, unless otherwise agreed by the Custodian and the Fund in writing; (c)
Appendix "B" listing Foreign Subcustodians and Special Subcustodians approved by
the Fund may be amended from time to time to add or delete one or more Foreign
Subcustodians or Special Subcustodians by the Fund's execution and delivery to
the Custodian of an amended Appendix "B", in which case such amendment shall
take effect immediately upon execution by the Custodian; and (d) Appendix "C"
setting forth the procedures relating to the Custodian's security interest may
be amended only by an instrument in writing executed by the Fund and the
Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. No interpretative or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the parties
hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may arise in
connection with the custodianship of foreign securities pursuant to an agreement
with a Foreign Subcustodian that is governed by the laws of the State of New
York, the provisions of this Agreement shall be construed in accordance with and
governed by the laws of the State of New York, provided that in all other
instances this Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts, in each case without giving
effect to principles of conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or Special
Instructions, notices and other writings contemplated by this Agreement shall be
delivered by hand or by facsimile transmission (provided that in the case of
delivery by facsimile transmission, notice shall also be mailed postage prepaid
to the parties at the following addresses:
(a) If to the Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Mr. Gary L. French
Telephone: (617) 570-6556
Telefax: (617) 742-1231
(b) If to the Custodian:
c/o The Bank of New York
110 Washington Street, 15th Floor
New York, New York 10286
Attn: Mr. Joseph F. Keenan
Telephone: (212) 693-5453
or to such other address as either party may have designated in writing to the
other party hereto.
Section 9.11. Assignment. This Agreement shall be binding on and shall inure
to the benefit of the Fund and the Custodian and their respective successors and
assigns, provided that, subject to the provisions of Section 7.01 hereof,
neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
Section 9.12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties.
Section 9.13. Confidentiality; Survival of Obligations. The parties hereto
agree that each shall treat confidentially the terms and conditions of this
Agreement and all information provided by each party to the other regarding its
business and operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for the purpose of
rendering services pursuant to this Agreement and, except as may be required in
carrying out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by any bank examiner of the
Custodian or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation. The
provisions of this Section 9.13 and Sections 9.01, 9.02, 9.03, 9.09, Section
2.28, Section 3.04, Section 7.01, Article V and Article VI hereof and any other
rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIDELITY SCHOOL STREET TRUST THE BANK OF NEW YORK
By: /s/ Gary L. French By: /s/ Stephen Grunston
Name: Gary L. French Name: Stephen Grunston
Title: Treasurer Title: Vice President
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity School Street Trust and The Bank of New York
Dated as of July 15, 1993
The following is a list of Portfolios for which the Custodian shall serve under
a Custodian Agreement dated as of July 15, 1993 (the "Agreement"):
Portfolio Name Effective as of:
Spartan Bond Strategist July 15, 1993
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be
executed in its name and behalf as of the day and year first set forth opposite
each such Portfolio.
FIDELITY SCHOOL STREET TRUST THE BANK OF NEW YORK
By: /s/ Gary L. French By: /s/ Stephen E. Grunston
Name: Gary L. French Name: Stephen E. Grunston
Title: Treasurer Title: Vice President
APPENDIX "B"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity School Street Trust and The Bank of New York
Dated as of September 16, 1994
The following is a list of Foreign Subcustodians and Special Subcustodians
under the Custodian Agreement dated as of July 15, 1993:
A. SPECIAL SUBCUSTODIANS:
SUBCUSTODIAN PURPOSE
Morgan Guaranty Trust Company of New York FICASH
B. FOREIGN SUBCUSTODIANS:
COUNTRY SECONDARY SUBCUSTODIAN DEPOSITORY
Argentina The Bank of Boston, Buenos Aires Caja de Valores, S.A.
Australia Australia and New Zealand Austraclear
Banking Group Ltd. RITS
Austria Giro Credit Bank AG der OeKB-WSB (Kontrollbank)
Osterreichischen Sparkassen
Belgium Banque Bruxelles Lambert CIK
Brazil The Bank of Boston, Sao Paulo BOVESPA
BVRS
Canada Royal Bank of Canada, Toronto CDS
Royal Trust Co.
Chile Banco de Chile None
The Bank of Boston, Santiago
China - Shanghai Standard Chartered Bank, Shanghai Shanghai Securities Central
Clearing & Registration Corp.
(SSCCRC)
China - Shenzhen Standard Chartered Bank, Shenzhen Shenzhen Central Registrars
Co., Ltd. (SCRC)
Denmark Den Danske Bank, Copenhagen VP
Finland Union Bank of Finland None
France Banque Paribas, Paris SICOVAM
COUNTRY SECONDARY SUBCUSTODIAN DEPOSITORY
Germany Dresdner Bank, A.G. Deutscher Kassenverein
Greece Alpha Credit Bank, A.E. None
Hong Kong Hongkong & Shanghai Banking Central Clearing &
Corporation Ltd., Hong Kong Settlement System
Hungary Citibank Budapest Rt. (9/16/94) None
India Hongkong & Shanghai Banking None
Corporation Ltd., Bombay
Indonesia Hongkong & Shanghai Banking None
Corporation Ltd., Jakarta
Ireland Allied Irish Banks, plc, Dublin None
Italy Citibank N.A., Milan Monte Titoli S.p.A.
Japan Yasuda Trust and Banking Co. Ltd. Japan Securities
Depository Center
Malaysia Hong Kong Bank Malaysia Berhad The Malaysian Central
Depository Sdn Bhd (MCD)
Mexico Banco Nacional de Mexico, S.A. Indeval
Netherlands ABN-AMRO Bank, N.V., NECIGEF/KAS
Amsterdam
New Zealand Australia and New Zealand Banking Austraclear Limited
Group Ltd.
Norway Den norske Bank, Oslo VPS
Pakistan Standard Chartered Bank, Karachi None
Philippines Hongkong & Shanghai Banking None
Corporation Ltd., Manila
Portugal Banco Comercial Portugues, S.A. Central de Valores Mobiliaros
Singapore United Overseas Bank CDP
South Africa Standard Bank of South Africa None
Limited, Johannesburg
South Korea Bank of Seoul Korean Securities
Depository Corporation
COUNTRY SECONDARY SUBCUSTODIAN DEPOSITORY
Spain Banco Bilbao Vizcaya Servico de Compensacion
y Liquidacion de Valores (SCLV)
Sri Lanka Standard Chartered Bank, Colombo Central Depository System, Ltd.
Sweden Skandinaviska Enskilda Banken, VPC
Stockholm
Switzerland Union Bank of Switzerland, Zurich SEGA
Taiwan The Hongkong & Shanghai Banking Taiwan Securities
Corporation, Ltd. Central Depository
Thailand The Siam Commercial Bank Shares Depository Center
Public Company Ltd.
Transnational Cedel
Turkey Citibank, N.A., Istanbul None
United Kingdom Bank of New York, London None
Uruguay The Bank of Boston, Montevideo None
Venezuela Citibank, N.A., Caracas None
Fidelity School Street Trust
By: /s/ Gary L. French
Name: Gary L. French
Title: Treasurer
APPENDIX "C" TO THE
CUSTODIAN AGREEMENT BETWEEN
fidelity school street trust and the bank of new york
Dated as of july 15, 1993
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian Agreement) of any
Portfolio, the Fund, on behalf of such Portfolio, shall pledge, assign and grant
to the Custodian a security interest in Collateral (as hereinafter defined),
under the terms, circumstances and conditions set forth in this Appendix "C".
Section 1. Defined Terms. As used in this Appendix "C" the following terms
shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or a day
on which the Custodian is closed for business.
(b) "Collateral" shall mean, with respect to any Portfolio, the securities
having a fair market value (as determined in accordance with the procedures set
forth in the prospectus for the Portfolio) equal to the aggregate of all
Overdraft Obligations of such Portfolio: (i) identified in any Pledge
Certificate executed on behalf of such Portfolio; or (ii) designated by the
Custodian for such Portfolio pursuant to Section 3 of this Appendix C. Such
securities shall consist of marketable securities held by the Custodian on
behalf of such Portfolio or, if no such marketable securities are held by the
Custodian on behalf of such Portfolio, such other securities designated by the
Fund in the applicable Pledge Certificate or by the Custodian pursuant to
Section 3 of this Appendix C.
(c) "Overdraft Obligations" shall mean, with respect to any Portfolio, the
amount of any outstanding Overdraft(s) provided by the Custodian to such
Portfolio together with all accrued interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form attached
to this Appendix "C" as Schedule 1 executed by a duly authorized officer of the
Fund and delivered by the Fund to the Custodian by facsimile transmission or in
such other manner as the Fund and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form attached
to this Appendix "C" as Schedule 2 executed by a duly authorized officer of the
Custodian and delivered by the Custodian to the Fund by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly authorized
officer of the party delivering the notice and delivered by facsimile
transmission or in such other manner as the Fund and the Custodian shall agree
in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft Obligations
of any Portfolio are not satisfied within one (1) Business Day after receipt by
the Fund of a Written Notice requesting security for such Overdraft Obligation
and stating the amount of such Overdraft Obligation, the Fund, on behalf of such
Portfolio, shall pledge, assign and grant to the Custodian a first priority
security interest, by delivering to the Custodian, a Pledge Certificate executed
by the Fund on behalf of such Portfolio describing the applicable Collateral.
Such Written Notice may, in the discretion of the Custodian, be included within
or accompany the Overdraft Notice relating to the applicable Overdraft
Obligations.
Section 3. Failure to Pledge Collateral. In the event that the Fund shall
fail: (a) to pay, on behalf of the applicable Portfolio, the Overdraft
Obligation described in such Written Notice; (b) to deliver to the Custodian a
Pledge Certificate pursuant to Section 2; or (c) to identify substitute
securities pursuant to Section 6 upon the sale or maturity of any securities
identified as Collateral, the Custodian may, by Written Notice to the Fund
specify Collateral which shall secure the applicable Overdraft Obligation. The
Fund, on behalf of any applicable Portfolio, hereby pledges, assigns and grants
to the Custodian a first priority security interest in any and all Collateral
specified in such Written Notice; provided that such pledge, assignment and
grant of security shall be deemed to be effective only upon receipt by the Fund
of such Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the Custodian
shall notify the Fund by Written Notice that the fair market value of the
Collateral securing any Overdraft Obligation is less than the amount of such
Overdraft Obligation, the Fund, on behalf of the applicable Portfolio, shall
deliver to the Custodian, within one (1) Business Day following the Fund's
receipt of such Written Notice, an additional Pledge Certificate describing
additional Collateral. If the Fund shall fail to deliver such additional Pledge
Certificate, the Custodian may specify Collateral which shall secure the
unsecured amount of the applicable Overdraft Obligation in accordance with
Section 3 of this Appendix C.
Section 5. Release of Collateral. Upon payment by the Fund of any Overdraft
Obligation secured by the pledge of Collateral, the Custodian shall promptly
deliver to the Fund a Release Certificate pursuant to which the Custodian shall
release Collateral from the lien under the applicable Pledge Certificate or
Written Notice pursuant to Section 3 having a fair market value equal to the
amount paid by the Fund on account of such Overdraft Obligation. In addition,
if at any time the Fund shall notify the Custodian by Written Notice that the
Fund desires that specified Collateral be released and: (a) that the fair market
value of the Collateral securing any Overdraft Obligation shall exceed the
amount of such Overdraft Obligation; or (b) that the Fund has delivered a Pledge
Certificate substituting Collateral for such Overdraft Obligation, the Custodian
shall deliver to the Fund, within one (1) Business Day following the Custodian's
receipt of such Written Notice, a Release Certificate relating to the Collateral
specified in such Written Notice.
Section 6. Substitution of Collateral. The Fund may substitute securities for
any securities identified as Collateral by delivery to the Custodian of a Pledge
Certificate executed by the Fund on behalf of the applicable Portfolio,
indicating the securities pledged as Collateral.
Section 7. Security for Individual Portfolios' Overdraft Obligations. The
pledge of Collateral by the Fund on behalf of any individual Portfolio shall
secure only the Overdraft Obligations of such Portfolio. In no event shall the
pledge of Collateral by one Portfolio be deemed or considered to be security for
the Overdraft Obligations of any other Portfolio.
Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any
Overdraft Obligation of a Portfolio within thirty (30) days after receipt by the
Fund of a Written Notice demanding security therefore, and (b) one (1) Business
Day's prior Written Notice to the Fund, the Custodian may elect to enforce its
security interest in the Collateral securing such Overdraft Obligation, by
taking title to (at the then prevailing fair market value), or selling in a
commercially reasonable manner, so much of the Collateral as shall be required
to pay such Overdraft Obligation in full. Notwithstanding the provisions of any
applicable law, including, without limitation, the Uniform Commercial Code, the
remedy set forth in the preceding sentence shall be the only right or remedy to
which the Custodian is entitled with respect to the pledge and security interest
granted pursuant to any Pledge Certificate or Section 3, without limiting the
foregoing, the Custodian hereby waives and relinquishes all contractual and
common law rights of set off to which it may now or hereafter be or become
entitled with respect to any obligations of the Fund to the Custodian arising
under this Appendix C to the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to be executed
in its name and behalf on the day and year first above written.
FIDELITY SCHOOL STREET TRUST THE BANK OF NEW YORK
By: /s/ Gary L. French By: /s/ Stephen E. Grunston
Name: Gary L. French Name: Stephen E. Grunston
Title: Treasurer Title: Vice President
SCHEDULE 1
TO
APPENDIX "C"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian Agreement dated
as of July 15, 1993 (the "Agreement"), between Fidelity School Street Trust (the
"Fund") and The Bank of New York (the "Custodian"). Capitalized terms used
herein without definition shall have the respective meanings ascribed to them in
the Agreement. Pursuant to [Section 2 or Section 4] of Appendix "C" attached to
the Agreement, the Fund, on behalf of [ ] (the "Portfolio"), hereby
pledges, assigns and grants to the Custodian a first priority security interest
in the securities listed on Exhibit "A" attached to this Pledge Certificate
(collectively, the "Pledged Securities"). Upon delivery of this Pledge
Certificate, the Pledged Securities shall constitute Collateral, and shall
secure all Overdraft Obligations of the Portfolio described in that certain
Written Notice dated , 19 , delivered by the Custodian to the Fund.
The pledge, assignment and grant of security in the Pledged Securities hereunder
shall be subject in all respect to the terms and conditions of the Agreement,
including, without limitation, Sections 7 and 8 of Appendix "C" attached
thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be executed
in its name, on behalf of the Portfolio this day of 19 .
FIDELITY SCHOOL STREET TRUST
By: /s/ Gary L. French
Name: Gary L. French
Title: Treasurer
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
SCHEDULE 2
TO
APPENDIX "C"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian Agreement dated
as of July 15, 1993 (the "Agreement"), between Fidelity School Street Trust (the
"Fund") and The Bank of New York (the "Custodian"). Capitalized terms used
herein without definition shall have the respective meanings ascribed to them in
the Agreement. Pursuant to Section 5 of Appendix "C" attached to the Agreement,
the Custodian hereby releases the securities listed on Exhibit "A" attached to
this Release Certificate from the lien under the [Pledge Certificate dated
__________, 19__ or the Written Notice delivered pursuant to Section 3 of
Appendix "C" dated __________, 19__ ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to be
executed in its name and on its behalf this day of 19 .
THE BANK OF NEW YORK
By: _____________________
Name: _____________________
Title: _____________________
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Prospectuses and
Statements of Additional Information in Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A of Fidelity School Street Trust: Fidelity
Limited Term Municipals and Spartan Bond Strategist, of our reports dated
February 3, 1995 on the financial statements and financial highlights included
in the December 31, 1994 Annual Reports to Shareholders of Fidelity Limited Term
Municipals and Spartan Bond Strategist.
We also consent to the incorporation by reference in this Post-Effective
Amendment, of our report dated December 30, 1994 on the financial statements and
financial highlights included in the Annual Report to Shareholders of Fidelity
Court Street Trust: Fidelity High Yield Tax-Free Portfolio and our report dated
January 27, 1995 on the financial statements and financial highlights included
in the Annual Report to Shareholders of Fidelity Municipal Trust: Fidelity
Aggressive Tax-Free Portfolio.
We further consent to the references to our Firm under the headings "Financial
Highlights" in the Prospectuses and "Auditor" in the Statements of Additional
Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 10, 1995 /s/COOPERS & LYBRAND L.L.P.
Exhibit 15(a)
DISTRIBUTION AND SERVICE PLAN
of Fidelity Limited Term Municipals
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule 12b-1
under the Investment Company Act of 1940 (the "Act") of the single existing
series of shares (the "Portfolio") of Fidelity Limited Term Municipals (the
"Fund").
2. The Fund has entered into a General Distribution Agreement with respect to
the Portfolio with Fidelity Distributors Corporation (the "Distributor"), a
wholly-owned subsidiary of Fidelity Management & Research Company (the
"Adviser"), under which the Distributor uses all reasonable efforts, consistent
with its other business, to secure purchasers for the Portfolio's shares of
beneficial interest ("shares"). Under the agreement, the Distributor pays the
expenses of printing and distributing any prospectuses, reports and other
literature used by the Distributor, advertising, and other promotional
activities in connection with the offering of shares of the Portfolio for sale
to the public. It is understood that the Adviser may reimburse the Distributor
for these expenses from any source available to it, including management fees
paid to it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other third
parties who engage in the sale of shares or who render shareholder support
services, including but not limited to providing office space, equipment and
telephone facilities, answering routine inquiries regarding the Portfolio,
processing shareholder transactions and providing such other shareholder
services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan to
the Adviser, Distributor or any other party, it being recognized that the
Portfolio presently pays, and will continue to pay, a management fee to the
Adviser. To the extent that any payments made by the Portfolio to the Adviser,
including payment of management fees, should be deemed to be indirect financing
of any activity primarily intended to result in the sale of shares of the
Portfolio within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the month
following approval by a vote of at least a "majority of the outstanding voting
securities of the Portfolio" (as defined in the Act), the plan having been
approved by a vote of a majority of the Trustees of the Fund, including a
majority of Trustees who are not "interested persons" of the Fund (as defined in
the Act) and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements related to this Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in effect
from the date specified above until July 31, 1987, and from year to year
thereafter, provided, however, that such continuance is subject to approval
annually by a vote of a majority of the Trustees of the Fund, including a
majority of the Independent Trustees, cast in person at a meeting called for the
purpose of voting on this Plan. This Plan may be amended at any time by the
Board of Trustees, provided that (a) any amendment to authorize direct payments
by the Portfolio to finance any activity primarily intended to result in the
sale of shares of the Portfolio, to increase materially the amount spent by the
Portfolio for distribution, or any amendment of the Management Contract to
increase the amount to be paid by the Portfolio thereunder shall be effective
only upon approval by a vote of a majority of the outstanding voting securities
of the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence in
this paragraph.
7. This Plan may be terminated at any time, without the payment of any penalty,
by vote of a majority of the Independent Trustees or by a vote of a majority of
the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser and/or
Distributor to provide the Fund, for review by the Fund's Board of Trustees, and
the Trustees shall review, at least quarterly, a written report of the amounts
expended in connection with financing any activity primarily intended to result
in the sale of shares of the Portfolio (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific level
of expenses for activities primarily intended to result in the sale of shares of
the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth in the
Fund's Declaration of Trust, any obligations assumed by the Portfolio pursuant
to this Plan and any agreements related to this Plan shall be limited in all
cases to the Portfolio and its assets, and shall not constitute obligations of
any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
Exhibit 15(b)
DISTRIBUTION AND SERVICE PLAN
of Fidelity School Street Trust:
Spartan Bond Strategist
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule 12b-1
under the Investment Company Act of 1940 (the "Act") of Spartan Bond Strategist
(the "Portfolio"), a series of shares of Fidelity School Street Trust (the
"Fund").
2. The Fund has entered into a General Distribution Agreement with respect to
the Portfolio with Fidelity Distributors Corporation (the "Distributor"), a
wholly-owned subsidiary of Fidelity Management & Research Company (the
"Adviser"), under which the Distributor uses all reasonable efforts, consistent
with its other business, to secure purchasers for the Portfolio's shares of
beneficial interest ("shares"). Under the agreement, the Distributor pays the
expenses of printing and distributing any prospectuses, reports and other
literature used by the Distributor, advertising, and other promotional
activities in connection with the offering of shares of the Portfolio for sale
to the public. It is understood that the Adviser may reimburse the Distributor
for these expenses from any source available to it, including management fees
paid to it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other third
parties who engage in the sale of shares or who render shareholder support
services, including but not limited to providing office space, equipment and
telephone facilities, answering routine inquiries regarding the Portfolio,
processing shareholder transactions and providing such other shareholder
services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan to
the Adviser, Distributor or any other party, it being recognized that the
Portfolio presently pays, and will continue to pay, a management fee to the
Adviser. To the extent that any payments made by the Portfolio to the Adviser,
including payment of management fees, should be deemed to be indirect financing
of any activity primarily intended to result in the sale of shares of the
Portfolio within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the month
following approval by a vote of at least a "majority of the outstanding voting
securities of the Portfolio" (as defined in the Act), the plan having been
approved by a vote of a majority of the Trustees of the Fund, including a
majority of Trustees who are not "interested persons" of the Fund (as defined in
the Act) and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements related to this Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in effect
from the date specified above until May 31, 1994, and from year to year
thereafter, provided, however, that such continuance is subject to approval
annually by a vote of a majority of the Trustees of the Fund, including a
majority of the Independent Trustees, cast in person at a meeting called for the
purpose of voting on this Plan. This Plan may be amended at any time by the
Board of Trustees, provided that (a) any amendment to authorize direct payments
by the Portfolio to finance any activity primarily intended to result in the
sale of shares of the Portfolio, to increase materially the amount spent by the
Portfolio for distribution, or any amendment of the Management Contract to
increase the amount to be paid by the Portfolio thereunder shall be effective
only upon approval by a vote of a majority of the outstanding voting securities
of the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence in
this paragraph.
7. This Plan may be terminated at any time, without the payment of any penalty,
by vote of a majority of the Independent Trustees or by a vote of a majority of
the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser and/or
Distributor to provide the Fund, for review by the Fund's Board of Trustees, and
the Trustees shall review, at least quarterly, a written report of the amounts
expended in connection with financing any activity primarily intended to result
in the sale of shares of the Portfolio (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific level
of expenses for activities primarily intended to result in the sale of shares of
the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth in the
Fund's Declaration of Trust, any obligations assumed by the Portfolio pursuant
to this Plan and any agreements related to this Plan shall be limited in all
cases to the Portfolio and its assets, and shall not constitute obligations of
any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not be
affected thereby.
Exhibit 16(a)
SCHEDULE FOR COMPUTATION OF PERFORMANCE CALCULATIONS
CUMULATIVE TOTAL RETURNS and their income and capital components are described
in the fund's Statement of Additional Information, and are based on the net
asset values, dividends, capital gain distributions, and reinvestment prices of
the historical period covered.
AVERAGE ANNUAL RETURNS are calculated according to the following formula:
Average Annual Return = [(1 + Cumulative Return)1/n] - 1
[where n = the number of years in the base period]
FIDELITY LIMITED TERM MUNICIPALS
Name: Ltd. Term (036)
Notes:
Load:
Redemption:
FiscYear: 31-Dec
Reinvest Cum Total
Pay-date X-Date NAV MonthEnd Shares Value
1.00 Dec-84 1226.994 10000
1.00 Jan-85 1226.994 10380
1.00 Feb-85 1226.994 10135
1.00 Mar-85 1226.994 10172
1.00 Apr-85 1226.994 10393
1.00 May-85 1226.994 10577
1.00 Jun-85 1226.994 10626
1.00 Jul-85 1226.994 10577
1.00 Aug-85 1226.994 10479
1.00 Sep-85 1226.994 10331
1.00 Oct-85 1226.994 10626
1.00 Nov-85 1226.994 10822
1.00 Dec-85 1226.994 10896
1.00 Jan-86 1226.994 11264
1.00 Feb-86 1226.994 11448
1.00 Mar-86 1226.994 11472
1.00 Apr-86 1226.994 11411
1.00 May-86 1226.994 11202
1.00 Jun-86 1226.994 11276
1.00 Jul-86 1226.994 11252
1.00 Aug-86 1226.994 11644
1.00 Sep-86 1226.994 11595
1.00 Oct-86 1226.994 11816
1.00 Nov-86 1226.994 11877
1.00 Dec-86 1226.994 11755
1.00 Jan-87 1226.994 11975
1.00 Feb-87 1226.994 12061
1.00 Mar-87 1226.994 11939
1.00 Apr-87 1226.994 11227
1.00 May-87 1226.994 11141
1.00 Jun-87 1226.994 11325
1.00 Jul-87 1226.994 11399
1.00 Aug-87 1226.994 11374
1.00 Sep-87 1226.994 10871
1.00 Oct-87 1226.994 10871
1.00 Nov-87 1226.994 11067
1.00 Dec-87 1226.994 11166
1.00 Jan-88 1226.994 11546
1.00 Feb-88 1226.994 11534
1.00 Mar-88 1226.994 11276
1.00 Apr-88 1226.994 11288
1.00 May-88 1226.994 11264
1.00 Jun-88 1226.994 11301
1.00 Jul-88 1226.994 11288
1.00 Aug-88 1226.994 11239
1.00 Sep-88 1226.994 11313
1.00 Oct-88 1226.994 11399
1.00 Nov-88 1226.994 11276
1.00 Dec-88 1226.994 11325
1.00 Jan-89 1226.994 11387
1.00 Feb-89 1226.994 11239
1.00 Mar-89 1226.994 11129
1.00 Apr-89 1226.994 11264
1.00 May-89 1226.994 11387
1.00 Jun-89 1226.994 11436
1.00 Jul-89 1226.994 11485
1.00 Aug-89 1226.994 11362
1.00 Sep-89 1226.994 11288
1.00 Oct-89 1226.994 11325
1.00 Nov-89 1226.994 11399
1.00 Dec-89 1226.994 11423
1.00 Jan-90 1226.994 11325
1.00 Feb-90 1226.994 11350
1.00 Mar-90 1226.994 11325
1.00 Apr-90 1226.994 11166
1.00 May-90 1226.994 11276
1.00 Jun-90 1226.994 11301
1.00 Jul-90 1226.994 11374
1.00 Aug-90 1226.994 11288
1.00 Sep-90 1226.994 11301
1.00 Oct-90 1226.994 11350
1.00 Nov-90 1226.994 11436
14-Dec 14-Dec 9.28 Dec-90 1226.994 11374
1.00 Jan-91 1226.994 11436
1.00 Feb-91 1226.994 11485
1.00 Mar-91 1226.994 11472
1.00 Apr-91 1226.994 11534
1.00 May-91 1226.994 11558
1.00 Jun-91 1226.994 11497
1.00 Jul-91 1226.994 11558
1.00 Aug-91 1226.994 11607
1.00 Sep-91 1226.994 11693
1.00 Oct-91 1226.994 11742
1.00 Nov-91 1226.994 11693
03-Jan 20-Dec 9.48 Dec-91 1226.994 11681
1.00 Jan-92 1226.994 11681
1.00 Feb-92 1226.994 11669
1.00 Mar-92 1226.994 11583
1.00 Apr-92 1226.994 11620
1.00 May-92 1226.994 11656
1.00 Jun-92 1226.994 11730
1.00 Jul-92 1226.994 12012
1.00 Aug-92 1226.994 11865
1.00 Sep-92 1226.994 11865
1.00 Oct-92 1226.994 11644
1.00 Nov-92 1226.994 11828
04-Jan 18-Dec 9.56 Dec-92 1226.994 11779
1.00 Jan-93 1226.994 11865
08-Feb 05-Feb 9.70 Feb-93 1226.994 12221
1.00 Mar-93 1226.994 12049
1.00 Apr-93 1226.994 12110
1.00 May-93 1226.994 12135
1.00 Jun-93 1226.994 12245
1.00 Jul-93 1226.994 12221
1.00 Aug-93 1226.994 12417
1.00 Sep-93 1226.994 12503
1.00 Oct-93 1226.994 12466
1.00 Nov-93 1226.994 12331
03-Jan 17-Dec 9.94 Dec-93 1226.994 12258
1.00 Jan-94 1226.994 12344
07-Feb 04-Feb 10.00 Feb-94 1226.994 11988
1.00 Mar-94 1226.994 11448
1.00 Apr-94 1226.994 11460
1.00 May-94 1226.994 11509
1.00 Jun-94 1226.994 11399
1.00 Jul-94 1226.994 11558
1.00 Aug-94 1226.994 11546
1.00 Sep-94 1226.994 11350
1.00 Oct-94 1226.994 11141
1.00 Nov-94 1226.994 10871
1.00 Dec-94 1226.994 11031
Value of Value of
Rep Reinvst Reinvst Total
DIV CGLONG CGSHORT NAV Div Cap GainsValue
8.15
0.053080 8.46 65 0 10445
0.052748 8.26 129 0 10264
0.052700 8.29 195 0 10366
0.051525 8.47 263 0 10656
0.052797 8.62 334 0 10911
0.053253 8.66 403 0 11029
0.052905 8.62 469 0 11046
0.052763 8.54 532 0 11011
0.053392 8.42 594 0 10925
0.052896 8.66 679 0 11305
0.051539 8.82 759 0 11581
0.054638 8.88 836 0 11732
0.055088 9.18 937 0 12201
0.052732 9.33 1022 0 12470
0.052126 9.35 1094 0 12566
0.051544 9.30 1157 0 12569
0.052430 9.13 1207 0 12410
0.052376 9.19 1286 0 12562
0.051460 9.17 1354 0 12605
0.051647 9.49 1472 0 13116
0.050793 9.45 1536 0 13131
0.049103 9.63 1634 0 13450
0.047619 9.68 1709 0 13586
0.048406 9.58 1759 0 13513
0.048906 9.76 1861 0 13836
0.047954 9.83 1942 0 14004
0.047376 9.73 1990 0 13929
0.049487 9.15 1942 0 13169
0.048762 9.08 1997 0 13139
0.047675 9.23 2099 0 13425
0.048049 9.29 2183 0 13582
0.048380 9.27 2249 0 13623
0.049340 8.86 2222 0 13093
0.049666 8.86 2295 0 13167
0.048167 9.02 2409 0 13476
0.048508 9.10 2502 0 13668
0.048807 9.41 2661 0 14207
0.049255 9.40 2732 0 14266
0.049013 9.19 2746 0 14022
0.049394 9.20 2824 0 14112
0.049747 9.18 2894 0 14158
0.049649 9.21 2980 0 14281
0.050118 9.20 3055 0 14343
0.050428 9.16 3120 0 14359
0.050514 9.22 3220 0 14533
0.051546 9.29 3325 0 14724
0.050621 9.19 3370 0 14646
0.051009 9.23 3466 0 14791
0.051187 9.28 3567 0 14953
0.051717 9.16 3604 0 14843
0.052153 9.07 3653 0 14782
0.051647 9.18 3781 0 15045
0.052121 9.28 3908 0 15295
0.051136 9.32 4009 0 15445
0.051211 9.36 4111 0 15596
0.051568 9.26 4153 0 15515
0.053880 9.20 4217 0 15505
0.050089 9.23 4315 0 15640
0.051004 9.29 4429 0 15828
0.050677 9.31 4525 0 15948
0.048811 9.23 4570 0 15895
0.049352 9.25 4665 0 16014
0.052532 9.23 4746 0 16071
0.050145 9.10 4766 0 15932
0.050468 9.19 4902 0 16178
0.050340 9.21 5001 0 16301
0.050551 9.27 5123 0 16497
0.052027 9.20 5177 0 16465
0.052302 9.21 5276 0 16577
0.053433 9.25 5395 0 16745
0.052984 9.32 5532 0 16967
0.050262 0.05 9.27 5594 91 17059
0.050438 9.32 5717 91 17244
0.050417 9.36 5835 92 17411
0.051706 9.35 5925 92 17489
0.050502 9.40 6051 92 17677
0.051100 9.42 6160 92 17811
0.052455 9.37 6227 92 17815
0.051589 9.42 6358 92 18009
0.050613 9.46 6482 93 18182
0.049214 9.53 6624 93 18411
0.049015 9.57 6747 94 18583
0.046711 9.53 6809 93 18596
0.049153 0.12 0.03 9.52 6899 387 18968
0.052384 9.52 7004 387 19072
0.044808 9.51 7086 387 19142
0.050355 9.44 7135 384 19102
0.049407 9.47 7258 385 19263
0.050484 9.50 7384 386 19427
0.047517 9.56 7528 389 19647
0.047963 9.79 7807 398 20218
0.047317 9.67 7809 393 20068
0.045956 9.67 7905 393 20163
0.046904 9.49 7855 386 19886
0.044227 9.64 8072 392 20293
0.045705 0.07 0.03 9.60 8136 602 20517
0.044505 9.67 8290 606 20762
0.038708 0.01 0.01 9.96 8622 669 21512
0.043139 9.82 8594 659 21302
0.043168 9.87 8732 663 21505
0.043349 9.89 8844 664 21643
0.042250 9.98 9017 670 21932
0.044235 9.96 9096 669 21985
0.043513 10.12 9338 679 22434
0.042475 10.19 9497 684 22684
0.044367 10.16 9568 682 22716
0.042829 10.05 9560 675 22566
0.043957 0.03 0.19 9.99 9603 1167 23028
0.043672 10.06 9771 1175 23290
0.038772 0.01 0.01 9.77 9580 1187 22754
0.043963 9.33 9251 1133 21832
0.042535 9.34 9360 1134 21955
0.043240 9.38 9502 1139 22150
0.041477 9.29 9509 1128 22036
0.043225 9.42 9744 1144 22447
0.043507 9.41 9838 1143 22526
0.041713 9.25 9770 1123 22243
0.043474 9.08 9695 1103 21939
0.042230 8.86 9562 1076 21509
0.043849 8.99 9809 1092 21932
DividendsCap GainsCost of
Received Received Reinvst
in Cash in Cash Distrib
65 0 65
130 0 130
195 0 196
258 0 260
323 0 327
388 0 394
453 0 461
518 0 529
583 0 598
648 0 666
711 0 734
778 0 805
846 0 878
910 0 948
974 0 1018
1038 0 1087
1102 0 1158
1166 0 1229
1229 0 1300
1293 0 1371
1355 0 1441
1415 0 1509
1474 0 1576
1533 0 1644
1593 0 1713
1652 0 1781
1710 0 1848
1771 0 1919
1831 0 1989
1889 0 2058
1948 0 2128
2008 0 2199
2068 0 2271
2129 0 2345
2188 0 2416
2248 0 2489
2308 0 2562
2368 0 2636
2428 0 2711
2489 0 2786
2550 0 2862
2611 0 2939
2672 0 3017
2734 0 3095
2796 0 3174
2859 0 3256
2921 0 3336
2984 0 3417
3047 0 3499
3110 0 3583
3174 0 3667
3238 0 3751
3302 0 3837
3364 0 3921
3427 0 4006
3490 0 4092
3557 0 4182
3618 0 4266
3681 0 4353
3743 0 4439
3803 0 4523
3863 0 4608
3928 0 4699
3989 0 4786
4051 0 4874
4113 0 4963
4175 0 5052
4239 0 5145
4303 0 5239
4368 0 5335
4433 0 5431
4495 61 5613
4557 61 5706
4619 61 5799
4682 61 5896
4744 61 5990
4807 61 6086
4871 61 6185
4935 61 6283
4997 61 6380
5057 61 6475
5117 61 6569
5175 61 6660
5235 245 7049
5299 245 7153
5354 245 7243
5416 245 7344
5477 245 7444
5539 245 7547
5597 245 7644
5656 245 7743
5714 245 7840
5770 245 7936
5828 245 8034
5882 245 8126
5938 368 8433
5993 368 8528
6040 393 8654
6093 393 8747
6146 393 8841
6199 393 8935
6251 393 9028
6305 393 9125
6359 393 9221
6411 393 9315
6465 393 9414
6518 393 9510
6572 663 10102
6625 663 10203
6673 687 10339
6727 687 10442
6779 687 10541
6832 687 10643
6883 687 10741
6936 687 10843
6989 687 10947
7041 687 11047
7094 687 11151
7146 687 11253
7200 687 11360
Exhibit 16(b)
SCHEDULE FOR COMPUTATION OF ADJUSTED NAVS
Adjusted NAVs are derived by dividing the fund's actual NAV by a "factor" that
adjusts the NAV for any reinvestment of dividends and capital gains, if any,
that occurred during the period. The factor typically starts at "1" beginning at
the end of the period and, going backward, increases each time a distribution is
paid. (The end of the period adjusted NAV should equal the fund's actual NAV,
barring any month-end distributions.)
ADJUSTED NET ASSET VALUE:
Following Day Dividend + Following Day Capital Gains
Current Day Factor = <UNDEF>---------------------------------------------- +
1<UNDEF> (Following Day Factor)
Following Day NAV
Where:
Following Day Factor = 1.0 until the day preceding the first distribution.
Current Day NAV
Adjusted NAV = ---------------
Current Day Factor
Exhibit 16(d)
SCHEDULE FOR THE COMPUTATION OF MOVING AVERAGES
Spartan Bond Strategist
The 13-week and 39-week moving averages are long-term or weekly moving averages.
As such, they are based upon the closing adjusted NAV (presented here) on the
last business day of each week for the past 13 and 39 weeks through the last
business day of the week closest to the fund's fiscal year end.
Adjusted Net Asset Value:
Following Day Dividend + Following Day Capital Gains
Current Day Factor = <UNDEF>---------------------------------------------- +
1<UNDEF> (Following Day Factor)
Following Day NAV
Where:
Following Day Factor = 1.0 until the day preceding the first distribution.
Current Day NAV
Adjusted NAV = ---------------
Current Day Factor
13-week Moving Average is calculated as follows:
Sum of the end-of-week Adjusted Navs for the time period
13
39-week Moving Average is calculated as follows:
Sum of the end-of-week Adjusted NAVs for the time period
39
39 Week Moving Averages
WEEK END ADJUSTED
DATE FACTOR NAV
08-Apr-94 2.445687 3.76
15-Apr-94 2.445687 3.76
22-Apr-94 2.445687 3.76
29-Apr-94 2.445687 3.76
06-May-94 2.445687 3.76
13-May-94 2.445687 3.76
20-May-94 2.445687 3.76
27-May-94 2.432329 3.78
03-Jun-94 2.432329 3.79
10-Jun-94 2.432329 3.79
17-Jun-94 2.432329 3.79
24-Jun-94 2.432329 3.79
01-Jul-94 2.432329 3.79
08-Jul-94 2.432329 3.79
15-Jul-94 2.432329 3.79
22-Jul-94 2.432329 3.79
29-Jul-94 2.432329 3.79
05-Aug-94 2.432329 3.79
12-Aug-94 2.401079 3.84
19-Aug-94 2.401079 3.84
26-Aug-94 2.401079 3.84
02-Sep-94 2.401079 3.83
09-Sep-94 2.401079 3.83
16-Sep-94 2.401079 3.83
23-Sep-94 2.401079 3.83
30-Sep-94 2.401079 3.83
07-Oct-94 2.401079 3.83
14-Oct-94 2.401079 3.83
21-Oct-94 2.388026 3.86
28-Oct-94 2.388026 3.86
04-Nov-94 2.388026 3.86
11-Nov-94 2.388026 3.86
18-Nov-94 2.388026 3.86
25-Nov-94 2.388026 3.86
02-Dec-94 2.388026 3.86
09-Dec-94 2.388026 3.86
16-Dec-94 2.388026 3.87
23-Dec-94 2.388026 3.87
30-Dec-94 2.388026 3.87
<TABLE> <S> <C>
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<NAME> Fidelity School Street Trust
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<NAME> Fidelity Limited Term Municipals
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<S>
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<DISTRIBUTIONS-OF-INCOME> 55,464
<DISTRIBUTIONS-OF-GAINS> 2,438
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<NUMBER-OF-SHARES-SOLD> 50,770
<NUMBER-OF-SHARES-REDEEMED> 77,752
<SHARES-REINVESTED> 4,647
<NET-CHANGE-IN-ASSETS> (321,014)
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 9.990
<PER-SHARE-NII> .512
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<TABLE> <S> <C>
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<NAME> Fidelity School Street Trust
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<NAME> Spartan Bond Strategist
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<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 19,289
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<OTHER-ITEMS-LIABILITIES> 74
<TOTAL-LIABILITIES> 815
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,725
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<NUMBER-OF-SHARES-SOLD> 1,183
<NUMBER-OF-SHARES-REDEEMED> 1,377
<SHARES-REINVESTED> 109
<NET-CHANGE-IN-ASSETS> (3,358)
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<ACCUMULATED-GAINS-PRIOR> (202)
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