SPARTAN(registered trademark)INTERMEDIATE MUNICIPAL INCOME FUND
A FUND OF
FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Spartan Intermediate Municipal Income Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan Intermediate Municipal Income Fund (the fund) will
be held at the office of Fidelity Union Street Trust (the trust), 82
Devonshire Street, Boston, Massachusetts 02109 on February 18, 1998,
at 9:00 a.m. Eastern time. The purpose of the Meeting is to consider
and act upon the following proposal, and to transact such other
business as may properly come before the Meeting or any adjournments
thereof.
(1) To approve an Agreement and Plan of Reorganization between
Spartan Intermediate Municipal Income Fund and Fidelity School Street
Trust: Fidelity Limited Term Municipal Income Fund, providing for the
transfer of all of the assets of Spartan Intermediate Municipal Income
Fund to Fidelity Limited Term Municipal Income Fund in exchange solely
for shares of beneficial interest of Fidelity Limited Term Municipal
Income Fund and the assumption by Fidelity Limited Term Municipal
Income Fund of Spartan Intermediate Municipal Income Fund's
liabilities, followed by the distribution of Fidelity Limited Term
Municipal Income Fund shares to shareholders of Spartan Intermediate
Municipal Income Fund in liquidation of Spartan Intermediate Municipal
Income Fund.
The Board of Trustees has fixed the close of business on December 22,
1997 as the record date for the determination of the shareholders of
Spartan Intermediate Municipal Income Fund entitled to notice of, and
to vote at, such Meeting and any adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
December 22, 1997
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
SPARTAN INTERMEDIATE MUNICIPAL INCOME FUND
A FUND OF
FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
PROXY STATEMENT AND PROSPECTUS
DECEMBER 22, 1997
This Proxy Statement and Prospectus (Proxy Statement) is being
furnished to shareholders of Spartan Intermediate Municipal Income
Fund (Spartan Intermediate) (the fund), a fund of Fidelity Union
Street Trust (the trust), in connection with the solicitation of
proxies by the trust's Board of Trustees for use at the Special
Meeting of Shareholders of Spartan Intermediate and at any
adjournments thereof (the Meeting). The Meeting will be held on
Wednesday, February 18, 1998 at 9:00 a.m. Eastern time at 82
Devonshire Street, Boston, Massachusetts 02109, the principal
executive office of the trust.
As more fully described in the Proxy Statement, the purpose of the
Meeting is to vote on a proposed reorganization (Reorganization).
Pursuant to an Agreement and Plan of Reorganization (the Agreement),
Spartan Intermediate would transfer all of its assets to Fidelity
School Street Trust: Fidelity Limited Term Municipal Income Fund
(Fidelity Limited Term), in exchange solely for shares of beneficial
interest of Fidelity Limited Term and the assumption by Fidelity
Limited Term of Spartan Intermediate's liabilities. The number of
shares to be issued in the proposed Reorganization will be based upon
the relative net asset values of the funds at the time of the
exchange. As provided in the Agreement, Spartan Intermediate will
distribute shares of Fidelity Limited Term to its shareholders in
liquidation of Spartan Intermediate on February 26, 1998, or such
other date as the parties may agree (the Closing Date).
Fidelity Limited Term, a municipal bond fund, is a diversified fund
of Fidelity School Street Trust, an open-end management investment
company organized as a Massachusetts business trust on September 10,
1976. Fidelity Limited Term's investment objective is to seek high
current income that is free from federal income tax as is consistent
with the preservation of capital. Fidelity Limited Term seeks to
achieve its investment objective by normally investing in
investment-grade municipal securities, while maintaining an average
maturity of between three and 10 years.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Reorganization and
Fidelity Limited Term that a shareholder should know before voting on
the proposed Reorganization. The Statement of Additional Information
relating to this Proxy Statement dated December 22, 1997 has been
filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference. This Proxy Statement is accompanied
by the Prospectus (dated February 28, 1997 and supplemented August 29,
1997), which offers shares of Fidelity Limited Term. The Statement of
Additional Information for Fidelity Limited Term (dated February 28,
1997) is available upon request. Attachment 1 contains excerpts from
the Annual Report of Fidelity Limited Term dated December 31, 1996.
The Prospectus and Statement of Additional Information for Fidelity
Limited Term have been filed with the SEC and are incorporated herein
by reference. A Prospectus and Statement of Additional Information for
Spartan Intermediate, both dated October 21, 1997, have been filed
with the SEC and are incorporated herein by reference. Copies of these
documents may be obtained without charge by contacting the trust or
Fidelity School Street Trust at Fidelity Distributors Corporation, 82
Devonshire Street, Boston, Massachusetts 02109 or by calling
1-800-544-8888.
TABLE OF CONTENTS
Voting Information
Synopsis
Comparison of Other Policies of the Funds
Comparison of Principal Risk Factors
The Proposed Transaction
Additional Information about Fidelity Limited Term Municipal Income
Fund
Miscellaneous
Attachment 1. Excerpts from Annual Report of Fidelity Limited Term
Municipal Income Fund Dated December 31, 1996
Exhibit 1. Form of Agreement and Plan of Reorganization of Spartan
Intermediate Municipal Income Fund
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS OF
SPARTAN INTERMEDIATE MUNICIPAL INCOME FUND
A FUND OF
FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
TO BE HELD ON FEBRUARY 18, 1998
VOTING INFORMATION
This Proxy Statement and Prospectus (Proxy Statement) is furnished in
connection with a solicitation of proxies made by, and on behalf of,
the Board of Trustees of Fidelity Union Street Trust (the trust) to be
used at the Special Meeting of Shareholders of Spartan Intermediate
Municipal Income Fund (Spartan Intermediate) (the fund) and at any
adjournments thereof (the Meeting), to be held on Wednesday, February
18, 1998 at 9:00 a.m. at 82 Devonshire Street, Boston, Massachusetts
02109, the principal executive office of the trust and Fidelity
Management & Research Company (FMR), the fund's investment adviser.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about December 22,
1997. Supplementary solicitations may be made by mail, telephone,
telegraph, facsimile, electronic means or by personal interview by
representatives of the trust. In addition, D.F. King & Co., Inc.
and/or Management Information Services Corp. may be paid on a per-call
basis to solicit shareholders on behalf of the fund at an anticipated
cost of approximately $4,000. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all
solicitations will be borne by FMR. FMR will reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by the trust, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and which
are not revoked, will be voted at the Meeting. Shares represented by
such proxies will be voted in accordance with the instructions
thereon. If no specification is made on a proxy card, it will be voted
FOR the matters specified on the proxy card. Only proxies that are
voted will be counted toward establishing a quorum. Broker non-votes
are not considered voted for this purpose. Shareholders should note
that while votes to ABSTAIN will count toward establishing a quorum,
passage of any proposal being considered at the Meeting will occur
only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same
effect in determining whether the proposal is approved.
Spartan Intermediate may also arrange to have votes recorded by
telephone. D.F. King & Co., Inc. may be paid on a per-call basis for
vote-by-phone solicitations on behalf of the fund at an anticipated
cost of approximately $4,000. The expenses in connection with
telephone voting will be borne by FMR. If the fund records votes by
telephone, it will use procedures designed to authenticate
shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to
confirm that their instructions have been properly recorded. Proxies
given by telephone may be revoked at any time before they are voted in
the same manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting but sufficient votes to approve one or more of the
proposed items are not received, or if other matters arise requiring
shareholder attention, the persons named as proxy agents may propose
one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of
a majority of those shares present at the Meeting or represented by
proxy. When voting on a proposed adjournment, the persons named as
proxy agents will vote FOR the proposed adjournment all shares that
they are entitled to vote with respect to each item, unless directed
to vote AGAINST the item, in which case such shares will be voted
against the proposed adjournment with respect to that item. A
shareholder vote may be taken on one or more of the items in this
Proxy Statement or on any other business properly presented at the
meeting prior to such adjournment if sufficient votes have been
received and it is otherwise appropriate.
On August 31, 1997, there were 19,603,906 and 90,194,004 shares
issued and outstanding for Spartan Intermediate and Fidelity Limited
Term Municipal Income Fund (Fidelity Limited Term), respectively.
Shareholders of record at the close of business on December 22, 1997
will be entitled to vote at the Meeting. Each such shareholder will be
entitled to one vote for each dollar of net asset value held on that
date.
As of August 31, 1997, the Trustees, Members of the Advisory Board,
and officers of each fund owned, in the aggregate, less than 1% of
each fund's total outstanding shares.
As of August 31, 1997, the following owned of record 5% or more of a
fund's outstanding shares:
Fidelity Limited Term: National Financial Services Corporation,
Boston, MA (5.27%).
Spartan Intermediate: National Financial Services Corporation,
Boston, MA (29.34%).
To the knowledge of the trust and Fidelity School Street Trust, no
other shareholder owned of record or beneficially 5% or more of the
outstanding shares of each fund on that date. If the Reorganization
became effective on August 31, 1997, National Financial Services
Corporation would have owned of record 9.57% of the outstanding shares
of the combined fund.
VOTE REQUIRED: APPROVAL OF THE REORGANIZATION REQUIRES THE AFFIRMATIVE
VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" OF SPARTAN
INTERMEDIATE. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE 1940 ACT),
THE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING SECURITIES" MEANS
THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF THE VOTING
SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE
HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE
PRESENT OR REPRESENTED BY PROXY OR (B) MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED
"PRESENT" FOR THIS PURPOSE.
SYNOPSIS
The following is a summary of certain information contained elsewhere
in this Proxy Statement, in the Agreement, and in the Prospectuses of
Spartan Intermediate and Fidelity Limited Term, which are incorporated
herein by this reference. Shareholders should read the entire Proxy
Statement and the Prospectus of Fidelity Limited Term carefully for
more complete information.
The proposed reorganization (the Reorganization) would merge Spartan
Intermediate into Fidelity Limited Term, a municipal bond fund also
managed by FMR. If the Reorganization is approved, Spartan
Intermediate will cease to exist and current shareholders of the fund
will become shareholders of Fidelity Limited Term instead. FMR
anticipates that if the Reorganization is approved, the combined
fund's name will be changed to Spartan Intermediate Municipal Income
Fund immediately following completion of the Reorganization.
Both Spartan Intermediate and Fidelity Limited Term seek high current
income free from federal income tax by investing in investment-grade
municipal securities. Spartan Intermediate is managed by Norman Lind
and Fidelity Limited Term is managed by David Murphy. David Murphy is
expected to manage the combined fund. The two funds differ primarily
in their expense structures.
The proposed merger is part of a wider strategy by Fidelity to reduce
the number of municipal bond funds it manages. Combining the funds
will allow Fidelity to concentrate on a single intermediate municipal
bond fund for investors, and deliver lower operating expenses as well.
INVESTMENT OBJECTIVES AND POLICIES
Spartan Intermediate and Fidelity Limited Term have substantially
similar investment objectives and similar investment policies.
Spartan Intermediate seeks high current income free from federal
income tax. Fidelity Limited Term seeks high current income free from
federal income tax, consistent with the preservation of capital, from
a diversified portfolio of investment-grade securities. Both funds are
managed to have the same interest rate sensitivity as municipal bonds
with maturities between seven and 10 years and to maintain an average
maturity between three and 10 years. As of June 30, 1997, the
dollar-weighted average maturity for both Spartan Intermediate and
Fidelity Limited Term was 7.4 years. As a matter of fundamental
policy, Spartan Intermediate and Fidelity Limited Term each will
normally invest so that at least 80% of its assets are invested in
municipal securities whose interest is free from federal income tax.
Spartan Intermediate is a non-diversified fund and Fidelity Limited
Term is a diversified fund. As a non-diversified fund, Spartan
Intermediate can invest a greater portion of its assets in securities
of individual issuers than Fidelity Limited Term and may be more
sensitive than Fidelity Limited Term to changes in the market value of
a single issuer.
EXPENSE STRUCTURES
Spartan Intermediate and Fidelity Limited Term differ with respect to
the contractual structure of fund expenses. Spartan Intermediate pays
an "all-inclusive" management fee to FMR (at a rate of 0.55% of
average net assets per year) which covers substantially all fund
expenses. Fidelity Limited Term, by contrast, pays an income-based
management fee (calculated at an annual rate of 0.10% of the fund's
average net assets plus 5% of gross income) and other expenses
separately. FMR has voluntarily agreed to reimburse Fidelity Limited
Term to the extent that total operating expenses exceed 0.55% of
average net assets. If the Reorganization is approved, FMR has agreed
to limit the combined fund's expense ratio to 0.53% of average net
assets through December 31, 1999 (excluding interest, taxes, brokerage
commissions, and extraordinary expenses). After that date, the
combined fund's expenses could increase.
In sum, the Reorganization would provide Spartan Intermediate's
shareholders with a 0.02% total operating expense reduction over
Spartan Intermediate's current management fee of 0.55% of average net
assets per year, with expenses guaranteed to be lower than Spartan
Intermediate's for a period of almost two years. Further, the
Reorganization would provide Spartan Intermediate's shareholders with
the opportunity to participate in a fund with a comparable investment
portfolio and similar historical investment performance.
The Board of Trustees believes that the Reorganization would benefit
Spartan Intermediate shareholders and recommends that shareholders
vote in favor of the Reorganization.
THE PROPOSED REORGANIZATION
Shareholders of Spartan Intermediate will be asked at the Meeting to
vote upon and approve the Reorganization and the Agreement, which
provide for the acquisition by Fidelity Limited Term of all of the
assets of Spartan Intermediate in exchange solely for shares of
Fidelity Limited Term and the assumption by Fidelity Limited Term of
the liabilities of Spartan Intermediate. Spartan Intermediate will
then distribute the shares of Fidelity Limited Term to its
shareholders, so that each shareholder will receive the number of full
and fractional shares of Fidelity Limited Term equal in value to the
aggregate net asset value of the shareholder's shares of Spartan
Intermediate on the Closing Date (defined below). The exchange of
Spartan Intermediate's assets for Fidelity Limited Term's shares will
occur as of the close of business of the New York Stock Exchange
(NYSE) on February 26, 1998, or such other time and date as the
parties may agree (the Closing Date). Spartan Intermediate will then
be liquidated as soon as practicable thereafter.
The funds have received an opinion of counsel that, except with
respect to Section 1256 contracts, the Reorganization will not result
in any gain or loss for Federal income tax purposes either to Spartan
Intermediate or Fidelity Limited Term, or to the shareholders of
either fund. The rights and privileges of the former shareholders of
Spartan Intermediate will be effectively unchanged by the
Reorganization.
COMPARATIVE FEE TABLES
Each fund pays a management fee to FMR for managing its investments
and business affairs which is calculated and paid to FMR every month.
Spartan Intermediate pays FMR a management fee at an annual rate of
0.55% of its average net assets. FMR not only provides the fund with
investment advisory and research services, but also pays all of the
fund's expenses, with the exception of fees and expenses of the
non-interested Trustees; interest; taxes; brokerage commissions (if
any); and such nonrecurring expenses as may arise, including costs of
any litigation to which a fund may be a party, and any obligation it
may have to indemnify its officers and Trustees with respect to
litigation. The management fee that the fund pays FMR is reduced by an
amount equal to the fees and expenses paid by the fund to the
non-interested Trustees.
In contrast, Fidelity Limited Term pays management fees and other
expenses separately. Fidelity Limited Term's management fee is
calculated at an annual rate of 0.10% of its average net assets plus
5% of its gross income. In addition to the management fee payable by
the fund, Fidelity Limited Term incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and financial reports. For the fiscal year ended December
31, 1996, Fidelity Limited Term's total management fee rate, other
expenses, and total operating expense ratio were 0.38%, 0.18%, and
0.56%, respectively. Effective April 1, 1997, FMR voluntarily agreed
to limit the total operating expenses of Fidelity Limited Term to
0.55% of average net assets (excluding interest, taxes, brokerage
commissions, and extraordinary expenses).
Fidelity reserves the right to deduct an annual maintenance fee of
$12.00 from accounts in each fund with a value of less than $2,500.
If the Reorganization is approved, the combined fund will retain
Fidelity Limited Term's expense structure, requiring payment of an
income-based management fee and other operating expenses separately.
FMR has agreed to limit the combined fund's expense ratio to 0.53% of
its average net assets through December 31, 1999 (excluding interest,
taxes, brokerage commissions, and extraordinary expenses). This
expense limitation would result in a 0.02% lower total operating
expenses for Spartan Intermediate shareholders beginning on the first
business day after the Closing Date of the Reorganization through
December 31, 1999. After that date, the combined fund's expenses could
increase. If the proposed Reorganization is not approved, Spartan
Intermediate will maintain its current fee structure. For more
information about the funds' current fees, refer to their
Prospectuses.
Under Spartan Intermediate's all-inclusive management fee
arrangement, Spartan Intermediate shareholders currently have the
right to vote on any expense increases over 0.55% of average net
assets. Shareholders of the combined fund would also have the right to
vote on any increases in FMR's management fee; however, because the
management fee would not be all-inclusive, shareholders would not have
the right to vote on all types of expense increases.
The following tables show the fees and expenses of Spartan
Intermediate and Fidelity Limited Term for the 12 months ended June
30, 1997, adjusted to reflect current fees, and pro forma fees for the
combined fund based on the same period after giving effect to the
Reorganization, including the effect of FMR's guaranteed expense
limitation to 0.53% of average net assets through December 31, 1999
(excluding interest, taxes, brokerage commissions, and extraordinary
expenses).
ANNUAL FUND OPERATING EXPENSES
Annual fund operating expenses are paid out of each fund's assets.
Expenses are factored into each fund's share price or dividends and
are not charged directly to shareholder accounts. The following
figures are based on historical expenses, adjusted to reflect current
fees, of each fund and are calculated as a percentage of average net
assets of each fund.
Spartan Fidelity Pro Forma
Intermediate Limited TermA Expenses Combined
FundB
Management Fees 0.55% 0.38% 0.36%
(after reimbursement)
Other Expenses 0.00% 0.17% 0.17%
Total Fund Operating 0.55% 0.55% 0.53%
Expenses
(after reimbursement)
A Effective April 1, 1997, FMR voluntarily agreed to reimburse the
fund to the extent that total operating expenses exceed 0.55%
(excluding interest, taxes, brokerage commissions, and extraordinary
expenses). If this agreement were not in effect, the management fee,
other expenses, and total fund operating expenses, as a percentage of
average net assets, would have been 0.39%, 0.17%, and 0.56%,
respectively.
B FMR has agreed to limit the combined fund's total operating expenses
to 0.53% of its average net assets (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) through December
31, 1999. If this agreement were not in effect, the management fee,
other expenses, and total operating expenses, as a percentage of
average net assets, would be 0.38%, 0.17%, and 0.55%, respectively.
EXAMPLES OF EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical $1,000
investment in each fund under the current and pro forma (combined
fund) expenses calculated at the rates stated above, assuming a 5%
annual return.
After 1 After 3 After 5 After 10
Year Years Years Years
Spartan Intermediate $6 $18 $31 $69
Fidelity Limited Term $6 $18 $31 $69
Combined Fund $5 $17 $30 $66
These examples assume that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. These examples
illustrate the effect of expenses, but are not meant to suggest actual
or expected expenses, which may vary. The assumed return of 5% is not
a prediction of, and does not represent, actual or expected
performance of any fund.
FORMS OF ORGANIZATION
Spartan Intermediate is a non-diversified fund of Fidelity Union
Street Trust, an open-end management investment company organized as a
Massachusetts business trust on March 1, 1974. Fidelity Limited Term
is a diversified fund of Fidelity School Street Trust, an open-end
management company organized as a Massachusetts business trust on
September 10, 1976. The trusts are authorized to issue an unlimited
number of shares of beneficial interest. Because the funds are series
of Massachusetts business trusts, organized under substantially
similar Declarations of Trust, the rights of the security holders of
Spartan Intermediate under state law and the governing documents are
expected to remain unchanged after the Reorganization. For more
information regarding shareholder rights, refer to the section of the
Funds' Statements of Additional Information called "Description of the
Trust."
INVESTMENT OBJECTIVES AND POLICIES
The funds have similar investment objectives and policies in that
both seek high current income free from federal income tax by
investing in investment-grade municipal securities. Fidelity Limited
Term seeks this objective in a manner consistent with the preservation
of capital. Spartan Intermediate is a non-diversified fund and
Fidelity Limited Term is a diversified fund. As a non-diversified
fund, Spartan Intermediate can invest a greater portion of its assets
in securities of individual issuers than Fidelity Limited Term. As a
matter of fundamental policy, Spartan Intermediate and Fidelity
Limited Term each will normally invest so that at least 80% of its
assets are invested in municipal securities whose interest is free
from federal income tax. In addition, Spartan Intermediate and
Fidelity Limited Term may invest all of their assets in municipal
securities issued to finance private activities. The interest from
these securities is a tax-preference item for purposes of the federal
alternative minimum tax.
INVESTMENT POLICIES AND CHARACTERISTICS
The following table summarizes the funds' investment policies and
characteristics.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Interest Average Average Debt Quality AMT
Rate Maturity Maturity Ability
Sensitivity Policy as of
6/30/97
Spartan Intermediate 7-10 3-10 7.4 5% below 100%
years years years inv. grade
Fidelity Limited Term 7-10 3-10 7.4 only inv. 100%
years years years grade
</TABLE>
Spartan Intermediate and Fidelity Limited Term maintain an average
maturity between three and 10 years. FMR seeks to manage the funds so
that they generally react to changes in interest rates similarly to
municipal bonds with maturities between seven and 10 years. As of June
30, 1997, the average maturity of both Spartan Intermediate and
Fidelity Limited Term was 7.4 years.
As a matter of fundamental policy, Fidelity Limited Term invests only
in investment-grade securities. Spartan Intermediate normally invests
only in investment-grade securities, but reserves the right to invest
up to 5% of its assets in below investment-grade securities. As of
June 30, 1997, both funds held only investment-grade securities. Each
fund currently can invest all of its assets in securities subject to
the federal alternative minimum tax (AMT). The interest from these
investments is a tax-preference item for purposes of the federal
alternative minimum tax. As of June 30, 1997, 28.33% of Spartan
Intermediate's and 3.22% of Fidelity Limited Term's income dividends
were subject to the federal alternative minimum tax.
The investment objective of each fund is fundamental and may not be
changed without the approval of a vote of at least a majority of the
outstanding voting securities of the fund. There can be no assurance
that any fund will achieve its objective. With the exception of
fundamental policies, investment policies of the funds can be changed
without shareholder approval. The differences between the funds
discussed above, except as noted, could be changed without a vote of
shareholders.
PERFORMANCE COMPARISONS OF THE FUNDS
Spartan Intermediate and Fidelity Limited Term have experienced
similar performance, as shown in the tables below. The differential in
performance can be attributed primarily to the funds' historical
differences in portfolio holdings resulting from past differences in
investment policies regarding AMT ability and from the relative asset
size of the funds and their available cash flows.
The following table compares the funds' annual total returns for the
periods indicated. Please note that returns are based on past results
and are not an indication of future performance.
Annual Total Return (periods ended June 30)
1994 1995 1996 1997
Spartan Intermediate 1.24% 7.19% 6.26% 7.25%
Fidelity Limited Term 0.47% 7.68% 6.27% 7.42%
The following table compares Spartan Intermediate's cumulative total
returns to Fidelity Limited Term's for the period indicated. Please
note that returns are based on past results and are not an indication
of future performance.
Cumulative Total Return (January 1, 1994 to June 30, 1997)
Spartan Intermediate 16.91%
Fidelity Limited Term 17.63%
The following graph shows the value of a hypothetical $10,000
investment in each of Spartan Intermediate and Fidelity Limited Term
made on January 1, 1994 through June 30, 1997, assuming all
distributions are reinvested. The graph compares the cumulative total
return of Spartan Intermediate to the cumulative total return of
Fidelity Limited Term during this period.
$11,763
$11,691
$
1997
Spartan Limited Term
Intermediate Municipal
Municipal Income Fund
Income Fund (036)
(443)
12/31/93 10000.00 10000.00
01/31/94 10099.08 10113.79
02/28/94 9848.13 9880.94
03/31/94 9445.81 9480.40
04/30/94 9477.28 9533.78
05/31/94 9588.28 9618.75
06/30/94 9570.50 9568.99
07/31/94 9721.76 9747.42
08/31/94 9754.58 9782.09
09/30/94 9647.25 9659.13
10/31/94 9520.91 9527.01
11/30/94 9322.24 9340.48
12/31/94 9496.59 9523.76
01/31/95 9721.35 9771.38
02/28/95 9941.60 10004.41
03/31/95 10054.64 10103.51
04/30/95 10074.48 10105.63
05/31/95 10280.20 10357.22
06/30/95 10258.58 10304.29
07/31/95 10330.84 10382.73
08/31/95 10486.51 10527.11
09/30/95 10569.20 10614.95
10/31/95 10686.16 10737.22
11/30/95 10802.27 10858.45
12/31/95 10867.64 10937.38
01/31/96 10965.10 11038.10
02/29/96 10930.43 11002.77
03/31/96 10823.84 10892.01
04/30/96 10802.31 10870.63
05/31/96 10803.64 10859.49
06/30/96 10900.67 10950.57
07/31/96 10988.71 11032.61
08/31/96 10989.45 11034.19
09/30/96 11098.50 11138.42
10/31/96 11209.79 11267.75
11/30/96 11407.47 11442.80
12/31/96 11363.41 11422.44
01/31/97 11397.60 11459.73
02/28/97 11494.54 11551.77
03/31/97 11350.29 11422.81
04/30/97 11429.27 11495.48
05/31/97 11577.85 11641.99
06/30/97 11691.39 11762.80
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION. Spartan Intermediate is a non-diversified fund.
Fidelity Limited Term is a diversified fund. Generally, to meet
federal tax requirements at the close of each quarter, Spartan
Intermediate does not invest more than 25% of its total assets in the
securities of any one issuer and, with respect to 50% of total assets,
does not invest more than 5% of its total assets in the securities of
any one issuer. Fidelity Limited Term, as a matter of fundamental
policy, with respect to 75% of total assets, may not purchase a
security if, as a result, more than 5% would be invested in the
securities of any issuer. Because Spartan Intermediate can invest a
greater portion of its assets in securities of individual issuers than
Fidelity Limited Term, changes in the market value of a single issuer
could cause greater share-price fluctuation in Spartan Intermediate
than would occur in a diversified fund such as Fidelity Limited Term.
OTHER INVESTMENT POLICIES. Each fund may borrow from banks or other
funds advised by FMR, or through reverse repurchase agreements. As a
matter of fundamental policy, each fund may borrow only for temporary
or emergency purposes, but not in an amount exceeding 33 1/3% of its
total assets.
FMR normally invests each fund's assets according to its investment
strategy and does not expect to invest in federally taxable
obligations. However, each fund 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. Each
fund may also enter into when-issued and forward purchase or sale
transactions, invest in asset-backed securities, variable and floating
rate securities, municipal lease obligations, securities with put
features, private entity securities, and illiquid and restricted
securities. As stated above, for more information about the risks and
restrictions associated with these policies, see each fund's
Prospectus, and for a more detailed discussion of the funds'
investments, see their Statements of Additional Information, which are
incorporated herein by reference.
OPERATIONS OF FIDELITY LIMITED TERM FOLLOWING THE REORGANIZATION
FMR does not expect Fidelity Limited Term to revise its investment
policies as a result of the Reorganization. In addition, FMR does not
anticipate significant changes to the fund's management or to agents
that provide the fund with services. Specifically, the Trustees and
officers, the investment adviser, distributor, and other agents will
continue to serve Fidelity Limited Term in their current capacities.
David Murphy, who is currently the Portfolio Manager of Fidelity
Limited Term is expected to continue to be responsible for portfolio
management after the Reorganization.
All of the current investments of Spartan Intermediate are
permissible investments for Fidelity Limited Term. However, if the
Reorganization is approved, portfolio adjustments may be required to
more closely align the funds' portfolios. Transaction costs associated
with such adjustments that occur between shareholder approval and the
Closing Date will be borne by the fund that incurred them and may
result in a taxable gain or loss to the fund. Transaction costs
associated with such adjustments that occur after the Closing Date
will be borne by Fidelity Limited Term.
PURCHASES AND REDEMPTIONS
The purchase and redemption policies for both funds are identical.
The price to buy one share of each fund is each fund's net asset
value per share (NAV). Each fund's shares are sold without a sales
charge. Your shares are purchased at the next NAV calculated after
your investment is received and accepted. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time. Refer to each
fund's Prospectus for more information regarding how to buy shares.
The price to sell one share of each fund is the f und's NAV.
Your shares will be sold at the next NAV calculated after your order
is received and accepted. Each fund's NAV is normally calculated each
business day at 4:00 p.m. Eastern time.
On April 1, 1997, Spartan Intermediate closed to new accounts pending
the Reorganization. Spartan Intermediate shareholders on or prior to
that date can continue to purchase shares of the fund. Shareholders
may redeem shares through the Closing Date of the Reorganization. If
the Reorganization is approved, the purchase and redemption policies
of the combined fund will remain unchanged. Fidelity Limited Term does
not currently impose a redemption fee; however, the combined fund
reserves the right to adopt a redemption fee in the future if it
believes it is appropriate.
EXCHANGES
The exchange privilege currently offered by each fund is the same and
is not expected to change after the Reorganization. Shareholders of
the funds may exchange their shares of a fund for shares of any other
Fidelity fund available in a shareholder's state. Neither Spartan
Intermediate nor Fidelity Limited Term currently imposes a redemption
fee.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Each fund declares income
dividends daily and pays them monthly. Spartan Intermediate normally
distributes capital gains in October and December. Fidelity Limited
Term normally distributes capital gains in February and December. On
or before the Closing Date, Spartan Intermediate may declare
additional dividends or other distributions in order to distribute
substantially all of its investment company taxable income and net
realized capital gain.
Spartan Intermediate will be required to recognize gain or loss on
Section 1256 contracts held by the fund on the last day of its taxable
year which is August 31. If the Reorganization is approved, gains or
losses of Section 1256 contracts held on the Closing Date will be
recognized on the Closing Date.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Each fund has received an opinion of its counsel, Kirkpatrick &
Lockhart LLP, that the Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). Accordingly,
except with respect to Section 1256 contracts, no gain or loss will be
recognized to the funds or their shareholders as a result of the
Reorganization. Please see the section entitled "Federal Income Tax
Considerations" for more information.
As of August 31, 1997, Spartan Intermediate had capital loss
carryforwards for federal income tax purposes of approximately
$8,494,000. As of December 31, 1996, Fidelity Limited Term had no
capital loss carryforwards for federal income tax purposes. Under
current federal tax law, Fidelity Limited Term may be limited to using
only a portion, if any, of its capital loss carryforward or the
capital loss carryforwards transferred by Spartan Intermediate at the
time of the Reorganization ("capital loss carryforwards"). There is no
assurance that Fidelity Limited Term will be able to realize
sufficient capital gains to use the capital loss carryforwards before
they expire. The capital loss carryforward attributable to Spartan
Intermediate will expire between December 31, 2002 and December 31,
2003.
COMPARISON OF PRINCIPAL RISK FACTORS
Each fund is subject to the risks normally associated with bond
funds. As described more fully above, the funds have substantially
similar investment objectives and similar investment policies.
INVESTMENT STRATEGY. As a matter of fundamental policy, Fidelity
Limited Term invests only in investment-grade securities. Spartan
Intermediate currently intends to invest only in investment-grade
securities. However, Spartan Intermediate has the ability to invest up
to 5% of its assets in below investment-grade securities. Although
these securities may provide the potential for significant price
appreciation, it is important to note that they are considered to have
speculative characteristics, and involve greater risk of default or
price changes due to changes in the issuer's creditworthiness, or such
securities 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
activity.
DIVERSIFICATION. Diversifying a fund's investment portfolio can
reduce the risks of investing. Diversification may include limiting
the amount of money invested in any one issuer. A fund that is not
diversified may be more sensitive to changes in the market value of a
single issuer. Spartan Intermediate is a non-diversified fund.
Fidelity Limited Term is a diversified fund. As a non-diversified
fund, Spartan Intermediate can invest a greater portion of its assets
in securities of individual issuers than Fidelity Limited Term and may
be subject to greater share price fluctuation.
THE PROPOSED TRANSACTION
TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
INTERMEDIATE AND FIDELITY LIMITED TERM.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of
the Agreement are summarized below; however, this summary is qualified
in its entirety by reference to the Agreement, a copy of which is
attached at Exhibit 1 to this Proxy Statement.
The Agreement contemplates (a) Fidelity Limited Term acquiring as of
the Closing Date all of the assets of Spartan Intermediate in exchange
solely for shares of Fidelity Limited Term and the assumption by
Fidelity Limited Term of Spartan Intermediate's liabilities; and (b)
the distribution of shares of Fidelity Limited Term to the
shareholders of Spartan Intermediate as provided for in the Agreement.
The assets of Spartan Intermediate to be acquired by Fidelity Limited
Term include all cash, cash equivalents, securities, receivables
(including interest or dividends receivables), claims, choses in
action, and other property owned by Spartan Intermediate, and any
deferred or prepaid expenses shown as an asset on the books of Spartan
Intermediate on the Closing Date. Fidelity Limited Term will assume
from Spartan Intermediate all liabilities, debts, obligations, and
duties of Spartan Intermediate of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not arising in
the ordinary course of business, whether or not determinable on the
Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Spartan Intermediate will use its
best efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date, other than liabilities incurred
in the ordinary course of business. Fidelity Limited Term also will
deliver to Spartan Intermediate the number of full and fractional
shares of Fidelity Limited Term having an aggregate net asset value
equal to the value of the assets of Spartan Intermediate less the
liabilities of Spartan Intermediate as of the Closing Date. Spartan
Intermediate shall then distribute the Fidelity Limited Term shares
PRO RATA to its shareholders.
The value of Spartan Intermediate's assets to be acquired by Fidelity
Limited Term and the amount of its liabilities to be assumed by
Fidelity Limited Term will be determined as of the close of business
of the N YSE on the Closing Date, using the valuation procedures
set forth in Spartan Intermediate's then-current Prospectus and
Statement of Additional Information. The net asset value of a share of
Fidelity Limited Term will be determined as of the same time using the
valuation procedures set forth in its then-current Prospectus and
Statement of Additional Information.
As of the Closing Date, Spartan Intermediate will distribute to its
shareholders of record the shares of Fidelity Limited Term it
received, so that each Spartan Intermediate shareholder will receive
the number of full and fractional shares of Fidelity Limited Term
equal in value to the aggregate net asset value of shares of Spartan
Intermediate held by such shareholder on the Closing Date; Spartan
Intermediate will be liquidated as soon as practicable thereafter.
Such distribution will be accomplished by opening accounts on the
books of Fidelity Limited Term in the names of the Spartan
Intermediate shareholders and by transferring thereto shares of
Fidelity Limited Term. Each Spartan Intermediate shareholder's account
shall be credited with the respective PRO RATA number of full and
fractional shares (rounded to the third decimal place) of Fidelity
Limited Term due that shareholder. Fidelity Limited Term shall not
issue certificates representing its shares in connection with such
exchange.
Accordingly, immediately after the Reorganization, each former
Spartan Intermediate shareholder will own shares of Fidelity Limited
Term equal to the aggregate net asset value of that shareholder's
shares of Spartan Intermediate immediately prior to the
Reorganization. The net asset value per share of Fidelity Limited Term
will be unchanged by the transaction. Thus, the Reorganization will
not result in a dilution of any shareholder interest.
Any transfer taxes payable upon issuance of shares of Fidelity
Limited Term in a name other than that of the registered holder of the
shares on the books of Spartan Intermediate as of that time shall be
paid by the person to whom such shares are to be issued as a condition
of such transfer. Any reporting responsibility of Spartan Intermediate
is and will continue to be its responsibility up to and including the
Closing Date and such later date on which Spartan Intermediate is
liquidated.
Pursuant to its all-inclusive management contract with Spartan
Intermediate, FMR will bear the cost of the Reorganization, including
professional fees, expenses associated with the filing of registration
statements, and the cost of soliciting proxies for the Meeting, which
will consist principally of printing and mailing prospectuses and
proxy statements, together with the cost of any supplementary
solicitation. However, there may be some transaction costs associated
with portfolio adjustments to Spartan Intermediate and Fidelity
Limited Term due to the Reorganization prior to the Closing Date which
will be borne by Spartan Intermediate and Fidelity Limited Term,
respectively. Any transaction costs associated with portfolio
adjustments to Spartan Intermediate and Fidelity Limited Term due to
the Reorganization which occur after the Closing Date and any
additional merger-related costs attributable to Fidelity Limited Term
which occur after the Closing Date will be borne by Fidelity Limited
Term. The funds may recognize a taxable gain or loss on the
disposition of securities pursuant to these portfolio adjustments. See
the section entitled "Reasons for the Reorganization."
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by
a fund. In addition, the Agreement may be amended in any mutually
agreeable manner, except that no amendment that may have a materially
adverse effect on the shareholders' interests may be made subsequent
to the meeting.
REASONS FOR THE REORGANIZATION
The Boards of Trustees (the Boards) of the funds have determined that
the Reorganization is in the best interests of the shareholders of
both funds and that the Reorganization will not result in a dilution
of the interests of shareholders of either fund.
In considering the Reorganization, the Boards considered a number of
factors, including the following:
(1) the compatibility of the funds' investment objectives and
policies;
(2) the historical performance of the funds;
(3) the relative expense ratios of the funds;
(4) the costs to be incurred by each fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the funds;
(7) the elimination of duplicative funds;
(8) the impact of changes to the municipal bond product line on the
funds and their shareholders; and
(9) the benefit to FMR and to the shareholders of the funds.
FMR recommended the Reorganization to the Boards at a meeting of the
Boards on July 17, 1997. In recommending the Reorganization, FMR also
advised the Boards that the funds have substantially similar
investment objectives and similar policies and permissible
investments. In particular, at that time FMR informed the Boards that
the funds differed with respect to their expense structures and
policies concerning average maturities. If the Reorganization is
approved, Fidelity Limited Term's Board authorized that Fidelity
Limited Term's name be changed to Spartan Intermediate Municipal
Income Fund. In anticipation of this proposed name change, at the July
17, 1997 meeting, Fidelity Limited Term's Board approved a change in
maturity policy for Fidelity Limited Term from 12 years or less to
between three and 10 years, which became effective September 1, 1997.
FMR informed the Boards that both Fidelity Limited Term and Spartan
Intermediate's average maturity as of June 30, 1997 was 7.4 years.
The Boards also considered that former shareholders of Spartan
Intermediate will receive shares of Fidelity Limited Term equal to the
value of their shares of Spartan Intermediate. In addition, the funds
have received an opinion of counsel that, except with respect to
Section 1256 contracts, the Reorganization will not result in any gain
or loss for Federal income tax purposes either to Spartan Intermediate
or Fidelity Limited Term or to shareholders of either fund.
Furthermore, on July 17, 1997, the Boards considered FMR's
representation to the Boards that if the Reorganization is approved,
it would guarantee an expense ratio of 0.53% of average net assets for
the surviving fund (excluding interest, taxes, brokerage commissions,
and extraordinary expenses) following the Closing Date of the
Reorganization through December 31, 1999, resulting in an immediate
savings of 0.02% to shareholders of both Spartan Intermediate and
Fidelity Limited Term (based on total fund operating expenses for the
12 months ended June 30, 1997 ). Previously, FMR had informed
the Boards that effective April 1, 1997, it would voluntarily agree to
limit Fidelity Limited Term's total operating expenses to 0.55% of
average net assets. FMR informed the Boards that it would pay all of
Spartan Intermediate's expenses associated with the Reorganization,
including professional fees and the costs of proxy solicitation. The
Boards were informed that any expenses associated with the
Reorganization, including professional fees and any additional
merger-related costs, directly attributable to Fidelity Limited Term
would be borne by Fidelity Limited Term, provided they do not exceed
the fund's 0.55% expense cap.
In addition, Spartan Intermediate's Board also considered that
Spartan Intermediate shareholders currently have the right to vote on
any expense increases over 0.55% of average net assets. Shareholders
of the combined fund would also have the right to vote on any
increases in FMR's management fee; however, because the income-based
management fee would not be all-inclusive, shareholders would not have
the right to vote on all types of expense increases.
Finally, the Boards considered the proposed Reorganization in the
context of a general goal of reducing the number of duplicative funds
managed by FMR. While the reduction of duplicative funds and funds
with lower assets potentially would benefit FMR, it also should
benefit shareholders by facilitating increased operational
efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fidelity School Street Trust is registered with the Securities and
Exchange Commission (the Commission) as an open-end management
investment company. Trustees of Fidelity School Street Trust are
authorized to issue an unlimited number of shares of beneficial
interest of separate series. Currently, Fidelity Limited Term is the
only fund of Fidelity School Street Trust. Shareholders of Fidelity
Global Bond Fund and Fidelity New Markets Income Fund approved on
September 17, 1997 Agreements and Plans of Reorganization providing
for the reorganization of Fidelity Global Bond Fund and Fidelity New
Markets Income Fund into Fidelity School Street Trust, effective the
end of February, 1998. Each share of Fidelity Limited Term represents
an equal proportionate interest with each other share of the fund, and
each such share of Fidelity Limited Term is entitled to equal voting,
dividend, liquidation, and redemption rights. Each shareholder of the
fund is entitled to one vote for each dollar value of net asset value
of the fund that shareholder owns. Shares of Fidelity Limited Term
have no preemptive or conversion rights. The voting and dividend
rights, the right of redemption, and the privilege of exchange are
described in the fund's Prospectus. Shares are fully paid and
nonassessable, except as set forth in the fund's Statement of
Additional Information under the heading "Shareholder and Trustee
Liability."
Fidelity School Street Trust does not hold annual meetings of
shareholders. There will normally be no meetings of shareholders for
the purpose of electing Trustees unless less than a majority of the
Trustees holding office have been elected by shareholders, at which
time the Trustees then in office will call a shareholder meeting for
the election of Trustees. Under the 1940 Act, shareholders of record
of at least two-thirds of the outstanding shares of an investment
company may remove a Trustee by votes cast in person or by proxy at a
meeting called for that purpose. The Trustees are required to call a
meeting of shareholders for the purpose of voting upon the question of
removal of any Trustee when requested in writing to do so by the
shareholders of record holding at least 10% of Fidelity School Street
Trust's outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Spartan Intermediate's assets for Fidelity Limited
Term's shares and the assumption of the liabilities of Spartan
Intermediate by Fidelity Limited Term is intended to qualify for
federal income tax purposes as a tax-free reorganization under the
Code. With respect to the Reorganization, the participating funds have
received an opinion from Kirkpatrick & Lockhart LLP, counsel to
Spartan Intermediate and Fidelity Limited Term, substantially to the
effect that:
(i) The acquisition by Fidelity Limited Term of all of the assets of
Spartan Intermediate solely in exchange for Fidelity Limited Term
shares and the assumption by Fidelity Limited Term of Spartan
Intermediate's liabilities, followed by the distribution by Spartan
Intermediate of Fidelity Limited Term shares to the shareholders of
Spartan Intermediate pursuant to the liquidation of Spartan
Intermediate and constructively in exchange for their Spartan
Intermediate shares, will constitute a reorganization within the
meaning of section 368(a)(1)(C) of the Code, and Spartan Intermediate
and Fidelity Limited Term will each be "a party to a reorganization"
within the meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Intermediate upon
the transfer of all of its assets to Fidelity Limited Term in exchange
solely for Fidelity Limited Term shares and Fidelity Limited Term's
assumption of Spartan Intermediate's liabilities, followed by Spartan
Intermediate's subsequent distribution of those shares to shareholders
in liquidation of Spartan Intermediate;
(iii) No gain or loss will be recognized by Fidelity Limited Term
upon the receipt of the assets of Spartan Intermediate in exchange
solely for Fidelity Limited Term shares and its assumption of Spartan
Intermediate's liabilities;
(iv) The shareholders of Spartan Intermediate will recognize no gain
or loss upon the exchange of their Spartan Intermediate shares solely
for Fidelity Limited Term shares;
(v) The basis of Spartan Intermediate's assets in the hands of
Fidelity Limited Term will be the same as the basis of those assets in
the hands of Spartan Intermediate immediately prior to the
Reorganization, and the holding period of those assets in the hands of
Fidelity Limited Term will include the holding period of those assets
in the hands of Spartan Intermediate;
(vi) The basis of Spartan Intermediate shareholders in Fidelity
Limited Term shares will be the same as their basis in Spartan
Intermediate shares to be surrendered in exchange therefor; and
(vii) The holding period of the Fidelity Limited Term shares to be
received by the Spartan Intermediate shareholders will include the
period during which the Spartan Intermediate shares to be surrendered
in exchange therefor were held, provided such Spartan Intermediate
shares were held as capital assets by those shareholders on the date
of the Reorganization.
Shareholders of Spartan Intermediate should consult their tax
advisers regarding the effect, if any, of the proposed Reorganization
in light of their individual circumstances. Because the foregoing
discussion only relates to the federal income tax consequences of the
Reorganization, those shareholders also should consult their tax
advisers as to state and local tax consequences, if any, of the
Reorganization.
CAPITALIZATION
The following table shows the capitalization of the funds as of June
30, 1997 and on a pro forma combined basis (unaudited) as of that date
giving effect to the Reorganization.
Net Assets Net Asset Shares
Value Outstanding
Per Share
Spartan Intermediate $ 205,245,537 $ 10.28 19,966,309
Fidelity Limited Term $ 882,303,000 $ 9.72 90,786,000
Pro Forma Combined Fund $ 1,087,548,537 $ 9.72 111,901,796
CONCLUSION
The Agreement and Plan of Reorganization and the transactions
provided for therein were approved by the Boards at a meeting held on
July 17, 1997. The Boards of Trustees of Fidelity Union Street Trust
and Fidelity School Street Trust determined that the proposed
Reorganization is in the best interests of shareholders of each fund
and that the interests of existing shareholders of Spartan
Intermediate and Fidelity Limited Term would not be diluted as a
result of the Reorganization. In the event that the Reorganization is
not consummated, Spartan Intermediate will continue to engage in
business as a fund of a registered investment company and the Board of
Fidelity Union Street Trust will consider other proposals for the
reorganization or liquidation of the fund.
ADDITIONAL INFORMATION ABOUT FIDELITY LIMITED TERM MUNICIPAL INCOME
FUND
Fidelity Limited Term's Prospectus (dated February 28, 1997 and
supplemented August 29, 1997) is enclosed with this Proxy Statement
and is incorporated herein by reference. The Prospectus contains
additional information about the fund including its investment
objective and policies, investment adviser, advisory fees and
expenses, organization, and procedures for purchasing and redeeming
shares. Fidelity Limited Term's financial highlights for the 10-year
period ended December 31, 1996 and for the unaudited semi-annual
period ended June 30, 1997 are shown on the following page:
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Years ended
December 1997F 1996 1995 1994 1993C 1992 1991 1990 1989 1988 1987
31
2.Net asset
value, $ 9.700 $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270 $ 9.310 $ 9.230 $ 9.100 $ 9.580
beginning of period
3.Income from
Investment .244 .488 .497 .512 .516 .573 .603 .615 .617 .600 .582
Operations
Net interest income
4. Net realized
and .040 (.069) .810 (.980) .630 .180 .400 .010 .080 .130 (.480)
unrealized gain (loss)
5. Total from
investment .284 .419 1.307 (.468) 1.146 .753 1.003 .625 .697 .730 .102
operations
6.Less Distribut
ions (.244) (.488) (.497) (.512) (.516) (.573) (.603) (.615) (.617) (.600) (.582)
From net interest income
7. From net realized
gain (.020) (.031) -- (.010) (.220) (.100) (.150) (.050) -- -- --
8. In excess of
net -- -- -- (.010) (.020) -- -- -- -- -- --
realized gain
9. Total distribut
ions (.264) (.519) (.497) (.532) (.756) (.673) (.753) (.665) (.617) (.600) (.582)
10.Net asset value,
end of $ 9.720 $ 9.700 $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270 $ 9.310 $ 9.230 $ 9.100
period
11.Total
returnB,E 2.98% 4.43% 14.84% (4.76)% 12.24% 8.17% 11.19% 6.97% 7.83% 8.22% 1.14%
</TABLE>
RATIOS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12.Net assets, end of $ 882 $ 904 $ 943 $ 878 $ 1,199 $ 976 $ 696 $ 468 $ 442 $ 441 $ 459
period (In millions)
13.Ratio of expenses to .56%A .56% .57% .56% .57% .64% .68% .67% .66%D .67% .74%
average net assets
14.Ratio of net
interest 5.10%A 5.06% 5.25% 5.42% 5.19% 5.94% 6.41% 6.63% 6.70% 6.51% 6.29%
income to average net
assets
15.Portfolio turnover 13%A 27% 31% 30% 111% 50% 42% 72% 55% 30% 59%
rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
F SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED).
MISCELLANEOUS
LEGAL MATTERS. Certain legal matters in connection with the issuance
of Fidelity Limited Term shares have been passed upon by Kirkpatrick &
Lockhart LLP, counsel to Fidelity School Street Trust.
EXPERTS. The audited financial statements of Spartan Intermediate and
Fidelity Limited Term, incorporated by reference into the Statement of
Additional Information, have been examined by Coopers & Lybrand
L.L.P., independent accountants, whose reports thereon are included in
the Annual Report to Shareholders for the fiscal years ended August
31, 1996 and August 31, 1997 for Spartan Intermediate, and December
31, 1996 for Fidelity Limited Term. The unaudited financial statements
of Spartan Intermediate for the six-month period ended February 28,
1997 and of Fidelity Limited Term for the six-month period ended June
30, 1997 are also incorporated by reference into the Statement of
Additional Information. The financial statements audited by Coopers &
Lybrand L.L.P. have been incorporated by reference in reliance on
their reports given on their authority as experts in auditing and
accounting.
AVAILABLE INFORMATION. Fidelity Union Street Trust and Fidelity
School Street Trust are each subject to the informational requirements
of the Securities Exchange Act of 1934 and the 1940 Act, and in
accordance therewith file reports, proxy material, and other
information with the SEC. Such reports, proxy material, and other
information can be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington D.C. 20549
and 7 World Trade Center, New York, NY 10048. Copies of such material
can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington D.C. 20549, at prescribed rates.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR
NOMINEES. Please advise Fidelity Union Street Trust, in care of
Fidelity Service Company, Inc., P.O. Box 789, Boston, Massachusetts
02109, whether other persons are beneficial owners of shares for which
proxies are being solicited and, if so, the number of copies of the
Proxy Statement you wish to receive in order to supply copies to the
beneficial owners of the respective shares.
ATTACHMENT 1
EXCERPTS FROM ANNUAL REPORT OF FIDELITY LIMITED TERM MUNICIPAL INCOME
FUND DATED DECEMBER 31, 1996
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Limited Term Municipal Income Fund 4.43% 6.76% 6.89%
Lehman Brothers 1-17 Year Municipal Bond Index 4.45% n/a n/a
Intermediate Municipal Debt Funds Average 3.70% 6.11% 6.63%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Lehman Brothers
Fidelity Limited Term Muni Income Municipal Bond Index
$21,181
$19,465
$
IMAHDR PRASUN SHR__CHT 19961231 19970117 111239 S00000000000001
Limited Term Muni Income LB Municipal Bond
00036 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10238.94 10301.10
1987/02/28 10362.68 10351.78
1987/03/31 10307.21 10242.05
1987/04/30 9745.22 9728.11
1987/05/31 9722.60 9679.85
1987/06/30 9934.27 9964.06
1987/07/31 10050.56 10065.69
1987/08/31 10081.27 10088.34
1987/09/30 9689.04 9716.38
1987/10/31 9743.36 9750.78
1987/11/30 9972.28 10005.37
1987/12/31 10114.35 10150.55
1988/01/31 10513.15 10512.11
1988/02/29 10557.01 10623.22
1988/03/31 10376.21 10499.99
1988/04/30 10443.27 10579.79
1988/05/31 10477.04 10549.22
1988/06/30 10567.94 10703.55
1988/07/31 10613.97 10773.34
1988/08/31 10626.00 10782.82
1988/09/30 10754.20 10977.99
1988/10/31 10895.98 11171.20
1988/11/30 10838.06 11068.87
1988/12/31 10945.39 11182.11
1989/01/31 11065.38 11413.35
1989/02/28 10983.96 11283.13
1989/03/31 10938.58 11256.16
1989/04/30 11133.53 11523.38
1989/05/31 11318.02 11762.72
1989/06/30 11429.17 11922.46
1989/07/31 11541.02 12084.72
1989/08/31 11481.31 11966.42
1989/09/30 11473.72 11930.76
1989/10/31 11573.60 12076.67
1989/11/30 11712.79 12288.01
1989/12/31 11801.90 12388.53
1990/01/31 11762.36 12329.93
1990/02/28 11850.74 12439.66
1990/03/31 11892.42 12443.40
1990/04/30 11789.53 12353.31
1990/05/31 11971.52 12622.98
1990/06/30 12063.15 12733.94
1990/07/31 12207.94 12921.12
1990/08/31 12184.27 12733.51
1990/09/30 12266.79 12740.77
1990/10/31 12391.23 12971.88
1990/11/30 12555.98 13232.75
1990/12/31 12623.98 13290.31
1991/01/31 12760.76 13468.67
1991/02/28 12884.56 13585.85
1991/03/31 12941.97 13590.74
1991/04/30 13081.08 13771.49
1991/05/31 13180.02 13893.92
1991/06/30 13183.46 13880.17
1991/07/31 13326.39 14049.23
1991/08/31 13454.58 14234.26
1991/09/30 13624.13 14419.59
1991/10/31 13751.39 14549.36
1991/11/30 13761.03 14589.95
1991/12/31 14036.20 14903.05
1992/01/31 14113.44 14937.03
1992/02/29 14165.04 14941.81
1992/03/31 14135.78 14947.34
1992/04/30 14254.69 15080.37
1992/05/31 14375.83 15257.87
1992/06/30 14538.53 15513.90
1992/07/31 14961.25 15979.00
1992/08/31 14850.18 15823.21
1992/09/30 14920.75 15926.69
1992/10/31 14715.38 15770.13
1992/11/30 15016.56 16052.58
1992/12/31 15182.61 16216.47
1993/01/31 15363.70 16405.07
1993/02/28 15918.71 16998.44
1993/03/31 15763.90 16818.77
1993/04/30 15913.46 16988.47
1993/05/31 16015.60 17083.94
1993/06/30 16229.76 17369.08
1993/07/31 16269.17 17391.83
1993/08/31 16601.60 17753.93
1993/09/30 16786.12 17956.14
1993/10/31 16809.78 17990.80
1993/11/30 16698.65 17832.30
1993/12/31 17040.99 18208.74
1994/01/31 17234.89 18416.68
1994/02/28 16838.09 17939.69
1994/03/31 16155.54 17209.19
1994/04/30 16246.51 17355.12
1994/05/31 16391.30 17505.59
1994/06/30 16306.51 17398.63
1994/07/31 16610.57 17717.55
1994/08/31 16669.65 17778.85
1994/09/30 16460.11 17517.86
1994/10/31 16234.96 17206.74
1994/11/30 15917.11 16895.64
1994/12/31 16229.43 17267.52
1995/01/31 16651.40 17761.02
1995/02/28 17048.51 18277.51
1995/03/31 17217.38 18487.52
1995/04/30 17220.99 18509.34
1995/05/31 17649.73 19099.97
1995/06/30 17559.53 18933.80
1995/07/31 17693.21 19113.29
1995/08/31 17939.24 19355.65
1995/09/30 18088.92 19478.17
1995/10/31 18297.28 19761.38
1995/11/30 18503.87 20089.22
1995/12/31 18638.38 20282.28
1996/01/31 18810.01 20435.41
1996/02/29 18749.81 20297.47
1996/03/31 18561.05 20038.07
1996/04/30 18524.63 19981.36
1996/05/31 18505.64 19973.37
1996/06/30 18660.85 20190.88
1996/07/31 18800.66 20374.62
1996/08/31 18803.35 20369.73
1996/09/30 18980.97 20654.90
1996/10/31 19201.36 20888.51
1996/11/30 19499.67 21270.77
1996/12/31 19464.97 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970117 111242 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Limited Term Municipal Income Fund on December
31, 1986. As the chart shows, by December 31, 1996, the value of the
investment would have grown to $19,465 - a 94.65% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown
to $21,181 - a 111.81% increase.
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw one
of its strongest years ever. For the
year, the Lehman Brothers
Municipal Bond Index - a broad
measure of the municipal bond
market - had a total return of
4.43%. In comparison, the Lehman
Brothers Aggregate Bond Index -
a broad measure of the
performance of the U.S. taxable
bond market - had a total return
of 3.63%. Demand for munis came
from both insurance companies
and individual investors. The
diminishing likelihood of significant
tax reform in the near future also
helped support the muni market.
Like most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the muni
market prevailed to the point that
munis entered the fall trading at
expensive levels relative to their
taxable counterparts. At that point
and through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off some
of their municipal bond holdings to
take profits. That sell-off subsided
somewhat in November and
December, when munis
outperformed comparable Treasury
securities. However, even though
demand helped buoy munis
somewhat in December, munis were
caught in the overall bond market
downdraft caused by conflicting
economic data and renewed fears
that inflation might lead the Federal
Reserve Board to raise short-term
interest rates.
An interview with David Murphy, Portfolio Manager of Fidelity Limited
Term Municipal Income Fund
Q. DAVE, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
A. Reasonably well. For the 12 months that ended December 31, 1996,
the fund had a return of 4.43%. To get a sense of how the fund did
relative to its peers, the intermediate municipal debt funds average
returned 3.70% for the same period, according to Lipper Analytical
Services. The Lehman Brothers 1-17 Year Municipal Bond Index, which
tracks the types of securities in which the fund invests, had a
12-month return of 4.45% as of December 31.
Q. WHAT STRATEGIES DID YOU EMPLOY?
A. I used three primary strategies over the course of the year. First,
I matched the fund's duration - its sensitivity to interest rate
movements - to that of its benchmark. So, even though there was a fair
amount of interest rate volatility in the municipal market, I avoided
getting whipsawed by becoming bullish or bearish at the wrong time.
Second, in the beginning of the year I emphasized bonds in the
five-to-10 year maturity range. In the latter part of the year, I
reduced the five-to-10 year weighting in favor of the 10-20 year
range, which had become more attractive from a yield perspective.
Q. WHAT WAS THE THIRD STRATEGY?
A. The third strategy was to use a barbelled coupon structure - that
is, owning premium-coupon bonds as well as discount-coupon bonds.
Historically, premium-coupon bonds, which pay higher annual income
than newly-issued bonds, offer better downside protection should the
market fall. Discount-coupon bonds, which offer annual income below
newly-issued bonds, offer price appreciation potential should the
market rally. Over the entire period, as either of these types of
bonds moved closer to par (face value), I attempted to sell them and
replace them with similar premium or discount bonds.
Q. WHAT OTHER CHANGES DID YOU MAKE IN THE PORTFOLIO?
A. In addition to the change in maturity structure that I described
above, I reduced the fund's exposure to BBB-rated bonds somewhat.
Yield spreads between BBB-rated bonds and AAA-rated bonds became too
narrow for the additional risk we were taking on, so I began to sell
some of the fund's BBB holdings.
Q. DID YOU FOCUS ON ANY PARTICULAR STATES?
A. I emphasized bonds from California, which generally performed well
during the period. While the rest of the country has enjoyed an
economic expansion for the past six years, this state just emerged
from a prolonged economic downturn two years ago. Since then, even the
hardest hit areas - Southern California, for instance - have shown
employment growth, and the state's unemployment is at a six-year low.
Additionally, in the first four months of the state's current fiscal
year, the Golden State's tax revenues are $600 million ahead of
budget.
Q. DID YOU CONCENTRATE ON ANY OTHER SEGMENTS OF THE MARKET?
A. It really wasn't an environment conducive to making specific sector
plays. Relative to the index, I still have an overweighting in student
loan, hospital and electric utility bonds. Transportation-related
issues are slightly underweighted. One area that was interesting was
industrial development revenue bonds. These bonds are issued as
tax-exempt debt, but they're actually backed by an underlying,
taxpaying corporate entity. With the economy performing as well as it
has, these companies and their respective debt issuance performed
well.
Q. WHICH INDIVIDUAL POSITIONS MADE SIGNIFICANT CONTRIBUTIONS TO
PERFORMANCE?
A. When adhering to a duration-neutral strategy such as I am - that
is, I'm not making interest rate bets - it can be misleading to
pinpoint individual issues as being poor or top performers. If rates
fall, our long-duration bonds will perform best; if rates rise,
shorter-term securities will perform better. That being said, the
hospital sector, New York City general obligation bonds and student
loan revenue bond positions did well, mainly because they are
shorter-term instruments.
Q. WHAT'S YOUR OUTLOOK?
A. We're in the midst of a long-term, downward trend in inflation, and
municipal finances are as healthy as we've seen in a while. Going
forward, municipal bond investors will be monitoring the effects of
welfare reform and other government proposals on states and local
municipalities. While these changes would shift more responsibility to
the local levels and result in states receiving more federal funding,
the pressure to operate these programs efficiently would also rise.
I'll be watching closely to see how states cope with these changes in
order to move the fund's investments into states that are successfully
managing these changes.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT DATED
DECEMBER 31, 1996. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY
TIME BASED ON MARKET AND OTHER CONDITIONS.
DAVE MURPHY ON THE
PROLIFERATION OF MUNICIPAL
BOND INSURANCE:
"Bond insurance has become a
major driver of yield spreads
within the municipal market. In
fact, the amount of debt issuance
that comes to market with
insurance has soared from around
30% a couple years ago to almost
50% today. Bond insurance
guarantees the payment of
principal and interest on the
bond, although it's important to
point out the insurance does not
guarantee against price losses.
Bond insurance appeals to
issuers because they can bring
their debt to the market with
higher ratings and, thus, lower
yields. The municipal market is
basically driven by retail
investors who don't have either
the time or resources to research
an issuer's credit fundamentals.
In this sense, investors regard
insurance as a sort of comfort
buffer. They know that if the
issuer gets into trouble, an
insurance company will be right
there to step in. I do buy insured
paper, but I prefer uninsured
bonds. I'd just as soon seek the
higher income from
non-insured bonds and have our
talented credit research team
come to its own conclusions
regarding creditworthiness."
EXHIBIT 1
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as
of December 22, 1997, by and between Fidelity Union Street Trust, a
Massachusetts business trust, on behalf of its series Spartan
Intermediate Municipal Income Fund (Spartan Intermediate) and Fidelity
School Street Trust, a Massachusetts business trust, on behalf of its
series Fidelity Limited Term Municipal Income Fund (Fidelity Limited
Term). Fidelity Union Street Trust and Fidelity School Street Trust
may be referred to herein collectively as the "Trusts" or each
individually as a "Trust." The trusts are duly organized business
trusts under the laws of the Commonwealth of Massachusetts with their
principal place of business at 82 Devonshire Street, Boston,
Massachusetts 02109. Spartan Intermediate and Fidelity Limited Term
may be referred to herein collectively as the "Funds" or each
individually as the "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the Code). The
reorganization will comprise: (a) the transfer of all of the assets of
Spartan Intermediate to Fidelity Limited Term solely in exchange for
shares of beneficial interest in Fidelity Limited Term (the Fidelity
Limited Term Shares) and the assumption by Fidelity Limited Term of
Spartan Intermediate's liabilities; and (b) the constructive
distribution of such shares by Spartan Intermediate PRO RATA to its
shareholders in complete liquidation and termination of Spartan
Intermediate in exchange for all of Spartan Intermediate's outstanding
shares. Spartan Intermediate shall receive shares of Fidelity Limited
Term having an aggregate net asset value equal to the value of the
assets of Spartan Intermediate on the Closing Date (defined in Section
6), which Spartan Intermediate shall then distribute PRO RATA to its
shareholders. The foregoing transactions are referred to herein as the
"Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN INTERMEDIATE. Spartan
Intermediate represents and warrants to and agrees with Fidelity
Limited Term that:
(a) Spartan Intermediate is a series of Fidelity Union Street Trust,
a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts, and has
the power to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state,
and local authorizations to carry on its business as now being
conducted and to carry out this Agreement;
(b) Fidelity Union Street Trust is an open-end, management investment
company duly registered under the Investment Company Act of 1940, as
amended (the 1940 Act), and such registration is in full force and
effect;
(c) The Prospectus and Statement of Additional Information of Spartan
Intermediate (both dated October 21, 1997), previously furnished to
Fidelity Limited Term, did not and do not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan Intermediate, threatened
against Spartan Intermediate which assert liability on the part of
Spartan Intermediate. Spartan Intermediate knows of no facts which
might form the basis for the institution of such proceedings;
(e) Spartan Intermediate is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws,
or, to the knowledge of Spartan Intermediate, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Spartan Intermediate is a party or by which Spartan Intermediate is
bound or result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment or decree to
which Spartan Intermediate is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Spartan Intermediate at August 31, 1997, have been audited by
Coopers & Lybrand L.L.P., independent accountants, and have been
furnished to Fidelity Limited Term. Said Statement of Assets and
Liabilities and Schedule of Investments fairly present the Fund's
financial position as of such date and said Statement of Operations,
Statement of Changes in Net Assets, and Financial Highlights fairly
reflect its results of operations, changes in financial position, and
financial highlights for the periods covered thereby in conformity
with generally accepted accounting principles consistently applied;
(g) Spartan Intermediate has no known liabilities of a material
nature, contingent or otherwise, other than those shown as belonging
to it on its statement of assets and liabilities as of August 31, 1997
and those incurred in the ordinary course of Spartan Intermediate's
business as an investment company since August 31, 1997;
(h) The registration statement (Registration Statement) filed with
the Securities and Exchange Commission (Commission) by Fidelity School
Street Trust on Form N-14 relating to the shares of Fidelity Limited
Term issuable hereunder and the proxy statement of Spartan
Intermediate included therein (Proxy Statement), on the effective date
of the Registration Statement and insofar as they relate to Spartan
Intermediate (i) comply in all material respects with the provisions
of the Securities Act of 1933, as amended (the 1933 Act), the
Securities Exchange Act of 1934, as amended (the 1934 Act), and the
1940 Act, and the rules and regulations thereunder, and (ii) do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 7 and on the Closing
Date, the prospectus contained in the Registration Statement of which
the Proxy Statement is a part (the Prospectus), as amended or
supplemented, insofar as it relates to Spartan Intermediate, does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(i) All material contracts and commitments of Spartan Intermediate
(other than this Agreement) will be terminated without liability to
Spartan Intermediate prior to the Closing Date (other than those made
in connection with redemptions of shares and the purchase and sale of
portfolio securities made in the ordinary course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan
Intermediate of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, and state securities or blue sky laws (which term as
used herein shall include the District of Columbia and Puerto Rico);
(k) Spartan Intermediate has filed or will file all federal and state
tax returns which, to the knowledge of Spartan Intermediate's
officers, are required to be filed by Spartan Intermediate and has
paid or will pay all federal and state taxes shown to be due on said
returns or provision shall have been made for the payment thereof,
and, to the best of Spartan Intermediate's knowledge, no such return
is currently under audit and no assessment has been asserted with
respect to such returns;
(l) Spartan Intermediate has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment
company for all prior taxable years and intends to meet such
requirements for its current taxable year ending on the Closing Date;
(m) All of the issued and outstanding shares of Spartan Intermediate
are, and at the Closing Date will be, duly and validly issued and
outstanding and fully paid and nonassessable as a matter of
Massachusetts law (except as disclosed in the Fund's Statement of
Additional Information), and have been offered for sale and in
conformity with all applicable federal securities laws. All of the
issued and outstanding shares of Spartan Intermediate will, at the
Closing Date, be held by the persons and in the amounts set forth in
the list of shareholders submitted to Fidelity Limited Term in
accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan Intermediate will have the full right, power,
and authority to sell, assign, transfer, and deliver its portfolio
securities and any other assets of Spartan Intermediate to be
transferred to Fidelity Limited Term pursuant to this Agreement. At
the Closing Date, subject only to the delivery of Spartan
Intermediate's portfolio securities and any such other assets as
contemplated by this Agreement, Fidelity Limited Term will acquire
Spartan Intermediate's portfolio securities and any such other assets
subject to no encumbrances, liens, or security interests (except for
those that may arise in the ordinary course and are disclosed to
Fidelity Limited Term) and without any restrictions upon the transfer
thereof; and
(o) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Spartan Intermediate, and this
Agreement constitutes a valid and binding obligation of Spartan
Intermediate enforceable in accordance with its terms, subject to
shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY LIMITED TERM. Fidelity
Limited Term represents and warrants to and agrees with Spartan
Intermediate that:
(a) Fidelity Limited Term is a series of Fidelity School Street
Trust, a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts, and has
the power to own all of its properties and assets and to carry out its
obligations under this Agreement. It has all necessary federal, state,
and local authorizations to carry on its business as now being
conducted and to carry out this Agreement;
(b) Fidelity School Street Trust is an open-end, management
investment company duly registered under the 1940 Act, and such
registration is in full force and effect;
(c) The Prospectus and Statement of Additional Information of
Fidelity Limited Term (both dated February 28, 1997 with a Prospectus
supplement dated August 29, 1997), previously furnished to Spartan
Intermediate did not and do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity Limited Term, threatened
against Fidelity Limited Term which assert liability on the part of
Fidelity Limited Term. Fidelity Limited Term knows of no facts which
might form the basis for the institution of such proceedings;
(e) Fidelity Limited Term is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws,
or, to the knowledge of Fidelity Limited Term, of any agreement,
indenture, instrument, contract, lease, or other undertaking to which
Fidelity Limited Term is a party or by which Fidelity Limited Term is
bound or result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree to
which Fidelity Limited Term is a party or is bound;
(f) The Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, Financial
Highlights, and the Schedule of Investments (including market values)
of Fidelity Limited Term at December 31, 1996, have been audited by
Coopers & Lybrand L.L.P., independent accountants, and have been
furnished to Spartan Intermediate together with such unaudited
financial statements and schedule of investments (including market
values) for the six month period ended June 30, 1997. Said Statement
of Assets and Liabilities and Schedule of Investments fairly present
its financial position as of such date and said Statement of
Operations, Statement of Changes in Net Assets, and Financial
Highlights fairly reflect its results of operations, changes in
financial position, and financial highlights for the periods covered
thereby in conformity with generally accepted accounting principles
consistently applied;
(g) Fidelity Limited Term has no known liabilities of a material
nature, contingent or otherwise, other than those shown as belonging
to it on its statement of assets and liabilities as of December 31,
1996 and those incurred in the ordinary course of Fidelity Limited
Term's business as an investment company since December 31, 1996;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity
Limited Term of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, and state securities or blue sky laws (which term as
used herein shall include the District of Columbia and Puerto Rico);
(i) Fidelity Limited Term has filed or will file all federal and
state tax returns which, to the knowledge of Fidelity Limited Term's
officers, are required to be filed by Fidelity Limited Term and has
paid or will pay all federal and state taxes shown to be due on said
returns or provision shall have been made for the payment thereof,
and, to the best of Fidelity Limited Term's knowledge, no such return
is currently under audit and no assessment has been asserted with
respect to such returns;
(j) Fidelity Limited Term has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment
company for all prior taxable years and intends to meet such
requirements for its current taxable year ending on December 31, 1997;
(k) As of the Closing Date, the shares of beneficial interest of
Fidelity Limited Term to be issued to Spartan Intermediate will have
been duly authorized and, when issued and delivered pursuant to this
Agreement, will be legally and validly issued and will be fully paid
and nonassessable (except as disclosed in the Fund's Statement of
Additional Information) by Fidelity Limited Term, and no shareholder
of Fidelity Limited Term will have any preemptive right of
subscription or purchase in respect thereof;
(l) The execution, performance, and delivery of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
corporate action on the part of Fidelity Limited Term, and this
Agreement constitutes a valid and binding obligation of Fidelity
Limited Term enforceable in accordance with its terms, subject to
approval by the shareholders of Spartan Intermediate;
(m) The Registration Statement and the Proxy Statement, on the
effective date of the Registration Statement and insofar as they
relate to Fidelity Limited Term, (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act, and the
1940 Act, and the rules and regulations thereunder, and (ii) will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 7 and on the Closing
Date, the Prospectus, as amended or supplemented, insofar as it
relates to Fidelity Limited Term, will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(n) The issuance of the Fidelity Limited Term Shares pursuant to this
Agreement will be in compliance with all applicable federal securities
laws; and
(o) All of the issued and outstanding shares of beneficial interest
of Fidelity Limited Term have been offered for sale and sold in
conformity with the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan
Intermediate and to the other terms and conditions contained herein,
Spartan Intermediate agrees to assign, sell, convey, transfer, and
deliver to Fidelity Limited Term as of the Closing Date all of the
assets of Spartan Intermediate of every kind and nature existing on
the Closing Date. Fidelity Limited Term agrees in exchange therefor:
(i) to assume all of Spartan Intermediate's liabilities existing on or
after the Closing Date, whether or not determinable on the Closing
Date, and (ii) to issue and deliver to Spartan Intermediate the number
of full and fractional shares of Fidelity Limited Term having an
aggregate net asset value equal to the value of the assets of Spartan
Intermediate transferred hereunder, less the value of the liabilities
of Spartan Intermediate, determined as provided for under Section 4.
(b) The assets of Spartan Intermediate to be acquired by Fidelity
Limited Term shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest or dividends
receivables), claims, choses in action, and other property owned by
Spartan Intermediate, and any deferred or prepaid expenses shown as an
asset on the books of Spartan Intermediate on the Closing Date.
Spartan Intermediate will pay or cause to be paid to Fidelity Limited
Term any dividend or interest payments received by it on or after the
Closing Date with respect to the assets transferred to Fidelity
Limited Term hereunder, and Fidelity Limited Term will retain any
dividend or interest payments received by it after the Valuation Time
with respect to the assets transferred hereunder without regard to the
payment date thereof.
(c) The liabilities of Spartan Intermediate to be assumed by Fidelity
Limited Term shall include (except as otherwise provided for herein)
all of Spartan Intermediate's liabilities, debts, obligations, and
duties, of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary
course of business, whether or not determinable on the Closing Date,
and whether or not specifically referred to in this Agreement.
Notwithstanding the foregoing, Spartan Intermediate agrees to use its
best efforts to discharge all of its known liabilities prior to the
Closing Date, other than liabilities incurred in the ordinary course
of business.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), Spartan Intermediate
will constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the Fidelity
Limited Term Shares in exchange for such shareholders' shares of
beneficial interest in Spartan Intermediate and Spartan Intermediate
will be liquidated in accordance with Spartan Intermediate's Amended
and Restated Declaration of Trust. Such distribution shall be
accomplished by the Funds' transfer agent opening accounts on Fidelity
Limited Term's share transfer books in the names of the Spartan
Intermediate shareholders and transferring the Fidelity Limited Term
Shares thereto. Each Spartan Intermediate shareholder's account shall
be credited with the respective PRO RATA number of full and fractional
(rounded to the third decimal place) Fidelity Limited Term Shares due
that shareholder. All outstanding Spartan Intermediate shares,
including any represented by certificates, shall simultaneously be
canceled on Spartan Intermediate's share transfer records. Fidelity
Limited Term shall not issue certificates representing the Fidelity
Limited Term Shares in connection with the Reorganization.
(e) Any reporting responsibility of Spartan Intermediate is and shall
remain its responsibility up to and including the date on which it is
terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity Limited
Term Shares in a name other than that of the registered holder on
Spartan Intermediate's books of the Spartan Intermediate shares
constructively exchanged for the Fidelity Limited Term Shares shall be
paid by the person to whom such Fidelity Limited Term Shares are to be
issued, as a condition of such transfer.
4. VALUATION.
(a) The Valuation Time shall be as of the close of business of the
New York Stock Exchange on the Closing Date, or such other date as
may be mutually agreed upon in writing by the parties hereto (the
Valuation Time).
(b) As of the Closing Date, Fidelity Limited Term will deliver to
Spartan Intermediate the number of Fidelity Limited Term Shares having
an aggregate net asset value equal to the value of the assets of
Spartan Intermediate transferred hereunder less the liabilities of
Spartan Intermediate, determined as provided in this Section 4.
(c) The net asset value per share of the Fidelity Limited Term Shares
to be delivered to Spartan Intermediate, the value of the assets of
Spartan Intermediate transferred hereunder, and the value of the
liabilities of Spartan Intermediate to be assumed hereunder shall in
each case be determined as of the Valuation Time.
(d) The net asset value per share of the Fidelity Limited Term Shares
shall be computed in the manner set forth in the then-current Fidelity
Limited Term Prospectus and Statement of Additional Information, and
the value of the assets and liabilities of Spartan Intermediate shall
be computed in the manner set forth in the then-current Spartan
Intermediate Prospectus and Statement of Additional Information.
(e) All computations pursuant to this Section shall be made by or
under the direction of Fidelity Service Company, Inc., a wholly-owned
subsidiary of FMR Corp., in accordance with its regular practice as
pricing agent for Spartan Intermediate and Fidelity Limited Term.
5. FEES; EXPENSES.
(a) Pursuant to Spartan Intermediate's all-inclusive management
contract with Fidelity Management & Research Company (FMR), FMR will
pay all fees and expenses, including legal, accounting, printing,
filing, and proxy solicitation expenses, portfolio transfer taxes (if
any), or other similar expenses incurred in connection with the
transactions contemplated by this Agreement (but not including costs
incurred in connection with the purchase or sale of portfolio
securities). Any expenses associated with the Reorganization which may
be attributable to Fidelity Limited Term will be borne by Fidelity
Limited Term, provided that they do not exceed the fund's 0.55%
expense cap in effect since April 1, 1997 (but not including costs
incurred with the purchase or sale of portfolio securities).
(b) Each of Fidelity Limited Term and Spartan Intermediate represents
that there is no person who has dealt with it who by reason of such
dealings is entitled to any broker's or finder's or other similar fee
or commission arising out of the transactions contemplated by this
Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to
consummate the same (the Closing), unless otherwise provided herein,
shall occur at the principal office of the Trusts, 82 Devonshire
Street, Boston, Massachusetts, as of the Valuation Time on February
26, 1998, or at some other time, date, and place agreed to by Spartan
Intermediate and Fidelity Limited Term (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the Funds is closed to trading, or (ii) trading
thereon is restricted, or (iii) trading or the reporting of trading on
said market or elsewhere is disrupted, all so that accurate appraisal
of the total net asset value of Spartan Intermediate and the net asset
value per share of Fidelity Limited Term is impracticable, the
Valuation Time and the Closing Date shall be postponed until the first
business day after the day when such trading shall have been fully
resumed and such reporting shall have been restored, or such other
date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN INTERMEDIATE.
(a) Spartan Intermediate agrees to call a meeting of its shareholders
after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity Limited Term as herein provided,
adopting this Agreement, and authorizing the liquidation of Spartan
Intermediate.
(b) Spartan Intermediate agrees that as soon as reasonably
practicable after distribution of the Fidelity Limited Term Shares,
Spartan Intermediate shall be terminated as a series of Fidelity Union
Street Trust pursuant to its Amended and Restated Declaration of
Trust, any further actions shall be taken in connection therewith as
required by applicable law, and on and after the Closing Date Spartan
Intermediate shall not conduct any business except in connection with
its liquidation and termination.
8. CONDITIONS TO OBLIGATIONS OF FIDELITY LIMITED TERM.
(a) That Spartan Intermediate furnishes to Fidelity Limited Term a
statement, dated as of the Closing Date, signed by an officer of
Fidelity Union Street Trust, certifying that as of the Valuation Time
and the Closing Date all representations and warranties of Spartan
Intermediate made in this Agreement are true and correct in all
material respects and that Spartan Intermediate has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such dates;
(b) That Spartan Intermediate furnishes Fidelity Limited Term with
copies of the resolutions, certified by an officer of Fidelity Union
Street Trust, evidencing the adoption of this Agreement and the
approval of the transactions contemplated herein by the requisite vote
of the holders of the outstanding shares of beneficial interest of
Spartan Intermediate;
(c) That, on or prior to the Closing Date, Spartan Intermediate will
declare one or more dividends or distributions which, together with
all previous such dividends or distributions attributable to its
current taxable year, shall have the effect of distributing to the
shareholders of Spartan Intermediate substantially all of Spartan
Intermediate's investment company taxable income and all of its net
realized capital gain, if any, as of the Closing Date;
(d) That Spartan Intermediate shall deliver to Fidelity Limited Term
at the Closing a statement of its assets and liabilities, together
with a list of its portfolio securities showing each such security's
adjusted tax basis and holding period by lot, with values determined
as provided in Section 4 of this Agreement, all as of the Valuation
Time, certified on Spartan Intermediate's behalf by its Treasurer or
Assistant Treasurer;
(e) That Spartan Intermediate's custodian shall deliver to Fidelity
Limited Term a certificate identifying the assets of Spartan
Intermediate held by such custodian as of the Valuation Time on the
Closing Date and stating that as of the Valuation Time: (i) the assets
held by the custodian will be transferred to Fidelity Limited Term;
(ii) Spartan Intermediate's assets have been duly endorsed in proper
form for transfer in such condition as to constitute good delivery
thereof; and (iii) to the best of the custodian's knowledge, all
necessary taxes in conjunction with the delivery of the assets,
including all applicable federal and state stock transfer stamps, if
any, have been paid or provision for payment has been made;
(f) That Spartan Intermediate's transfer agent shall deliver to
Fidelity Limited Term at the Closing a certificate setting forth the
number of shares of Spartan Intermediate outstanding as of the
Valuation Time and the name and address of each holder of record of
any such shares and the number of shares held of record by each such
shareholder;
(g) That Spartan Intermediate calls a meeting of its shareholders to
be held after the effective date of the Registration Statement, to
consider transferring its assets to Fidelity Limited Term as herein
provided, adopting this Agreement, and authorizing the liquidation and
termination of Spartan Intermediate;
(h) That Spartan Intermediate delivers to Fidelity Limited Term a
certificate of an officer of Fidelity Union Street Trust, dated as of
the Closing Date, that there has been no material adverse change in
Spartan Intermediate's financial position since August 31, 1997, other
than changes in the market value of its portfolio securities, or
changes due to net redemptions of its shares, dividends paid, or
losses from operations; and
(i) That all of the issued and outstanding shares of beneficial
interest of Spartan Intermediate shall have been offered for sale and
sold in conformity with all applicable state securities laws and, to
the extent that any audit of the records of Spartan Intermediate or
its transfer agent by Fidelity Limited Term or its agents shall have
revealed otherwise, Spartan Intermediate shall have taken all actions
that in the opinion of Fidelity Limited Term are necessary to remedy
any prior failure on the part of Spartan Intermediate to have offered
for sale and sold such shares in conformity with such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN INTERMEDIATE.
(a) That Fidelity Limited Term shall have executed and delivered to
Spartan Intermediate an Assumption of Liabilities, certified by an
officer of Fidelity School Street Trust, dated as of the Closing Date
pursuant to which Fidelity Limited Term will assume all of the
liabilities of Spartan Intermediate existing at the Valuation Time in
connection with the transactions contemplated by this Agreement;
(b) That Fidelity Limited Term furnishes to Spartan Intermediate a
statement, dated as of the Closing Date, signed by an officer of
Fidelity School Street Trust, certifying that as of the Valuation Time
and the Closing Date all representations and warranties of Fidelity
Limited Term made in this Agreement are true and correct in all
material respects, and Fidelity Limited Term has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such dates; and
(c) That Spartan Intermediate shall have received an opinion of
Kirkpatrick & Lockhart LLP, counsel to Spartan Intermediate and
Fidelity Limited Term, to the effect that the Fidelity Limited Term
Shares are duly authorized and upon delivery to Spartan Intermediate
as provided in this Agreement will be validly issued and will be fully
paid and nonassessable by Fidelity Limited Term (except as disclosed
in Spartan Intermediate's Statement of Additional Information) and no
shareholder of Fidelity Limited Term has any preemptive right of
subscription or purchase in respect thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY LIMITED TERM AND SPARTAN
INTERMEDIATE.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of
the holders of the outstanding shares of beneficial interest of
Spartan Intermediate;
(b) That all consents of other parties and all other consents,
orders, and permits of federal, state, and local regulatory
authorities (including those of the Commission and of state Blue Sky
and securities authorities, including "no action" positions of such
federal or state authorities) deemed necessary by Fidelity Limited
Term or Spartan Intermediate to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order, or
permit would not involve a risk of a material adverse effect on the
assets or properties of Fidelity Limited Term or Spartan Intermediate,
provided that either party hereto may for itself waive any of such
conditions;
(c) That all proceedings taken by either Fund in connection with the
transactions contemplated by this Agreement and all documents
incidental thereto shall be satisfactory in form and substance to it
and its counsel, Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall
have been instituted or, to the knowledge of Fidelity Limited Term and
Spartan Intermediate, threatened by the Commission; and
(f) That Fidelity Limited Term and Spartan Intermediate shall have
received an opinion of Kirkpatrick & Lockhart LLP satisfactory to
Fidelity Limited Term and Spartan Intermediate that for federal income
tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan Intermediate and Fidelity
Limited Term will each be parties to the Reorganization under section
368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Intermediate upon
the transfer of all of its assets to Fidelity Limited Term in exchange
solely for the Fidelity Limited Term Shares and the assumption of
Spartan Intermediate's liabilities followed by the distribution of
those Fidelity Limited Term Shares to the shareholders of Spartan
Intermediate in liquidation of Spartan Intermediate;
(iii) No gain or loss will be recognized by Fidelity Limited Term on
the receipt of Spartan Intermediate's assets in exchange solely for
the Fidelity Limited Term Shares and the assumption of Spartan
Intermediate's liabilities;
(iv) The basis of Spartan Intermediate's assets in the hands of
Fidelity Limited Term will be the same as the basis of such assets in
Spartan Intermediate's hands immediately prior to the Reorganization;
(v) Fidelity Limited Term's holding period in the assets to be
received from Spartan Intermediate will include Spartan Intermediate's
holding period in such assets;
(vi) A Spartan Intermediate shareholder will recognize no gain or
loss on the exchange of his or her shares of beneficial interest in
Spartan Intermediate for the Fidelity Limited Term Shares in the
Reorganization;
(vii) A Spartan Intermediate shareholder's basis in the Fidelity
Limited Term Shares to be received by him or her will be the same as
his or her basis in the Spartan Intermediate shares exchanged
therefor;
(viii) A Spartan Intermediate shareholder's holding period for his
or her Fidelity Limited Term Shares will include the holding period of
Spartan Intermediate shares exchanged, provided that those Spartan
Intermediate shares were held as capital assets on the date of the
Reorganization.
Notwithstanding anything herein to the contrary, each of Spartan
Intermediate and Fidelity Limited Term may not waive the conditions
set forth in this subsection 10(f).
11. COVENANTS OF FIDELITY LIMITED TERM AND SPARTAN INTERMEDIATE.
(a) Fidelity Limited Term and Spartan Intermediate each covenants to
operate its respective business in the ordinary course between the
date hereof and the Closing Date, it being understood that such
ordinary course of business will include the payment of customary
dividends and distributions;
(b) Spartan Intermediate covenants that it is not acquiring the
Fidelity Limited Term Shares for the purpose of making any
distribution other than in accordance with the terms of this
Agreement;
(c) Spartan Intermediate covenants that it will assist Fidelity
Limited Term in obtaining such information as Fidelity Limited Term
reasonably requests concerning the beneficial ownership of Spartan
Intermediate's shares; and
(d) Spartan Intermediate covenants that its liquidation and
termination will be effected in the manner provided in its Amended and
Restated Declaration of Trust in accordance with applicable law and
after the Closing Date, Spartan Intermediate will not conduct any
business except in connection with its liquidation and termination.
12. TERMINATION; WAIVER.
Fidelity Limited Term and Spartan Intermediate may terminate this
Agreement by mutual agreement. In addition, either Fidelity Limited
Term or Spartan Intermediate may at its option terminate this
Agreement at or prior to the Closing Date because
(i) of a material breach by the other of any representation,
warranty, or agreement contained herein to be performed at or prior to
the Closing Date; or
(ii) a condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan Intermediate or Fidelity Limited Term,
or their respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter
hereof, constitutes the only understanding with respect to such
subject matter, may not be changed except by a letter of agreement
signed by each party hereto and shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity Limited Term
or Spartan Intermediate; provided, however, that following the
shareholders' meeting called by Spartan Intermediate pursuant to
Section 7 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Fidelity Limited
Term Shares to be paid to Spartan Intermediate shareholders under this
Agreement to the detriment of such shareholders without their further
approval.
(c) Either Fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on
the interests of such Fund's shareholders.
The representations, warranties, and covenants contained in the
Agreement, or in any document delivered pursuant hereto or in
connection herewith, shall survive the consummation of the
transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of each fund's Declaration of Trust, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of each Fund as trustees and not
individually and that the obligations of each fund under this
instrument are not binding upon any of such Fund's Trustees, officers,
or shareholders individually but are binding only upon the assets and
property of such Fund. Each Fund agrees that its obligations hereunder
apply only to such Fund and not to its shareholders individually or to
the Trustees of such Fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer of any rights or obligations hereunder shall be made by
any party without the written consent of the other parties. Nothing
herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation other than the
parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by an appropriate officer.
SIGNATURE LINES OMITTED
SIM-PXS-1297 CUSIP#316448802/FUND#443
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
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- -------------------------
FIDELITY UNION STREET TRUST: SPARTAN INTERMEDIATE MUNICIPAL INCOME
FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Eric D. Roiter , and Robert M. Gates , or
any one or more of them, attorneys, with full power of substitution,
to vote all shares of Fidelity Union Street Trust: Spartan
Intermediate Municipal Income Fund which the undersigned is entitled
to vote at the Special Meeting of Shareholders of the fund to be held
at the office of the trust at 82 Devonshire St., Boston, MA 02109, on
February 18, 1998 at 9:00 a.m. Eastern time and at any adjournments
thereof. All powers may be exercised by a majority of said proxy
holders or substitutes voting or acting or, if only one votes and
acts, then by that one. This Proxy shall be voted on the proposal
described in the Proxy Statement as specified on the reverse side.
Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
Date _____________, 1998
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 316448802/fund# 443
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
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- -------------------------
_____________________________________________________________________
________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To approve an Agreement and Plan of Reorganization FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
between Spartan Intermediate Municipal Income
Fund and Fidelity School Street Trust: Fidelity
Limited Term Municipal Income Fund, providing for
the transfer of all of the assets of Spartan Intermediate
Municipal Income Fund to Fidelity Limited Term
Municipal Income Fund in exchange solely for shares
of beneficial interest of Fidelity Limited Term
Municipal Income Fund and the assumption by
Fidelity Limited Term Municipal Income Fund of
Spartan Intermediate Municipal Income Fund's
liabilities, followed by the distribution of Fidelity
Limited Term Municipal Income Fund shares to
shareholders of Spartan Intermediate Municipal
Income Fund in liquidation of Spartan Intermediate
Municipal Income Fund.
</TABLE>
SIM-PXC-1297 cusip # 316448802/fund# 443
IMPORTANT
PROXY MATERIALS
PLEASE CAST YOUR VOTE NOW!
Dear Shareholder:
I am writing to ask you for your vote on an important proposal to
merge Spartan Intermediate Municipal Income Fund (SPARTAN
INTERMEDIATE) into Fidelity Limited Term Municipal Income Fund
(FIDELITY LIMITED TERM). A shareholder meeting is scheduled for
February 18, 1998. Votes received in time to be counted at the
meeting will decide whether the merger takes place. This package
contains information about the proposal and includes all the materials
you will need to vote by mail.
The fund's Board of Trustees has reviewed the proposed merger and has
recommended that the proposed merger be presented to shareholders.
The Trustees, most of whom are not affiliated with Fidelity, are
responsible for protecting your interests as a shareholder. The
Trustees have determined that the proposed merger is in shareholders'
best interests. However, the final decision is up to you.
The proposed merger would give shareholders of Spartan Intermediate
the opportunity to participate in a larger fund with similar
investment policies. The combined fund would also have lower expenses
guaranteed through December 31, 1999. We have attached a Q&A to
assist you in understanding the proposal. The enclosed proxy statement
includes a detailed description of the proposed merger.
Please read the enclosed materials and promptly cast your vote on the
proxy card. You are entitled to one vote for each dollar of net asset
value you own of a fund on the record date (December 22, 1997). Your
vote is extremely important, no matter how large or small your
holdings may be.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. To
cast your vote, simply complete the proxy card enclosed in this
package. Be sure to sign the card before mailing it in the
postage-paid envelope provided.
If you have any questions before you vote, please call us at
1-800-544-8888. We will be glad to help you get your vote in quickly.
Thank you for your participation in this important initiative for your
fund.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
President
Important information to help you understand and vote on the proposals
Please read the full text of the enclosed proxy statement. Below is a
brief overview of the proposal to be voted upon. Your vote is
important. If you have any questions regarding the proposal, please
call us at 1-800-544-8888. We appreciate you placing your trust in
Fidelity and look forward to helping you achieve your financial goals.
WHAT PROPOSAL AM I BEING ASKED TO VOTE ON?
(solid bullet) To approve a merger of Spartan Intermediate Municipal
Income Fund into Fidelity Limited Term Municipal Income Fund.
(Proposal 1)
WHAT IS THE REASON FOR AND ADVANTAGE OF THIS MERGER?
The proposed merger is part of a wider strategy by Fidelity to reduce
the number of municipal bond funds it manages. Combining the funds
will allow Fidelity to concentrate on a single, intermediate national
municipal bond fund. Shareholders would also benefit from the more
efficient product line through lower expenses, guaranteed through
December 31, 1999.
DO THE FUNDS BEING MERGED HAVE SIMILAR INVESTMENT POLICIES?
Spartan Intermediate and Fidelity Limited Term have substantially
similar investment objectives and policies.
SPARTAN INTERMEDIATE seeks high current income free from federal
income tax. FIDELITY LIMITED TERM also seeks high current income free
from federal income tax, consistent with the preservation of capital,
from a diversified portfolio of investment-grade securities.
Both funds are managed to have the same interest rate sensitivity as
municipal bonds with maturities between seven and ten years. Both
funds also maintain an average maturity between three and ten years.
As of September 30, 1997, the dollar-weighted average maturity was 7.5
years for both Spartan Intermediate and Fidelity Limited Term.
As a matter of fundamental policy, Spartan Intermediate and Fidelity
Limited Term each will normally invest so that at least 80% of its
assets are invested in municipal securities whose interest is free
from federal income tax.
WHO IS THE FUND MANAGER FOR THESE FUNDS?
Norman Lind currently manages Spartan Intermediate. David Murphy
currently manages Fidelity Limited Term (and is expected to manage the
combined fund).
HOW DO THE EXPENSE STRUCTURES AND FEES OF THE FUNDS COMPARE?
Both funds currently have the same expense ratios, equal to 0.55% of
average net assets per year. The combined fund's expense ratio would
be lower through December 31, 1999, at 0.53%.
Although the funds' expense ratios are currently the same, they have
different contracts with Fidelity. SPARTAN INTERMEDIATE pays an
"all-inclusive" management fee to Fidelity Management & Research
Company (FMR) at a rate of 0.55% of average net assets which covers
substantially all fund expenses.
FIDELITY LIMITED TERM has an expense structure that charges separately
for management fees and other operating expenses. Fidelity Limited
Term's management fee is income-based and calculated at an annual rate
of 0.10% of its average net assets plus 5% of its gross income. As of
April 1, 1997, FMR has voluntarily agreed to reimburse the fund to the
extent that the total operating expenses exceed 0.55% of average net
assets.
If the merger is approved, the combined fund will retain Fidelity
Limited Term's current expense structure. However, FMR has agreed to
limit the combined fund's expense ratio to 0.53% of average net assets
through December 31, 1999. This represents an expense reduction of
0.02% of each fund's average net assets per year. After that date,
the combined fund's expenses could increase or decrease.
WHAT WILL BE THE NAME OF THE SURVIVING FUND AFTER THE MERGERS ARE
COMPLETE?
If shareholders of Spartan Intermediate approve the merger of their
fund into Fidelity Limited Term, the combined fund's name will be
changed to Spartan Intermediate Municipal Income Fund. The new name
of the combined fund would be effective immediately following the
completion of the merger.
WHAT ARE THE FEDERAL TAX IMPLICATIONS OF THE MERGER?
The merger will not be a taxable event (i.e., no gain or loss will be
recognized for federal income tax purposes) to either fund or its
shareholders.
WHAT WILL BE THE SIZE OF THE COMBINED FUND AFTER THE MERGER?
If the merger proposal passes, the combined fund will have over $1
billion in assets.
HOW HAS FIDELITY LIMITED TERM PERFORMED?
The table below shows average annual total returns for both Fidelity
Limited Term and its Lipper peer group over the last 1, 5, and 10 year
periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN AS OF SEPTEMBER 30, 1997
1 YEAR 5 YEARS 10 YEARS
Fidelity Limited Term 8.45% 6.65% 7.83%
Lipper Intermediate Municipal Debt Funds Average 7.22% 6.09% 7.33%
</TABLE>
Please keep in mind that past performance is no guarantee of future
results and you may have a gain or loss when you sell your shares.
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF FIDELITY LIMITED TERM
THAT I WILL RECEIVE?
As of 4 P.M. Eastern time on the Closing Date of the merger,
shareholders of Spartan Intermediate will receive the number of full
and fractional shares of Fidelity Limited Term that is equal in value
to the aggregate net asset value of their shares on that date. The
anticipated Closing Date is February 26, 1998.
Please note that the Shareholder Meeting could be adjourned or the
Closing Date could be adjusted.
WHAT IMPACT WILL THE MERGER HAVE ON THE SHARE PRICE OF FIDELITY
LIMITED TERM?
The net asset value per share of Fidelity Limited Term will not be
affected by the merger.
WHAT IF THERE ARE NOT ENOUGH VOTES TO REACH QUORUM BY THE SCHEDULED
SHAREHOLDER MEETING DATE?
To facilitate receiving sufficient votes, we will need to take further
action. We or D.F. King & Co., Inc., a proxy solicitation firm, may
contact you by mail or telephone. Therefore, we encourage
shareholders to vote as soon as they review the enclosed proxy
materials to avoid additional mailings or telephone calls.
If there are not sufficient votes to approve the proposals by the time
of the Shareholder Meeting (February 18, 1998), the meeting may be
adjourned to permit further solicitation of proxy votes.
WHAT HAPPENS IF THE PROPOSAL FOR MY FUND IS NOT APPROVED?
If the proposal to merge your fund is not approved by shareholders,
the Board may consider other options.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy
card, and mailing it in the enclosed postage paid envelope. If you
need any assistance, or have any questions regarding the proposal or
how to vote your shares, please call us at 1-800-544-8888.
HOW DO I SIGN THE PROXY CARD?
INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names
appear on the account registration shown on the card.
JOINT ACCOUNTS: Either owner may sign, but the name of the person
signing should conform exactly to a name shown in the registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her
capacity. For example, a trustee for a trust or other entity should
sign, "Ann B. Collins, Trustee."
NOT AUTHORIZED FOR DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A
CURRENT FUND PROSPECTUS.
Average annual total returns for the period ended 9/30/97 are
historical and include changes in share price, reinvestment of
dividends and capital gains. Share price and return will vary.
Lipper Analytical Services, Inc. is a nationally recognized
organization that provides performance information for mutual funds.
Each fund is classified within a universe of funds similar in
investment objective. Peer group averages include the reinvestment of
dividends and capital gains, if any, and exclude sales charges.
Fidelity Distributors Corporation, General Distribution Agent for
Fidelity Mutual Funds. 82 Devonshire Street, Boston, MA 02109.
Brokerage services provided by Fidelity Brokerage Services, Inc.
Member NYSE, SIPC.
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 24, 1997. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov). The SAI
is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION 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.
LIM -pro-0297
(fund number 036, trading symbol FLTMX)
The fund seeks a high level of current income free from federal income
tax. The fund invests normally in investment-grade municipal
securities while maintaining an average maturity of 12 years or less.
FIDELITY
LIMITED TERM
MUNICIPAL INCOME
FUND
PROSPECTUS
FEBRUARY 28, 1997(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 CHARTER How the fund is organized.
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: High current income free from federal income tax with
preservation of capital. As with any mutual fund, there is no
assurance that the fund will achieve its goal.
STRATEGY: Invests normally in investment-grade municipal securities
while maintaining an average maturity of 12 years or less.
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.
SIZE: As of December 31, 1996, the fund had over $ 903 million
in assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors in higher tax brackets who
seek high current income that is free from federal income tax. The
fund's level of risk and potential reward depends on the quality and
maturity of its investments. You should consider your investment
objective and tolerance for risk when making an investment decision.
The value of the fund's 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
itself, the fund does 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. LIMITED TERM
MUNICIPAL INCOME 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 may pay when you buy
or sell shares of a fund. In addition, you may be charged an annual
account maintenance fee if your account balance falls below $2,500.
See "Transaction Details," page , for an explanation of how and when
these charges apply.
Maximum sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The
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. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see page ).
The following figures are based on historical expenses and are
calculated as a percentage of average net assets.
Management fee .38 %
12b-1 fee None
Other expenses .18 %
Total fund operating expenses .56 %
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 if you close your account after the number of years
indicated:
After 1 year $ 6
After 3 years $ 18
After 5 years $ 31
After 10 years $ 70
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 financial highlights table that follows has been audited by
Coopers & Lybrand L.L.P., independent accountants. the fund's
financial highlights, financial statements, and report of the auditor
are included in the fund's Annual Report, and are incorporated by
reference into (are legally a part of) the fund's SAI. Contact
Fidelity for a free copy of the Annual Report or the SAI.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16.Years ended December
31 1996 1995 1994 1993A 1992 1991 1990 1989 1988 1987
17.Net asset value, $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270 $ 9.310 $ 9.230 $ 9.100 $ 9.580
beginning of period
18.Income from
Investment .488 .497 .512 .516 .573 .603 .615 .617 .600 .582
Operations
Net interest income
19. Net realized and (.069) .810 (.980) .630 .180 .400 .010 .080 .130 (.480)
unrealized gain (loss)
20. Total from investment .419 1.307 (.468) 1.146 .753 1.003 .625 .697 .730 .102
operations
21.Less Distributions (.488) (.497) (.512) (.516) (.573) (.603) (.615) (.617) (.600) (.582)
From net interest income
22. From net realized
gain (.031) -- (.010) (.220) (.100) (.150) (.050) -- -- ---
23. In excess of net realized
gain -- -- (.010) (.020) -- -- -- -- -- --
24. Total distribut
ions (.519) (.497) (.532) (.756) (.673) (.753) (.665) (.617) (.600) (.582)
25.Net asset value, end
of period $ 9.700 $ 9.800 $ 8.990 $ 9.990 $ 9.600 $ 9.520 $ 9.270 $ 9.310 $ 9.230 $ 9.100
26.Total returnC 4.43% 14.84% (4.76)% 12.24% 8.17% 11.19% 6.97% 7.83% 8.22% 1.14%
27.RATIOS AND SUPPLEMENTAL DATA
28.Net assets, end of
period $ 904 $ 943 $ 878 $ 1,199 $ 976 $ 696 $ 468 $ 442 $ 441 $ 459
(In millions)
29.Ratio of expenses
to .56% .57% .56% .57% .64% .68% .67% .66%B .67% .74%
average net assets
30.Ratio of net interest
income to 5.06% 5.25% 5.42% 5.19% 5.94% 6.41% 6.63% 6.70% 6.51% 6.29%
average net assets
31.Portfolio turnover
rate 27% 31% 30% 111% 50% 42% 72% 55% 30% 59%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES.
B FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The
tables below show the fund's performance over past fiscal years
compared to different measures, including a comparative index and a
competitive funds average. Data for the comparative index is available
only from June 30, 1993 to the present. The chart on page presents
calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
December 31, 1996 year years years
Limited Term Municipal Income 4.43 % 6.76 % 6.89 %
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lehman Bros. 1-17 Year Muni. Bond Index 4.45 % n/a n/a
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lipper Intermediate Muni. Debt Funds Avg. 3.70 % 6.11 % 6.63 %
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
December 31, 1996 year years years
Limited Term Municipal Income 4.43 % 38.68 % 94.65 %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lehman Bros. 1-17 Year Muni. Bond Index 4.45 % n/a n/a
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lipper Intermediate Muni. Debt Funds Avg. 3.70 % 34.55 % 90.15 %
</TABLE>
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
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)
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 LEHMAN BROTHERS 1-17 YEAR MUNICIPAL BOND INDEX is a total
return performance benchmark for investment-grade municipal bonds with
maturities between one and 17 years.
Unlike the fund's returns, the total returns of the comparative index
do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Intermediate Municipal
Debt Funds Average, which currently reflects the performance of
over 136 mutual funds with similar investment objectives. This
average, published by Lipper Analytical Services, Inc., excludes the
effect of sales charges.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 19 87 19 88 1 989 19 90
19 91 19 92 19 93 19 94 19 95
19 96
LIMITED TERM MUNICIPAL 1.14 % 8.22 % 7.83 %
6.97 % 11.19 % 8.17 % 12.24 % -4.76 %
14.84 % 4.43 %
Lipper Intermed. Muni. Debt Funds Avg. 1.32 % 7.57 %
8.26 % 6.59 % 10.52 % 7.80 % 10.18 %
-3.51 % 12.89 % 3.70 %
Consumer Price Index 4.43 % 4.42 % 4.65 %
6.11 % 3.06 % 2.90 % 2.75 % 2.67 %
2.54 % 3.32 %
Percentage (%)
Row: 1, Col: 1, Value: 1.14
Row: 2, Col: 1, Value: 8.219999999999999
Row: 3, Col: 1, Value: 7.83
Row: 4, Col: 1, Value: 6.970000000000001
Row: 5, Col: 1, Value: 11.19
Row: 6, Col: 1, Value: 8.17
Row: 7, Col: 1, Value: 12.24
Row: 8, Col: 1, Value: -4.76
Row: 9, Col: 1, Value: 14.84
Row: 10, Col: 1, Value: 4.430000000000001
(LARGE SOLID BOX) Limited Term
Municipal
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
LIMITED TERM MUNICIPAL INCOME IS A MUTUAL FUND: an investment that
pools shareholders' money and invests it toward a specified goal. The
fund is a 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 the fund's 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
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
David Murphy is Vice President and manager of Limited Term Municipal
Income, which he has managed since December 1989. He also manages
several other Fidelity funds. Mr. Murphy joined Fidelity in
1989 .
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 FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 225
(solid bullet) Assets in Fidelity mutual
funds: over $ 432 billion
(solid bullet) Number of shareholder
accounts: over 29 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 270
(checkmark)
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services. Fidelity Service Co mpany, Inc .
(FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward
C. Johnson 3d family are the predominant owners of a class of shares
of common stock representing approximately 49% of the voting power of
FMR Corp. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form
a controlling group with respect to FMR Corp.
UMB Bank, n.a., is the fund's transfer agent, although it employs FSC
to perform these functions for the fund. UMB is located at 1010
Grand Avenue, Kansas City, Missouri.
A broker-dealer may use a portion of the commissions paid by the fund
to reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to
carry out the fund's transactions, provided that the fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND'S INVESTMENT APPROACH
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political or financial events. The types
and maturities of the securities a bond fund purchases and the credit
quality of their issuers will impact a bond fund's reaction to these
events.
INTEREST RATE RISK. In general, bond prices rise when interest rates
fall and fall when interest rates rise. Longer-term bonds are usually
more sensitive to interest rate changes. In other words, the longer
the maturity of a bond, the greater the impact a change in interest
rates is likely to have on the bond's price. In addition, short-term
interest rates and long-term interest rates do not necessarily move in
the same amount or in the same direction. A short-term bond tends to
react to changes in short-term interest rates and a long-term bond
tends to react to changes in long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of
its issuer. Changes in the financial condition of an issuer, changes
in general economic conditions, and changes in specific economic
conditions that affect a particular type of issuer can impact the
credit quality of an issuer. Lower quality bonds generally tend to be
more sensitive to these changes than higher quality bonds.
MUNICIPAL MARKET RISK. Municipal securities are backed by the entity
that issued them and/or other revenue streams. Municipal security
values may be significantly affected by political changes, as well as
uncertainties in the municipal market related to taxation or the
rights of municipal securities holders.
FIDELITY'S APPROACH TO BOND FUNDS. The total return from a bond
includes both income and price gains or losses. In selecting
investments for a bond fund, FMR considers a bond's expected income
together with its potential for price gains or losses. While income is
the most important component of bond returns over time, a bond fund's
emphasis on income does not mean the fund invests only in the
highest-yielding bonds available, or that it can avoid losses of
principal.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the range of eligible investments for the fund. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market inefficiencies.
In structuring a bond fund, FMR allocates assets among different
market sectors (for example, general obligation bonds of a state or
bonds financing a specific project) and different maturities based on
its view of the relative value of each sector or maturity. The
performance of the fund will depend on how successful FMR is in
pursuing this approach.
LIMITED TERM MUNICIPAL INCOME seeks high current income that is free
from federal income tax, consistent with preservation of capital, by
investing in investment-grade municipal securities under normal
conditions. The fund normally maintains a dollar-weighted average
maturity of 12 years or less. FMR seeks to manage the fund so that it
generally reacts to changes in interest rates similarly to municipal
bonds with maturities of between seven and 10 years. As of December
31, 1996, the fund's dollar-weighted average maturity was
approximately 8.3 years.
The fund normally invests at least 80% of its assets in
municipal securities whose interest is free from federal income tax.
In addition, the fund may invest all of its assets in municipal
securities issued to finance private activities. The interest from
these securities is a tax-preference item for purposes of the federal
alternative minimum tax.
FMR may use various techniques to hedge a portion of the fund's risks,
but there is no guarantee that these strategies will work as intended.
When you sell your shares of the fund, they may be worth more or less
than what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. The fund does not expect to invest in federally taxable
obligations. The 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 the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed earlier in
this section. A complete listing of the fund's limitations and more
detailed information about the fund's investments are 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 unless it believes that they are consistent with the fund's
investment objective and policies and that doing so will help the fund
achieve its goal. Fund holdings and recent investment strategies are
detailed in 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 generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero
coupon bonds, do not pay current interest, but are sold at a
discount from their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
In addition, bond prices are also affected by the credit
quality of the issuer. Investment-grade debt securities are
medium- and high-quality securities. Some, however, may possess
speculative characteristics , and may be more sensitive to
economic changes and to changes in the financial condition of issuers.
RESTRICTIONS: Limited Term Municipal Income invests only in
investment-grade securities . A security is considered to be
investment-grade if it is rated investment-grade by Moody's Investors
Service, Standard & Poor's, Duff & Phelps Credit Rating Co., or Fitch
Investors Service, L.P., or is unrated but judged to be of equivalent
quality by FMR.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities.
They may be fully or partially backed by the local government, or by
the credit of a private issuer or the current or anticipated revenues
from specific projects or assets. Because many municipal securities
are issued to finance similar types of projects, especially those
relating to education, health care, housing, transportation, and
utilities, the municipal markets can be affected by conditions in
those sectors . In addition, all municipal securities may be
affected by uncertainties regarding their tax status, legislative
changes, or rights of municipal securities holders. A municipal
security may be owned directly or through a participation interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of
credit and liquidity enhancement, including letters of credit,
guarantees, puts and demand features , and insurance, provided
by foreign or domestic entities such as banks and other financial
institutions. These arrangements expose the fund to the credit of the
entity providing the credit or liquidity support. Changes in the
credit quality of the provider could affect the value of the security
and the fund's share price. In addition, in the case of foreign
providers of credit or liquidity support, extensive public
information about the provider may not be available, and unfavorable
political, economic, or governmental developments could affect its
ability to honor its commitment.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by a
municipal issuer. The value of these securities depends on many
factors, including changes in market interest rates, the availability
of information concerning the pool and its structure, prepayment
expectations, the credit quality of the underlying assets, and the
market's perception of the servicer of the loan pool, and any credit
enhancement provided.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a
benchmark rate changes. Inverse floaters have interest rates that move
in the opposite direction from a benchmark, often making the
security's market value more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipal issuers to acquire
land, equipment, or facilities. If the issuer stops making payments or
transfers its obligations to a private entity, the obligation could
lose value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories
and possessions such as Guam, the Virgin Islands, and Puerto Rico, and
their political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) a security to the
issuer or another party. In exchange for this benefit, a fund
may accept a lower interest rate. Demand features and standby
commitments are types of put features.
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
economic viability of a project or changes in tax incentives could
affect the price of these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, or other factors that affect security prices. These
techniques may involve derivative transactions such as buying and
selling options and futures contracts, entering into swap agreements,
and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with 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.
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 some illiquid securities and some
other 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.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The price of
the security could change during this period.
CASH MANAGEMENT. The fund may invest in money market securities and in
a money market fund available only to funds and accounts managed by
FMR or its affiliates, whose goal is to seek a high level of current
income exempt from federal income tax while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
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, the fund may
not purchase a security if, as a result, more than 5% would be
invested in the securities of any one issuer. This limitation
do es not apply to U.S. Government securities. The fund may
invest more than 25% of its total assets in tax-free securities that
finance similar types of projects.
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 331/3% 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.
The fund 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.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the
securities of any one issuer
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.
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. The fund also pays OTHER EXPENSES, which are
explained at right.
FMR may, from time to time, agree to reimburse the fund for management
fees and other expenses 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's management fee is calculated at an annual rate of
.10% of the fund's average net assets plus 5% of gross income.
The total management fee for the fiscal year ended December
1996 was .38%.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing the fund's
investments, and handling securities loans. For the fiscal year ended
December 1996, FSC received fees equal to .1 6 % of the fund's
average net assets.
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who
are not affiliated with Fidelity.
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 the fiscal year ended December
1996 was 27%. This rate varies 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 80 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.
You may purchase or sell shares of the fund through an
investment professional, including a broker, who may charge you a
transaction fee for this service. If you invest through FBSI, another
financial institution, or an investment professional, read their
program materials for any special provisions, additional service
features or fees that may apply to your investment in the fund.
Certain features of the fund, such as the minimum initial or
subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
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 $2,500
TO ADD TO AN ACCOUNT $250
Through regular investment plans* $100
MINIMUM BALANCE $ 2 ,000
* FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER
TO "INVESTOR SERVICES" PAGE .
These minimums may vary for investments through Fidelity Portfolio
Advisory Services or a Fidelity Payroll Deduction Program account in
the fund. 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
FIDELITY FUND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION, ACCOUNT WITH THE SAME REGISTRATION,
INCLUDING NAME, ADDRESS, AND INCLUDING 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 APPLICATION. (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO "FIDELITY
MAKE YOUR CHECK PAYABLE TO LIMITED TERM MUNICIPAL INCOME
"FIDELITY LIMITED TERM MUNICIPAL FUND ." INDICATE YOUR FUND ACCOUNT
INCOME FUND" MAIL TO THE ADDRESS NUMBER ON YOUR CHECK AND MAIL TO
INDICATED ON THE APPLICATION. THE ADDRESS PRINTED ON 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
AND CHECK TO A (SMALL SOLID BULLET) BRING YOUR CHECK TO A FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL CENTER. CALL 1-800-544-9797 FOR THE
1-800-544-9797 FOR THE CENTER CENTER NEAREST YOU.
NEAREST YOU.
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WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL 1-800-544-7777 TO SET UP YOUR (SMALL SOLID BULLET) WIRE TO:
ACCOUNT AND TO ARRANGE A WIRE BANKERS TRUST COMPANY,
TRANSACTION. BANK ROUTING #021001033,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO: ACCOUNT #00163053.
BANKERS TRUST COMPANY, SPECIFY " FIDELITY LIMITED TERM
BANK ROUTING #021001033, MUNICIPAL INCOME FUND " AND INCLUDE
ACCOUNT #00163053. YOUR ACCOUNT NUMBER AND YOUR
SPECIFY " FIDELITY LIMITED TERM NAME.
MUNICIPAL INCOME 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
$ 2 ,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 that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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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 TENANT, (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
SOLE PROPRIETORSHIP, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
UGMA, UTMA EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR, (SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
CONSERVATOR, GUARDIAN
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
AND ACCEPTED 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.
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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.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
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 and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
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 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
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 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
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 FOR AN AUTHORIZATION FORM.
(SMALL SOLID BULLET) CHANGES REQUIRE A NEW AUTHORIZATION FORM.
</TABLE>
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
$100 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of 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:
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.
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 a
tax-free fund could affect you. 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 the fiscal year ended December 1996, 100 % of the fund's
income dividends was free from federal income tax. 2.2 % 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 when the fund has realized but
not yet distributed income or capital gains, you will pay the full
price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
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, 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.
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.
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.
(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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $ 24 .00 per shareholder. It is expected
that accounts will be valued on the second Friday in November of each
year. Accounts opened after September 30 will not be subject to the
fee for that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. Th is fee will not be deducted from
Fidelity brokerage accounts, retirement accounts (except
non-prototype retirement accounts), accounts using regular investment
plans, or if total assets with Fidelity exceed $ 3 0,000.
Eligibility for the $ 3 0,000 waiver is determined by aggregating
Fidelity accounts maintained by FSC or FBSI which are registered under
the same social security number or which list the same social security
number for the custodian of a Uniform Gifts/Transfers to Minors Act
account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $ 2 ,000, you will be given
30 days' notice to reestablish the minimum balance. If you do not
increase your balance, Fidelity reserves the right to close your
account and send the proceeds to you. Your shares will be redeemed at
the NAV on the day your account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the fund
without reimbursement from the fund. 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 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
available for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification
number.
(small solid bullet) Before exchanging into a fund, read its
prospectus.
(small solid bullet) If you exchange into a fund with a sales charge,
you pay the percentage-point difference between that fund's sales
charge and any sales charge you have previously paid in connection
with the shares you are exchanging. For example, if you had already
paid a sales charge of 2% on your shares and you exchange them into a
fund with a 3% sales charge, you would pay an additional 1% sales
charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund
performance and shareholders, 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.
SUPPLEMENT TO THE FIDELITY LIMITED TERM MUNICIPAL INCOME FUND FEBRUARY
28, 1997 PROSPECTUS
Effective September 1, 1997, the following information replaces
similar information found in the "Key Facts" section on page 3:
STRATEGY: Invests normally in investment-grade municipal securities
while maintaining an average maturity of between three and 10 years.
Effective September 1, 1997, the following information replaces
similar information found in the "Investment Principles and Risks"
section beginning on page 9:
LIMITED TERM MUNICIPAL INCOME seeks high current income that is free
from federal income tax, consistent with preservation of capital, by
investing in investment-grade municipal securities under normal
conditions. The fund normally maintains a dollar-weighted average
maturity of between three and 10 years. FMR seeks to manage the fund
so that it generally reacts to changes in interest rates similarly to
municipal bonds with maturities of between seven and 10 years. As of
December 31, 1996, the fund's dollar-weighted average maturity was
approximately 8.3 years.
The following changes became effective April 1, 1997:
The minimum investments have been changed to the following:
TO OPEN AN ACCOUNT $10,000
TO ADD TO AN ACCOUNT $1,000
Through regular investment plans $500
MINIMUM BALANCE $5,000
The minimum check amount has been increased to $1,000.
References to the minimums throughout the prospectus are changed to
the above minimums.
The following information replaces similar information found in
"Expenses" on page 4:
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of a fund. In addition, you may be charged an annual
account maintenance fee if your balance falls below $2,500. See
"Transaction Details," page 23, for an explanation of how and when
these charges apply.
Maximum sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Exchange Fee None
Annual account maintenance fee $12.00
(for accounts under $2,500)
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The
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. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see page 14).
The following figures are based on historical expenses, adjusted to
reflect current fees, and are calculated as a percentage of average
net assets.
Management fee (after reimbursement) .37%
12b-1 fee None
Other expenses .18%
Total fund operating expenses .55%
(after reimbursement)
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:
After 1 year $ 6
After 3 years $ 18
After 5 years $ 31
After 10 years $ 69
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
Effective April 1, 1997, FMR voluntarily agreed to implement an
expense cap. FMR will reimburse the fund to the extent that total
operating expenses exceeds .55%. If this agreement was not in effect,
the management fee and total operating expenses would be .38% and
.56%, respectively.
