SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-50318)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 100 [X]
and
REGISTRATION STATEMENT (No. 811-2460)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 100 [X]
Fidelity Union Street Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(X ) on (December 20, 1997) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date
for a previously filed
post-effective amendment.
SPARTAN MARYLAND MUNICIPAL INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1...................................... Cover Page
2a.................................... Expenses
b, c............................... Contents; The Fund at a Glance; Who May Want to
Invest
3a.................................... Financial Highlights
b................................... *
c, d............................. Performance
4a i.............................. Charter
ii............................... The Fund at a Glance; Investment Principles and
Risks
b................................... Investment Principles and Risks
c................................... Who May Want to Invest; Investment Principles and
Risks
5a.................................... Charter
b i.............................. Cover Page; The Fund at a Glance; Charter; Doing
Business with Fidelity
ii.............................. Charter
iii............................. Expenses; Breakdown of Expenses
c................................ Charter
d.................................... Charter; Breakdown of Expenses
e.................................... Cover Page; Charter
f.................................... Expenses
g i.............................. Charter
ii............................... *
5A.................................. Performance
6a i................................. Charter
ii................................ How to Buy Shares; How to Sell Shares; Transaction
Details; Exchange Restrictions
iii................................ Charter
b.................................. *
c.................................. Transaction Details; Exchange Restrictions
d.................................. *
e.................................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g.............................. Dividends, Capital Gains, and Taxes
7 a.................................. Cover Page; Charter
b................................. Expenses; How to Buy Shares; Transaction Details
c.................................. Sales Charge Reductions and Waivers
d.................................. How to Buy Shares
e.................................. *
f................................ *
8...................................... How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9...................................... *
</TABLE>
* Not Applicable
SPARTAN MARYLAND MUNICIPAL INCOME FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, 11............................. Cover Page
12.................................... Description of the Trust
13a - c............................ Investment Policies and Limitations
d.................................. Portfolio Transactions
14a - c............................ Trustees and Officers
15a,b.......................... *
c.............................. Trustees and Officers
16a i................................ FMR, Portfolio Transactions
ii.............................. Trustees and Officers
iii.............................. Management Contract
b................................. Management Contract
c, d............................. Contracts with FMR Affiliates
e - g........................... *
h................................. Description of the Trust
i................................. Contracts with FMR Affiliates
17a .-d........................... Portfolio Transactions
e.............................. *
18a.................................. Description of the Trust
b................................. *
19a.................................. Additional Purchase and Redemption Information
b................................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c................................. *
20.................................... Distributions and Taxes
21a, b............................ Contracts with FMR Affiliates
c................................. *
22A ............................... *
22B................................. Performance
23.................................... Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a
copy of the fund's most recent financial report and portfolio listing,
or a copy of the Statement of Additional Information (SAI) dated
December 20, 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, NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SMD-pro-
1297
(fund number 429, trading symbol SMDMX)
Spartan Maryland Municipal Income seeks a high level of current income
free from federal income tax and Maryland state and county income
taxes by investing in municipal securities.
SPARTAN(REGISTERED TRADEMARK)
MARYLAND
MUNICIPAL INCOME
FUND
PROSPECTUS
DECEMBER 20, 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 tax-free income for Maryland residents. As with any
mutual fund, there is no assurance that the fund will achieve its
goal.
STRATEGY: Normally invests in investment-grade municipal securities
whose interest is free from federal income tax and Maryland state and
county income taxes. Managed to generally react to changes in
interest rates similarly to municipal bonds with maturities between
eight and 18 years.
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 August 31, 1997, the fund had over $ 40 million in
assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors in higher
tax brackets who seek high current income that is free from federal
and Maryland state and county income taxes.
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.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified
fund.
THE SPECTRUM OF
FIDELITY FUNDS
BROAD CATEGORIES OF FIDELITY
FUNDS ARE PRESENTED HERE IN
ORDER OF ASCENDING RISK.
GENERALLY, INVESTORS SEEKING TO
MAXIMIZE RETURN MUST ASSUME
GREATER RISK. SPARTAN MARYLAND
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.
Sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Redemption fee (Short-term trading fee) 0.50%
on shares held less than 180 days
(as a % of amount redeemed)
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. FMR is responsible for the payment
of all other fund expenses with certain limited exceptions. Expenses
are factored into the fund's share price or dividends and are not
charged directly to shareholder accounts (see "Breakdown of
Expenses" , page ).
The following figures are based on historical expenses, and are
calculated as a percentage of average net assets. FMR has entered into
an arrangement on behalf of the fund with the fund's custodian
whereby credits realized as a result of uninvested cash balances are
used to reduce fund expenses. Including th is reduction, the
total operating expenses presented in the table would have been
0.54 %.
Management fee .55%
12b-1 fee None
Other expenses .00 %
Total fund operating expenses .55 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transaction expenses and the fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
1 year $ 6
3 years $ 18
5 years $ 31
10 years $ 69
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses 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.
THE MANAGEMENT FEE IS PAID
FROM THE FUND'S ASSETS, AND ITS
EFFECT IS ALREADY FACTORED INTO
ANY QUOTED SHARE PRICE OR
RETURN. OTHER EXPENSES ARE
PAID BY FMR OUT OF THE FUND'S
MANAGEMENT FEE. ALSO, AS AN
INVESTOR, YOU MAY PAY CERTAIN
EXPENSES DIRECTLY.
(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>
1.Years ended August 31 1997 1996 1995 1994E 1993D
2.Net asset value, beginning
of period $ 9.850 $ 9.840 $ 9.640 $ 10.350 $ 10.000
3.Income from Investment
Operations .466 .488 .541 .543 .194
Net interest income
4. Net realized and unrealized
gain (loss) .323 .009 .198 (.697) .348
5. Total from investment
operations .789 .497 .739 (.154) .542
6.Less Distributions (.466) (.488) (.541) (.543) (.194)
From net interest income
7. From net realized gain (.003) -- -- -- --
8. In excess of net realized
gain -- -- -- (.020) --
9. Total distributions (.469) (.488) (.541) (.563) (.194)
10. Redemption fees added to
paid in capital .000 .001 .002 .007 .002
11.Net asset value, end of
period $ 10.170 $ 9.850 $ 9.840 $ 9.640 $ 10.350
12.Total returnB,C 8.17% 5.12% 8.07% (1.46)% 5.49%
13.RATIOS AND SUPPLEMENTAL DATA
14.Net assets, end of period
(000 omitted) $ 40,231 $ 45,359 $ 43,489 $ 41,464 $ 28,941
15.Ratio of expenses to average
net assets .55% .40%F .15%F .03%F .00%,F
16.Ratio of expenses to average
net assets after .54%G .39%G .15% .03% .00%
expense reductions
17.Ratio of net interest income
to average net 4.65% 4.91% 5.71% 5.45% 5.46%A
assets
18.Portfolio turnover rate 41% 74% 72% 64% 29%A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FROM APRIL 22, 1993 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31,
1993.
E EFFECTIVE SEPTEMBER 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.
F 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
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 September 1 through August 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 Life of
August 31, 1997 year fundA
Spartan Maryland 8.17% 5.77% B
Municipal Income
Lehman Bros. MD 4+ Yr. Muni. Bond Index 9.07% n/a
Lipper MD Muni. Debt 8.26% n/a
Funds Average
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Life of
August 31, 1997 year fundA
Spartan Maryland 8.17% 27.74% B
Municipal Income
Lehman Bros. MD 4+ Yr. Muni . Bond Index 9.07% n/a
Lipper MD Muni . Debt 8.26% n/a
Funds Average
A FROM APRIL 22, 1993 (COMMENCEMENT OF OPERATIONS)
B IF FMR HAD NOT REIMBURSED CERTAIN FUND EXPENSES DURING THESE
PERIODS, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
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.
LEHMAN BROTHERS MARYLAND 4 PLUS YEAR MUNICIPAL BOND INDEX is a total
return performance benchmark for Maryland investment-grade municipal
bonds with maturities of at least four years.
Unlike the f und'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 Maryland Municipal Debt
Funds Average. As of August 31, 1997 the average reflected the
performance of 35 mutual funds with similar investment objectives.
This average, published by Lipper Analytical Services, Inc., excludes
the effect of sales loads.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1994 1995 1996
SPARTAN MARYLAND MUNICIPAL INCOME -7.51% 17.80% 3.87%
Lipper Maryland Municipal Debt Funds Average -6.94% 16.76% 3.22%
Consumer Price Index 2.67% 2.54% 3.32%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 8, Col: 1, Value: -7.51
Row: 9, Col: 1, Value: 17.8
Row: 10, Col: 1, Value: 3.87
(LARGE SOLID BOX) Spartan Maryland
Municipal Income
The fund's recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
SPARTAN MARYLAND MUNICIPAL INCOME IS A MUTUAL FUND: an investment that
pools shareholders' money and invests it toward a specified goal. The
fund 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.
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 periodically 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
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
David Murphy is Vice President and manager of Spartan Maryland
Municipal Income, which he has managed since April 1997. He also
manages several other Fidelity funds. Mr. Murphy joined Fidelity as a
portfolio manager in 1989.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
UMB Bank, n.a. (UMB) is the fund's transfer agent, and is located at
1010 Grand Avenue, Kansas City, Missouri. UMB employs Fidelity Service
Company, Inc. (FSC) to perform transfer agent servicing functions for
the fund.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 228
(solid bullet) Assets in Fidelity mutual
funds: over $510 billion
(solid bullet) Number of shareholder
accounts: over 33 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 275
(checkmark)
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.
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
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 af fected by the credit quality
of its issuer. Changes in the financial condi tion of an i ssuer,
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 opportuni ties 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.
THE FUND seeks high current income that is free from federal
income tax and the Maryland state and county income taxes by investing
in investment-grade municipal securities under normal conditions.
Although the fund does not maintain an average maturity within a
specified range, FMR seeks to manage the fund so that it generally
reacts to changes in interest rates similarly to municipal bonds with
maturities between eight and 18 years. As of August 31, 1997, the
fund's dollar-weighted average maturity was approximately 11.1
years.
The fund normally invests in municipal securities. FMR normally
invests at least 65% of the fund's total assets in state municipal
securities and normally invests so that at least 80% of the fund's
income is free from federal income tax. In addition, FMR may invest
all of the fund's 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.
The fund's performance is affected by the economic and political
conditions within the state of Maryland. The ability of issuers to
repay their debt can be affected by many factors that impact the
economic vitality of either the state or a political subdivision
within the state. Maryland's rate of economic growth has been slower
in the 1990's than it had been during the 1980's. State revenues in
the beginning of this decade were less than expected and, because
Maryland's constitution requires a balanced budget, expenditures were
cut. More recently, revenues have increased and spending cuts have not
been necessary.
FMR may use various techniques to hedge a portion of a fund's
risks, but there is no guarantee that these strategies will work as
intended. When you sell your shares of a 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 and does not expect to invest in federally or state 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 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: The fund normally invests in investment-grade
securities, but reserves the right to invest up to 5% of its assets in
below investment-grade securities (sometimes called "junk bonds"). 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 by FMR to be of equivalent quality.
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 risk 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 p roviders 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.
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.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of Maryland or its counties (including the City of
Baltimore), municipalities, authorities, or other subdivisions.
The ability of issuers to repay their debt can be affected by many
factors that impact the economic vitality of either the state or a
region within the state.
Other municipal securities free from Maryland taxation
include obligations of the U.S. territories and possessions such as
Guam, the Virgin Islands, Puerto Rico, and their political
subdivisions and public corporations. The economy of Puerto Rico is
closely linked to the U.S. economy, and will be affected by the
strength of the U.S. dollar, interest rates, the price stability of
oil imports, and the continued existence of favorable tax incentives.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. The value of these securities depends on
many factors, including changes in interest rates, the availability of
information concerning the pool and its structure, the credit quality
of the underlying assets, the market's perception of the servicer of
the pool, and any credit enhancement provided. In addition, these
securities may be subject to prepayment risk.
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, making the security's
market value more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire
land, equipment, or facilities. If the municipality stops making
payments or transfers its obligations to a private entity, the
obligation could lose value or become taxable.
PUT FEATURES entitle the holder to put (sell back) a security to the
issuer or another party. In exchange for this benefit, the 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
viability of a project or tax incentives could affect the value and
credit quality 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 values. These
techniques may involve derivative transactions such as buying and
selling options and futures contracts and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return
characteristics of the fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with the fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of
the fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
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 market value of the security could
change during this period.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one industry
or type of project. Economic, business, or political changes can
affect all securities of a similar type. A fund that is not
diversified may be more sensitive to changes in the market value of a
single issuer or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter, the fund
does not invest more than 25% of its total assets in any one issuer
and, with respect to 50% of total assets, does not invest more than 5%
of its total assets in any issuer. These limitations do not apply to
U.S. Government securities or to securities of other investment
companies. 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 a high level of current income exempt from federal
income tax and Maryland state and county income taxes.
Under normal conditions, the fund will invest so that at least 80% of
its income is exempt from federal income tax.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% 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.
FMR may, from time to time, agree to reimburse the fund for management
fees above a specified limit. FMR retains the ability to be repaid by
the fund if expenses fall below the specified limit prior to the end
of the fiscal year. Reimbursement arrangements, which may be
terminated at any time without notice, can decrease the fund's
expenses and boost its performance.
MANAGEMENT FEE
The fund's management fee is calculated and paid to FMR every
month. FMR pays all of the other expenses of the fund with limited
exceptions. The fund's annual management fee rate is 0.55% of its
average net assets.
UMB is the transfer and service agent for the fund. UMB has entered
into sub-agreements with FSC under which FSC performs transfer agency,
dividend disbursing, shareholder servicing, and accounting functions
for the fund. These services include processing shareholder
transactions, valuing the fund's investments, and calculating the
fund's share price and dividends. FMR, not the fund, pays for these
services.
The fund also pays other expenses, such as brokerage fees and
commissions, interest on borrowings, taxes, and the compensation of
trustees who are not affiliated with Fidelity.
The fund has adopted a DISTRIBUTION AND SERVICE PLAN. This plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay
FDC for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has not authorized such payments.
The fund's portfolio turnover rate for the fiscal year ended August
31, 1997 was 41 %. 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 PRICE TO BUY ONE SHARE of the fund is the fund's net asset
value per share (NAV). The fund's shares are sold without a sales
charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. The fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application
and mail it along with your check. You may also open your account in
person or by wire as described on page . If there is no application
accompanying this prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
If you buy shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by
exchange to another Fidelity fund, the payment may be delayed for up
to seven business days to ensure that your previous investment has
cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
TO ADD TO AN ACCOUNT $1,000
Through regular investment plans* $500
MINIMUM BALANCE $5,000
*FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
These minimums may vary for investments through Fidelity Portfolio
Advisory Services. Refer to the program materials for details.
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TO OPEN AN TO ADD TO AN
ACCOUNT ACCOUNT
PHONE
1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER (SMALL SOLID BULLET) EXCHANGE FROM
FIDELITY FUND ACCOUNT ANOTHER FIDELITY
WITH THE SAME FUND ACCOUNT WITH
REGISTRATION, INCLUDING THE SAME
NAME, ADDRESS, AND REGISTRATION,
TAXPAYER ID NUMBER. INCLUDING NAME,
ADDRESS, AND
TAXPAYER ID
NUMBER.
(SMALL SOLID BULLET) USE FIDELITY MONEY
LINE TO TRANSFER
FROM YOUR BANK
ACCOUNT. CALL BEFORE
YOUR FIRST USE TO
VERIFY THAT THIS
SERVICE IS IN PLACE
ON YOUR ACCOUNT.
MAXIMUM MONEY
LINE: UP TO
$100,000.
MAIL
(MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND SIGN THE (SMALL SOLID BULLET) MAKE YOUR CHECK
APPLICATION. MAKE YOUR PAYABLE TO THE
CHECK PAYABLE TO THE COMPLETE NAME OF
COMPLETE NAME OF THE THE FUND. INDICATE
FUND. MAIL TO THE YOUR FUND ACCOUNT
ADDRESS INDICATED ON NUMBER ON YOUR
THE APPLICATION. CHECK AND MAIL TO
THE ADDRESS PRINTED
ON YOUR ACCOUNT
STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL
1-800-544-6666 FOR
INSTRUCTIONS.
IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR APPLICATION (SMALL SOLID BULLET) BRING YOUR CHECK TO
AND CHECK A FIDELITY INVESTOR
TO A FIDELITY INVESTOR CENTER. CALL
CENTER. CALL 1-800-544-9797 FOR
1-800-544-9797 FOR THE CENTER NEAREST
THE CENTER NEAREST YOU.
YOU.
WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL 1-800-544-7777 (SMALL SOLID BULLET) WIRE TO:
TO SET UP YOUR ACCOUNT BANKERS TRUST
AND TO ARRANGE A WIRE COMPANY,
TRANSACTION. BANK ROUTING
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS #021001033,
TO: ACCOUNT
BANKERS TRUST #00163053.
COMPANY, SPECIFY THE COMPLETE
BANK ROUTING NAME OF THE FUND
#021001033, AND INCLUDE YOUR
ACCOUNT #00163053. ACCOUNT NUMBER AND
SPECIFY THE COMPLETE YOUR NAME.
NAME OF THE FUND AND
INCLUDE YOUR NEW
ACCOUNT NUMBER AND
YOUR NAME.
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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HOW TO SELL SHARES
You can arrange to take money out of your fun d account
at any time by selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of the fund is the fund's NAV minus the
short-term trading fee, if applicable. If you sell shares of the fund
after hold ing them less than 180 days, the fund will deduct
a short-term trading fee equal to 0.50 % of the value of those
shares.
Your shares will be sold at the next NAV calculated after your
order is received in proper form, minus the short-term trading fee, if
applicable. The fund's NAV is normally calculated each business day at
4:00 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$5,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table 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
ACCOUNT TYPE SPECIAL REQUIREMENTS
IF YOU SELL SHARES OF THE FUND AFTER HOLDING THEM LESS THAN
180 DAYS, THE FUND WILL DEDUCT A SHORT-TERM TRADING FEE
EQUAL TO 0.50% OF THE VALUE OF THOSE SHARES.
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PHONE 1-800-544-777 (PHONE_GRAPHIC) ALL ACCOUNT (SMALL SOLID BULLET) MAXIMUM CHECK
TYPES REQUEST: $100,000.
(SMALL SOLID BULLET) FOR MONEY LINE
TRANSFERS TO YOUR
BANK ACCOUNT;
MINIMUM: $10;
MAXIMUM: UP TO
$100,000.
(SMALL SOLID BULLET) YOU MAY EXCHANGE
TO OTHER FIDELITY
FUNDS IF BOTH
ACCOUNTS ARE
REGISTERED WITH THE
SAME NAME(S),
ADDRESS, AND
TAXPAYER ID NUMBER.
MAIL OR IN PERSON (MAIL_GRAPHIC)(HAND_GRAPHIC) INDIVIDUAL, (SMALL SOLID BULLET) THE LETTER OF
JOINT INSTRUCTION MUST BE
TENANT, SIGNED BY ALL PERSONS
SOLE PROPRI REQUIRED TO SIGN FOR
ETORSHIP, TRANSACTIONS, EXACTLY
UGMA, UT AS THEIR NAMES APPEAR
MA ON THE ACCOUNT.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN
THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF
THE TRUSTEE'S NAME IS
BUSINESS OR NOT IN THE ACCOUNT
ORGANIZATIO REGISTRATION, PROVIDE A
N COPY OF THE TRUST
DOCUMENT CERTIFIED
WITHIN THE LAST 60
DAYS.
(SMALL SOLID BULLET) AT LEAST ONE PERSON
EXECUTOR, AUTHORIZED BY
ADMINISTRAT CORPORATE RESOLUTION
OR, TO ACT ON THE ACCOUNT
CONSERVATOR MUST SIGN THE LETTER.
, GUARDIAN (SMALL SOLID BULLET) INCLUDE A CORPORATE
RESOLUTION WITH
CORPORATE SEAL OR A
SIGNATURE GUARANTEE.
(SMALL SOLID BULLET) CALL
1-800-544-6666 FOR
INSTRUCTIONS.
WIRE (WIRE_GRAPHIC) ALL ACCOUNT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR
TYPES THE WIRE FEATURE
BEFORE USING IT. TO
VERIFY THAT IT IS IN
PLACE, CALL
1-800-544-6666.
MINIMUM WIRE:
$5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION
REQUEST MUST BE
RECEIVED IN PROPER
FORM BY FIDELITY
BEFORE 4:00 P.M.
EASTERN TIME FOR
MONEY TO BE WIRED
ON THE NEXT BUSINESS
DAY.
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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT 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
MINIMUM FREQUENCY SETTING UP OR
$500 MONTHLY OR QUARTERLY CHANGING
(SMALL SOLID BULLET) FOR A NEW ACCOUNT,
COMPLETE THE
APPROPRIATE SECTION ON
THE FUND APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS,
CALL 1-800-544-6666
FOR AN APPLICATION.
(SMALL SOLID BULLET) TO CHANGE THE AMOUNT
OR FREQUENCY OF YOUR
INVESTMENT, CALL
1-800-544-6666 AT
LEAST THREE BUSINESS
DAYS PRIOR TO YOUR
NEXT SCHEDULED
INVESTMENT DATE.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR
$500 EVERY PAY PERIOD CHANGING
(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.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
MINIMUM FREQUENCY SETTING UP OR
$500 Monthly, bimonthly, CHANGING
quarterly, or annually (small solid bullet) To establish, call
1-800-544-6666
after both accounts
are opened.
(small solid bullet) To change the amount
or frequency of your
investment, call
1-800-544-6666.
A BECAUSE 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 October 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.
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.
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 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 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. In addition, Maryland state
taxes will be imposed on 50% of any such "tax preference" items (in
excess of certain statutory amounts).
To the extent the fund's income dividends and capital gain
distributions are derived from tax-free investments issued by Maryland
Issuers, they will be free from Maryland state and county taxes
(including City of Baltimore local taxes). If any capital gains are
earned from the fund's securities issued by U.S. territories or
possessions, states other than Maryland, or the District of Columbia,
they are subject to Maryland state and county taxes (including City of
Baltimore local taxes).
During the fiscal year ended August 31, 1997, 100 % of the
fund's income dividends was free from federal income tax and
100 % was free from Maryland taxes. 7.6 % 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. F SC normally calculates the fund's NAV as of
the close of business of the NYSE, normally 4:00 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 information
furnished by a pricing service or market quotations, if available, or
by another method that the Board of Trustees believes accurately
reflects fair value.
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 OR ELECTRONICALLY.
Fidelity will not be responsible for any losses
resulting from unauthorized transactions if it follows reasonable
security procedures designed to verify the identity of the
investor. Fidelity will request personalized security codes or
other information, and may also record calls. For transactions
conducted through the Internet, Fidelity recommends the use of an
Internet browser with 128-bit encryption. You should verify the
accuracy of your confirmation statements immediately after you receive
them. If you do not want the ability to redeem and exchange by
telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or 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 shares will be
purchased at the next NAV calculated after your investmen t is
received in proper form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) 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 canceled and you could be liable for any losses or fees the fund or
its transfer agent has incurred. 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 order is received in proper form,
minus the short-term trading fee, if applicable. 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.
A SHORT-TERM TRADING FEE of .50% will be deducted from the
redemption amount if you sell your shares of Spartan Maryland
Municipal Income Fund after holding them less than 180 days. This fee
is paid to the fund rather than Fidelity, and is designed to offset
the brokerage commissions, market impact, and other costs associated
with fluctuations in fund asset levels and cash flow caused by
short-term shareholder trading.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV, minus
the short-term trading fee, if applicable, 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
fees of up to 1.00% on purchases, administrative fees of up to $7.50,
and trading fees of up to 1.50% on exchanges. Check each fund's
prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN (registered trademark) MARYLAND MUNICIPAL INCOME FUND
A FUND OF FIDELITY UNION STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
D ECEMBER 20 , 1997
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current Prospectus dated
December 20, 1997 . Please retain this document for future
reference. The fund's Annual Report is a separate document supplied
with this SAI. To obtain a free additional copy of the Prospectus or
an Annual Report, please call Fidelity at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Considerations Affecting Maryland
Special Considerations Affecting Puerto Rico
Portfolio Transactions
Valuation
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Distribution and Service Plan
Contracts with FMR Affiliates
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB) and
Fidelity Service Company, Inc. (FSC)
SMD-ptb-1 0 97
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of the fund's assets that
may be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (1940
Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with
the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that
the fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a
U.S. territory or possession or a state or local government, or a
political subdivision of any of the foregoing) if, as a result, more
than 25% of the fund's total assets would be invested in securities of
companies whose principal business activities are in the same
industry;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(6) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities); or
(7) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(8) The fund may, not withstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) In order to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended, the
fund currently intends to comply with certain diversification limits
imposed by Subchapter M.
(ii) The fund does not currently intend to sell securities
short, unless it owns or has the right to obtain securities equivalent
in kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
(iii ) The fund does not currently intend to purchase securities
on margin, except that the fund may obtain such short-term credits as
are necessary for the clearance of transactions, and provided that
margin payments in connection with futures contracts and options on
futures contracts shall not constitute purchasing securities on
margin.
(iv ) The fund may borrow money only (a) from a bank or from a
registered investment company or portfolio for which FMR or an
affiliate serves as investment adviser or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements
are treated as borrowings for purposes of fundamental investment
limitation (2)). The fund will not purchase any security while
borrowings representing more than 5% of its total assets are
outstanding. The fund will not borrow from other funds advised by FMR
or its affiliates if total outstanding borrowings immediately after
such borrowing would exceed 15% of the fund's total assets.
(v ) The fund does not currently intend to purchase any security
if, as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) The fund does not currently intend to invest all of its
assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For purposes of limitation (4) , FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For purposes of limitation (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the 1940 Act . These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
Government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued
by the Securities and Exchange Commission (SEC), the Board of Trustees
has established and periodically reviews procedures applicable to
transactions involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on
a delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place
after the customary settlement period for that type of security.
Typically, no interest accrues to the purchaser until the security is
delivered. The fund may receive fees for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund
assumes the rights and risks of ownership, including the risk of price
and yield fluctuations. Because the fund is not required to pay for
securities until the delivery date, these risks are in addition to the
risks associated with the fund's other investments. If the fund
remains substantially fully invested at a time when delayed-delivery
purchases are outstanding, the delayed-delivery purchases may result
in a form of leverage. When delayed-delivery purchases are
outstanding, the fund will set aside appropriate liquid assets in a
segregated custodial account to cover its purchase obligations. When
the fund has sold a security on a delayed-delivery basis, the fund
does not participate in further gains or losses with respect to the
security. If the other party to a delayed-delivery transaction fails
to deliver or pay for the securities, the fund could miss a favorable
price or yield opportunity, or could suffer a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the fund does
not intend to invest in securities whose interest is federally
taxable. However, from time to time on a temporary basis, the fund may
invest a portion of its assets in fixed-income obligations whose
interest is subject to federal income tax.
Should the fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These
would include obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities; obligations of domestic banks;
and repurchase agreements. The fund's standards for high-quality,
taxable obligations are essentially the same as those described by
Moody's Investors Service, Inc. (Moody's) in rating corporate
obligations within its two highest ratings of Prime-1 and Prime-2, and
those described by Standard & Poor's (S&P) in rating corporate
obligations within its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax exemption
for interest on municipal obligations are introduced before Congress
from time to time. Proposals also may be introduced before
M aryland legislature that would affect the state tax treatment
of the fund's distributions. If such proposals were enacted, the
availability of municipal obligations and the value of the fund's
holdings would be affected and the Trustees would reevaluate the
fund's investment objective and policies.
FUTURES AND OPTIONS. The following sections pertain to futures and
options: Asset Coverage for Futures and Options Positions, Combined
Positions, Correlation of Price Changes, Futures Contracts, Futures
Margin Payments, Limitations on Futures and Options Transactions,
Liquidity of Options and Futures Contracts, OTC Options, Purchasing
Put and Call Options, and Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the Securities and Exchange
Commission with respect to coverage of options and futures
strategies by mutual funds, and if the guidelines so require will set
aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless
they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of the fund's
assets could impede portfolio management or the fund's ability to meet
redemption requests or other current obligations.
COMBINED POSITIONS. The fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the
overall position. For example, the fund may purchase a put option and
write a call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined
position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely
that the standardized contracts available will not match the fund's
current or anticipated investments exactly. The fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which it typically invests, which involves a risk that the options or
futures position will not track the performance of the fund's other
investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the
fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result
from differing levels of demand in the options and futures markets and
the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The fund may purchase or sell
options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in
all cases. If price changes in the fund's options or futures positions
are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
FUTURES CONTRACTS. When the fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified
future date. When the fund sells a futures contract, it agrees to sell
the underlying instrument at a specified future date. The price at
which the purchase and sale will take place is fixed when the fund
enters into the contract. Some currently available futures contracts
are based on specific securities, such as U.S. Treasury bonds or
notes, and some are based on indices of securities prices, such as the
Bond Buyer Municipal Bond Index. Futures can be held until their
delivery dates, or can be closed out before then if a liquid secondary
market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore,
purchasing futures contracts will tend to increase the fund's exposure
to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument
directly. When the fund sells a futures contract, by contrast, the
value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much
as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with a
futures broker, known as a futures commission merchant (FCM), when the
contract is entered into. Initial margin deposits are typically equal
to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value
on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of the
fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of the fund, the fund may be entitled
to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses
to the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed
a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The fund intends to comply with Rule
4.5 under the Commodity Exchange Act, which limits the extent to which
the fund can commit assets to initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of
the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options
if, as a result, the fund's total obligations upon settlement or
exercise of purchased futures contracts and written put options would
exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options
purchased by the fund would exceed 5% of the fund's total assets.
These limitations do not apply to options attached to or acquired or
traded together with their underlying securities, and do not apply to
securities that incorporate features similar to options.
The above limitations on the fund's investments in futures contracts
and options, and the fund's policies regarding futures contracts and
options discussed elsewhere in this SA I, may be changed as
regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for the fund to enter into new positions
or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold
a position until delivery or expiration regardless of changes in its
value. As a result, the fund's access to other assets held to cover
its options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through
negotiation with the other party to the option contract. While this
type of arrangement allows the fund greater flexibility to tailor an
option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing
organization of the exchanges where they are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this
right, the fund pays the current market price for the option (known as
the option premium). Options have various types of underlying
instruments, including specific securities, indices of securities
prices, and futures contracts. The fund may terminate its position in
a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the fund
will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the
strike price. The fund may also terminate a put option position by
closing it out in the secondary market at its current price, if a
liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss
(limited to the amount of the premium paid, plus related transaction
costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right
to purchase, rather than sell, the underlying instrument at the
option's strike price. A call buyer typically attempts to participate
in potential price increases of the underlying instrument with risk
limited to the cost of the option if security prices fall. At the same
time, the buyer can expect to suffer a loss if security prices do not
rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it
takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the fund assumes the
obligation to pay the strike price for the option's underlying
instrument if the other party to the option chooses to exercise it.
When writing an option on a futures contract, the fund will be
required to make margin payments to an FCM as described above for
futures contracts. The fund may seek to terminate its position in a
put option it writes before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not
liquid for a put option the fund has written, however, the fund must
continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it
is likely that the writer will also profit, because it should be able
to close out the option at a lower price. If security prices fall, the
put writer would expect to suffer a loss. This loss should be less
than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the
effects of a price decline. At the same time, because a call writer
must be prepared to deliver the underlying instrument in return for
the strike price, even if its current value is greater, a call writer
gives up some ability to participate in security price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of the fund's investments and, through
reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of the fund's investments,
FMR may consider various factors, including (1) the frequency of
trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender
features), and (5) the nature of the marketplace for trades (including
the ability to assign or offset the fund's rights and obligations
relating to the investment).
Investments currently considered by the fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However,
with respect to over-the-counter options the fund writes, all or a
portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and
terms of any agreement the fund may have to close out the option
before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 10%
of its net assets was invested in illiquid securities, it would seek
to take appropriate steps to protect liquidity.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or
other financial indicators. Indexed securities typically, but not
always, are debt securities or deposits whose value at maturity or
coupon rate is determined by reference to a specific instrument or
statistic. Indexed securities may have principal payments as well as
coupon payments that depend on the performance of one or more interest
rates. Their coupon rates or principal payments may change by several
percentage points for every 1% interest rate change. One example of
indexed securities is inverse floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are
indexed, and may also be influenced by interest rate changes. At the
same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates.
Indexed securities may be more volatile than the underlying
instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, the fund has received permission to lend
money to, and borrow money from, other funds advised by FMR or its
affiliates, but it currently intends to participate in this program
only as a borrower. Interfund borrowings normally extend overnight,
but can have a maximum duration of seven days. The fund will borrow
through the program only when the costs are equal to or lower than the
costs of bank loans. Loans may be called on one day's notice, and the
fund may have to borrow from a bank at a higher interest rate if an
interfund loan is called or not renewed.
INVERSE FLOATERS. have variable interest rates that typically move in
the opposite direction from prevailing short-term interest rate levels
- - rising when prevailing short-term interest rates fall, and vice
versa. This interest rate feature can make the prices of inverse
floaters considerably more volatile than bonds with comparable
maturities.
LOWER-QUALITY MUNICIPAL SECURITIES. The fund may invest a portion of
its assets in lower-quality municipal securities as described in the
Prospectus.
While the market for Maryland municipals is considered to be adequate,
adverse publicity and changing investor perceptions may affect the
ability of outside pricing services used by the fund to value its
portfolio securities, and the fund's ability to dispose of
lower-quality bonds. The outside pricing services are monitored by FMR
and reported to the Board to determine whether the services are
furnishing prices that accurately reflect fair value. The impact of
changing investor perceptions may be especially pronounced in markets
where municipal securities are thinly traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to
legislation or litigation involving the taxation of municipal
securities or the rights of municipal securities holders in the event
of a bankruptcy. Municipal bankruptcies are relatively rare, and
certain provisions of the U.S. Bankruptcy Code governing such
bankruptcies are unclear and remain untested. Further, the application
of state law to municipal issuers could produce varying results among
the states or among municipal securities issuers within a state. These
legal uncertainties could affect the municipal securities market
generally, certain specific segments of the market, or the relative
credit quality of particular securities. Any of these effects could
have a significant impact on the prices of some or all of the
municipal securities held by a fund.
MUNICIPAL SECTORS:
HEALTH CARE. The health care industry is subject to regulatory action
by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for
the health care industry is payments from the Medicare and Medicaid
programs. As a result, the industry is sensitive to legislative
changes and reductions in governmental spending for such programs.
Numerous other factors may affect the industry, such as general and
local economic conditions; demand for services; expenses (including
malpractice insurance premiums); and competition among health care
providers. In the future, the following elements may adversely affect
health care facility operations: adoption of legislation proposing a
national health insurance program; other state or local health care
reform measures; medical and technological advances which dramatically
alter the need for health services or the way in which such services
are delivered; changes in medical coverage which alter the traditional
fee-for-service revenue stream; and efforts by employers, insurers,
and governmental agencies to reduce the costs of health insurance and
health care services.
HOUSING. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They
generally are secured by the revenues derived from mortgages purchased
with the proceeds of the bond issue. It is extremely difficult to
predict the supply of available mortgages to be purchased with the
proceeds of an issue or the future cash flow from the underlying
mortgages. Consequently, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner
repayments will create an irregular cash flow. Many factors may affect
the financing of multi-family housing projects, including acceptable
completion of construction, proper management, occupancy and rent
levels, economic conditions, and changes to current laws and
regulations.
MUNICIPAL LEASES and participation interests therein may take the form
of a lease, an installment purchase, or a conditional sale contract
and are issued by state and local governments and authorities to
acquire land or a wide variety of equipment and facilities. Generally,
the fund will not hold such obligations directly as a lessor of the
property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest
gives the fund a specified, undivided interest in the obligation in
proportion to its purchased interest in the total amount of the
obligation.
Municipal leases frequently have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the
leased asset to pass to the governmental issuer) have evolved as a
means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for
the issuance of debt. Many leases and contracts include
"non-appropriation clauses" providing that the governmental issuer has
no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance
limitations.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the
fund to buy refunded municipal obligations at a stated price and yield
on a settlement date that may be several months or several years in
the future. The fund generally will not be obligated to pay the full
purchase price if it fails to perform under a refunding contract.
Instead, refunding contracts generally provide for payment of
liquidated damages to the issuer (currently 15-20% of the purchase
price). The fund may secure its obligations under a refunding contract
by depositing collateral or a letter of credit equal to the liquidated
damages provisions of the refunding contract. When required by SEC
guidelines, the fund will place liquid assets in a segregated
custodial account equal in amount to its obligations under refunding
contracts.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. To
protect the fund from risk that the original seller will not fulfill
its obligation, the securities are held in an account of the fund at a
bank, marked-to-market daily, and maintained at a value at least equal
to the sale price plus the accrued incremental amount. While it does
not presently appear possible to eliminate all risks from these
transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well as
delays and costs to the fund in connection with bankruptcy
proceedings), it is the fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse
between the time it decides to seek registration and the time it may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, the fund might obtain a less favorable price than prevailed
when it decided to seek registration of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
fund sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the
instrument at a particular price and time. While a reverse repurchase
agreement is outstanding, the fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. The fund will enter into reverse repurchase agreements
only with parties whose creditworthiness has been found satisfactory
by FMR. Such transactions may increase fluctuations in the market
value of the fund's assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day
settlement at an exercise price equal to the amortized cost of the
underlying security plus accrued interest, if any, at the time of
exercise. The fund may acquire standby commitments to enhance the
liquidity of portfolio securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a
third party at any time. The fund may purchase standby commitments
separate from or in conjunction with the purchase of securities
subject to such commitments. In the latter case, the fund would pay a
higher price for the securities acquired, thus reducing their yield to
maturity.
Issuers or financial intermediaries may obtain letters of credit or
other guarantees to support their ability to buy securities on demand.
FMR may rely upon its evaluation of a bank's credit in determining
whether to support an instrument supported by a letter of credit. In
evaluating a foreign bank's credit, FMR will consider whether adequate
public information about the bank is available and whether the bank
may be subject to unfavorable political or economic developments,
currency controls, or other governmental restrictions that might
affect the bank's ability to honor its credit commitment.
Standby commitments are subject to certain risks, including the
ability of issuers of standby commitments to pay for securities at the
time the commitments are exercised; the fact that standby commitments
are not marketable by the fund; and the possibility that the
maturities of the underlying securities may be different from those of
the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term, fixed-rate, tax-exempt bond (generally held pursuant to a
custodial arrangement) with a tender agreement that gives the holder
the option to tender the bond at its face value. As consideration for
providing the tender option, the sponsor (usually a bank,
broker-dealer, or other financial institution) receives periodic fees
equal to the difference between the bond's fixed coupon rate and the
rate (determined by a remarketing or similar agent) that would cause
the bond, coupled with the tender option, to trade at par on the date
of such determination. After payment of the tender option fee, the
fund effectively holds a demand obligation that bears interest at the
prevailing short-term tax-exempt rate. In selecting tender option
bonds for the fund, FMR will consider the creditworthiness of the
issuer of the underlying bond, the custodian, and the third party
provider of the tender option. In certain instances, a sponsor may
terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment
formulas that help stabilize their market values. Many variable and
floating rate instruments also carry demand features that permit the
fund to sell them at par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender
options or demand features that permit the fund to tender (or put) the
bonds to an institution at periodic intervals and to receive the
principal amount thereof. The fund considers variable rate instruments
structured in this way (Participating VRDOs) to be essentially
equivalent to other VRDOs it purchases. The IRS has not ruled whether
the interest on Participating VRDOs is tax-exempt and, accordingly,
the fund intends to purchase these instruments based on opinions of
bond counsel. A fund may also invest in fixed-rate bonds that are
subject to third party puts and in participation interests in such
bonds held by a bank in trust or otherwise.
ZERO COUPON BONDS do not make regular interest payments. Instead, they
are sold at a deep discount from their face value and are redeemed at
face value when they mature. Because zero coupon bonds do not pay
current income, their prices can be very volatile when interest rates
change. In calculating its daily dividend, the fund takes into account
as income a portion of the difference between a zero coupon bond's
purchase price and its face value.
SPECIAL CONSIDERATIONS AFFECTING MARYLAND
According to 1990 Census reports, Maryland's population in that year
was 4,797,893, reflecting an increase of 13.8% from the 1980 Census.
Maryland's population is concentrated in urban areas; the eight
counties and Baltimore City located in the Baltimore and Washington
Corridor contain 37.4% of the State's land area and 86.9 % of
its population. The estimated 1990 population for the Baltimore
Standard Metropolitan Statistical Area was 2,382 ,172 and for
the Maryland portion of the Washington Standard Metropolitan
Statistical Area, 1,789,029 . Overall Maryland's population per
square mile in 1990 was 487.7. The Maryland Office of Planning
reported that the total population of the State of Maryland had risen
to 5,0 71,600 in 199 6 .
Total personal income in Maryland grew at annual rates between 8.1%
and 8.7 % in each of the years 1986 through 19 90 , but
fell to a rate of growth of 3. 0 % in 1991. The rate in 1992,
however, increased by 4. 0 % and increased by an additional
4. 1 % in 1993, 5.2 % in 1994, 4.9% in 1995, and 4.0% in
1996. Similarly, per capita personal income, which had grown at a rate
of no lower than 6.2% for the period from 1972 to 1989, grew at a rate
of 4.8% in 1990 and 1.7% in 1991. The annual rate in 1992, however,
increased by 3.0% and an additional 3.2% in 1993, 4.3% in 1994, 4.0%
in 1995, and 3.3% in 1996. Unemployment in Maryland peaked in 1982 at
8.4%, then decreased steadily to a low of 3.7% in 1989. In 1990,
unemployment increased to 4.7%, and increased further to 6.0% in 1991
and 6.7% in 1992 before dropping to 6.2% in 1993, to 5.1% in 1994
where it remained in 1995 bef ore dropping again to 4.9% in
1996 .
Retail sales in Maryland dropped by 2.2% in 1991, but rebounded and
grew by 0.2% in 1992, 6.1% in 1993, 9.6% in 1994, 2.9% in 1995, and
1.5% in 1996 versus nationwide growth of 0.6%, 4.8%, 6.5%, 7.4%, 4.6%,
and 4.9% in such years, respectively.
Services (including mining), wholesale and retail trade, government
and manufacturing (primarily painting and publishing, food and kindred
products, instruments and related products, industrial machinery,
electronic equipment and chemical and allied products) are the leading
areas of employment in the State of Maryland. In contrast to the
nation as a whole, more people in Maryland are employed in government
than in manufacturing (19. 1 % versus 7.9 % in 1996 in
Maryland compared to 16. 3 % versus 15. 5 % in the U.S. as a
whole). Between 197 6 and 1996, total manufacturing wage and
salary employment decreased by 2 5 .2%, while total
non - manufacturing wage and salary employment increased 60.5%.
The State's total expenditures for the fiscal years ending June 30,
1994, 1995, and 1996 were $12.4 billion, $13.5 billion, and $14.1
billion respectively. Total expenditures for fiscal year 199 7
were estimated at $15.2 billion as of July 30, 1997. The State's
General Fund, representing 55%-60% of each year's total budget, had on
a budgetary basis an unreserved surplus of $6 0 million in
fiscal year 1994, and additional unreserved surpluses of $133 million
and 13.1 million in fiscal years 1995 and 1996 respectively. The State
Constitution mandates a balanced budget.
On April 8 , 1997, the General Assembly approved the budget for
fiscal year 1998. The Budget includes $3.1 billion in aid to local
governments reflecting a $200 million increase in funding over 1996.
Based on the 1998 Budget, it is estimated that the General Fund
surplus on a budgetary basis at June 30, 1998 will be approximately
$ 27.9 million . In addition, it is estimated that the balance in
the Revenue Stabilization Account of the State Reserve Fund (which
was established in 1986 to retain State revenues for future needs and
to reduce the need for future tax increase) at June 30,
199 8 will be $ 554 million.
The Budget incorporates the first year of a five year phase-in of a
10% reduction in personal income taxes estimated to result in a
reduction of revenues of $38.5 million in fiscal year 1998 (and
estimated to reduce revenues by $450 million when fully phased in).
The Budget also includes the first year of additional funding pursuant
to legislation enacted incorporating education-related Court-issued
consent decrees between the State and Baltimore City. The City is to
receive $230 million in additional operating funds over the next 5
fiscal years.
The State of Maryland and its various political subdivisions issue a
number of different kinds of municipal obligations, including general
obligation bonds, supported by tax collections, revenue bonds payable
from certain identified tax levies or revenue streams, conduit revenue
bonds payable from the repayment of certain loans to authorized
entities such as hospitals and universities, and certificates of
participation in tax-exempt municipal leases.
The State of Maryland issues general obligation bonds, which are
payable from ad valorem property taxes. The State Constitution
prohibits the contracting of State debt unless the debt is authorized
by law levying an annual tax or taxes sufficient to pay the debt
service within 15 years and prohibiting the repeal of the tax or taxes
or their use for another purpose until the debt has been paid. The
State also enters into lease-purchase agreements, in which
participation interests are often sold publicly as individual
securities.
As of October 1997, the State's general obligation bonds were rated
"Aaa" by Moody's Investors Service, (Moody's), "AAA" by Standard &
Poor's (S&P), and "AAA" by Fitch Investors Service, L.P. (Fitch).
The Maryland Department of Transportation issues Consolidated
Transportation Bonds, which are payable out of specific excise taxes,
motor vehicle taxes, and corporate income taxes, and from the general
revenues of the Department. Issued to finance highway, port, transit,
rail or aviation facilities, as of August 1996, these bonds were rated
"Aa" by Moody's, "AA" by S&P, and "AA" by Fitch. The Maryland
Transportation Authority, a unit of the Department, issues its own
revenue bonds for transportation facilities, which are payable from
certain highway, bridge and tunnel tolls. These bonds were rated "A1"
by Moody's and "A+" by S&P as of October 1997 .
Other State Agencies which issue municipal obligations include the
Maryland Stadium Authority, which has issued bonds payable from sports
facility lease revenues and certain lottery revenues, the Maryland
Water Quality Financing Administration, which issues bonds to provide
loans to local governments for wastewater control projects, the
Community Development Administration of the Department of Housing and
Community Development, which issues mortgage revenue bonds for
housing, the Maryland Environmental Service, which issues bonds
secured by the revenues from its various water supply, wastewater
treatment and waste management projects, and the various public
institutions of higher education in Maryland (which include the
University of Maryland System, Morgan State University, and St. Mary's
College of Maryland) which issue their own revenue bonds. None of
these bonds constitute debts or pledges of the full faith and credit
of the State of Maryland. The issuers of these obligations are subject
to various economic risks and uncertainties, and the credit quality of
the securities issued by them may vary considerably from the quality
of obligations backed by the full faith and credit of the State.
In addition, the Maryland Health and Higher Educational Facilities
Authority and the Maryland Industrial Development Financing Authority
issue conduit revenue bonds, the proceeds of which are lent to
borrowers eligible under relevant state and federal law. These bonds
are payable solely from the loan payments made by borrowers, and their
credit quality varies with the financial strengths of the respective
borrowers.
Maryland has 24 geographical subdivisions, composed of 23 counties
plus the independent City of Baltimore, which functions much like a
county. Some of the counties and the City of Baltimore operate
pursuant to the provisions of codes of their own adoption, while
others operate pursuant to State-approved charters and State statutes.
Maryland counties and the City of Baltimore receive most of their
revenues from ad valorem taxes on real and personal property,
individual income taxes, transfer taxes, miscellaneous taxes and aid
from the State. Their expenditures include public safety, public
works, health, public welfare, court and correctional services,
education and general governmental costs.
The economic factors affecting the State, as discussed above, also
have affected the counties and the City of Baltimore. In addition,
reductions in State aid caused by State budget deficits have caused
the local governments to trim expenditures and, in some cases, raise
taxes.
According to recent available ratings, general obligation bonds of
Montgomery County (abutting Washington, D.C.) are rated "Aaa" by
Moody's and "AAA" by S&P. Prince George's County, also in the
Washington, D.C. suburbs, issues general obligation bonds rated
"A a3 " by Moody's and "AA-" by S&P, while Baltimore County, a
separate political subdivision surrounding the City of Baltimore,
issues general obligation bonds rated "Aaa" by Moody's and "AAA" by
S&P. The City of Baltimore's general obligation bonds are rated "A1"
by Moody's and "A" by S&P. The other counties in Maryland all have
general obligation bond ratings of "A" or better, except for Allegany
County, the bonds of which are rated "Ba 2 " by Moody's. The
Washington Suburban Sanitary District, a bi-county agency providing
water and sewerage services in Montgomery and Prince George's
counties, issues general obligation bonds rated "Aa1" by Moody's and
"AA" by S&P as of October 1997 . Additionally, some of the large
municipal corporations in Maryland (such as the cities of Rockville
and Annapolis) have issued general obligation bonds. There can be no
assurance that these ratings will continue.
Many of Maryland's counties have established subsidiary agencies with
bond issuing powers, such as housing authorities, parking revenue
authorities, and industrial development authorities. In addition, all
Maryland municipalities have the authority under State law to issue
conduit revenue bonds. These entities are subject to various economic
risks and uncertainties and the credit quality of the securities
issued by them may vary considerably from the credit quality of
obligations backed by the full faith and credit of the State.
SPECIAL CONSIDERATIONS AFFECTING PUERTO RICO
The following highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the
Commonwealth or Puerto Rico), and is based on information drawn from
official statements and prospectuses relating to the securities
offerings of Puerto Rico, its agencies and instrumentalities, as
available on the date of this SAI. FMR has not independently verified
any of the information contained in such official statements,
prospectuses, and other publicly available documents, but is not aware
of any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked to that of the
United States. In fiscal 1995 , trade with the United States
accounted for approximately 89% of Puerto Rico's exports and
approximately 65% of its imports. In this regard, in fiscal 1995
Puerto Rico experienced a $4.6 billion positive adjusted
merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1995 ,
aggregate personal income was $27.0 billion ($26.2 billion in
1992 prices) and personal per capita income was $7,296 ($7,074
in 1992 prices). Gross domestic product in fiscal 1992 was $23.7
billion and gross product in fiscal 1996 was $30.2 billion; ($26.7
billion in 1992 prices). This represents an increase in gross product
of 27.5% from fiscal 1992 to 1996 (12.7% in 1992 prices). For fiscal
1997, an increase in gross domestic product of 2.7% over fiscal 1996
is forecasted. However, actual growth in the Puerto Rico economy will
depend on several factors including the condition of the U.S. economy,
the exchange value of the U.S. dollar, the price stability of oil
imports, any increase or decrease in the number of visitors to the
island, the level of exports, the level of federal transfers, and the
cost of borrowing.
Puerto Rico's economy continued to expand throughout the five-year
period from fiscal 1992 through fiscal 1996. Almost every sector of
the economy participated, and record levels of employment were
achieved. Factors behind the continued expansion included
government-sponsored economic development programs, periodic declines
in the exchange value of the U.S. dollar, the level of federal
transfers, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but
it still remains significantly above the U.S. average and has been
increasing in recent years. Despite long-term improvements, the
unemployment rate rose from 16.5% to 16.8% from fiscal 1992 to fiscal
1993. However, by the end of fiscal 1994, the unemployment rate
dropped to 15.9% and as of the end of fiscal 1996, stands at 13.8%.
Despite this downturn, there is a possibility that the unemployment
rate will increase.
Manufacturing is the largest sector in the economy accounting for
$17.7 billion or 41.8% of gross domestic product in fiscal 1995.
Manufacturing has experienced a basic change over the years as a
result of the influx of higher wage, high technology industries such
as the pharmaceutical industry, electronics, computers,
microprocessors, scientific instruments and high technology machinery.
The service sector, which includes finance, insurance, real estate,
wholesale and retail trade, hotels and related services and other
services, ranks second in its contribution to gross domestic product
and is the sector that employs the greatest number of people. In
fiscal 1995, the service sector generated $15.9 billion in gross
domestic product or 37.5% of the total. Employment in this sector grew
from 449,000 in fiscal 1992 to 527,000 in fiscal 1996, a cumulative
increase of 17.6%, which increase was greater than the 11.8%
cumulative growths in employment over the same period, providing 46.7%
of total employment. The government sector of the Commonwealth plays
an important role in the economy of the island. In fiscal year 1995,
the government accounted for $4.5 billion or 10.6% of Puerto Rico's
gross domestic product and provided 21.7% of the total employment.
Tourism also contributes significantly to the island economy,
accounting for $1.8 billion of gross domestic product in fiscal
1995.
The present administration has developed and is implementing a new
economic development program which is based on the premise that the
private sector should provide the primary impetus for economic
development and growth. This new program, which is referred to as the
New Economic Model, promotes changing the role of the government from
one of being a provider of most basic services to that of a
facilitator for private sector initiatives and encourages private
sector investment by reducing government-imposed regulatory
restraints.
The New Economic Model contemplates the development of initiatives
that will foster private investment in, and private management of,
sectors that are served more efficiently and effectively by the
private enterprise. One of these initiatives has been the adoption of
a new tax code intended to expand the tax base, reduce top personal
and corporate tax rates, and simplify the tax system.
The New Economic Model also seeks to identify and promote areas in
which Puerto Rico can compete more effectively in the global markets.
Tourism has been identified as one such area because of its potential
for job creation and contribution to the gross product. In 1993, a new
Tourism Incentives Act and a Tourism Development Fund were implemented
in order to provide special tax incentives and financing for the
development of new hotel projects and the tourism industry. As a
result of these initiatives, new hotels have been constructed or are
under construction which have increased the number of hotel rooms on
the island from 8,415 in fiscal 1992 to 10,345 in fiscal 1996 and to
12,250 by the end of fiscal 1997.
The New Economic Model also seeks to reduce the size of the
government's direct contribution to gross domestic product. As part of
this goal, the government has transferred certain governmental
operations and sold a number of its assets to private parties. Among
these are: (i) the sale of the assets of the Puerto Rico Maritime
Authority; (ii) the execution of a five-year management agreement for
the operation and management of the Aqueducts and Sewer Authority by a
private company; (iii) the execution by the Aqueducts and Sewer
Authority of a construction and operating agreement with a private
consortium for the design, construction, and operation of an
approximately 75 million gallon per day water pipeline to the San Juan
metropolitan area from the Dos Bocas reservoir in Utuado; and (iv) the
execution by the Electric Power Authority of power purchase contracts
with private power producers under which two cogeneration plants (with
a total capacity of 800 megawatts) will be constructed.
As part of the government's program to facilitate the provision of
private health services, in 1994 a new health insurance program was
started in the Fajardo region to provide qualifying Puerto Rico
residents with comprehensive health insurance coverage. In conjunction
with this program certain public health facilities are being
privatized. The administration's goal is to provide universal health
insurance for such qualifying residents. The total cost of this
program will depend on the number of municipalities included and the
total number of participants. As of June 30, 1996, over 760,000
persons were participating in the program at an annual cost to the
Commonwealth of approximately $296 million.
One of the factors assisting the development of the manufacturing
sector in Puerto Rico has been the federal and Commonwealth tax
incentives available, most notably section 936 of the Internal Revenue
Code of 1986, as amended ("Section 936") and the Commonwealth's
Industrial Incentives Program. The Industrial Incentives Program,
through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from
municipal license taxes during a 10, 15, 20, or 25 year period
depending on location.
For many years, U.S. companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax
exemption for operating and qualifying investment income from Puerto
Rico sources. Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for calculating the
tax credit and limited the amount of the credit that a qualifying
company could claim. These limitations are based on a percentage of
qualifying income (the "percentage of income limitation") and on
qualifying expenditures on wages and other wage related benefits (the
"economic activity limitation" or "wage credit limitation"). As a
result of amendments incorporated in the Small Business Job Protection
Act of 1996 enacted by the U.S. Congress and signed into law by
President Clinton on August 20, 1996 (the "1996 Amendments"), the tax
credit is now being phased out over a ten-year period for existing
claimants and is no longer available for corporations that establish
operations in Puerto Rico after October 13, 1995 (including existing
Section 936 Corporations (as defined below) to the extent
substantially new operations are established in Puerto Rico). The 1996
Amendments also moved the credit based on the economic activity
limitation to Section 30A of the Code and phased it out over 10 years.
In addition, the 1996 Amendments eliminated the credit previously
available for income derived from certain qualified investments in
Puerto Rico. The Section 30A Credit and the remaining Section 936
credit are discussed below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the
Code. Section 30A permits a "qualifying domestic corporation" ("QDC")
that meets certain gross income tests (which are similar to the 80%
and 75% gross income tests of Section 936 of the Code discussed below)
to claim a credit (the "Section 30A Credit") against the federal
income tax imposed on taxable income derived from sources outside the
United States from the active conduct of a trade or business in Puerto
Rico or from the sale of substantially all the assets used in such
business ("possession income").
A QDC is a U.S. corporation which (i) was actively conducting a
trade or business in Puerto Rico on October 13, 1995, (ii) had a
Section 936 election in effect for its taxable year that included
October 13, 1995, (iii) does not have in effect an election to use the
percentage limitation of Section 936(a)(4)(B) of the Code, and (iv)
does not add a "substantial new line of business."
The Section 30A Credit is limited to the sum of (i) 60% of
qualified possession wages as defined in the Code, which includes
wages up to 85% of the maximum earnings subject to the OASDI portion
of Social Security taxes plus an allowance for fringe benefits of 15%
of qualified possession wages, (ii) a specified percentage of
depreciation deductions ranging between 15% and 65%, based on the
class life of tangible property, and (iii) a portion of Puerto Rico
income taxes paid by the QDC, up to a 9% effective tax rate (but only
if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the Code may compute the amount of
its active business income, eligible for the Section 30A Credit, by
using either the cost sharing formula, the profit-split formula, or
the cost-plus formula, under the same rules and guidelines prescribed
for such formulas as provided under Section 936 (see discussion
below). To be eligible for the first two formulas, the QDC must have a
significant presence in Puerto Rico.
In the case of taxable years beginning after December 31, 2001, the
amount of possession income that would qualify for the Section 30A
Credit would be subject to a cap based on the QDC's possession income
for an average adjusted base period ending before October 14,
1995.
Section 30A applies only to taxable years beginning after December
31, 1995 and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A Credit, U.S.
corporations that meet certain requirements and elect its application
("Section 936 Corporations") are entitled to credit against their U.S.
corporate income tax, the portion of such tax attributable to income
derived from the active conduct of a trade or business within Puerto
Rico ("active business income") and from the sale or exchange of
substantially all assets used in the active conduct of such trade or
business. To qualify under Section 936 in any given taxable year, a
corporation must derive for the three-year period immediately
preceding the end of such taxable year, (i) 80% or more of its gross
income from sources within Puerto Rico, and (ii) 75% or more of its
gross income from the active conduct of a trade or business in Puerto
Rico.
Under Section 936, a Section 936 Corporation may elect to compute
its active business income, eligible for the Section 936 credit, under
one of three formulas: (A) a cost-sharing formula, whereby it is
allowed to claim all profits attributable to manufacturing
intangibles, and other functions carried out in Puerto Rico, provided
it contributes to the research and development expenses of its
affiliated group or pays certain royalties; (B) a profit-split
formula, whereby it is allowed to claim 50% of the net income of its
affiliated group from the sale of products manufactured in Puerto
Rico; or (C) a cost-plus formula, whereby it is allowed to claim a
reasonable profit on the manufacturing costs incurred in Puerto Rico.
To be eligible for the first two formulas, the Section 936 Corporation
must have a significant business presence in Puerto Rico for purposes
of the Section 936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the
Section 936 credit is only available to companies that elect the
percentage of income limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments, subject to a five-year
phase-in period from 1994 to 1998 during which period the percentage
of the allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be subject to
a cap based on the Section 936 Corporation's possession income for an
average adjusted base period ending on October 14, 1995. The Section
936 credit is eliminated for taxable years beginning in 2006.
OUTLOOK. It is not possible at this time to determine the long-term
effect on the Puerto Rico economy of the enactment of the 1996
Amendments to Section 936. The Government of Puerto Rico does not
believe there will be short-term or medium-term material adverse
effects on Puerto Rico's economy as a result of the enactment of the
1996 Amendments. The Government of Puerto Rico further believes that
during the phase-out period sufficient time exists to implement
additional incentive programs to safeguard Puerto Rico's competitive
position. Additionally, the Governor intends to propose a new federal
incentive program similar to what is now provided under Section 30A.
Such program would provide U.S. companies a tax credit based on
qualifying wages paid, other wage related expenses such as fringe
benefits, depreciation expenses for certain tangible assets, and
research and development expenses, and would restore the credit
granted to passive income under Section 936 prior to its repeal by the
1996 Amendments. Under the Governor's proposal, the credit granted to
qualifying companies would continue in effect until Puerto Rico shows,
among other things, substantial economic improvements in terms of
certain economic parameters.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in
the fund's management contract. FMR is also responsible for the
placement of transaction orders for other investment companies and
accounts for which it or its affiliates act as investment adviser. In
selecting broker-dealers, subject to applicable limitations of the
federal securities laws, FMR considers various relevant factors,
including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability,
and financial condition of the broker-dealer firm; the broker-dealer's
execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; and
the availability of securities or the purchasers or sellers of
securities. In addition, such broker-dealers may furnish analyses and
reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; effect
securities transactions, and perform functions incidental thereto
(such as clearance and settlement). The selection of such
broker-dealers generally is made by FMR (to the extent possible
consistent with execution considerations) based upon the quality of
research and execution services provided.
The receipt of research from broker-dealers that execute transactions
on behalf of the fund may be useful to FMR in rendering investment
management services to the fund or its other clients, and conversely,
such research provided by broker-dealers who have executed transaction
orders on behalf of other FMR clients may be useful to FMR in carrying
out its obligations to the fund. The receipt of such research has not
reduced FMR's normal independent research activities; however, it
enables FMR to avoid the additional expenses that could be incurred if
FMR tried to develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that
are in excess of the amount of commissions charged by other
broker-dealers in recognition of their research and execution
services. In order to cause the fund to pay such higher commissions,
FMR must determine in good faith that such commissions are reasonable
in relation to the value of the brokerage and research services
provided by such executing broker-dealers, viewed in terms of a
particular transaction or FMR's overall responsibilities to the fund
and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation
should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the fund, or shares of
other Fidelity funds to the extent permitted by law. FMR may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC), an indirect
subsidiary of FMR Corp., if the commissions are fair, reasonable,
and comparable to commissions charged by non-affiliated, qualified
brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
F or the fiscal periods ended August 31, 1997 and 1996, the
fund's portfolio turnover rates were 41 % and 74%,
respectively.
For the fiscal years ended August 31, 1997, 1996, and 1995, the
fund paid no brokerage commissions.
During the fiscal year ended August 31, 1997, the fund paid no fees
to brokerage firms that provided research servi ces.
From time to time the Trustees will review whether the recapture for
the benefit of the fund of some portion of the brokerage commissions
or similar fees paid by the fund on portfolio transactions is legally
permissible and advisable. The fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at
present no other recapture arrangements are in effect. The Trustees
intend to continue to review whether recapture opportunities are
available and are legally permissible and, if so, to determine in the
exercise of their business judgment whether it would be advisable for
the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the
same as those of other funds managed by FMR, investment decisions for
the fund are made independently from those of other funds managed by
FMR or accounts managed by FMR affiliates. It sometimes happens that
the same security is held in the portfolio of more than one of these
funds or accounts. Simultaneous transactions are inevitable when
several funds and accounts are managed by the same investment adviser,
particularly when the same security is suitable for the investment
objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the fund is
concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines the fund's
net asset value per share (NAV) as of the close of the New York Stock
Exchange (NYSE) (normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing the fund's NAV.
Portfolio securities are valued by various methods. If quotations
are not available, fixed-income securities are usually valued on the
basis of information furnished by a pricing service that uses a
valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services
are available, and the fund may use various pricing services or
discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available.
Securities and other assets for which there is no readily available
market value are valued in good faith by a committee appointed by the
Board of Trustees. The procedures set forth above need not be used to
determine the value of the securities owned by the fund if, in the
opinion of a committee appointed by the Board of Trustees, some other
method would more accurately reflect the fair market value of such
securities.
PERFORMANCE
The fund may quote performance in various ways. All performance
information supplied by the fund in advertising is historical and is
not intended to indicate future returns. The fund's share price,
yield, and total return fluctuate in response to market conditions and
other factors, and the value of fund shares when redeemed may be more
or less than their original cost.
YIELD CALCULATIONS. Yields for the fund are computed by dividing the
fund's interest income for a given 30-day or one-month period, net of
expenses, by the average number of shares entitled to receive
distributions during the period, dividing this figure by the fund's
net asset value (NAV) at the end of the period, and annualizing the
result (assuming compounding of income) in order to arrive at an
annual percentage rate. Yields do not reflect the fund's 0.50%
s hort term trading fee, which applies to shares held less than
180 days. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with
respect to bonds trading at a discount by adding a portion of the
discount to daily income. Capital gains and losses generally are
excluded from the calculation.
Income calculated for the purposes of calculating the fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the fund's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
the fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the fund from the continuous sale of
its shares will likely be invested in instruments producing lower
yields than the balance of the fund's holdings, thereby reducing the
fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.
The fund's tax-equivalent yield is the rate an investor would have to
earn from a fully taxable investment before taxes to equal the fund's
tax-free yield. Tax-equivalent yields are calculated by dividing the
fund's yield by the result of one minus a stated federal or combined
federal and state income tax rate. If only a portion of the fund's
yield is tax-exempt, only that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for
199 8 . The second table shows the approximate yield a taxable
security must provide at various income brackets to produce
after- t ax yields equivalent to those of hypothetical tax-exempt
obligations yielding from 2 % to 7%. Of course, no assurance can
be given that the fund will achieve any specific tax-exempt yield.
While the fund invests principally in obligations whose interest is
exempt from federal and state income tax, other income received by the
fund may be taxable. The tables do not take into account local taxes,
if any, payable on fund distributions.
Use the first t able to find your approximate effective tax
bracket taking into account federal and state taxes for 1997.
1 99 8 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
**1997 Combined
Maryland State &
*Taxable Income Federal ***Maryland ***Highest ***Combined Highest County,
Marginal Marginal County Maryland & and Federal
Single Return Joint Return Rate Rate Rate County Rate Tax Bracket
$ 3,001 - 25,350 $ 3,001 - 42,350 15.00% 5% 3.00% 8.00% 21.80%
25,351 - 61,400 42,351 - 102,300 28.00% 5% 3.00% 8.00% 33.76%
61,401 - 128,100 102,301 - 155,950 31.00% 5% 3.00% 8.00% 36.52%
128,101 - 278,450 155,951 - 278,450 36.00% 5% 3.00% 8.00% 41.12%
Over 278,450 Over 278,450 39.60% 5% 3.00% 8.00% 44.43%
</TABLE>
* This table has been prepared using projected federal tax brackets
for 1998. Net amount subject to federal income tax after deductions
and exemptions. Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions,
limitations on itemized deductions, and other credits, exclusions, and
adjustments which may increase a taxpayer's marginal tax rate. An
increase in a shareholder's marginal tax rate would increase that
shareholder's tax-equivalent yield.
*** The Maryland state and county rates are accurate through
December 1997.
Combined Maryland and federal effective tax brackets take into account
the highest combined Maryland state and county income tax rate of
8.00%.
For Allegany, Price George's Montgomery, St. Mary's, Somerset,
Caroline, and Wicomico counties, the county income tax rate is equal
to 60% of Maryland state taxes. For Carroll County, the county income
tax rate is 58% of the state tax. For Baltimore and Queen Anne's
counties, the county income tax rate is 55% of the state tax. For
Talbot County, the county income tax is 40% of the state tax. For
Worcester county, the county income tax rate is 30% of the state tax.
The county income tax rate for the remaining counties of the State of
Maryland, as well as the city of Baltimore, is 50% of the state tax.
Figures are tax-effected to reflect the federal tax benefit for
persons who itemize deductions.
Having determined your effective tax bracket, use the following table
to determine the tax-equivalent yield for a given tax-free yield.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
If your combined federal and state effective tax rate in 1997 is:
To match these 21.80% 33.76% 36.52% 41.12% 44.43%
tax-free yields:
Your taxable investment would have to earn the following yield:
2.0% 2.56% 3.02% 3.15% 3.40% 3.60%
3.0% 3.84% 4.53% 4.73% 5.10% 5.40%
4.0% 5.12% 6.04% 6.30% 6.79% 7.20%
5.0% 6.39% 7.55% 7.88% 8.49% 9.00%
6.0% 7.67% 9.06% 9.45% 10.19% 10.80%
7.0% 8.95% 10.57% 11.03% 11.89% 12.60%
</TABLE>
The fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When the fund invests in
these obligations, its tax-equivalent yield will be lower. In the
table above, the tax-equivalent yields are calculated assuming
investments are 100% federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of the fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the fund's
NAV over a stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical
historical investment in the fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had
been constant over the period. For example, a cumulative total return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual total
returns are a convenient means of comparing investment alternatives,
investors should realize that the fund's performance is not constant
over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis and may or may not include the effect of the fund's
0.50% short-term trading fee on shares held less than 180 days.
Excluding the fund's redemption fee from a total return calculation
produces a higher total return figure. Total returns, yields, and
other performance information may be quoted numerically or in a table,
graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by the fund and reflects all elements of its return. Unless otherwise
indicated, the fund's adjusted NAVs are not adjusted for sales
charges, if any.
HISTORICAL FUND RESULTS. The following tables show the fund's yields,
tax-equivalent yields, and total returns for periods ended August 31,
1997. Total return figures do not include the effect of the fund's
0.50% short-term trading fee, applicable to shares held less
than 180 days.
The tax-equivalent yield is based on a combined effective federal and
state income tax rate of 39.20 % and reflects that, as of August
31, 19 9 7, none of the fund's income was subject to state taxes.
Note that the fund may invest in securities whose income is subject to
the federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
Thirty- Day Tax- One Life of One Life of
Yield Equivalent Year Fund* Year Fund*
Yield
4.29 % 7.06 % 8.17% 5.77% 8.17% 27.74%
</TABLE>
* From April 22, 1993 (commencement of operations).
Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's total returns would have been lower.
The following table shows the income and capital elements of the
fund's cumulative total return. The table compares the fund's return
to the record of the Standard & Poor's 500 Index (S&P 500), the Dow
Jones Industrial Average (DJIA), and the cost of living, as measured
by the Consumer Price Index (CPI), over the same period. The CPI
information is as of the month-end closest to the initial investment
date for the fund. The S&P 500 and DJIA comparisons are provided to
show how the fund's total return compared to the record of a broad
unmanaged index of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Because the
fund invests in fixed-income securities, common stocks represent a
different type of investment from the fund. Common stocks generally
offer greater growth potential than the fund, but generally experience
greater price volatility, which means greater potential for loss. In
addition, common stocks generally provide lower income than a
fixed-income investment such as the fund. The S&P 500 and DJIA returns
are based on the prices of unmanaged groups of stocks and, unlike the
fund's returns, do not include the effect of brokerage commissions or
other costs of investing.
During the period from April 22, 1993 (commencement of
operations) to August 31, 1997, a hypothetical $10,000 investment
in Spartan Mar yland Municipal Income would have grown to
$12,7 7 4, assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures
below should not be considered representative of he dividend income or
capital gain or loss that could be realized from an investment in the
fund today. Tax consequences of different investments have not been
factored into the figures below. The figures in the table do not
include the effect of the fund's .50% short-term trading fee
applicable to shares held less than 180 days.
SPARTAN MARYLAND MUNICIPAL INCOME INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
August 31 Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1997 $ 10,170 $ 2,580 $ 24 $ 12,774 $ 22,602 $ 24,595 $ 11,167
1996 $ 9,850 $ 1,939 $ 20 $ 11,809 $ 16,069 $ 17,778 $ 10,924
1995 $ 9,840 $ 1,374 $ 20 $ 11,234 $ 13,535 $ 14,278 $ 10,618
1994 $ 9,640 $ 736 $ 19 $ 10,395 $ 11,145 $ 11,812 $ 10,347
1993* $ 10,350 $ 199 $ 0 $ 10,549 $ 10,567 $ 10,725 $ 10,056
</TABLE>
* From April 22, 1993 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on April 22, 1993, the n et amount invested in fund shares was
$10,000. The cost of the initial investment ($10,000) together with
the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time
they were reinvested) amounted to $12,526 . If distributions had
not been reinvested, the amount of distributions earned from the fund
over time would have been smaller, and cash payments for the period
would have amounted to $2,231 for dividends and $23 fo r capital
gain distributions.
PERFORMANCE COMPARISONS. The fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and
are prepared without regard to tax consequences. Lipper may also rank
funds based on yield. In addition to the mutual fund rankings, the
fund's performance may be compared to stock, bond, and money market
mutual fund performance indices prepared by Lipper or other
organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher
potential returns, they also carry the highest degree of share price
volatility. Likewise, money market funds may offer greater stability
of principal, but generally do not offer the higher potential returns
available from stock mutual funds.
From time to time, the fund's performance may also be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, the fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating
service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Fidelity funds
to one another in appropriate categories over specific periods of time
may also be quoted in advertising.
The fund's performance may also be compared to that of a benchmark
index representing the universe of securities in which the fund may
invest. The total return of a benchmark index reflects reinvestment of
all dividends and capital gains paid by securities included in the
index. Unlike the fund's returns, however, the index returns do not
reflect brokerage commissions, transaction fees, or other costs of
investing directly in the securities included in the index.
The fund may compare to the Lehman Brothers Municipal Bond Index, a
total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year. In addition, the fund
may also be compared to the Lehman Brothers Maryland 4 Plus Year
Municipal Bond Index which includes Maryland investment-grade
municipal bonds in the Lehman Brothers Municipal Bond Index with
maturities of four years or greater. Issues included in the index
have been issued after December 31, 1990 and have an outstanding par
value of at least $50 million. Subsequent to December 31, 1995, zero
coupon bonds and issues subject to the alternative minimum tax are
included in the index.
The fund may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, the fund may offer greater liquidity or higher
potential returns than CDs, the fund does not guarantee your principal
or your return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
The fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual
municipal bond. Unlike tax-free mutual funds, individual municipal
bonds offer a stated rate of interest and, if held to maturity,
repayment of principal. Although some individual municipal bonds might
offer a higher return, they do not offer the reduced risk of a mutual
fund that invests in many different securities. The initial investment
requirements and sales charges of many tax-free mutual funds are lower
than the purchase cost of individual municipal bonds, which are
generally issued in $5,000 denominations and are subject to direct
brokerage costs.
In advertising materials, Fidelity may reference or discuss its
products and services, which may include other Fidelity funds;
retirement investing; brokerage products and services; model
portfolios or allocations; saving for college or other goals;
charitable giving; and the Fidelity credit card. In addition, Fidelity
may quote or reprint financial or business publications and
periodicals as they relate to current economic and political
conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a
particular mutual fund, and Fidelity services and products. Fidelity
may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus(Registered trademark), a quarterly
magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility
seek to compare the fund's historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All
measures of volatility and correlation are calculated using averages
of historical data. In advertising, the fund may also discuss or
illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
fund's percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are
high and more shares when prices are low. While such a strategy does
not assure a profit or guard against loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers
of shares are purchased at the same intervals. In evaluating such a
plan, investors should consider their ability to continue purchasing
shares during periods of low price levels.
As of August 31, 1997, FMR advised over $ 29 billion in tax-free
fund assets, $ 97 billion in money market fund assets,
$ 368 billion in equity fund assets, $ 74 billion in
international fund assets, and $ 27 billion in Spartan fund
assets. The fund may reference the growth and variety of money market
mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the
purpose of researching and managing investments abroad.
In addition to performance rankings, the fund may compare its total
expense ratio to the average total expense ratio of similar funds
tracked by Lipper. The fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV)
is calculated each day the New York Stock Exchange (NYSE) is open for
trading. The NYSE has designated the following holiday closings for
1997 and 1998: New Year's Day, Martin Luther King's Birthday (in
1998), President's Day, Good Friday, Memorial Day, Independence
Day (observed), Labor Day, Thanksgiving Day, and Christmas Day.
Although FMR expects the same holiday schedule to be observed in the
future, the NYSE may modify its holiday schedule at any time. In
addition, the fund will not process wire purchases and redemptions on
days when the Federal Reserve Wire System is closed.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated
earlier if trading on the NYSE is restricted or as permitted by the
Securities and Exchange Commission (SEC). To the extent that portfolio
securities are traded in other markets on days when the NYSE is
closed, the fund's NAV may be affected on days when investors do not
have access to the fund to purchase or redeem shares. In addition,
trading in some of the fund's portfolio securities may not occur on
days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are
valued in computing the fund's NAV. Shareholders receiving securities
or other property on redemption may realize a gain or loss for tax
purposes, and will incur any costs of sale, as well as the associated
inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the
1940 Act), the fund is required to give shareholders at least 60 days'
notice prior to terminating or modifying its exchange privilege. Under
the Rule, the 60-day notification requirement may be waived if (i) the
only effect of a modification would be to reduce or eliminate an
administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund
suspends the redemption of the shares to be exchanged as permitted
under the 1940 Act or the rules and regulations thereunder, or the
fund to be acquired suspends the sale of its shares because it is
unable to invest amounts effectively in accordance with its investment
objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves
the right at any time, without prior notice, to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would
be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks
remain uncashed for six months, Fidelity may reinvest your
distributions at the then-current NAV. All subsequent distributions
will then be reinvested until you provide Fidelity with alternate
instructions.
DIVIDENDS. To the extent that the fund's income is designated as
federally tax-exempt interest, the daily dividends declared by the
fund are also federally tax-exempt. Short-term capital gains are
distributed as dividend income, but do not qualify for the
dividends-received deduction. These gains will be taxed as ordinary
income. The fund will send each shareholder a notice in January
describing the tax status of dividend and capital gain distributions
(if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal
tax returns. Shareholders who earn other income, such as Social
Security benefits, may be subject to federal income tax on up to 85%
of such benefits to the extent that their income, including tax-exempt
income, exceeds certain base amounts.
The fund purchases municipal securities whose interest FMR believes is
free from federal income tax. Generally, issuers or other parties have
entered into covenants requiring continuing compliance with federal
tax requirements to preserve the tax-free status of interest payments
over the life of the security. If at any time the covenants are not
complied with, or if the IRS otherwise determines that the issuer did
not comply with relevant tax requirements, interest payments from a
security could become federally taxable retroactive to the date the
security was issued. For certain types of structured securities, the
tax status of the pass-through of tax-free income may also be based on
the federal and state tax treatment of the structure.
As a result of the Tax Reform Act of 1986, interest on certain
"private activity" securities is subject to the federal alternative
minimum tax (AMT), although the interest continues to be excludable
from gross income for other tax purposes. Interest from private
activity securities will be considered tax-exempt for purposes of the
fund's policies of investing so that at least 80% of its income is
free from federal income tax. Interest from private activity
securities is a tax preference item for the purposes of determining
whether a taxpayer is subject to the AMT and the amount of AMT to be
paid, if any. Private activity securities issued after August 7, 1986
to benefit a private or industrial user or to finance a private
facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after
April 30, 1993 and short-term capital gains distributed by the fund
are taxable to shareholders as dividends, not as capital gains.
Dividend distributions resulting from a recharacterization of gain
from the sale of bonds purchased with market discount after April 30,
1993 are not considered income for purposes of the fund's policy of
investing so that at least 80% of its income is free from federal
income tax.
Corporate investors should note that a tax preference item for
purposes of the corporate AMT is 75% of the amount by which adjusted
current earnings (which includes tax-exempt interest) exceeds the
alternative minimum taxable income of the corporation. If a
shareholder receives an exempt-interest dividend and sells shares at a
loss after holding them for a period of six months or less, the loss
will be disallowed to the extent of the amount of exempt-interest
dividend.
MARYLAND TAX MATTERS. To the extent that dividends paid by the fund
qualify as exempt-interest dividends of a regulated investment
company, the portion of exempt-interest dividends that represents
interest received by the fund on obligations (a) of Maryland or its
political subdivisions and authorities, or (b) of the United States or
an authority, commission, instrumentality, possession or territory of
the United States, will be exempt from Maryland state and local income
taxes when allocated or distributed to a shareholder of the fund.
In addition, gains realized by the fund from the sale or exchange of a
bond issued by Maryland or a political subdivision of Maryland, or by
the United States or an authority, commission or instrumentality of
the United States, will not be subject to Maryland state and local
income taxes. To the extent that distributions of the fund are
attributable to sources other than those described in the preceding
sentences, such as interest received by the fund on obligations issued
by states other than Maryland or capital gains realized on obligations
issued by U.S. territories and possessions and from states other than
Maryland, and income earned on repurchase agreements, such
distributions will be subject to Maryland state and local income
taxes. Income earned on certain private activity bonds which the fund
might hold will constitute a Maryland tax preference for individual
shareholders. In addition, capital gains realized by a shareholder
upon a redemption or exchange of fund shares will be subject to
Maryland state and local income taxes.
Interest on indebtedness incurred or continued (directly or
indirectly) by a shareholder of the fund to purchase or carry shares
of the fund will not be deductible for Maryland state and local income
tax purposes to the extent such interest is allocable to
exempt-interest dividends.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund
on the sale of securities and distributed to shareholders are
federally taxable as capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a
capital gain distribution on shares of the fund, and such shares are
held six months or less and are sold at a loss, the portion of the
loss equal to the amount of the capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by the fund are taxable to shareholders as dividends, not
as capital gains.
As of August 31, 199 7 , the fund had a capital loss carryforward
aggregating approximately $ 1,396,000 . This loss carryforward,
of which $ 35,000 , and $ 1,361,000 will expire on August
31, 2003 , and 2004 , respectively, is available to
offset future capital gains.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, the fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis , and intends to comply
with other tax rules applicable to regulated investment
companies .
The fund is treated as a separate entity from the other funds of
Fidelity Union Street Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the fund and its
shareholders, and no attempt has been made to discuss individual tax
consequences. In addition to federal income taxes, shareholders may be
subject to state and local taxes on fund distributions, and shares may
be subject to state and local personal property taxes. Investors
should consult their tax advisers to determine whether the fund is
suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two
classes. Class B is held predominantly by members of the Edward C.
Johnson 3d family and is entitled to 49% of the vote on any matter
acted upon by the voting common stock. Class A is held predominantly
by non-Johnson family member employees of FMR Corp. and its affiliates
and is entitled to 51% of the vote on any such matter. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Under
the Investment Company Act of 1940 (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, through their
ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect
to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (67) , Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman
and a Director of FMR Texas Inc., Fidelity Management & Research
(U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
J. GARY BURKHEAD (56), Member of the Advisory Boar d (1997), is
Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President of Fidelity Personal Investments and Brokerage
Group (1997). Previously, Mr. Burkhead served as President of
Fidelity Management & Research Company.
RALPH F. COX (65) , Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste
Services, Inc. (non-hazardous waste, 1993), CH2M Hill Companies
(engineering), Rio Grande, Inc. (oil and gas production), and Daniel
Industries (petroleum measurement equipment manufacturer). In
addition, he is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (65 ), Trustee (1992). Prior to her
retirement in September 1991, Mrs. Davis was the Senior Vice President
of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (53), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is currently a Trustee for the Forum For
International Policy, a Board Member for the Virginia Neurological
Institute, and a Senior Advisor of the Harvard Journal of World
Affairs. In addition, Mr. Gates also serves as a member of the
corporate board for LucasVarity PLC (automotive components and diesel
engines), Charles Stark Draper Laboratory (non-profit), NACCO
Industries, Inc. (mining and manufacturing), and TRW Inc. (original
equipment and replacement products).
E. BRADLEY JONES (69) , Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing , 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition , he serves as
a Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (64) , Trustee, is Executive-in-Residence (1995)
at Columbia University Graduate School of Business and a financial
consultant. From 1987 to January 1995, Mr. Kirk was a Professor at
Columbia University Graduate School of Business. Prior to 1987, he was
Chairman of the Financial Accounting Standards Board. Mr. Kirk is a
Director of General Re Corporation (reinsurance), and he previously
served as a Director of Valuation Research Corp. (appraisals and
valuations, 1993-1995). In addition, he serves as Chairman of the
Board of Directors of the National Arts Stabilization Fund, Chairman
of the Board of Trustees of the Greenwich Hospital Association, a
Member of the Public Oversight Board of the American Institute of
Certified Public Accountants' SEC Practice Section (1995), and as a
Public Governor of the National Association of Securities Dealers,
Inc. (1996).
*PETER S. LYNCH (54) , Trustee, is Vice Chairman and Director of
FMR (1992). Prior to May 31, 1990, he was a Director of FMR and
Executive Vice President of FMR (a position he held until March 31,
1991); Vice President of Fidelity Magellan Fund and FMR Growth Group
Leader; and Managing Director of FMR Corp. Mr. Lynch was also Vice
President of Fidelity Investments Corporate Services (1991-1992). In
addition, he serves as a Trustee of Boston College, Massachusetts Eye
& Ear Infirmary, Historic Deerfield (1989) and Society for the
Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
WILLIAM O. McCOY (63), Trustee (1997), is the Vice President of
Finance for the University of North Carolina (16-school system, 1995).
Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman
of the Board of BellSouth Corporation (telecommunications, 1984) and
President of BellSouth Enterprises (1986). He is currently a Director
of Liberty Corporation (holding company, 1984), Weeks Corporation of
Atlanta (real estate, 1994), Carolina Power and Light Company
(electric utility, 1996), and the Kenan Transport Co. (1996).
Previously, he was a Director of First American Corporation (bank
holding company, 1979-1996). In addition, Mr. McCoy serves as a member
of the Board of Visitors for the University of North Carolina at
Chapel Hill (1994) and for the Kenan-Flager Business School
(University of North Carolina at Chapel Hill, 1988).
GERALD C. McDONOUGH (68) , Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director of
Brush-Wellman Inc. (metal refining), York International Corp. (air
conditioning and refrigeration), Commercial Intertech Corp. (hydraulic
systems, building systems, and metal products, 1992), CUNO, Inc.
(liquid and gas filtration products, 1996), and Associated Estates
Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN ( 64) , Trustee (1993) is Chairman of the Board,
President, and Chief Executive Officer of Lexmark International, Inc.
(office machines, 1991). Prior to 1991, he held the positions of Vice
President of International Business Machines Corporation ("IBM") and
President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993), Imation Corp. (imaging and information storage, 1997),
and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State
United Way (1993) and is a member of the University of Alabama
President's Cabinet.
*ROBERT C. POZEN (51), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of FMR Texas Inc. (1997), Fidelity Management & Research
(U.K.) Inc. (1997), and Fidelity Management & Research (Far East) Inc.
(1997). Previously, Mr. Pozen served as General Counsel, Managing
Director, and Senior Vice President of FMR Corp.
THOMAS R. WILLIAMS (68) , Trustee, is President of The Wales
Group, Inc. (management and financial advisory services). Prior to
retiring in 1987, Mr. Williams served as Chairman of the Board of
First Wachovia Corporation (bank holding company), and Chairman and
Chief Executive Officer of The First National Bank of Atlanta and
First Atlanta Corporation (bank holding company). He is currently a
Director of ConAgra, Inc. (agricultural products), Georgia Power
Company (electric utility), National Life Insurance Company of
Vermont, American Software, Inc., and AppleSouth, Inc. (restaurants,
1992).
DWIGHT D. CHURCHILL (43), is Vice President of Bond Funds, group
leader of the Bond Group, and is Senior Vice President of FMR (1997).
Mr. Churchill joined Fidelity in 1993 as Vice President and Group
Leader of Taxable Fixed-Income Investments. Prior to joining Fidelity,
he spent three years as president and CEO of CSI Asset Management,
Inc. in Chicago, an investment management subsidiary of The
Prudential.
FRED L. HENNING, JR. (58), is Vice President of Fidelity's
Fixed-Income Group (1995) and Senior Vice President of FMR (1995).
Before assuming current responsibilities, Mr. Henning was head of
Fidelity's Money Market Division.
DAVID L. MURPHY (49), Vice President, and manager of Spartan
Maryland Municipal Income, which he has managed since April 1997. He
also manages several other Fidelity funds. Mr. Murphy joined Fidelity
as a portfolio manager in 1989.
ARTHUR S. LORING (49) , Secretary, is Senior Vice President
(1993) and General Counsel of FMR, Vice President-Legal of FMR Corp.,
and Vice President and Clerk of FDC.
RICHARD A. SILVER (50), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining FMR,
Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
THOMAS D. MAHER (52), Assistant Vice President, is Assistant Vice
President of Fidelity's municipal bond funds (1996) and of Fidelity's
money market funds and Vice President and Associate General Counsel of
FMR Texas Inc.
JOHN H. COSTELLO (51 ), Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (51), Assistant Treasurer (1994), is an
employee of FMR (1994). Prior to becoming Assistant Treasurer of the
Fidelity funds, Mr. Rush was Chief Compliance Officer of FMR Corp.
(1993-1994) and Chief Financial Officer of Fidelity Brokerage
Services, Inc. (1990-1993).
THOMAS J. SIMPSON (39), Assistant Treasurer, is Assistant Treasurer
of Fidelity's municipal bond funds (1996) and of Fidelity's money
market funds (1996) and an employee of FMR (1996). Prior to joining
FMR, Mr. Simpson was Vice President and Fund Controller of Liberty
Investment Services (1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of the fund for his
or her services for the fiscal year ended August 31, 1997, or calendar
year ended December 31, 1996, as applicable.
COMPENSATION TABLE
Trustees Aggregate Total
and Compensation Compensation
Members of the Advisory Board from from the
the fundB ,C Fund Complex*A
J. Gary Burkhead** $ 0 $ 0
Ralph F. Cox $ 19 $ 137,700
Phyllis Burke Davis $ 18 $ 134,700
Richard J. Flynn*** $ 6 $ 168,000
Robert M. Gates**** $ 10 $ 0
Edward C. Johnson 3d** $ 0 $ 0
E. Bradley Jones $ 18 $ 134,700
Donald J. Kirk $ 18 $ 136,200
Peter S. Lynch** $ 0 $ 0
William O. McCoy***** $ 18 $ 85,333
Gerald C. McDonough $ 21 $ 136,200
Edward H. Malone*** $ 6 $ 136,200
Marvin L. Mann $ 19 $ 134,700
Robert C. Pozen** $ 0 $ 0
Thomas R. Williams $ 19 $ 136,200
* Information is for the calendar year ended December 31, 1996 for 235
funds in the complex.
** Interested Trustees of the fund and Mr. Burkhead are compensated by
FMR.
*** Richard J. Flynn & Edward Malone served on the Board of
Trustees through December 31, 1996.
**** Mr. Gates was appointed to t he Board of Trustees of Union
Street Trust effective March 1, 1997.
***** During the period from May 1, 1996 through December 31, 1996,
William O. McCoy served as a Member of the Advisory Board of the
trust. Mr. McCoy was appointed to the Board of Trustees effective
January 1, 1997.
A Compensation figures include cash, a pro rata portion of
benefits accrued under the retirement program for the period ended
December 30, 1996 and required to be deferred, and may include amounts
deferred at the election of Trustees.
B Compensation figures include cash, and may include amounts required
to be deferred, a pro rata portion of benefits accrued under the
retirement program for the period ended December 30, 1996 and required
to be deferred, and amounts deferred at the election of Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee, most of which is subject to vesting: Ralph F.
Cox, $ 1 , Phyllis Burke Davis, $ 1 , Richard J. Flynn, $0,
Robert M. Gates, $ 0 , E. Bradley Jones, $ 1 , Donald J.
Kirk, $ 1 , William O. McCoy, $ 0 , Gerald C. McDonough,
$ 1 , Edward H. Malone, $ 1 , Marvin L. Mann, $ 1 , and
Thomas R. Williams, $ 1 .
Under a retirement program adopted in July 1988 and modified in
November 1995 and November 1996, each non-interested Trustee who
retired before December 30, 1996 may receive payments from a
Fidelity fund during his or her lifetime based on his or her basic
trustee fees and length of service. The obligation of a fund to make
such payments is neither secured nor funded. A Trustee became eligible
to participate in the program at the end of the calendar year in which
he or she reached age 72, provided that, at the time of retirement, he
or she had served as a Fidelity fund Trustee for at least five years.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are treated as though equivalent dollar amounts had been invested
in shares of a cross-section of Fidelity funds including funds in each
major investment discipline and representing a majority of Fidelity's
assets under management (the Reference Funds). The amounts ultimately
received by the Trustees under the Plan will be directly linked to the
investment performance of the Reference Funds. Deferral of fees in
accordance with the Plan will have a negligible effect on a fund's
assets, liabilities, and net income per share, and will not obligate a
fund to retain the services of any Trustee or to pay any particular
level of compensation to the Trustee. A fund may invest in the
Reference Funds under the Plan without shareholder approval.
As of December 30, 1996, the non-interested Trustees terminated the
retirement program for Trustees who retire after such date. In
connection with the termination of the retirement program, each
then-existing non-interested Trustee received a credit to his or her
Plan account equal to the present value of the estimated benefits that
would have been payable under the retirement program. The amounts
credited to the non-interested Trustees' Plan accounts are subject to
vesting and are treated as though equivalent dollar amounts had been
invested in shares of the Reference Funds. The amounts ultimately
received by the Trustees in connection with the credits to their Plan
accounts will be directly linked to the investment performance of the
Reference Funds. The termination of the retirement program and related
crediting of estimated benefits to the Trustees' Plan accounts did not
result in a material cost to the funds.
As of October 31, 1997, the Tr ustees, Members of the Advisory
Board, and officers of the fund owned, in the aggregate, less than
1% of t he fund's total outstanding shares.
As of October 31, 1 997, the following owned of record 5% or
more of the fund's outstanding shares: National Financial Ser vices
Corporation, Boston, M A (2 3 . 13 %).
MANAGEMENT CONTRACT
FMR is the fund's manager pursuant to a management contract dated
March 18, 1993, which was approved by FMR, as the then sole
shareholder, on March 18, 1993.
MANAGEMENT SERVICES. The fund employs FMR to furnish investment
advisory and other services. Under the terms of its management
contract with the fund, FMR acts as investment adviser and, subject to
the supervision of the Board of Trustees, directs the investments of
the fund in accordance with its investment objective, policies, and
limitations. FMR also provides the fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of the fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of the
fund or FMR performing services relating to research, statistical, and
investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES. Under the terms of the fund's management
contract, FMR is responsible for payment of all operating expenses of
the fund with certain exceptions. Specific expenses payable by FMR
include expenses for typesetting, printing, and mailing proxy
materials to shareholders, legal expenses, fees of the custodian,
auditor and interested Trustees, the fund's proportionate share of
insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal securities laws and making
necessary filings under state securities laws. The fund's management
contract further provides that FMR will pay for typesetting, printing,
and mailing prospectuses, statements of additional information,
notices, and reports to shareholders; however, under the terms of the
fund's transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders of the applicable
classes. FMR also pays all fees associated with transfer agent,
dividend disbursing, and shareholder services, and pricing and
bookkeeping services.
FMR pays all other expenses of the fund with the following exceptions:
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 the fund may be a
party, and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
MANAGEMENT FEE. For the services of FMR under the management contract,
the fund pays FMR a monthly management fee at t he annual rate of
.55% of its average net assets throughout the month. The
management fee paid to FMR by the fund is reduced by an amount equal
to the fees and expenses paid by the fund to the non-interested
Trustees.
For the fiscal years ended August 31, 19 97, 1996, and 1995, the
fund paid FMR management fees of $ 243,371 , $251,668, and
$220,9 02, respectively, after reduction of fees and expenses
paid by the fund to the non-interested Trustees. In addition, for
the fiscal years ended August 31, 1997, 1996, and 1995, credits
reducing management fees amounted to $6,064, $3,018, and $0,
respectively.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to
be repaid for these expense reimbursements in the amount that expenses
fall below the limit prior to the end of the fiscal year.
Expense reimbursements by FMR will increase the fund's total returns
and yield, and repayment of the reimbursement by the fund will lower
its total returns and yield.
During the past three fiscal periods, FMR voluntarily agreed,
subject to revision or termination, to reimburse the fund if and to
the extent that its aggregate operating expenses, including management
fees, were in excess of an annual rate of its average net assets. The
table below shows the periods of reimbursement and levels of expense
limitations; the dollar amount of management fees incurred under the
fund's contract before reimbursement; and the dollar amount of
management fees reimbursed by FMR under the expense reimbursement for
each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Periods of Aggregate Fiscal Years Management Amount of
Expense Limitation Operating Ended Fee Management
From To Expense August 31 Before Fee
Limitation Reimbursement Reimbursement
Spartan Maryland September 1, August 31, .00% 1997 $ 243,371 * $ 0
Municipal Income 1996 1997
April 1, 1996 August 31, .00% 1996 $ 251,668 * $ 68,241
1996
February 1, March 31, .40%
1996 1996
September 1, January 31, .25%
1995 1996
May 1, August 31, .25% 1995 $
220,902* $ 159,214
1995 1995
September 1, April 30, .10%
1994 1995
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on behalf
of the fund pursuant to Rule 12b-1 under the 1940 Act (the Rule). The
Rule provides in substance that a mutual fund may not engage directly
or indirectly in financing any activity that is primarily intended to
result in the sale of shares of the fund except pursuant to a plan
approved on behalf of the fund under the Rule. The Plan, as approved
by the Trustees, allows the fund and FMR to incur certain expenses
that might be considered to constitute indirect payment by the fund of
distribution expenses.
Under the Plan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. The Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund
shares. In addition, the Plan provides that FMR, directly or
through FDC , may make payments to third parties, such as banks
or broker-dealers, that engage in the sale of fund shares, or provide
shareholder support services. Currently, the Board of Trustees has not
authorized such payments for Spartan Maryland Municipal Income
shares.
Prior to approving the Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that the Plan does not authorize payments by the fund other than
those made to FMR under its management contract with the fund. To the
extent that the Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plan by local
entities with whom shareholders have other relationships.
T he Plan was approved by FMR as the then sole shareholder of the
fund on March 18, 199 3 .
The Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the fund might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to
register as dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plan. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
The fund has entered into a transfer agent agreement with UMB. Under
the terms of the agreement, UMB provides transfer agency, dividend
disbursing, and shareholder services for the fund. UMB in turn has
entered into a sub-transfer agent agreement with FSC, an affiliate of
FMR. Under the terms of the sub-agreement, FSC performs all processing
activities associated with providing these services for the fund and
receives all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an annual
account fee and an asset-based fee each based on account size and fund
type for each retail account and certain institutional accounts. With
respect to certain institutional retirement accounts, FSC receives an
annual account fee and an asset-based fee based on account type or
fund type. These annual account fees are subject to increase based on
postal rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in each Fidelity Freedom Fund,
a fund of funds managed by an FMR affiliate, according to the
percentage of the Freedom Fund's assets that is invested in the fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
The fund has also entered into a service agent agreement with UMB.
Under the terms of the agreement, UMB provides pricing and bookkeeping
services for the fund. UMB in turn has entered into a sub-service
agent agreement with FSC. Under the terms of the sub-agreement, FSC
performs all processing activities associated with providing these
services, including calculating the NAV and dividends for the fund and
maintaining the fund's portfolio and general accounting records, and
receives all related pricing and bookkeeping fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a
monthly fee based on the fund's average daily net assets throughout
the month.
FMR bears the cost of transfer agency, dividend disbursing, and
shareholder services and pricing and bookkeeping services under the
terms of its management contract with the fund.
The fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreement calls for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan Maryland Municipal Income Fund is a fund
of Fidelity Union Street Trust, an open-end manage ment investment
company organized as a Massachusetts business trust on March 1, 1974.
On April 30, 1990, the Board of Trustees voted to change the name of
the trust from Fidelity Daily Income Trust to Fidelity Union Street
Trust. Currently, there are six funds of the trust: Spartan
Short-Intermediate Municipal Income Fund, Spartan Intermediate
Municipal Income Fund, Spartan Ginnie Mae Fund, Spartan Maryland
Municipal Income Fund, Fidelity Export and Multinational Fund, and
Spartan A rizona Municipal Income Fund. The Declaration of Trust
permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund are segregated on the books of account,
and are to be charged with the liabilities with respect to such fund
and with a share of the general expenses of the trust. Expenses with
respect to the trust are to be allocated in proportion to the asset
value of the respective funds, except where allocations of direct
expense can otherwise be fairly made. The officers of the trust,
subject to the general supervision of the Board of Trustees, have the
power to determine which expenses are allocable to a given fund, or
which are general or allocable to all of the funds. In the event of
the dissolution or liquidation of the trust, shareholders of each fund
are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the trust shall not have
any claim against shareholders except for the payment of the purchase
price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or the Trustees
include a provision limiting the obligations created thereby to the
trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the trust or a
fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose
of voting on removal of one or more Trustees. The trust or any fund
may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the
trust or the fund, as determined by the current value of each
shareholder's investment in the fund or trust. If not so terminated,
the trust and its funds will continue indefinitely. Each fund may
invest all of its assets in another investment company.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri,
is custodian of the assets of the fund. The custodian is responsible
for the safekeeping of a fund's assets and the appointment of any
subcustodian banks and clearing agencies. The custodian takes no part
in determining the investment policies of a fund or in deciding which
securities are purchased or sold by a fund. However, a fund may invest
in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts serves as the fund's independent accountant. The auditor
examines financial statements for the fund and provides other audit,
tax, and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the
fiscal year ended August 31, 1997 , and report of the auditor,
are included in the fund's Annual Report, which is a separate report
supplied with this SAI. The fund's financial statements,
including the financial highlights, and report of the auditor are
incorporated herein by reference. For a free additional copy of the
fund's Annual Report, contact Fidelity at 1-800-544-8888, 82
Devonshire Street, Boston, MA 02109, or your investment
professional.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying
the value of each investment by the time remaining to its maturity,
adding these calculations, and then dividing the total by the value of
the fund's portfolio. An obligation's maturity is typically determined
on a stated final maturity basis, although there are some exceptions
to this rule.
For example, if it is probable that the issuer of an instrument
will take advantage of a maturity-shortening device, such as a call,
refunding, or redemption provision, the date on which the instrument
will probably be called, refunded, or redeemed may be considered to be
its maturity date. When a municipal bond issuer has committed to call
an issue of bonds and has established an independent escrow account
that is sufficient to, and is pledged to, refund that issue, the
number of days to maturity for the prerefunded bond is considered to
be the number of days to the announced call date of the bonds.
The descriptions that follow are examples of eligible ratings for
the fund. The fund may, however, consider the ratings for other types
of investments and the ratings assigned by other rating organizations
when determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF MUNICIPAL
OBLIGATIONS
Moody's ratings for long-term municipal obligations fall within
nine categories. They range from Aaa (highest quality) to C (lowest
quality). Those bonds within the Aa through B categories that Moody's
believes possess the strongest credit attributes within those
categories are designated by the symbol "1."
AAA - Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise
what are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa
securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA - Bonds that are rated Baa are considered as
medium-grade obligations, (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length
of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long period
of time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger
with respect to principal or interest.
CA - Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked short-comings.
C - Bonds that are rated C are the lowest-rated class of
bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL
DEBT
Municipal debt issues may be designated by Standard & Poor's as
either investment grade ("AAA" through "BBB") or speculative grade
("BB" through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA through CCC may be modified by the addition of a plus sign (+) or
minus sign (-) to show relative standing within the major rating
categories.
AAA - Debt rated AAA has the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest rated issues
only in small degree.
A - Debt rated A has a strong capacity to pay interest and
repay principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category
than in higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon favorable business,
financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC - Debt rated CC is typically applied to debt subordinated
to senior debt which is assigned an actual or implied CCC debt
rating.
C - The rating C is typically applied to debt subordinated
to senior debt which is assigned an actual or implied CCC- debt
rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed but debt service payments are
continued.
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D - Debt rated D is in payment default. The D rating
category is used when interest payments or principal payments are not
made on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during
such grace period. The D rating will also be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements and Financial Highlights, included in the
Annual Report for Spartan Maryland Municipal Income Fund for the
fiscal year ended August 31, 1997 are incorporated herein by reference
into the fund's Statement of Additional Information and were filed on
October 20, 1997 for Fidelity Union Street Trust (No. 811-2460)
pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
(b) Exhibits:
1. Amended and Restated Declaration of Trust, dated September 14,
1995, is incorporated herein by reference to Exhibit (1) to
Post-Effective Amendment No. 92.
2. (a) Bylaws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) to Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract, dated December 13, 1990, between Spartan
Ginnie Mae Fund and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(b) to Post-Effective
Amendment No. 89.
(b) Management Contract, dated March 18, 1993, between Spartan
Maryland Municipal Income Fund and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(c) to
Post-Effective Amendment No. 89.
(c) Management Contract, dated March 18, 1993, between Spartan
Intermediate Municipal Income Fund and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(g) to
Post-Effective Amendment No. 84.
(d) Management Contract, dated October 18, 1993, between Spartan
Short-Intermediate Municipal Income Fund and Fidelity Management &
Research Company is incorporated herein by reference to Exhibit 5(f)
to Post-Effective Amendment No. 89.
(e) Management Contract, dated July 14, 1994, between Fidelity
Export Fund (currently known as Fidelity Export and Multinational
Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(g) to Post-Effective Amendment No.
89.
(f) Sub-Advisory Agreement, dated July 14, 1994, between Fidelity
Management & Research Company, Fidelity Management & Research Company
(U.K.) Inc., and Fidelity Union Street Trust on behalf of Fidelity
Export Fund (currently known as Fidelity Export and Multinational
Fund) is incorporated herein by reference to Exhibit 5(h) to
Post-Effective Amendment No. 89.
(g) Sub-Advisory Agreement, dated July 14, 1994, between Fidelity
Management & Research Company, Fidelity Management & Research Company
(Far East) Inc., and Fidelity Union Street Trust on behalf of Fidelity
Export Fund (currently known as Fidelity Export and Multinational
Fund) is incorporated herein by reference to Exhibit 5(i) to
Post-Effective Amendment No. 89.
(j) Management Contract, dated September 16, 1994, between Spartan
Arizona Municipal Income Portfolio and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(j) to
Post-Effective Amendment No. 89.
(k) Management Contract, dated April 19, 1990, between Spartan
Municipal Income Portfolio and Fidelity Management & Research Company
is incorporated herein by reference to Exhibit 5(a) to Post-Effective
Amendment No. 89.
6. (a) General Distribution Agreement, dated December 13, 1990,
between Fidelity Union Street Trust, on behalf of Spartan Ginnie Mae
Fund and Fidelity Distributors Corporation is incorporated herein by
reference to Exhibit 6(b) to Post-Effective Amendment No. 84.
(b) Amendment, dated May 10, 1994, to the General Distribution
Agreement, dated December 13, 1990, between Spartan Ginnie Mae Fund
and Fidelity Distributors Corporation is incorporated herein by
reference to Exhibit 6(c) to Post-Effective Amendment No. 89.
(c) General Distribution Agreement, dated March 18, 1993, between
Fidelity Union Street Trust, on behalf of Spartan Maryland Municipal
Income Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(d) to Post-Effective Amendment No.
89.
(d) General Distribution Agreement, dated March 18, 1993, between
Fidelity Union Street Trust, on behalf of Spartan Intermediate
Municipal Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(f) to Post-Effective Amendment No.
84.
(e) Amendment, dated May 10, 1994, to the General Distribution
Agreement, dated March 18, 1993, between Fidelity Union Street Trust,
on behalf of Spartan Intermediate Municipal Fund and Fidelity
Distributors Corporation is incorporated herein by reference to
Exhibit 6(h) to Post-Effective Amendment No. 89.
(f) General Distribution Agreement, dated July 14, 1994, between
Fidelity Union Street Trust, on behalf of Fidelity Export Fund
(currently known as Fidelity Export and Multinational Fund), and
Fidelity Distributors Corporation is incorporated herein by reference
to Exhibit 6(i) to Post-Effective Amendment No. 92.
(g) Amendments to the General Distribution Agreement between
Fidelity Union Street Trust on behalf of Fidelity Export Fund
(currently known as Fidelity Export and Multinational Fund), and
Fidelity Distributors Corporation, dated March 14, 1996 and July 15,
1996, are incorporated herein by reference to Exhibit 6(k) of Fidelity
Select Portfolios' Post-Effective Amendment No. 57 (File No. 2-69972).
(h) General Distribution Agreement, dated September 16, 1994,
between Fidelity Union Street Trust, on behalf of Spartan Arizona
Municipal Income Portfolio, and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(j) to Post-Effective
Amendment No. 91.
(i) General Distribution Agreement, dated October 18, 1993, between
Fidelity Union Street Trust, on behalf of Spartan Short-Intermediate
Municipal Fund, and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(k) to Post-Effective Amendment No.
92.
(j) General Distribution Agreement, dated April 19, 1990, between
Fidelity Union Street Trust, on behalf of Spartan Municipal Income
Portfolio, and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(a) to Post-Effective Amendment No.
89.
(k) Amendments to the General Distribution Agreement between
Fidelity Union Street Trust, on behalf of Spartan Arizona Municipal
Income Fund, Spartan Ginnie Mae Fund, Spartan Intermediate Municipal
Income Fund, Spartan Maryland Municipal Income Fund, Spartan Municipal
Income Fund and Spartan Short-Intermediate Municipal Income Fund, and
Fidelity Distributors Corporation, dated March 14, 1996 and July 15,
1996, are incorporated herein by reference to Exhibit 6(a) of Fidelity
Court Street Trust's Post-Effective Amendment No. 61 (File No.
2-58774).
(l) Form of Bank Agency Agreement (as revised January, 1997) is
incorporated herein by reference to Exhibit 6(n) to Post-Effective
Amendment No. 97.
(m) Form of Selling Dealer Agreement for Bank-Related Transactions
(as revised January, 1997) is incorporated herein by reference to
Exhibit 6(o) to Post-Effective Amendment No. 97.
7. (a) Retirement Plan for Non-Interested Person Trustees, Directors
or General Partners, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Portfolio's
(File No. 2-69972) Post-Effective Amendment No. 54.
. (b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
8. (a) Custodian Agreement and Appendix C, dated December 1, 1994,
between The Bank of New York and Fidelity Union Street Trust on behalf
of Spartan Ginnie Mae Fund is incorporated herein by reference to
Exhibit 8(a) of Fidelity Hereford Street Trust's Post-Effective
Amendment No. 4 (File No. 33-52577).
(b) Appendix A, dated April 17, 1997, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and Fidelity
Union Street Trust on behalf of Spartan Ginnie Mae Fund is
incorporated herein by reference to Exhibit 8(b) of Fidelity Hereford
Street Trust's Post-Effective Amendment No. 8 (File No. 33-52577).
(c) Appendix B, dated June 19, 1997, to the Custodian Agreement,
dated December 1, 1994, between The Bank of New York and Fidelity
Union Street Trust on behalf of Spartan Ginnie Mae Fund is
incorporated herein by reference to Exhibit 8(c) of Fidelity Income
Fund's Post-Effective Amendment No. 42 (File No. 2-92661).
(d) Custodian Agreement, Appendix B, and Appendix C, dated December
1, 1994, between UMB Bank, n.a. and Fidelity Union Street Trust on
behalf of Spartan Short-Intermediate Municipal Fund, Spartan
Intermediate Municipal Fund, Spartan Municipal Income Portfolio,
Spartan Maryland Municipal Income Fund, and Spartan Arizona Municipal
Income Portfolio is incorporated herein by reference to Exhibit 8 of
Fidelity California Municipal Trust's Post-Effective Amendment No. 28
(File No. 2-83367).
(e) Appendix A, dated October 17, 1996, to the Custodian Agreement,
dated December 1, 1994, between UMB Bank, n.a. and Fidelity Union
Street Trust on behalf of Spartan Short-Intermediate Municipal Fund,
Spartan Intermediate Municipal Fund, Spartan Municipal Income
Portfolio, Spartan Maryland Municipal Income Fund, and Spartan Arizona
Municipal Income Portfolio is incorporated herein by reference to
Exhibit 8(a) of Fidelity Court Street Trust's Post-Effective Amendment
No. 61 (File No. 2-58774).
(f) Custodian Agreement and Appendix C, dated August 1, 1994,
between The Chase Manhattan Bank, N.A. and Fidelity Union Street Trust
on behalf of Fidelity Export Fund (currently known as Fidelity Export
and Multinational Fund) is incorporated herein by reference to Exhibit
8(a) of Fidelity Investment Trust's Post-Effective Amendment No. 59
(File No. 2-90649).
(g) Appendix A, dated October 17, 1996, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Fidelity Union Street Trust on behalf of Fidelity Export Fund
(currently known as Fidelity Export and Multinational Fund) is
incorporated herein by reference to Exhibit 8(c) of Fidelity Charles
Street Trust's Post-Effective Amendment No. 57 (File No. 2-73133).
(h) Appendix B, dated June 19, 1997, to the Custodian Agreement,
dated August 1, 1994, between The Chase Manhattan Bank, N.A. and
Fidelity Union Street Trust on behalf of Fidelity Export Fund
(currently known as Fidelity Export and Multinational Fund) is
incorporated herein by reference to Exhibit 8(c) of Fidelity
Securities Fund's Post-Effective Amendment No. 36 (File No. 2-93601).
(i) Fidelity Group Repo Custodian Agreement among The Bank of New
York, J. P. Morgan Securities, Inc., and Fidelity Union Street Trust
on behalf of Fidelity Export Fund (currently known as Fidelity Export
and Multinational Fund) and Spartan Ginnie Mae Fund, dated February
12, 1996, is incorporated herein by reference to Exhibit 8(d) of
Fidelity Institutional Cash Portfolios' (File No. 2-74808)
Post-Effective Amendment No. 31.
(j) Schedule 1 to the Fidelity Group Repo Custodian Agreement
between The Bank of New York and Fidelity Union Street Trust on behalf
of Fidelity Export Fund (currently known as Fidelity Export and
Multinational Fund) and Spartan Ginnie Mae Fund, dated February 12,
1996, is incorporated herein by reference to Exhibit 8(e) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(k) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and Fidelity Union Street Trust on
behalf of Fidelity Export Fund (currently known as Fidelity Export and
Multinational Fund) and Spartan Ginnie Mae Fund, dated November 13,
1995, is incorporated herein by reference to Exhibit 8(f) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(l) Schedule 1 to the Fidelity Group Repo Custodian Agreement
between Chemical Bank and Fidelity Union Street Trust on behalf of
Fidelity Export Fund (currently known as Fidelity Export and
Multinational Fund) and Spartan Ginnie Mae Fund, dated November 13,
1995, is incorporated herein by reference to Exhibit 8(g) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(m) Joint Trading Account Custody Agreement between The Bank of New
York and Fidelity Union Street Trust on behalf of Fidelity Export Fund
(currently known as Fidelity Export and Multinational Fund) and
Spartan Ginnie Mae Fund, dated May 11, 1995, is incorporated herein by
reference to Exhibit 8(h) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.
(n) First Amendment to Joint Trading Account Custody Agreement
between The Bank of New York and Fidelity Union Street Trust on
behalf of Fidelity Export Fund (currently known as Fidelity Export and
Multinational Fund) and Spartan Ginnie Mae Fund, dated July 14, 1995,
is incorporated herein by reference to Exhibit 8(i) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
9. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand L.L.P. is filed herein as Exhibit
11.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement
and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(a) of Fidelity Union Street Trust's
(File No. 2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(i) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(l) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(m) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post Effective Amendment No.
57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) of Fidelity Commonwealth Trust's (File No.
2-52322) Post Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity
Securities Fund's (File No. 2-93601) Post Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document,
Standardized Adoption Agreement, and Non-Standardized Adoption
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(o) of Fidelity Securities Fund's (File No. 2-93601) Post
Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k)
Basic Plan Document, Standardized Adoption Agreement, and
Non-Standardized Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Securities Fund's (File No. 2-93601) Post Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan
Adoption Agreement, Non-Standardized Discretionary Contribution Plan
No. 002 Adoption Agreement, and Non-Standardized Discretionary
Contribution Plan No. 003 Adoption Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(g) of Fidelity
Securities Fund's (File No. 2-93601) Post Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No.
2-93601) Post Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(c) of Fidelity Securities Fund's (File No. 2-93601) Post
Effective Amendment No. 33.
(q) Fidelity SIMPLE-IRAPlan Adoption Agreement, Company Profile
Form, and Plan Document, as currently in effect, is incorporated
herein by reference to Exhibit 14(q) of Fidelity Aberdeen Street
Trust's (File No. 33-43529) Post Effective Amendment No. 19.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Ginnie Mae Fund is incorporated herein by reference to Exhibit
15(a) to Post Effective Amendment No.99.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Maryland Municipal Income Fund is is incorporated herein by reference
to Exhibit 15(b) to Post Effective Amendment No.99.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Intermediate Municipal Income Fund is incorporated herein by
reference to Exhibit 15(e) to Post Effective Amendment No. 96.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Arizona Municipal Income Portfolio is is incorporated herein
by reference to Exhibit 15(d) to Post Effective Amendment No.99.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Short-Intermediate Municipal Income Fund is incorporated
herein by reference to Exhibit 15(g) to Post Effective Amendment No.
96.
16. (a) A schedule for the computation of 30-day yields and total
returns on behalf of the registrant is incorpo- rated herein by
reference to Exhibit 16(a) to Post-Effective Amendment No. 92.
(b) A schedule for the computation of moving averages on behalf
of the registrant is incorporated herein by reference to Exhibit
16(b) to Post-Effective Amendment No. 92.
17. Financial Data Schedules are filed herein as Exhibit 27.
18. Not applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of Fidelity Union Street Trust is the same as
the boards of other funds advised by FMR, each of which has Fidelity
Management & Research Company as its investment adviser. In addition,
the officers of these funds are substantially identical. Nonetheless,
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities: October 31, 1997
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Export and Multinational Fund 49,926
Spartan Arizona Municipal Income Fund 292
Spartan Ginnie Mae Fund 15,444
Spartan Intermediate Municipal Income Fund 3,163
Spartan Maryland Municipal Income Fund 966
Spartan Short-Intermediate Municipal Income Fund 13,110
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification
shall be provided to any past or present Trustee or officer. It
states that the Registrant shall indemnify any present or past Trustee
or officer to the fullest extent permitted by law against liability
and all expenses reasonably incurred by him in connection with any
claim, action, suit, or proceeding in which he is involved by virtue
of his service as a Trustee, an officer, or both. Additionally,
amounts paid or incurred in settlement of such matters are covered by
this indemnification. Indemnification will not be provided in certain
circumstances, however. These include instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of
the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against
any loss, liability, claim, damages or expense arising by reason of
any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, Statement of Additional
Information, shareholder reports or other information filed or made
public by the Registrant included a materially misleading statement or
omission. However, the Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with,
information furnished to the Registrant by or on behalf of the
Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of
willful misfeasance, bad faith, gross negligence, and reckless
disregard of the obligations and duties under the Distribution
Agreement.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed sub-transfer agent, the Transfer Agent agrees
to indemnify Service for Service's losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and
expenses) (losses) to the extent that the Transfer Agent is entitled
to and receives indemnification from the Portfolio for the same
events. Under the Transfer Agency Agreement, the Registrant agrees to
indemnify and hold the Transfer Agent harmless against any losses,
claims, damages, liabilities, or expenses (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder which names the
Transfer Agent and/or the Registrant as a party and is not based on
and does not result from the Transfer Agent's willful misfeasance, bad
faith or negligence or reckless disregard of duties, and arises out of
or in connection with the Transfer Agent's performance under the
Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by the Transfer Agent's willful misfeasance, bad faith
or negligence or reckless disregard of duties) which results from the
negligence of the Registrant, or from the Transfer Agent's acting upon
any instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of the Transfer Agent's acting in reliance upon advice
reasonably believed by the Transfer Agent to have been given by
counsel for the Registrant, or as a result of the Transfer Agent's
acting in reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or
executed by the proper person.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed transfer agent, the Registrant agrees to
indemnify and hold Service harmless against any losses, claims,
damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names the
Service and/or the Registrant as a party and is not based on and does
not result from Service's willful misfeasance, bad faith or negligence
or reckless disregard of duties, and arises out of or in connection
with Service's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by Service's willful misfeasance, bad faith or
negligence or reckless disregard of duties) which results from the
negligence of the Registrant, or from Service's acting upon any
instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of Service's acting in reliance upon advice reasonably believed
by Service to have been given by counsel for the Registrant, or as a
result of Service's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held,
during the past two fiscal years, the following positions of a
substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Board of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of the
Board and Director of FMR, FMR Corp., FMR Texas
Inc., FMR (U.K.) Inc., and FMR (Far East) Inc.;
Chairman of the Board and Representative Director of
Fidelity Investments Japan Limited; President and
Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; President and Director
of FMR Texas Inc., FMR (U.K.) Inc., and FMR (Far
East) Inc.; General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
Marta Amieva Vice President of FMR.
John Carlson Vice President of FMR.
Dwight D. Churchill Senior Vice President of FMR.
Barry Coffman Vice President of FMR.
Arieh Coll Vice President of FMR.
Stephen G. Manning Assistant Treasurer of FMR
William Danoff Senior Vice President of FMR and of a fund advised by
FMR.
Scott E. DeSano Vice President of FMR.
Craig P. Dinsell Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
George C. Domolky Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and a fund advised by FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
(U.K.) Inc., and FMR (Far East) Inc.; Secretary of FMR
Texas Inc.
Robert Gervis Vice President of FMR.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Kevin E. Grant Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Senior Vice President of FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
William J. Hayes Senior Vice President of FMR; Vice President of Equity
funds advised by FMR.
Richard Hazlewood Vice President of FMR and of a fund advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR; Vice President of
Fixed-Income funds advised by FMR.
Bruce Herring Vice President of FMR.
John R. Hickling Vice President of FMR and of a fund advised by FMR.
Robert F. Hill Vice President of FMR; Director of Technical Research.
Curt Hollingsworth Vice President of FMR and of funds advised by FMR.
Abigail P. Johnson Senior Vice President of FMR and of a fund advised by
FMR; Associate Director and Senior Vice President of
Equity funds advised by FMR.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
(U.K.) Inc.
David P. Kurrasch Vice President of FMR.
Robert A. Lawrence Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by FMR;
Vice President of High Income funds advised by FMR.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Mark G. Lohr Vice President of FMR; Treasurer of FMR, FMR (U.K.)
Inc., FMR (Far East) Inc., and FMR Texas Inc.
Arthur S. Loring Senior Vice President, Clerk, and General Counsel of
FMR; Vice President/Legal, and Assistant Clerk of
FMR Corp.; Secretary of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Charles Mangum Vice President of FMR.
Kevin McCarey Vice President of FMR.
Diane McLaughlin Vice President of FMR.
Neal P. Miller Vice President of FMR.
Robert H. Morrison Vice President of FMR; Director of Equity Trading.
David L. Murphy Vice President of FMR and of funds advised by FMR.
Scott Orr Vice President of FMR.
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR.
Kenneth A. Rathgeber Vice President of FMR; Treasurer of funds advised by
FMR.
Kennedy P. Richardson Vice President of FMR.
Mark Rzepczynski Vice President of FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Fergus Shiel Vice President of FMR.
Carol Smith-Fachetti Vice President of FMR.
Steven J. Snider Vice President of FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity funds advised by FMR;
Senior Vice President and Director of Operations and
Compliance of FMR (U.K.) Inc.
Thomas Sprague Vice President of FMR.
Robert E. Stansky Senior Vice President of FMR; Vice President of a fund
advised by FMR.
Scott Stewart Vice President of FMR.
Cythia Straus Vice President of FMR.
Thomas Sweeney Vice President of FMR and of a fund advised by FMR.
Beth F. Terrana Senior Vice President of FMR; Vice President of a fund
advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
25 Lovat Lane, London, EC3R 8LL, England
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR U.K.,
FMR, FMR Corp., FMR Texas Inc., and FMR (Far
East) Inc.; Chairman of the Executive Committee of
FMR; President and Chief Executive Officer of FMR
Corp.; Chairman of the Board and Representative
Director of Fidelity Investments Japan Limited;
President and Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; President and Director
of FMR Texas Inc., FMR (U.K.) Inc., and FMR (Far
East) Inc.; General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Mark G. Lohr Treasurer of FMR U.K., FMR, FMR (Far East) Inc., and
FMR Texas Inc.; Vice President of FMR.
Stephen G. Manning Assistant Treasurer of FMR U.K., FMR, FMR (Far
East) Inc., and FMR Texas Inc.; Treasurer of FMR
Corp.
Francis V. Knox Compliance Officer of FMR U.K.; Vice President of
FMR.
Jay Freedman Clerk of FMR U.K., FMR (Far East) Inc., and FMR
Corp.; Assistant Clerk of FMR; Secretary of FMR
Texas Inc.
(3) FIDELITY MANAGEMENT & RESEARCH COMPANY (FAR EAST) INC. (FMR FAR
EAST)
Shiroyama JT Mori Bldg., 4-3-1 Toranomon Minato-ku, Tokyo 105,
Japan
FMR Far East provides investment advisory services to Fidelity
Management & Research Company and Fidelity Management Trust Company.
The directors and officers of the Sub-Adviser have held the following
positions of a substantial nature during the past two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FMR Far
East, FMR, FMR Corp., FMR Texas Inc., and
FMR (U.K.) Inc.; Chairman of the Executive
Committee of FMR; President and Chief
Executive Officer of FMR Corp.; Chairman of
the Board and Representative Director of Fidelity
Investments Japan Limited; President and
Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; President and
Director of FMR Texas Inc., FMR (U.K.) Inc.,
and FMR (Far East) Inc.; General Counsel,
Managing Director, and Senior Vice President of
FMR Corp.
Bill Wilder Vice President of FMR Far East; President and
Representative Director of Fidelity Investments
Japan Limited.
Mark G. Lohr Treasurer of FMR Far East, FMR, FMR (U.K.)
Inc., and FMR Texas Inc.; Vice President of
FMR.
Stephen G. Manning Assistant Treasurer of FMR Far East, FMR,
FMR (U.K.) Inc., and FMR Texas Inc.; Vice
President and Treasurer of FMR Corp.
Jay Freedman Clerk of FMR Far East, FMR (U.K.) Inc., and
FMR Corp.; Assistant Clerk of FMR; Secretary
of FMR Texas Inc.
Robert Auld Vice President of FMR Far East.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
most funds advised by FMR.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
James Curvey Director None
Martha B. Willis President None
Arthur S. Loring Vice President and Clerk Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the
funds' respective custodian, The Bank of New York, 110 Washington
Street, New York, N.Y., The Chase Manhattan Bank, 1 Chase Manhattan
Plaza, New York, N.Y., and UMB Bank, n.a., 1010 Grand Avenue, Kansas
City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(1) The Registrant undertakes for Spartan Maryland Municipal Income
Fund, Spartan Intermediate Municipal Income Fund, Fidelity Export and
Multinational Fund, and Spartan Arizona Municipal Income Fund: (1) to
call a meeting of shareholders for the purpose of voting upon the
questions of removal of a trustee or trustees, when requested to do so
by record holders of not less than 10% of its outstanding shares; and
(2) to assist in communications with other shareholders pursuant to
Section 16(c)(1) and (2), whenever shareholders meeting the
qualifications set forth in Section 16(c) seek the opportunity to
communicate with other shareholders with a view toward requesting a
meeting.
(2) The Registrant on behalf of Spartan Short-Intermediate Municipal
Income Fund, Spartan Intermediate Municipal Income Fund, Spartan
Ginnie Mae Fund, Spartan Maryland Municipal Income Fund, Fidelity
Export and Multinational Fund, and Spartan Arizona Municipal Income
Fund, provided the information required by Item 5A is contained in the
annual report, undertakes to furnish each person to whom a prospectus
has been delivered, upon their request and without charge, a copy of
the Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 100 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 16th day of December 1997.
Fidelity Union Street Trust
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d (dagger) President and Trustee December 16, 1997
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer December 16, 1997
Richard A. Silver
/s/Robert C. Pozen Trustee December 16, 1997
Robert C. Pozen
/s/Ralph F. Cox * Trustee December 16, 1997
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee December 16, 1997
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee December 16, 1997
Robert M. Gates
/s/E. Bradley Jones * Trustee December 16, 1997
E. Bradley Jones
/s/Donald J. Kirk * Trustee December 16, 1997
Donald J. Kirk
/s/Peter S. Lynch * Trustee December 16, 1997
Peter S. Lynch
/s/Marvin L. Mann * Trustee December 16, 1997
Marvin L. Mann
/s/William O. McCoy * Trustee December 16, 1997
William O. McCoy
/s/Gerald C. McDonough * Trustee December 16, 1997
Gerald C. McDonough
/s/Thomas R. Williams * Trustee December 16, 1997
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectus and Statement of Additional Information in Post-Effective
Amendment No. 100 to the Registration Statement on Form N-1A of
Fidelity Union Street Trust: Spartan Maryland Municipal Income Fund,
of our report dated October 6, 1997 on the financial statements and
financial highlights included in the August 31, 1997 Annual Report to
Shareholders of Spartan Maryland Municipal Income Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Auditor" in the
Statement of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 16, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035330
<NAME> Fidelity Union Street Trust
<SERIES>
<NUMBER> 51
<NAME> Spartan Maryland Municipal Income Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 38,961
<INVESTMENTS-AT-VALUE> 39,913
<RECEIVABLES> 420
<ASSETS-OTHER> 59
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,392
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 161
<TOTAL-LIABILITIES> 161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,675
<SHARES-COMMON-STOCK> 3,956
<SHARES-COMMON-PRIOR> 4,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,393)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 949
<NET-ASSETS> 40,231
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,295
<OTHER-INCOME> 0
<EXPENSES-NET> 238
<NET-INVESTMENT-INCOME> 2,057
<REALIZED-GAINS-CURRENT> 388
<APPREC-INCREASE-CURRENT> 1,013
<NET-CHANGE-FROM-OPS> 3,458
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,057
<DISTRIBUTIONS-OF-GAINS> 14
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 509
<NUMBER-OF-SHARES-REDEEMED> 1,322
<SHARES-REINVESTED> 162
<NET-CHANGE-IN-ASSETS> (5,129)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,776)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 243
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 244
<AVERAGE-NET-ASSETS> 44,205
<PER-SHARE-NAV-BEGIN> 9.850
<PER-SHARE-NII> .466
<PER-SHARE-GAIN-APPREC> .323
<PER-SHARE-DIVIDEND> .466
<PER-SHARE-DISTRIBUTIONS> .003
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.170
<EXPENSE-RATIO> 55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
