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. 99 [X]
and
REGISTRATION STATEMENT (No. 811-2460)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 99 [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: 617-570-7000
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 (October 23, 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.
FIDELITY EXPORT AND MULTINATIONAL 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
FIDELITY EXPORT AND MULTINATIONAL 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.
FIDELITY
EXPORT AND
MULTINATIONAL
FUND
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
October 23, 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.
EXF-pro-1097
(fund number 332, trading symbol FEXPX)
Export and Multinational Fund is a growth fund. It seeks to increase
the value of your investment over the long term by investing mainly in
equity securities of U.S. companies that are expected to benefit from
exporting or selling their goods or services outside the U.S.
PROSPECTUS
OCTOBER 23, 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 sales charge
(load) and its 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, including
tax-sheltered retirement plans.
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
SALES CHARGE REDUCTIONS AND
WAIVERS
KEY FACTS
THE FUND AT A GLANCE
GOAL: Long-term growth of capital (increase in the value of
the fund's shares). As with any mutual fund, there is no assurance
that the fund will achieve its goal.
STRATEGY: Invests mainly in equity securities of U.S. companies that
are expected to benefit from exporting or selling their goods or
services outside the U.S.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946
and is now America's largest mutual fund manager. Foreign affiliates
of FMR may help choose investments for the fund.
SIZE: As of August 31, 1997, the fund had over $452 million in assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially high long-term returns. The fund is designed for those who
believe that companies which are expected to benefit from exporting or
selling their goods or services outside the U.S. have greater growth
potential than other companies. This strategy can lead to investments
in smaller, less well-known companies and industry focused companies
that may be sensitive to foreign economic and political conditions.
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. Export and
Multinational Fund is in the
GROWTH category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME Seeks
long-term growth and income
by investing in stocks and
bonds.
(right arrow) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
The value of the fund's investments will vary from day to day, and
generally reflect market conditions, interest rates, and other
company, political, or economic news both here and abroad. In the
short-term, stock prices can fluctuate dramatically in response to
these factors. The securities of small, less well-known
companies may be more volatile than those of larger companies. Over
time, however, stocks have shown greater growth potential than other
types of securities. Investments in foreign securities may involve
risks in addition to those of U.S. investments, including increased
political and economic risk, as well as exposure to currency
fluctuations. 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.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of the fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. Lower sales charges may be available for accounts over
$250,000. See "Transaction Details," page , and "Sales Charge
Reductions and Waivers," page , for an explanation of how and when
these charges apply.
Maximum sales charge on purchases 3%
(as a % of offering price)
Sales charge on None
reinvested distributions
Deferred sales charge on redemptions None
Redemption fee (Short-term trading fee) 0.75%
on shares held less than 90 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. It also incurs other expenses for
services such as maintaining shareholder records and furnishing
shareholder statements and financial reports. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page ).
The following figures are based on historical expenses, adjusted to
reflect current fees , of the fund and are calculated as a
percentage of average net assets of the fund. A portion of the
brokerage commissions that the fund pays is used to reduce the fund's
expenses. In addition, the fund has entered into arrangements with its
custodian and transfer agent whereby credits realized as a result
of uninvested cash balances are used to reduce custodian and
transfer agent expenses. Including these reductions, the total fund
operating expenses presented in the table would have been 0.91%.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
These expenses are paid from
the fund's assets, and their
effect is already factored into
any quoted share price or
return. A lso,a s an investor, you
may pay certain expenses
directly (for example, the
fund's 3% sales charge).
(checkmark)
Management fee 0.60%
12b-1 fee None
Other expenses 0.38%
Total fund operating expenses 0.98%
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transcation 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 $ 40
3 years $ 60
5 years $ 83
10 years $ 147
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expense s or returns, all of which
may vary.
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>
Years ended August 31 1997 1996 1995F
Net asset value, beginning of period $ 14.85 $ 14.22 $ 10.00
Income from Investment Operations
Net investment income (loss)D (.02) (.05) (.03)
Net realized and unrealized gain (loss) 6.05 1.52 4.26
Total from investment operations 6.03 1.47 4.23
Less Distributions
From net realized gain (.86) (.84) (.01)
Redemption fees added to paid in capital -- -- --
Net asset value, end of period $ 20.02 $ 14.85 $ 14.22
Total returnB,C 41.94% 11.15% 42.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 452,636 $ 267,059 $ 503,427
Ratio of expenses to average net assets .98% 1.03% 1.22%A
Ratio of expenses to average net assets after expense reductions .91%G 1.00%G 1.22%A
Ratio of net investment income (loss) to average net assets (.13)% (.39)% (.27)%A
Portfolio turnover rate 429% 313% 245%A
Average commission rate E $ .0404 $ .0326
</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 ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND
IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
F FOR THE PERIOD OCTOBER 4, 1994 (COMMENCEMENT OF SALE OF
SHARES ) TO AUGUST 31, 1995.
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
Mutual fund performance is commonly measured as TOTAL RETURN. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes.
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. The chart on page presents calendar
year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Life of
August 31, 1997 year fundA
Export and Multinational Fund 41.94% 32.03%
Export and Multinational Fund 37.68% 30.65%
(load adj.B)
S&P 500 40.65% 28.66%
Lipper Growth Funds Avg. 33.51% n/a
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Life of
August 31, 1997 year fundA
Export and Multinational Fund 41.94% 124.58%
Export and Multinational Fund 37.68% 117.85%
(load adj.B)
S&P 500 40.65% 108.29%
Lipper Growth Funds Avg. 33.51% n/a
A FROM OCTOBER 4, 1994 (COMMENCEMENT OFOPERATIONS)
B LOAD-ADJUSTED RETURNS INCLUDE THE EFFECT OF THE FUND'S 3% SALES
CHARGE
EXAMPLE: Let's say, hypothetically, that you put $10,000 in the fund
on October 4, 1994. From that date through August 31, 1997, the fund's
total return, including the effect of the 3% sales charge, was
117. 85 %. Your $10,000 would have grown to $21,7 85 (the
initial investment plus 117. 85 % of $10,000).
$10,000 OVER LIFE OF FUND
Fiscal years 19 95 199 7
Row: 1, Col: 1, Value: 9700.0
Row: 2, Col: 1, Value: 10252.9
Row: 3, Col: 1, Value: 9932.799999999999
Row: 4, Col: 1, Value: 9942.83
Row: 5, Col: 1, Value: 9729.220000000001
Row: 6, Col: 1, Value: 10185.58
Row: 7, Col: 1, Value: 10418.61
Row: 8, Col: 1, Value: 10942.94
Row: 9, Col: 1, Value: 11389.59
Row: 10, Col: 1, Value: 12583.9
Row: 11, Col: 1, Value: 13516.04
Row: 12, Col: 1, Value: 13807.33
Row: 13, Col: 1, Value: 14302.53
Row: 14, Col: 1, Value: 13083.96
Row: 15, Col: 1, Value: 13371.84
Row: 16, Col: 1, Value: 13146.1
Row: 17, Col: 1, Value: 12753.38
Row: 18, Col: 1, Value: 13104.76
Row: 19, Col: 1, Value: 12846.39
Row: 20, Col: 1, Value: 14717.02
Row: 21, Col: 1, Value: 15843.54
Row: 22, Col: 1, Value: 14799.7
Row: 23, Col: 1, Value: 13993.57
Row: 24, Col: 1, Value: 15347.46
Row: 25, Col: 1, Value: 16887.37
Row: 26, Col: 1, Value: 16933.63
Row: 27, Col: 1, Value: 18180.93
Row: 28, Col: 1, Value: 18226.32
Row: 29, Col: 1, Value: 19205.65
Row: 30, Col: 1, Value: 18073.98
Row: 31, Col: 1, Value: 16898.79
Row: 32, Col: 1, Value: 17170.83
Row: 33, Col: 1, Value: 19183.88
Row: 34, Col: 1, Value: 20533.18
Row: 35, Col: 1, Value: 21991.28
Row: 36, Col: 1, Value: 21784.53
$
$21,785
UNDERSTANDING
PERFORMANCE
BECAUSE THIS FUND INVESTS IN
STOCKS, ITS PERFORMANCE IS
RELATED TO THAT OF THE OVERALL
STOCK MARKET. HISTORICALLY, STOCK
MARKET PERFORMANCE HAS BEEN
CHARACTERIZED BY VOLATILITY IN
THE SHORT RUN AND GROWTH IN THE
LONG RUN.
(CHECKMARK)
EXPLANATION OF TERMS
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1995 1996
EXPORT AND MULTINATIONAL FUND 32.22% 38.64%
S&P 500 37.58% 22.96%
Lipper Growth Funds Avg. 30.79% 19.24%
Consumer Price Index 2.54% 3.32%
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.
STANDARD & POOR'S 500 INDEX (S&P 500(registered trademark)) is a
widely recognized, unmanaged index of common stocks.
Unlike the fund's returns, the total returns of the comparative index
do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Growth Funds Average. As
of August 31, 1997, the average reflected the performance of
784 mutual funds with similar investment objectives. This
average, published by Lipper Analytical Services, Inc., excludes the
effect of sales loads.
Other illustrations of equity fund performance may show moving
averages over specified periods.
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 ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
EXPORT AND MULTINATIONAL FUND 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. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.), in London, England, and Fidelity Management &
Research (Far East) Inc. (FMR Far East), in Tokyo, Japan, assist FMR
with foreign investments.
Jason Weiner is manager of Export and Multinational , which he
has managed since January 1997. Previously, he managed other Fidelity
funds. Since joining Fidelity in 1991, Mr. Weiner has worked as an
analyst and manager.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the ultimate parent company of FMR, FMR U.K., and FMR Far
East. 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
EXPORT AND MULTINATIONAL FUND seeks long-term growth of capital by
investing mainly in equity securities of U.S. companies that are
expected to benefit from exporting or selling their goods or services
outside the United States (export and multinational companies). FMR
normally invests at least 65% of the fund's total assets in these
securities.
FMR defines export companies to include companies that:
(small solid bullet) derive, or FMR anticipates will derive, 10% or
more of their annual revenues from sales of exported goods or
services; or
(small solid bullet) engage in export-related businesses, such as
export trading or export management companies.
FMR defines multinational companies to include companies that:
(small solid bullet) derive a substantial portion of their revenues or
profits from foreign operations, or that have a substantial portion of
their assets abroad.
U.S. export and multinational companies may be well positioned for
growth because they often offer products or services that are unique,
of higher quality, or less expensive than comparable products or
services. Export companies tend to have smaller capitalizations than
the average S&P 500 company. Although the stocks of these smaller
capitalization companies may lead to greater growth opportunities,
they involve greater risk and are generally more volatile than
investments in large capitalization companies. Multinational companies
include larger companies that conduct their foreign operations through
local affiliates or subsidiaries.
The strength and stability of the export companies' and multinational
companies' foreign markets are significant factor s for the
fund. Foreign political, economic, and currency changes may
dramatically affect demand for products, and hence affect the fund's
performance.
The value of the fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies and general market and economic
conditions. Investments in foreign securities may involve risks in
addition to those of U.S. investments, including increased political
and economic risk, as well as exposure to currency fluctuations.
FMR may use various investment techniques to hedge a portion of the
fund's risks, but there is no guarantee that these strategies will
work as FMR intends. Also, as a mutual fund, the fund seeks to spread
investment risk by diversifying its holdings among many companies and
industries. Of course, when you sell your shares of the fund, they may
be worth more or less than what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. The fund also reserves the right to invest without
limitation in preferred stocks and investment-grade debt instruments
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.
EQUITY SECURITIES may include common stocks, preferred stocks,
convertible securities, and warrants. Common stocks, the most familiar
type, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.
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: Purchase of a debt security is consistent with the
fund's debt quality policy if it is rated at or above the stated level
by Moody's Investors Service or rated in the equivalent
categories by S tandard & P oor's , or is unrated
but judged to be of equivalent quality by FMR. The fund currently
intends to limit its investments in lower than Baa-quality debt
securities to 5% of its assets.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These
include risks relating to political or economic conditions in foreign
countries, fluctuations in foreign currencies, withholding or other
taxes, operational risks, increased regulatory burdens, and the
potentially less stringent investor protection and disclosure
standards of foreign markets. Additionally, governmental issuers of
foreign debt securities may be unwilling to pay interest and repay
principal when due and may require that the conditions for payment be
renegotiated. All of these factors can make foreign investments,
especially those in developing countries, more volatile than U.S.
investments.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity prices, or other
factors that affect security values. These techniques may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap
agreements, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of the fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with the fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk
or increase return. These techniques may increase the volatility of
the fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could
result in a loss if the counterparty to the transaction does not
perform as promised.
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.
OTHER INSTRUMENTS may include securities of closed-end investment
companies and real estate-related instruments.
CASH MANAGEMENT. The fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
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. 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 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 not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR, or through reverse repurchase agreements. If the fund borrows
money, its share price may be subject to greater fluctuation until the
borrowing is paid off. If the fund makes additional investments while
borrowings are outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 331/3% of its total assets.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering the fund's securities. The fund may also lend
money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following 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 long-term growth of capital.
The fund may not invest more than 25% of its total assets in any one
industry. This limitation does not apply to U.S. Government
securities.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. The fund also pays OTHER EXPENSES,
which are explained on page .
FMR may, from time to time, agree to reimburse the fund for management
fees and other expenses above a specified limit. FMR retains the
ability to be repaid by the fund if expenses fall below the specified
limit prior to the end of the fiscal year. Reimbursement arrangements,
which may be terminated at any time without notice, can decrease the
fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee
is calculated by adding a group fee rate to an individual fund fee
rate, and multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0 .52%,
and it drops as total assets under management increase.
For August 1997, the group fee rate was 0.2957 %. The individual
fund fee rate is 0.30% .
The total management fee rate for the fiscal year ended August 31,
1997 was 0.60 %.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on
issuers based outside the United States. Under the sub-advisory
agreements, FMR pays FMR U.K. and FMR Far East fees equal to 110% and
105%, respectively, of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
management fee rate with respect to the fund's investments that the
sub-adviser manages on a discretionary basis.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing the
fund's investments, handling securities loans, and calculating the
fund's share price and dividends.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in FMR's
total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will pay
a lower rate as FMR's assets
under management increase.
(checkmark)
For the fiscal year ended August 31, 1997, the fund paid transfer
agency and pricing and bookkeeping fees equal to 0 .34% of its
average net assets. This amount is before expense reductions, if any.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity. A
broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees.
The fund's portfolio turnover rate for the fiscal year ended August
31, 1997 was 429 %. This rate varies from year to year. High
turnover rates increase transaction costs and may increase taxable
capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, 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.
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 $ 498 billion
(solid bullet) Number of shareholder
accounts: over 33 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 273
(checkmark)
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, or call your retirement
benefits number or Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of
legal age and under 70 with earned income to invest up to $2,000 per
tax year. Individuals can also invest in a spouse's IRA if the spouse
has earned income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE
PENSION PLANS allow self-employed individuals or small business owners
(and their employees) to make tax-deductible contributions for
themselves and any eligible employees up to $30,000 per year.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employed income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SIMPLE IRAS provide small business owners and those
with self-employed income (and their eligible employees) with many of
the same advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
most tax-exempt institutions, including schools, hospitals, and other
charitable organizations.
(solid bullet) 401(K) PROGRAMS allow employees of corporations of all
sizes to contribute a percentage of their wages on a tax-deferred
basis. These accounts need to be established by the trustee of the
plan.
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 offering price
or the fund's net asset value per share (NAV), depending on whether
you pay a sales charge. If you pay a sales charge, your price will be
the fund's offering price. When you buy shares of the fund at the
offering price, Fidelity deducts the appropriate sales charge and
invests the rest in the fund. If you qualify for a sales charge
waiver, your price will be the fund's NAV. See "Sales Charge
Reductions and Waivers," page , for an explanation of how and when the
sales charge and waivers apply.
Your shares will be purchased at the next offering price or NAV, as
applicable, calculated after your investment is received and accepted.
The fund's offering price and NAV are 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 ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by
exchange to another Fidelity fund, the payment may be delayed for up
to seven business days to ensure that your previous investment has
cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $250
Through regular investment plans* $100
MINIMUM BALANCE $2,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $500
*FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
UNDERSTANDING
OFFERING PRICE
Let's say you invest $2,500 at
an offering price of $10. Of
the $10 offering price, 3%
($.30) is the sales charge, and
97% ($9.70) represents the
NAV. The value of your initial
investment will be $2,425
(250 shares worth $9.70
each), and you will have paid
a sales charge of $75.
(checkmark)
Row: 1, Col: 1, Value: 25.0
Row: 1, Col: 2, Value: 75.0
Row: 1, Col: 3, Value: 75.0
Row: 1, Col: 4, Value: 75.0
Row: 1, Col: 5, Value: 75.0
Row: 1, Col: 6, Value: 75.0
Row: 1, Col: 7, Value: 75.0
Row: 1, Col: 8, Value: 75.0
Row: 1, Col: 9, Value: 75.0
Row: 1, Col: 10, Value: 75.0
Row: 1, Col: 11, Value: 75.0
Row: 1, Col: 12, Value: 75.0
Row: 1, Col: 13, Value: 75.0
Row: 1, Col: 14, Value: 75.0
Row: 1, Col: 15, Value: 75.0
Row: 1, Col: 16, Value: 75.0
Row: 1, Col: 17, Value: 75.0
Row: 1, Col: 18, Value: 75.0
Row: 1, Col: 19, Value: 75.0
Row: 1, Col: 20, Value: 75.0
Row: 1, Col: 21, Value: 75.0
Row: 1, Col: 22, Value: 75.0
Row: 1, Col: 23, Value: 75.0
Row: 1, Col: 24, Value: 75.0
Row: 1, Col: 25, Value: 75.0
Row: 1, Col: 26, Value: 75.0
Row: 1, Col: 27, Value: 75.0
Row: 1, Col: 28, Value: 75.0
Row: 1, Col: 29, Value: 75.0
Row: 1, Col: 30, Value: 75.0
Row: 1, Col: 31, Value: 75.0
Row: 1, Col: 32, Value: 75.0
Row: 1, Col: 33, Value: 75.0
Row: 1, Col: 34, Value: 75.0
$2,500 Investment
3% sales charge = $75
Value of Investment = $2,425
These minimums may vary for investments through Fidelity Portfolio
Advisory Services. There is no minimum account balance or initial or
subsequent investment minimum for certain retirement accounts funded
through salary deduction, or accounts opened with the proceeds of
distributions from Fidelity retirement accounts. Refer to the program
materials for details.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE 1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER
FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION, ACCOUNT WITH THE SAME REGISTRATION,
INCLUDING NAME, ADDRESS, AND INCLUDING NAME, ADDRESS, AND
TAXPAYER ID NUMBER. TAXPAYER ID NUMBER.
(SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO
TRANSFER
FROM YOUR BANK ACCOUNT. CALL BEFORE
YOUR FIRST USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON YOUR ACCOUNT.
MAXIMUM MONEY LINE: UP TO
$100,000.
</TABLE>
<TABLE>
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MAIL
(MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND SIGN THE APPLICATION. (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO
"EXPORT
MAKE YOUR CHECK PAYABLE TO "EXPORT AND MULTINATIONAL FUND." INDICATE
AND MULTINATIONAL FUND." MAIL TO THE YOUR FUND ACCOUNT NUMBER ON YOUR
ADDRESS INDICATED ON 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.
</TABLE>
<TABLE>
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IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR APPLICATION AND CHECK TO A (SMALL SOLID BULLET) BRING YOUR CHECK TO A
FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL CENTER. CALL 1-800-544-9797 FOR THE
1-800-544-9797 FOR THE CENTER CENTER NEAREST YOU.
NEAREST YOU.
</TABLE>
<TABLE>
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WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL 1-800-544-7777 TO SET UP YOUR (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT
ACCOUNTS.
ACCOUNT AND TO ARRANGE A WIRE (SMALL SOLID BULLET) WIRE TO:
TRANSACTION. NOT AVAILABLE FOR BANKERS TRUST COMPANY,
RETIREMENT ACCOUNTS. BANK ROUTING #021001033,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO: ACCOUNT #00163053.
BANKERS TRUST COMPANY, SPECIFY THE COMPLETE NAME OF THE
BANK ROUTING #021001033, FUND AND INCLUDE YOUR ACCOUNT
ACCOUNT #00163053. NUMBER AND YOUR NAME.
SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR NEW ACCOUNT
NUMBER AND YOUR NAME.
</TABLE>
<TABLE>
<CAPTION>
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AUTOMATICALLY
(AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER. SIGN UP FOR THIS SERVICE
WHEN OPENING YOUR ACCOUNT, OR CALL
1-800-544-6666 TO ADD IT.
</TABLE>
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<CAPTION>
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
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 holding them less than 90 days, the fund will deduct a
short-term trading fee equal to 0.75% of the value of those
shares.
Your shares will be sold at the next NAV calculated after your
order is received and accepted, 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.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone or in writing. Call 1-800-544-6666 for a
retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF THE FUND AFTER HOLDING THEM LESS THAN 90 DAYS, THE FUND WILL DEDUCT A
SHORT-TERM TRADING FEE EQUAL TO 0.75% OF THE VALUE OF THOSE SHARES.
</TABLE>
<TABLE>
<CAPTION>
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PHONE 1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MAY EXCHANGE TO OTHER FIDELITY FUNDS IF
BOTH ACCOUNTS ARE REGISTERED WITH THE SAME
NAME(S), ADDRESS, AND TAXPAYER ID NUMBER.
MAIL OR IN PERSON
(MAIL_GRAPHIC)
(HAND_GRAPHIC) INDIVIDUAL, JOINT TENANT, (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
SOLE PROPRIETORSHIP, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
UGMA, UTMA EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR, (SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
CONSERVATOR, GUARDIAN
</TABLE>
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WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
RETIREMENT USING IT. TO VERIFY THAT IT IS IN PLACE, CALL
1-800-544-6666. MINIMUM WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION REQUEST MUST BE RECEIVED
AND ACCEPTED BY FIDELITY BEFORE 4 P.M. EASTERN
TIME FOR MONEY TO BE WIRED ON THE NEXT
BUSINESS DAY.
</TABLE>
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
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. The shares you
exchange will carry credit for any sales charge you previously paid in
connection with their purchase.
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. Because of the fund's sales charge, you may not want to
set up a systematic withdrawal plan during a period when you are
buying shares on a regular basis.
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 retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 FOR AN APPLICATION.
(SMALL SOLID BULLET) TO CHANGE THE AMOUNT OR FREQUENCY OF YOUR INVESTMENT, CALL
1-800-544-6666 AT LEAST THREE BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED INVESTMENT DATE.
</TABLE>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 FOR AN AUTHORIZATION FORM.
(SMALL SOLID BULLET) CHANGES REQUIRE A NEW AUTHORIZATION FORM.
</TABLE>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666.
</TABLE>
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 income and capital
gains to shareholders each year. Normally, dividends and capital gains
are 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.
FOR RETIREMENT ACCOUNTS, all distributions are automatically
reinvested. When you are over 59 years old, you can receive
distributions in cash.
SHARES PURCHASED THROUGH REINVESTMENT of dividend and capital gain
distributions are not subject to the fund's 3% sales charge. Likewise,
if you direct distributions to a fund with a 3% sales charge, you will
not pay a sales charge on those purchases.
When the fund deducts a distribution from its NAV, the reinvestment
price is the fund's NAV at the close of business that day. Cash
distribution checks will be mailed within seven days.
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 DIVIDENDS FROM
STOCKS AND INTEREST FROM BOND,
MONEY MARKET, AND OTHER
INVESTMENTS. THESE ARE PASSED
ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND REALIZES
CAPITAL GAINS WHENEVER IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how your investment in the
fund will be taxed. If your account is not a tax-deferred retirement
account, you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions are taxed as long-term capital gains.
Every January, Fidelity will send you and the IRS a statement showing
the tax characterization of distributions paid to you in the
previous year.
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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments , and these taxes generally will reduce
the fund's distributions.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV and
offering price 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 market
quotations. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
on the basis of amortized cost. This method minimizes the effect of
changes in a security's market value. Foreign securities are valued on
the basis of quotations from the primary market in which they are
traded, and are translated from the local currency into U.S. dollars
using current exchange rates. In addition, if quotations and
information furnished by a pricing service are not readily available
or if the values have been materially affected by events occurring
after the closing of a foreign market, assets may be valued by a
method that the Board of Trustees believes accurately reflects fair
value.
THE OFFERING PRICE of the fund is its NAV divided by the
difference between one and the applicable sales charge percentage. The
maximum sales charge is 3% of the offering price.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your s ocial s ecurity or taxpayer identification
number is correct and that you are not subject to 31% backup
withholding for failing to report income to the IRS. If you violate
IRS regulations, the IRS can require the fund to withhold 31% of your
taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does
not follow reasonable procedures designed to verify the identity of
the caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy
of your confirmation statements immediately after you receive them. If
you do not want the ability to redeem and exchange by telephone, call
Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. The fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. See
"Exchange Restrictions" on page . Purchase orders may be refused if,
in FMR's opinion, they would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be
purchas ed at the next offering price or NAV, as
applicable, calculated after your investment is received
and accepted. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be cancelled and you could be liable for any losses or fees the fund
or its transfer agent has incurred.
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 and
accepted , 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) 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 0.75% will be deducted from the
redemption amount if you sell your shares after holding them less than
90 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.
The short-term trading fee, if applicable, is charged on exchanges
out of the fund. If you bought shares on different days, the shares
you held longest will be redeemed first for purposes of determining
whether the short-term trading fee applies. The short-term trading fee
does not apply to shares that were acquired through reinvestment of
distributions.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500 (including any
amount paid as a sales charge), subject to an annual maximum charge of
$24.00 per shareholder. It is expected that accounts will be valued on
the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part
the relatively higher costs of servicing smaller accounts. This fee
will not be deducted from Fidelity brokerage accounts, retirement
accounts (except non-prototype retirement accounts), accounts using
regular investment plans, or if total assets with Fidelity exceed
$30,000. Eligibility for the $30,000 waiver is determined by
aggregating Fidelity accounts maintained by FSC or FBSI which are
registered under the same social security number or which list the
same social security number for the custodian of a Uniform
Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV , 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 collects the proceeds from the fund's 3% sales charge and may pay
a portion of them to securities dealers who have sold the fund's
shares, or to others, including banks and other financial institutions
(qualified recipients), under special arrangements in connection with
FDC's sales activities. The sales charge paid to qualified recipients
is 1.50% of the fund's offering price.
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. 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 exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCTIONS. The fund's sales charge may be reduced if you invest
directly with Fidelity or through prototype or prototype-like
retirement plans sponsored by FMR or FMR Corp. The amount you invest,
plus the value of your account, must fall within the ranges shown
below. However, purchases made with assistance or intervention from a
financial intermediary are not eligible. Call Fidelity to see if your
purchase qualifies.
Sales Charge
Ranges As a % of As an
Offering Price approximate %
of net
amount invested
$0 - 249,999 3.00% 3.09%
$250,000 - 499,999 2.00% 2.04%
$500,000 - 999,999 1.00% 1.01%
$1,000,000 or more none none
The sales charge will also be reduced by the percentage of any sales
charge you previously paid on investments in other Fidelity funds (not
including Fidelity's Foreign Currency Funds). Similarly, your shares
carry credit for any sales charge you would have paid if the
reductions in the table above had not existed. These sales charge
credits only apply to purchases made in one of the ways listed below,
and only if you continuously owned Fidelity fund shares or a Fidelity
brokerage core account, or participated in The CORPORATEplan for
Retirement Program.
1. By exchange from another Fidelity fund.
2. With proceeds of a transaction within a Fidelity brokerage core
account, including any free credit balance, core money market fund, or
margin availability, to the extent such proceeds were derived from
redemption proceeds from another Fidelity fund.
3. With redemption proceeds from one of Fidelity's Foreign Currency
Funds, if the Foreign Currency Fund shares were originally purchased
with redemption proceeds from a Fidelity fund.
4. Through the Directed Dividends Option (see page ).
5. By participants in The CORPORATEplan for Retirement Program when
shares are purchased through plan-qualified loan repayments, and for
exchanges into and out of the Managed Income Portfolio.
WAIVERS. The fund's sales charge will not apply:
1. If you buy shares as part of an employee benefit plan having more
than 200 eligible employees or a minimum of $3 million in plan assets
invested in Fidelity mutual funds.
2. To shares in a Fidelity account purchased with the proceeds of a
distribution from an employee benefit plan, provided that at the time
of the distribution, the employer or its affiliate maintained a plan
that both qualified for waiver (1) above and had at least some of its
assets invested in Fidelity-managed products. (Distributions
transferred to an IRA account must be transferred within 60 days from
the date of the distribution. All other distributions must be
transferred directly into a Fidelity account).
3. If you are a charitable organization (as defined for purposes of
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or
more.
4. If you purchase shares for a charitable remainder trust or life
income pool established for the benefit of a charitable organization
(as defined for purposes of Section 501(c)(3) of the Internal Revenue
Code).
5. If you are an investor participating in the Fidelity Trust
Portfolios program.
6. To shares purchased by a mutual fund for which FMR or an affiliate
serves as investment manager.
7. To shares purchased through Portfolio Advisory Services or Fidelity
Charitable Advisory Services.
8. If you are a current or former trustee or officer of a Fidelity
fund or a current or retired officer, director, or regular employee of
FMR Corp. or Fidelity International Limited or their direct or
indirect subsidiaries (a Fidelity trustee or employee), the spouse of
a Fidelity trustee or employee, a Fidelity trustee or employee acting
as custodian for a minor child, or a person acting as trustee of a
trust for the sole benefit of the minor child of a Fidelity trustee or
employee.
9. If you are a bank trust officer, registered representative, or
other employee of a qualified recipient, as defined on page .
10. To contributions and exchanges to a prototype or prototype-like
retirement plan sponsored by FMR Corp. or FMR and which is marketed
and distributed directly to plan sponsors or participants without any
assistance or intervention from any intermediary distribution channel.
11. If you invest through a non-prototype pension or profit-sharing
plan that maintains all of its mutual fund assets in Fidelity mutual
funds, provided the plan executes a Fidelity non-prototype sales
charge waiver agreement confirming its qualification.
12. If you are a registered investment adviser (RIA) purchasing for
your discretionary accounts, provided you execute a Fidelity RIA load
waiver agreement which specifies certain aggregate minimum and
operating provisions. Except for correspondents of National Financial
Services Corporation, this waiver is available only for shares
purchased directly from Fidelity, and is unavailable if the RIA is
part of an organization principally engaged in the brokerage business.
13. If you are a trust institution or bank trust department purchasing
for your non-discretionary, non-retirement fiduciary accounts,
provided you execute a Fidelity Trust load waiver agreement which
specifies certain aggregate minimum and operating provisions. This
waiver is available only for shares purchased either directly from
Fidelity or through a bank-affiliated broker, and is unavailable if
the trust department or institution is part of an organization not
principally engaged in banking or trust activities.
These waivers must be qualified through FDC in advance. More detailed
information about waivers (1), (2), (5), (9), ( 10 ), and
( 12 ) is contained in the Statement of Additional Information. A
representative of your plan or organization should call Fidelity for
more information.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY EXPORT AND MULTINATIONAL FUND
A FUND OF FIDELITY UNION STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 23, 1997
This Statement of Additional Information ( SAI ) is not a
prospectus but should be read in conjunction with the fund's current
Prospectus (dated October 23, 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
Portfolio Transactions
Valuation
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Contracts with FMR Affiliates
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
EXF-ptb-1097
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of the fund's assets that
may be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the
fund. However, except for the fundamental investment limitations
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) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(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);
(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 lend assets other than
securities to other parties, except by (a) lending money (up to 5% of
the fund's net assets) to a registered investment company or portfolio
for which FMR or an affiliate serves as investment adviser or (b)
acquiring loans, loan participations, or other forms of direct debt
instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements.)
(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 (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 Investment Company Act of
1940. These transactions may include repurchase agreements with
custodian banks; short-term obligations of, and repurchase agreements
with, the 50 largest U.S. banks (measured by deposits); municipal
securities; U.S. Government securities with affiliated financial
institutions that are primary dealers in these securities; short-term
currency transactions; and short-term borrowings. In accordance with
exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
CLOSED-END INVESTMENT COMPANIES. The fund may purchase the shares of
closed-end investment companies to facilitate investment in certain
countries. Shares of closed-end investment companies may trade at a
premium or a discount to their net asset value.
EXPORT COMPANIES. U.S. companies first became required to report their
annual export sales figures to the SEC in 1987, and these figures must
be disclosed publicly if they account for at least 10% of the
companies total annual sales.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign currencies,
and securities issued by U.S. entities with substantial foreign
operations may involve significant risks in addition to the risks
inherent in U.S. investments. The value of securities denominated in
foreign currencies and of dividends and interest paid with respect to
such securities will fluctuate based on the relative strength of the
U.S. dollar.
Foreign investments involve a risk of local political, economic, or
social instability, military action or unrest, or adverse diplomatic
developments, and may be affected by actions of foreign governments
adverse to the interests of U.S. investors. Such actions may include
the possibility of expropriation or nationalization of assets,
confiscatory taxation, restrictions on U.S. investment or on the
ability to repatriate assets or convert currency into U.S. dollars, or
other government intervention. There is no assurance that FMR will be
able to anticipate these potential events or counter their effects.
These risks are magnified for investments in developing countries,
which may have relatively unstable governments, economies based on
only a few industries, and securities markets that trade a small
number of securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States.
Foreign markets may offer less protection to investors than U.S.
markets. It is anticipated that in most cases the best available
market for foreign securities will be on an exchange or in
over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and
securities of some foreign issuers (particularly those located in
developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading
practices, including those involving securities settlement where fund
assets may be released prior to receipt of payment, may result in
increased risk in the event of a failed trade or the insolvency of a
foreign broker-dealer, and may involve substantial delays. In
addition, the costs of foreign investing, including withholding taxes,
brokerage commissions and custodial costs, are generally higher than
for U.S. investors. In general, there is less overall governmental
supervision and regulation of securities exchanges, brokers, and
listed companies than in the United States. It may also be difficult
to enforce legal rights in foreign countries. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those
applicable to U.S. issuers.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject
to such restrictions.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs including European Depositary Receipts (EDRs) and Global
Depositary Receipts (GDRs), are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by
depository banks and generally trade on an established market in the
United States or elsewhere. The underlying shares are held in trust by
a custodian bank or similar financial institution in the issuer's home
country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate
actions. ADRs are an alternative to directly purchasing the underlying
foreign securities in their national markets and currencies. However,
ADRs continue to be subject to many of the risks associated with
investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the
underlying issuer's country.
FOREIGN CURRENCY TRANSACTIONS. A fund may conduct foreign currency
transactions on a spot (i.e., cash) or forward basis (i.e., by
entering into forward contracts to purchase or sell foreign
currencies). Although foreign exchange dealers generally do not charge
a fee for such conversions, they do realize a profit based on the
difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign
currency at one rate, while offering a lesser rate of exchange should
the counterparty desire to resell that currency to the dealer. Forward
contracts are customized transactions that require a specific amount
of a currency to be delivered at a specific exchange rate on a
specific date or range of dates in the future. Forward contracts are
generally traded in an interbank market directly between currency
traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the
contract before its maturity, or may hold the contract to maturity and
complete the contemplated currency exchange. A fund may use currency
forward contracts for any purpose consistent with its investment
objective.
The following discussion summarizes the principal currency management
strategies involving forward contracts that could be used by a fund. A
fund may also use swap agreements, indexed securities, and options and
futures contracts relating to foreign currencies for the same
purposes.
A "settlement hedge" or "transaction hedge" is designed to protect a
fund against an adverse change in foreign currency values between the
date a security is purchased or sold and the date on which payment is
made or received. Entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in an underlying
security transaction for a fixed amount of U.S. dollars "locks in" the
U.S. dollar price of the security. Forward contracts to purchase or
sell a foreign currency may also be used by a fund in anticipation of
future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected
by FMR.
A fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if a fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return
for U.S. dollars to hedge against possible declines in the pound's
value. Such a hedge, sometimes referred to as a "position hedge,"
would tend to offset both positive and negative currency fluctuations,
but would not offset changes in security values caused by other
factors. A fund could also hedge the position by selling another
currency expected to perform similarly to the pound sterling. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would
not hedge currency exposure as effectively as a direct hedge into U.S.
dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged
securities are denominated.
A fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting
exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to
the currency that is sold, and increase exposure to the currency that
is purchased, much as if a fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a fund to assume the risk of
fluctuations in the value of the currency it purchases.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, a
fund will segregate assets to cover currency forward contracts, if
any, whose purpose is essentially speculative. A fund will not
segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy
hedges.
Successful use of currency management strategies will depend on FMR's
skill in analyzing currency values. Currency management strategies may
substantially change a fund's investment exposure to changes in
currency exchange rates and could result in losses to a fund if
currencies do not perform as FMR anticipates. For example, if a
currency's value rose at a time when FMR had hedged a fund by selling
that currency in exchange for dollars, a fund would not participate in
the currency's appreciation. If FMR hedges currency exposure through
proxy hedges, a fund could realize currency losses from both the hedge
and the security position if the two currencies do not move in tandem.
Similarly, if FMR increases a fund's exposure to a foreign currency
and that currency's value declines, a fund will realize a loss. There
is no assurance that FMR's use of currency management strategies will
be advantageous to a fund or that it will hedge at appropriate times.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund,
however, may exercise its rights as a shareholder and may communicate
its views on important matters of policy to management, the Board of
Directors, and shareholders of a company when FMR determines that such
matters could have a significant effect on the value of the fund's
investment in the company. The activities that the fund may engage in,
either individually or in conjunction with others, may include, among
others, supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a
company's directors or management; seeking changes in a company's
direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is
increasingly prone to litigation and it is possible that the fund
could be involved in lawsuits related to such activities. FMR will
monitor such activities with a view to mitigating, to the extent
possible, the risk of litigation against the fund and the risk of
actual liability if the fund is involved in litigation. No guarantee
can be made, however, that litigation against the fund will not be
undertaken or liabilities incurred.
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, Options and Futures
Relating to Foreign Currencies, 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
Standard & Poor's 500 Index (S&P 500). 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 SAI , 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.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and
are standardized as to contract size and delivery date. Most currency
futures contracts call for payment or delivery in U.S. dollars. The
underlying instrument of a currency option may be a foreign currency,
which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency
call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed
above. The fund may purchase and sell currency futures and may
purchase and write currency options to increase or decrease its
exposure to different foreign currencies. The fund may also purchase
and write currency options in conjunction with each other or with
currency futures or forward contracts. Currency futures and options
values can be expected to correlate with exchange rates, but may not
reflect other factors that affect the value of the fund's investments.
A currency hedge, for example, should protect a Yen-denominated
security from a decline in the Yen, but will not protect the fund
against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of the fund's foreign-denominated
investments changes in response to many factors other than exchange
rates, it may not be possible to match the amount of currency options
and futures to the value of the fund's investments exactly over time.
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
repurchase agreements not entitling the holder to payment of principal
and interest within seven days, over-the-counter options, and
non-government stripped fixed-rate mortgage-backed securities. Also,
FMR may determine some restricted securities, government-stripped
fixed-rate mortgage-backed securities, loans and other direct debt
instruments, emerging market securities, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund
writes, all or a portion of the value of the underlying instrument may
be illiquid depending on the assets held to cover the option and the
nature and terms of any agreement the fund may have to close out the
option before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 10%
of its net assets 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,
currencies, precious metals or other commodities, or other financial
indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic.
Gold-indexed securities, for example, typically provide for a maturity
value that depends on the price of gold, resulting in a security whose
price tends to rise and fall together with gold prices.
Currency-indexed securities typically are short-term to
intermediate-term debt securities whose maturity values or interest
rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their
maturity value may increase when the specified currency value
increases, resulting in a security that performs similarly to a
foreign-denominated instrument, or their maturity value may decline
when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the
values of a number of different foreign currencies relative to each
other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which
they are indexed, and may also be influenced by interest rate changes
in the United States and abroad. At the same time, indexed securities
are subject to the credit risks associated with the issuer of the
security, and their values may decline substantially if the issuer's
creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. Government
agencies. Indexed securities may be more volatile than the underlying
instruments.
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. Interfund loans and borrowings normally extend overnight,
but can have a maximum duration of seven days. Loans may be called on
one day's notice. The fund will lend through the program only when the
returns are higher than those available from an investment in
repurchase agreements, and will borrow through the program only when
the costs are equal to or lower than the cost of bank loans. The fund
may have to borrow from a bank at a higher interest rate if an
interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or
additional borrowing costs.
ISSUER LOCATION. FMR determines where an issuer or its principal
business activities are located by looking at such factors as its
country of organization, the primary trading market for its
securities, and the location of its assets, personnel, sales, and
earnings. The issuer of a security is considered to be located in a
particular country if (1) the security is issued or guaranteed by the
government of the country or any of its agencies, political
subdivisions, or instrumentalities; (2) the security has its primary
trading market in that country; or (3) the issuer is organized under
the laws of that country, derives at least 50% of its revenues or
profits from goods sold, investments made, or services performed in
the country, or has at least 50% of its assets located in the country.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed
by a corporate, governmental, or other borrower to another party. They
may represent amounts owed to lenders or lending syndicates (loans and
loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other parties. Direct debt instruments
involve a risk of loss in case of default or insolvency of the
borrower and may offer less legal protection to the fund in the event
of fraud or misrepresentation. In addition, loan participations
involve a risk of insolvency of the lending bank or other financial
intermediary. Direct debt instruments may also include standby
financing commitments that obligate the fund to supply additional cash
to the borrower on demand.
LOWER-QUALITY DEBT SECURITIES. The fund may purchase lower-quality
debt securities (those rated below Baa by Moody's Investors Service or
BBB by Standard & Poor's, and unrated securities judged by FMR to be
of equivalent quality) that have poor protection with respect to the
payment of interest and repayment of principal, or may be in default.
These securities are often considered to be speculative and involve
greater risk of loss or price changes due to changes in the issuer's
capacity to pay. The market prices of lower-quality debt securities
may fluctuate more than those of higher-quality debt securities and
may decline significantly in periods of general economic difficulty,
which may follow periods of rising interest rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic
downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication
of the future performance of the high-yield bond market, especially
during periods of economic recession.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield corporate debt securities
than is the case for securities for which more external sources for
quotations and last-sale information are available. Adverse publicity
and changing investor perceptions may affect the ability of outside
pricing services to value lower-quality debt securities and the fund's
ability to sell these securities.
Since the risk of default is higher for lower-quality debt securities,
FMR's research and credit analysis are an especially important part of
managing securities of this type held by the fund. In considering
investments for the fund, FMR will attempt to identify those issuers
of high-yielding securities whose financial condition is adequate to
meet future obligations, has improved, or is expected to improve in
the future. FMR's analysis focuses on relative values based on such
factors as interest or dividend coverage, asset coverage, earnings
prospects, and the experience and managerial strength of the issuer.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors
such as real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the
management skill and creditworthiness of the issuer. Real
estate-related instruments may also be affected by tax and regulatory
requirements, such as those relating to the environment.
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.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the
securities loaned and, at the same time, to earn additional income.
Since there may be delays in the recovery of loaned securities, or
even a loss of rights in collateral supplied should the borrower fail
financially, loans will be made only to parties deemed by FMR to be of
good standing. Furthermore, they will only be made if, in FMR's
judgment, the consideration to be earned from such loans would justify
the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any
security in which the fund is authorized to invest. Investing this
cash subjects that investment, as well as the security loaned, to
market forces (i.e., capital appreciation or depreciation).
SHORT SALES "AGAINST THE BOX." The fund may sell securities short
when it owns or has the right to obtain securities equivalent in kind
or amount to the securities sold short. Such short sales are known as
short sales "against the box." If the fund enters into a short
sale against the box, it will be required to set aside securities
equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs, including interest
expenses, in connection with opening, maintaining, and closing short
sales against the box.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the United States or abroad), foreign
currency values, mortgage securities, corporate borrowing rates, or
other factors such as security prices or inflation rates. Swap
agreements can take many different forms and are known by a variety of
names. The fund is not limited to any particular form of swap
agreement if FMR determines it is consistent with the fund's
investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from
one type of investment to another. For example, if the fund agreed to
exchange payments in dollars for payments in foreign currency, the
swap agreement would tend to decrease the fund's exposure to U.S.
interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of the fund's investments
and its share price.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from the fund. If a
swap agreement calls for payments by the fund, the fund must be
prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in losses.
The fund expects to be able to eliminate its exposure under swap
agreements either by assignment or other disposition, or by entering
into an offsetting swap agreement with the same party or a similarly
creditworthy party.
The fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If the fund enters into a swap agreement on a net basis,
it will segregate assets with a daily value at least equal to the
excess, if any, of the fund's accrued obligations under the swap
agreement over the accrued amount the fund is entitled to receive
under the agreement. If the fund enters into a swap agreement on other
than a net basis, it will segregate assets with a value equal to the
full amount of the fund's accrued obligations under the agreement.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in the
management contract. If FMR grants investment management authority to
the sub-advisers (see the section entitled "Management Contract"), the
sub-advisers are authorized to place orders for the purchase and sale
of portfolio securities, and will do so in accordance with the
policies described below. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including,
but not limited to: the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold;
the execution efficiency, settlement capability, and financial
condition of the broker-dealer firm; the broker-dealer's execution
services rendered on a continuing basis; the reasonableness of any
commissions; and arrangements for payment of fund expenses. Generally,
commissions for investments traded on foreign exchanges will be higher
than for investments traded on U.S. exchanges and may not be subject
to negotiation.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other accounts
over which FMR or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; 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) in accordance with a ranking
of broker-dealers determined periodically by FMR's investment staff
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions
on behalf of the 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) and Fidelity Brokerage
Services (FBS), indirect subsidiaries of FMR Corp., if the commissions
are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. From
September 1992 through December 1994, FBS operated under the name
Fidelity Brokerage Services Limited (FBSL). As of January 1995, FBSL
was converted to an unlimited liability company and assumed the name
FBS.
FMR may allocate brokerage transactions to broker-dealers who have
entered into arrangements with FMR under which the broker-dealer
allocates a portion of the commissions paid by the fund toward payment
of the fund's expenses, such as transfer agent fees or custodian fees.
The transaction quality must, however, be comparable to those of other
qualified broker-dealers.
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.
For the fiscal periods ended August 31, 1997 and 1996, the fund's
portfolio turnover rates were 429 % and 313 %,
respectively. Because a high turnover rate increases transaction
costs and may increase taxable gains, FMR carefully weighs the
anticipated benefits of short-term investing against these
consequences. An increased turnover rate is due to a greater volume of
shareholder purchase orders, short-term interest rate volatility and
other special market conditions.
For the fiscal years ended August 31, 1997, 1996, and 1995, the fund
paid brokerage commissions of $ 1,856,815 , $ 1,670,389 ,
and $ 914,116 , respectively. The fund pays both commissions and
spreads in connection with the placement of portfolio transactions.
NFSC is paid on a commission basis. During the fiscal years ended
August 31, 1997, 1996, and 1995, the fund paid brokerage commissions
of $ 298,171 , $ 442,616 , and $ 200,964 ,
respectively, to NFSC. During the fiscal year ended August 31, 1997,
this amounted to approximately 16.06 % of the aggregate
brokerage commissions paid by the fund for transactions involving
approximately 27.16 % of the aggregate dollar amount of
transactions for which the fund paid brokerage commissions. The
difference between the percentage of brokerage commissions paid to and
the percentage of the dollar amount of transactions effected through
NFSC is a result of the low commission rates charged by NFSC.
During the fiscal years ended August 31, 1997 and August 31,
1996 , the fund paid brokerage commissions of $ 1,431 and
$ 19,503 , respectively, to FBS. During the fiscal year ended
August 31, 1995 , the fund paid brokerage commissions of
$ 0 to FBSL. During the fiscal year ended August 31,
1997 , this amounted to approximately 0.08 % of the aggregate
brokerage commissions paid by the fund involving approximately
0 % of the aggregate dollar amount of transactions for which the
fund paid brokerage commissions.
During the fiscal year ended August 31, 1997, the fund paid
$ 1,788,815 in commissions to brokerage firms that provided
research services involving approximately $ 1,447,019,513 of
transactions. The provision of research services was not necessarily a
factor in the placement of all this business with such firms.
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 sai d 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 depending on the
primary market or exchange on which they trade. Most equity securities
for which the primary market is the United States are valued at last
sale price or, if no sale has occurred, at the closing bid price. Most
equity securities for which the primary market is outside the United
States are valued using the official closing price or the last sale
price in the principal market in which they are traded. If the last
sale price (on the local exchange) is unavailable, the last evaluated
quote or last bid price normally is used. Securities of other open-end
investment companies are valued at their respective NAVs.
Fixed-income securities and other assets for which market quotations
are readily available may be valued at market values determined by
such securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets. Or, fixed-income securities and convertible securities may be
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.
Foreign securities are valued based on prices furnished by independent
brokers or quotation services which express the value of securities in
their local currency. FSC gathers all exchange rates daily at the
close of the NYSE using the last quoted price on the local currency
and then translates the value of foreign securities from their local
currencies into U.S. dollars. Any changes in the value of forward
contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of NAV. If an extraordinary event that is
expected to materially affect the value of a portfolio security occurs
after the close of an exchange on which that security is traded, then
that security will be valued as determined in good faith by a
committee appointed by the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which market quotations and information furnished by a pricing
service are not readily available are valued either at amortized cost
or at original cost plus accrued interest, both of which approximate
current value. In addition, securities and other assets for which
there is no readily available market value may be 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.
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 be quoted with or without taking the fund's 3%
maximum sales charge into account and may or may not include the
effect of the fund's 0.75% redemption fee on shares held less than
less than 90 days. Excluding the fund's sales charge and short-term
trading 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.
MOVING AVERAGES. The fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's
adjusted closing NAV for a specified period. A short-term moving
average is the average of each day's adjusted closing NAV for a
specified period. Moving Average Activity Indicators combine adjusted
closing NAVs from the last business day of each week with moving
averages for a specified period to produce indicators showing when an
NAV has crossed, stayed above, or stayed below its moving average. On
August 29, 1997, the 13-week and 39-week long-term moving averages
were $ 19.32 and $ 17.56 , respectively.
HISTORICAL FUND RESULTS. The following table shows the fund's total
returns for periods ended August 31, 1997. Total return figures
include the effect of the fund's 3% sales charge, but do not include
the effect of the fund's 0.75% short-term trading fee,
applicable to shares held less than less than 90 days.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Life of One Life of
Year Fund* Year Fund*
Export and Multinational Fund 37.68 % 30.65 % 37.68 % 117.85 %
</TABLE>
* From October 4, 1994 (commencement of operations).
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. The fund has
the ability to invest in securities not included in either index, and
its investment portfolio may or may not be similar in composition to
the indexes. 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 October 4, 1994 (commencement of operations) to
August 31, 1997, a hypothetical $10,000 investment in Export and
Multinational Fund would have grown to $ 21,785 , including the
effect of the fund's 3% maximum sales charge and assuming all
distributions were reinvested. This was a period of fluctuating stock
prices and the figures below should not be considered representative
of the dividend income or capital gain or loss that could be realized
from an investment in the fund today. 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 0.75%
short-term trading fee applicable to shares held less than 90
days.
Export and Multinational Fund INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year
Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1997 $ 19,421 $ 20 $ 2,344 $ 21,785 $ 20,829 $ 21,129 $ 10,763
19 96 $ 14,405 $ 15 $ 927 $ 15,347 $ 14,809 $ 15,273 $ 10,529
19 95* $ 13,793 $ 14 $ 0 $ 13,807 $ 12,473 $ 12,226 $ 10,234
</TABLE>
* From October 4, 1994 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on October 4, 1994 assuming the 3% maximum sales charge had been in
effect, the net amount invested in fund shares was $ 9,700 . 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 $ 11,737 . 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
$ 10 for dividends and $ 1,649 for 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. 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 its performance to that of the Standard & Poor's
500 Index, a widely recognized, unmanaged index of common stocks.
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.
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.
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.
The fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes,
which may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the Investment Company Act of 1940 (the
1940 Act), FDC exercises its right to waive the fund's front-end sales
charge on shares acquired through reinvestment of dividends and
capital gain distributions or in connection with the fund's merger
with or acquisition of any investment company or trust. In addition,
FDC has chosen to waive the fund's sales charge in certain instances
because of efficiencies involved in those sales of shares. The sales
charge will not apply:
1. to shares purchased in connection with an employee benefit plan
(including the Fidelity-sponsored 403(b) and corporate IRA programs
but otherwise as defined in the Employee Retirement Income Security
Act) maintained by a U.S. employer and having more than 200 eligible
employees, or a minimum of $3,000,000 in plan assets invested in
Fidelity mutual funds, or as part of an employee benefit plan
maintained by a U.S. employer that is a member of a parent-subsidiary
group of corporations (within the meaning of Section 1563(a)(1) of the
Internal Revenue Code, with "50%" substituted for "80%") any member of
which maintains an employee benefit plan having more than 200 eligible
employees, or a minimum of $3,000,000 in plan assets invested in
Fidelity mutual funds, or as part of an employee benefit plan
maintained by a non-U.S. employer having 200 or more eligible
employees, or a minimum of $3,000,000 in assets invested in Fidelity
mutual funds, the assets of which are held in a bona fide trust for
the exclusive benefit of employees participating therein;
2. to shares purchased by an insurance company separate account used
to fund annuity contracts purchased by employee benefit plans
(including 403(b) programs, but otherwise as defined in the Employee
Retirement Income Security Act), which, in the aggregate, have either
more than 200 eligible employees or a minimum of $3,000,000 in assets
invested in Fidelity funds;
3. to shares in a Fidelity account purchased (including purchases by
exchange) with the proceeds of a distribution from an employee benefit
plan provided that: (i) at the time of the distribution, the employer,
or an affiliate (as described in exemption 1 above) of such
employer, maintained at least one employee benefit plan that qualified
for exemptio n 1 and that had at least some portion of its
assets invested in one or more mutual funds advised by FMR, or in one
or more accounts or pools advised by Fidelity Management Trust
Company; and (ii) either (a) the distribution is transferred from the
plan to a Fidelity IRA account within 60 days from the date of the
distribution or (b) the distribution is transferred directly from the
plan into another Fidelity account;
4. to shares purchased by a charitable organization (as defined for
purposes of Section 501(c)(3) of the Internal Revenue Code) investing
$100,000 or more;
5. to shares purchased for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as
defined for purposes of Section 501(c)(3) of the Internal Revenue
Code);
6. to shares purchased by an investor participating in the Fidelity
Trust Portfolios program (these investors must make initial
investments of $100,000 or more in the Trust Portfolios funds and
must, during the initial six-month period, reach and maintain an
aggregate balance of at least $500,000 in all accounts and subaccounts
purchased through the Trust Portfolios program);
7. to shares purchased by a mutual fund for which FMR or an affiliate
serves as investment manager;
8. to shares purchased through Portfolio Advisory Services or Fidelity
Charitable Advisory Services;
9. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or Fidelity International Limited or their
direct or indirect subsidiaries (a Fidelity Trustee or employee), the
spouse of a Fidelity Trustee or employee, a Fidelity Trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of a trust for the sole benefit of the minor child of a
Fidelity Trustee or employee;
10. to shares purchased by a bank trust officer, registered
representative, or other employee of a qualified recipient. Qualified
recipients are securities dealers or other entities, including banks
and other financial institutions, who have sold the fund's shares
under special arrangements in connection with FDC's sales activities;
11. to shares purchased by contributions and exchanges to the
following prototype or prototype-like retirement plans sponsored by
FMR Corp. or FMR and that are marketed and distributed directly to
plan sponsors or participants without any intervention or assistance
from any intermediary distribution channel: The Fidelity IRA, the
Fidelity Rollover IRA, The Fidelity SEP-IRA and SARSEP, The Fidelity
SIMPLE IRA, The Fidelity Retirement Plan, Fidelity Defined Benefit
Plan, The Fidelity Group IRA, The Fidelity 403(b) Program, The
Fidelity Investments 401(a) Prototype Plan for Tax-Exempt Employers,
and The CORPORATEplan for Retirement (Profit Sharing and Money
Purchase Plan);
12. to shares purchased as part of a pension or profit-sharing plan as
defined in Section 401(a) of the Internal Revenue Code that maintains
all of its mutual fund assets in Fidelity mutual funds, provided the
plan executes a Fidelity non-prototype sales charge waiver request
form confirming its qualification;
13. to shares purchased by a registered investment adviser (RIA) for
his or her discretionary accounts, provided he or she executes a
Fidelity RIA load waiver agreement which specifies certain aggregate
minimum and operating provisions. This waiver is available only for
shares purchased directly from Fidelity, without a broker, unless
purchased through a brokerage firm which is a correspondent of
National Financial Services Corporation (NFSC). The waiver is
unavailable, however, if the RIA is part of an organization
principally engaged in the brokerage business, unless the brokerage
firm in the organization is an NFSC correspondent; or
14. to shares purchased by a trust institution or bank trust
department for its non-discretionary, non-retirement fiduciary
accounts, provided it executes a Fidelity Trust load waiver agreement
which specifies certain aggregate minimum and operating provisions.
This waiver is available only for shares purchased either directly
from Fidelity or through a bank-affiliated broker, and is unavailable
if the trust department or institution is part of an organization not
principally engaged in banking or trust activities.
The fund's sales charge may be reduced to reflect sales charges
previously paid, or that would have been paid absent a reduction for
some purchases made directly with Fidelity as noted in the prospectus,
in connection with investments in other Fidelity funds. This includes
reductions for investments in prototype-like retirement plans
sponsored by FMR or FMR Corp., which are listed above.
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. A portion of the fund's income may qualify for the
dividends-received deduction available to corporate shareholders to
the extent that the fund's income is derived from qualifying
dividends. Because the fund may earn other types of income, such as
interest, income from securities loans, non-qualifying dividends, and
short-term capital gains, the percentage of dividends from the fund
that qualifies for the deduction generally will be less than 100%. The
fund will notify corporate shareholders annually of the percentage of
fund dividends that qualifies for the dividends-received deduction. A
portion of the fund's dividends derived from certain U.S. Government
obligations may be exempt from state and local taxation. Gains
(losses) attributable to foreign currency fluctuations are generally
taxable as ordinary income, and therefore will increase (decrease)
dividend distributions. Short-term capital gains are distributed as
dividend income. The fund will send each shareholder a notice in
January describing the tax status of dividends and capital gain
distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund
on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a 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 hereby designates approximately
$ 12,200,000 as a capital gain dividend for the purpose of the
dividend-paid deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to
foreign securities. Because the fund does not currently anticipate
that securities of foreign issuers will constitute more than 50% of
its total assets at the end of its fiscal year, shareholders should
not expect to claim a foreign tax credit or deduction on their federal
income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, the fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies.
If the fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the
Internal Revenue Code, it may be subject to U.S. federal income tax on
a portion of any excess distribution or gain from the disposition of
such shares. Interest charges may also be imposed on the fund with
respect to deferred taxes arising from such distributions or gains.
Generally, the fund will elect to mark-to-market any PFIC shares.
Unrealized gains will be recognized as income for tax purposes and
must be distributed to shareholders as dividends.
The fund is treated as a separate entity from the other funds of
Fidelity 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 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 Trustee s 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 Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President and Chief Executive Officer of the Fidelity
Institutional Group (1997). Previously, Mr. Burkhead served as
President of Fidelity Management & Research Company.
RALPH F. COX (65), Trustee, is President of RABAR Enterprises
( management consult ing-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 and member of the Executive Committee 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 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.
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).
WILLIAM J. HAYES (63), Vice President (1994), is Vice President of
Fidelity's equity funds; Senior Vice President of FMR; and Managing
Director of FMR Corp.
ABIGAIL P. JOHNSON (3 5 ), is Vice President of certain
Equity Funds (1997), and is a D irector of FMR Corp.
(1994) . Before assuming her current responsibilities, Ms.
Johnson managed a number of Fidelity funds .
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).
ROBERT H. MORRISON (57), Manager of Security Transactions of
Fidelity's equity funds is Vice President of FMR.
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).
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
<TABLE>
<CAPTION>
<S> <C> <C>
Trustees and Aggregate Total
Members of the Advisory Board Compensation from Compensation from the
Export and Fund Complex*A
Multinational FundB,C
J. Gary Burkhead ** $ 0 $ 0
Ralph F. Cox $ 163 137,700
Phyllis Burke Davis $ 159 134,700
Richard J. Flynn*** $ 47 168,000
Robert M. Gates **** $ 93 0
Edward C. Johnson 3d ** $ 0 0
E. Bradley Jones $ 160 134,700
Donald J. Kirk $ 161 136,200
Peter S. Lynch ** $ 0 0
William O. McCoy***** $ 163 85,333
Gerald C. McDonough $ 192 136,200
Edward H. Malone*** $ 39 136,200
Marvin L. Mann $ 163 134,700
Robert C. Pozen** $ 0 0
Thomas R. Williams $ 163 136,200
</TABLE>
* 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 and Edward H. Malone served on the Board of
Trustees through December 31, 1996.
**** Mr. Gates was appointed to the Board of Trustees of Fidelity
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 of Fidelity
Union Street Trust 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, $ 4 , Phyllis Burke Davis, $ 4 , Richard J. Flynn, $0,
Robert M. Gates, $ 0 , E. Bradley Jones, $ 4 , Donald J.
Kirk, $ 4 , William O. McCoy, $ 0 , Gerald C. McDonough,
$ 4 , Edward H. Malone, $ 4 , Marvin L. Mann, $ 4 , and
Thomas R. Williams, $ 4 .
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 f unds 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 August 31, 1997, the Trustees , Members of the Advisory
Board, and officers of the fund owned, in the aggregate, less than
1 % of the fund's total outstanding shares.
As of August 31, 1997, the following owned of record or
beneficially 5% or more of the fund's outstanding shares: National
Financial Services Corporation, Boston, MA (7.95%).
MANAGEMENT CONTRACT
FMR is the fund's manager pursuant to a management contract dated
July 14, 1994, which was approved by FMR, as the then sole
shareholder, on September 8, 1994.
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. In addition to the management fee
payable to FMR and the fees payable to the transfer, dividend
disbursing, shareholder servicing agent, pricing and bookkeeping
agent, and securities lending agent, the fund pays all of its expenses
that are not assumed by those parties. The fund pays for the
typesetting, printing, and mailing of its proxy materials to
shareholders, legal expenses, and the fees of the custodian, auditor
and non-interested Trustees. The fund's management contract further
provides that the fund 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. Other expenses paid
by the fund include interest, taxes, brokerage commissions, 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 is also liable for such non-recurring expenses as may
arise, including costs of any litigation to which the fund may be a
party, and any obligation it may have to indemnify 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 which has two components: a
group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Rate Group Net Effective Annual
Assets (for each level) Assets Fee Rate
0 - $3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900% 25 .4238
6 - 9 .4600% 50 .3823
9 - 12 .4300% 75 .3626
12 - 15 .4000% 100 .3512
15 - 18 .3850% 125 .3430
18 - 21 .3700% 150 .3371
21 - 24 .3600% 175 .3325
24 - 30 .3500% 200 .3284
30 - 36 .3450% 225 .3253
36 - 42 .3400% 250 .3223
42 - 48 .3350% 275 .3198
48 - 66 .3250% 300 .3175
66 - 84 .3200% 325 .3153
84 - 102 .3150% 350 .3133
102 - 138 .3100% 375 .3090
138 - 174 .3050% 400 .3067
174 - 210 .3000%
210 - 246 .2950%
246 - 282 .2900%
282 - 318 .2850%
318 - 354 .2800%
354 - 390 .2750%
Over 390 .2700%
On January 1, 1996, FMR voluntarily added new breakpoints to the
group fee rate schedule for average group assets in excess of
$390 billion, pending shareholder approval of a new management
contract reflecting the additional breakpoints. The group fee rate
schedule and its extensions provide for lower management fee rates as
FMR's assets under management increase. F or average group
assets in excess of $390 billion , the group fee rate schedule
with additional breakpoints voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
390 - $426 billion .2700% $425 billion .3046%
426 - 462 .2650 450 .3024
462 - 498 .2600 475 .3003
498 - 534 .2550 500 .2982
Over 534 .2500 525 .2962
550 .2942
The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $ 531 billion of group net assets - the
approximate level for August 1997 - was 0.2957 %, which
is the weighted average of the respective fee rates for each level of
group net assets up to $ 531 billion.
The fund's individual fund fee rate is 0.30%. Based on the average
group net assets of the funds advised by FMR for August 1997, the
fund's annual management fee rate would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
Export and Multinational Fund 0. 2957 % + 0.30% = 0. 5957 %
</TABLE>
One-twelfth of this annual management fee rate is applied to
the fund's net assets averaged for the most recent month, giving a
dollar amount, which is the fee for that month.
For the fiscal years ended August 31, 1997, 1996, and 1995, the fund
paid FMR management fees of $ 2,496,985 , $ 2,106,620 , and
$ 929,120 , 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 repayment of the reimbursement by the fund will lower its total
returns.
Effective March 28, 1995 , 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 2.00 % of its average net assets.
SUB-ADVISERS. On behalf of Export and Multinational Fund, FMR has
entered into sub-advisory agreements with FMR U.K. and FMR Far East.
Pursuant to the sub-advisory agreements, FMR may receive investment
advice and research services outside the United States from the
sub-advisers.
On behalf of the fund, FMR may also grant the sub-advisers investment
management authority as well as the authority to buy and sell
securities if FMR believes it would be beneficial to the fund.
Currently, FMR U.K. and FMR Far East each focus on issuers in
countries other than the United States such as those in Europe, Asia,
and the Pacific Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays
the fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far
East fees equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with providing investment
advice and research services.
On behalf of the fund, for providing discretionary investment
management and executing portfolio transactions, FMR pays FMR U.K. and
FMR Far East a fee equal to 50 % of its monthly management fee
rate with respect to the fund's average net assets managed by the
sub-adviser on a discretionary basis.
For providing investment advice and research services, fees paid to
the sub-advisers by FMR for the past three fiscal years are shown in
the table below.
Fiscal Year Ended FMR U.K. FMR Far East
August 31
199 7 $ 11,956 $ 11,533
199 6 $ 10,604 $ 11,075
199 5 $ 7,525 $ 9,450
For discretionary investment management and execution of portfolio
transactions, no fees were paid to the sub-advisers by FMR on behalf
of the fund for the past three fiscal years.
CONTRACTS WITH FMR AFFILIATES
The fund has entered into a transfer agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreement, FSC performs
transfer agency, dividend disbursing, and shareholder services for the
fund.
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.
The asset-based fees are subject to adjustment if the year-to-date
total return of the S&P 500 exceeds a positive or negative 15%.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC 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 agreement with FSC. Under
the terms of the agreement, FSC calculates the NAV and dividends for
the fund, maintains the fund's portfolio and general accounting
records, and administers the fund's securities lending program.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on the fund's average daily net assets throughout the month.
The annual fee rates for these pricing and bookkeeping services are
0 .0600% of the first $500 million of average net asset and
0 .0300% of average net assets in excess of $500 million. The
fee, not including reimbursement for out-of-pocket expenses, is
limited to a minimum of $60,000 and a maximum of $800,000 per year.
For the fiscal years ended August 31, 1997, 1996, and 1995, the
fund paid FSC pricing and bookkeeping fees, including reimbursement
for related out-of-pocket expenses, of $ 250,176 ,
$ 207,556 , and $ 96,442 , respectively.
For administering the fund's securities lending program, FSC receives
fees based on the number and duration of individual securities loans.
For the fiscal years ended August 31, 199 7 , 199 6 ,
and 199 5 , the fund paid no securities lending fees.
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 is a member of the National Association of Securities
Dealers, Inc. The distribution agreement calls for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of each fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer
and sale of shares are paid by FMR.
During the fiscal years ended August 31, 1997, 1996, and 1995,
FDC collected sales charge revenue of $ 879,002 ,
$ 347,706 , and $ 0 , respectively, on purchases of fund
shares .
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Export and Multinational Fund is a
fund of Fidelity Union Street Trust, an open-end management 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 Arizona 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
name s "Fidelity" or "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to
such fund, and constitute the underlying assets of such fund. The
underlying assets of each fund are segregated on the books of account,
and are to be charged with the liabilities with respect to such fund
and with a share of the general expenses of the trust. Expenses with
respect to the trust are to be allocated in proportion to the asset
value of the respective funds, except where allocations of direct
expense can otherwise be fairly made. The officers of the trust,
subject to the general supervision of the Board of Trustees, have the
power to determine which expenses are allocable to a given fund, or
which are general or allocable to all of the funds. In the event of
the dissolution or liquidation of the trust, shareholders of each fund
are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the trust shall not have
any claim against shareholders except for the payment of the purchase
price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the trust or the Trustees
include a provision limiting the obligations created thereby to the
trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations. FMR believes that, in
view of the above, the risk of personal liability to shareholders is
remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value
of net asset value you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set
forth under the heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund may, as
set forth in the Declaration of Trust, call meetings of the trust or a
fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of the entire trust, the purpose
of voting on removal of one or more Trustees. The trust or any fund
may be terminated upon the sale of its assets to another open-end
management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the
trust or the fund, as determined by the current value of each
shareholder's investment in the fund or trust. If not so terminated,
the trust and its funds will continue indefinitely. Each fund may
invest all of its assets in another investment company.
CUSTODIAN. The Chase Manhattan Bank, 1 Chase Manhattan Plaza, New
York, New York, 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 its custodian and may
purchase securities from or sell securities to the custodian. The Bank
of New York , headquartered in New York, also may serve as a
special purpose custodian of certain assets in connection with
repurchase agreement transactions.
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 trust's independent accountant.
The auditor examines financial statements for the fund and provides
other audit, tax, and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the
fiscal year ended 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.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF CORPORATE BONDS
Moody's ratings for obligations with an original remaining maturity in
excess of one year fall within nine categories. They range from Aaa
(highest quality) to C (lowest quality). Moody applies numerical
modifiers of 1, 2, or 3 to each generic rating classification from Aa
through B. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks
on the lower end of its generic rating category.
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 CORPORATE BONDS
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 to 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 higher-rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions 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.
SPARTAN GINNIE MAE FUND
CROSS-REFERENCE SHEET
FORM N-1A
ITEM NUMBER
PROSPECTUS 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
b(ii) ............................................ Charter
b(iii)............................................ Expenses; Breakdown of Expenses
c............................................... Charter
d.................................................. Charter; Breakdown of Expenses
e.................................................. Cover Page; Charter
f................................................... Expenses
g(i)................................................ Charter
g(ii)............................................... *
5A ................................................ Performance
6a(i)............................................... Charter
a(ii) ............................................ How to Buy Shares; How to Sell Shares; Transaction Details;
Exchange Restrictions
a(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
6h.................................................. *
7a.................................................. Cover Page; Charter
b.................................................. Expenses; How to Buy Shares; Transaction Details
c.................................................. *
d.................................................. How to Buy Shares
e.................................................. *
f................................................... Breakdown of Expenses
8................................................... How to Sell Shares; Investor Services; Transaction Details;
Exchange Restrictions
9................................................... *
</TABLE>
* Not Applicable
PART B 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, b........................................ Trustees and Officers
c............................................. *
15a, b......................................... *
c............................................. Trustees and Officers
16a(i)......................................... FMR; Portfolio Transactions
a(ii)........................................ Trustees and Officers
a(iii), b................................... Management Contract
c,d............................................. Contracts with FMR Affiliates
e.......................................... *
f................................................ Distribution and Service Plan
g................................................ *
h.......................................... Description of the Trust
i............................................. Contracts with FMR Affiliates
17a,b,c........................................ Portfolio Transactions
d,e......................................... *
18a............................................. Description of the Trust
b............................................. *
19a............................................. Additional Purchase and Redemption Information
b............................................ Valuation of Portfolio Securities; Additional Purchase and
Redemption Information
c............................................. *
20............................................... Distributions and Taxes
21a............................................. Contracts with FMR Affiliates
c............................................. Contracts with FMR Affiliates
. c........................................... *
22a............................................. *
b............................................. Performance
23............................................... Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
SPARTAN(REGISTERED TRADEMARK)
GINNIE MAE
FUND
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
October 23, 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.
SGM-pro-1097
(fund number 461, trading symbol SGNMX)
Spartan Ginnie Mae seeks high current income by investing mainly in
mortgage securities issued by the Government National Mortgage
Association.
PROSPECTUS
OCTOBER 23, 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, including
tax-sheltered retirement plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money out
and closing your account.
INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income. As with any mutual fund, there is no
assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in mortgage securities issued by the
Government National Mortgage Association (Ginnie Maes). Managed to
generally react to changes in interest rates similarly to government
bonds with maturities between 2 and 10 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, 199 7 , the fund had over $ 533
m i llion in assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors who seek
high current income from a portfolio of Ginnie Maes. These securities
are interests in pools of mortgage loans, whose interest and principal
are guaranteed by the U.S. G overnment.
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. The fund's
investments are also subject to prepayment risk, which can lower the
fund's yield, particularly in periods of declining interest rates.
When you sell your shares, they may be worth more or less than what
you paid for them. By itself, the fund does not constitute a balanced
investment plan.
THE SPECTRUM OF
FIDELITY FUNDS
BROAD CATEGORIES OF FIDELITY
FUNDS ARE PRESENTED HERE IN
ORDER OF ASCENDING RISK.
GENERALLY, INVESTORS SEEKING TO
MAXIMIZE RETURN MUST ASSUME
GREATER RISK. SPARTAN GINNIE
MAE 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,
sell, or exchange shares of the 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.
S ales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Exchange fee $5.00
Wire transaction fee $5.00
Checkwriting fee, per check written $2.00
Account closeout fee $5.00
Annual account maintenance fee $12.00
(for accounts under $2,500)
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The
fund pays a management fee to FMR. FMR is responsible for the
payment of all other fund expenses with certain limited exceptions.
Expenses are fa ctored 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, adjusted to
reflect current fees, and are calculated as a percentage of average
net assets. FMR has entered into arrangements on behalf of the fund
with the fund's custodian and transfer agent whereby credits
realized as a result of uninvested cash balances are used to
reduce fund expenses.
Management fee (after reimbursement) 0.38 %
12b-1 fee None
Other expenses 0.00%
Total fund operating expenses 0.38 %
(after reimbursement)
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
and if you leave your account open:
Account open Account closed
1 year $ 4 $ 9
3 years $ 12 $ 17
5 years $ 21 $ 26
10 years $ 48 $ 53
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which
may vary.
Effective March 1, 1997, FMR has voluntarily agreed, through
December 31, 1998, to reimburse the fund to the extent that total
operating expenses exceed 0.38% of its average net assets. If this
agreement were not in effect, the management fee, other expenses, and
total operating expenses would have been 0.65%, 0.00%, and 0.65%,
respectively. Expenses eligible for reimbursement do not include
interest, taxes, brokerage commissions, or extraordinary expenses.
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> <C> <C>
Years ended August 31
1997 1996 1995 1994F 1993 1992 1991E
Net asset value, beginning
$ 9.780 $ 9.970 $ 9.640 $ 10.270 $ 10.400 $ 10.160 $ 10.000
of period
Income from Investment
.687D .639 .690 .332 .800 .832 .578
Operations
Net investment income
Net realized and
.271 (.181) .347 (.359) (.050) .236 .154
unrealized gain (loss)
Total from investment
.958 .458 1.037 (.027) .750 1.068 .732
operations
Less Distributions
(.678) (.648) (.707) (.533) (.640) (.808) (.572)
From net investment
income
From net realized gain
-- -- -- -- (.240) (.020) --
In excess of net
-- --- -- (.070) -- -- --
realized gain
Total distributions
(.678) (.648) (.707) (.603) (.880) (.828) (.572)
Net asset value, end of period
$ 10.060 $ 9.780 $ 9.970 $ 9.640 $ 10.270 $ 10.400 $ 10.160
Total returnB,C
10.07% 4.67% 11.28% (.25)% 7.61% 10.86% 7.53%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
$ 533,555 $ 434,550 $ 419,637 $ 401,018 $ 683,904 $ 837,588 $ 422,498
(000 omitted)
Ratio of expenses to
.51%G .63%G .65% .65% .41%G .17%G .25%A,G
average net assets
Ratio of expenses to
.51% .62%H .65% .65% .41% .17% .25%A
average net assets after
expense reductions
Ratio of net investment
6.91% 6.77% 7.30% 7.36% 7.63% 8.09% 8.69%A
income to average net assets
Portfolio turnover rate
104% 115% 229% 285% 241% 168% 41%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 ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FROM DECEMBER 27, 1990 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31,
1991.
F 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 INVESTMENT
INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
G 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.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The
total returns that follow are based on historical fund results and do
not reflect the effect of taxes or any transaction fees you may have
paid. The figures would be lower if fees were taken into account.
The fund's fiscal year runs from 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. The chart on page presents calendar year
performance and does not include the effect of the $5 account closeout
fee.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
August 31, 199 7 year years fundA
Spartan Ginnie Mae 10.06 % 6.59 % 7.69 %
Salomon Bros. GNMA 10.47% 6.92% n/a
Index
Lipper GNMA Funds 9.73 % 6.03 % n/a
Average
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
August 31, 199 7 year years fundA
Spartan Ginnie Mae 10.06% 37.61% 64.0 5 %
Salomon Bros. GNMA 10.47% 39.71% n/a
Index
Lipper GNMA Funds 9.73 % 34.07 % n/a
Average
A FROM DECEMBER 27, 1990 (COMMENCEMENT OF OPERATIONS)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over
a given period of time, expressed as an annual percentage rate. Yields
are calculated according to a standard that is required for all stock
and bond funds. Because this differs from other accounting methods,
the quoted yield may not equal the income actually paid to
shareholders.
UNDERSTANDING
PERFORMANCE
BECAUSE THIS FUND INVESTS IN
FIXED-INCOME SECURITIES, ITS
PERFORMANCE IS RELATED TO
CHANGES IN INTEREST RATES. FUNDS
THAT HOLD SHORT-TERM BONDS ARE
USUALLY LESS AFFECTED BY
CHANGES IN INTEREST RATES THAN
LONG-TERM BOND FUNDS. FOR THAT
REASON, LONG-TERM BOND FUNDS
TYPICALLY OFFER HIGHER YIELDS
AND CARRY MORE RISK THAN
SHORT-TERM BOND FUNDS.
(CHECKMARK)
SALOMON BROTHERS GNMA INDEX is a market capitalization
weighted index of 15- and 30-year fixed-rate securities backed by
mortgage pools of the Government National Mortgage Association (GNMA).
Unlike the fund's returns, the total returns of the comparative index
do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of
inflation calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Ginnie Mae Funds
Average. As of August 31, 1997, the average reflected the performance
of 51 mutual funds with similar investment objectives. This average,
published by Lipper Analytical Services, Inc., excludes the effect of
sales loads.
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.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1991 1992 1993 1994 1995 1996
SPARTAN GINNIE MAE 13.79% 6.50% 6.30% -1.51% 16.66% 4.98%
Salomon Brothers GNMA Index 15.89% 7.60% 6.70% -1.32% 16.91%
5.58%
Lipper GNMA Funds Average 14.86% 6.49% 6.57% -2.49% 16.25%
3.81%
Consumer Price Index 3.06% 2.90% 2.75% 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: 13.79
Row: 6, Col: 1, Value: 6.5
Row: 7, Col: 1, Value: 6.3
Row: 8, Col: 1, Value: -1.51
Row: 9, Col: 1, Value: 16.66
Row: 10, Col: 1, Value: 4.98
(LARGE SOLID BOX) Spartan Ginnie Mae
THE FUND IN DETAIL
CHARTER
SPARTAN GINNIE MAE 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.
Curt Hollingsworth is Vice President and manager of Spartan Ginnie
Mae, which he has managed since February 1997. He also manages several
other Fidelity funds. Since joining Fidelity in 1983, Mr.
Hollingsworth has worked as a fixed-income trader and portfolio
manager.
Fidelity investment personnel may in vest in securities for their
own accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent
servicing functions for the fund.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward
C. Johnson 3d family are the predominant owners of a class of shares
of common stock representing approximately 49% of the voting power of
FMR Corp. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form
a controlling group with respect to FMR Corp.
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 affected by the credit
quality of its issuer. Changes in the financial condition of an
issuer, changes in general economic conditions, and changes in
specific economic conditions that affect a particular type of issuer
can impact the credit quality of an issuer. Lower quality bonds
generally tend to be more sensitive to these changes than higher
quality bonds.
PREPAYMENT RISK. Many types of debt securities, including
mortgage securities, are subject to prepayment risk. Prepayment risk
occurs when the issuer of a security can prepay principal prior to the
security's maturity. Securities subject to prepayment risk generally
offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising
interest rate environment. In addition, the potential impact of
prepayment features on the price of a debt security may be difficult
to predict and result in greater volatility.
FIDELITY'S APPROACH TO BOND FUNDS. The total return from a
bond includes both income and price gains or losses. In selecting
investments for a bond fund, FMR considers a bond's expected income
together with its potential for price gains or losses. While income is
the most important component of bond returns over time, a bond fund's
emphasis on income does not mean the fund invests only in the
highest-yielding bonds available, or that it can avoid losses of
principal.
FMR focuses on assembling a portfolio of income-producing bonds
that it believes will provide the best balance between risk and return
within the range of eligible investments for the fund. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market inefficiencies.
In structuring a bond fund, FMR allocates assets among different
market sectors (for example, fixed-rate or adjustable rate mortgages)
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.
SPARTAN GINNIE MAE seeks high current income by investing
mainly in Ginnie Maes. When consistent with its goal, the fund may
also consider the potential for capital gain. FMR normally invests at
least 65% of the fund's total assets in Ginnie Maes. The fund may also
invest in U.S. Government securities and instruments related to U.S.
Government securities. Other instruments may include futures or
options on U.S. Government securities or interests in U.S. Government
securities that have been repackaged by dealers or other third
parties.
Ginnie Maes are government securities that are interests in pools of
mortgage loans. Their principal and interest payments are fully
guaranteed by the U.S. Government, making them high-quality
investments.
Although the fund can invest in securities of any maturity, FMR seeks
to manage the fund so that it generally reacts to changes in interest
rates similarly to government bonds with maturities between two and 10
years. However, the reaction of mortgage securities to changes in
interest rates can be difficult to predict since mortgage securities
are subject to prepayment of principal and interest and can be
structured in a complex manner. As of August 31, 1997, th e
fund's dollar-weighted average maturity was approximately 5.6
years. (In determining a security's maturity for purposes of
calculating a fund's average maturity, an estimate of the average time
for its principal to be paid may be used. This can be substantially
shorter than its stated final maturity.)
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. The fund also reserves the right to invest
without limitation in investment-grade money market or short-term debt
instruments for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which 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.
U.S. GOVERNMENT SECURITIES are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. Government. Not all U.S. Government securities are
backed by the full faith and credit of the United States. For example,
U.S. Government securities such as those issued by Fannie
Mae are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. Other U.S.
Government securities such as those issued by the Federal Farm
Credit Banks Funding Corporation are supported only by the credit of
the entity that issued them.
ASSET-BACKED SECURITIES include in terests in pools of debt
securities, commercial or consumer loans, or other receivables. The
value of these securities depends on many factors, including changes
in interest rates, the availability of information concerning the pool
and its structure, the credit quality of the underlying assets, the
market's perception of the servicer of the pool, and any credit
enhancement provided. In addition, these securities may be subject to
prepayment risk.
MORTGAGE SECURITIES include interests in pools of commercial or
residential mortgages, and may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed
securities. Mortgage securities may be issued by agencies or
instrumentalities of the U.S. Government or by private
entities.
The price of a mortgage security may be significantly affected by
changes in i n terest rates. Some mortgage securities may have a
structure that makes their reaction to interest rates and other
factors difficult to predict, making their price highly volatile.
Also, mortgage securities, especially stripped mortgage-backed
securities, are subject to prepayment risk. Securities subject to
prepayment risk generally offer less potential for gains during a
declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other debt securities, although stripped
securities may be more volatile and the value of certain types of
stripped securities may move in the same direction as interest rates.
U.S. Treasury securities that have been stripped by a Federal Reserve
Bank are obligations issued by the U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices,
interest rates, commodity prices, or other factors that affect
security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts, entering
into swap agreements and purchasing indexed securities.
FMR can use these practices to adjust the risk and return
characteristics of 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 SECURITIES. Some investments may be determined by FMR, under
the supervision of the Board of Trustees, to be illiquid, which means
that they may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly
to 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.
CASH MANAGEMENT. The fund may invest in money market
securities, in re purchase agreements, and in a money market
fund available only to funds and accounts managed by FMR or its
affiliates, whose goal is to seek a high level of current income while
maintaining a stable $1.00 share price. A major change in interest
rates or a default on the money market fund's investments could cause
its share price to change.
BORROWING. 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.
LENDING securities to broker-dealers and institutions, including
Fidelity Brokerage Services, Inc. (FBSI), an affiliate of FMR, is a
means of earning income. This practice could result in a loss or a
delay in recovering the fund's securities. The fund may also lend
money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following 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.
The fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs.
FMR 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 0.65% of its
average net assets. For the fiscal year ended August 31, 1997, the
fund paid FMR, after reimbursement, fees equal to 0.51% of average net
assets.
Effective March 1, 1997, FMR has voluntarily agreed to limit the
fund's total operating expenses to an annual rate of 0.38% of average
net assets. This agreement will continue until December 31, 1998.
FSC is the transfer and service agent for the fund. FSC
performs trans fer agency, dividend disbursing, shareholder
servicing, and accounting functions for the fund. These services
include processing shareholder transactions , valuing the fund's
investments, handling securities loans, and calculating the fund's
share price and dividends . FMR, not the fund, pays for these
services.
To offset shareholder service costs, FMR or its affiliates also
collect the fund's $5.00 exchange fee, $5.00 account closeout fee,
$5.00 fee for wire purchases and redemptions, and the $2.00
checkwriting charge.
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 104 %. This rate varies from year to year.
High turnover rates increase transaction costs and may increase
taxable capital gains. FMR considers these effects when evaluating the
anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-sheltered retirement plans for individuals investing on their own
or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 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.
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 $498 billion
(solid bullet) Number of shareholder
accounts: over 33 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 273
(checkmark)
The account guidelines that follow may not apply to certain retirement
ac counts. If you are investing through a retirement account or if
your employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, or call your retirement
benefits number or Fidelity directly, as appropriate.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(solid bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of
legal age and under 70 with earned income to invest up to $2,000 per
tax year. Individuals can also invest in a spouse's IRA if the spouse
has earned income of less than $250.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE
PENSION PLANS allow self-employed individuals or small business owners
(and their employees) to make tax-deductible contributions for
themselves and any eligible employees up to $30,000 per year.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide
small business owners or those with self-employed income (and their
eligible employees) with many of the same advantages as a Keogh, but
with fewer administrative requirements.
(solid bullet) SIMPLE IRAS provide small business owners and
those with self-employed income (and their eligible employees) with
many of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of
most tax-exempt institutions, including schools, hospitals, and other
charitable organizations.
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 and accepted. 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 ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as
an IRA, for the first time, you will need a special application.
Retirement investing also involves its own investment procedures. Call
1-800-544-8888 for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by
exchange to another Fidelity fund, the payment may be delayed for up
to seven business days to ensure that your previous investment has
cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $ 10,000
TO ADD TO AN ACCOUNT $1,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $1,000
Through regular investment plans* $500
MINIMUM BALANCE $5,000
For Fidelity IRA, Rollover IRA, SEP-IRA
and Keogh accounts $ 5,000
*FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER
TO "INVESTOR SERVICES," PAGE .
These minimums may vary for investments through Fidelity Portfolio
Adviso ry Services. There is no minimum account balance or initial
or subsequent investment minimum for certain retirement accounts
funded through salary deduction, or accounts opened with the proceeds
of distributions from Fidelity retirement accounts. Refer to the
pr ogram materials for details.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
PHONE 1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY
FUND
ACCOUNT WITH THE SAME REGISTRATION, ACCOUNT WITH THE SAME REGISTRATION,
INCLUDING NAME, ADDRESS, AND INCLUDING NAME, ADDRESS, AND
TAXPAYER ID NUMBER. TAXPAYER ID NUMBER.
(SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO
TRANSFER
FROM YOUR BANK ACCOUNT. CALL BEFORE
YOUR FIRST USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON YOUR ACCOUNT.
MAXIMUM MONEY LINE: UP TO
$100,000.
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MAIL
(MAIL_GRAPHIC)(SMALL SOLID BULLET) COMPLETE AND SIGN THE APPLICATION. (SMALL SOLID BULLET) MAKE YOUR CHECK PAYABLE TO
MAKE YOUR CHECK PAYABLE TO "SPARTAN GINNIE MAE FUND." INDICATE
"SPARTAN GINNIE MAE FUND." MAIL TO YOUR FUND ACCOUNT NUMBER ON YOUR
THE ADDRESS INDICATED ON THE CHECK AND MAIL TO THE ADDRESS PRINTED
APPLICATION. ON YOUR ACCOUNT STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL
1-800-544-6666 FOR INSTRUCTIONS.
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IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR APPLICATION AND CHECK TO A (SMALL SOLID BULLET) BRING YOUR CHECK TO A
FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL CENTER. CALL 1-800-544-9797 FOR THE
1-800-544-9797 FOR THE CENTER CENTER NEAREST YOU.
NEAREST YOU.
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WIRE
(WIRE_GRAPHIC) (SMALL SOLID BULLET) THERE MAY BE A $5.00 FEE FOR EACH (SMALL SOLID BULLET) THERE MAY BE A $5.00 FEE FOR
EACH
WIRE PURCHASE. WIRE PURCHASE.
(SMALL SOLID BULLET) CALL 1-800-544-7777 TO SET UP YOUR (SMALL SOLID BULLET) NOT AVAILABLE FOR RETIREMENT
ACCOUNTS.
ACCOUNT AND TO ARRANGE A WIRE (SMALL SOLID BULLET) WIRE TO:
TRANSACTION. NOT AVAILABLE FOR BANKERS TRUST COMPANY,
RETIREMENT ACCOUNTS. BANK ROUTING #021001033,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO: ACCOUNT #00163053.
BANKERS TRUST COMPANY, SPECIFY THE COMPLETE NAME OF THE
BANK ROUTING #021001033, FUND AND INCLUDE YOUR ACCOUNT
ACCOUNT #00163053. NU MBER AND YOUR NAME.
SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR NEW ACCOUNT
NUMBER AND YOUR NAME.
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AUTOMATICALLY
(AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER. SIGN UP FOR THIS SERVICE
WHEN OPENING YOUR ACCOUNT, OR CALL
1-800-544-6666 TO ADD IT.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of the fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your
order is received and accepted. The fund's NAV is normally calculated
each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone or in writing. Call 1-800-544-6666 for a
retirement distribution form.
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
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION
TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE, AND
ACCOUNT CLOSEOUT.
</TABLE>
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PHONE 1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
RETIREMENT (SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MAY EXCHANGE TO OTHER FIDELITY FUNDS IF
BOTH ACCOUNTS ARE REGISTERED WITH THE SAME
NAME(S), ADDRESS, AND TAXPAYER ID NUMBER.
MAIL OR IN PERSON
(MAIL_GRAPHIC)
(HAND_GRAPHIC) INDIVIDUAL, JOINT
TENANT, (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
SOLE PROPRIETORSHIP, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
UGMA, UTMA EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
RETIREMENT ACCOUNT (SMALL SOLID BULLET) THE ACCOUNT OWNER SHOULD COMPLETE A
RETIREMENT DISTRIBUTION FORM. CALL
1-800-544-6666 TO REQUEST ONE.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR, (SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
CONSERVATOR, GUARDIAN
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WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES EXCEPT (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
RETIREMENT USING IT. TO VERIFY THAT IT IS IN PLACE, CALL
1-800-544-6666. MINIMUM WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION REQUEST MUST BE RECEIVED
AND ACCEPTED BY FIDELITY BEFORE 4 P.M. EASTERN
TIME FOR MONEY TO BE WIRED ON THE NEXT
BUSINESS DAY.
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CHECK (CHECK_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MINIMUM CHECK: $1,000.
(SMALL SOLID BULLET) ALL ACCOUNT OWNERS MUST SIGN A SIGNATURE CARD
TO RECEIVE A CHECKBOOK.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone or in writing. You may
pay a $5.00 fee for each exchange out of the fund, unless you
place your transaction through Fidelity's automated
exchange services.
Note that exchanges out of the fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer
money by phone between your bank account and your fund account. Most
transfers are complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses,
and other long-term financial goals. Certain restrictions apply for
retirement accounts. Call 1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 FOR AN APPLICATION.
(SMALL SOLID BULLET) TO CHANGE THE AMOUNT OR FREQUENCY OF YOUR INVESTMENT, CALL
1-800-544-6666 AT LEAST THREE BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED INVESTMENT DATE.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 FOR AN AUTHORIZATION FORM.
(SMALL SOLID BULLET) CHANGES REQUIRE A NEW AUTHORIZATION FORM.
</TABLE>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666.
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A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains are normally
distributed in 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:
5. REINVESTMENT OPTION. Your dividend and capital gain distributions
will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned
this option.
6. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
7. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
8. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically
reinvested. When you are over 59 years old, you can receive
distributions in cash.
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 your investment in the
fund will be taxed. If your account is not a tax-deferred retirement
account, you should be aware of these 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. Distributions are subject to federal income
tax, and may also be subject to state or local taxes. If you live
outside the United States, your distributions could also be taxed by
the country in which you reside. Your distributions are taxable when
they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are
taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary
income; capital gain distributions are taxed as long-term capital
gains. Every January, Fidelity will send you and the IRS a statement
showing the tax characterization of distributions paid to you
in the previous year.
Mutual fund dividends from U.S. G overnment securities are
generally free from state and local income taxes. However, particular
states may limit this benefit, and some types of securities, such as
repurchase agreements and some agency-backed securities, may not
qualify for the benefit. Ginnie Mae securities and other
mortgage-backed securities are notable exceptions in most states. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on
the tax laws in your state.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of 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 capital gains, you will pay the full price
for the shares and then receive a portion of the price back in the
form of a taxable distribution.
There are tax requirements that all funds must follow in order to
avoid federal taxation. In its effort to adhere to these requirements,
the fund may have to limit its investment activity in some types of
instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calc ulates 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 on the basis of information furnished
by a pricing service or market quotations , if available, or by
another method that the Board of Trustees believes accurately reflects
fair value. Short-term securities with remaining maturities of
sixty days or less for which quotations and information
furnished by a pricing service are not readily available are
valued on the basis of amortized cost. This method minimizes the
effect of changes in a security's market value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is
correct and that you are not subject to 31% backup withholding for
failing to report income to the IRS. If you violate IRS regulations,
the IRS can require the fund to withhold 31% of your taxable
distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does
not follow reasonable procedures designed to verify the identity of
the caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy
of your confirmation statements immediately after you receive them. If
you do not want the ability to redeem and exchange by telephone, call
Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. The fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. See
"Exchange Restrictions" on page . Purchase orders may be
refused if, in FMR's opinion, they would disrupt management of the
fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be
purchased at the next NAV calculated after your investment is
received and accepted. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be cancelled and you could be liable for any losses or fees the fund
or its transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first
business day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when the fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received and
accepted. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday
will continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) The fund may hold payment on redemptions until it
is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the
amount of the check is greater than the value of your account, your
check will be returned to you and you may be subject to additional
charges.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account
balance at the time of the transaction is $50,000 or more. Otherwise,
you should note the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted
from your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the
amount of your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
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 shar eholder. 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 ac counts. This fee will not be deducted from Fidelity
brokerage accounts, r etirement 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 on the
day your account is closed and the $5.00 account closeout fee will be
charged.
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 exchange limit may be modified for accounts
in certain institutional retirement plans to conform to plan exchange
limits and Department of Labor regulations. See your plan materials
for further information.
(small solid bullet) 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 e xchanges.
Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(registered trademark) GINNIE MAE FUND
A FUND OF FIDELITY UNION STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 23, 1997
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current
Prospectus ( dated October 23, 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
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
Fidelity Service Company, Inc. (FSC)
SGM-ptb-1097
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy
or limitation states a maximum percentage of the fund's assets that
may be invested in any security or other asset, or sets forth a policy
regarding quality standards, such standard or percentage limitation
will be determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any
subsequent change in values, net assets, or other circumstances will
not be considered when determining whether the investment complies
with the fund's investment policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the
fund. However, except for the fundamental investment limitations
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) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(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 limit does not apply to purchases of debt securities or to
repurchase agreements.
(8) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) 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 lend assets other
than securities to other parties, except by (a) lending money (up to
7.5% of the fund's net assets) to a registered investment company or
portfolio for which FMR or an affiliate serves as investment adviser
or (b) acquiring loans, loan participations, or other forms of direct
debt instruments and, in connection therewith, assuming any associated
unfunded commitments of the sellers. (This limitation does not apply
to purchases of debt securities or to repurchase agreements).
(vii) The fund does not currently intend to purchase mortgage loans
directly (except through the purchase of mortgage securities).
(viii) The fund does not currently intend to purchase or sell
futures contracts on physical commodities.
(ix) 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 (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 Investment Company Act of
1940. These transactions may include repurchase agreements with
custodian banks; short-term obligations of, and repurchase agreements
with, the 50 largest U.S. banks (measured by deposits );
municipal securities; U.S. Government securities with affiliated
financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In
accordance with exemptive orders issued by the Securities and Exchange
Commission (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.
FANNIE MAES AND FREDDIE MACS are pass-through securities issued by
Fannie Mae and the Federal Home Loan Mortgage Corporation (FHLMC),
respectively. Fannie Mae and FHLMC, which guarantee payment of
interest and principal on Fannie Maes and Freddie Macs, are federally
chartered corporations supervised by the U.S. Government and acting as
governmental instrumentalities under authority granted by Congress.
Fannie Mae is authorized to borrow from the U.S. Treasury to meet its
obligations. Fannie Maes and Freddie Macs are not backed by the full
faith and credit of the United States Government; however, their close
relationship with the U.S. Government makes them high quality
securities with minimal credit risks.
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 fund further limits its options and futures investments to options
and futures contracts relating to U.S. Government securities.
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 SAI, 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
repurchase agreements not entitling the holder to payment of principal
and interest within seven days, non-government stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR
may determine some government-stripped fixed-rate mortgage-backed
securities 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. A mortgage indexed security, for example, could be
synthesized to replicate the performance of mortgage securities and
the characteristics of direct ownership.
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.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities issued by government and non-government entities such as
banks, mortgage lenders, or other financial institutions. A
mortgage-backed security may be an obligation of the issuer backed by
a mortgage or pool of mortgages or a direct interest in an underlying
pool of mortgages. Some mortgage-backed securities, such as
collateralized mortgage obligations or CMOs, make payments of both
principal and interest at a variety of intervals; others make
semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those
on commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and
the fund may invest in them if FMR determines they are consistent with
the fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in
the market's perception of issuers. In addition, regulatory or tax
changes may adversely affect the mortgage securities market as a
whole. Non-government mortgage-backed securities may offer higher
yields than those issued by government entities, but also may be
subject to greater price changes than government issues.
Mortgage-backed securities are subject to prepayment risk. Prepayment,
which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
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.
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.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity
Brokerage Services, Inc. (FBSI). FBSI is a member of the New York
Stock Exchange and a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the
securities loaned and, at the same time, to earn additional income.
Since there may be delays in the recovery of loaned securities, or
even a loss of rights in collateral supplied should the borrower fail
financially, loans will be made only to parties deemed by FMR to be of
good standing. Furthermore, they will only be made if, in FMR's
judgment, the consideration to be earned from such loans would justify
the risk.
FMR understands that it is the current view of the SEC Staff that a
fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of
cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the
fund must be able to terminate the loan at any time; (4) the fund must
receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest, or
other distributions on the securities loaned and to any increase in
market value; (5) the fund may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able
to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any
security in which the fund is authorized to invest. Investing this
cash subjects that investment, as well as the security loaned, to
market forces (i.e., capital appreciation or depreciation).
STRIPPED MORTGAGE-BACKED SECURITIES are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives
the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security (IO)
receives interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall,
prepayment rates tend to increase, which tends to reduce prices of IOs
and increase prices of POs. Rising interest rates can have the
opposite effect.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates, mortgage securities, corporate borrowing
rates, or other factors such as security prices or inflation rates.
Swap agreements can take many different forms and are known by a
variety of names. The fund is not limited to any particular form of
swap agreement if FMR determines it is consistent with the fund's
investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from
one type of investment to another. For example, if the fund agreed to
pay fixed rates in exchange for floating rates while holding
fixed-rate bonds, the swap would tend to decrease the fund's exposure
to long-term interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of the
fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is
the change in the specific interest rate, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to
make such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be
likely to decline, potentially resulting in losses. The fund expects
to be able to eliminate its exposure under swap agreements either by
assignment or other disposition, or by entering into an offsetting
swap agreement with the same party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap
agreements. If the fund enters into a swap agreement on a net basis,
it will segregate assets with a daily value at least equal to the
excess, if any, of the fund's accrued obligations under the swap
agreement over the accrued amount the fund is entitled to receive
under the agreement. If the fund enters into a swap agreement on other
than a net basis, it will segregate assets with a value equal to the
full amount of the fund's accrued obligations under the agreement.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating
interest rates and carry rights that permit holders to demand payment
of the unpaid principal balance plus accrued interest from the issuers
or certain financial intermediaries. Floating rate instruments have
interest rates that change whenever there is a change in a designated
base rate while variable rate instruments provide for a specified
periodic adjustment in the interest rate. These formulas are designed
to result in a market value for the instrument that approximates its
par value.
ZERO COUPON BONDS. Zero coupon bonds do not make 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 dividends, the fund takes
into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.
A broker-dealer creates a DERIVATIVE ZERO by separating the interest
and principal components of a U.S. Treasury security and selling them
as two individual securities. CATS (Certificates of Accrual on
Treasury Securities), TIGRs (Treasury Investment Growth Receipts), and
TRs (Treasury Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of
Registered Interest and Principal of Securities) by separating the
interest and principal components of an outstanding U.S. Treasury bond
and selling them as individual securities. Bonds issued by the
Resolution Funding Corporation (REFCORP) and the Financing Corporation
(FICO) can also be separated in this fashion. ORIGINAL ISSUE
ZEROS are zero coupon securities originally issued by the U.S.
Government, a government agency, or a corporation in zero coupon
form.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in the
management contract. 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) and Fidelity
Brokerage Services (FBS), indirect subsidiaries of FMR Corp., if
the commissions are fair, reasonable, and comparable to commissions
charged by non-affiliated, qualified brokerage firms for similar
services. From September 1992 through December 1994, FBS operated
under the name Fidelity Brokerage Services Limited (FBSL). As of
January 1995, FBSL was converted to an unlimited liability company and
assumed the name FBS.
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.
For the fisca l periods ended August 31, 1997 and 1996, the
fund's portfolio turnover rates were 104% and 115%, respectively.
Because a high turnover rate increases transaction costs and may
increase taxable gains, FMR carefully weighs the anticipated benefits
of short-term investing against these consequences.
The investment activities described herein are likely to result in the
fund engaging in a considerable amount of trading of securities held
for less than one year. Accordingly, it can be expected that the fund
will have a higher turnover rate, and thus a higher incidence of
short-term capital gains taxable as ordinary income, than might be
expected from investment companies that invest substantially all of
their funds on a long-term basis.
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 services.
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 depending on the
primary market or exchange on which they trade. Fixed-income
securities and other assets for which market quotations are readily
available may be valued at market values determined by such
securities' most recent bid prices (sales prices if the principal
market is an exchange) in the principal market in which they normally
are traded, as furnished by recognized dealers in such securities or
assets.
Or, fixed-income securities may be 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 of other open-end investment
companies are valued at their respective NAVs.
Short-term securities with remaining maturities of sixty days or
less for which market quotations and information furnished by a
pricing service are not readily available are valued either at
amortized cost or at original cost plus accrued interest, both of
which approximate current value. In addition, securities and other
assets for which there is no readily available market value may be
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 a fund are computed by dividing the
fund's interest income for a given 30-day or one-month period, net
of expenses, by the average number of shares entitled to receive
distributions during the period, dividing this figure by the fund's
net asset value (NAV) at the end of the period, and annualizing the
result (assuming compounding of income) in order to arrive at an
annual percentage rate. 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. Income is adjusted to reflect
gains and losses from principal repayments received by a fund with
respect to mortgage-related securities and other asset-backed
securities. Other 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.
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. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration, and may omit or include the effect of the $5.00 account
closeout fee.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid
by the fund and reflects all elements of its return. Unless otherwise
indicated, the fund's adjusted NAVs are not adjusted for sales
charges, if any.
HISTORICAL FUND RESULTS. The following table show s the fund's
yield and total returns for periods ended August 31, 1997. Total
return figures include the effect of the $5.00 account closeout fee
based on an average size account.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Thirty-Day One Five Life of One Five Life of
Yield Year Years Fund* Year Years Fund*
Spartan Ginnie
Mae 6.93 % 10.06 % 6.59 % 7.69 % 10.06 % 37.61 % 64.05%
</TABLE>
* From December 27, 1990 (commencement of operations).
Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund's yield and 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 December 27, 1990 (commencement of
operations) to August 31, 1997, a hypothetical $10,000 investment
in Spartan Ginnie Mae would have grown to $ 16,406 ,
assuming all distributions were reinvested. This was a period of
fluctuating interest rates and bond prices and the figures below
should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment
in the fund today. 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 $5.00 account closeout fee.
SPARTAN GINNIE MAE FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year
Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1997 $ 10,060 $ 5,963 $ 383 $ 16,406 $ 32,525 $ 34,479 $ 12,018
1996 $ 9,780 $ 4,753 $ 372 $ 14,905 $ 23,125 $ 24,920 $ 11,756
1995 $ 9,970 $ 3,891 $ 379 $ 14,240 $ 19,477 $ 20,013 $ 11,428
1994 $ 9,640 $ 2,790 $ 367 $ 12,797 $ 16,038 $ 16,557 $ 11,136
1993 $ 10,270 $ 2,257 $ 301 $ 12,828 $ 15,206 $ 15,033 $ 10,822
1992 $ 10,400 $ 1, 499 $ 2 2 $ 11,921 $ 13,196 $ 13,022 $ 10,531
1991* $ 10,160 $ 593 $ 0 $ 10,753 $ 12,226 $ 11,813 $ 10,209
</TABLE>
* From December 27, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on December 27, 1990, the net amount invested in fund shares was
$10,000. The cost of the initial investment ($10,000) together with
the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time
they were reinvested) amounted to $ 16,310 . 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 $ 4,586 for dividends and $ 330
for 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.
Spartan Ginnie Mae may compare its performance to that of the
Salomon Brothers GNMA Index, a market capitalization weighted index of
15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA). For mortgage issues,
the entry and exit amounts are $1 billion public amount
outstanding.
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.
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.
The fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes,
which may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
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. Because the fund's income is primarily derived from
interest, dividends from the fund generally will not qualify for the
dividends-received deduction available to corporate shareholders.
Short-term capital gains are distributed as dividend income, but do
not qualify for the dividends received deduction. A portion of the
fund's dividends derived from certain U.S. Government obligations may
be exempt from state and local taxation. Mortgage security paydown
gains (losses) on mortgage securities purchased by the fund on or
prior to June 8, 1997 are generally taxable as ordinary income
and, therefore, increase (decrease) taxable dividend distributions.
The fund will send each shareholder a notice in January describing the
tax status of dividend and capital gain distributions for the prior
year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund
on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a 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, 1997, the fund had a capital loss carryforward
aggregating approximately $ 14,424,000 . This loss carryforward,
of which $ 13,690,000 and $ 734,000 will expire on
August 31, 200 3 and 2004 , respectively, is available to
offset future capital gains.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business
trusts, state law provides for a pass-through of the state and
local income tax exemption afforded to direct owners of U.S.
Government securities. Some states limit this to mutual funds that
invest a certain amount in U.S. Government securities, and some types
of securities, such as repurchase agreements and some agency
backed securities, may not qualify for this benefit. The tax treatment
of your dividend distributions from the fund will be the same as if
you directly owned your proportionate share of the U.S. Government
securities in the fund's portfolio. Because the income earned on most
U.S. Government securities in which the fund invests is exempt from
state and local income taxes, the portion of your dividends from
the fund attributable to these securities will also be free from
income taxes. The exemption from state and local income taxation
does not preclude states from assessing other taxes on the ownership
of U.S. Government securities. In a number of states, corporate
franchise (income) tax laws do not exempt interest earned on U.S.
Government securities whether such securities are held directly or
through a fund.
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 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 Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President and Chief Executive Officer of the Fidelity
Institutional 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 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.
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 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 funds (1995) and Senior Vice President of FMR (1995).
Before assuming his current responsibilities, Mr. Henning was head of
Fidelity's Money Market Division.
CURT HOLLINGSWORTH (40), is Vice President of Spartan Ginnie Mae
(1997) and other funds advised by FMR, and is an employee of FMR
(1983).
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 of 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).
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).
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
<TABLE>
<CAPTION>
<S> <C> <C>
Trustees Aggregate Total
and Compensation Compensation from the
Members of the Advisory Board from Fund Complex*A
Spartan Ginnie MaeB,C
J. Gary Burkhead ** $ 0 $ 0
Ralph F. Cox $ 185 137,700
Phyllis Burke Davis $ 181 134,700
Richard J. Flynn*** $ 60 168,000
Robert M. Gates **** $ 103 0
Edward C. Johnson 3d ** $ 0 0
E. Bradley Jones $ 182 134,700
Donald J. Kirk $ 184 136,200
Peter S. Lynch ** $ 0 0
William O. McCoy***** $ 183 85,333
Gerald C. McDonough $ 217 136,200
Edward H. Malone*** $ 51 136,200
Marvin L. Mann $ 185 134,700
Robert C. Pozen** $ 0 0
Thomas R. Williams $ 185 136,200
</TABLE>
* 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 and Edward H. Malone served on the Board of
Trustees through December 31, 1996.
**** Mr. Gates was appointed to the Board of Trustees 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, $6, Phyllis Burke Davis, $6, Richard J. Flynn, $0, Robert M.
Gates, $0, E. Bradley Jones, $6, Donald J. Kirk, $6, William O. McCoy,
$0, Gerald C. McDonough, $6, Edward H. Malone, $6, Marvin L. Mann, $6,
and Thomas R. Williams, $6.
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
relating crediting of estimated benefits to the Trustees' Plan
accounts did not result in a material cost to the funds.
As of August 31, 1997 , the Trustees, Members of the Advisory
Board, and officers of the fund owned, in the aggregate, less than
1 % of the fund's total outstanding shares.
As of August 31, 1997 , the following owned of record 5% or more
of the fund's outstanding shares: National Financial Services
Corporation, Boston, MA (25.96%).
MANAGEMENT CONTRACT
FMR is the fund's manager pursuant to a management contract dated
December 13, 1990, which was approved by shareholders on January 22,
1992.
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 vari ety 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. FMR also pays all fees associated with transfer agent,
dividend disbursing, and shareholder services, pricing and bookkeeping
services, and administration of the fund's securities lending
program.
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 the annual
rate of 0.65% 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, 1997, 1996, and 1995, the
fund paid FMR management fees of $2,994,363 , $ 2,834,108, and
$2,489,882 , 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 $ 11,592 , $ 112,648 , 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.
Effective March 1, 1997, FMR voluntarily agreed, subject to revision
or termination, to reimburse the fund, through December 31, 1998, if
and to the extent that its aggregate operating expenses, including
management fees, are in excess of an annual rate of 0.38% of its
average net assets. For the fiscal years ended August 31, 1997, 1996,
and 1995, management fees incurred under the fund's contract prior to
reimbursement amounted to $2,994,363, $2,834,108, and $2,489,882,
respectively (after reduction for compensation to the
non-interested Trustees), and management fees reimbursed by FMR
amounted to $654,745, $0, and $0, respectively .
To defray shareholder service costs, FMR or its affiliates also
collect the fund's $5.00 exchange fee, $5.00 account closeout fee,
$5.00 fee for wire purchases and redemptions, and $2.00 checkwriting
charge. Shareholder transaction fees and charges collected by FMR are
shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Ended Exchange Fees Account Wire Fees Checkwriting
August 31 Closeout Fees Charges
Spartan Ginnie Mae 1997 $ 4,020 $ 1,270 $ 135 $ 669
1996 $ 6,025 $ 1,650 $ 365 $ 779
1995 $ 7,450 $ 3,010 $ 665 $ 874
</TABLE>
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on behalf
of the fund (the Plan) 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 Ginnie
Mae shares.
FMR made no payments either directly or through FDC to third parties
for the fiscal year ended 1997.
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, a dditional 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.
The Plan was approved by shareholders of Spartan Ginnie Mae on
January 22, 1992.
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 FSC, an
affiliate of FMR. Under the terms of the agreement, FSC performs
transfer agency, dividend disbursing, and shareholder services for the
fund.
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, FSC 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 FSC.
Under the terms of the agreement, FSC calculates the NAV and dividends
for the fund, maintains the fund's portfolio and general accounting
records, and administers the fund's securities lending program.
For providing pricing and bookkeeping services, FSC receives a
monthly fee based on the fund's average daily net assets throughout
the month.
For administering the fund's securities lending program, FSC
receives fees based on the number and duration of individual
securities loans.
FMR bears the cost of transfer agency, dividend disbursing, and
shareholder services, pricing and bookkeeping services, and
administration of the securities lending program 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 is a member of the National Association of Securities
Dealers, Inc. The distribution agreement calls for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
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 Ginnie Mae Fund is a fund of Fidelity
Union Street Trust, an open-end management investment company
originally 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 Intermediate Municipal Income Fund, Spartan Ginnie
Mae Fund, Spartan Maryland Municipal Income Fund, Spartan
Short-Intermediate Municipal Income Fund, Fidelity Export
and Multinational Fund , and Spartan Arizona 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. The Bank of New York, 110 Washington Street, New York, New
York, 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. The
Chase Manhattan Bank, headquartered in New York, also may serve as a
special purpose custodian of certain assets in connection with
repurchase agreement transactions.
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 trust's independent accountant . The
auditor examines financial statements for the fund and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for
the fiscal year ended 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.
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. Also, the maturities of mortgage-backed securities,
including collateralized mortgage obligations, and some asset-backed
securities are determined on a weighted average life basis, which is
the average time for principal to be repaid. For a mortgage security,
this average time is calculated by estimating the timing of principal
payments, including unscheduled prepayments, during the life of the
mortgage. The weighted average life of these securities is likely to
be substantially shorter than their stated final maturity.
SPARTAN ARIZONA MUNICIPAL INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 ................................ Cover Page
2 a ................................ Expenses
b, c ................................ Contents; The Fund at a Glance; Who May Want to
Invest
3 a ................................ Financial Highlights
b ................................ *
c, d ................................ Performance
4 a i............................... Charter
ii.............................. The Fund at a Glance; Investment Principles and
Risks
b ................................ Investment Principles and Risks
c ................................ Who May Want to Invest; Investment Principles
and Risks
5 a ................................ Charter
b i............................... Cover Page: The Fund at a Glance; Charter; Doing
Business with Fidelity
ii.............................. Charter
iii............................. Expenses; Breakdown of Expenses
c ................................ Charter
d ................................ Charter; Breakdown of Expenses
e ................................ Cover Page; Charter
f ................................ Expenses
g i............................... Charter
ii.............................. *
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5A ................................ Performance
6 a i............................... Charter
ii.............................. How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii............................. Charter
b ................................ Charter
c ................................ Transaction Details; Exchange Restrictions
d ................................ *
e ................................ Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g ................................ Dividends, Capital Gains, and Taxes
h ................................ *
7 a ................................ Cover Page; Charter
b ................................ Expenses; How to Buy Shares; Transaction Details
c ................................ *
d ................................ How to Buy Shares
e ................................ *
f ................................ Breakdown of Expenses
8 ................................ How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 ................................ *
</TABLE>
* Not Applicable
SPARTAN ARIZONA MUNICIPAL INCOME FUND
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................... Cover Page
12 ............................... Description of the Trust
13 a - c ............................... Investment Policies and Limitations
d ............................... Portfolio Transactions
14 a - c ............................... Trustees and Officers
15 a, b ............................... *
c ............................... Trustees and Officers
16 a i ............................... FMR, Portfolio Transactions
ii ............................... Trustees and Officers
iii ............................... Management Contract
b ............................... Management Contract
c, d ............................... Contracts with FMR Affiliates
e ............................... *
f ............................... Distribution and Service Plan
g ............................... *
h ............................... Description of the Trust
i ............................... Contracts with FMR Affiliates
17 a ............................... Portfolio Transactions
b ............................... *
c ............................... Portfolio Transactions
d, e ............................... *
18 a ............................... Description of the Trust
b ............................... *
19 a ............................... Additional Purchase and Redemption Information
b ............................... Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................... *
20 ............................... Distributions and Taxes
21 a, b ............................... Contracts with FMR Affiliates
c ............................... *
22 a ............................... *
b ............................... Performance
23 ............................... Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
SPARTAN(REGISTERED TRADEMARK)
ARIZONA
MUNICIPAL INCOME
FUND
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
October 23, 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.
AZI-pro-1097
(fund number 434, trading symbol FSAMI)
Spartan Arizona Municipal Income seeks a high level of current
income free from federal income tax and Arizona personal income
tax.
PROSPECTUS
OCTOBER 23, 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 Arizona residents. As
with any mutual fund, there is no assurance that the fund will achieve
its goal.
STRATEGY: Invests normally in investment-grade municipal securities
whose interest is free from federal income tax and Arizona personal
income tax. Managed to generally react to changes in interest rates
similarly to municipal bonds with maturities between 8 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, 199 7 , the fund had over $ 19
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 Arizona personal income taxes. The fund's level of risk
and potential reward depends on the quality and maturity of its
investments. You should consider your investment objective and
tolerance for risk when making an investment decision.
The value of the fund's investments and the income they generate will
vary from day to day, and generally reflect interest rates, market
conditions, and other economic and political news. When you sell your
shares, they may be worth more or less than what you paid for them. By
itself, the fund does not constitute a balanced investment plan.
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 ARIZONA
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 the 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.
<TABLE>
<CAPTION>
<S> <C>
S ales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Redemption fee (Short-term trading fee) on shares held less than 180 days (as a % of amount redeemeed) 0.50%
Annual account maintenance fee $12.00
(for accounts under $2,500)
</TABLE>
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 fa ctored 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
arrangements 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 this reduction, the total operating
expenses presented in the table would have been 0.53%.
Management fee 0.55%
12b-1 fee None
Other expenses 0%
Total fund operating expenses 0.55%
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>
Years ended August 31 1997 1996 1995D
Net asset value, beginning of period $ 10.460 $ 10.640 $
10.000
Income from Investment Operations .483 .514 .504
Net interest income
Net realized and unrealized gain (loss) .351 (.022) .637
Total from investment operations .834 .492 1.141
Less Distributions (.484) (.514) (.504)
From net interest income
From net realized gain (.070) (.160) --
Total distributions (.554) (.674)
(.504)
Redemption fees added to paid in capital .000 .002 .003
Net asset value, end of period $ 10.740 $ 10.460 $
10.640
Total returnB,C 8.16% 4.72%
11.74%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 19,766 $ 20,388 $
13,448
Ratio of expenses to average net assets .55% .30%E
.06%A,E
Ratio of expenses to average net assets after expense reductions .53%F .30% .06%A
Ratio of net interest income to average net assets 4.55% 4.82%
5.54%A
Portfolio turnover rate 27% 32% 56%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND,
FOR PERIODS OF LESS THAN ONE YEAR, ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FOR THE PERIOD OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO
AUGUST 31, 1995.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F 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
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal periods ended Past 1 Life of
August 31, 1997 year fundA
Spartan Arizona Municipal Income 8.16% 8.48%B
Lehman Bros. AZ Enhanced Muni. Bond Index 8.66% n/a
Lipper AZ Muni. Debt Funds Average 8.61% n/a
</TABLE>
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal periods ended Past 1 Life of
August 31, 1997 year fundA
Spartan Arizona Municipal Income 8.16% 26.57%B
Lehman Bros. AZ Enhanced Muni. Bond Index 8.66% n/a
Lipper AZ Muni. Debt Funds Average 8.61% n/a
</TABLE>
A FROM OCTOBER 11, 1994 (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
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)
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in 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 ENHANCED ARIZONA MUNICIPAL BOND INDEX is
a total return performance benchmark for Arizona investment-grade
municipal bonds with maturities of at least one year.
Unlike the fund's returns, the total returns of the comparative index
do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Arizona Municipal Debt
Funds Average. As of August 31, 1997 , the average reflected the
performance of 34 mutual funds with similar investment
objectives. This average, published by Lipper Analytical Services,
Inc., excludes the effect of sales loads.
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.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 199 5 1996
SPARTAN ARIZONA MUNICIPAL INCOME 18.49 %
3.51 %
Lipper AZ Muni. Debt. Funds Avg. 17.48 %
3.39 %
Consumer Price Index 2.54 % 3.32 %
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
SPARTAN ARIZONA 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.
Jonathan Short is Vice President and manager of Spartan Arizona
Municipal Income, which he has managed since October 1995. He also
manages other Fidelity funds. Since joining Fidelity in 1990, Mr.
Short has worked as an analyst and manager.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
FIDELITY 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 $498 billion
(solid bullet) Number of shareholder
accounts: over 33 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 273
(checkmark)
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.
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 affected by the credit
quality of its issuer. Changes in the financial condition of an
issuer, changes in general economic conditions, and changes in
specific economic conditions that affect a particular type of issuer
can impact the credit quality of an issuer. Lower quality bonds
generally tend to be more sensitive to these changes than higher
quality bonds.
MUNICIPAL MARKET RISK. Municipal securities are backed by the
entity that issued them and/or other revenue streams. Municipal
security values may be significantly affected by political changes as
well as uncertainties in the municipal market related to taxation or
the rights of municipal securities holders.
FIDELITY'S APPROACH TO BOND FUNDS. The total return from a bond
includes both income and price gains or losses. In selecting
investments for a bond fund, FMR considers a bond's expected income
together with its potential for price gains or losses. While income is
the most important component of bond returns over time, a bond fund's
emphasis on income does not mean the fund invests only in the
highest-yielding bonds available, or that it can avoid losses of
principal.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the range of eligible investments for the fund. FMR's
evaluation of a potential investment includes an analysis of the
credit quality of the issuer, its structural features, its current
price compared to FMR's estimate of its long-term value, and any
short-term trading opportunities resulting from market inefficiencies.
In structuring a bond fund, FMR allocates assets among different
market sectors (for example, general obligation bonds of a state or
bonds financing a specific project) and different maturities based on
its view of the relative value of each sector or maturity. The
performance of the fund will depend on how successful FMR is in
pursuing this approach.
SPARTAN ARIZONA MUNICIPAL INCOME seeks high current income that
is free from federal income tax and the Arizona personal income tax 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 10.8 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 at least 80% of the fund's assets in
municipal securities whose interest 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 Arizona. Arizona's economy recovered
from a slowdown in growth in the late 80's and 90's with a strong
expansion that is now in its fifth year. However, economic conditions
within the state are expected to reflect slower growth over the
current and upcoming fiscal year.
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 "municipal 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
providers of credit or liquidity support, extensive public information
about the provider may not be available, and unfavorable political,
economic, or governmental developments could affect its ability to
honor its commitment.
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 Arizona or its counties, 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 state municipal securities 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 f und seeks a high level of current income, exempt from
federal income tax and Arizona personal income tax.
The fu nd normally invests at least 80% of its assets in
municipal securities whose interest is free from federal income tax.
The fund m ay borrow only for temporary or emergency purposes,
but not in an amount exceeding 33 1/3 % 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, 19 97 was 27 %. This rate varies from year to
year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-sheltered retirement plans for individuals investing on their own
or through their employer.
Fidelity is committed to providing investors with practical
information to make investment decisions. Based in Boston, Fidelity
provides customers with complete service 24 hours a day, 365 days a
year, through a network of telephone service centers around the
country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 80 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or
intend to purchase individual securities as part of your total
investment portfolio, you may consider investing in the fund through a
brokerage account.
You may purchase or sell shares of the fund through an investment
professional, including a broker, who may charge you a transaction fee
for this service. If you invest through FBSI, another financial
institution, or an investment professional, read their program
materials for any special provisions, additional service features or
fees that may apply to your investment in the fund. Certain features
of the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE 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 and accepted. 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 ACCOUNT TO ADD TO AN ACCOUNT
PHONE 1-800-544-7777
(PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER FIDELITY FUND (SMALL SOLID BULLET) EXCHANGE FROM ANOTHER
FIDELITY FUND
ACCOUNT WITH THE SAME REGISTRATION, ACCOUNT WITH THE SAME REGISTRATION,
INCLUDING NAME, ADDRESS, AND INCLUDING NAME, ADDRESS, AND
TAXPAYER ID NUMBER. TAXPAYER ID NUMBER.
(SMALL SOLID BULLET) USE FIDELITY MONEY LINE TO
TRANSFER
FROM YOUR BANK ACCOUNT. CALL BEFORE
YOUR FIRST USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON YOUR ACCOUNT.
MAXIMUM MONEY LINE: UP TO
$100,000.
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MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND SIGN THE APPLICATION. (SMALL SOLID BULLET) MAKE YOUR CHECK
PAYABLE TO
MAKE YOUR CHECK PAYABLE TO "SPARTAN ARIZONA MUNICIPAL INCOME
"SPARTAN ARIZONA MUNICIPAL INCOME FUND." INDICATE YOUR FUND ACCOUNT
FUND." MAIL TO THE ADDRESS INDICATED NUMBER ON YOUR CHECK AND MAIL TO
ON THE APPLICATION. THE ADDRESS PRINTED ON YOUR ACCOUNT
STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL
1-800-544-6666 FOR INSTRUCTIONS.
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IN PERSON
(HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR APPLICATION AND CHECK TO A (SMALL SOLID BULLET) BRING YOUR CHECK TO A
FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL CENTER. CALL 1-800-544-9797 FOR THE
1-800-544-9797 FOR THE CENTER CENTER NEAREST YOU.
NEAREST YOU.
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WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL 1-800-544-7777 TO SET UP YOUR (SMALL SOLID BULLET) WIRE TO:
ACCOUNT AND TO ARRANGE A WIRE BANKERS TRUST COMPANY,
TRANSACTION. BANK ROUTING #021001033,
(SMALL SOLID BULLET) WIRE WITHIN 24 HOURS TO: ACCOUNT #00163053.
BANKERS TRUST COMPANY, SPECIFY THE COMPLETE NAME OF THE
BANK ROUTING #021001033, FUND AND INCLUDE YOUR ACCOUNT
ACCOUNT #00163053. NUMBER AND YOUR NAME.
SPECIFY THE COMPLETE NAME OF THE
FUND AND INCLUDE YOUR NEW ACCOUNT
NUMBER AND YOUR NAME.
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AUTOMATICALLY
(AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY AUTOMATIC ACCOUNT
BUILDER. SIGN UP FOR THIS SERVICE
WHEN OPENING YOUR ACCOUNT, OR CALL
1-800-544-6666 TO ADD IT.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of the fund is the fund's NAV minus
the short-term trading fee, if applicable. 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.
Your shares will be sold at the next NAV calculated after your
order is received and accepted, 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
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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 1-800-544-7777
(PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM CHECK REQUEST: $100,000.
(SMALL SOLID BULLET) FOR MONEY LINE TRANSFERS TO YOUR BANK ACCOUNT;
MINIMUM: $10; MAXIMUM: UP TO $100,000.
(SMALL SOLID BULLET) YOU MAY EXCHANGE TO OTHER FIDELITY FUNDS IF
BOTH ACCOUNTS ARE REGISTERED WITH THE SAME
NAME(S), ADDRESS, AND TAXPAYER ID NUMBER.
MAIL OR IN PERSON
(MAIL_GRAPHIC)
(HAND_GRAPHIC) INDIVIDUAL, JOINT TENANT, (SMALL SOLID BULLET) THE LETTER OF INSTRUCTION MUST BE SIGNED BY ALL
SOLE PROPRIETORSHIP, PERSONS REQUIRED TO SIGN FOR TRANSACTIONS,
UGMA, UTMA EXACTLY AS THEIR NAMES APPEAR ON THE ACCOUNT.
TRUST (SMALL SOLID BULLET) THE TRUSTEE MUST SIGN THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF THE TRUSTEE'S NAME IS NOT
IN THE ACCOUNT REGISTRATION, PROVIDE A COPY OF THE
TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
BUSINESS OR ORGANIZATION (SMALL SOLID BULLET) AT LEAST ONE PERSON AUTHORIZED BY CORPORATE
RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE
LETTER.
(SMALL SOLID BULLET) INCLUDE A CORPORATE RESOLUTION WITH CORPORATE
SEAL OR A SIGNATURE GUARANTEE.
EXECUTOR, ADMINISTRATOR, (SMALL SOLID BULLET) CALL 1-800-544-6666 FOR INSTRUCTIONS.
CONSERVATOR, GUARDIAN
WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE
USING IT. TO VERIFY THAT IT IS IN PLACE, CALL
1-800-544-6666. MINIMUM WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION REQUEST MUST BE RECEIVED
AND ACCEPTED BY FIDELITY BEFORE 4 P.M. EASTERN
TIME FOR MONEY TO BE WIRED ON THE NEXT
BUSINESS DAY.
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(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your
account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365
days a year. Whenever you call, you can speak with someone equipped to
provide the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more
than one account in the fund. Call 1-800-544-6666 if you need copies
of financial reports, prospectuses, or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar
year, and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or
revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from
your account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer
money by phone between your bank account and your fund account. Most
transfers are complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an
excellent way to invest for a home, educational expenses, and other
long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 MONTHLY OR QUARTERLY (SMALL SOLID BULLET) FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION ON THE FUND
APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS, CALL 1-800-544-6666 FOR AN APPLICATION.
(SMALL SOLID BULLET) TO CHANGE THE AMOUNT OR FREQUENCY OF YOUR INVESTMENT, CALL
1-800-544-6666 AT LEAST THREE BUSINESS DAYS PRIOR TO YOUR NEXT
SCHEDULED INVESTMENT DATE.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 EVERY PAY PERIOD (SMALL SOLID BULLET) CHECK THE APPROPRIATE BOX ON THE FUND APPLICATION, OR CALL
1-800-544-6666 FOR AN AUTHORIZATION FORM.
(SMALL SOLID BULLET) CHANGES REQUIRE A NEW AUTHORIZATION FORM.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, bimonthly, (small solid bullet) To establish, call 1-800-544-6666 after both accounts are
quarterly, or annually opened.
(small solid bullet) To change the amount or frequency of your investment, call
1-800-544-6666.
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A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income
and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains are normally
distributed in 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:
9. 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.
10. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each
dividend distribution.
11. CASH OPTION. You will be sent a check for your dividend and
capital gain distributions.
12. 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.
UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. THE FUND
PASSES ITS EARNINGS ALONG TO ITS
INVESTORS AS DISTRIBUTIONS.
THE FUND EARNS INTEREST FROM ITS
INVESTMENTS. THESE ARE PASSED
ALONG AS DIVIDEND
DISTRIBUTIONS. THE FUND MAY
REALIZE CAPITAL GAINS IF IT SELLS
SECURITIES FOR A HIGHER PRICE
THAN IT PAID FOR THEM. THESE
ARE PASSED ALONG AS CAPITAL
GAIN DISTRIBUTIONS.
(CHECKMARK)
TAXES
As with any investment, you should consider how an investment in a
tax-free fund could affect you. Below are some of the fund's tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is
distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on
bonds purchased at a discount are distributed as dividends and taxed
as ordinary income. 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 a statement showing the
tax status of distributions, and will report to the IRS the amount
of any taxable 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.
To the extent the fund's income dividends are derived from interest
on Arizona municipal securities the interest on which is exempt from
Arizona state personal income tax, the dividends will be free from
such tax.
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 Arizona taxes. 9.09% 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. FSC 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. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does
not follow reasonable procedures designed to verify the identity of
the caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy
of your confirmation statements immediately after you receive them. If
you do not want the ability to redeem and exchange by telephone, call
Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. The fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. See
"Exchange Restrictions" on page . Purchase orders may be refused if,
in FMR's opinion, they would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be
purchased at the next NAV calculated after your
investment is received and accepted. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees the fund or
its transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first
business day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money
order, U.S. Treasury check, Federal Reserve check, or direct deposit
instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements
with FDC may enter confirmed purchase orders on behalf of customers by
phone, with payment to follow no later than the time when the fund is
priced on the following business day. If payment is not received by
that time, the financial institution could be held liable for
resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received and
accepted, 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 0.50% will be deducted from the
redemption amount if you sell your shares 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 in 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) ARIZONA MUNICIPAL INCOME FUND
A FUND OF FIDELITY UNION STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 23, 1997
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current Prospectus
( dated October 23 , 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 Arizona
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)
AZI -ptb-1097
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, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) 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 objectives,
policies, and limitations as the fund.
For purposes of limitations (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 purposes of limitations (4) and (i), FMR identifies the issuer of
a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the Investment Company Act of
1940. 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
Arizona 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 SAI, 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 Arizona 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 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.
MUNICIPAL SECTORS:
ELECTRIC UTILITIES. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open
transmission access to any electricity supplier, although it is not
presently known to what extent competition will evolve. Other risks
include: (a) the availability and cost of fuel, (b) the availability
and cost of capital, (c) the effects of conservation on energy demand,
(d) the effects of rapidly changing environmental, safety, and
licensing requirements, and other federal, state, and local
regulations, (e) timely and sufficient rate increases, and (f)
opposition to nuclear power.
HEALTH CARE. 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.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student
loans. Bonds issued to supply educational institutions with funds are
subject to the risk of unanticipated revenue decline, primarily the
result of decreasing student enrollment or decreasing state and
federal funding. Among the factors that may lead to declining or
insufficient revenues are restrictions on students' ability to pay
tuition, availability of state and federal funding, and general
economic conditions. Student loan revenue bonds are generally offered
by state (or substate) authorities or commissions and are backed by
pools of student loans. Underlying student loans may be guaranteed by
state guarantee agencies and may be subject to reimbursement by the
United States Department of Education through its guaranteed student
loan program. Others may be private, uninsured loans made to parents
or students which are supported by reserves or other forms of credit
enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans. Cash flows supporting student
loan revenue bonds are impacted by numerous factors, including the
rate of student loan defaults, seasoning of the loan portfolio, and
student repayment deferral periods of forbearance. Other risks
associated with student loan revenue bonds include potential changes
in federal legislation regarding student loan revenue bonds, state
guarantee agency reimbursement and continued federal interest and
other program subsidies currently in effect.
WATER AND SEWER. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults.
Further, public resistance to rate increases, costly environmental
litigation, and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, highways, or other transit
facilities. Airport bonds are dependent on the general stability of
the airline industry and on the stability of a specific carrier who
uses the airport as a hub. Air traffic generally follows broader
economic trends and is also affected by the price and availability of
fuel. Toll road bonds are also affected by the cost and availability
of fuel as well as toll levels, the presence of competing roads and
the general economic health of an area. Fuel costs and availability
also affect other transportation-related securities, as do the
presence of alternate forms of transportation, such as public
transportation.
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 ARIZONA
Certain Arizona constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives,
as discussed below, could adversely affect the market values and
marketability of, or result in default of, existing obligations,
including obligations that may be held by the fund. Obligations of the
State or local governments may also be affected by budgetary pressures
affecting the State and economic conditions in the State. The
following highlights only some of the more significant financial
trends, and is based on information drawn from official statements and
prospectuses relating to securities offerings of or on behalf of the
State of Arizona, its agencies, instrumentalities and political
subdivisions, and other publicly available documents, as available on
the date of this Statement of Additional Information. FMR has not
independently verified any of the information contained in such
official statements and other publicly available documents, but is not
aware of any fact which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES, EXPENDITURES AND REVENUE
INCREASES
LIMITATIONS ON TAXES. Certain obligations held by the fund may be
obligations of issuers that rely in whole or in part, directly or
indirectly, on ad valorem property taxes as a source of revenue. The
taxing powers of Arizona local governments and districts are limited
by Arizona Law. Arizona's property tax system was substantially
revised by 1980 amendments to the Arizona Constitution and
implementing legislation. There are two separate tax systems: a
Primary system for taxes levied to pay current operation and
maintenance expenses; and a Secondary system for taxes levied to pay
principal and interest on bonded indebtedness, special district
assessments and tax overrides. There are specific provisions under
each system governing property value, the basis of assessment and
maximum annual tax levies.
Under the Primary system, property value is the basis for determining
primary property taxes of locally assessed real property and may
increase by more than 10% per year only under certain circumstances.
Under the Secondary system, there is no limitation on annual increases
in full cash value of any property.
Under the Primary system, annual tax levies are limited based on the
nature of the property being taxed, and the nature of the taxing
authority. Taxes levied for Primary purposes on residential property
only are limited to 1% of the full cash value of such property. In
addition, taxes levied for Primary purposes on all types of property
by counties, cities, towns and community college districts are limited
to a maximum increase of 2% over the prior year's levy, plus any
amount directly attributable to new construction and annexation and
involuntary tort judgments. The 2% limitation does not apply to taxes
levied for Primary purposes on behalf of local school districts.
Annual tax levies for bonded indebtedness and special district
assessments are unlimited under the Secondary system.
EXPENDITURES LIMITS. Provisions of the Arizona Constitution and
Arizona legislation limit increases in annual expenditures by
counties, cities and towns and community college districts and school
districts to an amount determined by the Arizona Economic Estimates
Commission. This limitation is based on the entity's actual
expenditures for fiscal year 1979-80, with this base adjusted annually
to reflect changes in population, cost of living, and boundaries.
LIMITATIONS ON REVENUE INCREASES. In November of 1992 an amendment to
the Constitution of Arizona was approved by the voters and signed by
the Governor. The amendment states that any legislation that provides
for a net increase in State revenues will be effective only on the
affirmative vote of two-thirds of the members of each house of the
State Legislature, and Gubernatorial approval. If the Governor vetoes
the measure, then the legislation shall not become effective unless
the legislation is approved by an affirmative vote of three-fourths of
the members of each house. The constitutional amendment does not apply
to the effects of inflation, increasing assessed valuation or any
other similar effect that increases State revenue but which is not
caused by an affirmative act of the Legislature.
The budgets enacted since fiscal year 1993-94 have not provided for
any increases in State revenues that required an approval from
two-thirds of the State Legislature.
OBLIGATIONS OF THE STATE OF ARIZONA
Under the Arizona Constitution, the State's power to contract debt is
limited to an amount of not more than $350,000 to supply casual
deficits or failures in revenues or to meet expenses not otherwise
provided for. In addition to that authority, the State may borrow
money to repel invasion, suppress insurrection, or defend the State in
time of war.
Certain State agencies and instrumentalities may issue debt secured by
limited special revenue sources. Additionally, obligations such as
lease-purchase agreements and Certificates of Participation that are
subject to annual appropriation are not debt within the meaning of
Arizona's constitutional and statutory limitations. As of June 30,
1996, various State agencies, boards, departments and
instrumentalities (including the Department of Transportation and
State educational institutions) had approximately $1.41 billion of
bonded indebtedness. Certificates of Participation of State agencies
and instrumentalities outstanding at December 31, 1996 totalled
approximately $541.7 million.
ECONOMY
Arizona has been, and is projected to continue to be, one of the
fastest growing areas in the United States. Over the last several
decades, the State has outpaced most other states in virtually every
major category of growth, including population, personal income, gross
state product, and job creation. From 1980 to 1996, the State's
population grew 64.3% and is currently estimated to be 4.5 million.
Geographically, Arizona is the nation's sixth largest state. The State
is divided into fifteen counties. Two of these counties, Maricopa
County (including Phoenix) and Pima County (including Tucson), are
more urban in nature and account for approximately 76% of total
population and 85% of total wage and salary employment in Arizona.
Significant job growth has occurred in the areas of aerospace and high
technology, construction, finance, insurance, and real estate. Major
employers include Motorola, Allied Signal, and the State.
RECENT STATE FINANCIAL RESULTS
REVENUES AND EXPENDITURES -- FISCAL YEAR 1996. For the fiscal
year ended June 30, 1996, general fund revenues increased by 4.4% and
the State enjoyed a general fund balance of approximately $399.9
million at year end. General fund revenues for that period were $4.66
billion. (If various tax reduction measures enacted by the Legislature
and described below had not been implemented, the rate of general fund
revenue growth for the period would have been over 10%).
REVENUES AND EXPENDITURES -- FISCAL YEAR 1996-1997. As of April
1997, the State's general fund revenues for fiscal year 1997 were
projected to be $4.86 billion (up 4.3% from the prior year). Total
general fund expenditures for that period were projected at $4.91
billion resulting in a projected fund balance of approximately $347
million. However, June 1997 projections indicate that actual fiscal
year 1997 tax revenues may exceed earlier projections by an additional
$100-200 million.
ECONOMIC TRENDS AND RECENT TAX REFORM MEASURES. Arizona's economy in
recent years has been consistent with the national economic cycle,
with Arizona's current economic expansion in its fifth year. The
State's general fund has benefitted from robust performance in nearly
all sectors including employment, personal income, retail sales,
economic development, corporate profits and booming residential
housing growth. This strong growth has enabled the State legislature
to enact substantial revenue reduction measures affecting corporate
taxes, the personal income tax and sales taxes. All Arizona economic
indicators are projected by State budgetary officials to exhibit
slower growth over the current and upcoming two fiscal years. General
fund revenue is projected to grow more slowly both due to the somewhat
slower economy and to the significant amount of additional revenue
reductions which become effective in 1998.
1997-1998 AND 1998-1999 BUDGET. Most budget units are now appropriated
funds on a biennial basis. The projected revenues upon which the
general fund budgets for such periods were based assume slowing but
steady growth in fiscal years 1998 and 1999, but also reflect certain
legislative revenue reductions, including income tax, sales tax and
property tax reform, which resulted in approximately a $517.9 million
revenue reduction in fiscal year 1997 (increasing to a $764.7 million
reduction in fiscal year 1998). Total revenues for fiscal year 1998
are projected to be essentially flat with a projected general fund
ending balance of $24.46 million. The fiscal year 1999 budget reflects
a net increase in projected revenues of 2.4% with general fund
revenues projected to be approximately $4.98 billion.
"RAINY DAY FUND." In 1990 the Legislature enacted a formula-based
Budget Stabilization Fund into which deposits are required to be made
during years of "above-trend" economic growth, for use in
"below-trend" periods. A deposit to the Fund was first called for in
fiscal year 1994, in the amount of $42.0 million. In fiscal year 1995
the ending balance in the Fund was expected to be $220.0 million, and
the Legislature revised the formula in connection with enacting the
current fiscal year budget to reduce the maximum balance required to
be maintained in such Fund to 5% of general fund revenues at the
conclusion of a given fiscal year. This has had the effect of
returning to the general fund several million dollars in each
subsequent fiscal year and is projected to require the return of $15.2
million (based on the adopted budget) as of June 30, 1998.
CERTAIN LITIGATION. Based on a 1993 U.S. Supreme Court ruling, the
State has determined to issue refunds, including statutory interest,
of State income taxes previously collected on Federal retirees'
pensions. The cost of this program (expected to be approximately
$159.4 million) will be spread over a five-year period ending in
fiscal year 1998.
OBLIGATIONS OF OTHER ISSUERS
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
community facilities district bonds may be adversely affected by a
general decline in real estate values or a slowdown in real estate
sales activity. In many cases, such bonds are secured by land which is
undeveloped at the time of issuance but anticipated to be developed
within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby
increasing the risk of a default on the bonds. The lien on the
property is the only security for such bonds.
LEASE-PURCHASE OBLIGATIONS. Certain Arizona lease-purchase
obligations, though payable from the general fund of the State or
municipality, are subject to annual appropriation by the applicable
governing body in amounts sufficient to pay the lease.
Nonappropriation is legally not a default and there may be no adequate
remedies available to the holders of the certificates evidencing the
lease obligation in the event nonappropriation occurs.
OTHER CONSIDERATIONS. The repayment of mortgage revenue bonds or other
obligations secured by real property may be affected by laws limiting
creditors' rights and subject to the exercise of judicial discretion.
Health care and hospital securities may be affected by changes in
State regulations governing cost reimbursements to health care
providers under AHCCCS (the State's indigent health care program).
In the early 1990's many cities, towns and counties experienced
declines or slowing growth in the Secondary assessed valuation,
causing a reduction or slower growth in property tax receipts and
putting pressure on local budgets and capital improvement projects
supported by such receipts. Municipalities responded to these
developments by a variety of methods including increasing the
Secondary property tax rate, deferring property tax-supported bond
projects, and using other revenue sources to fund projects. More
recently, economic growth has begun to reverse the pressure on
assessed valuations, at least in the larger urbanized areas of the
State.
Legislation has been or may be introduced which would modify existing
taxes or other revenue-raising measures. It is not presently possible
to predict the extent to which any such legislation will be enacted,
or if enacted, how it would affect Arizona municipal obligations.
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 funds 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.
For the fiscal periods ended August 31 , 1997 and 1996, the
fund's portfolio turnover rates were 27% and 32%, respectively.
For the fiscal years ended August 31, 1997, 1996, and 1995, the
fund paid no brokerage commissions.
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%
short-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 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 1997. The
second table shows the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields
equivalent to those of hypothetical tax-exempt obligations yielding
from 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 table to find your approximate effective tax bracket
taking into account federal and state taxes for 199 7 .
1997 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Taxable Income* Federal Arizona
State Combined
Marginal Rate Marginal Rate Federal and State
Effective Rate**
Single Return Joint Return
$ 0 - $ 10,000 $ 0 - $ 20,000 15.0% 2.90% 17.47%
10,001 - 24,650 20,001 - 41,200 15.0% 3.30% 17.81%
24,651 - 25,000 41,201 - 50,000 28.0% 3.30% 30.38%
25,001 - 50,000 50,001 - 99,600 28.0% 3.90% 30.81%
- 99,601 - 100,000 31.0% 3.90% 33.69%
50,001 - 59,750 - 28.0% 4.80% 31.46%
59,751 - 124,650 100,001 - 151,750 31.0% 4.80% 34.31%
124,651- 150,000 151,751 - 271,050 36.0% 4.80% 39.07%
- 271,051 - 300,000 39.6% 4.80% 42.50%
150,001- 271,050 - 36.0% 5.17% 39.31%
271,051 + 300,001 + 39.6% 5.17% 42.72%
</TABLE>
* This amount represents taxable income as defined in the Internal
Revenue Code. It is assumed that taxable income as defined in the
Internal Revenue Code is the same as under the Arizona Personal Income
Tax law, however, Arizona taxable income may differ due to differences
in exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the
applicable marginal rates for 1997, including indexing for inflation.
These rates include the effect of deducting state and city taxes on
your Federal return.
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> <C> <C> <C> <C>
If your combined federal and state effective tax rate in 1997 is:
30.38% 30.81% 33.69% 31.46% 34.31% 39.07% 42.50% 39.31% 42.72%
To match
these Your taxable investment would have to earn the following yield:
tax-free
yields:
2% 2.87% 2.89% 3.02% 2.92% 3.04% 3.28% 3.48% 3.30% 3.49%
3% 4.31% 4.34% 4.52% 4.38% 4.57% 4.92% 5.22% 4.94% 5.24%
4% 5.75% 5.78% 6.03% 5.84% 6.09% 6.57% 6.96% 6.59% 6.98%
5% 7.18% 7.23% 7.54% 7.29% 7.61% 8.21% 8.70% 8.24% 8.73%
6% 8.62% 8.67% 9.05% 8.75% 9.13% 9.85% 10.43% 9.89% 10.48%
7% 10.05% 10.12% 10.56% 10.21% 10.66% 11.49% 12.17% 11.53% 12.22%
</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% redemption fee on shares held less than 180 days. Excluding the
fund's redemption fee from a total return calculation produces a
higher total return figure. Total returns, yields, and other
performance information may be quoted numerically or in a table,
graph, or similar illustration.
NET ASSET 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.
The tax-equivalent yield is based on a combined effective federal
and state income tax rate of 39.07% and reflects that, as of
August 31 , 1997, 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> <C>
Average Annual Cumulative
Total Returns Total Returns
Thirty-Day Tax- One Life of One Life of
Yield Equivalent Year Fund* Year Fund*
Yield
Spartan AZ Municipal
Income 4.36 % 7.16 % 8.16 % 8.48 % 8.16 % 26.57 %
</TABLE>
* From October 11, 1994 (commencement of operations).
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 October 11, 1994 (commencement of
operations) to August 31, 1997, a hypothetical $10,000 investment in
Spartan Arizona Municipal Income would have grown to $12,657, assuming
all distributions were reinvested. This was a period of fluctuating
interest rates and bond prices and the figures below should not be
considered representative of the dividend income or capital gain or
loss that could be realized from an investment in the fund today. Tax
consequences of different investments have not been factored into the
figures below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN ARIZONA MUNICIPAL INCOME INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1997 $ 10,740 $ 1,667 $ 250 $ 12,657 $ 20,944 $ 21,262 $ 10,763
1996 $ 10,460 $ 1,075 $ 166 $ 11,701 $ 14,891 $ 15,367 $ 10,529
19 95 * $ 10,640 $ 534 $ 0 $ 11,174 $ 12,542 $ 12,342 $ 10,234
</TABLE>
* From October 11, 1994 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in the fund
on October 11, 1994 , the net amount invested in fund shares was
$10,000. The cost of the initial investment ($10,000) together with
the aggregate cost of reinvested dividends and capital gain
distributions for the period covered (their cash value at the time
they were reinvested) amounted to $ 11,879 . 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 $ 1,502 for dividends and $ 230 for
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, 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
compare its performance to that of the Lehman Brothers Enhanced
Arizona Municipal Bond Index, a total return performance benchmark for
Arizona investment-grade municipal bonds with maturities of at least
four years. Issues included in the index have been issued as part of
an offering of at least $20 million, have an outstanding par value of
at least $2 million, and have been issued after December 31, 1990.
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 assets are
in municipal securities whose interest 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.
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.
ARIZONA TAX MATTERS. The Arizona Department of Revenue has ruled
that dividends paid by a regulated investment company are exempt from
Arizona state income tax to the extent such dividends are derived from
interest on obligations the interest on which is exempt from Arizona
state income tax. For purposes of Arizona income taxation,
distributions derived from interest on other types of obligations
(i.e., obligations the interest on which is not exempt from Arizona
state income tax) will be taxable as ordinary income, whether paid in
cash or reinvested in additional shares. Distributions of net capital
gains (both short- and long-term net capital gains) are not exempt
from Arizona income taxation and are taxed at ordinary income tax
rates. Interest on indebtedness incurred or continued by a shareholder
in connection with the purchase of shares of a fund will not be
deductible for Arizona personal income tax purposes.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length
of time shareholders have held their shares. If a shareholder receives
a 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 hereby designates approximately
$ 344 as a capital gain dividend for the purpose of the
dividend-paid deduction.
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 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 Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President and Chief Executive Officer of the Fidelity
Institutional 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 ( 54 ), 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 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.
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 Compa ny
(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 ( 63 ), 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 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 his current responsibilities, Mr. Henning was head of
Fidelity's Money Market Division.
JONATHAN D. SHORT (34), is Vice President of Spartan Arizona
Municipal Income Fund (1997) and other funds advised by FMR, and an
employee of FMR (1990).
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).
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
<TABLE>
<CAPTION>
<S> <C> <C>
Trustees Aggregate Total
and Compensation Compensation
Members of the Advisory Board from Spartan from the
Arizona Municipal Fund Complex*A
IncomeB,C
J. Gary Burkhead ** $ 0 $ 0
Ralph F. Cox $ 9 137,700
Phyllis Burke Davis $ 9 134,700
Richard J. Flynn*** $ 3 168,000
Robert M. Gates **** $ 5 0
Edward C. Johnson 3d ** $ 0 0
E. Bradley Jones $ 9 134,700
Donald J. Kirk $ 9 136,200
Peter S. Lynch ** $ 0 0
William O. McCoy***** $ 9 85,333
Gerald C. McDonough $ 10 136,200
Edward H. Malone*** $ 2 136,200
Marvin L. Mann $ 9 134,700
Robert C. Pozen** $ 0 0
Thomas R. Williams $ 9 136,200
</TABLE>
* 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 and Edward H. Malone served on the Board of
Trustees through December 31, 1996.
**** Mr. Gates was appointed to the Board of Trustees 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, $0, Phyllis Burke Davis, $0, Richard J. Flynn, $0, Robert M.
Gates, $0, E. Bradley Jones, $0, Donald J. Kirk, $0, William O. McCoy,
$0, Gerald C. McDonough, $0, Edward H. Malone, $0, Marvin L. Mann, $0,
and Thomas R. Williams, $0.
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 August 31, 1997 , the Trustees, Members of the Advisory
Board, and officers of the fund owned, in the aggregate, less than
1 % of the fund's total outstanding shares.
As of August 31, 1997 , the following owned of record or
beneficially 5% or more of the fund's outstanding shares: National
Financial Services Corporation, Boston, MA (23.92%); Edward J.
Clauseen, Scottsdale, AZ (9.09%); Kolonia LLC, Sun City, AZ
(5.48%).
MANAGEMENT CONTRACT
FMR is the fund's manager pursuant to a management contract dated
September 16, 1994, which was approved by FMR, as the then sole
shareholder, on October 3, 1994.
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. 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 the annual
rate of 0.55% 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, 199 7 , 199 6 , and
199 5 , the fund paid FMR management fees of $120,658,
$ 100,646 , and $ 37,388 , 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 $3,361, $734, 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 years, 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 Before Management Fee
From To Expense August 31 Reimbursement Reimbursement
Limitation
Spartan Arizona Municipal
Income 9/1/94 4/30/95 0.00%
5/1/95 8/31/95 0.10% 1995 $ 37,388* $ 33,511
9/1/95 3/31/96 0.10%
4/1/96 5/31/96 0.40%
6/1/96 8/31/96 0.00% 1996 $ 100,646* $ 4 4,726
9/1/96 8/31/97 0.00% 1997 $ 120,658* $ 0
</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 the Plan 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.
FMR made no payments either directly or through FDC to third parties
for the fiscal year ended 19 97 .
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.
The Plan was approved by FMR as the then shareholder of the fund on
October 3, 1994.
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 Arizona Municipal Income Fund is
a fund of Fidelity Union Street Trust , an open-end management
investment company organized as a Massachusetts business trust on
March 1, 1974. Currently, there are seven funds of the trust: Fidelity
Export and Multinational Fund, Spartan Municipal Income Fund, Spartan
Arizona Municipal Income Fund, Spartan Ginnie Mae Fund, Spartan
Intermediate Municipal Income Fund, Spartan Maryland Municipal Income
Fund, and Spartan Short-Intermediate 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. The 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.
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 , 199 7 , 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.
APPENDIX
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 Fidelity Export and Multinational 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.
(a)(2) Financial Statements and Financial Highlights, included in the
Annual Report, for Spartan Arizona 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 14, 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.
(a)(3) Financial Statements and Financial Highlights, included in the
Annual Report, for Spartan Ginnie Mae 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 14, 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 filed herein as Exhibit 15(a).
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Maryland Municipal Income Fund is filed herein as Exhibit 15(b).
(c) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Intermediate Municipal Income Fund is incorporated herein by
reference to Exhibit 15(d) to Post Effective Amendment No. 96.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for
Spartan Arizona Municipal Income Portfolio is filed herein as Exhibit
15(d).
(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(f) to Post Effective Amendment No.
96.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Municipal Income Fund is incorporated herein by reference to Exhibit
15(a) 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: September 30, 1997
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Export and Multinational Fund 48,262
Spartan Arizona Municipal Income Fund 294
Spartan Ginnie Mae Fund 15,030
Spartan Intermediate Municipal Income Fund 3,213
Spartan Maryland Municipal Income Fund 985
Spartan Municipal Income Fund 10,774
Spartan Short-Intermediate Municipal Income Fund 13,065
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.
J. Gary Burkhead President of FIIS; President and Director of FMR, FMR
Texas Inc., FMR (U.K.) Inc., and FMR (Far East) Inc.;
Managing Director of FMR Corp.; Senior Vice
President and Trustee of funds advised by FMR.
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.
<TABLE>
<CAPTION>
<S> <C>
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.
J. Gary Burkhead President of FIIS; President and Director of FMR U.K.,
FMR, FMR (Far East) Inc., and FMR Texas Inc.;
Managing Director of FMR Corp.; Senior Vice
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.
J. Gary Burkhead President of FIIS; President and Director of FMR
Far East, FMR Texas Inc., FMR, and FMR
(U.K.) Inc.; Managing Director of FMR Corp.;
Senior Vice 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.
</TABLE>
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. 99 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and the Commonwealth
of Massachusetts, on the 21st day of October 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 October 21, 1997
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer October 21, 1997
Richard A. Silver
/s/Robert C. Pozen Trustee October 21, 1997
Robert C. Pozen
/s/Ralph F. Cox * Trustee October 21, 1997
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee October 21, 1997
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee October 21, 1997
Robert M. Gates
/s/E. Bradley Jones * Trustee October 21, 1997
E. Bradley Jones
/s/Donald J. Kirk * Trustee October 21, 1997
Donald J. Kirk
/s/Peter S. Lynch * Trustee October 21, 1997
Peter S. Lynch
/s/Marvin L. Mann * Trustee October 21, 1997
Marvin L. Mann
/s/William O. McCoy * Trustee October 21, 1997
William O. McCoy
/s/Gerald C. McDonough * Trustee October 21, 1997
Gerald C. McDonough
/s/Thomas R. Williams * Trustee October 21, 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
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
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 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
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectuses and Statements of Additional Information in
Post-Effective Amendment No. 99 to the Registration Statement on Form
N-1A of Fidelity Union Street Trust: Spartan Ginnie Mae Fund of our
report dated October 3, 1997, and Spartan Arizona Municipal Income
Fund and Fidelity Export and Multinational Fund (formerly Fidelity
Export Fund), of our reports dated October 6, 1997, on the financial
statements and financial highlights included in the August 31, 1997
Annual Reports to Shareholders of Spartan Ginnie Mae Fund, Fidelity
Export and Multinational Fund and Spartan Arizona Municipal Income
Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the
Statements of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 21, 1997
EXHIBIT 15(B)
DISTRIBUTION AND SERVICE PLAN
of Fidelity Union Street Trust:
Spartan Ginnie Mae Fund
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") of
Spartan Ginnie Mae Fund (the "Portfolio), a series of shares of
Fidelity Union Street Trust (the "Fund").
2. The Fund has entered into a General Distribution Agreement with
respect to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management &
Research Company (the "Adviser"), under which the Distributor uses all
reasonable efforts, consistent with its other business, to secure
purchasers for the Portfolio's shares of beneficial interest
("shares"). Under the agreement, the Distributor pays the expenses of
printing and distributing any prospectuses, reports and other
literature used by the Distributor, advertising, and other promotional
activities in connection with the offering of shares of the Portfolio
for sale to the public. It is recognized that the Advisor may use its
management fee revenues as well as past profits or its resources from
any other source, to make payment to the Distributor with respect to
any expenses incurred in connection with the distribution of Portfolio
shares, including the activities referred to above.
3. The Adviser directly, or through the Distributor, may, subject to
the approval of the Trustees, make payments to securities dealers and
other third parties who engage in the sale of shares or who render
shareholder support services, including but not limited to providing
office space, equipment and telephone facilities, answering routine
inquiries regarding the Portfolio, processing shareholder transactions
and providing such other shareholder services as the Fund may
reasonably request.
4. The Portfolio will not make separate payments as a result of this
Plan to the Adviser, Distributor or any other party, it being
recognized that the Portfolio presently pays, and will continue to
pay, a management fee to the Adviser. To the extent that any payments
made by the Portfolio to the Adviser, including payment of management
fees, should be deemed to be indirect financing of any activity
primarily intended to result in the sale of shares of the Portfolio
within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of
the month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the
Act), the Plan having been approved by a vote of a majority of the
Trustees of the Fund, including a majority of Trustees who are not
"interested persons" of the Fund (as defined in the Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements related to this Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain
in effect from the date specified above until May 31, 1991, and from
year to year thereafter, provided, however, that such continuance is
subject to approval annually by a vote of a majority of the Trustees
of the Fund, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on this Plan.
This Plan may be amended at any time by the Board of Trustees,
provided that (a) any amendment to authorize direct payments by the
Portfolio to finance any activity primarily intended to result in the
sale of shares of the Portfolio, to increase materially the amount
spent by the Portfolio for distribution, or any amendment of the
Management Contract to increase the amount to be paid by the Portfolio
thereunder shall be effective only upon approval by a vote of majority
of the outstanding voting securities of the Portfolio, and (b) any
material amendments of this Plan shall be effective only upon approval
in the manner provided in the first sentence in this paragraph.
7. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of the
Portfolio.
8. During the existence of this Plan, the Fund shall require the
Adviser and/or Distributor to provide the Fund, for review by the
Fund's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report of the amounts expended in connection with
financing any activity primarily intended to result in the sale of
shares of the Portfolio (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures
were made.
9. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set
forth in the Fund's Declaration of Trust, any obligations assumed by
the Portfolio pursuant to this Plan and any agreements related to this
Plan shall be limited in all cases to the Portfolio and its assets,
and shall not constitute obligations of any other series of shares of
the Fund.
11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
DISTRIBUTION AND SERVICE PLAN
FIDELITY UNION STREET TRUST:
SPARTAN MARYLAND MUNICIPAL INCOME FUND
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") of
Spartan Maryland Municipal Income Fund (the "Portfolio"), a series of
shares of Fidelity Union Street Trust (the "Fund").
2. The Fund has entered into a General Distribution Agreement with
respect to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management &
Research Company (the "Adviser"), under which the Distributor uses all
reasonable efforts, consistent with its other business, to secure
purchasers for the Portfolio's shares of beneficial interest
("shares"). Under the agreement, the Distributor pays the expenses of
printing and distributing any prospectuses, reports and other
literature used by the Distributor, advertising, and other promotional
activities in connection with the offering of shares of the Portfolio
for sale to the public. It is recognized that the Adviser may use its
management fee revenues as well as past profits or its resources from
any other source, to make payment to the Distributor with respect to
any expenses incurred in connection with the distribution of Portfolio
shares, including the activities referred to above.
3. The Adviser directly, or through the Distributor, may, subject to
the approval of the Trustees, make payments to securities dealers and
other third parties who engage in the sale of shares or who render
shareholder support services, including but not limited to providing
office space, equipment and telephone facilities, answering routine
inquiries regarding the Portfolio, processing shareholder transactions
and providing such other shareholder services as the Fund may
reasonably request.
4. The Portfolio will not make separate payments as a result of this
Plan to the Adviser, Distributor or any other party, it being
recognized that the Portfolio presently pays, and will continue to
pay, a management fee to the Adviser. To the extent that any payments
made by the Portfolio to the Adviser, including payment of management
fees, should be deemed to be indirect financing of any activity
primarily intended to result in the sale of shares of the Portfolio
within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of
the month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the
Act), the plan having been approved by a vote of a majority of the
Trustees of the Fund, including a majority of Trustees who are not
"interested persons" of the Fund (as defined in the Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements related to this Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain
in effect from the date specified above until May 31, 1993, and from
year to year thereafter, provided, however, that such continuance is
subject to approval annually by a vote of a majority of the Trustees
of the Fund, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on this Plan.
This Plan may be amended at any time by the Board of Trustees,
provided that (a) any amendment to authorize direct payments by the
Portfolio to finance any activity primarily intended to result in the
sale of shares of the Portfolio, to increase materially the amount
spent by the Portfolio for distribution, or any amendment of the
Management Contract to increase the amount to be paid by the Portfolio
thereunder shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of the Portfolio, and
(b) any material amendments of this Plan shall be effective only upon
approval in the manner provided in the first sentence in this
paragraph.
7. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of the
Portfolio.
8. During the existence of this Plan, the Fund shall require the
Adviser and/or Distributor to provide the Fund, for review by the
Fund's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report of the amounts expended in connection with
financing any activity primarily intended to result in the sale of
shares of the Portfolio (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures
were made.
9. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set
forth in the Fund's Declaration of Trust, any obligations assumed by
the Portfolio pursuant to this Plan and any agreements related to this
Plan shall be limited in all cases to the Portfolio and its assets,
and shall not constitute obligations of any other series of shares of
the Fund.
11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
Exhibit 15g
DISTRIBUTION AND SERVICE PLAN
of Fidelity Union Street Trust:
Spartan Arizona Municipal Income Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") of
Spartan Arizona Municipal Income Portfolio (the "Portfolio"), a series
of shares of Fidelity Union Street Trust (the "Fund").
2. The Fund has entered into a General Distribution Agreement with
respect to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management &
Research Company (the "Adviser"), under which the Distributor uses all
reasonable efforts, consistent with its other business, to secure
purchasers for the Portfolio's shares of beneficial interest
("shares"). Under the agreement, the Distributor pays the expenses of
printing and distributing any prospectuses, reports and other
literature used by the Distributor, advertising, and other promotional
activities in connection with the offering of shares of the Portfolio
for sale to the public. It is recognized that the Advisor may use its
management fee revenues as well as past profits or its resources from
any other source, to make payment to the Distributor with respect to
any expenses incurred in connection with the distribution of Portfolio
shares, including the activities referred to above.
3. The Adviser directly, or through the Distributor, may, subject to
the approval of the Trustees, make payments to securities dealers and
other third parties who engage in the sale of shares or who render
shareholder support services, including but not limited to providing
office space, equipment and telephone facilities, answering routine
inquiries regarding the Portfolio, processing shareholder transactions
and providing such other shareholder services as the Fund may
reasonably request.
4. The Portfolio will not make separate payments as a result of this
Plan to the Adviser, Distributor or any other party, it being
recognized that the Portfolio presently pays, and will continue to
pay, a management fee to the Adviser. To the extent that any payments
made by the Portfolio to the Adviser, including payment of management
fees, should be deemed to be indirect financing of any activity
primarily intended to result in the sale of shares of the Portfolio
within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of
the month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the
Act), the plan having been approved by a vote of a majority of the
Trustees of the Fund, including a majority of Trustees who are not
"interested persons" of the Fund (as defined in the Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements related to this Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain
in effect from the date specified above until June 30 1995 and from
year to year thereafter, provided, however, that such continuance is
subject to approval annually by a vote of a majority of the Trustees
of the Fund, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on this Plan.
This Plan may be amended at any time by the Board of Trustees,
provided that (a) any amendment to authorize direct payments by the
Portfolio to finance any activity primarily intended to result in the
sale of shares of the Portfolio, to increase materially the amount
spent by the Portfolio for distribution, or any amendment of the
Management Contract to increase the amount to be paid by the Portfolio
thereunder shall be effective only upon approval by a vote of a
majority of the outstanding voting securities of the Portfolio, and
(b) any material amendments of this Plan shall be effective only upon
approval in the manner provided in the first sentence in this
paragraph.
7. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of the
Portfolio.
8. During the existence of this Plan, the Fund shall require the
Adviser and/or Distributor to provide the Fund, for review by the
Fund's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report of the amounts expended in connection with
financing any activity primarily intended to result in the sale of
shares of the Portfolio (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures
were made.
9. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set
forth in the Fund's Declaration of Trust or other organizational
document, any obligations assumed by the Portfolio pursuant to this
Plan and any agreements related to this Plan shall be limited in all
cases to the Portfolio and its assets, and shall not constitute
obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035330
<NAME> Fidelity Union Street Trust
<SERIES>
<NUMBER> 31
<NAME> Spartan Ginnie Mae Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 603,138
<INVESTMENTS-AT-VALUE> 614,132
<RECEIVABLES> 3,470
<ASSETS-OTHER> 1,437
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 619,039
<PAYABLE-FOR-SECURITIES> 84,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 754
<TOTAL-LIABILITIES> 85,484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 545,876
<SHARES-COMMON-STOCK> 53,055
<SHARES-COMMON-PRIOR> 44,444
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,245
<ACCUMULATED-NET-GAINS> (21,061)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,985
<NET-ASSETS> 533,555
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 34,233
<OTHER-INCOME> 0
<EXPENSES-NET> 2,336
<NET-INVESTMENT-INCOME> 31,897
<REALIZED-GAINS-CURRENT> 2,400
<APPREC-INCREASE-CURRENT> 9,965
<NET-CHANGE-FROM-OPS> 44,262
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,451
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,022
<NUMBER-OF-SHARES-REDEEMED> 12,858
<SHARES-REINVESTED> 2,448
<NET-CHANGE-IN-ASSETS> 99,006
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (24,481)
<OVERDISTRIB-NII-PRIOR> 1,670
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,994
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,003
<AVERAGE-NET-ASSETS> 461,810
<PER-SHARE-NAV-BEGIN> 9.780
<PER-SHARE-NII> .687
<PER-SHARE-GAIN-APPREC> .271
<PER-SHARE-DIVIDEND> .678
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.060
<EXPENSE-RATIO> 51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035330
<NAME> Fidelity Union Street Trust
<SERIES>
<NUMBER> 91
<NAME> Spartan Arizona 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> 18,948
<INVESTMENTS-AT-VALUE> 19,628
<RECEIVABLES> 203
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,831
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 65
<TOTAL-LIABILITIES> 65
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,096
<SHARES-COMMON-STOCK> 1,840
<SHARES-COMMON-PRIOR> 1,949
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (17)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 687
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