As filed with the Securities and Exchange Commission
on March 27, 1997
Registration No. 2-55725
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
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UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
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Fidelity Municipal Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address Of Principal Executive Offices)
Registrant's Telephone Number (617) 563-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, MA 02109
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the Registration Statement becomes effective under the Securities Act of
1933.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment
Company Act of 1940; accordingly, no fee is payable herewith because of
reliance upon Rule 24f-2. A Rule 24f-2 Notice for the Registrant's most
recent fiscal year ended December 31, 1996 was filed with the Commission on
February 27, 1997. Pursuant to Rule 429, this Registration Statement
relates to shares previously registered on Form N-1A.
It is proposed that this filing will become effective on April 25, 1997,
pursuant to Rule 488.
FIDELITY AGGRESSIVE MUNICIPAL FUND
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Facing Page
Contents of Registration Statement
Cross Reference Sheet
Letter to Shareholders
Form of Proxy Card
Notice of Special Meeting
Part A - Prospectus and Proxy Statement
Part B- Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
FIDELITY MUNICIPAL TRUST:
FIDELITY AGGRESSIVE MUNICIPAL FUND
FORM N-14 CROSS REFERENCE SHEET
PART A
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Form N-14 Item Number and Caption Prospectus/Proxy Statement Caption
1. Beginning of Registration Statement and Out- Cover Page
side Front Cover Page of Prospectus
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2. Beginning and Outside Back Cover Page of Pro- Table of Contents
spectus
3. Fee Table, Synopsis Information and Risk Synopsis; Comparative Fee Tables; Comparison of
Factors Principal Risk Factors; The Proposed Transaction
4. Information About the Transactions Synopsis; The Proposed Transaction; Exhibit 1
5. Information About the Registrant Synopsis; Comparison of Principal Risk Factors;
Miscellaneous; Additional Information About
Fidelity Aggressive Municipal Fund; Prospectus of
Fidelity Aggressive Municipal Fund
6. Information About the Company Being Acquired Cover Page; Comparison of Principal Risk Factors;
Miscellaneous; Prospectus of Spartan Aggressive
Municipal Fund
7. Voting Information Voting Information
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required for Reoffering Not Applicable
by Persons Deemed to be
Underwriters
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PART B
Item Number and Caption Statement of Additional Information Caption
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information About the Registrant Prospectus and Statement of Additional
Information of Fidelity Aggressive
Municipal Fund
13. Additional Information About the Company Be- Not applicable
ing Acquired
14. Financial Statements Annual Report of Spartan Aggressive
Municipal Fund for the Fiscal Year Ended
August 31, 1996; Annual Report of Fidelity
Aggressive Municipal Fund for the Fiscal
Year Ended December 31, 1996.
Pro-Forma Financial Statements for the
Fiscal Year Ended December 31, 1996.
Part C Information required to be included in Part C
is set forth under the appropriate item so
numbered in Part C of this Registration
Statement.
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SPARTAN(registered trademark) AGGRESSIVE MUNICIPAL FUND
Dear Shareholder:
I am writing to let you know about an important proposal to merge Spartan
Aggressive Municipal Fund into Fidelity Aggressive Municipal Fund, and to
ask you to send in your vote. A shareholder meeting will be held in July,
and votes submitted in time to be counted at the meeting will decide
whether the merger takes place. This package contains information about
the proposal and includes all the materials you will need to vote by mail.
The Trustees of Spartan Aggressive recommend presenting to shareholders a
proposal to merge the fund into Fidelity Aggressive. The Trustees, most of
whom are not affiliated with Fidelity, are responsible for protecting your
interests as a shareholder. The Trustees have determined that the merger
is in shareholders' best interest, however, the final decision is up to
you.
Please take the time to read the enclosed materials and cast your vote on
the yellow proxy card promptly. YOUR VOTE IS EXTREMELY IMPORTANT, NO
MATTER HOW MANY SHARES YOU OWN.
SUMMARY OF THE PROPOSAL:
Fidelity is proposing the merger to shareholders because there no longer
are any significant differences between Spartan Aggressive and Fidelity
Aggressive. Effective April 1 of this year, Fidelity standardized some of
the features of its Spartan and Fidelity municipal bond funds. Both sets
of funds now offer the same low expenses historically offered by the
Spartan funds.
(small solid bullet) The funds have the same investment objective and the
same portfolio manager. Although their historical performance is slightly
different, this is due mainly to differences in the specific securities
held by each fund, rather than differences in their investment policies.
(small solid bullet) Both Spartan Aggressive and Fidelity Aggressive have
current expenses equal to 0.55% of the fund's average net assets.
(small solid bullet) The main difference between the funds is the structure
of their contracts with Fidelity. Spartan Aggressive has an
"all-inclusive" management fee which covers substantially all fund
expenses. Fidelity Aggressive pays its management fees and other operating
expenses separately.
(small solid bullet) If the merger is approved, the combined fund will
retain Fidelity Aggressive's current expense structure while guaranteeing
shareholders that the management fee and other expenses (other than
interest, taxes, brokerage commissions, and extraordinary expenses) will
not exceed 0.53% of its average net assets through December 31, 1999. This
represents an expense reduction of 0.02% of the fund's average net assets
per year. After December 31, 1999, the fund's expenses could increase.
(small solid bullet) The merger will be a tax-free reorganization, for
federal income tax purposes, with no gain or loss to you as a shareholder.
If shareholders vote to approve the merger, the current Spartan Aggressive
will cease to exist and you will automatically become a shareholder of the
merged fund instead. The merged fund will then adopt the name Spartan
Aggressive Municipal Fund and will continue to invest in municipal bonds in
accordance with its objective.
The merger would give shareholders of Spartan Aggressive the opportunity to
participate in a larger fund with an identical investment strategy and
similar investment portfolio, with lower expenses guaranteed for a period
of more than two years. The enclosed materials include a detailed
description of the funds and the proposed merger.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED. We
encourage you to exercise your right as a shareholder and to vote promptly.
To cast your vote, simply complete the yellow proxy card enclosed in this
package. Be sure to sign the card before mailing it in the postage-paid
envelope provided.
If you have any questions before you vote, please call us at
1-800-544-8888. We will be glad to help you get your vote in quickly.
Thank you for your participation in this important initiative for your
fund.
Sincerely,
[signature]
Edward C. Johnson 3d
President
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
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FIDELITY UNION STREET TRUST: SPARTAN AGGRESSIVE MUNICIPAL FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur S. Loring, and Phyllis Burke Davis, or any one or more
of them, attorneys, with full power of substitution, to vote all shares of
Fidelity Union Street Trust: Spartan Aggressive Municipal Fund which the
undersigned is entitled to vote at the Special Meeting of Shareholders of
the Fund to be held at the office of the trust at 82 Devonshire St.,
Boston, MA 02109, on July 16, 1997 at 2:15 p.m. Eastern time and at any
adjournments thereof. All powers may be exercised by a majority of said
proxy holders or substitutes voting or acting or, if only one votes and
acts, then by that one. This Proxy shall be voted on the proposal
described in the Proxy Statement as specified on the reverse side. Receipt
of the Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1997
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
SAM-PXC-0597 [cusip # 316448703/fund#442 ]
Please refer to the Proxy Statement discussion of this matter.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSAL.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
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__________________________________________________________________________
___________________
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1. To approve an Agreement and Plan of Reorganization FOR [ ] AGAINST [ ] ABSTAIN [ ] 1.
between Spartan Aggressive Municipal Fund and
Fidelity Aggressive Municipal Fund.
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[cusip # 316448703/fund# 442]
SPARTAN(registered trademark) AGGRESSIVE MUNICIPAL FUND
A FUND OF
FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Spartan Aggressive Municipal Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan Aggressive Municipal Fund (the Fund), will be held at
the office of the Fidelity Union Street Trust, 82 Devonshire Street,
Boston, Massachusetts 02109 on Wednesday, July 16, 1997, at 2:15 p.m.
Eastern time. The purpose of the Meeting is to consider and act upon the
following proposal, and to transact such other business as may properly
come before the Meeting or any adjournments thereof.
(1) To approve an Agreement and Plan of Reorganization (the Agreement)
between the Fund and Fidelity Aggressive Municipal Fund. The Agreement
provides for the transfer of all of the assets of the Fund to Fidelity
Aggressive Municipal Fund in exchange solely for shares of beneficial
interest of Fidelity Aggressive Municipal Fund and the assumption by
Fidelity Aggressive Municipal Fund of the Fund's liabilities, followed by
the distribution of Fidelity Aggressive Municipal Fund shares in
liquidation of the Fund.
The Board of Trustees has fixed the close of business on May 19, 1997 as
the record date for the determination of shareholders of the Fund entitled
to notice of, and to vote at, such Meeting and any adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
May 19, 1997
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER
WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR COOPERATION IN
MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of assistance
to you and help you avoid the time involved in validating your vote if you
fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual signing.
This can be shown either in the form of the account registration itself or
by the individual executing the proxy card. For example:
REGISTRATION VALID
SIGNATURE
A. 1) ABC Corp. John Smith,
Treasurer
2) ABC Corp. John Smith,
Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
SPARTAN AGGRESSIVE MUNICIPAL FUND
A FUND OF FIDELITY UNION STREET TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
PROXY STATEMENT AND PROSPECTUS
MAY 19, 1997
This Proxy Statement and Prospectus (Proxy Statement) is being furnished
to shareholders of Spartan Aggressive Municipal Fund (Spartan Aggressive or
the Fund), a fund of Fidelity Union Street Trust (the trust), in connection
with the solicitation of proxies by the trust's Board of Trustees for use
at the Special Meeting of Shareholders of the Fund and at any adjournments
thereof (the Meeting). The Meeting will be held on Wednesday, July 16,
1997, at 2:15 p.m. Eastern time at 82 Devonshire Street, Boston,
Massachusetts 02109, the principal executive office of the trust.
As more fully described in the Proxy Statement, the purpose of the Meeting
is to vote on a proposed reorganization (the Reorganization). Pursuant to
an Agreement and Plan of Reorganization (the Agreement), Spartan Aggressive
would transfer all of its assets to Fidelity Aggressive Municipal Fund
(Fidelity Aggressive), a fund of Fidelity Municipal Trust, in exchange
solely for shares of beneficial interest of Fidelity Aggressive and the
assumption by Fidelity Aggressive of Spartan Aggressive's liabilities. The
number of shares to be issued in the proposed Reorganization will be based
upon the relative net asset values of the funds at the time of the
exchange. As provided in the Agreement, Spartan Aggressive will distribute
shares of Fidelity Aggressive to its shareholders so that each shareholder
receives the number of full and fractional shares of Fidelity Aggressive
equal in value to the aggregate net asset value of the shares of Spartan
Aggressive held by such shareholder on July 31, 1997, or such other date as
the parties may agree (the Closing Date).
Fidelity Aggressive, a municipal bond fund, is a diversified fund of
Fidelity Municipal Trust, an open-end management investment company
organized as a Massachusetts business trust on June 22, 1984. Fidelity
Aggressive's investment objective is to seek to provide a high current
income, exempt from federal income tax. Fidelity Aggressive seeks to
achieve its investment objective by investing primarily in investment-grade
municipal securities.
This Proxy Statement is accompanied by the Prospectus of Fidelity
Aggressive (dated February 28, 1997) as supplemented on March 21, 1997,
which is incorporated herein by reference and should be retained for future
reference. These documents set forth concisely the information about the
Reorganization, Spartan Aggressive, and Fidelity Aggressive that a
shareholder should know before voting on the proposed Reorganization. A
Prospectus and Statement of Additional Information for Spartan Aggressive,
both dated October 18, 1996, a supplement to Spartan Aggressive's
Prospectus dated February 28, 1997 and a Statement of Additional
Information for Fidelity Aggressive dated February 28, 1997, have been
filed with the Securities and Exchange Commission and are incorporated
herein by reference. Copies of these documents may be obtained without
charge by contacting Fidelity Distributors Corporation at 82 Devonshire
Street, Boston, Massachusetts 02109 or by calling 1-800-544-8888.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
VOTING INFORMATION
SYNOPSIS
COMPARISON OF PRINCIPAL RISK FACTORS
THE PROPOSED TRANSACTION
ADDITIONAL INFORMATION ABOUT FIDELITY AGGRESSIVE MUNICIPAL FUND
MISCELLANEOUS
EXHIBIT 1. FORM OF AGREEMENT AND PLAN OF REORGANIZATION
SPARTAN AGGRESSIVE MUNICIPAL FUND
(A FUND OF FIDELITY UNION STREET TRUST)
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY UNION STREET TRUST:
SPARTAN AGGRESSIVE MUNICIPAL FUND
TO BE HELD ON JULY 16, 1997
_________________________________
VOTING INFORMATION
This Proxy Statement and Prospectus (Proxy Statement) is furnished in
connection with a solicitation of proxies made by, and on behalf of, the
Board of Trustees of Fidelity Union Street Trust (the trust) to be used at
the Special Meeting of Shareholders of Spartan Aggressive Municipal Fund
(Spartan Aggressive) and at any adjournments thereof (the Meeting), to be
held on Wednesday, July 16, 1997 at 2:15 p.m. Eastern time at 82 Devonshire
Street, Boston, Massachusetts 02109, the principal executive office of the
trust and Fidelity Management & Research Company (FMR), Spartan
Aggressive's investment adviser. The purpose of the Meeting is set forth in
the accompanying Notice. The solicitation is made primarily by the mailing
of this Proxy Statement and the accompanying proxy card on or about May 19,
1997. Supplementary solicitations may be made by mail, telephone,
telegraph, or by personal interview by representatives of the trust. In
addition, D.F. King may be paid on a per-call basis to solicit shareholders
on behalf of Spartan Aggressive at an anticipated cost of approximately
$6,500. The expenses in connection with preparing this Proxy Statement and
its enclosures and of all solicitations will be borne by FMR. FMR will
reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation material to the beneficial owners of shares.
If a quorum is not present at the Meeting, or if a quorum is present but
sufficient votes to approve the proposal are not received, or if other
matters arise requiring shareholder attention, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares present at the Meeting or represented by
proxy. When voting on a proposed adjournment, the persons named as proxies
will vote FOR the proposed adjournment all shares that they are entitled to
vote, unless directed to vote AGAINST the item, in which case such shares
will be voted against the proposed adjournment with respect to that item. A
shareholder vote may be taken on items in this Proxy Statement or on any
other business properly presented at the meeting prior to such adjournment
if sufficient votes have been received and it is otherwise appropriate.
If the enclosed proxy card is executed and returned, it may nevertheless
be revoked at any time prior to its use by written notification received by
the trust, by the execution of a later-dated proxy card, or by attending
the Meeting and voting in person. All proxy cards solicited by the Board of
Trustees that are properly executed and received by the Secretary prior to
the Meeting, and which are not revoked, will be voted at the Meeting.
Shares represented by such proxies will be voted in accordance with the
instructions thereon. If no specification is made on a proxy card, it will
be voted FOR the matters specified on the proxy card. Only proxies voted
will be counted towards establishing a quorum. Broker non-votes are not
considered voted for this purpose. Shareholders should note that while
votes to ABSTAIN will count toward establishing a quorum, passage of any
proposal being considered at the Meeting will occur only if a sufficient
number of votes are cast FOR the proposal. Accordingly, votes to ABSTAIN
and votes AGAINST will have the same effect in determining whether the
proposal is approved.
Spartan Aggressive may also choose to have votes recorded by telephone.
D.F. King may be paid on a per-call basis for vote-by-phone solicitations
on behalf of Spartan Aggressive at an anticipated cost of approximately
$6,500. If the Fund records votes by telephone, it will use procedures
designed to authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their instructions,
and to confirm that their instructions have been properly recorded. Proxies
given by telephone may be revoked at any time before they are voted in the
same manner that proxies voted by mail may be revoked.
On January 31, 1997 there were 74,515,941 shares of Fidelity Aggressive
Municipal Fund (Fidelity Aggressive) issued and outstanding.
On January 31, 1997 there were 8,856,483 shares of Spartan Aggressive
issued and outstanding. Shareholders of record of Spartan Aggressive at the
close of business on May 19, 1997 will be entitled to vote at the Meeting.
Each such shareholder will be entitled to one vote for each dollar value of
net asset value held on that date.
As of January 31, 1997, the Trustees and officers of Spartan Aggressive
and Fidelity Aggressive (together the Funds and each individually a Fund)
owned, in the aggregate, less than 1% of each Fund's total outstanding
shares.
To the knowledge of Fidelity Union Street Trust, substantial (5% or more)
record ownership of Spartan Aggressive as of January 31, 1997 was as
follows: National Financial Services Corp., New York, New York 10281,
2,411,165 shares (27.26%), and Fidelity Management Trust Company, Boston,
MA 02109, 597,885 (6.76%). To the knowledge of Fidelity Union Street Trust,
no other shareholder owned record or beneficially more than 5% of the
outstanding shares of Spartan Aggressive on that date. To the knowledge of
Fidelity Municipal Trust, substantial (5% or more) record ownership of
Fidelity Aggressive as of January 31, 1997 was as follows: National
Financial Services Corp., New York, New York 10281, 9,390,134 shares
(12.64%). To the knowledge of Fidelity Municipal Trust, no other
shareholder owned of record or beneficially more than 5% of the outstanding
shares of Fidelity Aggressive on that date.
VOTE REQUIRED: APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION (THE
AGREEMENT) REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING
VOTING SECURITIES" OF SPARTAN AGGRESSIVE. UNDER THE INVESTMENT COMPANY ACT
OF 1940 (THE 1940 ACT), A "MAJORITY VOTE OF THE OUTSTANDING VOTING
SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF
THE VOTING SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE
HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING SECURITIES ARE PRESENT
OR REPRESENTED BY PROXY, OR (B) MORE THAN 50% OF THE OUTSTANDING VOTING
SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED "PRESENT" FOR THIS PURPOSE.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, in the Agreement, and in the Prospectuses of Spartan
Aggressive and Fidelity Aggressive, which are incorporated herein by this
reference. Shareholders should read the entire Proxy Statement and the
Prospectus of Fidelity Aggressive carefully for more complete information.
The proposed reorganization (the Reorganization) would merge Spartan
Aggressive into Fidelity Aggressive, a larger municipal bond fund also
managed by FMR. If the Reorganization is approved, Spartan Aggressive will
cease to exist and current shareholders will become shareholders of
Fidelity Aggressive instead. However, FMR anticipates that the combined
fund would adopt the name "Spartan Aggressive Municipal Fund" upon approval
of the merger.
The Funds have the same investment objectives and policies and are
currently managed by the same portfolio manager. Although Spartan
Aggressive has performed slightly better than Fidelity Aggressive (see page
__), in FMR's opinion this was attributable to Fund size, cash flows and
historical differences in each Fund's investment holdings and policies. The
Funds formerly had different minimum investments, service features and
transaction fees. However, the Trustees have approved eliminating these
differences effective April 1, 1997.
The principal remaining difference between the Funds is the contractual
structure of the Funds' expenses. Spartan Aggressive pays an
"all-inclusive" management fee to FMR, which covers substantially all fund
expenses. FMR has voluntarily agreed to reduce Spartan Aggressive's
all-inclusive management fee rate by 0.05%, from 0.60% to 0.55% of the
fund's average net assets per year. Fidelity Aggressive, by contrast, pays
its management fees and other expenses separately. FMR has voluntarily
agreed to reduce Fidelity Aggressive's management fee rate by 0.05%, from
0.45% to 0.40%, and to reimburse the Fund to the extent that total
operating expenses exceed 0.55%. If the merger is approved, FMR has agreed
to limit the merged Fund's expenses to 0.53% of average net assets per year
through December 31, 1999 (excluding interest, taxes, brokerage commissions
and extraordinary expenses). After that date, the Fund's expenses could
increase.
In sum, the merger would provide Spartan Aggressive shareholders with the
opportunity to participate in a larger fund with expenses guaranteed to be
lower than Spartan Aggressive's for a period of more than two years. The
Board of Trustees believes that the Reorganization would benefit the Fund's
shareholders and recommends that shareholders vote in favor of the
proposal.
THE PROPOSED REORGANIZATION
Shareholders of Spartan Aggressive will be asked at the Meeting to vote
upon and approve the Reorganization and the Agreement, which provides for
the acquisition by Fidelity Aggressive of all of the assets of Spartan
Aggressive in exchange solely for shares of Fidelity Aggressive and the
assumption by Fidelity Aggressive of the liabilities of Spartan Aggressive.
Spartan Aggressive will then distribute the shares of Fidelity Aggressive
to its shareholders, so that each shareholder will receive the number of
full and fractional shares of Fidelity Aggressive equal in value to the
aggregate net asset value of the shareholder's shares of Spartan Aggressive
on the Closing Date (defined below). The exchange of Spartan Aggressive's
assets for Fidelity Aggressive's shares will occur as of 4:00 p.m. Eastern
time on July 31, 1997, or such other time and date as the parties may agree
(the Closing Date). Spartan Aggressive will then be liquidated as soon as
practicable thereafter.
The Funds will receive an opinion of counsel that, except with respect to
Section 1256 contracts, the Reorganization will not result in any gain or
loss for Federal income tax purposes either to Spartan Aggressive or
Fidelity Aggressive or to the shareholders of either Fund. The rights and
privileges of the former shareholders of Spartan Aggressive will be
effectively unchanged by the Reorganization.
COMPARATIVE FEE TABLES
Each Fund pays a management fee to FMR for managing its investments and
business affairs which is calculated and paid to FMR every month.
Spartan Aggressive pays FMR a management fee at an annual rate of 0.60% of
its average net assets. Effective March 1, 1997, FMR agreed to voluntarily
reduce Spartan Aggressive's all-inclusive management fee rate by 0.05%,
from 0.60% to 0.55% of the fund's average net assets per year. FMR not only
provides the Fund with investment advisory and research services, but also
pays all of the Fund's expenses, with the exception of fees and expenses of
all Trustees of the trust who are not "interested persons" of the trust or
FMR; interest on borrowings; taxes; brokerage commissions (if any); and
such nonrecurring expenses as may arise, including costs of any litigation
to which the Fund may be a party, and any obligation it may have to
indemnify the officers and Trustees with respect to litigation. The
management fee that the Fund pays FMR is reduced by an amount equal to the
fees and expenses paid by the Fund to the non-interested Trustees.
In contrast, Fidelity Aggressive pays its management fees and other
expenses separately. Fidelity Aggressive's management fee is calculated by
adding a group fee rate to an individual fund fee rate, and multiplying the
result by the Fund's average net assets. The group fee rate is based on the
average net assets of all mutual funds advised by FMR. In addition to the
management fee payable by the Fund, Fidelity Aggressive also incurs other
expenses for services such as maintaining shareholder records and
furnishing shareholder statements and financial reports. For the 12 months
ended December 31, 1996, the total management fee rate and total operating
expenses for Fidelity Aggressive were 0.45% and 0.63%, respectively.
Effective March 1, 1997 and April 1, 1997, respectively, FMR has
voluntarily agreed to reduce its management fee by 0.05% and to limit the
fund's total operating expenses to the extent they exceed 0.55%.
Fidelity also reserves the right to deduct an annual maintenance fee of
$12.00 from accounts in each Fund with a value of less than $2,500. Each
Fund also imposes a redemption fee equal to 1.00% of the amount redeemed on
shares held less than 180 days. The redemption fee is payable to the Fund
to help offset the costs associated with short-term trading. The
redemption fee will be eliminated subsequent to the closing of the
Reorganization; however, the Fund reserves the right to reinstate the
redemption fee if it believes it is appropriate.
If the Reorganization is approved, the combined fund will retain Fidelity
Aggressive's expense structure, requiring payment of a management fee and
other operating expenses. FMR has voluntarily agreed to limit the combined
fund's expense ratio to 0.53% of its average net assets until December 31,
1999 (excluding interest, taxes, brokerage commissions and extraordinary
expenses). This expense limitation would result in a 0.02% lower total
operating expense ratio for Spartan Aggressive shareholders beginning on
the first business day after the effective date of the Reorganization.
After December 31, 1999, the fund's expenses could increase. If the
proposed Reorganization is not approved, both Spartan Aggressive and
Fidelity Aggressive will maintain their current fee structures. For more
information about the Funds' fees, refer to their Prospectuses.
Under Spartan Aggressive's all-inclusive management fee arrangement,
Spartan Aggressive shareholders currently have the right to vote on any
expense increases over 0.60%. Shareholders of the combined fund would also
have the right to vote on any increases in FMR's management fee; however,
because the management fee would not be all-inclusive, shareholders would
not have the right to vote on all types of expense increases.
The following table shows the current fees and expenses of Spartan
Aggressive and Fidelity Aggressive for the 12 months ended December 31,
1996, adjusted to reflect current fees, and pro forma fees for the combined
fund based on the same period after giving effect to the Reorganization,
including the effect of FMR's voluntary expense limitation to 0.53% through
December 31, 1999.
ANNUAL FUND OPERATING EXPENSES
Annual fund operating expenses are paid out of each Fund's assets.
Expenses are factored into the Fund's share price or dividends and are not
charged directly to shareholder accounts. The following are based on
historical expenses, adjusted to reflect current fees, and are calculated
as a percentage of average net assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRO FORMA EXPENSES
SPARTAN AGGRESSIVE1 FIDELITY AGGRESSIVE2 COMBINED FUND3
Management Fees (after 0.55% 0.37% 0.35%
voluntary reductions)
Other Expenses 0.00% 0.18% 0.18%
Total Fund Operating 0.55% 0.55% 0.53%
Expenses
</TABLE>
1 Effective March 1, 1997, FMR voluntarily agreed to reduce the
all-inclusive rate from 0.60% to 0.55% of the fund's average net assets. If
this agreement were not in effect, the management fee, other expenses and
total fund operating expenses would have been 0.60%, 0.00%, and 0.60%,
respectively.
2 FMR voluntarily agreed to implement a management fee reduction of 0.05%,
effective March 1, 1997, and to reimburse the Fund to the extent that
total operating expenses exceed 0.55%, effective April 1, 1997. If these
agreements were not in effect, the management fee, other expenses and total
fund operating expenses, as a percentage of average net assets would have
been 0.45%, 0.18%, and 0.63%, respectively. Expenses eligible for
reimbursement do not include interest, taxes, brokerage commissions, or
extraordinary expenses.
EXAMPLES OF EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical $1,000
investment in each Fund under the current and pro forma (combined fund)
expenses calculated at the rates stated above, assuming a 5% annual return.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AFTER 1 YEAR AFTER 3 YEARS AFTER 5 YEARS AFTER 10 YEARS
Spartan Aggressive $6 $18 $31 $69
Fidelity Aggressive $6 $18 $31 $69
Combined Fund3 $5 $17 $30 $69
</TABLE>
3 FMR has voluntarily agreed to limit the combined fund's operating
expenses to 0.53% of its average net assets through December 31, 1999.
This example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed under Annual Fund
Operating Expenses remain the same in the years shown. These examples
illustrate the effect of expenses, but are not meant to suggest actual or
expected costs, which may vary. The assumed return of 5% is not a
prediction of, and does not represent, actual or expected performance of
any fund.
FORMS OF ORGANIZATION
Spartan Aggressive is a non-diversified fund of Fidelity Union Street
Trust, an open-end management investment company organized as a
Massachusetts business trust on March 1, 1974. Fidelity Aggressive is a
diversified fund of Fidelity Municipal Trust, an open-end management
investment company organized as a Massachusetts business trust on June 22,
1984. Both trusts are authorized to issue an unlimited number of shares of
beneficial interest. Because Spartan Aggressive and Fidelity Aggressive are
series of Massachusetts business trusts, organized under substantially
similar Declarations of Trust, the rights of the security holders of
Spartan Aggressive under state law and the governing documents are expected
to remain unchanged after the Reorganization. For more information
regarding shareholder rights, refer to the section of the Funds' Statements
of Additional Information called "Description of the Trust."
INVESTMENT OBJECTIVES AND POLICIES
The Funds have similar investment objectives and policies in that both
seek high current income free from federal income tax by investing
primarily in investment-grade municipal securities. Each Fund limits
below-investment-grade securities to less than 35% of its assets, including
up to 10% of its assets in defaulted securities. Spartan Aggressive and
Fidelity Aggressive had 0.6% and 1.2% of their assets invested in defaulted
securities as of February 28, 1997. Both Spartan Aggressive and Fidelity
Aggressive had approximately 18% of their assets invested in lower-quality
securities as of February 28, 1997. Although the Funds can invest in
securities of any maturity, FMR seeks to manage the Funds so that they
generally react to changes in interest rates similar to municipal bonds
with maturities between 8 and 18 years. As of February 28, 1997, each
Fund's dollar weighted average maturity was 14.6 years for Spartan
Aggressive and 15.5 years for Fidelity Aggressive. Each Fund, as a matter
of fundamental policy, will normally invest 80% of its assets in municipal
securities whose interest is exempt from federal tax. Both Spartan
Aggressive and Fidelity Aggressive may invest without limitation is
securities subject to the federal alternative minimum tax.
The investment objective of each Fund is fundamental and may not be
changed without the approval of a vote of at least a majority of the
outstanding voting securities of the Fund. There can be no assurance that
either Fund will achieve its objective. With the exception of fundamental
policies, investment policies of the Funds can be changed without
shareholder approval. The differences between the Funds discussed below,
except as noted, could be changed without a vote of shareholders.
PERFORMANCE COMPARISONS OF THE FUNDS
The following table compares the Funds' annual total returns for the
periods indicated, as well as each Fund's cumulative total return for the
period from April 29, 1993 (commencement of operations of Spartan
Aggressive) to February 28, 1997. Please note that total returns are based
on past results and are not an indication of future performance.
Annual Total Return Cumulative
(periods ended February 28) Total Return
April 29,
1994 1995 1996 1997 1993 to
February 28,
1997
Spartan Aggressive1 7.89%* 0.69% 11.36% 5.26% 27.34%
Fidelity Aggressive 7.05%* 0.65% 9.21% 4.58% 23.07%
*From April 29, 1993 to February 28, 1994 (unannualized)
1 Spartan returns do not include the effect of the $5.00 closeout fee.
As the table above shows, Spartan Aggressive has provided its shareholders
moderately better performance than that of Fidelity Aggressive. This
differential in performance can be attributed to Fund size, cash flows and
historical differences in each Fund's investment holdings and policies.
The following graph shows the value of a hypothetical $10,000 investment
in each Fund made on April 29, 1993, assuming all distributions are
reinvested. The graph compares the cumulative returns of the Funds on a
monthly basis from April 1993 through February 1997, and illustrates the
relative volatility of their performance over shorter periods of time.
Spartan Aggressive Fidelity Aggressive
Row: 1, Col: 1, Value: 10000.0
Row: 1, Col: 2, Value: 10000.0
Row: 2, Col: 1, Value: 10011.84
Row: 2, Col: 2, Value: 10036.42
Row: 3, Col: 1, Value: 10123.62
Row: 3, Col: 2, Value: 10115.97
Row: 4, Col: 1, Value: 10304.72
Row: 4, Col: 2, Value: 10283.82
Row: 5, Col: 1, Value: 10327.87
Row: 5, Col: 2, Value: 10313.94
Row: 6, Col: 1, Value: 10563.88
Row: 6, Col: 2, Value: 10536.34
Row: 7, Col: 1, Value: 10737.12
Row: 7, Col: 2, Value: 10665.22
Row: 8, Col: 1, Value: 10760.83
Row: 8, Col: 2, Value: 10686.79
Row: 9, Col: 1, Value: 10669.01
Row: 9, Col: 2, Value: 10613.6
Row: 10, Col: 1, Value: 10908.93
Row: 10, Col: 2, Value: 10835.09
Row: 11, Col: 1, Value: 11034.71
Row: 11, Col: 2, Value: 10954.13
Row: 12, Col: 1, Value: 10789.46
Row: 12, Col: 2, Value: 10705.31
Row: 13, Col: 1, Value: 10265.34
Row: 13, Col: 2, Value: 10247.54
Row: 14, Col: 1, Value: 10339.72
Row: 14, Col: 2, Value: 10296.23
Row: 15, Col: 1, Value: 10426.28
Row: 15, Col: 2, Value: 10373.42
Row: 16, Col: 1, Value: 10380.99
Row: 16, Col: 2, Value: 10339.84
Row: 17, Col: 1, Value: 10574.75
Row: 17, Col: 2, Value: 10516.69
Row: 18, Col: 1, Value: 10628.69
Row: 18, Col: 2, Value: 10547.21
Row: 19, Col: 1, Value: 10476.57
Row: 19, Col: 2, Value: 10411.15
Row: 20, Col: 1, Value: 10270.89
Row: 20, Col: 2, Value: 10239.86
Row: 21, Col: 1, Value: 10008.39
Row: 21, Col: 2, Value: 9982.280000000001
Row: 22, Col: 1, Value: 10242.46
Row: 22, Col: 2, Value: 10204.67
Row: 23, Col: 1, Value: 10555.62
Row: 23, Col: 2, Value: 10502.24
Row: 24, Col: 1, Value: 10863.61
Row: 24, Col: 2, Value: 10775.25
Row: 25, Col: 1, Value: 10999.31
Row: 25, Col: 2, Value: 10788.61
Row: 26, Col: 1, Value: 11021.27
Row: 26, Col: 2, Value: 10806.63
Row: 27, Col: 1, Value: 11373.56
Row: 27, Col: 2, Value: 11115.56
Row: 28, Col: 1, Value: 11280.69
Row: 28, Col: 2, Value: 11026.06
Row: 29, Col: 1, Value: 11326.94
Row: 29, Col: 2, Value: 11094.43
Row: 30, Col: 1, Value: 11475.34
Row: 30, Col: 2, Value: 11211.94
Row: 31, Col: 1, Value: 11575.78
Row: 31, Col: 2, Value: 11297.22
Row: 32, Col: 1, Value: 11748.89
Row: 32, Col: 2, Value: 11433.22
Row: 33, Col: 1, Value: 11954.72
Row: 33, Col: 2, Value: 11626.95
Row: 34, Col: 1, Value: 12058.68
Row: 34, Col: 2, Value: 11724.06
Row: 35, Col: 1, Value: 12140.24
Row: 35, Col: 2, Value: 11802.84
Row: 36, Col: 1, Value: 12098.05
Row: 36, Col: 2, Value: 11767.84
Row: 37, Col: 1, Value: 11881.3
Row: 37, Col: 2, Value: 11522.17
Row: 38, Col: 1, Value: 11853.48
Row: 38, Col: 2, Value: 11487.11
Row: 39, Col: 1, Value: 11838.66
Row: 39, Col: 2, Value: 11475.15
Row: 40, Col: 1, Value: 11966.97
Row: 40, Col: 2, Value: 11605.79
Row: 41, Col: 1, Value: 12084.53
Row: 41, Col: 2, Value: 11696.92
Row: 42, Col: 1, Value: 12104.25
Row: 42, Col: 2, Value: 11725.21
Row: 43, Col: 1, Value: 12244.67
Row: 43, Col: 2, Value: 11836.07
Row: 44, Col: 1, Value: 12398.87
Row: 44, Col: 2, Value: 11969.92
Row: 45, Col: 1, Value: 12613.75
Row: 45, Col: 2, Value: 12176.26
Row: 46, Col: 1, Value: 12564.37
Row: 46, Col: 2, Value: 12141.08
Row: 47, Col: 1, Value: 12608.75
Row: 47, Col: 2, Value: 12190.36
Row: 48, Col: 1, Value: 12733.96
Row: 48, Col: 2, Value: 12307.1
$
$12,734
$
$12,307
$
$
$
4/93 10/93 5/94 12/94 7/95 2/96 9/96 2/97
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION. Spartan Aggressive differs from Fidelity Aggressive with
respect to its policies on diversification. Unlike Fidelity Aggressive,
Spartan Aggressive is a non-diversified fund. Generally, to meet federal
tax requirements at the close of each quarter, Spartan Aggressive does not
invest more than 25% of its total assets in the securities of any one
issuer and, with respect to 50% of total assets, does not invest more than
5% of its total assets in the securities of any one issuer. Fidelity
Aggressive, as a matter of fundamental policy, may invest no more than 25%
of its total assets in the securities of any one issuer, and with respect
to 75% of total assets, may not invest more than 5% in any one issuer.
Because Spartan Aggressive can invest a greater portion of its assets in
securities of individual issuers than Fidelity Aggressive, changes in the
market value of a single issuer could cause greater share-price fluctuation
in Spartan Aggressive than would occur in a more diversified fund such as
Fidelity Aggressive.
OTHER INVESTMENT POLICIES. Each Fund may borrow from banks or other funds
advised by FMR, or through reverse repurchase agreements. As a matter of
fundamental policy, each Fund may borrow only for temporary or emergency
purposes, but not in an amount exceeding 33 1/3% of its total assets.
FMR normally invests each Fund's assets according to its investment
strategy and does not expect to invest in federally taxable obligations.
However, each Fund reserves the right to invest without limitation in
short-term instruments, to hold a substantial amount of uninvested cash, or
to invest more than normally permitted in federally taxable obligations for
temporary, defensive purposes. Both Funds may also enter into when-issued
and delayed delivery transactions, invest in asset-backed securities,
variable and floating rate securities, municipal lease obligations,
securities with put features, private entity securities, and illiquid and
restricted securities. As stated above, for more information about the
risks and restrictions associated with these policies, see each Fund's
Prospectus, and for a more detailed discussion of the Funds' investments,
see their Statements of Additional Information, which are incorporated
herein by reference.
OPERATIONS OF FIDELITY AGGRESSIVE FOLLOWING THE REORGANIZATION
FMR does not expect Fidelity Aggressive to revise its investment policies
as a result of the Reorganization. In addition, FMR does not anticipate
significant changes to the Fund's management or to agents that provide the
Fund with services. Specifically, the Trustees and officers, the investment
adviser, distributor, and other agents will continue to serve Fidelity
Aggressive in their current capacities. The Funds currently have the same
portfolio manager who is expected to continue to be responsible for
Fidelity Aggressive's portfolio management after the Reorganization.
All of the current investments of Spartan Aggressive are permissible
investments for Fidelity Aggressive. In the event that the sale of either
portfolio's assets becomes necessary after the effective date of the
Reorganization, any transaction costs associated with such adjustments will
be borne by Fidelity Aggressive.
PURCHASES AND REDEMPTIONS
The purchase and redemption policies for both Funds are identical.
Each Fund's share price, or net asset value per share (NAV), is calculated
every business day. Shares of both Funds are sold without a sales charge.
Shares are purchased at the next share price calculated after an investment
is received and accepted. Share price is normally calculated at 4:00 p.m.
Eastern time. Refer to a Fund's Prospectus for more information regarding
how to buy shares.
Shares of both Funds may be redeemed on any business day at their NAV.
Shares of both Funds are redeemed at the next share price calculated after
an order is received and accepted, normally 4:00 p.m. Eastern time. Each
Fund imposes a 1.00% redemption fee on shares held less than 180 days that,
if applicable, is deducted from the amount redeemed.
On January 20, 1997, Spartan Aggressive was closed to all new and
subsequent purchases with the exception of reinvestment of dividends or
other distributions pending the Reorganization. Shareholders may redeem
shares through the Closing Date. If the Reorganization is approved, the
purchase policies of the surviving fund will remain unchanged. The 1.00%
redemption fee on shares held less than 180 days will be eliminated
subsequent to the closing of the Reorganization; however, the Fund reserves
the right to reinstate the redemption fee if it believes it is appropriate.
EXCHANGES
The exchange privilege currently offered by both Funds is the same and is
not expected to change after the Reorganization. Shareholders of the Funds
may exchange their shares of a Fund for shares of any other Fidelity fund
available in a shareholder's state. Exchanges are subject to a 1.00%
redemption fee on shares held less than 180 days, as described above in the
"Purchases and Redemptions" section. If the Reorganization is approved, the
redemption fee will be eliminated; however, the Fund reserves the right to
reinstate the redemption fee if it believes it is appropriate.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Each Fund declares dividends daily
and pays them monthly. Spartan Aggressive normally distributes capital
gains in October and December whereas Fidelity Aggressive normally
distributes capital gains in February and December. On or before the
Closing Date, Spartan Aggressive will declare one or more dividends or
distributions which, together with all such previous dividends and
distributions attributable to its current taxable year, will have the
effect of distributing substantially all of its investment company taxable
income and net realized capital gain, if any, in order to maintain its tax
status as a regulated investment company.
Spartan Aggressive will be required to recognize gain or loss on Section
1256 contracts held by the Fund on the last day of its taxable year which
typically is August 31. If the Reorganization is approved, gains or losses
of Section 1256 contracts held on the Closing Date will be recognized on
the Closing Date.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Each Fund has received an opinion of its counsel, Kirkpatrick & Lockhart
LLP, that the Reorganization will constitute a tax-free reorganization
within the meaning of Section 368 (a)(1)(C) of the Internal Revenue Code of
1986, as amended (the Code). Accordingly, except with respect to Section
1256 contracts, no gain or loss will be recognized to the Funds or their
shareholders as a result of the Reorganization. Please see the section
entitled "Federal Income Tax Considerations" for more information.
Spartan Aggressive and Fidelity Aggressive have capital loss carryforwards
for federal tax purposes of $1,844,612 and $19,154,868 as of August 31,
1996 and December 31, 1996, respectively. Under current federal tax law,
Fidelity Aggressive may be limited to using only a portion, if any, of the
capital loss carryforward transferred by Spartan Aggressive at the time of
the Reorganization. There is no assurance that Fidelity Aggressive will be
able to realize sufficient capital gains to use its capital loss
carryforward as well as a portion, if any, of Spartan Aggressive's capital
loss carryforward, before they expire. The capital loss carryforward
attributable to Spartan Aggressive will expire between December 31, 2002
and December 31, 2003. The capital loss carryforward attributable to
Fidelity Aggressive will expire between December 31, 2002 and December 31,
2004.
COMPARISON OF PRINCIPAL RISK FACTORS
Both Funds are subject to the risks normally associated with bond funds.
As described more fully below, the Funds have similar investment
objectives, policies, and permissible investments.
INVESTMENT STRATEGY. Each Fund has the capability of investing up to 35%
of its assets in below-investment-grade securities. Although these
securities may provide the potential for significant price appreciation, it
is important to note that they are considered to have speculative
characteristics, and involve greater risk of default or price changes due
to changes in the issuer's creditworthiness, or such securities may already
be in default. The market prices of these securities may fluctuate more
than higher-quality securities and may decline significantly in periods of
general or regional economic difficulty.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. Diversification may include limiting the amount of
money invested in any one issuer 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. As described above,
Spartan Aggressive has the flexibility to invest in fewer issuers than
Fidelity Aggressive because it is a non-diversified fund, but may be
subject to greater share price fluctuation.
THE PROPOSED TRANSACTION
TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SPARTAN
AGGRESSIVE MUNICIPAL FUND AND FIDELITY AGGRESSIVE MUNICIPAL FUND.
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as
Exhibit I to this Proxy Statement.
The Agreement contemplates (a) Fidelity Aggressive acquiring as of the
Closing Date all of the assets of Spartan Aggressive in exchange solely for
shares of Fidelity Aggressive and the assumption by Fidelity Aggressive of
Spartan Aggressive's liabilities; and (b) the distribution of shares of
Fidelity Aggressive to the shareholders of Spartan Aggressive as provided
for in the Agreement.
The assets of Spartan Aggressive to be acquired by Fidelity Aggressive
include all cash, cash equivalents, securities, receivables (including
interest or dividends receivables), claims, choses in action, and other
property owned by Spartan Aggressive, and any deferred or prepaid expenses
shown as an asset on the books of Spartan Aggressive on the Closing Date.
Fidelity Aggressive will assume from Spartan Aggressive all liabilities,
debts, obligations, and duties of Spartan Aggressive of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable on
the Closing Date, and whether or not specifically referred to in the
Agreement; provided, however, that Spartan Aggressive will use its best
efforts, to the extent practicable, to discharge all of its known
liabilities prior to the Closing Date. Fidelity Aggressive also will
deliver to Spartan Aggressive the number of full and fractional shares of
Fidelity Aggressive having an aggregate net asset value equal to the value
of the assets of Spartan Aggressive less the liabilities of Spartan
Aggressive as of the Closing Date. Spartan Aggressive shall then distribute
the Fidelity Aggressive shares PRO RATA to its shareholders.
The value of Spartan Aggressive's assets to be acquired by Fidelity
Aggressive and the amount of its liabilities to be assumed by Fidelity
Aggressive will be determined as of the close of business (4:00 p.m.
Eastern time) of Spartan Aggressive on the Closing Date, using the
valuation procedures set forth in Spartan Aggressive's then-current
Prospectus and Statement of Additional Information. The net asset value of
a share of Fidelity Aggressive will be determined as of the same time using
the valuation procedures set forth in its then-current Prospectus and
Statement of Additional Information.
As of the Closing Date, Spartan Aggressive will distribute to its
shareholders of record the shares of Fidelity Aggressive it received, so
that each Spartan Aggressive shareholder will receive the number of full
and fractional shares of Fidelity Aggressive equal in value to the
aggregate net asset value of shares of Spartan Aggressive held by such
shareholder on the Closing Date; Spartan Aggressive will be liquidated as
soon as practicable thereafter. Such distribution will be accomplished by
opening accounts on the books of Fidelity Aggressive in the names of the
Spartan Aggressive shareholders and by transferring thereto shares of
Fidelity Aggressive. Each Spartan Aggressive shareholder's account shall be
credited with the respective PRO RATA number of full and fractional shares
(rounded to the third decimal place) of Fidelity Aggressive due that
shareholder. Fidelity Aggressive shall not issue certificates representing
its shares in connection with such exchange.
Accordingly, immediately after the Reorganization, each former Spartan
Aggressive shareholder will own shares of Fidelity Aggressive equal to the
aggregate net asset value of that shareholder's shares of Spartan
Aggressive immediately prior to the Reorganization. The net asset value per
share of Fidelity Aggressive will be unchanged by the transaction. Thus,
the Reorganization will not result in a dilution of any shareholder
interest.
Any transfer taxes payable upon issuance of shares of Fidelity Aggressive
in a name other than that of the registered holder of the shares on the
books of Spartan Aggressive as of that time shall be paid by the person to
whom such shares are to be issued as a condition of such transfer. Any
reporting responsibility of Spartan Aggressive is and will continue to be
its responsibility up to and including the Closing Date and such later date
on which Spartan Aggressive is liquidated.
Pursuant to its management contract with Spartan Aggressive and its
all-inclusive management fee, FMR will bear the cost of the Reorganization,
including professional fees, expenses associated with the filing of
registration statements, and the cost of soliciting proxies for the
Meeting, which will consist principally of printing and mailing
prospectuses and proxy statements, together with the cost of any
supplementary solicitation. However, there may be some transaction costs
associated with portfolio adjustments to Spartan Aggressive and Fidelity
Aggressive due to the the Reorganization which will be borne by Spartan
Aggressive and Fidelity Aggressive, respectively. In addition, there may be
some additional merger-related costs attributable to Fidelity Aggressive
which will be borne by Fidelity Aggressive. The Funds may recognize a
taxable gain or loss on the disposition of securities pursuant to these
portfolio adjustments. See the section entitled "Reasons for the
Reorganization."
The consummation of the Reorganization is subject to a number of
conditions set forth in the Agreement, some of which may be waived by a
Fund. In addition, the Agreement may be amended in any mutually agreeable
manner, except that no amendment that may have a materially adverse effect
on the shareholders' interests may be made subsequent to the Meeting.
REASONS FOR THE REORGANIZATION
The Boards of Trustees (the Boards) of both Funds have determined that the
Reorganization is in the best interests of the shareholders of both Funds
and that the Reorganization will not result in a dilution of the interests
of shareholders of both Funds.
In considering the Reorganization, the Boards considered a number of
factors, including the following:
(1) the compatibility of the Funds' investment objectives and policies;
(2) the historical performance of the Funds;
(3) the relative expense ratios of the Funds;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) the relative size of the Funds;
(7) the elimination of duplicative funds;
(8) the impact of changes to the municipal bond product line on the Funds
and their shareholders; and
(9) the benefit to FMR.
FMR recommended the Reorganization to the Boards at a meeting of the
Boards on November 14, 1996. In recommending the Reorganization, FMR also
advised the Boards that the Funds have identical investment objectives,
policies, and permissible investments. In particular, at that time FMR
informed the Boards that the Funds differ primarily with respect to their
expense structures.
The Boards also considered that former shareholders of Spartan Aggressive
will receive shares of Fidelity Aggressive equal to the value of their
shares of Spartan Aggressive. In addition, the Funds will receive an
opinion of counsel that, except with respect to Section 1256 contracts, the
Reorganization will not result in any gain or loss for Federal income tax
purposes either to Spartan Aggressive or Fidelity Aggressive or to the
shareholders of either Fund.
Furthermore, on November 14, 1996 the Boards considered that combining the
Funds would result in an immediate benefit to shareholders by lowering
expenses, as a percentage of net assets, by 0.02% for shareholders of
Spartan Aggressive and approximately 0.05% for shareholders of Fidelity
Aggressive, following the effective date of the Reorganization.
Subsequently, FMR informed the Boards that effective April 1, 1997, it
would voluntarily agree to limit Fidelity Aggressive's total operating
expenses to the extent that they exceeded 0.55% of average net assets and
that effective March 1, 1997 it would voluntarily limit Spartan
Aggressive's all-inclusive management fee rate to 0.55% of average net
assets. FMR also represented to the Boards that it would guarantee an
expense ratio of 0.53% for the surviving fund (excluding interest, taxes,
brokerage commissions and extraordinary expenses), resulting in a 0.02%
savings to shareholders of both Spartan Aggressive and Fidelity Aggressive,
if the Reorganization is approved. FMR informed the Boards that it would
pay all of Spartan Aggressive's expenses associated with the
Reorganization, including professional fees and the costs of proxy
solicitation. The Boards were informed that any merger-related expenses
directly attributable to Fidelity Aggressive would be borne by Fidelity
Aggressive, provided they do not exceed the fund's 0.55% expense cap. FMR
further informed the Boards that although the Funds would bear any costs
(as described above) associated with portfolio adjustments resulting from
the Reorganization, FMR believed that such costs would be minimal and would
be counterbalanced by the reduction in the expense ratio for both Funds.
Finally, the Boards considered the proposed Reorganization in the context
of a general goal of reducing the number of duplicative funds managed by
FMR. While the reduction of duplicative funds and funds with lower assets
potentially would benefit FMR, it also should benefit shareholders by
facilitating increased operational efficiencies.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Fidelity Municipal Trust (the trust) is registered with the Securities and
Exchange Commission (the Commission) as an open-end management investment
company. The trust's Trustees are authorized to issue an unlimited number
of shares of beneficial interest of separate series. Fidelity Aggressive is
one of seven funds of the trust. Each share of Fidelity Aggressive
represents an equal proportionate interest with each other share of the
Fund, and each such share of Fidelity Aggressive is entitled to equal
voting, dividend, liquidation, and redemption rights. Each shareholder of
the Fund is entitled to one vote for each dollar value of net asset value
of the Fund that shareholder owns. Shares of Fidelity Aggressive have no
preemptive or conversion rights. The voting and dividend rights, the right
of redemption, and the privilege of exchange are described in the Fund's
Prospectus. Shares are fully paid and nonassessable, except as set forth in
the Fund's Statement of Additional Information under the heading
"Shareholder and Trustee Liability."
The trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees then in office
will call a shareholders meeting for the election of Trustees. Under the
1940 Act, shareholders of record of at least two-thirds of the outstanding
shares of an investment company may remove a trustee by votes cast in
person or by proxy at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any Trustee when requested in writing to do so
by the shareholders of record holding at least 10% of the trust's
outstanding shares.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Spartan Aggressive's assets for Fidelity Aggressive's
shares and the assumption of the liabilities of Spartan Aggressive by
Fidelity Aggressive is intended to qualify for federal income tax purposes
as a tax-free reorganization under the Code. With respect to the
Reorganization, the participating Funds have received an opinion from
Kirkpatrick & Lockhart LLP, counsel to Spartan Aggressive and Fidelity
Aggressive, substantially to the effect that:
(i) The acquisition by Fidelity Aggressive of all of the assets of
Spartan Aggressive solely in exchange for Fidelity Aggressive shares and
the assumption by Fidelity Aggressive of Spartan Aggressive's liabilities,
followed by the distribution by Spartan Aggressive of Fidelity Aggressive
shares to the shareholders of Spartan Aggressive pursuant to the
liquidation of Spartan Aggressive and constructively in exchange for their
Spartan Aggressive shares, will constitute a reorganization within the
meaning of section 368(a)(1)(C) of the Code, and Spartan Aggressive and
Fidelity Aggressive will each be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
(ii) No gain or loss will be recognized by Spartan Aggressive upon the
transfer of all of its assets to Fidelity Aggressive in exchange solely for
Fidelity Aggressive shares and Fidelity Aggressive's assumption of Spartan
Aggressive's liabilities, followed by Spartan Aggressive's subsequent
distribution of those shares to shareholders in liquidation of Spartan
Aggressive;
(iii) No gain or loss will be recognized by Fidelity Aggressive upon the
receipt of the assets of Spartan Aggressive in exchange solely for Fidelity
Aggressive shares and its assumption of Spartan Aggressive's liabilities;
(iv) The shareholders of Spartan Aggressive will recognize no gain or loss
upon the exchange of their Spartan Aggressive shares solely for Fidelity
Aggressive shares;
(v) The basis of Spartan Aggressive's assets in the hands of Fidelity
Aggressive will be the same as the basis of those assets in the hands of
Spartan Aggressive immediately prior to the Reorganization, and the holding
period of those assets in the hands of Fidelity Aggressive will include the
holding period of those assets in the hands of Spartan Aggressive;
(vi) The basis of Spartan Aggressive shareholders in Fidelity Aggressive
shares will be the same as their basis in Spartan Aggressive shares to be
surrendered in exchange therefor; and
(vii) The holding period of the Fidelity Aggressive shares to be received
by the Spartan Aggressive shareholders will include the period during which
the Spartan Aggressive shares to be surrendered in exchange therefor were
held, provided such Spartan Aggressive shares were held as capital assets
by those shareholders on the date of the Reorganization.
Shareholders of Spartan Aggressive should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light of
their individual circumstances. Because the foregoing discussion only
relates to the federal income tax consequences of the Reorganization, those
shareholders also should consult their tax advisers as to state and local
tax consequences, if any, of the Reorganization.
CAPITALIZATION
The following tables show the capitalization of the Funds as of December
31, 1996 and on a pro forma combined basis (unaudited) as of that date
giving effect to the Reorganization.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRO FORMA
SPARTAN AGGRESSIVE FIDELITY AGGRESSIVE COMBINED FUND
Net Assets $92,214,911 $852,015,443 $944,230,354
Net Asset Value Per Share $10.09 $11.36 $11.36
Shares Outstanding 9,143,289 74,996,590 83,114,100
</TABLE>
CONCLUSION
The Agreement and Plan of Reorganization and the transactions provided for
therein were approved by the Boards at a meeting held on November 14, 1996.
The Boards of Trustees of Fidelity Union Street Trust and Fidelity
Municipal Trust determined that the proposed Reorganization is in the best
interests of shareholders of each Fund and that the interests of existing
shareholders of Spartan Aggressive and Fidelity Aggressive would not be
diluted as a result of the Reorganization. In the event that the
Reorganization is not consummated, Spartan Aggressive will continue to
engage in business as a fund of a registered investment company and the
Board of Fidelity Union Street Trust will consider other proposals for the
reorganization or liquidation of the Fund.
ADDITIONAL INFORMATION ABOUT FIDELITY AGGRESSIVE MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Years ended
December 31 1996 1995 1994 1993B 1992 1991 1990 1989 1988 1987
2.Net asset value,
beginning of period $ 11.6 $ 10.8 $ 12.3 $ 11.8 $ 11.8 $ 11.4 $ 11.4 $ 11.3 $ 10.8 $ 11.5
70 10 30 80 00 30 90 30 20 60
3.Income from
Investment Operations .699 .709 .770 .783 .834 .863 .886 .881 .894 .902
Net interest income
4. Net realized and (.307) .858 (1.473 .788 .208 .429 (.060) .160 .510 (.740)
unrealized gain (loss) )
5. Total from
investment .392 1.567 (.703) 1.571 1.042 1.292 .826 1.041 1.404 .162
operations
6.Less Distributions (.699) (.709) (.770) (.783) (.834) (.863) (.886) (.881) (.894) (.902)
From net interest income
7. In excess of net
interest (.004) -- -- -- -- -- -- -- -- --
income D
8. From net realized
gain -- -- (.050) (.340) (.130) (.060) -- -- -- --
9. Total
distributions (.703) (.709) (.820) (1.12 (.964) (.923) (.886) (.881) (.894) (.902)
3)
10.Redemption fees added
to paid in capital .001 .002 .003 .002 .002 .001 -- -- -- --
11.Net asset value,
end of period $ 11.3 $ 11.6 $ 10.8 $ 12.3 $ 11.8 $ 11.8 $ 11.4 $ 11.4 $ 11.3 $ 10.8
60 70 10 30 80 00 30 90 30 20
12.Total returnA 3.56% 14.89 (5.82) 13.63 9.17 11.77 7.48 9.50 13.40 1.42%
% % % % % % % %
13.RATIOS AND SUPPLEMENTAL DATA
14.Net assets, end of
period (In millions) $ 852 $ 910 $ 796 $ 952 $ 762 $ 654 $ 551 $ 546 $ 456 $ 353
15.Ratio of expenses
to average net assets .63% .64% .63% .64% .64% .69% .66% .69% .73% .74%C
16.Ratio of net interest
income to average
net assets 6.14% 6.24 6.69% 6.37 7.01 7.46 7.79 7.68 7.98% 8.06%
% % % % % %
17.Portfolio turnover
rate 35% 39% 40% 54% 43% 30% 46% 46% 46% 68%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
C 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.
D THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
MISCELLANEOUS
AVAILABLE INFORMATION. Fidelity Municipal Trust and Fidelity Union Street
Trust are subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and in accordance therewith file
reports, proxy material, and other information with the Commission. Such
reports, proxy material, and other information can be inspected and copied
at the Public Reference Room maintained by the Commission at 450 Fifth
Street, N.W., Washington D.C. 20549 and 7 World Trade Center, New York,
N.Y. 10048. Copies of such material can also be obtained from the Public
Reference Branch Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington D.C. 20549, at prescribed
rates.
LEGAL MATTERS. Certain legal matters in connection with the issuance of
Fidelity Aggressive's shares will be passed upon by Kirkpatrick & Lockhart
LLP, counsel to the trusts.
EXPERTS. The audited financial statements of Fidelity Aggressive,
incorporated by reference into the Statement of Additional Information,
have been audited by Coopers & Lybrand L.L.P., independent accountants,
whose report thereon is included in the Annual Report to Shareholders for
the fiscal year ended December 31, 1996. The audited financial statements
of Spartan Aggressive, incorporated by reference into the Statement of
Additional Information, have been audited by Coopers & Lybrand L.L.P.,
whose report thereon is included in the Annual Report to Shareholders for
the fiscal year ended August 31, 1996. The financial statements audited by
Coopers & Lybrand L.L.P. have been incorporated by reference in reliance on
their reports given on their authority as experts in auditing and
accounting.
EXHIBIT I
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the Agreement) is made as of
the 16th of May 1997, by and among Fidelity Union Street Trust, a
Massachusetts business trust, on behalf of Spartan Aggressive Municipal
Fund (Spartan Aggressive), a series of Fidelity Union Street Trust, and
Fidelity Municipal Trust, a Massachusetts business trust, on behalf of
Fidelity Aggressive Municipal Fund (Fidelity Aggressive), a series of
Fidelity Municipal Trust. Fidelity Union Street Trust and Fidelity
Municipal Trust may be referred to herein collectively as the "Trusts" or
each individually as a "Trust." Fidelity Aggressive and Spartan Aggressive
may be referred to herein collectively as the "Funds" or each individually
as the "Fund."
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the Code). The reorganization will
comprise: (a) the transfer of all of the assets of Spartan Aggressive to
Fidelity Aggressive solely in exchange for shares of beneficial interest in
Fidelity Aggressive (the Fidelity Aggressive Shares) and the assumption by
Fidelity Aggressive of Spartan Aggressive's liabilities; and (b) the
constructive distribution of such shares by Spartan Aggressive PRO RATA to
its shareholders in complete liquidation and termination of Spartan
Aggressive in exchange for all of Spartan Aggressive's outstanding shares.
Spartan Aggressive shall receive shares of Fidelity Aggressive having an
aggregate net asset value equal to the value of the assets of Spartan
Aggressive on the Closing Date (as defined below), which Spartan Aggressive
shall then distribute PRO RATA to its shareholders. The foregoing
transactions are referred to herein as the "Reorganization."
In consideration of the mutual promises and subject to the terms and
conditions herein, the parties covenant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SPARTAN AGGRESSIVE. Spartan
Aggressive represents and warrants to and agrees with Fidelity Aggressive
that:
(a) Spartan Aggressive is a series of Fidelity Union Street Trust, a
business trust duly organized, validly existing, and in good standing under
the laws of the Commonwealth of Massachusetts, and has the power to own all
of its properties and assets and to carry out its obligations under this
Agreement. It has all necessary federal, state, and local authorizations
to carry on its business as now being conducted and to carry out this
Agreement;
(b) Fidelity Union Street Trust is an open-end, management investment
company duly registered under the Investment Company Act of 1940, as
amended (the 1940 Act), and such registration is in full force and effect;
(c) The Prospectus and Statement of Additional Information of Spartan
Aggressive dated October 18, 1996, and a supplement dated February 28, 1997
to the Prospectus previously furnished to Fidelity Aggressive, did not and
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Spartan Aggressive, threatened against
Spartan Aggressive which assert liability on the part of Spartan
Aggressive. Spartan Aggressive knows of no facts which might form the
basis for the institution of such proceedings;
(e) Spartan Aggressive is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Spartan Aggressive, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Spartan
Aggressive is a party or by which Spartan Aggressive is bound or result in
the acceleration of any obligation or the imposition of any penalty under
any agreement, judgment or decree to which Spartan Aggressive is a party or
is bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Spartan Aggressive at
August 31, 1996, have been audited by Coopers & Lybrand L.L.P., independent
accountants, and have been furnished to Fidelity Aggressive. Said
Statements of Assets and Liabilities and Schedule of Investments fairly
present the Fund's financial position as of such date and said Statement of
Operations, Changes in Net Assets, and Financial Highlights fairly reflect
its results of operations, changes in financial position, and financial
highlights for the periods covered thereby in conformity with generally
accepted accounting principles consistently applied;
(g) Spartan Aggressive has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of August 31, 1996 and those
incurred in the ordinary course of Spartan Aggressive's business as an
investment company since August 31, 1996;
(h) The registration statement (Registration Statement) filed with the
Securities and Exchange Commission (Commission) by Fidelity Municipal Trust
on Form N-14 relating to the shares of Fidelity Aggressive issuable
hereunder and the proxy statement of Spartan Aggressive included therein
(Proxy Statement), on the effective date of the Registration Statement and
insofar as they relate to Spartan Aggressive (i) comply in all material
respects with the provisions of the Securities Act of 1933, as amended (the
1933 Act), the Securities Exchange Act of 1934, as amended (the 1934 Act),
and the 1940 Act, and the rules and regulations thereunder, and (ii) do not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at the time of the shareholders' meeting
referred to in Section 7 and on the Closing Date, the prospectus contained
in the Registration Statement of which the Proxy Statement is a part (the
Prospectus), as amended or supplemented, insofar as it relates to Spartan
Aggressive, does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(i) All material contracts and commitments of Spartan Aggressive (other
than this Agreement) will be terminated without liability to Spartan
Aggressive prior to the Closing Date (other than those made in connection
with redemptions of shares and the purchase and sale of portfolio
securities made in the ordinary course of business);
(j) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Spartan
Aggressive of the transactions contemplated by this Agreement, except such
as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(k) Spartan Aggressive has filed or will file all federal and state tax
returns which, to the knowledge of Spartan Aggressive's officers, are
required to be filed by Spartan Aggressive and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Spartan
Aggressive's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(l) Spartan Aggressive has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company for
all prior taxable years and intends to meet such requirements for its
current taxable year ending on the Closing Date;
(m) All of the issued and outstanding shares of Spartan Aggressive are,
and at the Closing Date will be, duly and validly issued and outstanding
and fully paid and nonassessable as a matter of Massachusetts law (except
as disclosed in the Fund's Statement of Additional Information), and have
been offered for sale and in conformity with all applicable federal
securities laws. All of the issued and outstanding shares of Spartan
Aggressive will, at the Closing Date, be held by the persons and in the
amounts set forth in the list of shareholders submitted to Fidelity
Aggressive in accordance with this Agreement;
(n) As of both the Valuation Time (as defined in Section 4) and the
Closing Date, Spartan Aggressive will have the full right, power, and
authority to sell, assign, transfer, and deliver its portfolio securities
and any other assets of Spartan Aggressive to be transferred to Fidelity
Aggressive pursuant to this Agreement. As of the Closing Date, subject
only to the delivery of Spartan Aggressive's portfolio securities and any
such other assets as contemplated by this Agreement, Fidelity Aggressive
will acquire Spartan Aggressive's portfolio securities and any such other
assets subject to no encumbrances, liens, or security interests (except for
those that may arise in the ordinary course and are disclosed to Fidelity
Aggressive) and without any restrictions upon the transfer thereof; and
(o) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Spartan Aggressive, and this Agreement constitutes a
valid and binding obligation of Spartan Aggressive enforceable in
accordance with its terms, subject to shareholder approval.
2. REPRESENTATIONS AND WARRANTIES OF FIDELITY AGGRESSIVE. Fidelity
Aggressive represents and warrants to and agrees with Spartan Aggressive
that:
(a) Fidelity Aggressive is a series of Fidelity Municipal Trust, a
business trust duly organized, validly existing, and in good standing under
the laws of the Commonwealth of Massachusetts, and has the power to own all
of its properties and assets and to carry out its obligations under this
Agreement. It has all necessary federal, state, and local authorizations
to carry on its business as now being conducted and to carry out this
Agreement;
(b) Fidelity Municipal Trust is an open-end, management investment
company duly registered under the 1940 Act, and such registration is in
full force and effect;
(c) The Prospectus and Statement of Additional Information of Fidelity
Aggressive, dated February 28, 1997, and a supplement dated March 21, 1997
to the Prospectus previously furnished to Spartan Aggressive did not and do
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(d) There are no material legal, administrative, or other proceedings
pending or, to the knowledge of Fidelity Aggressive, threatened against
Fidelity Aggressive which assert liability on the part of Fidelity
Aggressive. Fidelity Aggressive knows of no facts which might form the
basis for the institution of such proceedings;
(e) Fidelity Aggressive is not in, and the execution, delivery, and
performance of this Agreement will not result in, violation of any
provision of its Amended and Restated Declaration of Trust or By-laws, or,
to the knowledge of Fidelity Aggressive, of any agreement, indenture,
instrument, contract, lease, or other undertaking to which Fidelity
Aggressive is a party or by which Fidelity Aggressive is bound or result in
the acceleration of any obligation or the imposition of any penalty under
any agreement, judgment, or decree to which Fidelity Aggressive is a party
or is bound;
(f) The Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, Financial Highlights, and the
Schedule of Investments (including market values) of Fidelity Aggressive at
December 31, 1996, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, and have been furnished to Spartan Aggressive.
Said Statements of Assets and Liabilities and Schedule of Investments
fairly present its financial position as of such date and said Statement of
Operations, Changes in Net Assets, and Financial Highlights fairly reflect
its results of operations, changes in financial position, and financial
highlights for the periods covered thereby in conformity with generally
accepted accounting principles consistently applied;
(g) Fidelity Aggressive has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of December 31, 1996 and those
incurred in the ordinary course of Fidelity Aggressive's business as an
investment company since December 31, 1996;
(h) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Fidelity
Aggressive of the transactions contemplated by this Agreement, except such
as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
state securities or blue sky laws (which term as used herein shall include
the District of Columbia and Puerto Rico);
(i) Fidelity Aggressive has filed or will file all federal and state tax
returns which, to the knowledge of Fidelity Aggressive's officers, are
required to be filed by Fidelity Aggressive and has paid or will pay all
federal and state taxes shown to be due on said returns or provision shall
have been made for the payment thereof, and, to the best of Fidelity
Aggressive's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) Fidelity Aggressive has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company for
all prior taxable years and intends to meet such requirements for its
current taxable year ending on December 31, 1997;
(k) As of the Closing Date, the shares of beneficial interest of Fidelity
Aggressive to be issued to Spartan Aggressive will have been duly
authorized and, when issued and delivered pursuant to this Agreement, will
be legally and validly issued and will be fully paid and nonassessable
(except as disclosed in the Fund's Statement of Additional Information) by
Fidelity Aggressive, and no shareholder of Fidelity Aggressive will have
any preemptive right of subscription or purchase in respect thereof;
(l) The execution, performance, and delivery of this Agreement will have
been duly authorized prior to the Closing Date by all necessary corporate
action on the part of Fidelity Aggressive, and this Agreement constitutes a
valid and binding obligation of Fidelity Aggressive enforceable in
accordance with its terms, subject to approval by the shareholders of
Spartan Aggressive;
(m) The Registration Statement and the Proxy Statement, on the effective
date of the Registration Statement and insofar as they relate to Fidelity
Aggressive, (i) will comply in all material respects with the provisions of
the 1933 Act, the 1934 Act, and the 1940 Act, and the rules and regulations
thereunder, and (ii) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the time of
the shareholders' meeting referred to in Section 7 and on the Closing Date,
the Prospectus, as amended or supplemented, insofar as it relates to
Fidelity Aggressive, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(n) The issuance of the Fidelity Aggressive Shares pursuant to this
Agreement will be in compliance with all applicable federal securities
laws; and
(o) All of the issued and outstanding shares of beneficial interest of
Fidelity Aggressive have been offered for sale and sold in conformity with
the federal securities laws.
3. REORGANIZATION.
(a) Subject to the requisite approval of the shareholders of Spartan
Aggressive and to the other terms and conditions contained herein, Spartan
Aggressive agrees to assign, sell, convey, transfer, and deliver to
Fidelity Aggressive as of the Closing Date all of the assets of Spartan
Aggressive of every kind and nature existing on the Closing Date. Fidelity
Aggressive agrees in exchange therefor: (i) to assume all of Spartan
Aggressive's liabilities existing on or after the Closing Date, whether or
not determinable on the Closing Date, and (ii) to issue and deliver to
Spartan Aggressive the number of full and fractional shares of Fidelity
Aggressive having an aggregate net asset value equal to the value of the
assets of Spartan Aggressive transferred hereunder, less the value of the
liabilities of Spartan Aggressive, determined as provided for under Section
4.
(b) The assets of Spartan Aggressive to be acquired by Fidelity
Aggressive shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest or dividends receivables),
claims, choses in action, and other property owned by Spartan Aggressive,
and any deferred or prepaid expenses shown as an asset on the books of
Spartan Aggressive on the Closing Date. Spartan Aggressive will pay or
cause to be paid to Fidelity Aggressive any dividend or interest payments
received by it on or after the Closing Date with respect to the assets
transferred to Fidelity Aggressive hereunder, and Fidelity Aggressive will
retain any dividend or interest payments received by it after the Valuation
Time with respect to the assets transferred hereunder without regard to the
payment date thereof.
(c) The liabilities of Spartan Aggressive to be assumed by Fidelity
Aggressive shall include (except as otherwise provided for herein) all of
Spartan Aggressive's liabilities, debts, obligations, and duties, of
whatever kind or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of business,
whether or not determinable on the Closing Date, and whether or not
specifically referred to in this Agreement. Notwithstanding the foregoing,
Spartan Aggressive agrees to use its best efforts to discharge all of its
known liabilities prior to the Closing Date.
(d) Pursuant to this Agreement, as soon after the Closing Date as is
conveniently practicable (the Liquidation Date), Spartan Aggressive will
constructively distribute PRO RATA to its shareholders of record,
determined as of the Valuation Time on the Closing Date, the Fidelity
Aggressive Shares in exchange for such shareholders' shares of beneficial
interest in Spartan Aggressive and Spartan Aggressive will be liquidated in
accordance with Spartan Aggressive's Amended and Restated Declaration of
Trust. Such distribution shall be accomplished by the Funds' transfer
agent opening accounts on Fidelity Aggressive's share transfer books in the
names of the Spartan Aggressive shareholders and transferring the Fidelity
Aggressive Shares thereto. Each Spartan Aggressive shareholder's account
shall be credited with the respective PRO RATA number of full and
fractional (rounded to the third decimal place) Fidelity Aggressive Shares
due that shareholder. All outstanding Spartan Aggressive shares, including
any represented by certificates, shall simultaneously be canceled on
Spartan Aggressive's share transfer records. Fidelity Aggressive shall not
issue certificates representing the Fidelity Aggressive Shares in
connection with the Reorganization.
(e) Any reporting responsibility of Spartan Aggressive is and shall
remain its responsibility up to and including the date on which it is
terminated.
(f) Any transfer taxes payable upon issuance of the Fidelity Aggressive
Shares in a name other than that of the registered holder on Spartan
Aggressive's books of the Spartan Aggressive shares constructively
exchanged for the Fidelity Aggressive Shares shall be paid by the person to
whom such Fidelity Aggressive Shares are to be issued, as a condition of
such transfer.
4. VALUATION.
(a) The Valuation Time shall be 4:00 p.m. Eastern time on the Closing
Date, or such other date as may be mutually agreed upon in writing by the
parties hereto (the Valuation Time).
(b) As of the Closing Date, Fidelity Aggressive will deliver to Spartan
Aggressive the number of Fidelity Aggressive Shares having an aggregate net
asset value equal to the value of the assets of Spartan Aggressive
transferred hereunder less the liabilities of Spartan Aggressive,
determined as provided in this Section 4.
(c) The net asset value per share of the Fidelity Aggressive Shares to be
delivered to Spartan Aggressive, the value of the assets of Spartan
Aggressive transferred hereunder, and the value of the liabilities of
Spartan Aggressive to be assumed hereunder shall in each case be determined
as of the Valuation Time.
(d) The net asset value per share of the Fidelity Aggressive Shares shall
be computed in the manner set forth in the then-current Fidelity Aggressive
Prospectus and Statement of Additional Information, and the value of the
assets and liabilities of Spartan Aggressive shall be computed in the
manner set forth in the then-current Spartan Aggressive Prospectus and
Statement of Additional Information.
(e) All computations pursuant to this Section shall be made by or under
the direction of Fidelity Service Company, Inc., a wholly owned subsidiary
of FMR Corp., in accordance with its regular practice as pricing agent for
Spartan Aggressive and Fidelity Aggressive.
5. FEES; EXPENSES.
(a) Pursuant to Spartan Aggressive's all-inclusive management contract
with Fidelity Management & Research Company (FMR), FMR will pay all fees
and expenses, including legal, accounting, printing, filing, and proxy
solicitation expenses, portfolio transfer taxes (if any), or other similar
expenses incurred in connection with the transactions contemplated by this
Agreement (but not including costs incurred in connection with the purchase
or sale of portfolio securities). Any merger-related expenses which may be
attributable to Fidelity Aggressive will be borne by Fidelity Aggressive.
(b) Each of Fidelity Aggressive and Spartan Aggressive represents that
there is no person who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission
arising out of the transactions contemplated by this Agreement.
6. CLOSING DATE.
(a) The Reorganization, together with related acts necessary to
consummate the same (the Closing), unless otherwise provided herein, shall
occur at the principal office of the Trusts, 82 Devonshire Street, Boston,
Massachusetts, as of the Valuation Time on July 31, 1997, or as of some
other time, date, and place agreed to by Spartan Aggressive and Fidelity
Aggressive (the Closing Date).
(b) In the event that on the Closing Date: (i) any of the markets for
securities held by the Funds is closed to trading, or (ii) trading thereon
is restricted, or (iii) trading or the reporting of trading on said market
or elsewhere is disrupted, all so that accurate appraisal of the total net
asset value of Spartan Aggressive and the net asset value of Fidelity
Aggressive is impracticable, the Valuation Time and the Closing Date shall
be postponed until the first business day after the day when such trading
shall have been fully resumed and such reporting shall have been restored,
or such other date as the parties may agree.
7. SHAREHOLDER MEETING AND TERMINATION OF SPARTAN AGGRESSIVE.
(a) Spartan Aggressive agrees to call a meeting of its shareholders after
the effective date of the Registration Statement, to consider transferring
its assets to Fidelity Aggressive as herein provided, adopting this
Agreement, and authorizing the liquidation of Spartan Aggressive.
(b) Spartan Aggressive agrees that as soon as reasonably practicable
after distribution of the Fidelity Aggressive Shares, Spartan Aggressive
shall be terminated as a series of Fidelity Union Street Trust pursuant to
its Amended and Restated Declaration of Trust, any further actions shall be
taken in connection therewith as required by applicable law, and on and
after the Closing Date Spartan Aggressive shall not conduct any business
except in connection with its liquidation and termination.
8. CONDITIONS TO FIDELITY AGGRESSIVE'S OBLIGATIONS. The obligations of
Fidelity Aggressive hereunder shall be subject to the following conditions:
(a) That Spartan Aggressive furnishes to Fidelity Aggressive a statement,
dated as of the Closing Date, signed by an officer of Fidelity Union Street
Trust, certifying that as of the Valuation Time and the Closing Date all
representations and warranties of Spartan Aggressive made in this Agreement
are true and correct in all material respects and that Spartan Aggressive
has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to such dates;
(b) That Spartan Aggressive furnishes Fidelity Aggressive with copies of
the resolutions, certified by an officer of Fidelity Union Street Trust,
evidencing the adoption of this Agreement and the approval of the
transactions contemplated herein by the requisite vote of the holders of
the outstanding shares of beneficial interest of Spartan Aggressive;
(c) That, on or prior to the Closing Date, Spartan Aggressive will
declare one or more dividends or distributions which, together with all
previous such dividends or distributions attributable to its current
taxable year, shall have the effect of distributing to the shareholders of
Spartan Aggressive substantially all of Spartan Aggressive's investment
company taxable income and all of its net realized capital gain, if any, as
of the Closing Date;
(d) That Spartan Aggressive shall deliver to Fidelity Aggressive at the
Closing a statement of its assets and liabilities, together with a list of
its portfolio securities showing each such security's adjusted tax basis
and holding period by lot, with values determined as provided in Section 4
of this Agreement, all as of the Valuation Time, certified on Spartan
Aggressive's behalf by its Treasurer or Assistant Treasurer;
(e) That Spartan Aggressive's custodian shall deliver to Fidelity
Aggressive a certificate identifying the assets of Spartan Aggressive held
by such custodian as of the Valuation Time on the Closing Date and stating
that as of the Valuation Time: (i) the assets held by the custodian will
be transferred to Fidelity Aggressive; (ii) Spartan Aggressive's assets
have been duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof; and (iii) to the best of the custodian's
knowledge, all necessary taxes in conjunction with the delivery of the
assets, including all applicable federal and state stock transfer stamps,
if any, have been paid or provision for payment has been made;
(f) That Spartan Aggressive's transfer agent shall deliver to Fidelity
Aggressive at the Closing a certificate setting forth the number of shares
of Spartan Aggressive outstanding as of the Valuation Time and the name and
address of each holder of record of any such shares and the number of
shares held of record by each such shareholder;
(g) That Spartan Aggressive calls a meeting of its shareholders to be
held after the effective date of the Registration Statement, to consider
transferring its assets to Fidelity Aggressive as herein provided, adopting
this Agreement, and authorizing the liquidation and termination of Spartan
Aggressive;
(h) That Spartan Aggressive delivers to Fidelity Aggressive a certificate
of an officer of Fidelity Union Street Trust, dated as of the Closing Date,
that there has been no material adverse change in Spartan Aggressive's
financial position since August 31, 1996, other than changes in the market
value of its portfolio securities, or changes due to net redemptions of its
shares, dividends paid, or losses from operations; and
(i) That all of the issued and outstanding shares of beneficial interest
of Spartan Aggressive shall have been offered for sale and sold in
conformity with all applicable state securities laws and, to the extent
that any audit of the records of Spartan Aggressive or its transfer agent
by Fidelity Aggressive or its agents shall have revealed otherwise, Spartan
Aggressive shall have taken all actions that in the opinion of Fidelity
Aggressive are necessary to remedy any prior failure on the part of Spartan
Aggressive to have offered for sale and sold such shares in conformity with
such laws.
9. CONDITIONS TO OBLIGATIONS OF SPARTAN AGGRESSIVE.
(a) That Fidelity Aggressive shall have executed and delivered to Spartan
Aggressive an Assumption of Liabilities, certified by an officer of
Fidelity Municipal Trust, dated as of the Closing Date pursuant to which
Fidelity Aggressive will assume all of the liabilities of Spartan
Aggressive existing at the Valuation Time in connection with the
transactions contemplated by this Agreement;
(b) That Fidelity Aggressive furnishes to Spartan Aggressive a statement,
dated as of the Closing Date, signed by an officer of Fidelity Municipal
Trust, certifying that as of the Valuation Time and the Closing Date all
representations and warranties of Fidelity Aggressive made in this
Agreement are true and correct in all material respects, and Fidelity
Aggressive has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
dates; and
(c) That Spartan Aggressive shall have received an opinion of Kirkpatrick
& Lockhart LLP, counsel to Spartan Aggressive and Fidelity Aggressive, to
the effect that the Fidelity Aggressive Shares are duly authorized and upon
delivery to Spartan Aggressive as provided in this Agreement will be
validly issued and will be fully paid and nonassessable by Fidelity
Aggressive (except as disclosed in Spartan Aggressive's Statement of
Additional Information) and no shareholder of Fidelity Aggressive has any
preemptive right of subscription or purchase in respect thereof.
10. CONDITIONS TO OBLIGATIONS OF FIDELITY AGGRESSIVE AND SPARTAN
AGGRESSIVE.
(a) That this Agreement shall have been adopted and the transactions
contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of beneficial interest of Spartan
Aggressive;
(b) That all consents of other parties and all other consents, orders,
and permits of federal, state, and local regulatory authorities (including
those of the Commission and of state blue sky and securities authorities,
including "no action" positions of such federal or state authorities)
deemed necessary by Fidelity Aggressive or Spartan Aggressive to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of Fidelity Aggressive or Spartan
Aggressive, provided that either party hereto may for itself waive any of
such conditions;
(c) That all proceedings taken by either Fund in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to it and its counsel,
Kirkpatrick & Lockhart LLP;
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement;
(e) That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Fidelity Aggressive and Spartan
Aggressive, threatened by the Commission; and
(f) That Fidelity Aggressive and Spartan Aggressive shall have received
an opinion of Kirkpatrick & Lockhart LLP satisfactory to Fidelity
Aggressive and Spartan Aggressive that for federal income tax purposes:
(i) The Reorganization will be a reorganization under section
368(a)(1)(C) of the Code, and Spartan Aggressive and Fidelity Aggressive
will each be parties to the Reorganization under section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Spartan Aggressive upon the
transfer of all of its assets to Fidelity Aggressive in exchange solely for
the Fidelity Aggressive Shares and the assumption of Spartan Aggressive's
liabilities followed by the distribution of those Fidelity Aggressive
Shares to the shareholders of Spartan Aggressive in liquidation of Spartan
Aggressive;
(iii) No gain or loss will be recognized by Fidelity Aggressive on the
receipt of Spartan Aggressive's assets in exchange solely for the Fidelity
Aggressive Shares and the assumption of Spartan Aggressive's liabilities;
(iv) The basis of Spartan Aggressive's assets in the hands of Fidelity
Aggressive will be the same as the basis of such assets in Spartan
Aggressive's hands immediately prior to the Reorganization;
(v) Fidelity Aggressive's holding period in the assets to be received
from Spartan Aggressive will include Spartan Aggressive's holding period in
such assets;
(vi) A Spartan Aggressive shareholder will recognize no gain or loss on
the exchange of his or her shares of beneficial interest in Spartan
Aggressive for the Fidelity Aggressive Shares in the Reorganization;
(vii) A Spartan Aggressive shareholder's basis in the Fidelity
Aggressive Shares to be received by him or her will be the same as his or
her basis in the Spartan Aggressive shares exchanged therefor;
(viii) A Spartan Aggressive shareholder's holding period for his or her
Fidelity Aggressive Shares will include the holding period of Spartan
Aggressive shares exchanged, provided that those Spartan Aggressive shares
were held as capital assets on the date of the Reorganization.
Notwithstanding anything herein to the contrary, each of Spartan
Aggressive and Fidelity Aggressive may not waive the conditions set forth
in this subsection 10(f).
11. COVENANTS OF FIDELITY AGGRESSIVE AND SPARTAN AGGRESSIVE.
(a) Fidelity Aggressive and Spartan Aggressive each covenants to operate
its respective business in the ordinary course between the date hereof and
the Closing Date, it being understood that such ordinary course of business
will include the payment of customary dividends and distributions;
(b) Spartan Aggressive covenants that it is not acquiring the Fidelity
Aggressive Shares for the purpose of making any distribution other than in
accordance with the terms of this Agreement;
(c) Spartan Aggressive covenants that it will assist Fidelity Aggressive
in obtaining such information as Fidelity Aggressive reasonably requests
concerning the beneficial ownership of Spartan Aggressive's shares; and
(d) Spartan Aggressive covenants that its liquidation and termination
will be effected in the manner provided in its Amended and Restated
Declaration of Trust in accordance with applicable law and after the
Closing Date, Spartan Aggressive will not conduct any business except in
connection with its liquidation and termination.
12. TERMINATION; WAIVER.
Fidelity Aggressive and Spartan Aggressive may terminate this Agreement by
mutual agreement. In addition, either Fidelity Aggressive or Spartan
Aggressive may at its option terminate this Agreement at or prior to the
Closing Date because:
(i) of a material breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date;
or
(ii) a condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
In the event of any such termination, there shall be no liability for
damages on the part of Spartan Aggressive or Fidelity Aggressive, or their
respective Trustees or officers.
13. SOLE AGREEMENT; AMENDMENTS; WAIVERS; SURVIVAL OF WARRANTIES.
(a) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the subject matter hereof,
constitutes the only understanding with respect to such subject matter, may
not be changed except by a letter of agreement signed by each party hereto
and shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts.
(b) This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the respective
President, any Vice President, or Treasurer of Fidelity Aggressive or
Spartan Aggressive; provided, however, that following the shareholders'
meeting called by Spartan Aggressive pursuant to Section 7 of this
Agreement, no such amendment may have the effect of changing the provisions
for determining the number of Fidelity Aggressive Shares to be paid to
Spartan Aggressive shareholders under this Agreement to the detriment of
such shareholders without their further approval.
(c) Either Fund may waive any condition to its obligations hereunder,
provided that such waiver does not have any material adverse effect on the
interests of such Fund's shareholders.
The representations, warranties, and covenants contained in the Agreement,
or in any document delivered pursuant hereto or in connection herewith,
shall survive the consummation of the transactions contemplated hereunder.
14. DECLARATIONS OF TRUST.
A copy of the Declaration of Trust of each Fund, as restated and amended,
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed
on behalf of the Trustees of each Fund as trustees and not individually and
that the obligations of each Fund under this instrument are not binding
upon any of such Fund's Trustees, officers, or shareholders individually
but are binding only upon the assets and property of such Fund. Each Fund
agrees that its obligations hereunder apply only to such Fund and not to
its shareholders individually or to the Trustees of such Fund.
15. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
of any rights or obligations hereunder shall be made by any party without
the written consent of the other parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any
person, firm, or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason
of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an appropriate officer.
SIGNATURE LINES OMITTED
SUPPLEMENT TO THE FIDELITY AGGRESSIVE MUNICIPAL FUND
FEBRUARY 28, 1997
PROSPECTUS
In the Financial Highlights table on page 5, the line item "Total from
investment operations" should be $.392 for the year ended December 31, 1996
instead of $(.392) as previously reported.
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing, or a copy of
the Statement of Additional Information (SAI) dated February 28, 1997. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
available along with other related materials on the SEC's Internet Web site
(http://www.sec.gov). The SAI is incorporated herein by reference (legally
forms a part of the prospectus). For a free copy of either document, call
Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, Federal
Reserve Board, or any other agency, and are subject to investment risks,
including possible loss of principal amount invested.
LIKE ALL MUTUAL FUNDS,
THESE SECURITIES HAVE
NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
FAT-pro-0297
FIDELITY
AGGRESSIVE
MUNICIPAL
FUND
(fund number 012, trading symbol FATFX)
The fund seeks a high level of current income free from federal income tax
by investing primarily in investment-grade municipal securities.
PROSPECTUS
FEBRUARY 28, 1997(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income free from federal income tax. As with any mutual
fund, there is no assurance that the fund will achieve its goal.
STRATEGY: Invests primarily in investment-grade municipal securities.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager.
SIZE: As of December 31, 1996, the fund had over $852 million in assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors in higher tax brackets who seek
high current income that is free from federal income tax. The fund's level
of risk and potential reward depend on the quality and maturity of its
investments. Lower-quality, longer-term investments typically carry the
most risk and the highest yield potential. You should consider your
investment objective and tolerance for risk when making an investment
decision.
The value of the fund's investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions,
and other economic and political news. When you sell your shares, they may
be worth more or less than what you paid for them. By itself, the fund does
not constitute a balanced investment plan.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk.
Aggressive Municipal is in the
INCOME category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy or
sell shares of a fund. In addition, you may be charged an annual account
maintenance fee if your account balance falls below $2,500. See
"Transaction Details," page , for an explanation of how and when these
charges apply.
Maximum sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Redemption fee (as a % of amount redeemed 1.00
on shares held less than 180 days) %
Exchange fee None
Annual account maintenance fee (for accounts under $2,500) $12.0
0
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. It also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and financial reports. The fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following figures are based on historical expenses, adjusted to reflect
current fees, and are calculated as a percentage of average net assets.
Management fee (after fee reduction) .40%
A
12b-1 fee None
Other expenses .18%
Total fund operating expenses .58%
AEFFECTIVE MARCH 1, 1997, FMR VOLUNTARILY AGREED TO IMPLEMENT A MANAGEMENT
FEE REDUCTION. THE INDIVIDUAL FUND FEE RATE WAS REDUCED FROM .30% TO .25%.
IF THIS AGREEMENT WERE NOT IN EFFECT, THE MANAGEMENT FEE AND TOTAL
OPERATING EXPENSES WOULD BE .45% AND .63%, RESPECTIVELY.
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 year $ 6
After 3 years $ 19
After 5 years $ 32
After 10 years $ 73
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The financial highlights table that follows has been audited by Coopers &
Lybrand L.L.P., independent accountants. The fund's financial highlights,
financial statements, and report of the auditor are included in the fund's
Annual Report, and are incorporated by reference into (are legally a part
of) the fund's SAI. Contact Fidelity for a free copy of the Annual Report
or the SAI.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18.Years ended 1996 1995 1994 1993B 1992 1991 1990 1989 1988 1987
December 31
19.Net asset $ 11.6 $ 10.8 $ 12.3 $ 11.8 $ 11.8 $ 11.4 $ 11.4 $ 11.3 $ 10.8 $ 11.5
value, beginning 70 10 30 80 00 30 90 30 20 60
of period
20.Income from .699 .709 .770 .783 .834 .863 .886 .881 .894 .902
Investment
Operations
Net interest
income
21. Net realized (.307) .858 (1.473 .788 .208 .429 (.060) .160 .510 (.740)
and )
unrealized gain
(loss)
22. Total from (.392) 1.567 (.703) 1.571 1.042 1.292 .826 1.041 1.404 .162
investment
operations
23.Less (.699) (.709) (.770) (.783) (.834) (.863) (.886) (.881) (.894) (.902)
Distributions
From net
interest income
24. In excess of (.004) -- -- -- -- -- -- -- -- --
net interest D
income
25. From net -- -- (.050) (.340) (.130) (.060) -- -- -- --
realized gain
26. Total (.703) (.709) (.820) (1.12 (.964) (.923) (.886) (.881) (.894) (.902)
distributions 3)
27.Redemption .001 .002 .003 .002 .002 .001 -- -- -- --
fees added to
paid in capital
28.Net asset $ 11.3 $ 11.6 $ 10.8 $ 12.3 $ 11.8 $ 11.8 $ 11.4 $ 11.4 $ 11.3 $ 10.8
value, end of 60 70 10 30 80 00 30 90 30 20
period
29.Total returnA 3.56% 14.89 (5.82) 13.63 9.17 11.77 7.48 9.50 13.40 1.42%
% % % % % % % %
30.RATIOS AND SUPPLEMENTAL DATA
31.Net assets, $ 852 $ 910 $ 796 $ 952 $ 762 $ 654 $ 551 $ 546 $ 456 $ 353
end of period (In
millions)
32.Ratio of .63% .64% .63% .64% .64% .69% .66% .69% .73% .74%C
expenses to
average net
assets
33.Ratio of net 6.14% 6.24 6.69% 6.37 7.01 7.46 7.79 7.68 7.98% 8.06%
interest income to % % % % % %
average net
assets
34.Portfolio 35% 39% 40% 54% 43% 30% 46% 46% 46% 68%
turnover rate
</TABLE>
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
F EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
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 THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The tables
below show the fund's performance over past fiscal years compared to
different measures, including a comparative index and a competitive funds
average. The chart on page presents calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Pas Past Past
December 31, 1996 t 1 5 10
yea year year
r s s
Aggressive Municipal 3.56 6.81 7.72
% % %
Lehman Brothers Municipal Bond Index 4.43 7.28 7.79
% % %
Lipper High Yld. Muni. Debt Funds Average 4.17 6.92 7.34
% % %
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Pas Past Past
December 31, 1996 t 1 5 10
yea year year
r s s
Aggressive Municipal 3.56 39.01 110.3
% % 3%
Lehman Brothers Municipal Bond Index 4.43 42.13 111.81
% % %
Lipper High Yld. Muni. Debt Funds Average 4.17 39.85 103.3
% % 5%
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 MUNICIPAL BOND INDEX is a total return performance
benchmark for 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 High Yield Municipal Debt Funds
Average, which reflects the performance of 43 mutual funds with similar
investment objectives. This average, published by Lipper Analytical
Services, Inc., excludes the effect of sales charges.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
AGGRESSIVE MUNICIPAL 1.42% 13.40% 9.50% 7.48% 11.77% 9.17% 13.63% -5.82
14.89
% 3.56%
Lipper High Yld. Muni Debt
Funds Average 0.38% 11.28% 10.11% 5.13% 11.52% 8.51% 11.41% -4.67% 15.9
8% 4.17%
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54%
3.32
%
Percentage (%)
Row: 1, Col: 1, Value: 1.42
Row: 2, Col: 1, Value: 13.4
Row: 3, Col: 1, Value: 9.5
Row: 4, Col: 1, Value: 7.48
Row: 5, Col: 1, Value: 11.77
Row: 6, Col: 1, Value: 9.17
Row: 7, Col: 1, Value: 13.63
Row: 8, Col: 1, Value: -5.819999999999999
Row: 9, Col: 1, Value: 14.89
Row: 10, Col: 1, Value: 3.56
(LARGE SOLID BOX) Aggressive
Municipal
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
AGGRESSIVE MUNICIPAL IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. The fund is a
diversified fund of Fidelity Municipal Trust, an open-end management
investment company organized as a Massachusetts business trust on June 22,
1984.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
Tanya Roy is manager of Aggressive Municipal, which she has managed since
October 1995. She also manages other Fidelity funds. Ms. Roy joined
Fidelity in 1989 as an analyst; she has been managing funds since 1995.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 225
(solid bullet) Assets in Fidelity mutual
funds: over $432 billion
(solid bullet) Number of shareholder
accounts: over 29 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 270
(checkmark)
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service 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 family are the predominate owners of a class of shares of common
stock representing approximately 49% of the voting power of FMR Corp. Under
the Investment Company Act of 1940 (the 1940 Act), control of a company is
presumed where one individual or group of individuals owns more than 25% of
the voting stock of that company; therefore, the Johnson family may be
deemed under the 1940 Act to form a controlling group with respect to FMR
Corp.
UMB Bank, n.a., is the fund's transfer agent, although it employs FSC to
perform these functions for the fund. UMB is located at 1010 Grand Avenue,
Kansas City, Missouri.
A broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
the fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND'S INVESTMENT APPROACH
BOND FUNDS IN GENERAL. The yield and share price of a bond fund change
daily based on changes in interest rates and market conditions, and in
response to other economic, political or financial events. The types and
maturities of the securities a bond fund purchases and the credit quality
of their issuers will impact a bond fund's reaction to these events.
INTEREST RATE RISK. In general, bond prices rise when interest rates fall
and fall when interest rates rise. Longer-term bonds are usually more
sensitive to interest rate changes. In other words, the longer the maturity
of a bond, the greater the impact a change in interest rates is likely to
have on the bond's price. In addition, short-term interest rates and
long-term interest rates do not necessarily move in the same amount or in
the same direction. A short-term bond tends to react to changes in
short-term interest rates and a long-term bond tends to react to changes in
long-term interest rates.
ISSUER RISK. The price of a bond is affected by the credit quality of its
issuer. Changes in the financial condition of an issuer, changes in general
economic conditions, and changes in specific economic conditions that
affect a particular type of issuer can impact the credit quality of an
issuer. Lower quality bonds generally tend to be more sensitive to these
changes than higher quality bonds.
MUNICIPAL MARKET RISK. Municipal securities are backed by the entity that
issued them and/or other revenue streams. Municipal security values may be
significantly affected by political changes, as well as uncertainties in
the municipal market related to taxation or the rights of municipal
securities holders.
FIDELITY'S APPROACH TO BOND FUNDS. The total return from a bond includes
both income and price gains or losses. In selecting investments for a bond
fund, FMR considers a bond's expected income together with its potential
for price gains or losses. While income is the most important component of
bond returns over time, a bond fund's emphasis on income does not mean the
fund invests only in the highest-yielding bonds available, or that it can
avoid losses of principal.
FMR focuses on assembling a portfolio of income-producing bonds that it
believes will provide the best balance between risk and return within the
range of eligible investments for the fund. FMR's evaluation of a potential
investment includes an analysis of the credit quality of the issuer, its
structural features, its current price compared to FMR's estimate of its
long-term value, and any short-term trading opportunities resulting from
market inefficiencies.
In structuring a bond fund, FMR allocates assets among different market
sectors (for example, general obligation bonds of a state or bonds
financing a specific project) and different maturities based on its view of
the relative value of each sector or maturity. The performance of the fund
will depend on how successful FMR is in pursuing this approach.
AGGRESSIVE MUNICIPAL seeks high current income that is free from federal
income tax by investing primarily in investment-grade municipal securities.
Effective March 17, 1997, the fund will limit its investments in below
investment-grade securities to 35% of its assets. Although prior to this
date, the fund had no limit on its investments in below investment-grade
securities, its holdings in below investment-grade securities were 34.1% of
its assets as of December 31, 1996. 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 8 and 18 years. As of December 31,
1996, the fund's dollar-weighted average maturity was approximately 16.8
years.
FMR normally invests at least 80% of the fund's assets in federally
tax-free municipal securities. 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.
FMR may use various techniques to hedge a portion of the fund's risks, but
there is no guarantee that these strategies will work as intended. When you
sell your shares of the fund, they may be worth more or less than what you
paid for them.
FMR normally invests the fund's assets according to its investment
strategy. The fund does not expect to invest in federally taxable
obligations. The fund also reserves the right to invest without limitation
in short-term instruments, to hold a substantial amount of uninvested cash,
or to invest more than normally permitted in federally taxable obligations
for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of the fund's limitations and more detailed information
about the fund's investments are contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objective and policies and that doing so will help the fund achieve its
goal. Fund holdings and recent investment strategies are detailed in the
fund's financial reports, which are sent to shareholders twice a year. For
a free SAI or financial report, call 1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer generally pays the investor a
fixed, variable, or floating rate of interest, and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do
not pay current interest, but are sold at a discount from their face
values.
Debt securities have varying levels of sensitivity to changes in interest
rates and varying degrees of credit quality. In general, bond prices rise
when interest rates fall, and fall when interest rates rise. Longer-term
bonds and zero coupon bonds are generally more sensitive to interest rate
changes.
Lower-quality debt securities (sometimes called "junk bonds") are
considered to have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness,
or they may already be in default. The market prices of these securities
may fluctuate more than higher-quality securities and may decline
significantly in periods of general or regional economic difficulty.
Lower-quality securities may be thinly traded, making them difficult to
sell promptly at an acceptable price. Adverse publicity and changing
investor perceptions may affect the ability to obtain prices for, or to
sell these securities.
The following table provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the fund's portfolio. These
figures are dollar-weighted averages of month-end portfolio holdings during
the fiscal year ended December 1996, and are presented as a percentage of
total security investments. These percentages are historical and do not
necessarily indicate the fund's current or future debt holdings.
RESTRICTIONS: The fund does not currently intend to invest more than 10% of
its total assets in bonds that are in default. Effective March 17, 1997,
the fund intends to limit its investments in below investment-grade
securities to less than 35% of its assets. 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.
FISCAL YEAR ENDED DECEMBER 1996 DEBT HOLDINGS, BY RATING
MOODY'S INVESTORS
SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF
INVESTMENTS)
Rating Average Rating Average
INVESTMENT GRADE
Highest quality Aaa 20.6% AAA 19.6%
High quality Aa 4.4% AA 4.9%
Upper-medium grade A 10.8% A 10.7%
Medium grade Baa 21.0% BBB 17.0%
LOWER QUALITY
Moderately speculative Ba 7.6% BB 7.8%
Speculative B 0.7% B 0.5%
Highly speculative Caa 0.5% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears --- 0.0% D 0.5%
65.6% 61.0%
(AS A % OF INVESTMENTS)
SECURITIES NOT RATED BY MOODY'S OR S&P(dagger)
Investment Grade (double dagger) 1.9%
Lower Quality (double dagger) 26.0%
Total 27.9%
(dagger) THE DOLLAR-WEIGHTED AVERAGE PERCENTAGES REFLECTED IN THE TABLE MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS
WELL AS UNRATED SECURITIES.
(double dagger) AS DETERMINED BY FMR
MUNICIPAL SECURITIES are issued to raise money for a variety of public or
private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be fully or partially backed by the local government, or by the credit
of a private issuer or the current or anticipated revenues from specific
projects or assets. Because many municipal securities are issued to finance
similar types of projects, especially those relating to education, health
care, housing, transportation, and utilities, the municipal markets can be
affected by conditions in those sectors. In addition, all municipal
securities may be affected by uncertainties regarding their tax status,
legislative changes, or rights of municipal securities holders. A municipal
security may be owned directly or through a participation interest.
CREDIT AND LIQUIDITY SUPPORT. Issuers may employ various forms of credit
and liquidity enhancement, including letters of credit, guarantees, puts
and demand features, and insurance, provided by foreign or domestic
entities such as banks and other financial institutions. These arrangements
expose the fund to the credit 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.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by a municipal issuer.
The value of these securities depends on many factors, including changes in
market interest rates, the availability of information concerning the pool
and its structure, prepayment expectations, the credit quality of the
underlying assets, and the market's perception of the servicer of the loan
pool, and any credit enhancement provided.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, often making the security's market
value more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipal issuers to acquire land,
equipment, or facilities. If the issuer stops making payments or transfers
its obligations to a private entity, the obligation could lose value or
become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories and
possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) a security to the issuer
or another party. In exchange for this benefit, 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 economic viability
of a project or changes in tax incentives could affect the price of these
securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security prices. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, entering into swap agreements, and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return characteristics
of 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 price of the security
could change during this period.
CASH MANAGEMENT. The fund may invest in money market securities and in a
money market fund available only to funds and accounts managed by FMR or
its affiliates, whose goal is to seek a high level of current income exempt
from federal income tax while maintaining a stable $1.00 share price. A
major change in interest rates or a default on the money market fund's
investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may not
purchase a security if, as a result, more than 5% would be invested in the
securities of any one issuer. This limitation does not apply to U.S.
Government securities. The fund may invest more than 25% of its total
assets in tax-free securities that finance similar types of projects.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
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 to provide a high current yield, exempt from federal income
tax.
The fund will normally invest at least 80% of its assets in municipal
securities whose interest is exempt from federal tax.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any one issuer.
The fund may not invest more than 25% of its total assets in any one
industry.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained on
the following 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.
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)
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .37%, and it drops as
total assets under management increase.
For December 1996, the group fee rate was .1425%. The individual fund fee
rate is .30%. The total management fee rate for the fiscal year ended
December 1996 was .45%. Effective March 1, 1997, FMR has voluntarily agreed
to reduce the fund's individual fund fee rate from .30% to .25%. If this
reduction were in effect, the total management fee rate would have been
.40%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing the fund's
investments, and handling securities loans. In the fiscal year ended
December 1996, FSC received fees equal to .16% of the fund's average net
assets.
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for the fiscal year ended December 1996
was 35%. This rate varies from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 80 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
You may purchase or sell shares of the fund through an investment
professional, including a broker, who may charge you a transaction fee for
this service. If you invest through FBSI, another financial institution, or
an investment professional, read their program materials for any special
provisions, additional service features or fees that may apply to your
investment in the fund. Certain features of the fund, such as the minimum
initial or subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
TO ADD TO AN ACCOUNT $250
Through regular investment plans* $100
MINIMUM BALANCE $2,000
* FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
These minimums may vary for investments through Fidelity Portfolio Advisory
Services. Refer to the program materials for details.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to "Fidelity
check payable to Aggressive Municipal
"Fidelity Aggressive Fund." Indicate your
Municipal Fund." Mail fund account number
to the address on your check and mail
indicated on the to the address printed
application. on your account
statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Fidelity
Bank Routing Aggressive Municipal
#021001033, Fund" and include your
Account #00163053. account number and
Specify "Fidelity your name.
Aggressive Municipal
Fund" and include your
new account number
and your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $2,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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 REDEMPTION FEE EQUAL TO1.00% OF THE VALUE OF THOSE SHARES.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received and
accepted by Fidelity before 4
p.m. Eastern time for money
to be wired on the next
business day.
</TABLE>
<TABLE>
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<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
TOUCHTONE XPRESSSM
1-800-544-5555
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more than
one account in the fund. Call 1-800-544-6666 if you need copies of
financial reports, prospectuses, or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
</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 (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
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, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in February
and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days or longer for a December
ex-dividend date.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
The fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
A portion of the fund's dividends may be free from state or local taxes.
Income from investments in your state are often tax-free to you. Each year,
Fidelity will send you a breakdown of the fund's income from each state to
help you calculate your taxes.
During the fiscal year ended December 1996, 100% of the fund's income
dividends was free from federal income tax and 20.75% of the fund's income
dividends was subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when the fund has realized but not
yet distributed income or capital gains, you will pay the full price for
the shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees the fund or its
transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when the fund is priced on
the following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE REDEMPTION FEE, if applicable, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR, and it does not
apply to shares that were acquired through reinvestment of distributions.
If shares you are redeeming were not all held for the same length of time,
those shares you held longest will be redeemed first for purposes of
determining whether the fee applies.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $24.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. This fee will not be
deducted from Fidelity brokerage accounts, retirement accounts (except
non-prototype retirement accounts), accounts using regular investment
plans, or if total assets with Fidelity exceed $30,000. Eligibility for the
$30,000 waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number or
which list the same social security number for the custodian of a Uniform
Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $2,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the fund without reimbursement
from the fund. Qualified recipients are securities dealers who have sold
fund shares or others, including banks and other financial institutions,
under special arrangements in connection with FDC's sales activities. In
some instances, these incentives may be offered only to certain
institutions whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be available for
sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
Spartan Aggressive Municipal Fund
(A Fund of Fidelity Union Street Trust)
Fidelity Aggressive Municipal Fund
(A Fund of Fidelity Municipal Trust)
FORM N-14
STATEMENT OF ADDITIONAL INFORMATION
_________________
This Statement of Additional Information, relates to the proposed
reorganization whereby Fidelity Aggressive Municipal Fund (Fidelity
Aggressive), a Fund of Fidelity Municipal Trust, would acquire
substantially all of the assets of Spartan Aggressive Municipal Fund
(Spartan Aggressive), a Fund of Fidelity Union Street Trust, and assume all
of Spartan Aggressive's liabilities in exchange solely for shares of
beneficial interest in Fidelity Aggressive.
This Statement of Additional Information consists of this cover page and
the following described documents, each of which is attached hereto and
incorporated herein by reference:
1. The Prospectus and Statement of Additional Information of Spartan
Aggressive Municipal Fund, dated October 18, 1996 and the Supplement to the
Prospectus dated February 28, 1997.
2. The Statement of Additional Information (SAI) of Fidelity Aggressive
Municipal Fund, dated February 28, 1997.
3. The Annual Report of Spartan Aggressive Municipal Fund for the fiscal
year ended August 31, 1996.
4. The Annual Report of Fidelity Aggressive Municipal Fund for the fiscal
year ended December 31, 1996.
This Statement of Additional Information is not a prospectus. A Proxy
Statement and Prospectus dated May 19, 1997, relating to the
above-referenced matter may be obtained from Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, Massachusetts, 02109. This
Statement of Additional Information relates to, and should be read in
conjunction with, such Proxy Statement and Prospectus.
The date of this Statement of Additional Information is May 19, 1997.
FIDELITY AGGRESSIVE MUNICIPAL FUND
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1997
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current Prospectus (dated
February 28, 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 of Portfolio Securities
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)
Fidelity Service Company, Inc. (FSC)
FAT-ptb-0297
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) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
For purposes of limitation (1) and (5) , FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
.
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940 (the 1940
Act). These transactions may include repurchase agreements with custodian
banks; short-term obligations of, and repurchase agreements with, the 50
largest U.S. banks (measured by deposits); municipal securities; U.S.
government securities with affiliated financial institutions that are
primary dealers in these securities; short-term currency transactions; and
short-term borrowings. In accordance with exemptive orders issued by the
Securities and Exchange Commission (SEC), the Board of Trustees has
established and periodically reviews procedures applicable to transactions
involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. 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
(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 state legislatures 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 Statement of Additional Information, are not
fundamental policies and 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 municipals is considered to be adequate, adverse
publicity and changing investor perceptions may affect the ability of
outside pricing services used by the fund to value its portfolio
securities, and the fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
MARKET DISRUPTION RISK. The value of municipal securities may be affected
by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL SECTORS:
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.
MUNICIPAL LEASES and participation interests therein may take the form of a
lease, an installment purchase, or a conditional sale contract and are
issued by state and local governments and authorities to acquire land or a
wide variety of equipment and facilities. Generally, the fund will not hold
such obligations directly as a lessor of the property, but will purchase a
participation interest in a municipal obligation from a bank or other third
party. A participation interest gives the fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the
total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
it fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place liquid
assets in a segregated custodial account equal in amount to its obligations
under refunding contracts.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect the fund
from risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to the fund in connection with
bankruptcy proceedings), it is the fund's current policy to engage in
repurchase agreement transactions with parties whose creditworthiness has
been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, the fund might obtain
a less favorable price than prevailed when it decided to seek registration
of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a third
party at any time. The fund may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such
commitments. In the latter case, the fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, the fund intends to purchase these
instruments based on opinions of bond counsel. A fund may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
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, Fidelity Brokerage
Services, Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal periods ended December 31, 1996 and 1995, the fund's
portfolio turnover rates were 35% and 39%, respectively.
For the fiscal years ended 1996, 1995, and 1994, the fund paid no brokerage
commissions.
For the fiscal year ended 1996, 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 OF PORTFOLIO SECURITIES
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 are 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 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 1.00%
redemption fee, which applies to shares held less than 180 days. Income is
calculated for purposes of yield quotations in accordance with standardized
methods applicable to all stock and bond funds. In general, interest income
is reduced with respect to bonds trading at a premium over their par value
by subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses generally
are excluded from the calculation.
Income calculated for the purposes of calculating 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.
In calculating the fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
The fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment before taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing the fund's yield by
the result of one minus a stated federal 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 table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1997. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 4% to 8%. Of course, no assurance can
be given that the fund will achieve any specific tax-exempt yield. While
the fund invests principally in obligations whose interest is exempt from
federal income tax, other income received by the fund may be taxable.
1997 TAX RATES AND TAX-EQUIVALENT YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
Taxable Income* Marginal 4% 5% 6% 7% 8%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Rate** Then taxable-equivalent yield is:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 24,651 - 59,750 $ 41,201 - 99,600 28% 5.56% 6.94% 8.33% 9.72% 11.11%
59,751 - 124,650 99,601 - 151,750 31% 5.80% 7.25% 8.70% 10.14% 11.59%
124,651 - 271,050 151,751 - 271,050 36% 6.25% 7.81% 9.38% 10.94% 12.50%
271,051 + Above 271,051 + Above 39.6% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
The fund may invest a portion of its assets in obligations that are subject
to federal income tax. When the fund invests in these obligations, its
tax-equivalent yields will be lower. In the table above, tax-equivalent
yields are calculated assuming investments are 100% federally tax-free.
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 1.00% 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 NAVs, adjusted NAVs,
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 December 31,
1996. Total return figures include the effect of the fund's 1.00%
redemption fee, applicable to shares held less than 180 days.
The tax-equivalent yield is based on a 36% federal income tax rate. Note
that the fund may invest in securities whose income is subject to the
federal alternative minimum tax.
<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> <C>
Thirty-Day Tax- One Five Ten One Five Ten
Yield Equivalent Year Years Years Year Years Years
Yield
Aggressive 5.35% 8.36% 3.56% 6.81% 7.72% 3.56% 39.01% 110.33%
Municipal
</TABLE>
If FMR had not reimbursed certain fund expenses during these periods, the
fund's ten year 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 funds. 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 10-year period ended December 31, 1996, a hypothetical $10,000
investment in Aggressive Municipal would have grown to $21,033, 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 1.00% redemption fee applicable to shares held 180 days.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY AGGRESSIVE MUNICIPAL FUND INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period 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
1996 $ 9,827 $ 10,420 $ 786 $ 21,033 $ 41,499 $ 46,181 $ 14,353
1995 $ 10,095 $ 9,415 $ 800 $ 20,310 $ 33,750 $ 35,882 $ 13,891
1994 $ 9,351 $ 7,586 $ 741 $ 17,678 $ 24,531 $ 26,244 $ 13,548
1993 $ 10,666 $ 7,336 $ 768 $ 18,770 $ 24,213 $ 25,001 $ 13,195
1992 $ 10,277 $ 5,986 $ 255 $ 16,518 $ 21,996 $ 21,370 $ 12,842
1991 $ 10,208 $ 4,846 $ 77 $ 15,131 $ 20,434 $ 19,916 $ 12,480
1990 $ 9,888 $ 3,649 $ 0 $ 13,537 $ 15,660 $ 16,018 $ 12,109
1989 $ 9,939 $ 2,655 $ 0 $ 12,594 $ 16,164 $ 16,104 $ 11,412
1988 $ 9,801 $ 1,700 $ 0 $ 11,501 $ 12,275 $ 12,222 $ 10,905
1987 $ 9,360 $ 782 $ 0 $ 10,142 $ 10,526 $ 10,543 $ 10,443
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in the fund on
December 31, 1986, the net amount invested in the fund shares was $10,000.
The cost of the initial investment ($10,000) together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested) amounted to
$21,398. If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $7,112 for dividends
and $505 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
redemption 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.
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, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index), 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,
a quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
an investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of December 31, 1996, FMR advised over $28 billion in tax-free fund
assets, $96 billion in money market fund assets, $303 billion in equity
fund assets, $61 billion in international fund assets, and $25 billion in
Spartan fund assets. The fund may reference the growth and variety of money
market mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the largest
amount of equity fund assets under management by a mutual fund investment
adviser in the United States, making FMR America's leading equity (stock)
fund manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its NAV is calculated each day the New
York Stock Exchange (NYSE) is open for trading. The NYSE has designated the
following holiday closings for 1997: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Although FMR expects the same holiday schedule to be
observed in the future, the NYSE may modify its holiday schedule at any
time. 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 SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares. In addition,
trading in some of the fund's portfolio securities may not occur on days
when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. 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 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 fully invested in federally tax-exempt
municipal securities. 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.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund, and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital gains.
As of December 31, 1996, the fund had a capital loss carryforward
aggregating approximately $19,155,000. This loss carryforward, of which
$1,444,000, $8,549,000, and $9,162,000 will expire on December 31, 2002,
2003, and 2004, respectively, is available to offset future capital gains.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some futures contracts and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
The fund is treated as a separate entity from the other funds of Fidelity
Municipal Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting 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
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. The
business address of each Trustee 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 (66), 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 (55), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (64), Trustee (1991), is a management consultant (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 Sanifill Corporation
(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.
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),
Cleveland-Cliffs Inc (mining), 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
marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc. (1985-1995).
In addition, he serves as a Trustee of First Union Real Estate Investments,
a Trustee and member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (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 (53), 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). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
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 (67), Trustee and Vice-Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Prior to his retirement in July 1988, he was Chairman and Chief
Executive Officer of Leaseway Transportation Corp. (physical distribution
services). Mr. McDonough is a Director of Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products, 1996), and
Associated Estates Realty Corporation (a real estate investment trust,
1993). Mr. McDonough served as a Director of ACME-Cleveland Corp. (metal
working, telecommunications, and electronic products) from 1987-1996.
MARVIN L. MANN (63), Trustee (1993) is Chairman of the Board, President,
and Chief Executive Officer of Lexmark International, Inc. (office
machines, 1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign
Vice Chairman of the Tri-State United Way (1993) and is a member of the
University of Alabama President's Cabinet.
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 BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
FRED L. HENNING, JR. (57), Vice President, is Vice President of Fidelity's
fixed-income funds (1995) and Senior Vice President of FMR (1995).
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.
KENNETH A. RATHGEBER (49), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
THOMAS D. MAHER (51), 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 (50), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (50), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994) and Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
THOMAS J. SIMPSON (38), Assistant Treasurer, is Assistant Treasurer of
Fidelity's municipal bond funds (1996) and of Fidelity's money market funds
(1996) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was
Vice President and Fund Controller of Liberty Investment Services
(1987-1995).
The following table sets forth information describing the compensation of
each Trustee of the fund for his or her services for the fiscal year ended
December 31, 1996.
COMPENSATION TABLE
Trustees Aggregate Total
Compensation Compensation
from from the Fund
Aggressive Complex*A
MunicipalA,B
J. Gary Burkhead ** $ 0 $ 0
Ralph F. Cox 299 137,700
Phyllis Burke Davis 296 134,700
Richard J. Flynn*** 368 168,000
Edward C. Johnson 3d ** 0 0
E. Bradley Jones 296 134,700
Donald J. Kirk 299 136,200
Peter S. Lynch ** 0 0
William O. McCoy**** 177 85,333
Gerald C. McDonough 298 136,200
Edward H. Malone*** 296 136,200
Marvin L. Mann 293 134,700
Thomas R. Williams 299 136,200
* Information is as of December 31, 1996 for 235 funds in the complex.
** Interested Trustees of the fund are compensated by FMR.
*** Richard J. Flynn and Edward H. Malone served on the Board of Trustees
through December 31, 1996.
**** During the period from May 1, 1996 through December 31, 1996, William
O. McCoy served as a Member of the Advisory Board of Fidelity Municipal
Trust.
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 The following amounts are required to be deferred by each non-interested
Trustee, most of which is subject to vesting: Ralph F. Cox, $11, Phyllis
Burke Davis, $11, Richard J. Flynn, $0, E. Bradley Jones, $11, Donald J.
Kirk, $11, William O. McCoy, $0, Gerald C. McDonough, $11, Edward H.
Malone, $11, Marvin L. Mann, $11, and Thomas R. Williams, $11.
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.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of fees in accordance with the Plan will have a
negligible effect on the fund's assets, liabilities, and net income per
share, and will not obligate the funds to retain the services of any
Trustee or to pay an particular level of compensation to the Trustee. The
funds may invest in such designated securities 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 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. 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 December 31, 1996, the Trustees and officers of the fund owned, in
the aggregate, less than 1% of the fund's total outstanding shares.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments,
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 and state
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB, the fund pays all of its expenses, without limitation, 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. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund has entered into a revised transfer agent agreement with UMB,
pursuant to which UMB bears the costs of providing these services to
existing shareholders. Other expenses paid by the fund include interest,
taxes, brokerage commissions, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. 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.
FMR is the fund's manager pursuant to a management contract dated March 1,
1993, which was approved by shareholders on February 17, 1993.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and an
individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels, which is the
result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $453 billion of group net assets
- - the approximate level for December 1996 - was .1425%, which is the
weighted average of the respective fee rates for each level of group net
assets up to $453 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
Prior to March 1, 1993, the group fee rate was based on a schedule with
breakpoints ending at .1400% for average group assets in excess of $174
billion. The group fee rate breakpoints shown above for average group
assets in excess of $120 billion and under $228 billion were voluntarily
adopted by FMR on January 1, 1992. The additional breakpoints shown above
for average group assets in excess of $228 billion were voluntarily adopted
by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for average group assets
in excess of $156 billion and under $372 billion as shown in the schedule
below. The revised group fee rate schedule was identical to the above
schedule for average group assets under $156 billion. The fund's current
management contract reflects the group fee rate schedule above for average
group assets under $156 billion and the group fee rate schedule below for
average group assets in excess of $156 billion and under $372 billion.
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $372 billion, pending
shareholder approval of a new management contract reflecting the additional
breakpoints. The revised group fee rate schedule and its extensions provide
for lower management fee rates as FMR's assets under management increase.
The revised group fee rate schedule for average group assets in excess of
$156 billion and up to $372 billion with additional breakpoints voluntarily
adopted by FMR for average group assets in excess of $372 billion is as
follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
120 - $156 billion .1450% $ 150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
372 - 408 .1200 325 .1514
408 - 444 .1175 350 .1494
444 - 480 .1150 375 .1476
480 - 516 .1125 400 .1459
Over 516 .1100 425 .1443
450 .1427
475 .1413
500 .1399
525 .1385
550 .1372
The individual fund fee rate is .30%. Based on the average group net assets
of the funds advised by FMR for December 1996, the annual management fee
rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
.1425% + .30% = .4425%
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.
During the fiscal years ended December 31, 1996, 1995, and 1994, FMR
received $3,873,699, $3,996,093, and $4,041,568, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.45%, .45%, and .46%, respectively, of the average net assets of the fund
for each of those years.
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.
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 Investment Company Act of
1940 (the Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is primarily
intended to result in the sale of shares of a 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 also specifically
recognizes that FMR, either directly or through FDC, may use its management
fee revenue, past profits, or other resources, without limitation, to pay
promotional and administrative expenses in connection with the offer and
sale of shares of the fund. In addition, the Plan provides that FMR may use
its resources, including its management fee revenues, to make payments to
third parties that assist in selling shares of the fund, or to third
parties, including banks, that render shareholder support services.
Currently, the Board of Trustees has not authorized such payments.
Prior to approving the Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
the the fund and its shareholders. In particular, the Trustees noted that
the Plan does not authorize payments by the fund other than those made to
FMR under its management contract with the fund. To the extent that the
Plan gives FMR and FDC greater flexibility in connection with the
distribution of shares of the fund, additional sales of 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 Aggressive Municipal on December
30, 1986.
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 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
UMB Bank, n.a. (UMB) is the fund's custodian and transfer agent. UMB has
entered into a sub-contract with FSC, an affiliate of FMR, under the terms
of which FSC performs the processing activities associated with providing
transfer agent and shareholder servicing functions for the fund. Under the
sub-contract, FSC bears the expense of typesetting, printing, and mailing
prospectuses, statements of additional information, and all other reports,
notices, and statements to shareholders, with the exception of proxy
statements. FSC also pays all out-of-pocket expenses associated with
transfer agent services.
Under this arrangement, 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.
UMB has an additional sub-contract with FSC, pursuant to which FSC performs
the calculations necessary to determine the fund's NAV and dividends and
maintains the fund's accounting records. The annual fee rates for these
pricing and bookkeeping services are based on the fund's average net
assets, specifically, .0400% of the first $500 million of average net
assets and .0200% of average net assets in excess of $500 million. The fee
is limited to a minimum of $60,000 and a maximum of $800,000 per year.
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid to FSC for the fiscal years ended 1996, 1995, and 1994 were
$296,466, $301,000, and $306,000, respectively. The transfer agent fee and
charges and pricing and bookkeeping fees described above are paid to FSC by
UMB, which is entitled to reimbursement from the fund for these expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at net
asset value. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
FDC also collects Aggressive Municipal's 1% redemption fee for shares held
less than 180 days. When redeemed, shares acquired through the reinvestment
of dividends and capital gains are exempt from the redemption fee. For the
fiscal years ended 1996, 1995, and 1994, FDC collected redemption fees
totaling $88,615, $166,032 and $255,161, respectively.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Aggressive Municipal Fund is a fund of
Fidelity Municipal Trust, an open-end management investment company
originally organized as a Maryland corporation on November 22, 1976 and
reorganized as a Massachusetts business trust on June 22, 1984, at which
time its name changed from Fidelity Municipal Bond Fund, Inc. to Fidelity
Municipal Bond Fund. On March 1, 1986, the trust's name was changed to
Fidelity Municipal Trust. Currently, there are seven funds of Fidelity
Municipal Trust: Fidelity Municipal Bond Fund; Fidelity Aggressive
Municipal Fund; Fidelity Insured Municipal Income Fund; Fidelity Ohio
Municipal Income Fund; Fidelity Michigan Municipal Income Fund; Fidelity
Minnesota Municipal Income Fund; and Spartan Pennsylvania 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 "Fidelity"
may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value you own. The shares have no preemptive or conversion
rights; the voting and dividend rights, the right of redemption, and the
privilege of exchange are described in the Prospectus. Shares are fully
paid and nonassessable, except as set forth under the heading "Shareholder
and Trustee Liability" above. Shareholders representing 10% or more of the
trust or a fund may, as set forth in the Declaration of Trust, call
meetings of the trust or a fund for any purpose related to the trust or
fund, as the case may be, including, in the case of a meeting of the entire
trust, the purpose of voting on removal of one or more Trustees. The trust
or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the trust or the fund, as determined by the current value of
each shareholder's investment in the fund or trust. If not so terminated,
the trust and its funds will continue indefinitely. Each fund may invest
all of its assets in another investment company.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri, is
custodian of the assets of the fund. The custodian is responsible for the
safekeeping of a fund's assets and the appointment of any subcustodian
banks and clearing agencies. The custodian takes no part in determining the
investment policies of a fund or in deciding which securities are purchased
or sold by a fund. However, a fund may invest in obligations of the
custodian and may purchase securities from or sell securities to the
custodian.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain funds advised by FMR.
Transactions that have occurred to date include mortgages and personal and
general business loans. In the judgment of FMR, the terms and conditions of
those transactions were not influenced by existing or potential custodial
or other fund relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the fiscal
year ended December 31, 1996 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.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
The descriptions that follow are examples of eligible ratings for the fund.
The fund may, however, consider the ratings for other types of investments
and the ratings assigned by other rating organizations when determining the
eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF MUNICIPAL OBLIGATIONS
Moody's ratings for long-term municipal obligations fall within nine
categories. They range from Aaa (highest quality) to C (lowest quality).
Those bonds within the Aa through B categories that Moody's believes
possess the strongest credit attributes within those categories are
designated by the symbol "1."
AAA - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds that are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds that are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL DEBT
Municipal debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB" through
"D"). While speculative grade debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions. Ratings from AA through CCC may be
modified by the addition of a plus sign (+) or a 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 rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
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.
SUPPLEMENT TO THE SPARTAN(registered trademark) MUNICIPAL FUNDS' OCTOBER
18, 1996 PROSPECTUS
PROPOSED REORGANIZATION. The Board of Trustees of Spartan Aggressive
Municipal Fund has unanimously approved an Agreement and Plan of
Reorganization ("Agreement") between Spartan Aggressive Municipal Fund and
Fidelity Aggressive Municipal Fund, a fund of Fidelity Municipal Trust.
The Agreement provides for transfer of substantially all of the assets and
the assumption of all of the liabilities of Spartan Aggressive Municipal
Fund solely in exchange for the number of shares of Fidelity Aggressive
Municipal Fund equal in value to the relative net asset value of the
outstanding shares of Spartan Aggressive Municipal Fund. Following such
exchange, Spartan Aggressive Municipal Fund will distribute the Fidelity
Aggressive Municipal Fund shares to its shareholders pro rata, in
liquidation of Spartan Aggressive Municipal Fund as provided in the
Agreement (the transactions contemplated by the Agreement referred to as
the "Reorganization").
The Reorganization can be consummated only if, among other things, it is
approved by a majority vote of shareholders. A Special Meeting (the
"Meeting") of the Shareholders of Spartan Aggressive Municipal Fund will be
held on July 16, 1997, and approval of the Agreement will be voted on at
that time. In connection with the Meeting, Spartan Aggressive Municipal
Fund will be filing with the Securities and Exchange Commission and
delivering to its shareholders of record a Proxy Statement describing the
Reorganization and a Prospectus for Fidelity Aggressive Municipal Fund.
If the Agreement is approved at the Meeting and certain conditions required
by the Agreement are satisfied, the Reorganization is expected to become
effective on or about July 31, 1997. If shareholder approval of the
Agreement is delayed due to failure to meet a quorum or otherwise, the
Reorganization will become effective, if approved, as soon as practicable
thereafter.
In the event Spartan Aggressive Municipal Fund shareholders fail to approve
the Agreement, Spartan Aggressive Municipal Fund will continue to engage in
business as a registered investment company and the Board of Trustees will
consider other proposals for the reorganization or liquidation of Spartan
Aggressive Municipal Fund.
The following paragraph on the cover page has been removed:
Spartan Aggressive Municipal may invest without limitation in lower-quality
debt securities, sometimes called "municipal junk bonds." Investors should
consider that these securities carry greater risks, such as the risk of
default, than other debt securities. Refer to "Investment Principles and
Risks" on page 17 for further information.
The following information supplements that found in the "Who May Want to
Invest" section beginning on page 3.
Effective January 20, 1997, Spartan Aggressive Municipal was closed to all
new and subsequent purchases except for reinvestment of dividends or other
distributions.
The following information replaces similar information found in the
"Expenses" section on page 6.
SPARTAN AGGRESSIVE MUNICIPAL
Operating Expenses
Management fee .55%A
12b-1 fee None
Other expenses .00%
Total fund operating expenses .55%
AEffective March 1, 1997, FMR has voluntarily agreed to
implement a management fee reduction from .60% to .55%.
Examples
Account Account
open closed
After 1 $ $
year
After 3 $ $
years
After 5 $ $
years
After 10 $ $
years
Effective March 17, 1997, the following information replaces similar
information found in the "Investment Principles and Risks" section on page
18.
SPARTAN AGGRESSIVE MUNICIPAL invests primarily in investment grade
municipal securities. The fund may also invest up to 35% of its assets in
below investment-grade securities. 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 municipal bonds
with maturities between eight and 18 years. As of August 31, 1996, the
fund's dollar-weighted average maturity was approximately 15 years. The
fund normally invests so that at least 80% of its assets are invested in
municipal securities whose interest is free from federal income tax.
Effective March 17, 1997, the following information replaces similar
information found in the "Securities and Investment Practices" section on
page 20.
RESTRICTIONS: Spartan Short-Intermediate Municipal Income, Spartan
Intermediate Municipal Income, and Spartan Municipal Income normally invest
in investment-grade securities, but reserve the right to invest up to 5% of
their assets in below investment-grade securities (sometimes called
"municipal junk bonds"). Spartan Aggressive Municipal currently intends to
limit its investments in below investment-grade securities to less than 35%
of its assets and does not currently intend to invest more than 10% of its
total assets in bonds that are in default. A security is considered to be
investment-grade if it is rated investment grade by Moody's Investors
Service, Standard and 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.
The following information replaces similar information found in the
"Breakdown of Expenses" section on page 25.
FMR has voluntarily agreed to limit Spartan Municipal Money's total
operating expenses to an annual rate of .40% of average net assets for the
fiscal year ended 1996. Effective March 1, 1997, FMR has voluntarily agreed
to reduce Spartan Aggressive Municipal's management fee rate from .60% to
.55%. If this reduction were in effect, the total management fee rate would
have been .55%.
The following information replaces similar information found in the "How to
Buy Shares" section on page 28.
These minimums may vary for investments through Fidelity Portfolio Advisory
Services. Refer to the program materials for details. Effective January 20,
1997, Spartan Aggressive Municipal was closed to new and subsequent
purchases except for reinvestment of dividends or other distributions.
The following information replaces similar information found in the
"Transaction Details" section found on page 38.
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.
The following information replaces similar information found in the "Key
Facts" section on page 4.
Spartan Allowed to invest in With its ability to invest in
Agressiv lower-quality municipal lower-quality securities
e securities. Although the fund with longer-term
Municipa can invest in securities of any maturities, this is the
l maturity, FMR seeks to most aggressive fund in
manage the fund so that it the family.
generally reacts to changes in
interest rates similarly to
municipal bonds with
maturities between 8 and 18
years.
(high risk graphic)
(low to medium risk graphic)
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
each fund's most recent financial reports and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated October 18, 1996.
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.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
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.
Spartan Aggressive Municipal may invest without limitation in lower-quality
debt securities, sometimes called "municipal junk bonds." Investors should
consider that these securities carry greater risks, such as the risk of
default, than other debt securities. Refer to "Investment Principles and
Risks" on page for further information.
LIKE ALL MUTUAL FUNDS,
THESE SECURITIES HAVE
NOT BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION
OR ANY STATE
SECURITIES COMMISSION,
NOR HAS THE SECURITIES
AND EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
SMU-pro-1096
Each of these funds seeks a high level of income free from federal income
tax. The funds have different strategies, however, and carry varying
degrees of risk and yield potential.
SPARTAN(registered trademark)
MUNICIPAL
FUNDS
SPARTAN MUNICIPAL MONEY FUND
SPARTAN SHORT-INTERMEDIATE
MUNICIPAL INCOME FUND
SPARTAN INTERMEDIATE
MUNICIPAL INCOME FUND
SPARTAN MUNICIPAL
INCOME FUND
SPARTAN AGGRESSIVE
MUNICIPAL FUND
PROSPECTUS
OCTOBER 18, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
The chart on page highlights the strategy, risk, and yield potential for
each fund. Elements common to all five funds are described below.
GOAL: High current income free from federal income tax. As with any mutual
fund, there is no assurance that a fund will achieve its goal.
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. FMR Texas Inc. (FMR Texas), a
subsidiary of FMR, chooses investments for Spartan Municipal Money.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors in higher tax brackets who
seek high current income that is free from federal income taxes. Each
fund's level of risk and potential reward, depend on the quality and
maturity of its investments. Spartan Municipal Money is managed to keep its
share price stable at $1.00. The bond funds, with their broader range of
investments, have the potential for higher yields, but also carry a higher
degree of risk. You should consider your investment objective and tolerance
for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions,
and other federal and state political and economic news. When you sell your
shares of any of the bond funds, they may be worth more or less than what
you paid for them. By themselves, these funds do not constitute a balanced
investment plan.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. The
funds in this prospectus are
in the INCOME category,
except for Spartan Municipal
Money, which is in the MONEY
MARKET category.
(right arrow) 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)
FUND STRATEGY RISK AND YIELD POTENTIAL
THE RISK LEVEL AND YIELD POTENTIAL OF MONEY MARKET AND BOND FUNDS DEPEND ON
THE QUALITY AND MATURITY OF THEIR INVESTMENTS. THE CHART BELOW PRESENTS
EACH FUND'S STRATEGY AND EXPLAINS ITS RISK AND YIELD POTENTIAL RELATIVE TO
THE OTHER FUNDS IN THIS FAMILY.
<TABLE>
<CAPTION>
<S> <C> <C>
Spartan Invests normally in high-quality, Because this fund seeks
Municipal short-term municipal securities to maintain a stable
Money with an average maturity of $1.00 share price, it is
90 days or less. the safest and lowest
yielding fund in the
family.
(low risk graphic)
Spartan Invests under normal With its emphasis on
Short-Interme conditions in investment-grade short maturities, this is
diate municipal securities while the most conservative
Municipal normally maintaining an bond fund in the family.
average maturity of two to five
years.
(low to medium risk graphic)
Spartan Invests under normal conditions With its emphasis on
Intermediate in investment-grade municipal intermediate maturities,
Municipal securities while normally this is the moderate
maintaining an average maturity member of the family.
of between three and 10 years.
(medium risk graphic)
Spartan Invests under normal conditions With its emphasis on
Municipal in municipal securities of longer-term maturities,
Income investment-grade quality. this is the moderately
Although the fund can invest in aggressive member of
securities of any maturity, FMR the family.
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.
(low to medium risk graphic)
Spartan Allowed to invest in With its ability to invest in
Aggressive lower-quality municipal lower-quality securities
Municipal securities. Although the fund with longer-term
can invest in securities of any maturities, this is the
maturity, FMR seeks to most aggressive fund in
manage the fund so that it the family.
generally reacts to changes in
interest rates similarly to
municipal bonds of comparable
quality with maturities between
12 and 20 years.
(high risk graphic)
</TABLE>
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell or
hold shares of a fund. See pages and - for more information about these
fees.
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge on purchases None
and reinvested distributions
Deferred sales charge on redemptions None
Redemption fee (as a % of amount redeemed
on shares held less than 180 days)
for Spartan Municipal Income .50%
for Spartan Aggressive Municipal 1.00
%
for all other funds None
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written (available for Spartan Municipal Money, $2.00
Spartan Short-Intermediate Municipal Income, and Spartan Intermediate
Municipal Income)
Account closeout fee $5.00
Annual account maintenance fee (for accounts under $2,500) $12.0
0
</TABLE>
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each fund's
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following figures on page are based on historical expenses adjusted to
reflect current fees, and are calculated as a percentage of average net
assets. Each fund has entered into arrangements on behalf of the fund with
its custodian and transfer agent whereby interest earned on uninvested cash
balances is used to reduce custodian and transfer agent expenses.
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as described on page . For
every $1,000 you invested, the examples on page show you how much you
would pay in total expenses after the number of years indicated, first
assuming that you leave your account open, and then assuming that you close
your account at the end of the period.
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FMR has voluntarily agreed to reimburse Spartan Municipal Money to the
extent that total operating expenses exceed .40% of its average net assets.
If this agreement were not in effect, the management fee, other expenses,
and total operating expenses would have been .50%, .00%, and .50%
respectively. Expenses eligible for reimbursement do not include interest,
taxes, brokerage commissions, or extraordinary expenses.
SPARTAN MUNICIPAL MONEY
Operating Expenses Examples
Account Account
open closed
Management fee (after .40% After 1 year $4 $9
reimbursement)
12b-1 fee None After 3 $13 $18
years
Other expenses .00% After 5 $22 $27
years
Total fund operating .40% After 10 $51 $56
expenses years
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME
Operating Expenses Examples
Account Account
open closed
Management fee .55% After 1 year $6 $11
12b-1 fee None After 3 $18 $23
years
Other expenses .00% After 5 $31 $36
years
Total fund operating .55% After 10 $69 $74
expenses years
SPARTAN INTERMEDIATE MUNICIPAL INCOME
Operating Expenses Examples
Account Account
open closed
Management fee .55% After 1 year $6 $11
12b-1 fee None After 3 $18 $23
years
Other expenses .00% After 5 $31 $36
years
Total fund operating .55% After 10 $69 $74
expenses years
SPARTAN MUNICIPAL INCOME
Operating Expenses Examples
Account Account
open closed
Management fee .55% After 1 year $6 $11
12b-1 fee None After 3 $18 $23
years
Other expenses .00% After 5 $31 $36
years
Total fund operating .55% After 10 $69 $74
expenses years
SPARTAN AGGRESSIVE MUNICIPAL
Operating Expenses Examples
Account Account
open closed
Management fee .60% After 1 year $6 $11
12b-1 fee None After 3 $19 $24
years
Other expenses .00% After 5 $33 $38
years
Total fund operating .60% After 10 $75 $80
expenses years
FINANCIAL HIGHLIGHTS
The tables that follow are included in each fund's Annual Report and have
been audited by Coopers & Lybrand L.L.P., independent accountants. Their
reports on the financial statements and financial highlights are included
in the Annual Reports. The financial statements and financial highlights
are incorporated by reference into (are legally a part of) the funds'
Statement of Additional Information.
SPARTAN MUNICIPAL MONEY
5.Selected Per-Share Data and Ratios
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
6.Years ended August 31 1996 1995 1994 1993 1992 1991C
7.Income from Investment .034 .035 .025 .026 .038 .030
Operations
Net interest income
8.Less Distributions (.034) (.035) (.025) (.026) (.038) (.030)
From net interest income
9.Net asset value, end of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
10.Total returnA 3.41% 3.59% 2.50% 2.66% 3.91% 3.03%
11.Net assets, end of period $ 2,380 $ 2,206 $ 2,288 $ 1,696 $ 1,303 $ 424
(In millions)
12.Ratio of expenses to .39% .40% .33% .27% .20% .09%B
average net assets B B B B B ,D
13.Ratio of net interest 3.36% 3.53% 2.48% 2.61% 3.67% 4.69%
income D
to average net assets
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER
HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
B FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
C FOR THE PERIOD JANUARY 14, 1991 (COMMENCEMENT OF OPERATIONS) TO AUGUST
31, 1991
D ANNUALIZED
SPARTAN SHORT-INTERMEDIATE MUNICIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14.Selected Per-Share Data
and Ratios
15.Years ended 1996 1995 1994D 1993F 1992E 1991E 1990E 1989E 1988E 1987E
August 31
16.Net asset $ 9.98 $ 9.84 $ 10.0 $ 9.88 $ 9.78 $ 9.52 $ 9.49 $ 9.45 $ 9.51 $ 9.92
value, 0 0 90 0 0 0 0 0 0 0
beginning of period
17.Income from .418 .429 .443 .303 .490 .559 .562 .536 .516 .433
Investment
Operations
Net interest
income
18. Net realized (.050) .140 (.240) .210 .100 .260 .030 .040 (.060) (.410)
and
unrealized gain
(loss)
19. Total from .368 .569 .203 .513 .590 .819 .592 .576 .456 .023
investment
operations
20.Less (.418) (.429) (.443) (.303) (.490) (.559) (.562) (.536) (.516) (.433)
Distributions
From net interest
income
21. In excess of -- -- (.010) -- -- -- -- -- -- --
net realized gain
22. Total (.418) (.429) (.453) (.303) (.490) (.559) (.562) (.536) (.516) (.433)
distributions
23.Net asset $ 9.93 $ 9.98 $ 9.84 $ 10.0 $ 9.88 $ 9.78 $ 9.52 $ 9.49 $ 9.45 $ 9.51
value, end of 0 0 0 90 0 0 0 0 0 0
period
24.Total returnB,C 3.75 5.95 2.05 5.25 6.18 8.85 6.42 6.30 4.89 .26%
% % % % % % % % %
25.Net assets, $ 791 $ 909 $ 1,08 $ 967 $ 659 $ 244 $ 59 $ 58 $ 77 $ 59
end of period 3
(In millions)
26.Ratio of .54% .55% .47% .55% .55% .55% .60% .58% .35% .60%
expenses to G G A G G G G G
average net assets
27.Ratio of net 4.17 4.38 4.45 4.55 4.95 5.68 5.90 5.69 5.48 4.58
interest income to % % % %A % % % % % %
average net assets
28.Portfolio 78% 51% 44% 56%A 28% 59% 75% 82% 96% 180%
turnover rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE 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 EFFECTIVE SEPTEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E YEARS ENDED DECEMBER 31
F FOR THE EIGHT MONTHS ENDING AUGUST 31, 1993
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.
SPARTAN INTERMEDIATE MUNICIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
29.Selected Per-Share Data and Ratios
30.Years ended August 31 1996 1995 1994D 1993E
31.Net asset value, beginning of period $ 10.060 $ 9.840 $ 10.340 $ 10.000
32.Income from Investment Operations .486 .490 .514 .177
Net interest income
33. Net realized and unrealized gain (loss) (.010) .220 (.460) .340
34. Total from investment operations .476 .710 .054 .517
35.Less Distributions (.486) (.490) (.514) (.177)
From net interest income
36. From net realized gain -- -- (.010) --
37. In excess of net realized gain -- -- (.030) --
38. Total distributions (.486) (.490) (.554) (.177)
39.Net asset value, end of period $ 10.050 $ 10.060 $ 9.840 $ 10.340
40.Total returnB,C 4.80% 7.50% .52% 5.22%
41.Net assets, end of period (000 omitted) $ 216,121 $ 219,711 $ 256,269 $ 219,400
42.Ratio of expenses to average net assets .50% .42% .20% --F
F F F
43.Ratio of net interest income to average 4.81% 5.04% 5.09% 5.20%
net assets A
44.Portfolio turnover rate 64% 44% 69% 95%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE 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 EFFECTIVE SEPTEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FOR THE PERIOD APRIL 26, 1993 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31,
1993
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
SPARTAN MUNICIPAL INCOME
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
45.Selected Per-Share Data
and Ratios
46.Years ended 1996 1995 1994C 1993 1992 1991 1990E
August 31
47.Net asset value, $ 10.180 $ 10.070 $ 11.370 $ 10.710 $ 10.360 $ 9.890 $ 10.000
beginning of period
48.Income from .537 .587 .611 .663 .704 .739 .187
Investment Operations
Net interest income
49. Net realized and .039 .189 (.752) .727 .387 .463 (.120)
unrealized
gain (loss)
50. Total from .576 .776 (.141) 1.390 1.091 1.202 .067
investment operations
51.Less Distributions (.537) (.587) (.611) (.663) (.704) (.739) (.187)
From net interest F
income
52. From net -- (.080) (.550) (.070) (.040) -- --
realized gain
53. Total (.537) (.667) (1.161) (.733) (.744) (.739) (.187)
distributions
54. Redemption fees .001 .001 .002 .003 .003 .007 .010
added
to paid in capital
55.Net asset value, $ 10.220 $ 10.180 $ 10.070 $ 11.370 $ 10.710 $ 10.360 $ 9.890
end of period
56.Total returnA,B 5.74 8.20 (1.42) 13.55 10.93 12.65 .76
% % % % % % %
57.Net assets, end of $ 540,98 $ 574,05 $ 680,17 $ 912,71 $ 870,66 $ 550,93 $ 93,118
period 3 6 6 0 4 0
(000 omitted)
58.Ratio of expenses .54% .55 .55 .47% .36% .23% --D,
to D % % D D D G
average net assets
59.Ratio of net 5.18 5.99 5.76 6.09 6.68 7.24 7.91%
interest income to % % % % % % G
average net assets
60.Portfolio turnover 49 69 48 50 62 78 116%
rate % % % % % % G
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE.
C EFFECTIVE SEPTEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
E FOR THE PERIOD JUNE 4, 1990 (COMMENCEMENT OF OPERATIONS) TO AUGUST
31,1990
F THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
G ANNUALIZED
SPARTAN AGGRESSIVE MUNICIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
61.Selected Per-Share Data and Ratios
62.Years ended August 31 1996 1995 1994D 1993E
63.Net asset value, beginning of period $ 9.930 $ 9.790 $ 10.350 $ 10.000
64.Income from Investment Operations .566 .602 .603 .209
Net interest income
65. Net realized and unrealized gain (.034) .125 (.564) .346
(loss)
66. Total from investment operations .532 .727 .039 .555
67.Less Distributions (.566) (.602) (.603) (.209)
From net interest income
68. From net realized gain -- -- (.010) --
69. In excess of net realized gain -- -- (.010) --
70. Total distributions (.566) (.602) (.623) (.209)
71. Redemption fees added to paid in .004 .015 .024 .004
capital
72.Net asset value, end of period $ 9.900 $ 9.930 $ 9.790 $ 10.350
73.Total returnB,C 5.48% 7.97% .61% 5.64%
74.Net assets, end of period (000 $ 91,319 $ 74,563 $ 61,673 $ 17,267
omitted)
75.Ratio of expenses to average net .60% .60% .60% .60%A
assets
76.Ratio of net interest income to 5.65% 6.24% 6.03% 6.24%A
average net assets
77.Portfolio turnover rate 45% 51% 64% 53%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 EFFECTIVE SEPTEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FOR THE PERIOD APRIL 29, 1993 (COMMENCEMENT OF SALE OF SHARES) TO AUGUST
31, 1993
PERFORMANCE
Mutual 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 any transaction fees you may have paid. The figures would be
lower if fees were taken into account.
Each fund's fiscal year runs from September 1 through August 31. The tables
below show each fund's performance over past fiscal years with each bond
fund's compared to different measures, including a comparative index and
competitive funds average. For Spartan Short-Intermediate Municipal and
Spartan Intermediate Municipal, data for the comparative indexes is
available only from June 30, 1993 to the present. Data for the comparative
index for Spartan Aggressive Municipal is available only from September 1,
1995 to the present. The charts on pages and present calendar year
performance for the bond funds, and do not reflect the effect of the $5
account closeout fee.
TOTAL RETURNS
Average Annual Total Return Cumulative Total Return
Fiscal periods ended Past 1 Past 5 Life of Past 1 Past 5 Life of
August 31, 1996 year years fund year years fund
Spartan Municipal 3.41 3.21 3.39 3.41% 17.14 20.68
Money % % % A % % A
Spartan 3.75 5.31 5.05 3.75% 29.53 61.19
Short-Intermediate % % %B % %B
Municipal Income
Lehman Brothers 1-5 3.90 n/a n/a 3.90% n/a n/a
Year %
Municipal Bond Index
Lipper Short 3.33 5.54 n/a 3.33% 30.93 n/a
Municipal Debt % % %C
Funds Average
Spartan Intermediate 4.80 n/a 5.36 4.80% n/a 19.15
Municipal % %C %C
Income
Lehman Brothers 4.52 n/a n/a 4.52% n/a n/a
1-17 Year %
Municipal Bond Index
Lipper Intermediate 3.89 n/a n/a 3.89% n/a n/a
Municipal Debt Funds %
Average
Spartan Municipal 5.74 7.28 7.95 5.74% 42.08 61.26
Income % % %D % %D
Lehman Brothers 5.24 7.43 n/a 5.24% 43.10 n/a
Municipal % % %
Bond Index
Lipper General 4.68 6.93 n/a 4.68% 39.84 n/a
Municipal Debt Funds % % %
Average
Spartan Aggressive 5.48 n/a 5.88 5.48% n/a 21.04
Municipal % %E %E
Lehman Brothers 5.24 n/a n/a 5.24% n/a n/a
Municipal %
Bond Index
Lipper High Yield 5.43 n/a n/a 5.43% n/a n/a
Municipal Debt Funds %
Average
A FROM JANUARY 14, 1991
B FROM DECEMBER 24, 1986
C FROM APRIL 26, 1993
D FROM JUNE 4, 1990
E FROM APRIL 29, 1993
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond funds
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is a total return performance
benchmark for investment-grade municipal bonds with maturities of at least
one year.
THE LEHMAN BROTHERS 1-5 YEAR MUNICIPAL BOND INDEX is a total return
performance benchmark for investment-grade municipal bonds with maturities
between one and five years.
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 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)
THE LEHMAN BROTHERS 1-17 YEAR MUNICIPAL BOND INDEX is a total return
performance benchmark for investment-grade municipal bonds with maturities
between one and 17 years.
Unlike the bond fund's returns, the total returns of each 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 averages are the Lipper Short Municipal Debt Funds
Average for Spartan Short-Intermediate Municipal Income, the Lipper
Intermediate Municipal Debt Funds Average for Spartan Intermediate
Municipal Income, the Lipper General Municipal Debt Funds Average for
Spartan Municipal Income and Lipper High Yield Municipal Debt Funds Average
for Spartan Aggressive Municipal, which currently reflect the performance
of over 26, 147, 237, and 43 with similar investment objectives,
respectively. These averages, published by Lipper Analytical Services,
Inc., exclude the effect of sales charges.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME
Calendar year total returns 1987 1988 1989 1990 1991 1992 1993 1994 1995
Spartan Short-Intermediate .26% 4.89% 6.30% 6.42% 8.85% 6.18% 7.12% -0.09
% 8.47%
Lipper Short Municipal Debt Funds Average 2.56% 5.94% 7.36% 6.53% 9.15%
6.92% 7.42
% -.84% 8.32%
Lehman Brothers 1-5 Year Municipal Bond Index n/a n/a n/a n/a n/a n/a
n/a .48% 9.02%
Consumer Price Index 4.43% 4.42% 4.65% 6.11% 3.06% 2.90% 2.75% 2.67% 2.54
%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.26
Row: 3, Col: 1, Value: 4.89
Row: 4, Col: 1, Value: 6.3
Row: 5, Col: 1, Value: 6.42
Row: 6, Col: 1, Value: 8.850000000000001
Row: 7, Col: 1, Value: 6.18
Row: 8, Col: 1, Value: 7.119999999999999
Row: 9, Col: 1, Value: -0.09
Row: 10, Col: 1, Value: 8.470000000000001
(LARGE SOLID BOX) Spartan
Short-
Intermediate
Municipal
Income
SPARTAN INTERMEDIATE MUNICIPAL INCOME
Calendar year total returns 1994 1995
Spartan Intermediate Municipal Income
- -5.03% 14.44%
Lipper Intermediate Municipal Debt Funds Average
- -3.51% 12.89%
Lehman Brothers 1-17 Year Municipal Bond Index
- -3.36% 14.91%
Consumer Price Index 2.67% 2.54
%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 8, Col: 1, Value: 0.0
Row: 9, Col: 1, Value: -5.03
Row: 10, Col: 1, Value: 14.44
(LARGE SOLID BOX) Spartan
Intermediate
Municipal
Income
SPARTAN MUNICIPAL INCOME
Calendar year total returns 1991 1992 1993 1994 1995
Spartan Municipal Income 12.69% 8.38% 14.31% -8.1
0% 18.58%
Lipper General Municipal Debt Funds Average 12.09% 8.79
% 12.47% -6.5% 16.84%
Lehman Brothers Municipal Bond Index 12.14% 8.81
% 12.29% -5.17% 17.45%
Consumer Price Index 3.06% 2.90% 2.75% 2.67% 2.54
%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 12.69
Row: 7, Col: 1, Value: 8.380000000000001
Row: 8, Col: 1, Value: 14.31
Row: 9, Col: 1, Value: -8.1
Row: 10, Col: 1, Value: 18.58
(LARGE SOLID BOX) Spartan
Municipal
Income
SPARTAN AGGRESSIVE MUNICIPAL
Calendar year total returns 1994 1995
Spartan Aggressive Municipal -6.11
% 17.73%
Lipper High Yield Municipal Debt
4.67% 15.98%
Lehman Brothers Municipal Bond Index
- -5.17 17.45
Consumer Price Index 2.67% 2.54
%
Percentage (%)
Row: 1, Col: 1, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 8, Col: 1, Value: 0.0
Row: 9, Col: 1, Value: -6.109999999999999
Row: 10, Col: 1, Value: 17.73
(LARGE SOLID BOX) Spartan
Aggressive
Municipal
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. Spartan Municipal Money is
currently a diversified fund of Fidelity Union Street Trust II. Spartan
Short-Intermediate Municipal Income, Spartan Intermediate Municipal Income,
Spartan Municipal Income, and Spartan Aggressive Municipal are currently
non-diversified funds of Fidelity Union Street Trust. Both trusts are
open-end management investment companies. Fidelity Union Street Trust II
was organized as a Delaware business trust on June 20, 1991. Fidelity Union
Street Trust was organized as a Massachusetts business trust on March 1,
1974. There is a remote possibility that one fund might become liable for a
misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review the funds' performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. For Spartan Municipal
Money, you are entitled to one vote for each share you own. For each bond
fund, the number of votes you are entitled to is based upon the dollar
value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FMR Texas, located in Irving, Texas, has primary
responsibility for providing investment management services for Spartan
Municipal Money.
Norman Lind is manager and Vice President of Spartan Short-Intermediate
Municipal Income Fund and Spartan Intermediate Municipal Income Fund, both
of which he has managed since October 1995. Mr. Lind also manages Advisor
Short-Intermediate Municipal Income Fund, New York Municipal Income Fund,
New York Insured Municipal Income Fund, Spartan New York Intermediate
Municipal Income Fund, and Spartan New York Municipal Income Fund.
Previously, he managed Spartan Municipal Income Fund, and he served as a
municipal research analyst. Mr. Lind joined Fidelity in 1986.
David Murphy is manager and Vice President of Spartan Municipal Income
Fund, which he has managed since October 1995. Mr. Murphy also manages
Michigan Municipal Income, Municipal Income, Limited Term Municipal Income
Fund, and Advisor Intermediate Municipal Income Fund. Previously he managed
Spartan Short-Intermediate Municipal Income Fund, Spartan Intermediate
Municipal Income Fund, Spartan New Jersey Municipal Income Fund, Spartan
New York Intermediate Municipal Income Fund, and Advisor Short-Intermediate
Municipal Income Fund. Mr. Murphy joined Fidelity in 1989.
Tanya Roy is manager of Spartan Aggressive Municipal, which she has managed
since October 1995. Ms. Roy also manages Advisor High Income Municipal Fund
and Aggressive Municipal Fund. Previously, she managed Municipal Bond Fund
and was a municipal bond analyst. Ms. Roy joined Fidelity in 1989.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corp. (FDC) distributes and markets Fidelity's funds
and services. Fidelity Service Co. (FSC) performs transfer agent servicing
functions for the funds.
FMR Corp. is the ultimate parent company of FMR and FMR Texas. Members of
the Edward C. Johnson 3d family are the predominant owners of a class of
shares of common stock representing approximately 49% of the voting power
of FMR Corp. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form a
controlling group with respect to FMR Corp.
UMB Bank, n.a., (UMB) is each fund's transfer agent, although it employs
FSC to perform these functions for each fund. UMB is located at 1010 Grand
Avenue, Kansas City, Missouri.
A broker-dealer may use a portion of the commissions paid by the bond
funds, to reduce custodian or transfer agent fees for the funds. FMR may
use its broker-dealer affiliates and other firms that sell fund shares to
carry out a fund's transactions, provided that the fund receives brokerage
services and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
EACH FUND'S INVESTMENT APPROACH
EACH FUND seeks high current income that is free from federal income tax.
Their strategies and levels of risk in pursuing this objective are
different.
SPARTAN MUNICIPAL MONEY seeks to maintain a $1.00 share price by investing
in high-quality, short-term municipal securities of all types. The fund
normally invests so that at least 80% of its income is free from federal
income tax.
When you sell your shares of the money market fund, they should be worth
the same amount as when you bought them. Of course, there is no guarantee
that the fund will maintain a stable $1.00 share price. The money market
fund follows industry-standard guidelines on the quality and maturity of
its investments, which are designed to help maintain a stable $1.00 share
price. The fund will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities it buys. In general, securities with longer
maturities are more vulnerable to price changes, although they may provide
higher yields. It is possible that a major change in interest rates or a
default on the fund's investments could cause its share price (and the
value of your investment) to change.
Spartan Municipal Money may not use investment techniques which are
inconsistent with the fund's goal of maintaining a stable share price.
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME stresses preservation of
capital by investing in investment grade municipal securities under normal
conditions. Although the fund can invest in securities of any maturity, the
fund, under normal conditions, maintains a dollar-weighted average maturity
of between two and five years. As of August 31, 1996, the fund's
dollar-weighted average maturity was approximately 3.3 years. The fund
normally invests so that 80% or more of its income is free from federal
income tax.
SPARTAN INTERMEDIATE MUNICIPAL INCOME invests in investment-grade municipal
securities under normal conditions. Although the fund can invest in
securities of any maturity, the fund maintains a dollar-weighted average
maturity of between three to 10 years under normal conditions. FMR seeks to
manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between seven and 10 years. As
of August 31, 1996, the fund's dollar-weighted average maturity was
approximately 7.8 years. The fund normally invests so that at least 80% of
its assets are invested in municipal securities whose interest is free from
federal income tax.
SPARTAN MUNICIPAL INCOME invests in investment grade municipal securities
under normal conditions. 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 municipal bonds with maturities
between eight and 18 years. As of August 31, 1996, the fund's
dollar-weighted average maturity was approximately 13.8 years. The fund
normally invests so that at least 80% of its income is free from federal
income tax.
SPARTAN AGGRESSIVE MUNICIPAL invests in municipal securities of any quality
under normal conditions. Since the fund can emphasize lower quality
securities, FMR's research and analysis are an integral part of choosing
the fund's 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 municipal bonds of comparable
quality with maturities between 12 and 20 years. As of August 31, 1996, the
fund's dollar-weighted average maturity was approximately 15 years. The
fund normally invests so that at least 80% of its assets are invested in
municipal securities whose interest is free from federal income tax.
The money market fund stresses income, preservation of capital, and
liquidity. The bond funds seek to provide a higher level of income by
investing in a broader range of securities.
The total return from a bond is a combination of income and price gains or
losses. While income is the most important component of bond returns over
time, the bond funds' emphasis on income does not mean that a fund invests
only in the highest-yielding bonds available, or that it can avoid risks to
principal. In selecting investments for a fund, FMR considers a bond's
income potential together with its potential for price gains or losses. FMR
focuses on assembling a portfolio of income-producing securities that it
believes will provide the best tradeoff between risk and return within the
range of securities that are eligible investments for the fund.
Each fund's yield and each bond fund's share price change daily and are
based on interest rates, market conditions, other economic and political
news, and on the quality and maturity of its investments. In general, bond
prices rise when interest rates fall, and vice versa. This effect is
usually more pronounced for longer-term securities. Lower-quality
securities offer higher yields, but also carry more risk. FMR may use
various investment techniques to hedge a portion of the bond funds' risks,
but there is no guarantee that these strategies will work as intended. When
you sell your shares of the bond funds, they may be worth more or less than
what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that each fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond funds do not expect to invest in state taxable
obligations. Each fund also reserves the right to invest without limitation
in short-term instruments, to hold a substantial amount of uninvested cash,
or to invest more than normally permitted in federally taxable obligations
for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of each fund's limitations and more detailed information
about each 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 a fund's investment
objective and policies and that doing so will help a fund achieve its goal.
Fund holdings and recent investment strategies are detailed in each fund's
financial reports, which are sent to shareholders twice a year. For a free
SAI or financial report, call 1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
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.
Lower-quality debt securities are considered to have speculative
characteristics, and involve greater risk of default or price changes due
to changes in the issuer's creditworthiness, or they may already be in
default. The market prices of these securities may fluctuate more than
higher quality securities and may decline significantly in periods of
general or regional economic difficulty.
The table on page provides a summary of ratings assigned to debt holdings
(not including money market instruments) in the Spartan Aggressive
Municipal's portfolio. These figures are dollar-weighted averages of
month-end portfolio holdings during fiscal 1996, and are presented as a
percentage of total security investments. These percentages are historical
and do not necessarily indicate a fund's current or future debt holdings.
RESTRICTIONS: Spartan Short-Intermediate Municipal Income, Spartan
Intermediate Municipal Income, and Spartan Municipal Income normally invest
in investment-grade securities, but reserve the right to invest up to 5% of
their 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 and
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. Spartan
Aggressive Municipal Fund does not currently intend to invest more than 10%
of its total assets in bonds that are in default.
SPARTAN AGGRESSIVE MUNICIPAL
Fiscal 1996 Debt Holdings, by Rating MOODY'S
INVESTORS SERVICE STANDARD & POOR'S
(AS A % OF INVESTMENTS) (AS A % OF
INVESTMENTS)
Rating Average Rating Average
INVESTMENT GRADE
Highest quality Aaa 25.81% AAA 24.38%
High quality Aa 3.80% AA 3.51%
Upper-medium grade A 12.27% A 12.64%
Medium grade Baa 15.53% BBB 19.47%
LOWER QUALITY
Moderately speculative Ba 7.54% BB 10.01%
Speculative B 0.10% B .70%
Highly speculative Caa 0.00% CCC 0.00%
Poor quality Ca 0.00% CC 0.00%
Lowest quality, no interest C C
In default, in arrears -- D 0.00%
65.05% 70.71%
(AS A % OF INVESTMENTS)
SECURITIES NOT RATED BY MOODY'S OR S&P(dagger)
Investment Grade (double dagger) 1.42%
Lower Quality (double dagger) 16.85%
Total 18.27%
(dagger) THE DOLLAR-WEIGHTED AVERAGE PERCENTAGES REFLECTED IN THE TABLE MAY
INCLUDE SECURITIES RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS
WELL AS UNRATED SECURITIES.
(double dagger) AS DETERMINED BY FMR
MUNICIPAL SECURITIES are issued to raise money for a variety of public or
private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. The value of some or all 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. A fund may own a municipal
security directly or through a participation interest.
CREDIT SUPPORT. Issuers may employ various forms of credit enhancement,
including letters of credit, guarantees, or insurance from a bank,
insurance company, or other entity. These arrangements expose the fund to
the credit risk of the entity. In the case of foreign entities, extensive
public information about the entity may not be available and the entity may
be subject to unfavorable political, economic, governmental developments
which might affect its ability to honor its commitment.
MONEY MARKET SECURITIES are high quality, short term instruments issued by
municipalities, local and state governments, and other entities. These
securities may carry fixed, variable, or floating interest rates. Some
money market securities employ a trust or similar structure to modify the
maturity, price characteristics, or quality of financial assets so that
they are eligible investments for money market funds. If the structure does
not perform as intended, adverse tax or investment consequences may result.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE AND FLOATING RATE 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.
RESTRICTIONS: Spartan Municipal Money may not purchase certain types of
variable and floating rate securities which are inconsistent with the funds
goal of maintaining a stable share price.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories and
possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) a security to the issuer
or another party. In exchange for this benefit, a fund may accept a lower
interest rate. The credit quality of the investment may be affected by the
creditworthiness of the put provider. Demand features, standby commitments
and tender options 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. A 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 a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with a
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 a 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 a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period.
CASH MANAGEMENT. A fund may invest in money market securities, and in a
money market fund, available only to funds and accounts managed by FMR or
its affiliates whose goal is to seek a high level of current income exempt
from federal income tax while maintaining a stable $1.00 share price. A
major change in interest rates or a default on the money market fund's
investments could cause its share price to change.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
changes in the market value of a single issuer or industry.
RESTRICTIONS: With respect to 75% of total assets, Spartan Municipal Money
may not invest more than 5% of its total assets in any one issuer. Spartan
Short-Intermediate Municipal Income, Spartan Intermediate Municipal Income,
Spartan Municipal Income, and Spartan Aggressive Municipal are all
considered non-diversified. Generally, to meet federal requirements at the
close of each quarter, a fund does not invest more than 25% of its total
assets in any one issuer and, with respect to 50% of total assets, does not
invest more than 5% of its total assets in any one issuer. These
limitations do not apply to U.S. government securities. A fund may invest
more than 25% of its total assets in tax free securities that finance
similar types of projects.
BORROWING. Each fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If a fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: Each 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.
SPARTAN MUNICIPAL MONEY seeks as high level of federally tax-exempt income
as is consistent with the preservation of capital and liquidity. The fund
will normally invest so that at least 80% of its income is free from
federal income tax.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any one issuer.
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME seeks as high a level of
current income, exempt from federal income tax, as is consistent with
preservation of capital by investing primarily in short term municipal
obligations. The fund will normally invest so that at least 80% of its
income is free from federal income tax.
SPARTAN INTERMEDIATE MUNICIPAL INCOME seeks high current income that is
exempt from federal income tax, by investing in municipal obligations. The
fund will normally invest so that at least 80% if its assets are invested
in municipal securities whose interest is free from federal income tax.
SPARTAN MUNICIPAL INCOME seeks high current income by investing primarily
in municipal securities. The fund will normally invest so that at least 80%
of its income is free from federal income tax.
SPARTAN AGGRESSIVE MUNICIPAL seeks a high current yield that is exempt from
federal income tax. The fund will normally invest so that at least 80% of
its assets are invested in municipal securities whose interest is free from
federal income tax.
EACH FUND may borrow solely for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services for Spartan Municipal Money.
FMR may, from time to time, agree to reimburse the funds for management
fees above a specified limit. FMR retains the ability to be repaid by a
fund if expenses fall below the specified limit prior to the end of the
fiscal year. Reimbursement arrangements, which may be terminated at any
time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The table
below, shows the annual rate of each funds management fee as a percentage
of average net assets for the fiscal year ended 1996.
FMR has voluntarily agreed to limit Spartan Municipal Money's total
operating expenses to an annual rate of .40% of average net assets for the
fiscal year ended 1996.
MANAGEMENT AND TRANSACTION FEES
MANAGEMENT FEES TRANSACTIONS FEES
Before After Exchang Closeout Wire Checkwriti
reimbursement reimbursemen e ng
t
Spartan .50% .40% $10,4 $2,6 $2,30 $14,2
Municipal 44 84 5 81
Money
Spartan Short- .55% n/a $7,79 $2,3 $590 $1,65
Intermediate 0 35 3
Municipal
Spartan .55% .50% $1,80 $685 $545 $446
Intermediate 5
Municipal
Spartan .55% n/a $3,85 $1,7 $425 n/a
Municipal 5 65
Income
Spartan .60% n/a $665 $175 $45 n/a
Aggressive
Municipal
FMR HAS A SUB-ADVISORY AGREEMENT with FMR Texas, which has primary
responsibility for providing investment management for Spartan Municipal
Money, while FMR retains responsibility for providing other management
services. FMR pays FMR Texas 50% of its management fee (before expense
reimbursements) for these services.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds $5.00 exchange fee, $5.00 account close out fee, $5.00 fee for wire
purchases and redemptions, and for Spartan Municipal Money, Spartan
Short-Intermediate Municipal Income, and Spartan Intermediate Municipal
Income, the $2.00 check writing charge. The table on page shows what these
fees amounted for the fiscal year ended 1996.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
The table below shows each fund's turnover rate for the fiscal year ended
1996. These rates vary from year to year.
PORTFOLIO TURNOVER RATES
Spartan Municipal Money n/a
Spartan Short-Intermediate Municipal 78%
Spartan Intermediate Municipal 64%
Spartan Municipal Income 49%
Spartan Aggressive Municipal 45%
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 a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed 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
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Spartan Municipal Money is managed to keep its share price
stable at $1.00. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Spartan Municipal Money $25,000
TO ADD TO AN ACCOUNT $1,000
Through regular investment plans* $500
MINIMUM BALANCE $5,000
For Spartan Municipal Money $10,000
* FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO THE
"INVESTOR SERVICES" SECTION BEGINNING ON PAGE .
These minimums may vary for investments through Fidelity Portfolio Advisory
Services. Refer to the program materials for details.
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
(checkmark)
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account ($10,000 for Spartan Municipal Money) 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 in Spartan Municipal Money,
Spartan Short-Intermediate Municipal Income, or Spartan Intermediate
Municipal Income, you may write an unlimited number of checks. Do not,
however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
IF YOU SELL SHARES OF SPARTAN MUNICIPAL INCOME OR SPARTAN AGGRESSIVE MUNICIPAL AFTER
HOLDING THEM LESS THAN 180 DAYS, THE FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO .50%
AND 1.00% RESPECTIVELY, OF THE VALUE OF THOSE SHARES. 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>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(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. There may be a $5.00 fee for
each exchange out of the funds, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
</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
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</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
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond funds 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. Each fund offers four
options (three for Spartan Municipal Money):
1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, 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, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for Spartan Municipal Money.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, 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, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
A portion of a fund's dividends may be free from state or local taxes.
Income from investments in your state are often tax-free to you. Each year,
Fidelity will send you a breakdown of your fund's income from each state to
help you calculate your taxes.
During the fiscal year ended 1996, 100% of each fund's income dividends was
free from federal income tax, 77.63%, 21.11%, 32.80%, 16.55% and 21.67% of
Spartan Municipal Money's, Spartan Short-Intermediate Municipal's, Spartan
Intermediate Municipal's, Spartan Municipal Income's, and Spartan
Aggressive Municipal's income dividends, respectively, were subject to the
federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares when a fund has realized but not
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 FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond funds, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH AN INVESTMENT PROFESSIONAL,
INCLUDING A BROKER, who may charge you a transaction fee for this service.
If you invest through an investment professional, read your investment
professional's program materials for any additional service features or
fees that may apply. Certain features of the fund, such as the minimum
initial or subsequent investment amounts, may be modified.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
THE REDEMPTION FEE for Spartan Municipal Income and Spartan Aggressive
Municipal, if applicable, will be deducted from the amount of your
redemption. This fee is paid to the fund rather than FMR, and it does not
apply to shares that were acquired through reinvestment of distributions.
If shares you are redeeming were not all held for the same length of time,
those shares you held longest will be redeemed first for purposes of
determining whether the fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(small solid bullet) The $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 $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts (except non-prototype retirement
accounts), accounts using regular investment plans, or if total assets in
Fidelity funds exceed $50,000. Eligibility for the $50,000 waiver is
determined by aggregating Fidelity mutual fund accounts maintained by FSC
or FBSI which are registered under the same Social Security number or which
list the same Social Security number for the custodian of a Uniform
Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan Municipal
Money) 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.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(Registered trademark) MUNICIPAL FUNDS
SPARTAN MUNICIPAL MONEY FUND
A FUND OF FIDELITY UNION STREET TRUST II
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME FUND
SPARTAN INTERMEDIATE MUNICIPAL INCOME FUND
SPARTAN MUNICIPAL INCOME FUND
SPARTAN AGGRESSIVE MUNICIPAL FUND
FUNDS OF FIDELITY UNION STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 18, 1996
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated October 18, 1996). Please retain this
document for future reference. The funds' financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended August 31, 1996, are incorporated herein by reference. To obtain an
additional copy of the Prospectus or the Annual Report, please call
Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Contracts with FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
FMR Texas Inc. (FMR Texas) (Spartan Municipal Money)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB )
and Fidelity Service Co. (FSC)
SMU-ptb-1096
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of a fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with 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 Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN MUNICIPAL MONEY FUND
(SPARTAN MUNICIPAL MONEY)
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government, or any of its agencies or instrumentalities) if, as a result
thereof, (a) more than 5% of the fund's total assets would be invested in
the securities of that issuer, or (b) the fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short;
(4) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions;
(5) 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;
(6) 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;
(7) 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;
(8) 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);
(9) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; or
(10) 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 (for this purpose,
purchasing debt securities and engaging in repurchase agreements do not
constitute lending).
(11) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to purchase the voting securities of
any issuer.
(ii) The fund does not currently intend to sell securities short.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (5)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger, or (ii) to securities of other open-ended investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (1) and (7), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the money market fund's policies on quality and maturity, see the
section entitled "Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME FUND
(SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME)
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 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 (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger or (ii) to securities of other open-ended investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(viii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(ix) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(x) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (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 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"
beginning on page .
INVESTMENT LIMITATIONS OF SPARTAN INTERMEDIATE MUNICIPAL INCOME FUND
(SPARTAN INTERMEDIATE MUNICIPAL INCOME)
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 invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger or (ii) to securities of other open-ended investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be interested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (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 purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
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"
beginning on page .
INVESTMENT LIMITATIONS OF SPARTAN MUNICIPAL INCOME FUND
(SPARTAN MUNICIPAL INCOME)
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 deemed to be 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 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 invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to purchase or sell futures
contracts on physical commodities.
(viii) 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.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger or (ii) to securities of other open-ended investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(xi) 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.
(xii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (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 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"
beginning on page .
INVESTMENT LIMITATIONS OF SPARTAN AGGRESSIVE MUNICIPAL FUND
(SPARTAN AGGRESSIVE MUNICIPAL)
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 invest in interests in real
estate investment trusts that are not readily marketable, or to invest in
interests in real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply (i) to securities received as dividends, through
offers of exchange, or as a result of a reorganization, consolidation, or
merger or (ii) to securities of other open-ended investment companies
managed by FMR or a successor or affiliate purchased pursuant to an
exemptive order granted by the SEC.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xii) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (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 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 purposes of limitation (ix), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
The following pages contain more detailed information about types of
instruments in which a fund may invest, strategies FMR may employ in
pursuit of a fund's investment objective and a summary of related risks.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that doing so will help the fund achieve its goal.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission (SEC), the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. The bond
funds may receive fees for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the funds do not
intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, each fund may invest a
portion of its assets in fixed-income obligations whose interest is subject
to federal income tax.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The bond funds' standards for high-quality, taxable obligations
are essentially the same as those described by Moody's Investors Service,
Inc. (Moody's) in rating corporate obligations within its two highest
ratings of Prime-1 and Prime-2, and those described by Standard & Poor's
Corporation (S&P) in rating corporate obligations within its two highest
ratings of A-1 and A-2. The money market fund will purchase taxable
obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the funds' distributions. If such
proposals were enacted, the availability of municipal obligations and the
value of the funds' holdings would be affected and the Trustees would
reevaluate the funds' investment objectives and policies.
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 funds will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of a
fund's assets could impede portfolio management or the fund's ability to
meet redemption requests or other current obligations.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. The funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically
invest, which involves a risk that the options or futures position will not
track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each bond fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The funds intend to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the funds can
commit assets to initial margin deposits and option premiums.
In addition, each fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this 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 a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
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 funds 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, a fund obtains
the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option 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 a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
For the money market fund, FMR may determine some restricted securities and
municipal lease obligations to be illiquid.
For the bond funds, investments currently considered to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However, with
respect to over-the-counter options a fund writes, all or a portion of the
value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the fund
may have to close out the option before expiration.
In the absence of market quotations, illiquid investments for the money
market fund are valued for purposes of monitoring amortized cost valuation,
and for the bond funds are priced at fair value as determined in good faith
by a committee appointed by the Board of Trustees. If through a change in
values, net assets, or other circumstances, a fund were in a position where
more than 10% of its net assets was invested in illiquid securities, it
would seek to take appropriate steps to protect liquidity.
INDEXED SECURITIES. Each fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon rates
or principal payments may change by several percentage points for every 1%
interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive order
issued by the SEC, each fund has received permission to lend money to, and
borrow money from, other funds advised by FMR or its affiliates, but each
fund 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. A 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 a 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 bond funds may invest a portion of
their assets in lower-quality municipal securities as described in the
Prospectus.
While the market for municipals is considered to be substantial, adverse
publicity and changing investor perceptions may affect the ability of
outside pricing services used by a fund to value its portfolio securities,
and the 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.
Each fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
MUNICIPAL 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, making it more difficult for
the money market fund to maintain a stable net asset value per share.
MONEY MARKET SECURITIES are high-quality, short-term obligations. Some
money market securities employ a trust or other similar structure to modify
the maturity, price characteristics, or quality of financial assets. For
example, put features can be used to modify the maturity of a security or
interest rate adjustment features can be used to enhance price stability.
If the structure does not perform as intended, adverse tax or investment
consequences may result. Neither the Internal Revenue Service (IRS) nor any
other regulatory authority has ruled definitively on certain legal issues
presented by structured securities. Future tax or other regulatory
determinations could adversely affect the value, liquidity, or tax
treatment of the income received from these securities or the nature and
timing of distributions made by the fund.
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 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 homeowners 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 dependant 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 the
area. Fuel costs and availability also affect other transportation related
securities, as do the presence of alternate forms of transportation, such
as public transportation.
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 funds will not
hold such obligations directly as a lessor of the property, but will
purchase a participation interest in a municipal obligation from a bank or
other third party. A participation interest gives a fund a specified,
undivided interest in the obligation in proportion to its purchased
interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
PUT FEATURES entitle the holder to sell a security back to the issuer or a
third party at any time or at specified intervals. They are subject to the
risk that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on
demand by obtaining letters of credit or other guarantees from other
entities. Demand features, standby commitments, and tender options are
types of put features.
QUALITY AND MATURITY (MONEY MARKET FUND ONLY). Pursuant to procedures
adopted by the Board of Trustees, the fund may purchase only high-quality
securities that FMR believes present minimal credit risks. To be considered
high-quality, a security must be rated in accordance with applicable rules
in one of the two highest categories for short-term securities by at least
two nationally recognized rating services (or by one, if only one rating
service has rated the security); or, if unrated, judged to be of equivalent
quality by FMR.
High-quality securities are divided into "first tier" and "second tier"
securities. First tier securities are those deemed to be in the highest
rating category (e.g., Standard & Poor's A-1 or SP-1), and second tier
securities are those deemed to be in the second highest rating category
(e.g., Standard & Poor's A-2 or SP-2).
The fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, the fund may look to an interest rate reset or demand feature.
REFUNDING CONTRACTS. A 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. A 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). A fund may secure its obligations under a refunding
contract by depositing collateral or a letter of credit equal to the
liquidated damages provisions of the refunding contract. When required by
SEC guidelines, a 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, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect the fund
from the 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 a fund in connection with bankruptcy
proceedings), it is each fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been
reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement. A
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.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its evaluation of
the credit of a bank or another entity in determining whether to purchase a
security supported by a letter of credit guarantee, insurance or other
source of credit or liquidity.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily a fund will not transfer a standby commitment to a third party,
although it could sell the underlying municipal security to a third party
at any time. A fund may purchase standby commitments separate from or in
conjunction with the purchase of securities subject to such commitments. In
the latter case, the fund would pay a higher price for the securities
acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit a fund to sell them at
par value plus accrued interest on short notice.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments of
the interest rate paid on the security. Variable rate securities provide
for a specified periodic adjustment in the interest rate, while floating
rate securities have interest rates that change whenever there is a change
in a designated benchmark rate. Some variable or floating rate securities
have put features.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the fund's
management contract. In the case of the money market fund, FMR has granted
investment management authority to the sub-adviser (see the section
entitled "Management Contracts"), and the sub-adviser is 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.
Securities purchased and sold by the money market fund generally will be
traded on a net basis (i.e., without commission). In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, FMR considers various relevant factors, including, but not limited
to, the size and type of the transaction; the nature and character of the
markets for the security to be purchased or sold; the execution efficiency,
settlement capability, and financial condition of the broker-dealer firm;
the broker-dealer's execution services rendered on a continuing basis; and
the reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; 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). FMR
maintains a listing of broker-dealers who provide such services on a
regular basis. However, as many transactions on behalf of the money market
fund are placed with broker-dealers (including broker-dealers on the list)
without regard to the furnishing of such services, it is not possible to
estimate the proportion of such transactions directed to such
broker-dealers solely because such services were provided. The selection of
such broker-dealers generally is made by FMR (to the extent possible
consistent with execution considerations) based upon the quality of
research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal years ended August 31, 1996 and 1995, the portfolio turnover
rates amounted to:
1996 1995
Spartan Short-Intermediate Municipal Income 78% 51%
Spartan Intermediate Municipal Income 64% 44%
Spartan Municipal Income 49% 69%
Spartan Aggressive Municipal 45% 51%
For fiscal 1996, 1995 and 1994 the funds paid no brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME, SPARTAN INTERMEDIATE MUNICIPAL
INCOME, SPARTAN MUNICIPAL INCOME, AND SPARTAN AGGRESSIVE MUNICIPAL.
Valuations of portfolio securities furnished by the pricing service
employed by the funds are based upon a computerized matrix system or
appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
funds and FSC under the general supervision of the Board of Trustees. There
are a number of pricing services available, and the Trustees, or officers
acting on behalf of the Trustees, on the basis of on-going evaluation of
these services, may use other pricing services or discontinue the use of
any pricing service in whole or in part. Futures contracts and options are
valued on the basis of market quotations if available.
SPARTAN MUNICIPAL MONEY. The fund values its investments on the basis of
amortized costs. This technique involves valuing an instrument at its cost
as adjusted for amortization of premium or accretion of discount rather
than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the fund would
receive if it sold the instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act of 1940. The fund must adhere to certain conditions
under Rule 2a-7.
The Board of Trustees of the trust oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the fund's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the Trustees
believe that a deviation from Spartan Municipal Money's amortized cost per
share may result in material dilution or other unfair results to
shareholders, the Trustees have agreed to take such corrective action, if
any, as they deem appropriate to eliminate or reduce, to the extent
reasonably practicable, the dilution or unfair results. Such corrective
action could include selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind; establishing NAV by using
available market quotations; and such other measures as the Trustees may
deem appropriate.
During periods of declining interest rates, the money market fund's yields
based on amortized cost may be higher than the yields based on market
valuations. Under these circumstances, a shareholder in the fund would be
able to obtain a somewhat higher yield than would result if the fund
utilized market valuations to determine its NAV. The converse would apply
in a period of rising interest rates.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. A bond fund's share price, and each
fund's yield and total return fluctuate in response to market conditions
and other factors, and the value of a bond fund's shares when redeemed may
be more or less than their original cost.
YIELD CALCULATIONS. To compute the money market fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return. This
base period return is annualized to obtain a current annualized yield. The
money market fund also may calculate a compound effective yield by
compounding the base period return over a one-year period. In addition to
the current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market fund
are calculated on the same basis as other money market funds, as required
by regulation.
For the bond funds, yields 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 dividends during the period,
dividing this figure by the fund's net asset value per share (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 Spartan Municipal Income's .50% redemption fee, or Spartan
Aggressive Municipal Income's 1.00% redemption fee, which applies to shares
held less than 180 days. Income is calculated for purposes of the bond
fund's 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 determining the bond 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 bond fund's yield may not equal
its distribution rate, the income paid to your account, or the income
reported in the fund's financial statements.
In calculating the fund's yield, a fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates a
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment before taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federal and state tax
rate. If only a portion of a fund's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1996. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 2% to 8%. Of course, no assurance can
be given that a fund will achieve any specific tax-exempt yield. While the
funds invest principally in obligations whose interest is exempt from
federal income tax, other income received by the funds may be taxable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 TAX RATES AND TAX-EQUIVALENT YIELDS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:
Taxable Income* Tax 2% 3% 4% 5% 6% 7% 8%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket** Then taxable-equivalent yield is:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 58,151 - $ 121,300 $ 96,901 - $ 147,700 31% 2.90% 4.35% 5.80% 7.25% 8.70% 10.15% 11.59%
$ 121,301 - $ 263,750 $ 147,701 - $ 263,750 36% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$ 263,751 and above $ 263,751 and above 39.6% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
A fund may invest a portion of its assets in obligations that are subject
to federal income tax. When a fund invests in these obligations, its
tax-equivalent yields will be lower. In the table above, tax-equivalent
yields are calculated assuming investments are 100% federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in a
fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual total return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years. While
average annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a fund's performance is not
constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and may or may not include the effect of
Spartan Municipal Income's .50% or Spartan Aggressive Municipal Income's
1.00% redemption fee on shares held less than 180 days. Excluding a fund's
redemption fee from a total return calculation produces a higher total
return figure. Total returns, yields, and other performance information may
be quoted numerically or in a table, graph, or similar illustration, and
may omit or include the effect of the $5.00 account closeout fee.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following tables show the money market fund's
7-day yields, each bond fund's 30-day yields, each fund's tax-equivalent
yields, and total returns for periods ended August 31, 1996. Total return
figures include the effect of the $5.00 account closeout fee based on an
average size account, but not Spartan Municipal Income's and Spartan
Aggressive Municipal Income's .50% and 1.00% redemption fees respectively,
applicable to shares held less than 180 days.
The tax-equivalent yield is based on a 36% federal income tax rate. Note
that each fund may invest in securities whose income is subject to the
federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Returns Cumulative Total Returns
</TABLE>
Thirty-/ Tax Equivalent One Five Life of One Five Life of
Seven-D
ay
Yield Yield Year Years Fund** Year Years Fund**
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Spartan Municipal Money * 3.26% 5.09% 3.41% 3.21% 3.39% 3.41% 17.13% 20.68%
Spartan Short-Intermediate 4.03% 6.30% 3.74% 5.31% 5.05% 3.74% 29.52% 61.18%
Municipal Income*
Spartan Intermediate 4.64% 7.25% 4.79% N/A 5.36% 4.79% N/A 19.14%
Municipal Income
Spartan Municipal Income 5.02% 7.84% 5.73% 7.28% 7.95% 5.73% 42.07% 61.25%
Spartan Aggressive Municipal 5.53% 8.64% 5.47% N/A 5.87% 5.47% N/A 21.03%
</TABLE>
* If FMR had not reimbursed certain fund expenses during these periods,
Spartan Municipal Money's yield would have been 3.16%, respectively and the
total returns would have been lower.
** From commencement of operations: Spartan Municipal Money - January 14,
1991; Spartan Short-Intermediate Municipal Income - December 24, 1986;
Spartan Intermediate Municipal Income - April 26, 1993; Spartan Municipal
Income - June 4, 1990; Spartan Aggressive Municipal Income - April 29, 1993
The following tables show the income and capital elements of each fund's
cumulative total return. The tables compare each fund's return to the
record of the Standard & Poor's (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 each fund. The S&P 500 and DJIA
comparisons are provided to show how each fund's total return compared to
the record of a broad unmanaged index of common stocks and a narrower set
of stocks of major industrial companies, respectively, over the same
period. Because Spartan Municipal Money invests in short-term fixed-income
securities, and the other funds invest in fixed-income securities, common
stocks represent a different type of investment from the fund. Common
stocks generally offer greater growth potential than the funds, but
generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investment such as the funds. The S&P 500 and
DJIA returns are based on the prices of unmanaged groups of stocks and,
unlike each funds' returns, do not include the effect of brokerage
commissions or other costs of investing.
SPARTAN MUNICIPAL MONEY FUND. During the period from January 14, 1991
(commencement of operations) to August 31, 1996, a hypothetical $10,000
investment in Spartan Municipal Money Fund would have grown to $12,068,
assuming all distributions were reinvested. This was a period of
fluctuating interest rates and bond prices and the figures on the next page
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
SPARTAN MUNICIPAL MONEY FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Period Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Value Living**
August 31 $10,000 Dividend
Investment Distributions
1996 $ 10,000 $ 2,068 $ 12,068 $ 24,238 $ 26,225 $ 11,756
1995 $ 10,000 $ 1,670 $ 11,670 $ 20,415 $ 21,064 $ 11,428
1994 $ 10,000 $ 1,265 $ 11,265 $ 16,810 $ 17,424 $ 11,136
1993 $ 10,000 $ 990 $ 10,990 $ 15,938 $ 15,820 $ 10,822
1992 $ 10,000 $ 705 $ 10,705 $ 13,832 $ 13,704 $ 10,531
1991* $ 10,000 $ 303 $ 10,303 $ 12,815 $ 12,431 $ 10,209
</TABLE>
* From January 14, 1991 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January
14, 1991, 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 for the period covered (their cash value at the time
they were reinvested), amounted to $12,068. If distributions had not been
reinvested, the amount of distributions earned from the fund over time
would have been smaller, and cash payments (dividends) for the period would
have amounted to $1,883. The fund did not distribute any capital gains
during the period. Tax consequences of different investments have not been
factored into the above figures. The figures in the table do not reflect
the effect of the fund's $5.00 account closeout fee.
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME FUND. During the period from
December 24, 1986 (commencement of operations) to August 31, 1996, a
hypothetical $10,000 investment in Spartan Short-Intermediate Municipal
Fund would have grown to $16,119, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME FUND INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
August 31 Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 9,930 $ 6,175 $ 14 $ 16,119 $ 35,677 $ 39,593 $ 14,235
1995 $ 9,980 $ 5,543 $ 14 $ 15,537 $ 30,050 $ 31,797 $ 13,837
1994 $ 9,840 $ 4,810 $ 14 $ 14,664 $ 24,743 $ 26,306 $ 13,484
1993 $ 10,090 $ 4,279 $ 0 $ 14,369 $ 23,460 $ 23,884 $ 13,104
1992 $ 9,840 $ 3,543 $ 0 $ 13,383 $ 20,359 $ 20,689 $ 12,751
1991 $ 9,640 $ 2,805 $ 0 $ 12,445 $ 18,863 $ 18,768 $ 12,362
1990 $ 9,450 $ 2,040 $ 0 $ 11,490 $ 14,863 $ 15,552 $ 11,910
1989 $ 9,450 $ 1,394 $ 0 $ 10,844 $ 15,644 $ 15,674 $ 11,276
1988 $ 9,470 $ 785 $ 0 $ 10,255 $ 11,236 $ 11,213 $ 10,769
1987* $ 9,660 $ 285 $ 0 $ 9,945 $ 13,666 $ 14,188 $ 10,353
</TABLE>
* From December 24, 1986 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on December
24, 1986, 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 $16,057.
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 $4,696 for dividends and $10 for
capital gain distributions. Tax consequences of different investments have
not been factored into the above figures. The figures in the table do not
reflect the effect of the fund's $5.00 account closeout fee.
SPARTAN INTERMEDIATE MUNICIPAL INCOME FUND. During the period from April
26, 1993 (commencement of operations) to August 31, 1996, a hypothetical
$10,000 investment in Spartan Intermediate Municipal Fund would have grown
to $11,915, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN INTERMEDIATE MUNICIPAL FUND INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
August 31 Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 10,050 $ 1,825 $ 40 $ 11,915 $ 16,309 $ 17,906 $10,924
1995 $ 10,060 $ 1,270 $ 40 $ 11,370 $ 13,737 $ 14,381 $ 10,618
1994 $ 9,840 $ 697 $ 39 $ 10,576 $ 11,311 $ 11,897 $ 10,347
1993* $ 10,340 $ 182 $ 0 $ 10,522 $ 10,725 $ 10,802 $ 10,056
</TABLE>
* From April 26, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on April 26,
1993, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $11,856.
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 $1,666 for dividends and $40 for
capital gain distributions. Tax consequences of different investments have
not been factored into the above figures. The figures in the table do not
reflect the effect of the fund's $5.00 account closeout fee.
SPARTAN MUNICIPAL INCOME FUND. During the period from June 4, 1990
(commencement of operations) to August 31, 1996, a hypothetical $10,000
investment in Spartan Municipal Income Fund would have grown to $16,126,
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.
SPARTAN MUNICIPAL INCOME FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
August 31 Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 10,220 $ 5,010 $ 896 $ 16,126 $ 21,496 $ 23,165 $ 12,175
1995 $ 10,180 $ 4,182 $ 889 $ 15,251 $ 18,106 $ 18,604 $ 11,834
1994 $ 10,070 $ 3,263 $ 762 $ 14,095 $ 14,908 $ 15,391 $ 11,533
1993 $ 11,370 $ 2,790 $ 137 $ 14,297 $ 14,135 $ 13,974 $ 11,207
1992 $ 10,710 $ 1,835 $ 46 $ 12,591 $ 12,267 $ 12,105 $ 10,906
1991 $ 10,360 $ 990 $ 0 $ 11,350 $ 11,365 $ 10,981 $ 10,573
1990* $ 9,890 $ 186 $ 0 $ 10,076 $ 8,955 $ 9,099 $ 10,186
</TABLE>
* From June 4, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on June 4,
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 $16,011.
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 $4,025 for dividends and $742 for
capital gain distributions. Tax consequences of different investments have
not been factored into the above figures. The figures in the table do not
reflect the effect of the fund's $5.00 account closeout fee or the fund's
.50% redemption fee applicable to shares held less than 180 days.
SPARTAN AGGRESSIVE MUNICIPAL FUND. During the period from April 29, 1993
(commencement of operations) to August 31, 1996, a hypothetical $10,000
investment in Spartan Aggressive Municipal Fund would have grown to
$12,104, 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.
SPARTAN AGGRESSIVE MUNICIPAL FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended Value of Value of Value of Total S&P 500 DJIA Cost of
August 31 Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1996 $ 9,900 $ 2,184 $ 20 $ 12,104 $ 16,271 $ 17,903 $ 10,924
1995 $ 9,930 $ 1,525 $ 20 $ 11,475 $ 13,704 $ 14,378 $ 10,618
1994 $ 9,790 $ 820 $ 19 $ 10,629 $ 11,284 $ 11,895 $ 10,347
1993* $ 10,350 $ 214 $ 0 $ 10,564 $ 10,699 $ 10,800 $ 10,056
</TABLE>
* From April 29, 1993 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on April 29,
1993, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $12,210.
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 $1,981 for dividends and $20 for
capital gain distributions. Tax consequences of different investments have
not been factored into the above figures. The figures in the table do not
reflect the effect of the fund's $5.00 account closeout fee or the fund's
1.00% redemption fee applicable to shares held less than 180 days.
PERFORMANCE COMPARISONS. A fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Generally, Lipper rankings are based on total
return, assume reinvestment of distributions, do not take sales charges or
redemption 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, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. Each bond fund may compare its performance to the
Lehman Brothers Municipal Bond Index, a total return performance benchmark
for investment-grade municipal bonds with maturities of at least one year.
Spartan Short-Intermediate Municipal Income may also compare to the Lehman
Brothers 1-5 Year Municipal Bond Index, a total return performance
benchmark for investment-grade municipal bonds with maturities between one
and five years. Spartan Intermediate Municipal Income may compare to the
Lehman Brothers 1-17 Year Municipal Bond Index, a total return performance
benchmark for investment-grade municipal bonds with maturities between one
and 17 years. Issues included in these indexes 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 each index. Spartan
Aggressive Municipal may also compare to the Lehman Brothers 70%
Municipal/30% Non-Investment Grade Composite Index, a total return
performance benchmark for both investment-grade and non-investment grade
municipal bonds. This index is weighted 70% with the Lehman Brothers
Municipal Bond Index and weighted 30% with the Lehman Brothers
Non-Investment Grade Bond Index, a total return performance benchmark for
municipal bonds with maturities of at least one year that have a maximum
credit rating of Ba1 or are unrated and have been issued after December 31,
1990.
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, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared 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, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; work sheets 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 Consumer Price Index, and
combinations of various capital markets. The performance of these capital
markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES All-Tax-Free which is
reported in the MONEY FUND REPORT(registered trademark), covers over 412
All Tax Free money market funds. The Bond Fund Report
AverageS(trademark)/All-Tax-Free, which is reported in the BOND FUND
REPORT(registered trademark), covers over 568 tax free bond funds. When
evaluating comparisons to money market funds, investors should consider the
relevant differences in investment objectives and policies. Specifically,
money market funds invest in short-term, high-quality instruments and seek
to maintain a stable $1.00 share price. Bond funds, however, invest in
longer-term instruments and their share prices change daily in response to
a variety of factors.
A fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include other Fidelity funds; retirement investing;
brokerage products and services; 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,
a quarterly magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific periods
of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of August 31, 1996, FMR advised over $27 billion in tax-free fund
assets, $90 billion in money market fund assets, $271 billion in equity
fund assets, $55 billion in international fund assets, and $24 billion in
Spartan fund assets. The funds may reference the growth and variety of
money market mutual funds and the adviser's innovation and participation in
the industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates maintain
a worldwide information and communications network for the purpose of
researching and managing investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1996: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Although FMR expects the same
holiday schedule to be observed in the future, the NYSE may modify its
holiday schedule at any time. In addition, the funds will not process wire
purchases and redemptions on days when the Federal Reserve Wire System is
closed.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time. However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the Securities and
Exchange Commission (SEC). To the extent that portfolio securities are
traded in other markets on days when the NYSE is closed, a fund's NAV may
be affected on days when investors do not have access to the fund to
purchase or redeem shares. In addition, trading in some of a fund's
portfolio securities may not occur on days when the fund is open for
business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), each fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. Each fund will send each
shareholder a notice in January describing the tax status of 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.
Each 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 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 Spartan Municipal Money, Spartan
Short-Intermediate Municipal Income, and Spartan Municipal Income fund's
policies of investing so that at least 80% of their income is free from
federal income tax,and Spartan Intermediate Municipal's and Spartan
Aggressive Municipal's policies of investing so that at least 80% of their
assets are 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 each fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for purposes of Spartan Municipal Income, Spartan Municipal Money,
and Spartan Short-Intermediate Municipal Income fund's policy of investing
so that at least 80% of its income is free from federal income tax. Spartan
Municipal Money may distribute any net realized short-term capital gains
and taxable market discount once a year or more often, as necessary, to
maintain its net asset value at $1.00 per share.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
each fund are taxable to shareholders as dividends, not as capital gains.
The money market fund does not anticipate distributing long-term capital
gains.
As of August 31, 1996, Spartan Municipal Money Market Fund had a capital
loss carryforward aggregating approximately $198,900, of which $900, $700,
$45,800, $26,500 and $125,000 will expire on August 31, 1999, 2001, 2002,
2003, and 2004 respectively, and is available to offset future capital
gains.
As of August 31, 1996, Spartan Short-Intermediate Municipal Income Fund had
a capital loss carryforward aggregating approximately $6,706,000 of which
$5,803,000 and $903,000 will expire on August 31, 2003 and 2004
respectively, and is available to offset future capital gains.
As of August 31, 1996, Spartan Intermediate Municipal Income Fund had a
capital loss carry forward aggregating approximately $8,853,000 of which
$3,556,000 and $5,297,000 will expire on August 31, 2003 and 2004
respectively, and is available to offset future capital gains.
As of August 31, 1996, Spartan Municipal Income Fund had a capital loss
carryforward aggregating approximately $19,439,000 of which $2,188,000 and
$17,251,000 will expire on August 31, 2003 and 2004 respectively, and is
available to offset future capital gains.
As of August 31, 1996, Spartan Aggressive Municipal Fund had a capital loss
carryforward aggregating approximately $1,845,000 of which $1,047,000 and
$798,000 will expire on August 31, 2003 and 2004 respectively, and is
available to offset future capital gains.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. Each fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some, futures contracts, and options are included in this 30%
calculation, which may limit a fund's investments in such instruments.
Spartan Municipal Money fund is treated as a separate entity from the other
funds of Fidelity Union Street Trust II and Spartan Short-Intermediate
Municipal Income, Spartan Intermediate Municipal Income, Spartan Municipal
Income, and Spartan Aggressive Municipal are treated as separate entities
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 each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the Investment Company Act of 1940 (1940 Act) control
of a company is presumed where one individual or group of individuals owns
more than 25% of the voting stock of that company. Therefore, through their
ownership of voting common stock and the execution of the shareholders'
voting agreement, members of the Johnson family may be deemed, under the
1940 Act, to form a controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees, 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.
Trustees and officers elected or appointed to Fidelity Union Street Trust
prior to the Money Markets fund conversion from a Massachusetts business
trust served in identical capacities. 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 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 and
Members of the Advisory Board 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 (66), 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 (55), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (64), Trustee (1991), is a management consultant (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 Sanifill Corporation
(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 (64), 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.
RICHARD J. FLYNN (72), Trustee and Chairman of the non-interested Trustees,
is a financial consultant. Prior to September 1986, Mr. Flynn was Vice
Chairman and a Director of the Norton Company (manufacturer of industrial
devices). He is currently a Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc., and he previously served as a Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES (68), 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),
Cleveland-Cliffs Inc (mining), 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
marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc. (1985-1995).
In addition, he serves as a Trustee of First Union Real Estate Investments,
a Trustee and member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (63), 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, Vice 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 (53), 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). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
GERALD C. McDONOUGH (67), Trustee and Vice-Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Prior to his retirement in July 1988, he was Chairman and Chief
Executive Officer of Leaseway Transportation Corp. (physical distribution
services). Mr. McDonough is a Director of Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration),
Commercial Intertech Corp. (hydraulic systems, building systems and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products, 1996), and
Associated Estates Realty Corporation (a real estate investment trust,
1993). Mr. McDonough served as a Director of ACME-Cleveland Corp. (metal
working, telecommunications, and electronic products) from 1987-1996.
EDWARD H. MALONE (71), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of the Naples
Philharmonic Center for the Arts and Rensselaer Polytechnic Institute, and
he is a member of the Advisory Boards of Butler Capital Corporation Funds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (63), Trustee (1993) is Chairman of the Board, President,
and Chief Executive Officer of Lexmark International, Inc. (office
machines, 1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign
Vice Chairman of the Tri-State United Way (1993) and is a member of the
University of Alabama President's Cabinet.
WILLIAM O. McCOY (62), Member of the Advisory Board (1996), 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) and
President of BellSouth Enterprises. He is currently a Director of Liberty
Corporation (holding company), Weeks Corporation of Atlanta (real estate,
1994), and Carolina Power and Light Company (electric utility, 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).
THOMAS R. WILLIAMS (67), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
FRED L. HENNING, JR. (57), Vice President, is Vice President of Fidelity's
fixed-income (1995) funds and Senior Vice President of FMR (1995).
SARAH H. ZENOBLE (47), Vice President, is Vice President of Fidelity's
money market fund's (1996) and Vice President of FMR Texas Inc.
NORMAN LIND (40), is manager and Vice President of Spartan
Short-Intermediate Municipal Income and Spartan Intermediate Municipal
Income, both of which he has managed since October 1995. Mr. Lind also
manages Advisor Short-Intermediate Municipal Income, New York Municipal
Income, New York Insured Municipal Income, Spartan New York Intermediate
Municipal Income, and Spartan New York Municipal Income. Previously, he
managed Spartan Municipal Income, and he served as a municipal research
analyst. Mr. Lind joined Fidelity in 1986.
DAVID MURPHY (48), is manager and Vice President of Spartan Municipal
Income, which he has managed since October 1995. Mr. Murphy also manages
High Yield Tax-Free, Limited Term Municipal Income, Advisor Intermediate
Municipal Income, and Michigan Municipal Income. Previously, he managed
Spartan Short-Intermediate Municipal Income, Spartan Intermediate Municipal
Income, Spartan New Jersey Municipal Income, Spartan New York Intermediate
Municipal Income, and Advisor Short-Intermediate Municipal Income. Mr.
Murphy joined Fidelity in 1989.
SCOTT ORR (34), is manager and Vice President of Spartan Municipal Money
Market, which he has managed since June 1995. He also manages Institutional
Tax-Exempt Cash Portfolios, Daily Tax Exempt Money, and Spartan Arizona
Municipal Money Market. Previously he managed Connecticut Municipal Money
Market, Michigan Municipal Money Market, New Jersey Municipal Money Market,
Spartan Connecticut Municipal Money Market, and Spartan New Jersey
Municipal Money Market, and he served as a municipal bond analyst. Mr. Orr
joined Fidelity in 1989.
ARTHUR S. LORING (48), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (49), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
THOMAS D. MAHER (51), Assistant Vice President, is Assistant Vice President
of Fidelity's money market funds and Vice President and Associate General
Counsel of FMR Texas Inc.
JOHN H. COSTELLO (49), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (50), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994) and Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
THOMAS J. SIMPSON (38), Assistant Treasurer (1996), is Assistant Treasurer
of Fidelity's money market funds and an employee of FMR (1996). Prior to
joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty
Investment Services (1987-1995).
The following table sets forth information describing the compensation of
each current trustee of each fund and each member of the advisory board for
his or her services as trustee for the fiscal year ended August 31, 1996.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J. Gary Ralph Phyllis Richard Edward C. E. Donald Peter S. Gerald C. Edward Marvin Thomas William
Burkhead** F. Cox Burke J. Johnson Bradley J. Kirk Lynch** McDonough H. L. Mann R. O.
Davis Flynn 3d** Jones Malone Williams McCoy
Spartan $ 0 $ 79 $ 77 $ 100 $ 0 $ 78 $ 78 $ 0 $ 77 $ 78 $ 78 $ 78 $ 23
Intermediate
Municipal
Income
Spartan 0 313 306 397 0 310 310 0 306 307 307 309 86
Short-Interm
ediate
Municipal
Income
Spartan 0 203 199 258 0 201 201 0 198 199 199 201 58
Municipal
Income
Spartan 0 811 793 1,029 0 802 802 0 792 794 794 801 242
Municipal
Money
Spartan 0 29 28 37 0 29 29 0 28 29 29 29 9
Aggressive
Municipal
Income
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trustees Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
J. Gary Burkhead** $ 0 $ 0 $ 0
Ralph F. Cox 5,200 52,000 128,000
Phyllis Burke Davis 5,200 52,000 125,000
Richard J. Flynn 0 52,000 160,500
Edward C. Johnson 3d** 0 0 0
E. Bradley Jones 5,200 49,400 128,000
Donald J. Kirk 5,200 52,000 129,500
Peter S. Lynch** 0 0 0
Gerald C. McDonough 5,200 52,000 128,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 128,000
Thomas R. Williams 5,200 52,000 125,000
William O. McCoy N/A N/A 0
</TABLE>
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the Plan). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' 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 the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
Each fund may invest in such designated securities under the Plan without
shareholder approval.
Under a retirement program adopted in July 1988 and modified in November
1995, each non-interested Trustee 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 becomes eligible to participate in
the program at the end of the calendar year in which he or she reaches age
72, provided that, at the time of retirement, he or she has served as a
Fidelity fund Trustee for at least five years. Currently, Messrs. Ralph S.
Saul, William R. Spaulding, Bertram H. Witham, and David L. Yunich, all
former non-interested Trustees, receive retirement benefits under the
program.
As of August 31,1996 the Trustees and officers of each fund owned, in the
aggregate, less than 1% of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing each fund's investments,
compensates all officers of each fund and all Trustees who are "interested
persons" of the trusts or of FMR, and all personnel of each fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each fund. These services include providing facilities
for maintaining each fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with each fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state laws; developing management and shareholder services for each fund;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the Trustees.
FMR is responsible for the payment of all expenses of each fund with
certain exceptions. Specific expenses payable by FMR include, without
limitation, expenses for the typesetting, printing, and mailing proxy
materials to shareholders; legal expenses, and the fees of the custodian,
auditor and interested Trustees; costs of typesetting, printing, and
mailing prospectuses and statements of additional information, notices and
reports to shareholders; each fund's proportionate share of insurance
premiums and Investment Company Institute dues. FMR also provides for
transfer agent and dividend disbursing services and portfolio and general
accounting record maintenance through FSC.
FMR pays all other expenses of each fund with the following exceptions:
fees and expenses of all Trustees of the trust who are not "interested
persons" of the trust or FMR (the non-interested Trustees); interest on
borrowings; taxes; brokerage commissions (if any); and such nonrecurring
expenses as may arise, including costs of any litigation to which a fund
may be a party, and any obligation it may have to indemnify the officers
and Trustees with respect to litigation.
FMR is Spartan Municipal Money's manager pursuant to a management contract
dated February 28, 1992. The contract was approved by Fidelity Union Street
Trust as the then sole shareholder of Spartan Municipal Money on February
28, 1992, in conjunction with an Agreement and Plan to convert the fund
from a series of a Massachusetts business trust to a series of a Delaware
trust. The Agreement and Plan of Conversion was approved by public
shareholders of the fund on December 11, 1991. Besides reflecting the
fund's conversion, the February 28, 1992 contract is identical to the
fund's prior management contract with FMR, which was approved by
shareholders on December 11, 1991.
FMR is Spartan Short-Intermediate Municipal Income's manager pursuant to a
management contract dated October 18, 1993. The contract was approved by
Fidelity Municipal Trust as the then sole shareholder of the fund on
October 18, 1993, in conjunction with an Agreement and Plan to convert the
fund from a series of one Massachusetts business trust to a series of
another Massachusetts business trust. The Agreement and Plan of Conversion
was approved by public shareholders of the fund on August 18, 1993. Besides
reflecting the fund's conversion, the October 18, 1993 contract is
identical to the fund's prior management contract with FMR, which was
approved by shareholders on November 13, 1991.
FMR is Spartan Municipal Income's manager pursuant to a management contract
dated April 19, 1990, which was approved by shareholders on December 12,
1990, and Spartan Intermediate Municipal's and Spartan Aggressive
Municipal's manager pursuant to management contracts dated March 18, 1993,
which were approved by FMR, the then sole shareholder of each fund on April
8, 1993.
For the services of FMR under each management contract, the funds pay FMR a
monthly management fee at the annual rate of .50% (Spartan Municipal
Money), .55% (Spartan Short-Intermediate Municipal Income), .55% (Spartan
Intermediate Municipal Income), .55% (Spartan Municipal Income), and .60%
(Spartan Aggressive Municipal) of average net assets throughout the month.
The management fee paid to FMR is reduced by an amount equal to the fees
and expenses of the non-interested Trustees. Fees received by FMR, after
reduction of fees and expenses of the non-interested Trustees, for the last
three fiscal years are shown in the tables below:
FMR may, from time to time, voluntarily reimburse all or a portion of each
fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase each fund's total returns and yield and repayment of
the reimbursement by each fund will lower its total returns: and yield.
During the fiscal periods reported, FMR voluntarily agreed to reimburse
certain funds to the extent that the fund's aggregate operating expenses
were in excess of an annual rate of its average net assets. The tables
below identify the funds in reimbursement; the levels of and periods for
such reimbursement; and the dollar amount reimbursed by FMR, if any, for
each period.
SPARTAN MUNICIPAL MONEY:
From To Expense Limitation
August 1, 1994 -- .40%
July 1, 1994 July 31, 1994 .35%
June 1, 1993 June 30, 1994 .32%
April 1, 1993 May 31, 1993 .28%
November 1, 1992 March 31, 1993 .25%
September 1, 1992 October 31, 1992 .23%
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fee Before Amount of Expense Amount of Credits Reducing
Fiscal Years Ended Reimbursement and Credits Limitation Reimbursement Management Fees
1996 $ 11,391,870 $ 2,280,081 $ 197,613
1995 $ 11,137,523 $ 2,229,935 $ --
1994 $ 10,606,957 $ 3,602,545 $ --
</TABLE>
SPARTAN SHORT-INTERMEDIATE MUNICIPAL INCOME:
From To Expense Limitation
June 1, 1994 July 31, 1994 .45%
January 10, 1994 May 31, 1994 .40%
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fee Before Amount of Expense Amount of Credits Reducing
Fiscal Years Ended Reimbursement and Credits Limitation Reimbursement Management Fees
1996 $ 4,739,273 $ -- $ 56,000
1995 $ 5,253,000 $ -- $ --
1994 $ 6,100,246 $ 866,308 $ --
</TABLE>
SPARTAN INTERMEDIATE MUNICIPAL INCOME:
From To Expense Limitation
February 1, 1995 February 1, 1996 .45%
October 1, 1994 January 31, 1995 .40%
August 1, 1994 September 31, 1994 .30%
June 1, 1994 July 31, 1994 .35%
November 1, 1993 May 31, 1994 .20%
October 18, 1993 October 31, 1993 .15%
September 1, 1993 October 17, 1993 .10%
April 26, 1993 August 31, 1993 .00%
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fee Before Amount of Expense Amount of Credits Reducing
Fiscal Years Ended Reimbursement and Credits Limitation Reimbursement Management Fees
1996 $ 1,223,445 $ 92,948 $ 13,944
1995 $ 1,213,370 $ 289,444 $ --
1994 $ 1,459,525 $ 916,717 $ --
</TABLE>
SPARTAN MUNICIPAL INCOME:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fee Before Amount of Expense Amount of Credits Reducing
Fiscal Years Ended Reimbursement and Credits Limitation Reimbursement Management Fees
1996 $ 3,102,894 $ -- $ 59,880
1995 $ 3,224,403 $ -- $ --
1994 $ 4,332,192 $ -- $ --
</TABLE>
SPARTAN AGGRESSIVE MUNICIPAL:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fee Before Amount of Expense Amount of Credits Reducing
Fiscal Years Ended Reimbursement and Credits Limitation Reimbursement Management Fees
1996 $ 508,913 $ -- $ 461
1995 $ 383,028 $ -- $ --
1994 $ 243,521 $ -- $ --
</TABLE>
To defray shareholder service costs, FMR or its affiliates also collect
each fund's $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for
wire purchases and redemptions, and Spartan Municipal Money's, Spartan
Short Intermediate Municipal Income's, and Spartan Intermediate Municipal
Income's $2.00 checkwriting charge. Spartan Municipal Income's .50% and
Spartan Aggressive Municipal's 1.00% redemption fee on shares held less
than 180 days is retained by each fund, it is not collected by FMR.
Shareholder transaction fees and charges collected by FMR are indicated in
the table below.
SPARTAN MUNICIPAL MONEY
Year Ended Account Checkwriting
August 31 Exchange Fees Closeout Fees Wire Fees Charge
1996 $ 10,444 $ 2,684 $ 2,305 $ 14,281
1995 $ 13,120 $ 3,274 $ 3,005 $ 16,448
1994 $ 21,336 $ 3,303 $ 3,155 $ 16,370
SPARTAN SHORT-INTERMEDIATE MUNICIPAL
Period Ended Account Checkwriting
August 31 Exchange Fees Closeout Fees Wire Fees Charge
1996 $ 7,790 $ 2,335 $ 590 $ 1,653
1995 $ 11,545 $ 3,806 $ 770 $ 2,454
1994 $ 20,989 $ 3,308 $ 1,805 $ 3,341
SPARTAN INTERMEDIATE MUNICIPAL INCOME
Period Ended Account Checkwriting
August 31 Exchange Fees Closeout Fees Wire Fees Charge
1996 $ 1,805 $ 685 $ 545 $ 446
1995 $ 3,750 $ 1,100 $ 245 $ 600
1994 $ 6,631 $ 885 $ 435 $ 730
SPARTAN MUNICIPAL INCOME
Year Ended Account
August 31 Exchange Fees Closeout Fees Wire Fees
1996 $ 3,855 $ 1,765 $ 425
1995 $ 8,145 $ 2,875 $ 665
1994 $ 16,475 $ 2,985 $ 1,110
SPARTAN AGGRESSIVE MUNICIPAL
Period Ended Account
August 31 Exchange Fees Closeout Fees Wire Fees
1996 $ 665 $ 175 $ 45
1995 $ 1,000 $ 215 $ 50
1994 $ 775 $ 145 $ 80
SUB-ADVISER. On behalf of Spartan Municipal Money Fund, FMR has entered
into a sub-advisory agreement with FMR Texas pursuant to which FMR Texas
has primary responsibility for providing portfolio investment management
services to Spartan Municipal Money Fund.
Under the sub-advisory agreement, dated February 28, 1992 which was
approved by shareholders on December 11, 1991, FMR pays FMR Texas fees
equal to 50% of the management fee payable to FMR under its management
contract with the fund. The fees paid to FMR Texas are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect from
time to time. On behalf of the money market fund, for fiscal 1996, 1995,
and 1994, FMR paid FMR Texas fees of $5,695,935, $5,568,762, and $5,303,479
respectively.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of the
funds (the Plans) pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the Rule). The Rule provides in substance that a mutual fund may
not engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow the funds and FMR to incur
certain expenses that might be considered to constitute indirect payment by
the funds of distribution expenses.
Under each Plan, if the payment of management fees by the funds to FMR is
deemed to be indirect financing by the funds of the distribution of their
shares, such payment is authorized by the Plans. Each Plan also
specifically recognizes that FMR, either directly or through FDC, may use
its management fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection
with the offer and sale of shares of each fund. In addition, each Plan
provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that assist in selling shares
of each fund, or to third parties, including banks, that render shareholder
support services.
No third party payments were made in fiscal 1996, 1995, and 1994.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
the fund and its shareholders. In particular, the Trustees noted that the
Plans do not authorize payments by a fund other than those made to FMR
under its management contract with the fund. To the extent that each Plan
gives FMR and FDC greater flexibility in connection with the distribution
of shares of each fund, additional sales of fund shares may result.
Furthermore, certain shareholder support services may be provided more
effectively under the Plans by local entities with whom shareholders have
other relationships.
Spartan Municipal Money's Plan was approved by Fidelity Union Street Trust
on February 28, 1992, as the then sole shareholder of the fund, pursuant to
an Agreement and Plan of Conversion approved by public shareholders of the
fund on December 11, 1991. Spartan Short-Intermediate Municipal Income's
Plan was approved by Fidelity Municipal Trust on October 20, 1993, as the
then sole shareholder of the fund pursuant to an Agreement and Plan of
Conversion approved by public shareholders of the fund on August 18, 1993.
The Plan for Spartan Municipal Income was approved by shareholders on
December 12, 1990. The Plans for Spartan Intermediate Municipal and Spartan
Aggressive Municipal were approved by FMR, the then sole shareholder of
each fund, on April 8, 1993.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
Each fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plans.
No preference for the instruments of such depository institutions will be
shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
UMB Bank, n.a. (UMB) is each fund's custodian and transfer agent. UMB has
entered into sub-contracts with FSC, an affiliate of FMR, under the terms
of which FSC performs the processing activities associated with providing
transfer agent and shareholder servicing functions for each fund. Under
this arrangement, 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. UMB
has additional sub-contracts with FSC, pursuant to which FSC performs the
calculations necessary to determine each fund's NAV and dividends and
maintains each fund's accounting records. For pricing and bookkeeping
services, FSC receives a fee based on each fund's average net assets. UMB
is entitled to reimbursement from FMR for fees paid to FSC because FMR must
bear these costs pursuant to its management contract with each fund.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Spartan Short-Intermediate Municipal Income Fund,
Spartan Intermediate Municipal Income Fund, Spartan Municipal Income Fund,
and Spartan Aggressive Municipal Fund are funds of Fidelity Union Street
Trust (the Massachusetts Trust), an open-end management investment company
organized as a Massachusetts business trust on March 1, 1974 as Fidelity
Daily Income Trust. The trust's name was changed to Fidelity Union Street
Trust by a supplement to the Declaration of Trust dated and filed with the
Commonwealth of Massachusetts on April 30, 1990. Currently, there are eight
funds of the Massachusetts trust: Spartan Municipal Income Fund, Spartan
Ginnie Mae Fund, Spartan Maryland Municipal Income Fund, Spartan Aggressive
Municipal Fund, Spartan Intermediate Municipal Income Fund, Spartan
Short-Intermediate Municipal Income Fund, Spartan Arizona Municipal Income
Fund, and Fidelity Export Fund. Spartan Short-Intermediate Municipal Fund
entered into an agreement to acquire all of the assets of Spartan
Short-Intermediate Municipal Fund, a series of Fidelity Municipal Trust on
October 20, 1993. The Massachusetts trust's Declaration of Trust permits
the Trustees to create additional funds.
Spartan Municipal Money Fund is a fund of Fidelity Union Street Trust II
(the Delaware Trust), an open-end management investment company organized
as a Delaware business trust on June 20, 1991. Currently there are four
funds of the Delaware trust: Spartan Municipal Money Fund, Fidelity Daily
Income Trust, Spartan Arizona Municipal Money Market Fund, and Spartan
World Money Market Fund. Spartan Municipal Money Fund entered into an
agreement to acquire all of the assets of Spartan Municipal Money Fund, a
series of Fidelity Union Street Trust, on February 28, 1992. The Delaware
trust's Trust Instrument permits the Trustees to create additional funds.
In the event that FMR ceases to be investment advisor to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for a misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of their respective trusts. Expenses with respect to
the trusts are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Boards of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
trust is an entity of the type commonly known as "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 Massachusetts 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 Massachusetts trust or its
Trustees shall include a provision limiting the obligations created thereby
to the Massachusetts trust and its assets. The Declaration of Trust
provides for indemnification out of each fund's property of any
shareholders 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 the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
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.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument 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
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that Trustees are not protected 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 - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. For the bond funds as a shareholder, you receive one
vote for each dollar value of net asset value you own. For the money market
fund you receive one vote for each share you own. The shares have no
preemptive or conversion rights; 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
respective "Shareholder and Trustee Liability" headings above. Shareholders
representing 10% or more of a trust or one of its funds may, as set forth
in the Declaration of Trust or Trust Instrument, call meetings of the trust
or fund for any purpose related to the trust or fund, as the case may be,
including, in the case of a meeting of an entire trust, the purpose on
voting on removal of one or more Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund. However, the Trustees of the Delaware
trust may, without prior shareholder approval, change the form of the
organization of the Delaware trust by merger, consolidation, or
incorporation. If not so terminated or reorganized, the trusts and their
funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware trust to be
incorporated under Delaware law. Each fund of the Massachusetts and
Delaware trusts may also invest all of its assets in another investment
company.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri, 64106,
is custodian of the assets of the funds. The custodian is responsible for
the safekeeping of a fund's assets and the appointment of the 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. Morgan Guaranty Trust Company of New York, The Bank of New York
and The Chase Manhattan Bank, each headquartered in New York, also may
serve as a special purpose custodian of certain assets in connection with
pooled 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 (bond funds) and 1999 Bryan Street, Dallas, Texas (money
market fund) serves as the trusts' independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the fiscal
year ended August 31, 1996 are included in the fund's Annual Report, which
is a separate report supplied with this Statement of Additional
Information. Each fund's financial statements and financial highlights and
the report of the auditors, thereon are incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
The descriptions that follow are examples of eligible ratings for the
funds. A 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 STATE AND MUNICIPAL
NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality. All security
elements are accounted for, but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
MIG-4/VMIG-4 - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF STATE AND MUNICIPAL NOTES:
SP-1 - Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 - Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE MUNICIPAL BOND RATINGS:
AAA - Bonds which 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 which 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 which 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 which 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 which 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 which 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 which 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 which 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 which 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.
There are nine basic rating categories for long-term obligations. They
range from AAA (highest quality) to C (lowest quality). Those bonds within
the AA, A, BAA, BA and B categories that Moody's believes possess the
strongest credit attributes within those categories are designated by the
symbols AA1, A1, BAA1, BA1 and B1.
DESCRIPTION OF STANDARD & POOR'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the 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.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
AGGRESSIVE MUNICIPAL
FUND
ANNUAL REPORT
AUGUST 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 25 Notes to the financial statements.
REPORT OF INDEPENDENT 28 The auditors' opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
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.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first eight
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value), and the effect of the $5 account closeout fee on
an average sized account. You can also look at the fund's income to measure
performance. If Fidelity had not reimbursed certain fund expenses during
the periods shown, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Aggressive Municipal 5.47% 21.03%
Lehman Brothers Municipal Bond Index 5.24% n/a
High Yield Municipal Debt Funds Average 5.43% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year or since the fund started on
April 29, 1993. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare the fund's returns to the performance of the Lehman
Brothers Municipal Bond Index, which is a total return performance
benchmark for investment-grade municipal bonds with maturities of at least
one year. To measure how the fund's performance stacked up against its
peers, you can compare it to the high yield municipal debt funds average
which reflects the performance of 43 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc., over the past 12 months. Both
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 1996 PAST 1 LIFE OF
YEAR FUND
Spartan Aggressive Municipal 5.47% 5.87%
Lehman Brothers Municipal Bond Index 5.24% n/a
High Yield Municipal Debt Funds Average 5.43% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960831 19960916 090330 S00000000000001
Spartan Aggressive Muni Lehman Brothers Muni
00442 LB015
1993/04/30 10000.00 10000.00
1993/05/31 10111.64 10056.20
1993/06/30 10292.54 10224.04
1993/07/31 10315.66 10237.43
1993/08/31 10551.38 10450.57
1993/09/30 10724.42 10569.61
1993/10/31 10748.11 10590.01
1993/11/30 10656.39 10496.71
1993/12/31 10896.03 10718.29
1994/01/31 11021.66 10840.70
1994/02/28 10776.70 10559.92
1994/03/31 10253.20 10129.92
1994/04/30 10327.49 10215.82
1994/05/31 10413.95 10304.40
1994/06/30 10368.71 10241.44
1994/07/31 10562.24 10429.16
1994/08/31 10616.12 10465.25
1994/09/30 10464.18 10311.62
1994/10/31 10258.74 10128.48
1994/11/30 9996.55 9945.36
1994/12/31 10230.34 10164.26
1995/01/31 10543.13 10454.75
1995/02/28 10850.76 10758.77
1995/03/31 10986.30 10882.39
1995/04/30 11008.24 10895.23
1995/05/31 11360.11 11242.90
1995/06/30 11267.35 11145.09
1995/07/31 11313.54 11250.74
1995/08/31 11461.77 11393.40
1995/09/30 11562.09 11465.52
1995/10/31 11734.99 11632.23
1995/11/30 11940.58 11825.21
1995/12/31 12044.42 11938.85
1996/01/31 12125.88 12028.99
1996/02/29 12083.74 11947.79
1996/03/31 11867.24 11795.10
1996/04/30 11839.46 11761.72
1996/05/31 11824.66 11757.02
1996/06/30 11952.82 11885.05
1996/07/31 12070.24 11993.20
1996/08/31 12089.93 11990.33
IMATRL PRASUN SHR__CHT 19960831 19960916 090336 R00000000000123
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Aggressive Municipal Fund on April 30, 1993, shortly
after the fund started. As the chart shows, by August 31, 1996, the value
of the investment would have grown to $12,090 - a 20.90% increase on the
initial investment. This assumes the fund was still owned on August 31,
1996 and therefore does not include the effect of the $5 account closeout
fee on an average sized account. For comparison, look at how the Lehman
Brothers Municipal Bond Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 would have grown to
$11,990 - a 19.90% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
APRIL 29, 1993
(COMMENCEMEN
YEARS ENDED AUGUST 31, T OF OPERATIONS)
1996 1995 1994 TO AUGUST 31,
1993
Dividend return 5.78% 6.54% 5.84% 2.14%
Capital appreciation return -0.31% 1.42% -5.24% 3.49%
Total return 5.47% 7.96% 0.60% 5.63%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED AUGUST 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.62(cents) 28.17(cents) 56.64(cents)
Annualized dividend rate 5.44% 5.64% 5.66%
30-day annualized yield 5.53% - -
30-day annualized tax-equivalent 8.64% - -
yield
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.00 over
the past month, $9.90 over the past six months and $10.01 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Increased demand for municipal
bonds in the face of continued
low supply allowed municipal
bonds to outperform taxable debt
securities during the 12 months
ended August 31, 1996. While
the bond market in general has
been on a slow slide throughout
much of 1996, municipals have
held their ground better than
most. For the past 12 months, the
Lehman Brothers Municipal Bond
Index - a broad measure of the
municipal bond market - had a
total return of 5.24%. In
comparison, the Lehman
Brothers Aggregate Bond Index
- - a proxy for investment-grade
taxable bonds - had a total
return of 4.11%. Factors that
helped munis outperform
included a lack of supply of new
issues, strong demand for
municipal bonds from insurance
companies and the diminishing
likelihood of significant tax reform
in the near future. Like most
domestic bonds, munis were hurt
by stronger-than-expected signs
of strength in the economy earlier
in 1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis ended the period
trading at expensive levels
relative to their taxable
counterparts.
An interview with Tanya Roy, Portfolio Manager of Spartan Aggressive
Municipal Fund
Q. HOW DID THE FUND PERFORM, TANYA?
A. The fund had a total return of 5.47% for the 12-month period ended
August 31, 1996. By comparison, the high-yield municipal debt fund's
average returned 5.43% for the same time period, according to Lipper
Analytical Services. In addition, the Lehman Brothers Municipal Bond Index
returned 5.24% for the past year.
Q. HOW WOULD YOU DESCRIBE THE INVESTING ENVIRONMENT DURING THE PAST SIX
MONTHS?
A. During the period, yields on municipals rose, on average, about 40 to 45
basis points. If you look at the performance of municipals versus
Treasuries for the same time period - which is a popular comparison -
municipals outperformed Treasuries by a healthy margin. There are a couple
of reasons for this. One is that, from a technical standpoint, there was a
relatively moderate supply of municipal bonds coming to market and healthy
demand from insurance companies and retail investors to absorb the new
supply. Another is the absence of concern about tax reform, which had
hindered the performance of municipals for a good part of 1995.
Q. WHY DID HIGH-YIELD MUNICIPALS OUTPERFORM INVESTMENT-GRADE MUNICIPALS
DURING THE PERIOD?
A. New issuance was fairly light, not only for the municipal market as a
whole, but also specifically in the high-yield sector, forcing available
high-yield bonds to be bid up. In addition, a number of sectors that are
well represented in the high-yield universe, such as health care, have
performed well due to improving financial and operational results.
Q. WHERE DID YOU FIND INVESTMENT OPPORTUNITIES DURING THE PAST SIX MONTHS?
A. In the health care industry, hospitals have been good performers, with
spreads remaining tight and the supply very low compared to what it has
been in the past. There's been a lot of consolidation in the hospital
sector, and there continues to be a fair amount of debate in the market
about the prognosis for the health care sector. Interestingly, the
volatility in the market has created opportunity for the fund. For example,
in one situation the fund benefited when the bonds of a hospital it owned
were tendered - or bought back by the issuer - at a favorable price. Health
care remained one of the largest sector holdings in the fund at the end of
the period.
Q. WHICH INVESTMENTS PROVED DISAPPOINTING?
A. The fund's performance was hurt by its interest in the Ford Heights,
Illinois, incinerator project. In March, the governor of Illinois signed a
bill that repealed a tax subsidy supporting three incinerator projects in
the state, including Ford Heights. Ford Heights later entered bankruptcy
proceedings. Though the fund no longer holds the bonds, the position did
hurt the fund's performance.
Q. TANYA, WE UNDERSTAND THERE HAS BEEN A CHANGE TO THE FUND'S INVESTMENT
POLICIES . . .
A. That's right. As of June 24, 1996, the fund changed some of its debt
quality policies. The fund is no longer required to invest 65% of its
holdings in securities equivalent in quality to those rated A or below.
This change allows me more flexibility to invest in higher-quality
securities if I believe the return potential of lower-quality securities is
not commensurate with the risk. The fund was introduced in 1993, but the
Tax Act of 1986 significantly reduced the supply of lower-quality municipal
bonds by preventing or reducing the ability of certain issuers or sectors
of the market to issue tax-exempt bonds. For a while, a substantial supply
of these kinds of bonds was available in the secondary market, but now that
is no longer the case. While the fund will still invest in lower-quality
securities, it is no longer required to do so to such a large extent.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The performance of the municipal market should continue to be influenced
by light supply. That said, it is difficult to see municipals outperforming
Treasuries much more than they already have so far this year. Although
high-yield issuance has been lighter than I would like, I expect to
continue to invest in attractive high-yield opportunities for shareholders.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing mainly in the stocks
of North American
companies that are expected
to benefit from exporting
goods and services
START DATE: October 4, 1994
SIZE: as of August 31, 1996,
more than $267 million
MANAGER: Arieh Coll, since
October 1994; manager,
Fidelity Select Brokerage and
Investment Management
Portfolio, 1993-1995;
Fidelity Select Software and
Computer Services Portfolio,
1991-1994; Fidelity Select
Technology Portfolio,
1992-1993; joined Fidelity in
1989
(checkmark)
ARIEH COLL ON HIS INVESTING
PHILOSOPHY:
"I have several personal rules
of investing that I try to
remember each time I buy
and sell a stock. They include:
(solid bullet) DON'T LOSE MONEY. It's as
important, if not more
important, to limit losses as it
is to secure gains. Substantial
losses often prove difficult to
make up.
(solid bullet) INVEST WITHIN MY CIRCLE OF
COMPETENCE. If I don't feel
completely comfortable with
an investment, I stay away.
(solid bullet) STAY FOCUSED. I try to avoid
distractions that interfere
with my research. The reality
is that the more time one
spends doing basic research,
the more great companies one
will likely uncover.
(solid bullet) BE PATIENT. It may seem
obvious to me that a
company's stock is
undervalued, but sometimes it
takes a while for the stock
market to agree and push up
the price.
(solid bullet) INVEST WITH CONVICTION. If I
really like a company, I try to
buy a lot of its stock. Great
investment ideas don't pop up
every day.
INVESTMENT CHANGES
TOP FIVE STATES AS OF AUGUST 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
New York 10.9 8.7
California 9.9 12.7
Michigan 6.9 9.2
Pennsylvania 6.7 6.2
Texas 4.6 3.1
TOP FIVE SECTORS AS OF AUGUST 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Industrial
Development 23.0 17.8
Electric
Revenue 21.1 15.9
General
Obligation 18.1 16.6
Health Care 14.3 15.8
Special Tax 6.7 7.7
AVERAGE YEARS TO MATURITY AS OF AUGUST 31, 1996
6 MONTHS AGO
Years 15.0 14.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF AUGUST 31, 1996
6 MONTHS AGO
Years 7.1 7.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO
CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A
BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. EFFECTIVE
JUNE, 1996, THE MODEL USED TO CALCULATE DURATIONS MAY HAVE BEEN SLIGHTLY
MODIFIED IN ORDER TO FURTHER REFINE THIS INFORMATION. THESE CHANGES IN
METHODOLOGY MAY PRODUCE ADJUSTMENTS IN HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF AUGUST 31, 1996 AS OF FEBRUARY 29, 1996
11
Aaa 28.5%
Aa, A 18.6%
Baa 21.2%
Ba or B 10.2%
Non-rated 15.7%
Short-term
investments 5.8%
Aaa 26.8%
Aa, A 20.3%
Baa 18.5%
Ba or B 10.3%
Non-rated 18.3%
Short-term
investments 5.8%
Row: 1, Col: 1, Value: 5.8
Row: 1, Col: 2, Value: 15.7
Row: 1, Col: 3, Value: 10.2
Row: 1, Col: 4, Value: 21.2
Row: 1, Col: 5, Value: 18.6
Row: 1, Col: 6, Value: 28.5
Row: 1, Col: 1, Value: 5.8
Row: 1, Col: 2, Value: 18.3
Row: 1, Col: 3, Value: 10.3
Row: 1, Col: 4, Value: 18.5
Row: 1, Col: 5, Value: 20.3
Row: 1, Col: 6, Value: 26.8
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNTED FOR 15.7% AND 16.5% OF THE FUND'S
INVESTMENTS ON AUGUST 31, 1996 AND FEBRUARY 29, 1996, RESPECTIVELY.
INVESTMENTS AUGUST 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 94.2%
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
ALABAMA - 0.6%
Mobile Wtr. & Swr. Commissioners Wtr. & Swr.
Rev. Rfdg. 6.50% 1/1/09 A $ 500,000 $ 533,750
ARIZONA - 1.7%
Arizona Trans. Board Excise Tax Rev. (Maricopa
County Regional Area Road-B Proj.)
6% 7/1/03 (AMBAC Insured) Aaa 500,000 530,000
Navajo County Ind. Dev. Auth. (Stone Container
Corp. Proj.) 7.40% 4/1/26 (c) - 1,000,000 1,015,000
1,545,000
CALIFORNIA - 9.9%
California Pub. Works Board Lease Rev.
(Various California State Univ. Projs.)
Series B, 5.55% 6/6/10 A1 1,000,000 978,750
La Quinta Redev. Agcy. Tax Allocation Rfdg.
(Redev. Proj. Area #1) 7.30% 9/1/12
(MBIA Insured) Aaa 470,000 551,663
Madera County Ctfs. of Prtn. (Valley
Children's
Hosp.) 6.25% 3/15/05 (MBIA Insured) Aaa 1,000,000 1,071,250
Riverside County Ctfs. of Prtn. (Air Force
Village
West, Inc.) Series A, 8.125% 6/15/12 - 500,000 523,750
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev. (Procter & Gamble Proj.)
6.50% 7/1/14 BBB- 500,000 508,125
Sacramento Pwr. Auth. Cogeneration Proj.
Rev.
6.50% 7/1/07 BBB- 1,000,000 1,040,000
Santa Clara County Fin. Auth. Lease Rev.
(VMC Replacement Proj.) Series A,
7.75% 11/15/08 (AMBAC Insured) Aaa 1,000,000 1,208,750
Santa Margarita/Dana Point Auth. Rev.
(Impt. Dists. 1-2-2A & 8) Series A,
7.25% 8/1/10 (MBIA Insured) Aaa 1,045,000 1,216,119
South Orange County Pub. Fin. Auth. Spl.
Tax Rev. (Foothill Area) Series C,
8% 8/15/08 (FGIC Insured) Aaa 500,000 613,750
Tri-City Hosp. Dist. Rev. Rfdg. Series B,
5.375% 2/15/07 (MBIA Insured) (d) Aaa 1,000,000 986,250
Upland Ctfs. of Prtn. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A 500,000 471,875
9,170,282
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
COLORADO - 1.8%
Colorado Health Facs. Auth. Rev. Rfdg.
(Rocky Mountain Adventist):
6.625% 2/1/13 Baa $ 500,000 $ 505,000
6.625% 2/1/22 Baa 500,000 501,875
Colorado Springs Arpt. Rev. (Cap. Appreciation)
Series C, 0% 1/1/06 BBB+ 250,000 140,000
Denver City & County Arpt. Rev. Series A (c):
6.60% 11/15/97 Baa 250,000 255,625
6.90% 11/15/98 Baa 250,000 260,625
1,663,125
CONNECTICUT - 3.0%
Connecticut Health & Ed. Facs. Auth. Rev.:
Rfdg. (Quinnipiac College) Series D,
6% 7/1/13 BBB- 1,000,000 942,500
(New Britain Mem. Hosp.) Series A,
7.75% 7/1/22 BBB- 800,000 839,000
Connecticut Hsg. Fin. Auth. (Hsg. Mtg.
Fin. Prog.) Subseries B-1, 6.50% 5/15/18 Aa 200,000 203,750
Eastern Connecticut Resources Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A (c):
5.50% 1/1/14 A- 500,000 455,000
5.50% 1/1/20 A- 400,000 354,500
2,794,750
DISTRICT OF COLUMBIA - 3.2%
District of Columbia Gen. Oblig. Rfdg.:
Series A:
5.625% 6/1/02 Ba 200,000 198,000
5.75% 6/1/03 Ba 180,000 178,425
Series A-3, 5.60% 6/1/07 Ba 300,000 283,500
District of Columbia Redev. Land Agcy.
(Washington Sports Arena):
4.85% 11/1/97 Baa 1,000,000 997,500
5.625% 11/1/10 Baa 1,350,000 1,294,313
2,951,738
FLORIDA - 2.2%
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 1,000,000 1,096,250
Dade County Seaport Rfdg. 6.50% 10/1/08
(MBIA Insured) Aaa 850,000 940,313
2,036,563
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
GEORGIA - 4.2%
Cobb County School Dist. Unltd. Tax:
5% 2/1/97 Aa1 $ 250,000 $ 251,450
6% 2/1/02 Aa1 1,220,000 1,293,200
Georgia Muni. Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series Z, 5.50% 1/1/12 A 2,000,000 1,940,000
Savannah Econ. Dev. Auth. Ind. Dev. Rev.
(Stone Container Corp. Proj.)
7.40% 4/1/26 (c) - 400,000 405,500
3,890,150
ILLINOIS - 1.9%
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (2nd Lien)
(Gen. Arpt. Proj.) Series A, 6.375% 1/1/15
(MBIA Insured) Aaa 200,000 206,750
Metropolitan Pier & Expo Auth. Dedicated
Tax Rev. (Cap. Appreciation)
(McCormick Place Expansion Proj.)
Series A, 0% 6/15/09 (FGIC Insured) Aaa 1,000,000 473,750
Metropolitan Pier & Expo Auth. Rev. Rfdg.
(Cap. Appreciation) (McCormick Place
Expansion Proj.) Series A,
0% 6/15/08 (MBIA Insured) Aaa 1,155,000 586,163
Round Lake Beach Tax Increment Rev. Rfdg.
7.50% 12/1/13 - 500,000 508,750
1,775,413
INDIANA - 3.4%
Fishers Econ. Dev. Rev. 1st Mtg. (United Student
Funds, Inc.) 8.375% 9/1/14 - 1,500,000 1,556,250
Greensburg Ind. Econ. Dev. Rev. Rfdg.
(Kroger Co. Proj.) 7.25% 6/1/11 Ba1 1,000,000 1,043,750
Indiana Bond Bank Rev. (State Revolving Fund
Prog.) Series A, 7% 2/1/05 A 500,000 543,750
3,143,750
KENTUCKY - 3.4%
Kenton County Arpt. Board Arpt. Spl. Facs. Rev.
(Delta Airlines Proj.) Series A,
7.125% 2/1/21 (c) Baa3 2,000,000 2,077,500
Winchester Ind. Bldg. Rev. Rfdg. (Kroger Co.)
7.75% 7/1/12 Ba1 1,000,000 1,060,000
3,137,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
LOUISIANA - 1.3%
Hodge Util. Rev. (Stone Container Corp.)
9% 3/1/10 (c) - $ 200,000 $ 215,750
Port New Orleans Ind. Dev. Rev. Rfdg.
(Continental Grain Co. Proj.) 7.50% 7/1/13 BB- 1,000,000 1,030,000
1,245,750
MARYLAND - 1.3%
Baltimore County Poll. Cont. Rev. Rfdg.
(Bethlehem Steel Proj.) Series B, 7.50% 6/1/15 - 500,000 516,875
Maryland Energy Fing. Administration Ltd.
Oblig. Solid Waste Disp. Facs. Recycling
Rev. (Hagerstown Fiber Ltd. Partners 94)
9% 10/15/16 - 300,000 247,875
Maryland Health & Higher Edl. Facs.
Auth. Rev. Rfdg. (Howard County Gen. Hosp.)
5.50% 7/1/25 Baa1 500,000 430,625
1,195,375
MASSACHUSETTS - 3.8%
Massachusetts Health & Edl. Facs. Auth.
1st Mtg. Rev. (Fairview Extended Care)
Series A, 10.25% 1/1/21 - 1,000,000 1,128,750
Massachusetts Ind. Fin. Agcy. Rev:
(Evergreen Ctr., Inc.) 9.25% 11/1/11 - 435,000 465,994
(Massachusetts Biomedical Research)
Series A-1, 7.10% 8/1/99 A1 400,000 417,000
(Reeds Landing Proj.) 8.625% 10/1/23 - 500,000 530,625
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev.:
Series A, 5.45% 7/1/18 (AMBAC Insured) Aaa 500,000 459,375
Series D, 6% 7/1/06 A 500,000 510,000
3,511,744
MICHIGAN - 6.9%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.25% 9/30/12 A 1,000,000 912,500
Flint Michigan Hosp. Bldg. Auth. Rev. Series A,
6% 7/1/06 Baa 500,000 476,875
Greater Detroit Resources Recovery Auth. Rev.
6.25% 12/13/06 (AMBAC Insured) Aaa 1,000,000 1,068,750
Michigan Hosp. Fin. Auth. Rev. Rfdg.
(Pontiac Osteopathic Hosp.) 6% 2/1/24 Baa1 500,000 458,125
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.) Series B, 5% 1/1/19 A1 1,000,000 858,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev.
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 (c) - $ 1,000,000 $ 766,250
Royal Oak Hosp. Fin. Auth. Rev. Rfdg.
(William Beaumont Hosp.) 6.25% 1/1/09 Aa 400,000 422,500
Tawas City Hosp. Fin. Auth. Hosp. Rev.
(Tawas St. Joseph Hosp. Proj.) Series A,
8.50% 3/15/12 - 400,000 412,000
Williamston Commty. School Dist. 6.25% 5/1/09
(MBIA Insured) Aaa 1,000,000 1,060,000
6,435,750
MINNESOTA - 0.6%
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Rev. Rfdg. Series A, 6.25% 1/1/06
(AMBAC Insured) (d) Aaa 500,000 536,250
MISSISSIPPI - 1.0%
Claiborne County Poll. Cont. Rev. (Sys. Energy
Resource, Inc.) 6.20% 2/1/26 Ba1 1,000,000 946,250
MISSOURI - 0.6%
Kansas City Ind. Dev. Auth. Rev. (Kingswood
United Methodist Manor Proj.) Series 1993,
9% 11/15/13 - 500,000 537,500
NEBRASKA - 0.6%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Elec. Sys.)
Series A, 6% 1/1/06 A1 500,000 518,750
NEVADA - 1.6%
Clark County Ind. Dev. Rev. (Southwest Gas
Corp.)
Series A, 6.50% 12/1/33 (c) Baa3 1,000,000 962,500
Las Vegas Downtown Redev. Agcy. Tax Increment
Rev. (Sub. Lien Fremont St. Proj.) Series A,
6.10% 6/15/14 BBB+ 500,000 477,500
1,440,000
NEW JERSEY - 3.1%
Camden County Impt. Auth. Lease Rev.
(Holt Hauling & Warehousing) (c):
9.625% 1/1/11 - 600,000 592,500
9.875% 1/1/21 - 700,000 690,375
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.
Rfdg.
(Holt Hauling & Warehouse)
8.60% 12/15/17 (c) - 500,000 509,375
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.) Series A, 6.50% 6/15/05
(AMBAC Insured) Aaa 1,000,000 1,097,500
2,889,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
NEW MEXICO - 2.9%
Albuquerque Arpt. Rev. Rfdg. 6.50% 7/1/08
(AMBAC Insured) (c)(d) Aaa $ 250,000 $ 260,000
Farmington Poll. Cont. Rev. (Pub. Svc. Co.
of New Mexico San Juan Proj.):
Series A:
6% 3/1/08 Ba2 1,790,000 1,738,538
6.50% 9/1/09 Ba2 250,000 250,088
Series X, 5.90% 4/1/07 Ba2 500,000 484,375
2,733,001
NEW YORK - 10.9%
Metropolitan Trans. Auth. Svc. Contract Transit
Facs. Rfdg.:
Series 5, 6.90% 7/1/05 Baa1 1,000,000 1,065,000
Series 7, 5.40% 7/1/06 Baa1 1,000,000 970,000
Nassau County Gen. Impt. Series T,
5.20% 9/1/04 Aaa 1,000,000 1,008,750
New York City Gen. Oblig.:
Series B, 5.60% 8/15/06 Baa1 350,000 336,438
Series D, 6.50% 2/15/05 Baa1 500,000 515,000
5.70% 8/15/02 Baa1 500,000 504,375
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.) Series A,
5.50% 5/15/05 Baa1 750,000 741,563
New York State Energy Research & Dev. Auth.
Elec. Facs. Rev. (Long Island Lighting)
Series A (c):
7.15% 12/1/20 Ba3 800,000 800,000
6.90% 8/1/22 Ba3 595,000 583,100
New York State Local Gov't. Assistance Corp.:
Rfdg. Series C, 5.50% 4/1/17 A 850,000 810,688
Series B, 7.50% 4/1/20
(Pre-Refunded to 4/1/01@102) (e) Aaa 1,000,000 1,128,750
New York State Tollway Auth. Hwy. & Bridge
Trust Fund Series B, 5.125% 4/1/15
(MBIA Insured) Aaa 1,000,000 923,750
New York State Tollway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge) 5.90% 4/1/07 Baa1 250,000 252,500
New York State Urban Dev. Corp. Rev.
5.25% 1/1/07 Baa1 500,000 475,625
10,115,539
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
NEW YORK & NEW JERSEY - 0.6%
New York & New Jersey Port Auth. Spl.
Oblig. Rev.
(Continental Airlines Corp.; Eastern
Airlines,
Inc.; U.S. Air, Inc. - LaGuardia Proj.)
9.125% 12/1/15 (c) B2 $ 500,000 $ 557,500
NORTH CAROLINA - 2.6%
North Carolina Eastern Muni. Pwr. Agcy.
Pwr. Sys. Rev. Rfdg. Series C:
5.25% 1/1/04 A 1,000,000 973,750
7% 1/1/07 A 1,000,000 1,086,250
North Carolina Muni. Pwr. Agcy. Rev. Rfdg.
(No 1 Catawba Elec.) 6.25% 1/1/17
(AMBAC Insured) Aaa 300,000 307,500
2,367,500
OHIO - 1.0%
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Cont. Loan Fund) Wtr. Quality Series,
5.50% 6/1/15 (MBIA Insured) Aaa 1,000,000 960,000
OREGON - 0.6%
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15 A1 500,000 516,875
PENNSYLVANIA - 6.7%
Delaware County Auth. 1st. Mtg. Rev.
(Riddle Village Proj.) 7% 6/1/00 - 600,000 608,250
Montgomery County Higher Ed. & Health Auth.
Hosp. Rev. (United Hosp. Proj.):
Series A, 8.375% 11/1/03 Ba1 135,000 152,044
Series B, 7.50% 11/1/15 Ba1 165,000 179,025
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A, 6.70% 9/1/14 (MBIA Insured) Aaa 1,500,000 1,631,250
Philadelphia Auth. for Ind. Dev. Rev. Rfdg.
(Philadelphia Arpt.) 7.75% 12/1/17 (c) - 805,000 841,225
Philadelphia Hosps. & Higher Ed. Facs. Auth.
Hosp. Rev. Rfdg. 5.95% 7/1/03 Baa1 500,000 500,625
Somerset County Hosp. Auth. Rev. (Health
Care
1st Mtg.- GF Somerset Care, Inc.)
8.40% 6/1/09 - 515,000 544,613
Southern Pennsylvania Trans. Auth. Spl. Rev.
6.50% 3/1/05 (FGIC Insured) Aaa 1,000,000 1,093,750
Warren County Ind. Dev. Auth. Specialized
Dev. Rev. Rfdg. (Beverly Enterprises, Inc.)
8.75% 11/1/06 - 125,000 135,313
9%, 11/1/12 - 500,000 546,875
6,232,970
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
TENNESSEE - 1.7%
Memphis-Shelby County Arpt. Auth. Arpt. Rev.
Rfdg. Series B, 6.50% 2/15/09
(MBIA Insured) (c) Aaa $ 500,000 $ 531,250
Metropolitan Gov't. Nashville & Davidson
County
Wtr. & Swr. Rev. Rfdg. 6% 1/1/07
(MBIA Insured) Aaa 1,000,000 1,058,750
1,590,000
TEXAS - 4.3%
Alliance Arpt. Inc. Auth. Spl. Facs. Rev.
(American Airlines, Inc. Proj.)
7.50% 12/1/29 (c) Baa2 2,000,000 2,110,000
El Paso Property Fin. Auth. Single Family
Mtg. Rev.
Series A, 8.70% 12/1/18
(GNMA Coll.) (c) Aaa 715,000 765,050
Harris County Cultural Ed. Facs. Fin. Corp.
Rev. Rfdg. (Space Ctr. Houston Proj.):
Series A, 9.25% 8/15/23 - 85,000 80,963
Series B, 0% 8/15/23 (b) - 215,000 54,288
Lower Neches Valley Auth. Ind. Dev. Corp. Swr.
Facs. Rev. (Mobil Oil Refining Corp. Proj.)
6.40% 3/1/30 (c) Aa2 1,000,000 1,011,250
4,021,551
UTAH - 1.0%
Intermountain Pwr. Agcy. Pwr. Supply Rev. Rfdg.
Series B, 5.75% 7/1/16 (MBIA Insured) (d) Aaa 1,000,000 941,250
VIRGINIA - 1.2%
Loudoun County Ind. Dev. Auth. Residential
Care Facs. Rev. (Falcons Landing Proj.)
Series A, 8.75% 11/1/24 - 1,055,000 1,068,180
WASHINGTON - 4.4%
Washington Pub. Pwr. Supply Sys.
(Nuclear Proj. #2) Rev.:
Rfdg. Series A, 0% 7/1/11 (MBIA Insured) Aaa 1,350,000 558,563
5.55% 7/1/10 (FGIC Insured) Aaa 2,700,000 2,602,125
5.40% 7/1/12 Aa 1,000,000 920,000
4,080,688
WYOMING - 0.2%
Sweetwater County Poll. Cont. Rev. Rfdg.
(Idaho Pwr. Co. Proj.) Series A,
6.05% 7/15/26 A3 200,000 196,250
TOTAL MUNICIPAL BONDS
(Cost $87,549,269) 87,280,444
MUNICIPAL NOTES (B) - 5.8%
MOODY'S PRINCIPAL VALUE
RATINGS (UNAUDITED(A) AMOUNT (NOTE 1)
ALABAMA - 1.3%
Phenix City Ind. Dev. Board Environmental
Impt. Rev. (Mead Coated Board Proj.)
Series 1993-A, 3.75%, LOC Toronto
Dominion Bank, VRDN (c) A-1+ $ 1,200,000 $ 1,200,000
ARIZONA - 0.4%
Coconino County Poll. Cont. Corp. Poll. Cont.
Rev. (Arizona Pub. Svc. Co. Navajo Proj.)
Series 1994-A, 4%, LOC Bank of America
Nat'l. Trust & Savings, VRDN (c) P-1 400,000 400,000
KENTUCKY - 0.6%
Daviess County Solid Waste Disp. Facs. Rev.
(Scott Paper Co.) Series 1993-B, 3.85%,
VRDN (c) P-1 500,000 500,000
LOUISIANA - 1.3%
Calcasieu Parish, Inc. Ind. Dev. Board
Environmental Rev. Rfdg. (Citgo Petroleum Corp.)
4%, LOC Banque Nationale de Paris,
VRDN (c) VMIG 1 1,200,000 1,200,000
SOUTH CAROLINA - 0.4%
South Carolina Jobs Econ. Dev. Auth. Econ.
Dev. Rev. (Wellman, Inc. Proj.) Series 1991,
4.10%, LOC Wachovia Bank, VRDN (c) - 400,000 400,000
TEXAS - 0.3%
Brazos River Hbr. Navigation Dist. of Brazoria
(Dow Chemical Co. Proj.) Series 1996,
4%, VRDN (c) P-1 300,000 300,000
VIRGINIA - 1.5%
King George County Ind. Dev. Auth. Exempt Facs.
Rev. (Birchwood Power Partners) Series 1996-A
4%, LOC Credit Suisse, VRDN (c) A-1+ 1,000,000 1,000,000
Southampton County Ind. Dev. Auth. Facs. Rev.
(Hadson Pwr. #11-Southampton Proj.)
Series 1990-A, 3.70%,
LOC Credit Suisse, VRDN (c) - 400,000 400,000
1,400,000
TOTAL MUNICIPAL NOTES
(Cost $5,400,000) 5,400,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $92,949,269) $ 92,680,444
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
4. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
5. Security collateralized by an amount sufficient to pay interest and
principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 44.2% AAA, AA, A 43.5%
Baa 16.9% BBB 17.5%
Ba 8.5% BB 9.8%
B 0.6% B 3.2%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 15.7%. FMR has
determined that unrated debt securities that are lower quality account for
15.7% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Industrial Development 23.0%
Electric Revenue 21.1
General Obligation 18.1
Health Care 14.3
Special Tax 6.7
Others (individually less than 5%) 16.8
TOTAL 100.0%
INCOME TAX INFORMATION
At August 31, 1996, the aggregate cost of investment securities for income
tax purposes was $92,950,259. Net unrealized depreciation aggregated
$269,815, of which $1,109,239 related to appreciated investment securities
and $1,379,054 related to depreciated investment securities.
At August 31, 1996, the fund had a capital loss carryforward of
approximately $1,845,000 of which $1,047,000 and $798,000 will expire on
August 31, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AUGUST 31, 1996
ASSETS
Investment in securities, at value (cost $92,949,269) - $ 92,680,444
See accompanying schedule
Cash 142,514
Interest receivable 1,419,778
Redemption fees receivable 107
TOTAL ASSETS 94,242,843
LIABILITIES
Payable for investments purchased $ 2,742,572
Delayed delivery
Distributions payable 134,853
Accrued management fee 46,103
TOTAL LIABILITIES 2,923,528
NET ASSETS $ 91,319,315
Net Assets consist of:
Paid in capital $ 93,486,449
Accumulated undistributed net realized gain (loss) (1,898,309)
on investments
Net unrealized appreciation (depreciation) on (268,825)
investments
NET ASSETS, for 9,222,650 shares outstanding $ 91,319,315
NET ASSET VALUE, offering price and redemption price $9.90
per share ($91,319,315 (divided by) 9,222,650 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED AUGUST 31, 1996
INTEREST INCOME $ 5,307,199
EXPENSES
Management fee $ 508,913
Non-interested trustees' compensation 344
Total expenses before reductions 509,257
Expense reductions (1,548) 507,709
NET INTEREST INCOME 4,799,490
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 499,617
Futures contracts (75,461) 424,156
Change in net unrealized appreciation (depreciation) on:
Investment securities (1,155,623)
Futures contracts 66,431 (1,089,192)
NET GAIN (LOSS) (665,036)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 4,134,454
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 4,799,490 $ 3,988,362
Net interest income
Net realized gain (loss) 424,156 (1,540,072)
Change in net unrealized appreciation (depreciation) (1,089,192) 2,464,802
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,134,454 4,913,092
FROM OPERATIONS
Distributions to shareholders from net interest income (4,799,490) (3,988,362)
Share transactions 41,045,501 47,030,882
Net proceeds from sales of shares
Reinvestment of distributions 3,299,472 2,802,507
Cost of shares redeemed (26,961,145) (37,965,544)
Redemption fees 37,488 97,520
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 17,421,316 11,965,365
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 16,756,280 12,890,095
NET ASSETS
Beginning of period 74,563,035 61,672,940
End of period $ 91,319,315 $ 74,563,035
OTHER INFORMATION
Shares
Sold 4,081,530 4,907,461
Issued in reinvestment of distributions 329,404 291,017
Redeemed (2,699,136) (3,987,462)
Net increase (decrease) 1,711,798 1,211,016
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED AUGUST 31, APRIL 29, 1993
(COMMENCEMENT
OF OPERATIONS) TO
1996 1995 1994 D AUGUST 31, 1993
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.930 $ 9.790 $ 10.350 $ 10.000
of period
Income from Investment Operations .566 .602 .603 .209
Net interest income
Net realized and unrealized (.034) .125 (.564) .346
gain (loss)
Total from investment operations .532 .727 .039 .555
Less Distributions
From net interest income (.566) (.602) (.603) (.209)
From net realized gain - - (.010) -
In excess of net realized gain - - (.010) -
Total distributions (.566) (.602) (.623) (.209)
Redemption fees added to .004 .015 .024 .004
paid in capital
Net asset value, end of period $ 9.900 $ 9.930 $ 9.790 $ 10.350
TOTAL RETURN B, C 5.48% 7.97% 0.61% 5.64%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 91,319 $ 74,563 $ 61,673 $ 17,267
(000 omitted)
Ratio of expenses to average .60% .60% .60% .60% A
net assets
Ratio of net interest income to 5.65% 6.24% 6.03% 6.24% A
average
net assets
Portfolio turnover rate 45% 51% 64% 53% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D EFFECTIVE SEPTEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended August 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Aggressive Municipal Fund (the fund) is a fund of Fidelity Union
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net interest income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, market discount and losses deferred due to
futures and options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary book and tax basis differences
that will reverse in a subsequent period. Any taxable gain remaining at
fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to 1% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $55,101,602 and $36,262,313, respectively.
The market value of futures contracts opened and closed during the period
amounted to $3,734,765 and $6,014,666, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses, except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
expenses. FMR receives a fee that is computed daily at an annual rate of
.60% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$885 for the period.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses). For the period, the reimbursement reduced the expenses by $461.
In addition, FMR has entered into arrangements on behalf of the fund with
the fund's custodian and transfer agent whereby interest earned on
uninvested cash balances was used to offset a portion of the fund's
expenses. During the period, the fund's expenses were reduced by $1,087
under these arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Union Street Trust and the Shareholders of
Spartan Aggressive Municipal Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Union Street Trust: Spartan Aggressive Municipal Fund, including
the schedule of portfolio investments, as of August 31, 1996, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the three years in the period then
ended and for the period April 29, 1993 (commencement of operations) to
August 31, 1993. These financial statements and financial highlights are
the responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian
and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Union Street Trust: Spartan Aggressive Municipal Fund as of
August 31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the
period then ended and for the period April 29, 1993 (commencement of
operations) to August 31, 1993, in conformity with generally accepted
accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 4, 1996
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Fidelity Service Co.
Boston, MA
and
UMB Bank, n.a.
Kansas City, MO
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S TAX-FREE BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Municipal Income
New York Insured Municipal Income
Ohio Municipal Income
Spartan Aggressive Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemption 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
AGGRESSIVE MUNICIPAL
FUND
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT 35 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 36
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
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.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although stocks managed to post solid returns throughout 1996, signs of
strength in the economy have led to inflation fears, causing some
uncertainty in both the stock and bond markets. In 1995, both stock and
bond markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns.
An intermediate-length fund could be appropriate if your investment horizon
is two to four years, and a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
dividend income and capital gains (the profits earned upon the sale of
securities that have grown in value). You can also look at the fund's
income, as reflected in the fund's yield, to measure performance. If
Fidelity had not reimbursed certain fund expenses, the past ten years total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Aggressive Municipal Fund 3.56% 39.01% 110.33%
Lehman Brothers Municipal Bond Index 4.43% 42.13% 111.81%
High Yield Municipal Debt Funds Average 4.17% 39.85% 103.35%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Municipal Bond
Index - a total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year. To measure how the fund's
performance stacked up against its peers, you can compare it to the high
yield municipal debt funds average, which reflects the performance of 43
mutual funds with similar objectives tracked by Lipper Analytical Services,
Inc., over the past one year. Both benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Aggressive Municipal Fund 3.56% 6.81% 7.72%
Lehman Brothers Municipal Bond Index 4.43% 7.28% 7.79%
High Yield Municipal Debt Funds Average 4.17% 6.92% 7.34%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking the arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961231 19970114 120639 S00000000000001
Aggressive Municipal LB Municipal Bond
00012 LB015
1986/12/31 10000.00 10000.00
1987/01/31 10291.03 10301.10
1987/02/28 10461.09 10351.78
1987/03/31 10438.03 10242.05
1987/04/30 9943.68 9728.11
1987/05/31 9877.14 9679.85
1987/06/30 10095.85 9964.06
1987/07/31 10207.18 10065.69
1987/08/31 10264.83 10088.34
1987/09/30 9978.94 9716.38
1987/10/31 9838.39 9750.78
1987/11/30 9990.00 10005.37
1987/12/31 10141.85 10150.55
1988/01/31 10537.90 10512.11
1988/02/29 10683.65 10623.22
1988/03/31 10594.44 10499.99
1988/04/30 10618.99 10579.79
1988/05/31 10682.17 10549.22
1988/06/30 10861.02 10703.55
1988/07/31 10953.79 10773.34
1988/08/31 11018.18 10782.82
1988/09/30 11189.40 10977.99
1988/10/31 11382.20 11171.20
1988/11/30 11345.38 11068.87
1988/12/31 11501.33 11182.11
1989/01/31 11638.25 11413.35
1989/02/28 11622.17 11283.13
1989/03/31 11648.28 11256.16
1989/04/30 11890.47 11523.38
1989/05/31 12103.65 11762.72
1989/06/30 12264.79 11922.46
1989/07/31 12373.64 12084.72
1989/08/31 12355.18 11966.42
1989/09/30 12360.96 11930.76
1989/10/31 12372.08 12076.67
1989/11/30 12524.52 12288.01
1989/12/31 12594.50 12388.53
1990/01/31 12582.55 12329.93
1990/02/28 12682.40 12439.66
1990/03/31 12730.05 12443.40
1990/04/30 12649.78 12353.31
1990/05/31 12842.78 12622.98
1990/06/30 12948.28 12733.94
1990/07/31 13170.01 12921.12
1990/08/31 13040.20 12733.51
1990/09/30 13163.00 12740.77
1990/10/31 13251.93 12971.88
1990/11/30 13469.23 13232.75
1990/12/31 13537.06 13290.31
1991/01/31 13601.22 13468.67
1991/02/28 13734.66 13585.85
1991/03/31 13772.95 13590.74
1991/04/30 13954.20 13771.49
1991/05/31 14050.60 13893.92
1991/06/30 14102.66 13880.17
1991/07/31 14326.55 14049.23
1991/08/31 14527.94 14234.26
1991/09/30 14694.27 14419.59
1991/10/31 14808.87 14549.36
1991/11/30 14860.51 14589.95
1991/12/31 15130.70 14903.05
1992/01/31 15184.24 14937.03
1992/02/29 15220.32 14941.81
1992/03/31 15263.44 14947.34
1992/04/30 15406.97 15080.37
1992/05/31 15605.48 15257.87
1992/06/30 15812.77 15513.90
1992/07/31 16290.11 15979.00
1992/08/31 16128.53 15823.21
1992/09/30 16219.16 15926.69
1992/10/31 16030.02 15770.13
1992/11/30 16339.57 16052.58
1992/12/31 16518.20 16216.47
1993/01/31 16766.58 16405.07
1993/02/28 17354.76 16998.44
1993/03/31 17209.01 16818.77
1993/04/30 17386.56 16988.47
1993/05/31 17524.37 17083.94
1993/06/30 17815.15 17369.08
1993/07/31 17867.33 17391.83
1993/08/31 18252.61 17753.93
1993/09/30 18475.87 17956.14
1993/10/31 18513.23 17990.80
1993/11/30 18386.44 17832.30
1993/12/31 18770.14 18208.74
1994/01/31 18976.36 18416.68
1994/02/28 18545.32 17939.69
1994/03/31 17752.31 17209.19
1994/04/30 17836.65 17355.12
1994/05/31 17970.37 17505.59
1994/06/30 17912.20 17398.63
1994/07/31 18218.56 17717.55
1994/08/31 18271.43 17778.85
1994/09/30 18035.73 17517.86
1994/10/31 17739.00 17206.74
1994/11/30 17292.78 16895.64
1994/12/31 17678.04 17267.52
1995/01/31 18193.53 17761.02
1995/02/28 18666.48 18277.51
1995/03/31 18689.63 18487.52
1995/04/30 18720.84 18509.34
1995/05/31 19256.02 19099.97
1995/06/30 19100.97 18933.80
1995/07/31 19219.41 19113.29
1995/08/31 19422.99 19355.65
1995/09/30 19570.71 19478.17
1995/10/31 19806.31 19761.38
1995/11/30 20141.92 20089.22
1995/12/31 20310.15 20282.28
1996/01/31 20446.62 20435.41
1996/02/29 20386.00 20297.47
1996/03/31 19960.41 20038.07
1996/04/30 19899.67 19981.36
1996/05/31 19878.95 19973.37
1996/06/30 20105.26 20190.88
1996/07/31 20263.14 20374.62
1996/08/31 20312.14 20369.73
1996/09/30 20504.19 20654.90
1996/10/31 20736.06 20888.51
1996/11/30 21093.51 21270.77
1996/12/31 21032.58 21181.43
IMATRL PRASUN SHR__CHT 19961231 19970114 120642 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Aggressive Municipal Fund on December 31, 1986. As the chart
shows, by December 31, 1996, the value of the investment would have grown
to $21,033 - a 110.33% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $21,181 - a 111.81% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
Dividend return 6.18% 6.93% 6.15% 6.80% 7.31%
Capital appreciation return -2.62% 7.96% -11.97% 6.83% 1.86%
Total return 3.56% 14.89% -5.82% 13.63% 9.17%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or capital gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 7.39(cents) 35.77(cents) 69.90(cents)
Annualized dividend rate 7.65% 6.28% 6.16%
30-day annualized yield 5.35% - -
30-day annualized tax-equivalent yield 8.36% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average share price of $11.38 over the past month, $11.30 over
the past six months and $11.34 over the past year, you can compare the
fund's income over these three periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36% federal
tax bracket, but does not reflect the payment of the federal alternative
minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Solid demand helped municipal
bonds perform better than their
investment-grade taxable
counterparts in 1996, even
though new issue supply saw
one of its strongest years ever.
For the year, the Lehman
Brothers Municipal Bond Index -
a broad measure of the municipal
bond market - had a total return
of 4.43%. In comparison, the
Lehman Brothers Aggregate
Bond Index - a broad measure
of the performance of the U.S.
taxable bond market - had a
total return of 3.63%. Demand for
munis came from both insurance
companies and individual
investors. The diminishing
likelihood of significant tax reform
in the near future also helped
support the muni market. Like
most domestic bonds, munis
were affected by
stronger-than-expected signs of
strength in the economy early in
1996. Nevertheless, the market
conditions that supported the
muni market prevailed to the
point that munis entered the fall
trading at expensive levels
relative to their taxable
counterparts. At that point and
through October, the
performance of the municipal
market stalled somewhat, as
investor demand declined and
institutional investors sold off
some of their municipal bond
holdings to take profits. That
sell-off subsided somewhat in
November and December, when
munis outperformed comparable
Treasury securities. However,
even though demand helped
buoy munis somewhat in
December, munis were caught in
the overall bond market
downdraft caused by conflicting
economic data and renewed
fears that inflation might lead the
Federal Reserve Board to raise
short-term interest rates.
An interview with Tanya Roy, Portfolio Manager of Fidelity Aggressive
Municipal Fund
Q. HOW HAS THE FUND PERFORMED, TANYA?
A. For the year ending December 31, 1996, the fund returned 3.56%, compared
to the 4.17% return of the high yield municipal debt funds average,
according to Lipper Analytical Services. Additionally, the Lehman Brothers
Municipal Bond Index had a total return of 4.43% for the same 12-month
period.
Q. WHY DID THE FUND UNDERPERFORM ITS PEERS DURING THE PAST YEAR?
A. There were two principal reasons. In the first half of the period, the
fund's performance was hurt by its holdings in the Ford Heights, Illinois,
incinerator project, which entered bankruptcy this past spring. The fund no
longer holds the bonds. The second reason was its holdings in a resource
recovery project involved in the paper recycling business. Paper prices
have been very depressed this year, and these projects have had difficulty
meeting their original financial and operating forecasts. As a result,
bonds in this sector have lagged the market.
Q. ON THE OTHER HAND, THE FUND'S HEALTH CARE HOLDINGS PERFORMED WELL. WHAT
WERE SOME OF THE REASONS FOR THEIR STRONG PERFORMANCE?
A. There has been quite a bit of consolidation in the hospital sector,
which has generated a great deal of debate in the market about the
prospects for individual hospital bonds. In conjunction with our credit
analysts, I have taken advantage of the market uncertainty to find
attractive health care opportunities for the fund. For example, the fund
benefited recently when a hospital whose bonds it owns announced a merger
with a strong hospital system in its service area. The value of the bonds
increased significantly as a result.
Q. WHICH OTHER SECTORS PERFORMED WELL?
A. General obligation bonds (GOs) issued by cities and states were some of
the fund's best performers during the past six months. A GO is a municipal
bond backed by the full faith and credit of the issuer, including the
taxing power of the municipality. Their strong recent performance was a
direct reflection of a healthy economy, which resulted in higher tax and
general revenue collections. Additionally, many municipalities have exerted
considerable restraint in managing their expenditures. That has led to
improved cash reserves and general fund balances and, consequently, solid
bond performance. For example, GOs issued by the District of Columbia and
New York City have performed well and benefited the fund's performance.
Q. YOU'VE UPGRADED THE CREDIT QUALITY OF THE PORTFOLIO OVER THE PAST YEAR.
WHAT WAS THE RATIONALE FOR THAT MOVE?
A. The rationale for the upgrade was to take advantage of the strong
performance of high-yield municipal bonds. Recently, non-investment-grade
bonds were trading as narrow as 75 basis points (or three-quarters of a
percentage point) over insured bonds. Six months ago, non-investment-grade
bonds offered roughly one percentage point in additional yield over insured
bonds six months ago. Because spreads were tight, I was able to buy
higher-quality bonds without sacrificing much yield.
Q. HAVE THERE BEEN ANY RECENT POLICY CHANGES FOR THE FUND?
A. The fund's Board of Trustees just approved a change under which the fund
will invest primarily in investment-grade securities going forward, and
limit lower-quality securities to less than 35% of assets. Previously, the
fund could invest in any combination of higher and lower quality bonds.
This change recognizes a decline in the attractiveness of
below-investment-grade issues, while still permitting the fund to invest in
this sector if bonds with the appropriate risk/return characteristics are
available. That said, I'd expect the fund's lower-quality bond position,
which stood at about 35% of the portfolio at the end of the period, to
decline significantly.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Should the economic and inflation trends of last year continue through
1997, I expect credit quality spreads in general to remain tight,
influenced by stable issuer credit quality and a limited amount of new
high-yield issuance. I plan to continue to upgrade the fund's credit
quality while spreads are tight in order to maximize the value that
currently exists in the high-yield market. I expect selected investment
opportunities to present themselves in several areas, including the
electric, health care and general obligation sectors due to changing
financial fundamentals, developing regulatory initiatives and ongoing
consolidation.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks high income by
investing in municipal
securities of any quality
TRADING SYMBOL: FATFX
FUND NUMBER: 012
START DATE: September 13,
1985
SIZE: as of December 31,
1996, more than $852 million
MANAGER: Tanya Roy, since
1995; manager, Fidelity
Advisor High Income Fund,
since 1995; Fidelity Municipal
Bond Fund, March 1995 to
October 1995; joined Fidelity
in 1987
(checkmark)
TANYA ROY ON AIRLINE SECTOR
BONDS:
"The airline industry's
industrial development bonds
constitute one of the most
interesting sectors in the
municipal market. Airlines
issue tax-exempt bonds to
finance terminal facilities and
airport gates. The airline
industry has undergone an
extensive turnaround in the
past few years. The recession
in the early '90s caused
significant financial problems
for many airlines.
Over-capacity, high operating
costs and price cutting resulted
in significant losses and
several bankruptcies.
Because of these problems,
airline bonds traded at
extremely wide yield
premiums, some 200 to 300
basis points (or 2-3
percentage points) greater
than Aaa-rated bond yields.
"The sector as a whole was
cheap, despite the fact that not
all airlines were suffering
equally, presenting
opportunities for the fund.
Since hitting bottom, the
industry has aggressively cut
costs, realigned route systems
and enhanced revenue
generation, all of which have led
to substantially improved
financial and operating
performance. As a result,
airline bonds have been one of
the top-performing sectors in
the muni market in the recent
past. With airline spreads now
as narrow as 60 to 70 basis
points over Aaa bonds, the
fund has reaped the rewards
of having invested in this
sector during the past few
years."
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
New York 11.0 12.3
Massachusetts 8.7 9.8
Pennsylvania 8.1 7.9
California 6.5 7.0
Illinois 4.7 2.9
TOP FIVE SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Health Care 21.9 24.0
Electric
Revenue 18.6 16.0
Industrial
Development 18.5 19.8
General
Obligation 17.8 16.5
Transportation 5.5 4.6
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 16.8 17.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1996
6 MONTHS AGO
Years 7.1 7.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1996 AS OF JUNE 30, 1996
Aaa 23.0%
Aa, A 15.7%
Baa 22.0%
Ba, B 10.5%
Caa 0.3%
Non-rated 25.9%
Short-term investments 2.6%
Aaa 19.5%
Aa, A 16.1%
Baa 23.6%
Ba, B 9.0%
Caa 0.4%
Non-rated 30.0%
Short-term investments 1.4%
Row: 1, Col: 1, Value: 2.6
Row: 1, Col: 2, Value: 25.9
Row: 1, Col: 3, Value: 1.3
Row: 1, Col: 4, Value: 10.5
Row: 1, Col: 5, Value: 22.0
Row: 1, Col: 6, Value: 15.7
Row: 1, Col: 7, Value: 22.0
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 29.0
Row: 1, Col: 3, Value: 1.4
Row: 1, Col: 4, Value: 9.0
Row: 1, Col: 5, Value: 22.6
Row: 1, Col: 6, Value: 16.1
Row: 1, Col: 7, Value: 19.5
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED DEBT
SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW ACCOUNT FOR 23.3% AND 28.1%
OF THE FUND'S INVESTMENTS AT DECEMBER 31, 1996, AND JUNE 30, 1996,
RESPECTIVELY.
INVESTMENTS DECEMBER 31, 1996
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.4%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
ALABAMA - 0.5%
Cullman Med. Ctr. (Cullman Reg'l. Med. Ctr.)
Series A, 6.50% 2/15/23 Baa $ 4,000,000 $ 4,010,000
ARIZONA - 1.8%
Cochise County Ind. Dev. Auth. Hosp. Rev.
(Sierra
Vista Commty. Hosp. Proj.) 6.75% 12/1/26 - 2,000,000 1,995,000
Navajo County Ind. Dev. Auth. (Stone
Container
Corp. Proj.) 7.40% 4/1/26 (e) - 6,750,000 6,977,813
Sierra Vista Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.)
8.75% 12/1/16 - 4,000,000 4,330,000
Tucson Gen. Oblig. Rfdg. 6.75% 7/1/03
(FGIC Insured) Aaa 1,800,000 2,016,000
15,318,813
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (e) Aaa 2,300,000 2,417,875
CALIFORNIA - 6.5%
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series A, 5.30% 8/1/14 (MBIA Insured) Aaa 1,325,000 1,306,781
Series R, 6.15% 8/1/27 (MBIA Insured) (e) Aaa 1,000,000 1,006,250
California Pub. Wks. Board Lease Rev.:
(Various California State Univ. Projs.)
Series A:
6.50% 9/1/05 A 1,155,000 1,264,725
5.50% 10/1/13 A 5,755,000 5,632,706
5.25% 12/1/13 A 3,750,000 3,571,875
5.50% 6/1/14 A1 2,665,000 2,631,688
(Various Community College Projs.)
Series A, 5.50% 12/1/08 A1 2,415,000 2,427,075
East Bay Muni. Util. Dist. Wtr. Sys. Rev.
Rfdg.
5.75% 6/1/04 (MBIA Insured) Aaa 2,000,000 2,132,500
Foothill/Eastern Trans. Corridor Agcy.
Toll Rd. Rev. (Sr. Lien) (Cap. Appreciation)
Series A, 0% 1/1/08 (h) Baa 2,500,000 1,615,625
Los Angeles County Metropolitan Transit Auth.
Sales Tax Rev. 1st Tier Sr. Series A,
5.90% 7/1/14 (MBIA Insured) Aaa 2,245,000 2,326,381
Northern California Pwr. Agcy. Pub. Pwr.
Rev. Rfdg. (Geothermal Proj.) Series A,
5.85% 7/1/10 (AMBAC Insured) Aaa 4,000,000 4,240,000
Port Oakland Port Rev. (Cap. Appreciation)
Series F, 0% 11/1/09 (MBIA Insured) Aaa 7,000,000 3,526,250
Riverside County Ctfs. of Prtn. Rfdg. (Air Force
Village West, Inc.) Series A, 8.125% 6/15/20 - 7,000,000 7,411,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev. (Proctor & Gamble Proj.):
7% 7/1/04 BBB- $ 1,200,000 $ 1,323,000
6.375% 7/1/10 BBB- 1,500,000 1,558,125
Sacramento Pwr. Auth. Cogeneration Proj.
Rev.
6.50% 7/1/09 BBB- 2,200,000 2,312,750
San Diego County Reg'l. Trans. Commission
SalesTax Rev. Second Series A,
6.25% 4/1/03 (FGIC Insured) Aaa 3,000,000 3,270,000
San Francisco City & County Arpts. Commty.
Intl. Arpt. Rev. Rfdg. 2nd Series Issue 2,
6.75% 5/1/13 (MBIA Insured) Aaa 1,000,000 1,097,500
South Orange County Pub. Fin. Auth. Spl.
Tax Rev. (Foothill Area) Series C,
8% 8/15/08 (FGIC Insured) Aaa 1,000,000 1,260,000
Upland Ctfs. of Prtn. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A 3,500,000 3,399,375
West & Central Basin Fing. Auth. Rev.
(West Basin Rfdg. Proj.) Series A,
5% 8/1/13 (AMBAC Insured) Aaa 3,000,000 2,816,250
56,130,106
COLORADO - 3.5%
Colorado Health Facs. Auth. Rev. Rfdg.:
(Rocky Mountain Adventist):
6.625% 2/1/13 Baa 6,100,000 6,260,125
6.625% 2/1/22 Baa 3,400,000 3,463,750
Denver City & County Arpt. Rev.:
Series A (e):
(Cap. Appreciation) 0% 11/15/05
(MBIA Insured) Aaa 1,480,000 926,850
6.60% 11/15/97 Baa 1,000,000 1,019,020
6.90% 11/15/98 Baa 3,850,000 4,013,625
7% 11/15/99 Baa 2,750,000 2,915,000
Series C, 6.50% 11/15/06 Baa 4,075,000 4,268,563
Series D, 7.40% 11/15/01 Baa 3,000,000 3,322,500
Highlands Ranch Metropolitan Dist. #2:
6.25% 6/15/07 (FSA Insured) Aaa 1,600,000 1,768,000
6.50% 6/15/10 (FSA Insured) Aaa 1,000,000 1,125,000
Mesa County Ind. Dev. Rev. (Joy Technologies,
Inc. Proj.) 8.50% 9/15/06 Ba1 1,250,000 1,359,375
30,441,808
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CONNECTICUT - 1.7%
Connecticut Health & Edl. Facs. Auth. Rev.
(New Britain Mem. Hosp.) Series A,
7.75% 7/1/22 BBB- $ 6,100,000 $ 6,565,125
Eastern Connecticut Resources Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A (e):
5% 1/1/04 A- 900,000 887,625
5.50% 1/1/14 A- 5,000,000 4,731,250
5.50% 1/1/20 A- 2,250,000 2,078,438
14,262,438
DISTRICT OF COLUMBIA - 2.6%
District of Columbia Gen. Oblig. Series A:
6% 6/1/03 Ba 1,800,000 1,806,750
6% 6/1/04 Ba 1,880,000 1,882,350
6% 6/1/05 Ba 2,075,000 2,072,406
6% 6/1/06 Ba 1,580,000 1,572,100
District of Columbia Gen. Oblig. Unltd. Tax
Rfdg:
Series A:
5.625% 6/1/02 Ba 1,815,000 1,815,000
5.75% 6/1/03 Ba 2,280,000 2,282,850
5.875% 6/1/05 (AMBAC Insured) Aaa 1,250,000 1,317,188
Series A-3 :
5.10% 6/1/02 Ba 1,200,000 1,170,000
5.60% 6/1/07 Ba 2,770,000 2,662,663
Series C, 5.25% 12/1/03 (FGIC Insured) Aaa 2,170,000 2,210,688
District of Columbia Hosp. Rev. (Hosp. for
Sick Children) Series A, 8.875% 1/1/21 - 2,905,000 3,097,456
21,889,451
FLORIDA - 0.3%
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 2,230,000 2,453,000
GEORGIA - 1.1%
Cobb County School Dist. Unltd. Tax
5% 2/1/97 Aa1 1,345,000 1,346,856
Georgia Gen. Oblig.:
Series B, 7.50% 4/1/97 Aaa 1,000,000 1,010,370
6% 3/1/04 Aaa 1,000,000 1,085,000
Savannah Econ. Dev. Auth. Ind. Dev. Rev.
(Stone Container Corp. Proj.)
7.40% 4/1/26 (e) - 5,600,000 5,782,000
9,224,226
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
ILLINOIS - 4.7%
Chicago Midway Arpt. Rev. Series B,
6% 1/1/05 (MBIA Insured) (e) Aaa $ 1,360,000 $ 1,433,100
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.:
Rfdg. (Delta Airlines, Inc.) 6.45% 5/1/18 Ba2 1,750,000 1,778,438
(American Airlines, Inc. Proj.) Series A,
7.875% 11/1/25 (e) Baa2 4,720,000 5,079,900
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(Sr. Lien) Series A, 5% 1/1/12 A1 4,000,000 3,800,000
(2nd Lien) (Gen. Arpt. Prog.) Series A:
6.25% 1/1/09 (AMBAC Insured) (e) Aaa 6,100,000 6,496,500
6.375% 1/1/15 (MBIA Insured) Aaa 2,300,000 2,449,500
Cooke & Will Counties Township High School
Dist. #206 Series A, 0% 12/1/03
(AMBAC Insured) (Escrowed to Maturity) (f) Aaa 2,100,000 1,504,125
Illinois Dev. Fin. Auth. Poll. Cont. Rev.
Rfdg.
(Commonwealth Edison Co. Proj.) Series D,
6.75% 3/1/15 (AMBAC Insured) Aaa 6,000,000 6,570,000
Illinois Health Facs. Auth. Rev. (Glen Oaks
Med. Ctr.) Series D, 9.50% 11/15/15 Baa1 3,545,000 4,045,731
Metropolitan Pier & Exposition Auth.
Dedicated
State Tax Rev. (McCormick Place Expansion
Proj.):
Rfdg. (Cap. Appreciation) Series B,
0% 6/15/08 (MBIA Insured) Aaa 6,000,000 3,225,000
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) Aaa 4,000,000 2,150,000
0% 6/15/09 (FGIC Insured) Aaa 4,000,000 2,015,000
40,547,294
INDIANA - 0.7%
Burns Hbr. Solid Waste Disp. Facs. Rev.
(Bethlehem Steel Corp. Proj.) 8% 4/1/24 (e) - 3,180,000 3,458,250
Indiana Health Facs. Fing. Auth. Hosp. Rev.
Rfdg.
(Clarian Health Partners Inc.) 5.50%
2/15/16 Aa3 3,000,000 2,872,500
6,330,750
KENTUCKY - 0.8%
Kenton County Arpt. Board Arpt. Rev. (Spl.
Facs.
Delta) Series A, 7.50% 2/1/20 (e) Baa3 3,600,000 3,897,000
Owensboro Elec. Lt. & Pwr. Rev. Series B:
0% 1/1/09 (AMBAC Insured) Aaa 2,000,000 1,040,000
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 2,153,400
7,090,400
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
LOUISIANA - 4.3%
Hodge Util. Rev. (Stone Container Corp.)
9% 3/1/10 (e) - $ 2,500,000 $ 2,703,125
Lake Charles Hbr. & Term. Dist. Port Facs.
Rev.
Rfdg. (Trunkline LNG Co. Proj.) Series 1992,
7.75% 8/15/22 Baa2 14,900,000 16,930,125
Louisiana Gen. Oblig. Series A, 6.75%
5/15/03
(MBIA Insured) Aaa 4,000,000 4,430,000
Louisiana Pub. Facs. Auth. Ind. Dev. Rev.
Rfdg.
(Beverly Enterprises, Inc.) 8.25% 9/1/08 - 1,590,000 1,705,275
New Orleans Gen. Oblig. Rfdg. (Cap.
Appreciation)
0% 9/1/08 (AMBAC Insured) Aaa 10,000,000 5,375,000
Port New Orleans Ind. Dev. Rev. Rfdg.
(Continental Grain Co. Proj.) 7.50% 7/1/13 BB 3,000,000 3,213,750
West Feliciana Parish Poll. Cont. Rev.
(Various Gulf
States Util. Co. Proj.) Series B, 9% 5/1/15 Ba1 2,340,000 2,600,325
36,957,600
MARYLAND - 0.2%
Baltimore Consolidated Pub. Impt. Rfdg.
Series A,
7.25% 10/15/04 (FGIC Insured) Aaa 1,545,000 1,794,131
MASSACHUSETTS - 8.7%
Massachusetts Bay Trans. Auth. Series B,
6.20% 3/1/16 A1 3,800,000 4,142,000
Massachusetts Gen. Oblig. Rfdg. Series A,
6.25% 7/1/04 A1 3,505,000 3,837,975
Massachusetts Health & Edl. Facs. Auth. Rev.:
(1st Mtg.) (Fairview Extended Care) Series A,
10.25% 1/1/21 - 12,000,000 13,575,000
(New England Med. Ctr.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 900,000 861,750
Massachusetts Hsg. Fin. Agcy. (Hsg. Rev.
Rental)
Series A, 6.60% 7/1/14 (AMBAC Insured) (e) Aaa 2,500,000 2,631,250
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Emerson College) 8.90% 1/1/18 - 10,000,000 11,000,000
(1st Mortgage) (Reeds Landing):
7.75% 10/1/00 - 1,000,000 1,027,620
8.625% 10/1/23 - 5,500,000 5,946,875
(Atlanticare Med. Ctr.) Series A,
10.125% 11/1/14 - 3,300,000 3,205,125
(Cap. Appreciation) (Massachusetts Biomedical):
Series A-2:
0% 8/1/03 A1 6,300,000 4,488,750
0% 8/1/06 A 4,000,000 2,375,000
0% 8/1/09 A 6,000,000 2,917,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Ind.
Rev.: - continued
(Evergreen Ctr., Inc.) 9.25% 11/1/11 - $ 3,965,000 $ 4,297,069
(Institute Dev. Disabilities) 9.25% 6/1/09 - 4,115,000 4,032,700
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) Aaa 3,985,000 4,562,825
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. Series D, 6% 7/1/06 Baa 800,000 830,000
Massachusetts Wtr. Resources Auth. Gen. Rev.
Rfdg.
Series C, 5.25% 12/1/15 A 5,000,000 4,800,000
74,531,439
MICHIGAN - 3.2%
Detroit Hosp. Fin. Auth. Facs. Rev.
(Michigan
Healthcare Corp. Proj.) 10% 12/1/20 (a) Caa 5,935,000 1,157,325
Flint Hosp. Bldg. Auth. Rev. (Hurley Med.
Ctr.)
7.80% 7/1/14 Baa 4,750,000 5,130,000
Highland Park Hosp. Fin. Auth. Hosp. Facs.
Rev. (a):
(Lakeside Commty. Hosp. Proj.) 10% 3/1/20 - 9,330,000 1,352,850
(Michigan Health Care Corp. Proj.)
Series A, 9.875% 12/1/19 Caa 7,350,000 1,433,250
Michigan Strategic Fund Ltd. Oblig. Rev.:
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20 - 11,500,000 12,937,500
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 (a)(e) - 12,150,000 5,589,000
27,599,925
MINNESOTA - 0.8%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Healthcare Sys. Rev. (Healthspan Health
Sys. Corp.) Series A, 4.75% 11/15/18
(AMBAC Insured) Aaa 4,000,000 3,515,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A, 9.75% 11/1/17 Baa 2,420,000 2,566,434
Series B, 9.75% 11/1/17 Baa 1,000,000 1,058,750
7,140,184
MISSISSIPPI - 0.8%
Claiborne County Poll. Cont. Rev. (Middle
South
Energy, Inc. Proj.) Series C, 9.875%
12/1/14 Ba1 6,195,000 6,860,963
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
MISSOURI - 2.4%
Boone County Ind. Dev. Auth. Ind. Rev.
(1st Mtg.)
(Fairview Extended Care) Series A,
10.125% 1/1/11 - $ 2,270,000 $ 2,752,375
Kansas City Ind. Dev. Auth. Ind. Dev. Rev.
(Bishop
Spencer Place Inc. Proj.) 8% 9/1/24 - 7,720,000 7,874,400
Kansas City Ind. Dev. Auth. Retirement Facs.
Rev.
Rfdg. (Kingswood United Methodist Proj.)
Series 1993, 9% 11/15/13 - 2,600,000 2,830,750
Lake Ozarks Commty. Bridge Corp. Sys. Rev.
6.40% 12/1/25 - 3,000,000 2,955,000
St. Louis Land Clearance Redev. Auth. Hsg.
Dev. Rev.
(Westminster Place Apts. Proj.) 11% 12/15/15 - 4,225,000 4,288,375
20,700,900
NEVADA - 1.4%
Clark County Ind. Dev. Rev. (Southwest Gas
Corp.)
Series A, 6.50% 12/1/33 Baa2 12,000,000 12,045,000
NEW HAMPSHIRE - 1.0%
New Hampshire Higher Edl. & Health Facs.
Auth. Rev.:
(1st Mtg. River Woods at Exeter):
8% 3/1/01 - 1,200,000 1,232,148
9% 3/1/23 - 3,170,000 3,451,338
(Littleton Hosp. Assoc., Inc.)
Series A, 9.50% 5/1/20 - 3,645,000 3,886,481
8,569,967
NEW JERSEY - 4.3%
Camden County Impt. Auth. Lease Rev.:
(Dockside Refrigerated) (Holt) 8.40%
4/1/24 (e) - 2,750,000 2,805,000
(Holt Hauling & Warehousing):
9.625% 1/1/11 - 4,000,000 4,020,000
9.875% 1/1/21 - 3,000,000 3,015,000
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.
Rfdg.:
(Holt Hauling & Warehousing):
Series G, 8.40% 12/15/15 - 5,000,000 5,143,750
Series H, 8.60% 12/15/17 (e) - 4,000,000 4,130,000
(Stolt Term. Proj.) 10.50% 1/15/18 - 3,500,000 3,768,730
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.) Series A:
6% 6/15/03 (AMBAC Insured) Aaa 4,035,000 4,332,581
6% 6/15/04 (AMBAC Insured) Aaa 8,900,000 9,589,750
36,804,811
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NEW MEXICO - 2.8%
Albuquerque Arpt. Rev. Rfdg. (c)(e):
6.50% 7/1/08 (AMBAC Insured) Aaa $ 1,250,000 $ 1,331,250
6.75% 7/1/09 (AMBAC Insured) Aaa 1,150,000 1,244,875
Farmington Poll. Cont. Rev. (Pub. Svc. Co.
of
New Mexico San Juan Proj.):
Rfdg. Series C, 5.70% 12/1/16
(AMBAC Insured) Aaa 4,000,000 3,995,000
Series A:
6% 3/1/08 Ba1 6,115,000 6,053,850
6.50% 9/1/09 Ba1 1,490,000 1,490,358
Series B, 6.30% 12/1/16 Ba1 7,000,000 7,026,250
Univ of New Mexico Rev. Rfdg. Series A,
6% 6/1/21 A1 2,840,000 2,971,350
24,112,933
NEW YORK - 11.0%
New York City Gen. Oblig.:
Series B, 5.70% 8/15/02 Baa1 4,000,000 4,125,000
7.50% 2/1/03 Baa1 14,000,000 15,540,000
New York City Ind. Dev. Auth. Ind. Dev. Rev.
(Japan Airlines Co. Ltd. Proj.) Series 1991,
6% 11/1/15, LOC Morgan Guaranty Trust Co.
(FSA Insured) (e) AAA 1,000,000 1,027,500
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.):
Series A:
5.50% 5/15/09 Baa1 3,000,000 2,958,750
5.50% 5/15/10 Baa1 1,500,000 1,473,750
5.50% 5/15/13 Baa1 5,250,000 5,079,375
5.25% 5/15/15 Baa1 10,000,000 9,375,000
5.875% 5/15/17 Baa1 3,300,000 3,300,000
Series B, 5.50% 5/15/08 Baa1 3,000,000 2,977,500
New York State Energy Research & Dev. Auth.
Elec. Facs. Rev. (Long Island Lighting)
Series A (e):
7.15% 12/1/20 Ba3 7,000,000 7,420,000
6.90% 8/1/22 Ba3 5,745,000 6,025,069
New York State Local Gov't. Assistance
Corp. Rfdg.:
(Cap. Appreciation) Series C, 0% 4/1/13 A 10,000,000 4,050,000
Series C, 5.50% 4/1/17 A 4,400,000 4,394,500
Series E, 5% 4/1/21 A 5,000,000 4,631,250
New York State Mtg. Agcy. Rev. (Homeowner
Mtg.)
Series 48, 6.05% 4/1/17 (e) Aa 5,000,000 5,037,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Pwr. Auth. Rev. & Gen. Purp.
Series CC, 5.125% 1/1/11 (FGIC Insured) Aaa $ 4,000,000 $ 3,940,000
New York State Thruway Auth. Hwy. &
Bridge
5% 4/1/97 A 2,500,000 2,507,975
New York State Thruway Auth. Svc.
Contract Rev.
(Local Hwy. & Bridge):
5.90% 4/1/07 Baa1 1,810,000 1,862,038
5.75% 4/1/16 Baa1 6,930,000 6,860,700
Niagara County Ind. Dev. Agcy. Rev.
(Wintergarden Inn Assoc. Proj.)
10% 6/1/11 (a) - 4,210,000 1,894,500
94,480,407
NEW YORK & NEW JERSEY - 0.9%
New York & New Jersey Port Auth. Spl.
Oblig. Rev.
(Continental Airlines Corp./ Eastern
Airlines, Inc./
U.S. Air LaGuardia Proj.) 9.125%
12/1/15 (e) B3 6,500,000 7,320,625
NORTH CAROLINA - 1.2%
North Carolina Eastern Muni. Pwr. Agcy.
Pwr. Sys. Rev. Rfdg.:
Series B, 7.25% 1/1/07 Baa1 5,000,000 5,612,500
Series C, 7% 1/1/07 Baa1 1,750,000 1,929,375
North Carolina Muni. Pwr. Agcy. #1
Catawba
Elec. Rev. Rfdg. 6.25% 1/1/17
(AMBAC Insured) Aaa 2,900,000 3,030,500
10,572,375
NORTH DAKOTA - 0.1%
North Dakota Hsg. Fin. Agcy. Rev. (Fing.
Prog. -
Home Mtg. Fing. Proj.) Series 1996 C,
3.85% 4/3/97 (FGIC Insured) (e) Aa 1,000,000 1,000,940
OHIO - 1.0%
Fairfield Econ. Dev. Rev. Rfdg. (Beverly
Enterprises Proj.) 8.50% 1/1/03 - 2,000,000 2,147,500
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
6.50% 12/1/03 (MBIA Insured) Aaa 2,925,000 3,246,750
Stark County Ind. Dev. Rev. Rfdg.
(Kroger Co. Proj.) 7.20% 9/1/12 Ba1 3,100,000 3,227,875
8,622,125
OKLAHOMA - 0.8%
Oklahoma County Ind. Auth. Rev. (Epworth
Village Proj.) Series A, 10.25% 4/1/19 - 2,935,000 3,147,788
Tulsa Muni. Arpt. Trust Rev. (American
Airlines
Corp. Proj.) 7.35% 12/1/11 Baa2 3,600,000 3,906,000
7,053,788
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
PENNSYLVANIA - 8.1%
Allegheny County Hosp. Dev. Auth.
Health Facs.
Rev. (Allegheny Valley School):
8% 2/1/02 Ba1 $ 885,000 $ 918,188
8.50% 2/1/15 Ba1 3,795,000 4,017,956
Cumberland County Muni. Auth. Rev.
(Carlisle Hosp.) 6.80% 11/15/23 Baa 3,800,000 3,909,250
Delaware County Auth. Rev. (1st Mtg. Riddle
Village Proj.) (f):
Series 1992, 8.75% 6/1/10 (Pre-Refunded
to 6/1/02 @ 102) - 2,000,000 2,407,500
7% 6/1/00 (Escrowed to Maturity) - 500,000 516,040
8.25% 6/1/22 (Escrowed to Maturity) - 4,500,000 5,512,500
9.25% 6/1/22 (Pre-Refunded
to 6/1/02 @ 102) - 6,170,000 7,573,675
Lehigh County Gen. Purp. Auth. Rev.
(Wiley House) 9.50% 11/1/16 - 5,930,000 6,308,038
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.:
Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 3,000,000 3,311,250
6.75% 9/1/19 Baa 4,500,000 4,758,750
Philadelphia Auth. for Ind. Dev. Rev. Rfdg.
(Philadelphia Arpt.) 7.75% 12/1/17 (e) - 2,600,000 2,762,500
Philadelphia Gen. Oblig.:
6.25% 5/15/11 (MBIA Insured) Aaa 3,400,000 3,638,000
6.25% 5/15/13 (MBIA Insured) Aaa 3,835,000 4,132,213
Philadelphia Hosps. & Higher Ed. Facs. Auth.
Hosp. Rev.:
Rfdg. 5.95% 7/1/03 Baa1 3,500,000 3,570,000
(Graduate Health Sys. Oblig. Group)
Series A&B:
7% 7/1/05 Ba 1,250,000 1,303,125
7.25% 7/1/18 Ba 2,450,000 2,535,750
Philadelphia Wtr. & Swr. Rev. (Cap.
Appreciation)
14th Series, 0% 10/1/05 (MBIA Insured) Aaa 3,000,000 1,961,250
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 1,000,000 1,128,750
6.75% 8/1/05 (MBIA Insured) Aaa 1,000,000 1,136,250
Pittsburgh Wtr. & Swr. Auth. Wtr. &
Swr. Sys. Rev.
Rfdg. Series A, 0% 9/1/06 (FGIC Insured)
(Escrowed to Maturity) (f) Aaa 3,000,000 1,860,000
Somerset County Hosp. Auth. Rev.
(Health Care)
(1st Mortgage-GF):
8.40% 6/1/09 - 1,900,000 2,037,750
8.50% 6/1/24 - 4,305,000 4,617,113
69,915,848
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
SOUTH CAROLINA - 2.0%
Charleston County Health Facs.
Rev. Rfdg.
(1st Mtg. Episcopal Proj.) (f):
Series A, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) - $ 3,000,000 $ 3,645,000
Series B, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) - 2,110,000 2,563,650
Charleston County Resource Recovery Rev.
(Foster Wheeler) Series A, 9.25% 1/1/10 (e) A 4,500,000 4,811,220
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A:
6.25% 1/1/04 (MBIA Insured) Aaa 2,565,000 2,783,025
6.50% 1/1/08 (MBIA Insured) Aaa 3,330,000 3,692,138
17,495,033
TENNESSEE - 1.7%
Metropolitan Gov't. Nashville & Davidson
County Wtr. & Swr. Rev. Rfdg. 6% 1/1/07
(MBIA Insured) Aaa 1,000,000 1,081,250
Springfield Ind. Dev. Board Ind. Dev. Rev.
Rfdg.
(Kroger Co. Proj.) 7.25% 5/1/11 Ba1 3,500,000 3,736,250
Tennessee Gen. Oblig. Rfdg. Series B,
6% 5/1/05 Aaa 1,000,000 1,090,000
Tennessee Hsg. Dev. Agcy. Mgt. Fin.
Series C,
6.45% 7/1/21 A1 8,365,000 8,574,125
14,481,625
TEXAS - 3.6%
Alliance Arpt. Auth. Spl. Facs. Rev.
(American Airlines, Inc. Proj.) (e):
7% 12/1/11 Baa2 7,000,000 7,778,750
7.50% 12/1/29 Baa2 2,000,000 2,140,000
Brazos River Auth. Poll. Cont. Rev.
(Texas Util.
Elec. Co. Proj.) Series A, 8.25% 1/1/19
(e) Baa2 5,620,000 6,027,450
El Paso Wtr. & Swr. Rev. (Cap.
Appreciation):
0% 3/1/05 (MBIA Insured) Aaa 2,650,000 1,752,313
0% 3/1/06 (MBIA Insured) Aaa 3,700,000 2,303,250
Harris County Cultural & Ed. Facs. Fin.
Corp.
Rev. Rfdg. (Space Ctr. Houston Proj.):
Series A, 9.25% 8/15/23 - 1,435,000 1,395,538
Series B, 0% 8/15/23 - 3,630,000 984,638
Houston Hsg. Fin. Corp. Single Family
Mtg. Rev.
(Verex Mtg. Assurance, Inc.) Series 1984 A,
10.875% 2/15/16 (Pre-Refunded to
2/12/97 @ 102) (f) A 1,020,000 1,027,262
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Round Rock Independent School
Dist. Rfdg. &
School Bldg. Unltd. Tax (Cap. Appreciation)
0% 8/15/09 (MBIA Insured) Aaa $ 7,430,000 $ 3,780,013
Sabine River Auth. Poll. Cont. Rev.
(Util. Elec.
Proj.) Series B, 8.25% 10/1/20 (e) Baa2 1,250,000 1,385,938
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B, 0% 2/1/08
(FGIC Insured) Aaa 2,000,000 1,105,000
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap.
Appreciation) 0% 2/1/09 (MBIA Insured) Aaa 2,000,000 1,042,500
30,722,652
UTAH - 2.8%
Intermountain Pwr. Agcy. Pwr. Supply Sys.
Rev.:
Rfdg. Series A, 6.50% 7/1/08
(AMBAC Insured) (c) Aaa 1,500,000 1,646,250
Rfdg. Series B:
5.75% 7/1/16 (MBIA Insured) (c) Aaa 5,500,000 5,451,875
5.75% 7/1/19 (MBIA Insured) (c) Aaa 6,500,000 6,394,375
Spl. Oblig. Sixth Series B, 6.25% 7/1/03
(MBIA Insured) Aaa 6,000,000 6,517,500
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 4,101,688
Utah Hsg. Fin. Agcy. (Residential Mtg.) (Cap.
Appreciation) Series 1983 A, 0% 7/1/16 A+ 260,004 35,101
24,146,789
VERMONT - 0.3%
Vermont Ind. Dev. Auth. Ind. Dev. Rev.
(Radisson Hotel) Series B-1, 7.75% 11/15/15 - 2,000,000 2,167,500
VIRGINIA - 3.2%
Charlottesville Ind. Dev. Auth. Ind. Dev.
Rev.
Rfdg. (Kroger Co. Proj.) 7.25% 5/1/10 Ba1 3,250,000 3,453,125
Loudoun County Ind. Dev. Auth. Residential
Care
Facs. Rev. (Falcons Landing Proj.) Series A:
9.25% 11/1/04 - 1,100,000 1,194,875
8.75% 11/1/24 - 13,900,000 14,647,125
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr.
Series A:
5.15% 7/1/09 (MBIA Insured) Aaa 4,000,000 4,000,000
5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 4,005,000
Virginia Hsg. Dev. Auth. Residential Mtg.
(Single Family
Mtg.) (Cap. Appreciation) Series 1983
B, 0% 9/1/14
(Pre-Refunded to 1/1/97 @ 16.063) (f) Aa 1,210,000 194,314
27,494,439
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
WASHINGTON - 4.5%
Douglas County Pub. Util. Dist.
#1 Wells
Hydroelec. Rev. Rfdg. (Pacific
Pwr. & Lt. Co.)
8.75% 9/1/18 A $ 1,395,000 $ 1,759,444
Washington Gen. Oblig. Rfdg. Series R,
5.60% 9/1/04 Aa 2,500,000 2,634,375
Washington Pub. Pwr. Supply Sys. Nuclear
Proj. #1 Rev. Rfdg. Series B, 7% 7/1/08 Aa1 1,000,000 1,135,000
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #2 Rev.:
Rfdg. Series B, 5.625% 7/1/12 (MBIA
Insured) Aaa 6,500,000 6,435,000
5.55% 7/1/10 (FGIC Insured) Aaa 5,300,000 5,187,375
5.40% 7/1/12 Aa1 11,600,000 11,005,500
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #3 Rev.:
Rfdg. (Cap. Appreciation)
Series B, 0% 7/1/08 (MBIA Insured) Aaa 3,000,000 1,586,250
5.40% 7/1/12 Aa1 10,000,000 9,325,000
39,067,944
WEST VIRGINIA - 0.6%
Kanawha County Ind. Dev. Rev. Rfdg.
(Topvalco, Inc. Proj.) 7.125% 11/1/12 Ba1 4,500,000 4,747,500
WYOMING - 1.2%
Sweetwater County Poll. Cont. Rev. Rfdg.
(Idaho
Pwr. Co. Proj.) Series A, 6.05% 7/15/26 A3 10,000,000 10,212,500
TOTAL MUNICIPAL BONDS
(Cost $828,597,033) 836,736,104
MUNICIPAL NOTES (D) - 2.6%
ALASKA - 0.1%
Valdez Marine Terminal Rev. Rfdg. (Arco.
Trans. Proj.) Series A, 3.70%, tender
1/7/97 VMIG 1 1,000,000 1,000,050
ARIZONA - 0.2%
Coconino County Poll. Cont. Corp. Poll. Cont.
Rev. (Arizona Pub. Svc. Co. Navajo Proj.)
Series 1994 A, 5.10%, LOC Bank of America,
VRDN (e) P-1 1,700,000 1,700,000
DELAWARE - 0.2%
Delaware Econ. Dev. Auth. Rev. (Delmarva
Pwr. & Lt. Proj.) Series 1994, 5.05%
VRDN (e) VMIG 1 1,400,000 1,400,000
MUNICIPAL NOTES (D) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
FLORIDA - 0.1%
Putnam County Dev. Auth. Poll.
Cont. Rev.
(Seminole Elec. Co-op. Proj.)
Series 1984 H-3,
3.80%, tender 3/15/97 A-1 $ 1,000,000 $ 1,000,540
KANSAS - 0.1%
Butler County Solid Waste Disp.
Facs. (Texaco Co.)
Series 1994 A, 5.10%, VRDN (e) VMIG 1 1,200,000 1,200,000
LOUISIANA - 0.0%
West Baton Rouge Parish Ind. Dist. #3 Rev.
(Dow Chemical Co. Proj.) Series 1995,
5.10%, VRDN (e) P-1 400,000 400,000
MISSOURI - 0.1%
Missouri Higher Ed. Loan Auth. Student Loan
Rev. Series 1988 A, 4.25%, LOC National
Westminster Bank PLC, VRDN (e) VMIG 1 1,100,000 1,100,000
MULTIPLE STATES - 0.2%
Clipper Participating VRDN Series 1995-1
Class A, 4.31% (Liquidity Facility State
Street Bank & Trust Co.) (e)(g) VMIG 1 1,312,018 1,312,018
NEVADA - 0.1%
Washoe County Wtr. Facs. Rev. (Sierra
Pacific
Pwr. Co. Proj.) Series 1990, 5.50%,
LOC Union Bank of Switzerland, VRDN (e) P-1 1,100,000 1,100,000
NORTH CAROLINA - 0.2%
Halifax County Ind. Facs. Poll. Cont.
Fing. Auth.
Rev. (Westmoreland - Hadson Partners
Roanoke
Valley Proj.) Series 1991, 5.70%,
LOC Credit Suisse, VRDN (e) - 1,500,000 1,500,000
TEXAS - 1.1%
Brazos River Auth. Poll. Cont. Rev. Rfdg.
(Texas Utils. Elec. Co. Proj.) VRDN (e):
Series 1995-A, 5.05%,
LOC Morgan Guaranty Trust Co. VMIG 1 200,000 200,000
Series 1995 C, 5.10%, LOC Swiss Bank VMIG 1 600,000 600,000
Gulf Coast Waste Disp. Auth. Poll.
Cont. & Solid
Waste Disp. Rev. Rfdg. (Amoco Oil Co.
Proj.)
5.05% 5/1/24 (e) VMIG 1 1,400,000 1,400,000
Gulf Coast Waste Disp. Auth. Solid
Waste Disp.
Rev. (Amoco Oil Co. Proj.) (e):
3.75%, tender 4/1/97 VMIG 1 2,300,000 2,301,173
Rfdg. 5.05%, VRDN VMIG 1 500,000 500,000
5.05%, VRDN VMIG 1 2,500,000 2,500,000
MUNICIPAL NOTES (D) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Trinity River Auth. Poll. Cont. Rev. Coll.
(Texas Utils. Elec. Co. Proj.) Series 96 A,
5.05% (BPA Bank of New York)
(AMBAC Insured), VRDN (e) VMIG 1 $ 1,500,000 $ 1,500,000
9,001,173
WEST VIRGINIA - 0.2%
Grant County Poll. Cont. Rev.
(Virginia Elec. &
Pwr. Co. Proj.) Series 1994, 3.80%,
tender 3/10/97 VMIG 1 1,200,000 1,200,914
TOTAL MUNICIPAL NOTES
(Cost $21,912,018) 21,914,695
TOTAL INVESTMENTS - 100%
(Cost $850,509,051) $ 858,650,799
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
a. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
b. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
c. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
d. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
e. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
f. Security collateralized by an amount sufficient to pay interest and
principal.
g. Provides evidence of ownership in one or more underlying municipal
bonds.
h. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 36.7% AAA, AA, A 37.4%
Baa 20.6% BBB 16.9%
Ba 9.3% BB 6.8%
B 0.9% B 1.8%
Caa 0.3% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.3%
The percentage not rated by both S&P and Moody's amounted to 25.9%. FMR has
determined that unrated debt securities that are lower quality account for
23.3% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 21.9%
Electric Revenue 18.6
Industrial Development 18.5
General Obligation 17.8
Transportation 5.5
Others (individually less than 5%) 17.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $850,666,449. Net unrealized appreciation
aggregated $7,984,350, of which $39,063,680 related to appreciated
investment securities and $31,079,330 related to depreciated investment
securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,155,000 of which $1,444,000, $8,549,000, and $9,162,000
will expire on December 31, 2002, 2003, and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996
ASSETS
Investment in securities, at value (cost $850,509,051) - $ 858,650,799
See accompanying schedule
Interest receivable 14,237,586
Redemption fees receivable 134
TOTAL ASSETS 872,888,519
LIABILITIES
Payable to custodian bank $ 52,406
Payable for investments purchased 1,200,000
Regular delivery
Delayed delivery 15,845,021
Payable for fund shares redeemed 1,778,620
Distributions payable 1,484,786
Accrued management fee 316,151
Other payables and accrued expenses 196,092
TOTAL LIABILITIES 20,873,076
NET ASSETS $ 852,015,443
Net Assets consist of:
Paid in capital $ 867,517,118
Accumulated undistributed net realized gain (loss) (23,643,423)
on investments
Net unrealized appreciation (depreciation) on 8,141,748
investments
NET ASSETS, for 74,996,590 shares outstanding $ 852,015,443
NET ASSET VALUE, offering price and redemption price per $11.36
share ($852,015,443 (divided by) 74,996,590 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
INTEREST INCOME $ 58,929,536
EXPENSES
Management fee $ 3,873,699
Transfer agent, accounting and custodian fees and 1,483,030
expenses
Non-interested trustees' compensation 3,389
Registration fees 38,107
Audit 56,316
Legal 11,086
Miscellaneous 12,733
Total expenses before reductions 5,478,360
Expense reductions (10,176) 5,468,184
NET INTEREST INCOME 53,461,352
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (9,811,869)
Futures contracts 350,403 (9,461,466)
Change in net unrealized appreciation (depreciation) on:
Investment securities (14,724,336)
Futures contracts (94,141) (14,818,477)
NET GAIN (LOSS) (24,279,943)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 29,181,409
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 53,461,352 $ 55,260,713
Net interest income
Net realized gain (loss) (9,461,466) (6,297,891)
Change in net unrealized appreciation (depreciation) (14,818,477) 71,821,694
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 29,181,409 120,784,516
FROM OPERATIONS
Distributions to shareholders (53,461,352) (55,260,713)
From net interest income
In excess of net interest income (302,777) -
TOTAL DISTRIBUTIONS (53,764,129) (55,260,713)
Share transactions 114,637,849 169,649,889
Net proceeds from sales of shares
Reinvestment of distributions 38,125,747 39,176,940
Cost of shares redeemed (186,338,274) (160,585,909)
Redemption fees 88,615 166,032
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (33,486,063) 48,406,952
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (58,068,783) 113,930,755
NET ASSETS
Beginning of period 910,084,226 796,153,471
End of period $ 852,015,443 $ 910,084,226
OTHER INFORMATION
Shares
Sold 10,105,497 15,043,662
Issued in reinvestment of distributions 3,363,911 3,447,309
Redeemed (16,452,415) (14,137,312)
Net increase (decrease) (2,983,007) 4,353,659
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 A 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.670 $ 10.810 $ 12.330 $ 11.880 $ 11.800
of period
Income from Investment .699 .709 .770 .783 .834
Operations
Net interest income
Net realized and unrealized (.307) .858 (1.473) .788 .208
gain (loss)
Total from investment .392 1.567 (.703) 1.571 1.042
operations
Less Distributions
From net interest income (.699) (.709) (.770) (.783) (.834)
In excess of net interest (.004) C - - - -
income
From net realized gain - - (.050) (.340) (.130)
Total distributions (.703) (.709) (.820) (1.123) (.964)
Redemption fees added to paid .001 .002 .003 .002 .002
in capital
Net asset value, end of period $ 11.360 $ 11.670 $ 10.810 $ 12.330 $ 11.880
TOTAL RETURN B 3.56% 14.89% (5.82) 13.63% 9.17%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 852,015 $ 910,084 $ 796,153 $ 952,225 $ 761,683
(000 omitted)
Ratio of expenses to average .63% .64% .63% .64% .64%
net assets
Ratio of net interest income to 6.14% 6.24% 6.69% 6.37% 7.01%
average net assets
Portfolio turnover rate 35% 39% 40% 54% 43%
</TABLE>
A EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES OF
FINANCIAL STATEMENTS).
C THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Aggressive Municipal Fund (formerly Fidelity Aggressive Tax-Free
Portfolio) (the fund) is a fund of Fidelity Municipal Trust (the trust) and
is authorized to issue an unlimited number of shares. The trust is
registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a
Massachusetts business trust. The financial statements have been prepared
in conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Securities for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net interest income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for litigation
proceeds, futures and options transactions, market discount, capital loss
carryforwards and losses deferred due to wash sales, and futures and
options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
book and tax basis differences which will reverse in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to 1% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market value of the
securities purchased on a when-issued or forward commitment basis are
identified as such in the fund's schedule of investments. The fund may
receive compensation for interest forgone in the purchase of a when-issued
security. With respect to the purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the accompanying balance sheet under the
caption "Delayed delivery." Losses may arise due to changes in the market
value of the underlying securities, if the counterparty does not perform
under the contract, or if the issuer does not issue the securities due to
political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on
which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $295,632,251 and $327,986,597, respectively.
The market value of futures contracts opened and closed during the period
amounted to $37,178,773 and $45,986,931, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
.3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .30%. For the period, the management
fee was equivalent to an annual rate of .45% of average net assets.
Effective March 1, 1997, FMR voluntarily agreed to reduce the individual
fund fee rate from .30% to .25%.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. The Bank has
entered into a sub-contract with Fidelity Service Co. (FSC), an affiliate
of FMR, under which FSC performs the activities associated with the fund's
transfer and shareholder servicing agent and accounting functions. The fund
pays account fees and asset-based fees that vary according to account size
and type of account. FSC pays for typesetting, printing and mailing of all
shareholder
reports, except proxy statements. The accounting fee is based on the level
of average net assets for the month plus out-of-pocket expenses. For the
period, FSC received transfer agent and accounting fees amounting to
$1,138,274 and $296,466, respectively.
For the period, the transfer agent fees were equivalent to an annual rate
of .13% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,704 and $7,472,
respectively, under these arrangements.
6. PROPOSED REORGANIZATION.
The Board of Trustees of the fund has approved an Agreement and Plan of
Reorganization ("Agreement") between the fund and Spartan Aggressive
Municipal Fund ("Reorganization"). The Agreement provides for the transfer
of substantially all of the assets and the assumption of substantially all
of the liabilities of Spartan Aggressive Municipal Fund in exchange solely
for the number of shares of the fund having the same aggregate net asset
value as the outstanding shares of Spartan Aggressive Municipal Fund at the
close of business on the day that the Reorganization is effective. The
Reorganization can be consummated only if, among other things, it is
approved by the vote of a
6. PROPOSED REORGANIZATION - CONTINUED
majority (as defined by the Investment Company Act of 1940) of outstanding
voting securities of Spartan Aggressive Municipal Fund. A Special Meeting
of Shareholders (Meeting) of Spartan Aggressive Municipal Fund will be held
on July 16, 1997 to vote on the Agreement. A detailed description of the
proposed transaction and voting information will be sent to shareholders of
Spartan Aggressive Municipal Fund in May 1997. If the Agreement is approved
at the Meeting, the Reorganization is expected to become effective on or
about July 31, 1997.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Aggressive Municipal Fund (formerly Fidelity Aggressive Tax-Free
Portfolio):
We have audited the accompanying statement s of assets and liabilities of
Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund (formerly
Fidelity Aggressive Tax-Free Portfolio), including the schedule of
portfolio investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund as of
December 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 20, 1997
DISTRIBUTIONS
During the fiscal year ended 1996, 100% of the fund's income dividends was
free from federal income tax, and 20.75% of the fund's income dividends was
subject to the federal alternative minimum tax.
The fund notified shareholders in January of the applicable percentage for
use in preparing 1996 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT
IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Ohio Municipal Income
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal Income
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
(registered trademark)
FIDELITY MUNICIPAL TRUST
PART C - OTHER INFORMATION
Item 15. 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 Registrant 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 Investments Institutional
Operations Company, Inc. ("FIIOC") is appointed sub-transfer agent, the
Transfer Agent agrees to indemnify FIIOC for FIIOC'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.
Item 16. Exhibits
1. Declaration of Trust of Registrant, dated as of March 17, 1994, is
incorporated herein by reference to Exhibit 1 of Post-Effective Amendment
No. 67.
2. Bylaws of the Trust, as amended, are incorporated herein by reference
to Exhibit 2(a) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
3. Not applicable.
4. Agreement and Plan of Reorganization between Fidelity Municipal Trust:
Fidelity Aggressive Municipal Fund and Fidelity Union Street Trust: Spartan
Aggressive Municipal Fund is filed herein as Exhibit 1 to the Proxy
Statement and Prospectus.
5. Not applicable.
6. (a) Management Contract, dated January 1, 1994, between Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(a) of Post-Effective Amendment No. 67.
(b) Management Contract, dated January 1, 1994, between Fidelity
Municipal Bond Portfolio (currently known as Fidelity Advisor Municipal
Bond Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(b) of Post-Effective Amendment No. 67.
(c) Management Contract, dated January 1, 1994, between Fidelity Insured
Tax-Free Portfolio (currently known as Fidelity Insured Municipal Income
Fund) and Fidelity Management & Research Company is incorporated herein by
reference to Exhibit 5(c) of Post-Effective Amendment No. 69.
(d) Management Contract, dated January 1, 1994, between Fidelity Michigan
Tax-Free High Yield Portfolio (currently known as Fidelity Michigan
Municipal Income Fund) and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(d) of Post-Effective
Amendment No. 64.
(e) Management Contract, dated January 1, 1994, between Fidelity
Minnesota Tax-Free Portfolio (currently known as Fidelity Minnesota
Municipal Income Fund) and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(e) of Post-Effective
Amendment No. 64.
(f) Management Contract, dated January 1, 1994, between Fidelity Ohio
Tax-Free High Yield Portfolio (currently known as Fidelity Ohio Municipal
Income Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(f) of Post-Effective Amendment No. 64.
(g) Management Contract, dated August 1, 1990, between Spartan
Pennsylvania Municipal High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(g) of
Post-Effective Amendment No. 67.
7. (a) General Distribution Agreement between Fidelity Insured Tax-Free
Portfolio (currently known as Fidelity Insured Municipal Income Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(a) of Post-Effective Amendment No. 67.
(b) General Distribution Agreement between Fidelity Aggressive Tax-Free
Portfolio (currently known as Fidelity Aggressive Municipal Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(b) of Post Effective Amendment No. 70.
(c) General Distribution Agreement between Fidelity Municipal Bond
Portfolio (currently known as Fidelity Advisor Municipal Bond Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(c) of Post-Effective Amendment No. 67.
(d) General Distribution Agreement between Fidelity Ohio Tax-Free High
Yield Portfolio (currently known as Fidelity Ohio Municipal Income Fund)
and Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(d) of Post-Effective Amendment No. 67.
(e) General Distribution Agreement between Fidelity Michigan Tax-Free
High Yield Portfolio (currently known as Fidelity Michigan Municipal Income
Fund) and Fidelity Distributors Corporation, dated April 1, 1987, is
incorporated herein by reference to Exhibit 6(e) of Post-Effective
Amendment No. 67.
(f) General Distribution Agreement between Fidelity Minnesota Tax-Free
Portfolio (currently known as Fidelity Minnesota Municipal Income Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(f) of Post-Effective Amendment No. 67.
(g) General Distribution Agreement between Fidelity Pennsylvania
Municipal High Yield Portfolio (currently known as Spartan Pennsylvania
Municipal Income Fund) and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(g) of
Post-Effective Amendment No. 67.
(h) Amendment to General Distribution Agreement, dated January 1, 1988,
between the Registrant and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(h) of Post-Effective
Amendment No. 67.
(i) Form of Bank Agency Agreement (most recently revised January, 1997)
is incorporated herein by reference to Exhibit 6(i) of Post-Effective
Amendment No. 79.
(j) Form of Selling Dealer Agreement (most recently revised January,
1997) is incorporated herein by reference to Exhibit 6(j) of Post-Effective
Amendment No. 79.
(k) Form of Selling Dealer Agreement for Bank Related Transactions (most
recently revised January, 1997) is incorporated herein by reference to
Exhibit 6(k) of Post-Effective Amendment No. 79.
(l) Amendments to the General Distribution Agreement between the
Registrant 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).
8. (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 December 1, 1995, is
incorporated herein by reference to Exhibit 7(b) of Fidelity School Street
Trust's (File No. 2-57167) Post-Effective Amendment No. 47.
9. (a) Custodian Agreement, Appendix B, and Appendix C, dated December 1,
1994, between UMB Bank, n.a. and the Registrant is incorporated herein by
reference to Exhibit 8 of Fidelity California Municipal Trust's
Post-Effective Amendment No. 28 (File No. 2-83367).
. (b) Appendix A, dated October 17, 1996, to the Custodian Agreement,
dated December 1, 1994, between UMB Bank, n.a. and the Registrant is
incorporated herein by reference to Exhibit 8(a) of Fidelity Court Street
Trust's Post-Effective Amendment No. 61 (File No. 2-58774).
10. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Insured Tax-Free Portfolio (currently known as Fidelity Insured Municipal
Income Fund) is incorporated herein by reference to Exhibit 15(a) of
Post-Effective Amendment No. 67.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Ohio Tax-Free High Yield Portfolio (currently known as Fidelity Ohio
Municipal Income Fund) is incorporated herein by reference to Exhibit 15(b)
of Post-Effective Amendment No. 67.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Michigan Tax-Free High Yield Portfolio (currently known as Fidelity
Michigan Municipal Income Fund) is incorporated herein by reference to
Exhibit 15(c) of Post-Effective Amendment No. 67.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Minnesota Tax-Free Portfolio (currently known as Fidelity Minnesota
Municipal Income Fund) is incorporated herein by reference to Exhibit 15(d)
of Post-Effective Amendment No. 67.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Pennsylvania Municipal High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) is incorporated herein by reference to
Exhibit 15(e) of Post-Effective Amendment No. 67.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Bond Portfolio (currently known Fidelity Advisor Municipal Bond
Fund: Initial Class) is incorporated herein by reference to Exhibit 15(f)
of Post-Effective Amendment No. 79.
(g) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund) is incorporated herein by reference to Exhibit 15(g) of
Post Effective Amendment No. 70.
(h) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Class T (formerly Class A) is incorporated
herein by reference to Exhibit 15(h) of Post-Effective Amendment No. 79.
(i) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Class B is incorporated herein by reference to
Exhibit 15(i) of Post-Effective Amendment No. 79.
(j) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Institutional Class is incorporated herein by
reference to Exhibit 15(j) of Post-Effective Amendment No. 79.
(k) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Advisor Municipal Bond Fund: Class A is incorporated herein by reference to
Exhibit 15(k) of Post-Effective Amendment 79.
(l) Rule 18f-3 Plan, dated February 1, 1997, is incorporated herein by
reference to Exhibit 18 of Post-Effective Amendment No. 79.
11. Opinion and Consent of Kirkpatrick & Lockhart LLP as to the legality
of shares being
registered is filed herein as Exhibit 11.
12. Opinion and Consent of Kirkpatrick & Lockhart LLP as to tax matters
in connection
with the reorganization of Spartan Aggressive Municipal Fund is filed
herein as Exhibit 12.
13. Not applicable.
14. Consent of Coopers & Lybrand L.L.P. is filed herein as Exhibit 14.
15. Pro-Forma Financial Statements for the Fiscal Year Ended December 31,
1996 are filed herein as Exhibit 15.
16. Powers of Attorney, dated December 19, 1996, January 3, 1997, and
March 6, 1997 are filed herein as Exhibit 16.
17. Rule 24f-2 Notice for Registrant's most recent fiscal year ended
December 31, 1996 is
filed herein as Exhibit 17.
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this Registration Statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act
of 1933, the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each Post-Effective Amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Massachusetts, on the
27th day of March 1997.
FIDELITY MUNICIPAL 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 March 27, 1997
Edward C. Johnson 3d (Principal Executive Officer)
/s/Kenneth A. Rathgeber * Treasurer March 27, 1997
Kenneth A. Rathgeber
/s/J. Gary Burkhead Trustee March 27, 1997
J. Gary Burkhead
/s/Ralph F. Cox ** Trustee March 27, 1997
Ralph F. Cox
/s/Phyllis Burke Davis ** Trustee March 27, 1997
Phyllis Burke Davis
/s/Robert M. Gates *** Trustee March 27, 1997
Robert M. Gates
/s/E. Bradley Jones ** Trustee March 27, 1997
E. Bradley Jones
/s/Donald J. Kirk ** Trustee March 27, 1997
Donald J. Kirk
/s/Peter S. Lynch ** Trustee March 27, 1997
Peter S. Lynch
/s/Marvin L. Mann ** Trustee March 27, 1997
Marvin L. Mann
/s/William O. McCoy ** Trustee March 27, 1997
William O. McCoy
/s/Gerald C. McDonough ** Trustee March 27, 1997
Gerald C. McDonough
/s/Thomas R. Williams ** Trustee March 27, 1997
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated January 3, 1997 and filed herewith.
* Signature affixed by John H. Costello 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 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.
March 24, 1997
Fidelity Municipal Trust
82 Devonshire Street
Boston, MA 02109
Ladies and Gentlemen:
You have requested our opinion regarding certain matters in connection
with the issuance of shares of Fidelity Aggressive Municipal Fund
("Fidelity Aggressive") a series of Fidelity Municipal Trust (the "Trust"),
pursuant to a Registration Statement to be filed by the Trust on Form N-14
("Registration Statement") under the Securities Act of 1933 ("1933 Act").
These shares will be issued in connection with the proposed acquisition by
Fidelity Aggressive of all of the assets of Spartan Aggressive Municipal
Fund ("Spartan Aggressive"), a series of Fidelity Union Street Trust, and
the assumption by Fidelity Aggressive of the liabilities of Spartan
Aggressive solely in exchange for Fidelity Aggressive shares.
In connection with our services as counsel for the Trust, we have
examined, among other things, originals or copies of such documents,
certificates and corporate and other records as we deemed necessary or
appropriate for purposes of this opinion. We have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us, the
conformity to original documents of all documents presented to us as copies
thereof and the authenticity of the original documents from which any such
copies were made, which assumptions we have not independently verified. As
to various matters of fact material to this opinion, we have relied upon
statements and certificates of officers of the Trust. Based upon this
examination, we are of the opinion that the shares to be issued pursuant to
the Registration Statement, when issued upon the terms provided in the
Registration Statement, subject to compliance with the 1933 Act, the
Investment Company Act of 1940, and applicable state law regulating the
offer and sale of securities, will be legally issued, fully paid, and
non-assessable.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a business trust
may be held personally liable for the obligations of the Trust. The
Trust's Declaration of Trust provides that the Trustees shall have no power
to bind any shareholder personally or to call upon any shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
shareholder may at any time personally agree to pay by way of subscription
for any shares or otherwise. The Declaration of Trust also requires that
every note, bond, contract or other undertaking issued by or on behalf of
the Trust or the Trustees relating to the Trust include a recitation
limiting the obligation represented thereby to the Trust and its assets
(although the omission of such recitation shall not operate to bind any
shareholder). The Declaration of Trust provides that: (i) in case any
shareholder or any former shareholder of any Series of the Trust shall be
held to be personally liable solely by reason of his being or having been a
shareholder and not because of his acts or omissions or
Fidelity Municipal Trust
March 24, 1997
Page 2
for some other reason, the shareholder or former shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of
a corporation or other entity, its corporate or
other general successor) shall be entitled out of the assets belonging to
the applicable Series to be held harmless from and indemnified against all
loss and expense arising from such liability; and (ii) a Series shall, upon
request by the shareholder, assume the defense of any claim made against
the shareholder for any act or obligation of the Series and satisfy any
judgment thereon.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Proxy Statement and Prospectus which constitute a part of
the Registration Statement. We further consent to your filing a copy of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/Kirkpatrick & Lockhart LLP
Kirkpatrick & Lockhart LLP
March 24, 1997
Fidelity Union Street Trust
Fidelity Municipal Trust
82 Devonshire Street
Boston, MA 02109
Ladies and Gentlemen:
Fidelity Union Street Trust ("FUST"), a Massachusetts business trust, on
behalf of Spartan Aggressive Municipal Fund ("Acquired"), a series of FUST,
and Fidelity Municipal Trust ("FMT"), a Massachusetts business trust, on
behalf of Fidelity Aggressive Municipal Fund ("Acquiring"), a series of
FMT, have requested our opinion as to certain federal income tax
consequences of a transaction ("Reorganization") in which Acquiring will
acquire all of the assets and assume all of the liabilities of Acquired in
exchange solely for shares of beneficial interest in Acquiring ("Acquiring
Shares") pursuant to an Agreement and Plan of Reorganization ("Agreement")
expected to be entered into between Acquired and Acquiring on May 19, 1997.
In rendering this opinion, we have examined a draft of the Agreement
("Draft Agreement"), the prospectus/proxy statement to be filed with the
Securities and Exchange Commission in connection with the Reorganization,
the currently effective prospectuses and statements of additional
information of Acquired and Acquiring, and such other documents as we have
deemed necessary. We have also relied, with your consent, on certificates
of officers of FUST and FMT.
OPINION
Based solely on the facts and representations set forth in the reviewed
documents and the certificates of officers of FUST and FMT, and assuming
that (i) those representations are true on the date of the Reorganization,
(ii) the Reorganization is consummated in accordance with the Agreement,
and (iii) the Agreement does not differ materially from the Draft
Agreement, our opinion with respect to the federal income tax consequences
of the Reorganization is as follows.
1. The Reorganization will be a reorganization under section 368(a)(1)(C)
of the Internal Revenue Code of 1986, as amended ("Code"), and Acquired and
Acquiring will each be parties to the Reorganization under section 368(b)
of the Code.
2. No gain or loss will be reorganized by Acquired upon the transfer of
all of its assets to Acquiring in exchange solely for Acquiring Shares and
Acquiring's assumption of Acquired's liabilities followed by the
distribution of those Acquiring Shares to the Acquired shareholders in
liquidation of Acquired.
Fidelity Union Street Trust
Fidelity Municipal Trust
March 24, 1997
Page 2
3. No gain or loss will be recognized by Acquiring on the receipt of
Acquired's assets in exchange solely for Acquiring Shares and the
assumption of Acquired's liabilities.
4. The basis of Acquired's assets in the hands of Acquiring will be the
same as the basis of such assets in Acquired's hands immediately prior to
the Reorganization.
5. Acquiring's holding period in the assets to be received from Acquired
will include Acquired's holding period in such assets.
6. The Acquired shareholders will recognize no gain or loss on the
exchange of the shares of beneficial interest in Acquired ("Acquired
Shares") solely for the Acquiring Shares in the Reorganization.
7. The Acquired shareholders' basis in the Acquiring Shares to be received
by them will be the same as their basis in the Acquired Shares to be
surrendered in exchange therefor.
8. The holding period of the Acquiring Shares to be received by the
Acquired shareholders will include the holding period of the Acquired
Shares to be surrendered in exchange therefor, provided those Acquired
Shares were held as capital assets on the date of the Reorganization.
The foregoing opinion is based on, and is conditioned on the continued
applicability of, the provisions of the Code and the regulations
thereunder, case law precedent, and the Internal Revenue Service
pronouncements in existence at the date hereof. We express no opinion as
to whether Acquired will recognize gain or loss under Section 1256 of the
Code on the transfer of futures, forwards, or options to Acquiring in the
Reorganization. Nor do we express any opinion other than those contained
herein.
We consent to the inclusion of this opinion in the Registration Statement
on Form N-14 filed with the Securities and Exchange Commission and the
inclusion of the name "Kirkpatrick & Lockhart LLP" in the "Federal Income
Tax Consequences of the Reorganization," "Federal Income Tax
Considerations" and "Legal Matters" sections of that Registration
Statement.
Very truly yours,
/s/Kirkpatrick & Lockhart LLP
Kirkpatrick & Lockhart LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Proxy
Statement and Prospectus (the Proxy/Prospectus) constituting part of this
Registration Statement on Form N-14 (the Registration Statement) of
Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund, of our report
dated February 20, 1997 on the financial statements and financial
highlights included in the December 31, 1996 Annual Report to Shareholders
of Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund.
We also consent to the incorporation by reference in this Registration
Statement, of our report dated October 4, 1996 on the financial statements
and financial highlights included in the August 31, 1996 Annual Report to
Shareholders of Fidelity Union Street Trust: Spartan Aggressive Municipal
Fund.
We further consent to the references to our Firm under the headings
"Experts" and "Financial Highlights" in the Proxy/Prospectus and to the
references to our Firm under the headings "Financial Highlights" in the
Prospectuses and "Auditor" in the Statements of Additional Information for
Fidelity Municipal Trust: Fidelity Aggressive Municipal Fund and Fidelity
Union Street Trust: Spartan Aggressive Municipal Fund, which are also
incorporated by reference into the Proxy/Prospectus.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 25, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY AGGRESSIVE MUNICIPAL FUND
SPARTAN AGGRESSIVE MUNICIPAL FUND
PRO FORMA COMBINING STATEMENT OF ASSETS & LIABILITIES AS OF DECEMBER 31, 1996
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA PRO FORMA
FIDELITY SPARTAN COMBINED ADJUSTMENTS COMBINED
AGGRESSIVE AGGRESSIVE
ASSETS
Investment in
securities, at
value
- See $ 858,650,799 $ 93,097,368 $ 951,748,167 $ 951,748,167
accompanying
schedule
Cash 0 666,481 666,481 (52,406) (f) 614,075
Interest 14,237,586 1,620,894 15,858,480 15,858,480
receivable
Redemption 134 0 134 134
fees receivable
TOTAL ASSETS 872,888,519 95,384,743 968,273,262 (52,406) 968,220,856
LIABILITIES
</TABLE>
<TABLE>
<CAPTION>
<S> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Payable to $ 52,406 $ - $ 52,406 $ (52,406) (f) 0
custodian bank
</TABLE>
<TABLE>
<CAPTION>
<S> <C><C> <C><C> <C><C> <C><C> <C><C><C>
Payable for
investments
purchased
Regular 1,200,000 2,718,165 3,918,165 3,918,165
delivery
Delayed 15,845,021 0 15,845,021 15,845,021
delivery
Payable for 1,778,620 253,528 2,032,148 2,032,148
fund shares
redeemed
Distributions 1,484,786 150,845 1,635,631 1,635,631
payable
Accrued 316,151 46,967 363,118 363,118
management
fee
Other payables 196,092 327 196,419 196,419
and accrued
expenses
TOTAL 20,873,076 3,169,832 24,042,908 (52,406) 23,990,502
LIABILITIES
NET ASSETS $ 852,015,443 $ 92,214,911 $ 944,230,354 $ - $ 944,230,354
Net Assets
consist of:
Paid in capital $ 867,517,118 $ 92,702,916 $ 960,220,034 $ 960,220,034
Accumulated
undistributed
net realized
gain (loss)
on (23,643,423) (1,926,038) (25,569,461) (25,569,461)
investments
Net unrealized
appreciation
(depreciation)
on
investments 8,141,748 1,438,033 9,579,781 9,579,781
NET ASSETS $ 852,015,443 $ 92,214,911 $ 944,230,354 $ - $ 944,230,354
NET ASSET
VALUE
Net Assets $852,015,443 $92,214,911 $944,230,354 $944,230,354
Offering price $11.36 $10.09 $11.22 $11.36
and redemption
price per share
Shares 74,996,590 9,143,289 84,139,879 (1,025,779) (a) 83,114,100
outstanding
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPARTAN AGGRESSIVE MUNICIPAL FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C><C> <C><C> <C><C> <C><C><C>
PRO FORMA PRO FORMA
FIDELITY SPARTAN COMBINED ADJUSTMENTS COMBINED
AGGRESSIVE AGGRESSIVE
INTERE $ 58,929,536 $ 5,499,729 $ 64,429,265 $ - $ 64,429,265
ST
INCOM
E
EXPEN
SES
Mana $ 3,873,699 $ 537,217 $ 4,410,916 $ (618,948) $ 3,791,968
gemen (b)
t fee
Transf 1,483,030 - 1,483,030 122,369 (c) 1,605,399
er
agent,
accou
nting
and
custod
ian
fees
and
expen
ses
Non-i 3,389 327 3,716 0 3,716
nterest
ed
trustee
s'
compe
nsatio
n
Regist 38,107 - 38,107 (607) (d) 37,500
ration
fees
Audit 56,316 - 56,316 1,684 (c) 58,000
Legal 11,086 - 11,086 0 11,086
Miscel 12,733 - 12,733 0 12,733
laneou
s
Total 5,478,360 537,544 6,015,904 (495,502) 5,520,402
expen
ses
before
reduct
ions
(10,176) (1,027) (11,203) (433,732) (e) (444,935)
Expen
se
reduct
ions
Total 5,468,184 536,517 6,004,701 (929,234) 5,075,467
expen
ses
NET 53,461,352 4,963,212 58,424,564 929,234 59,353,798
INTERE
ST
INCOM
E
REALIZ
ED
AND
UNREA
LIZED
GAIN
(LOSS)
Net
realize
d gain
(loss)
on:
(9,811,869) 41,450 (9,770,419) - (9,770,419)
Invest
ment
securit
ies
350,403 10,215 360,618 - 360,618
Future
s
contra
cts
Chang
e in
net
unreal
ized
apprec
ation
(depre
ciation
) on:
(14,724,336) (1,422,626) (16,146,962) - (16,146,962)
Invest
ment
securit
ies
(94,141) 0 (94,141) - (94,141)
Future
s
contra
cts
NET (24,279,943) (1,370,961) (25,650,904) - (25,650,904)
GAIN
(LOSS)
NET
INCREA
SE
(DECRE
ASE) IN
NET
ASSETS
RESULTI
NG
FROM $ 29,181,409 $ 3,592,251 $ 32,773,660 $ 929,234 $ 33,702,894
OPERA
TIONS
</TABLE>
Fidelity Aggressive Municipal Fund
Spartan Aggressive Municipal Fund
Notes to Pro Forma Combining Financial Statements
(Unaudited)
The accompanying unaudited Pro Forma Combining Schedule of Investments and
Statement of Assets and Liabilities as of December 31, 1996 and the
unaudited Pro Forma Combining Statement of Operations for the year ended
December 31, 1996 are intended to present the financial condition and
related results of operations of Fidelity Aggressive Municipal Fund as if
the reorganization, decrease in the management fee and decrease in the
expense limitation with Spartan Aggressive Municipal Fund had been
consummated at January 1, 1996. Had the pro forma adjustments not included
the effect of the decreased management fee and expense limitation, Pro
Forma Combined Expense reductions would have been $26,831, resulting in Pro
Forma Combined Net Interest Income and Pro Forma Combined Net Increase in
Net Assets resulting from operations of $58,440,192 and $32,789,288,
respectively.
The pro forma adjustments to these pro forma financial statements are
comprised of:
(a) Reflects the conversion of the Spartan Aggressive Municipal Fund
shares as of December 31, 1996 .
(b) Decrease in management fee to reflect Fidelity Aggressive Municipal
Fund's reduced individual management fee rate from 0.30% to 0.25% of
average net assets effective March 1, 1997, applied to the combined
fund's average net assets.
(c) Increase in fees reflects change from Spartan Aggressive Municipal's
all-inclusive fee structure to Fidelity Aggressive Fund's fee
structure.
(d) Decrease in fees due to an elimination of duplicate services.
(e) Reflects reduction in expenses due to FMR's agreement to temporarily
limit the combined fund's expenses to 0.53% of average net assets.
(f) Reclass to reflect net cash for the combined fund.
The unaudited pro forma combining statements should be read in conjunction
with the separate annual audited financial statements as of December 31,
1996 Fidelity Aggressive Municipal Fund and the separate annual audited
financial statements as of August 31, 1996 for Spartan Aggressive Municipal
Fund which are incorporated by reference in the Statement of Additional
Information to this Proxy and Prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY AGGRESSIVE MUNICIPAL FUND
SPARTAN AGGRESIVE MUNICIPAL FUND
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS DECEMBER 31, 1996
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL AMOUNT VALUE
MOODY'S FIDELITY SPARTAN FIDELITY SPARTAN
RATINGS AGGRESSIVE AGGRESSIVE COMBINED AGGRESSIVE AGGRESSIVE COMBINED
MUNICIPAL
BONDS
ALABAMA
Cullman Med. Baa 4,000,000 0 4,000,000 4,010,000 0 4,010,000
Ctr. (Cullman
Reg'l. Med.
Ctr.) Series A,
6.50% 2/15/23
Mobile Wtr. & A 0 500,000 500,000 0 538,750 538,750
Swr.
Commissioners
Wtr. & Swr.
Rfdg. 6.50%
1/1/09
4,010,000 538,750 4,548,750
ARIZONA
Arizona Trans. Aaa 0 500,000 500,000 0 539,375 539,375
Board Excise
Tax Rev.
(Maricopa
County
Regional Area
Road-B Proj.)
6% 7/1/03,
(AMBAC
Insured)
Navajo County -- 6,750,000 1,000,000 7,750,000 6,977,813 1,033,750 8,011,563
Ind. Dev. Auth.
(Stone
Container
Corp. Proj.)
7.40% 4/1/26
Sierra Vista -- 4,000,000 0 4,000,000 4,330,000 0 4,330,000
Ind. Dev. Auth.
Hosp. Rev.
Rfdg. (Sierra
Vista Commty.
Hosp. Proj.)
8.75% 12/1/16
Sierra Vista -- 2,000,000 500,000 2,500,000 1,995,000 498,750 2,493,750
Ind. Dev. Auth.
Hosp. Rev.
Rfdg. (Sierra
Vista Commty.
Hosp. Proj.)
6.75% 12/1/26
Tucson Gen. Aaa 1,800,000 0 1,800,000 2,016,000 0 2,016,000
Oblig. Rfdg.
6.75% 7/1/03
(FGIC Insured)
15,318,813 2,071,875 17,390,688
ARKANSAS
Little Rock Aaa 2,300,000 - 2,300,000 2,417,875 0 2,417,875
Arpt. Passenger
Facs. Charge
Rev. 5.65%
5/1/16
(AMBAC
Insured)
2,417,875 0 2,417,875
CALIFORNIA
California Gen. A1 - 1,000,000 1,000,000 0 1,151,250 1,151,250
Oblig. 7%
3/1/06
California Hsg. Aaa 1,325,000 - 1,325,000 1,306,781 0 1,306,781
Fin. Agcy. Rev.
(Home Mtg.)
Series A,
5.30% 8/1/14
(MBIA
Insured)
California Hsg. Aaa 1,000,000 500,000 1,500,000 1,006,250 503,125 1,509,375
Fin. Agcy. Rev.
Rfdg.
(HomeMortgag
e) Series R,
6.15% 8/1/27
(MBIA
Insured)
California Pub. A1 2,665,000 - 2,665,000 2,631,688 0 2,631,688
Wks. Board
Lease Rev.
(California
State Univ.
Proj.) Series A,
5.50%6/1/14
California Pub. A1 - 1,000,000 1,000,000 0 1,016,250 1,016,250
Wks. Board
Lease Rev.
(Various
California State
Univ. Projs.)
Series B5.55%
6/6/10
California Pub. A 5,755,000 - 5,755,000 5,632,706 0 5,632,706
Wks. Board
Lease Rev.
Rfgd.(Californi
a Univ. Proj.)
Series A,
5.50% 10/1/13
California Pub. A 1,155,000 - 1,155,000 1,264,725 0 1,264,725
Wrks Board
Lease Rev.
(Various
California State
Univ. Proj.)
Series A,
6.50% 9/1/05
California Pub. A1 2,415,000 - 2,415,000 2,427,075 0 2,427,075
Wrks. Board
Lease Rev.
(Various
Community
College Proj.)
Series A,
5.50% 12/1/08
California Pub. A 3,750,000 - 3,750,000 3,571,875 0 3,571,875
Wrks. Board
Lease
Rev.(Various
California State
Univ. Proj.)
Series A,
5.25% 12/1/13
Contra Costa Aaa - 500,000 500,000 0 541,250 541,250
Trans. Auth.
Series A, 6%
3/1/04 (FGIC
Insured)
East Bay Muni. Aaa - 1,000,000 1,000,000 0 1,031,250 1,031,250
Util. Dist. 6%
6/1/12 (MBIA
Insured)
East Bay Muni. Aaa 2,000,000 - 2,000,000 2,132,500 0 2,132,500
Util. Dist. Wtr.
Sys. Rev. Rfdg.
5.75% 6/1/04
(MBIA
Insured)
Foothill/Easter Baa 2,500,000 - 2,500,000 1,615,625 0 1,615,625
n Trans. Toll
Rd. Rev. (Sr.
Lien) Series A,
0% 1/1/08
La Quinta Aaa - 470,000 470,000 0 568,113 568,113
Redev. Agcy.
Tax Allocation
Rfdg.(Redev.
Proj. Area #1)
7.30% 9/1/12
(MBIA
Insured)
Los Angeles Aaa 2,245,000 - 2,245,000 2,326,381 0 2,326,381
County
Metropolitan
Transit Auth.
Sales Tax Rev.
Series A,
5.90% 7/1/14
(MBIA
Insured)
Madera Cnty. Aaa - 1,000,000 1,000,000 0 1,091,250 1,091,250
Ctfs. Partn.
(Valley
Children's
Hospital)
6.25% 3/15/05
(MBIA
Insured)
Northern Aaa 4,000,000 - 4,000,000 4,240,000 0 4,240,000
California Pwr.
Agcy. Pub.
Pwr. Rev.
Rfdg.
(Geothermal
Proj.) Series A,
5.85% 7/1/10
(AMBAC
Insured)
Port Oakland Aaa 7,000,000 - 7,000,000 3,526,250 0 3,526,250
Port Rev. (Cap.
Appreciation)
Series F, 0%
11/1/09 (MBIA
Insured)
Riverside -- - 500,000 500,000 0 530,625 530,625
County Ctfs. of
Prtn. (Air
Force Village
West, Inc.)
Series A,
8.125%
6/15/12
Riverside -- 7,000,000 - 7,000,000 7,411,250 0 7,411,250
County Ctfs. of
Prtn. Rfdg. (Air
Force Village
West, Inc.)
Series A,
8.125%
6/15/20
Sacramento -- - 1,000,000 1,000,000 0 1,065,000 1,065,000
Cogen Auth.
Pwr. & Gas
(Cogen Proj.)
6.50% 7/1/07
Sacramento -- 1,500,000 - 1,500,000 1,558,125 0 1,558,125
Cogeneration
Auth.
Cogeneration
Proj. Rev.
(Proctor &
Gamble Proj.)
6.375%7/1/10
Sacramento -- - 500,000 500,000 0 521,875 521,875
Cogeneration
Auth.
Cogeneration
Proj. Rev.
(Proctor &
Gamble Proj.)
6.50% 7/1/14
Sacramento -- 2,200,000 - 2,200,000 2,312,750 0 2,312,750
Pwr. Auth.
Cogeneration
(Cogeneration
Proj.) 6.50%
7/1/09
Sacremento -- 1,200,000 - 1,200,000 1,323,000 0 1,323,000
Cogeneration
Auth.
Cogeneration
Proj. Rev.
(Proctor&
Gamble Proj.)
7% 7/1/04
San Diego Aaa 3,000,000 - 3,000,000 3,270,000 0 3,270,000
County
Regulation
Trans.
Commision
Sales Tax Rev.
Second Series
A, 6.25%
4/1/03 (FGIC
Insured)
San Fransisco Aaa 1,000,000 - 1,000,000 1,097,500 0 1,097,500
City & County
Arpts.
Commty. Intl.
Arpt. Rev.
Rfdg. 6.75%
5/1/13 (MBIA
Insured)
Santa Clara Aaa - 1,000,000 1,000,000 0 1,241,250 1,241,250
County Fin.
Auth. Lease Rev.
(VMC
Replacement
Proj.) Series A,
7.75% 11/15/08,
(AMBAC
Insured)
Santa Aaa - 1,045,000 1,045,000 0 1,248,775 1,248,775
Margarita/Dana
Point Auth. Rev.
(Impt. Dists.
1-2-2A & 8)
Series A 7.25%
8/1/10(MBIA
Insured)
South Orange Aaa 1,000,000 500,000 1,500,000 1,260,000 630,000 1,890,000
County Pub.
Fin. Auth. Spl.
Tax Rev.
(Foothill Area)
Series C, 8%
8/15/08 (FGIC
Insured)
Upland Ctfs. of -- 3,500,000 500,000 4,000,000 3,399,375 485,625 3,885,000
Partn. (San
Antonio
Commty.
Hosp.) 5.25%
1/1/08
West & Central Aaa 3,000,000 3,000,000 2,816,250 0 2,816,250
Basin Fing.
Auth. Rev.
(West Basin
Rfdg. Proj.)
Series A, 5%
8/1/13
(AMBAC
Insured)
56,130,106 11,625,638 67,755,744
COLORADO
Colorado Baa 3,400,000 500,000 3,900,000 3,463,750 509,375 3,973,125
Health Facs.
Auth. Rev.
(Rocky
Mountain
Adventist)
6.625% 2/1/22
Colorado Baa 6,100,000 500,000 6,600,000 6,260,125 513,125 6,773,250
Health Facs.
Auth. Rev.
Rfdg. (Rocky
Mountain
Adventist)
6.625% 2/1/13
Colorado Baa - 250,000 250,000 0 146,563 146,563
Springs Arpt.
Rev. (Cap.
Appreciation)
Series C, 0%
1/1/06
Denver City & Aaa 1,480,000 - 1,480,000 926,850 0 926,850
County Arpt.
Rev. Series A,
(Cap.
Appreciation)
0% 11/15/05
(MBIA
Insured) AMT
Denver City & Baa 1,000,000 250,000 1,250,000 1,019,020 254,755 1,273,775
County Arpt.
Rev. Series A,
6.60% 11/15/97
(AMT)
Denver City & Baa 3,850,000 250,000 4,100,000 4,013,625 260,625 4,274,250
County Arpt.
Rev. Series A,
6.90% 11/15/98
Denver City & Baa 2,750,000 - 2,750,000 2,915,000 0 2,915,000
County Arpt.
Rev. Series A,
7% 11/15/99
Denver City & Baa 4,075,000 - 4,075,000 4,268,563 0 4,268,563
County Arpt.
Rev. Series C,
6.50% 11/15/06
(AMT)
Denver City & Baa 3,000,000 - 3,000,000 3,322,500 0 3,322,500
County Arpt.
Rev. Series D,
7.40% 11/15/01
Highlands Aaa 1,600,000 - 1,600,000 1,768,000 0 1,768,000
Ranch
Metropolitan
Dist. #2 6.25%
6/15/07 (CGIC
Insured)
Highlands Aaa 1,000,000 - 1,000,000 1,125,000 0 1,125,000
Ranch
Metropolitan
Dist. #2 6.50%
6/15/10 (CGIC
Insured)
Mesa County Ba1 1,250,000 - 1,250,000 1,359,375 0 1,359,375
Ind. Dev. Rev.
(Joy
Technologies,
Inc. Proj.)
8.50% 9/15/06
30,441,808 1,684,443 32,126,251
CONNECTICUT
Connecticut -- - 1,000,000 1,000,000 0 970,000 970,000
Health & Ed.
Facs. Auth.
Rev. Rfdg.
(Quinnipiac
College) Series
D, 6% 7/1/13
Connecticut -- 6,100,000 800,000 6,900,000 6,565,125 861,000 7,426,125
Health & Edl.
Facs. Auth.
Rev. (New
Britain Mem.
Hosp.) Series
A, 7.75%
7/1/22
Connecticut Aa 0 200,000 200,000 0 206,000 206,000
Hsg. Fin. Auth.
(Hsg. Mortgage
Fin. Prog.)
Subseries B-1
6.50% 5/15/18
Eastern -- 2,250,000 400,000 2,650,000 2,078,438 369,500 2,447,938
Connecticut
Res. Recovery
Auth. Solid
Waste Rev.
(Wheelabrator
Lisbon Proj.)
Series A,
5.50% 1/1/20
Eastern -- 5,000,000 500,000 5,500,000 4,731,250 473,125 5,204,375
Connecticut
Resources
Recovery Auth.
Solid Waste
Rev.
(Wheelabrator
Lisbon Proj.)
Series A,
5.50% 1/1/14
(AMT)
Eastern -- 900,000 0 900,000 887,625 0 887,625
Resource
Recovery Auth.
Solid Waste
Rev.
(Wheelabrator
Lisbon Proj.)
Series A, 5%
1/1/24 (AMT)
14,262,438 2,879,625 17,142,063
DISTRICT OF
COLUMBIA
District of Ba 1,815,000 200,000 2,015,000 1,815,000 200,000 2,015,000
Columbia Gen.
Oblig. Rfdg.
Series A,
5.625% 6/1/02
District of Ba 2,280,000 280,000 2,560,000 2,282,850 280,350 2,563,200
Columbia Gen.
Oblig. Rfdg.
Series A,
5.75% 6/1/03
District of Aaa 1,250,000 0 1,250,000 1,317,188 0 1,317,188
Columbia Gen.
Oblig. Rfdg.
Series A,
5.875% 6/1/05
(AMBAC
Insured)
District of Ba 1,880,000 200,000 2,080,000 1,882,350 200,250 2,082,600
Columbia Gen.
Oblig. Series
A, 6% 6/1/04
District of Ba 2,075,000 200,000 2,275,000 2,072,406 199,750 2,272,156
Columbia Gen.
Oblig. Series
A, 6% 6/1/05
District of Ba 1,580,000 200,000 1,780,000 1,572,100 199,000 1,771,100
Columbia Gen.
Oblig. Series
A, 6% 6/1/06
District of Ba 1,200,000 100,000 1,300,000 1,170,000 97,500 1,267,500
Columbia Gen.
Oblig. Series
A-3, 5.10
6/1/02
District of -- 2,905,000 0 2,905,000 3,097,456 0 3,097,456
Columbia
Hosp. Rev.
(Hosp. for Sick
Children)
Series A,
8.875% 1/1/21
District of Baa 0 1,350,000 1,350,000 0 1,319,625 1,319,625
Columbia
Redev. Land
Agcy. Spl. Tax
Rev.
(Washington
D.C. Sports
Arena)5.625%
11/1/10
District of Baa 0 1,000,000 1,000,000 0 1,000,640 1,000,640
Columbia
Redev. Land
Agcy.(Washing
ton Sports
Arena) 4.85%
11/01/97
District of Ba 2,770,000 300,000 3,070,000 2,662,663 288,375 2,951,038
Columbia
Rfdg. Series
A-3, 5.60%
6/1/07
District of Ba 1,800,000 200,000 2,000,000 1,806,750 200,750 2,007,500
Columbia
Series A, Gen.
Oblig. 6%
6/1/03
District of Aaa 2,170,000 0 2,170,000 2,210,688 0 2,210,688
Columbia
Unltd. Tax
Rfdg. Series C,
5.25% 12/1/03
(FGIC Insured)
21,889,451 3,986,240 25,875,691
FLORIDA
Broward A 2,230,000 965,000 3,195,000 2,453,000 1,061,500 3,514,500
County
Resources
Recovery Rev.
(SES Broward
Co. LP South
Proj.) 7.95%
12/1/08
Dade County Aaa 0 850,000 850,000 0 956,250 956,250
Rfdg. Seaport
6.50% 10/1/08
(MBIA
Insured)
2,453,000 2,017,750 4,470,750
GEORGIA
Cobb County Aa1 1,345,000 250,000 1,595,000 1,346,856 250,345 1,597,201
School Dist.
Unltd. Tax 5%
2/1/97
Cobb County Aa1 0 1,220,000 1,220,000 0 1,306,925 1,306,925
School Dist.
Unltd. Tax 6%
2/1/02
Georgia Gen. Aaa 1,000,000 0 1,000,000 1,085,000 0 1,085,000
Oblig. 6%
3/1/04
Georgia Gen. Aaa 1,000,000 0 1,000,000 1,010,370 0 1,010,370
Oblig. Series
B, 7.50%
4/1/97
Georgia Muni. A 0 2,000,000 2,000,000 0 2,005,000 2,005,000
Elec. Pwr.
Auth. Pwr.
Rev. Rfdg.
Series Z,
5.50% 1/1/12
Savannah -- 5,600,000 400,000 6,000,000 5,782,000 413,000 6,195,000
Economic Dev.
Auth. Rev.
(Indl Dev.
Stone
Container
Corp. Proj.)
7.40%
4/1/26(AMT)
9,224,226 3,975,270 13,199,496
ILLINOIS
Chicago Aaa 1,360,000 0 1,360,000 1,433,100 0 1,433,100
Midway Arpt.
Rev. Series B,
6.0% 1/1/05
(MBIA
Insured)
Chicago Aaa 6,100,000 630,000 6,730,000 6,496,500 670,950 7,167,450
O'Hare Int'l.
Arpt. Rev. (2nd
Lien) (Gen.
Arpt. Proj.)
Series A,
6.25%
1/1/09(AMBA
C Insured)
Chicago Aaa 2,300,000 0 2,300,000 2,449,500 0 2,449,500
O'Hare Int'l.
Arpt. Rev.
Rfdg. (2nd
Lien) Series A,
6.375%1/1/15
(MBIA
Insured)
Chicago Aaa 0 200,000 200,000 0 213,000 213,000
O'Hare Int'l.
Arpt. Rev.
Rfdg. (Gen.
Arpt. Proj.)
(2nd Lien)
Series A,
6.375%1/1/15
(MBIA
Insured)
Chicago Baa2 4,720,000 0 4,720,000 5,079,900 0 5,079,900
O'Hare Int'l.
Arpt. Spl. Facs.
Rev. (American
Airlines, Inc.
Proj.) Series A,
7.875% 11/1/25
(AMT)
Chicago A1 4,000,000 0 4,000,000 3,800,000 0 3,800,000
O'Hare Int'l.
Arpt. Spl. Facs.
Rev. Rfdg.
Series A, 5%
1/1/12
Chicago Ba2 1,750,000 0 1,750,000 1,778,438 0 1,778,438
O'Hare Int'l.
Arpt. Spl. Facs.
Rev.Rfdg.
(Delta Airlines,
Inc.) 6.45%
5/1/18
Cooke & Will Aaa 2,100,000 0 2,100,000 1,504,125 0 1,504,125
Counties
Township High
School
Dist.#206
Series A, 0%
12/1/03
(AMBAC
Insured)
Illinois Dev. Aaa 6,000,000 1,000,000 7,000,000 6,570,000 1,095,000 7,665,000
Fin. Auth. Poll.
Cont. Rev.
Rfdg. (Comm.
Edison Co.
Proj.) Series D,
6.75% 3/1/15
(AMBAC
Insured)
Illinois
Health Baa1 3,545,000 0 3,545,000 4,045,731 0 4,045,731
Facs. Auth.
Rev.
(GlenOaks
Med. Ctr.)
Series D,
9.50% 11/15/15
Metropolitan Aaa 4,000,000 0 4,000,000 2,150,000 0 2,150,000
Pier & Expo
Auth. Rev.
(McCormick
Place
Expansion
Proj.)
Dedicated
StateTax Rev.
Series A, 0%
6/15/08 (FGIC
Insured)
Metropolitan Aaa 6,000,000 1,155,000 7,155,000 3,225,000 620,813 3,845,813
Pier & Expo
Auth. Rev.
Rfdg. (Cap.
Appreciation)
(McCormick
Place
Expansion
Proj.) 0%
6/15/08 (MBIA
Insured)
Metropolitan Aaa 4,000,000 1,000,000 5,000,000 2,015,000 503,750 2,518,750
Pier &
Exposition
Auth.
Dedicated Tax
Rev.
(McCormick
Place
Expansion
Proj.) Series A,
0% 6/15/09,
(FGIC Insured)
Round Lake -- 0 500,000 500,000 0 516,875 516,875
Beach Tax
Increment Rev.
Rfdg. 7.50%
12/1/13
40,547,294 3,620,388 44,167,682
INDIANA
Burns Hbr. -- 3,180,000 0 3,180,000 3,458,250 0 3,458,250
Solid Waste
Disp. Facs.
Rev.
(Bethlehem
Steel Corp.
Proj.) 8%
4/1/24 (AMT)
Greensburg Ba1 0 1,000,000 1,000,000 0 1,060,000 1,060,000
Ind. Economic
Dev. (Kroger
Co. Proj.) Rev.
Rfdg. 7.25%
6/1/11
Indiana Bond -- 0 500,000 500,000 0 566,875 566,875
Bank Rev.
(State
Revolving
Fund Program)
Series A, 7%
2/1/05
Indiana Health Aa3 3,000,000 1,000,000 4,000,000 2,872,500 957,500 3,830,000
Facs. Fing.
Auth. Hosp.
Rev.Rfdg.
(Clarian Health
Partners Inc.)
Series 5.50%
2/15/16
6,330,750 2,584,375 8,915,125
KENTUCKY
Kenton County Baa3 3,600,000 0 3,600,000 3,897,000 0 3,897,000
Arpt. Board
Arpt. Rev. (Spl.
Facs. Delta)
Series A,
7.50% 2/1/20
(AMT)
Owensboro Aaa 2,000,000 0 2,000,000 1,040,000 0 1,040,000
Elec. Lt. &
Pwr. Rev.
Series B, 0%
1/1/09
(AMBAC
Insured)
Owensboro Aaa 4,440,000 0 4,440,000 2,153,400 0 2,153,400
Elec. Lt. &
Pwr. Rev.
Series B, 0%
1/1/10
(AMBAC
Insured)
Winchester Ba1 0 1,000,000 1,000,000 0 1,070,000 1,070,000
Ind. Bldg. Rev.
Rfdg. (Kroger
Co.) 7.75%
7/1/12
7,090,400 1,070,000 8,160,400
LOUISIANA
Hodge Util. -- 2,500,000 200,000 2,700,000 2,703,125 216,250 2,919,375
Rev. 9% 3/1/10
(Stone
Container
Corp. Insured)
(AMT) (Call to
3/1/00 @ 102)
Lake Charles Baa2 14,900,000 0 14,900,000 16,930,125 0 16,930,125
Hbr. & Term.
Dist. Port Facs.
Rev. Rfdg.
(Trunkline
LNG Co. Proj.)
Series 1992,
7.75% 8/15/22
Louisiana Gen. Aaa 4,000,000 0 4,000,000 4,430,000 0 4,430,000
Oblig. Series
A, 6.75%
5/15/03 (MBIA
Insured)
Louisiana Pub. -- 1,590,000 0 1,590,000 1,705,275 0 1,705,275
Facs. Auth.
Ind. Dev. Rev.
Rfdg. (Beverly
Enterprises,
Inc.) 8.25%
9/1/08
New Orleans Aaa 10,000,000 0 10,000,000 5,375,000 0 5,375,000
Gen. Oblig.
Rfdg. 0%
9/1/08
(AMBAC
Insured)
Port New -- 3,000,000 1,000,000 4,000,000 3,213,750 1,071,250 4,285,000
Orleans Ind.
Dev. Rev.
Rfdg.
(Continental
Grain Co.
Proj.) 7.50%
7/1/13
West Feliciana Ba1 2,340,000 0 2,340,000 2,600,325 0 2,600,325
Parish Poll.
Cont. Rev.
(Various Gulf
States Util. Co.
Proj.) 9%
5/1/15
36,957,600 1,287,500 38,245,100
MARYLAND
Baltimore Aaa 1,545,000 0 1,545,000 1,794,131 0 1,794,131
Consolidated
Pub. Impt.
Rfdg. Series A,
7.25%
10/15/04
(FGIC Insured)
Baltimore -- 0 500,000 500,000 0 525,625 525,625
County Poll.
Cont. Rev.
Rfdg.
(Bethlehem
Steel Proj. B)
7.50 6/1/15
1,794,131 525,625 2,319,756
MASSACHUSETTS
Massachusetts A1 3,800,000 0 3,800,000 4,142,000 0 4,142,000
Bay Trans.
Auth. Series B,
6.20% 3/1/16
Massachusetts A1 3,505,000 0 3,505,000 3,837,975 0 3,837,975
Gen. Oblig.
Rfdg. Series A,
6.25% 7/1/04
Massachusetts -- 12,000,000 1,000,000 13,000,000 13,575,000 1,131,250 14,706,250
Health & Edl.
Facs. Auth.
Rev. (1st Mtg.)
(Fairview
Extended Care)
Series A,
10.25% 1/1/21
Massachusetts Aaa 900,000 100,000 1,000,000 861,750 95,750 957,500
Health & Edl.
Facs. Auth.
Rev. (New
England Med.
Ctr.) Series G,
5.375%7/1/24
(MBIA
Insured)
Massachusetts Aaa 2,500,000 0 2,500,000 2,631,250 0 2,631,250
Hsg. Fin. Agcy.
(Hsg. Rev.
Rental) Series
A 6.60%
7/1/14
(AMBAC
Insured)(AMT)
Massachusetts -- 1,000,000 0 1,000,000 1,027,620 0 1,027,620
Ind. Fin. Agcy.
(1st
MortgageReeds
Landing)
7.75% 10/1/20
Massachusetts -- 5,500,000 500,000 6,000,000 5,946,875 540,625 6,487,500
Ind. Fin. Agcy.
8.625%
10/1/23
Massachusetts -- 4,115,000 0 4,115,000 4,032,700 0 4,032,700
Ind. Fin. Agcy.
Ind. Rev.
(Institite Dev.
Disabilities)
9.25% 6/1/09
Massachusetts Aaa 3,985,000 0 3,985,000 4,562,825 0 4,562,825
Ind. Fin. Agcy.
Ind. Rev.
(Union Mission
Proj.) 9.55%
9/1/26 (FHA
Guaranteed)
Massachusetts -- 3,300,000 0 3,300,000 3,205,125 0 3,205,125
Ind. Fin. Agcy.
Rev.
(Atlanticare
Med. Ctr.)
Series A,
10.125%
11/1/14
Massachusetts -- 6,000,000 0 6,000,000 2,917,500 0 2,917,500
Ind. Fin. Agcy.
Rev. (Cap
Appreciation)
(Massachusetts
Biomedical)
Series A-2, 0%
8/1/09
Massachusetts -- 4,000,000 0 4,000,000 2,375,000 0 2,375,000
Ind. Fin. Agcy.
Rev. (Cap.
Appreciation)
(Massachusetts
Biocmedical)
Series A-2, 0%
8/1/06
Massachusetts A1 6,300,000 0 6,300,000 4,488,750 0 4,488,750
Ind. Fin. Agcy.
Rev. (Cap.
Appreciation)
(Massachusetts
Biomedical)
Series A-1, 0%
8/1/03
Massachusetts -- 3,965,000 435,000 4,400,000 4,297,069 471,431 4,768,500
Ind. Fin. Agcy.
Rev.
(Evergreen
Ctr., Inc.)
9.25% 11/1/11
Massachusetts A1 0 400,000 400,000 0 418,000 418,000
Ind. Fin. Agcy.
Rev.
(Massachusetts
Biomedical
Research)
Series A-1,
7.10% 8/1/99
Massachusetts -- 10,000,000 0 10,000,000 11,000,000 0 11,000,000
Ind. Fin. Agcy.
Rev. Rfdg.
(Emerson
College) 8.90%
1/1/18
Massachusetts Baa 800,000 500,000 1,300,000 830,000 518,750 1,348,750
Muni.
Wholesale
Elec. Pwr.
Supply Sys.
Rev. Series D,
6% 7/1/06
Massachusetts A 5,000,000 0 5,000,000 4,800,000 0 4,800,000
Wtr. Resources
Auth. Gen.
Rfdg. Series C,
5.25% 12/1/15
74,531,439 3,175,806 77,707,245
MICHIGAN
Detroit -- 0 1,000,000 1,000,000 0 940,000 940,000
Convention
Facs. Rev.
Rfdg. (Cobo
Hall Expansion
Proj.) 5.25%
9/30/12
Detroit Hosp. Caa 5,935,000 0 5,935,000 1,157,325 0 1,157,325
Fing. Auth.
Facs. Rev.
(Michigan
Healthcare
Corp. Proj.) 0%
12/1/20
Flint Hosp. Baa 4,750,000 0 4,750,000 5,130,000 0 5,130,000
Bldg. Auth.
Rev. (Hurley
Med. Ctr.)
7.80% 7/1/14
Flint Michigan Baa 0 500,000 500,000 0 496,250 496,250
Hosp. Bldg.
Auth. Rev.
Series A, 6%
7/1/06
Greater Detroit Aaa 0 1,000,000 1,000,000 0 1,096,250 1,096,250
Resources
Recovery Auth.
Rev. 6.25%
12/13/06
(AMBAC
Insured)
Highland Park -- 9,330,000 0 9,330,000 1,352,850 0 1,352,850
Hosp. Fing.
Auth. Hosp.
Facs. Rev.
(Lakeside
Commty. Hosp.
Proj.) 0%
3/1/20
Highland Park Caa 7,350,000 0 7,350,000 1,433,250 0 1,433,250
Hosp. Fing.
Auth. Hosp.
Facs. Rev.
(Michigan
Health Care
Corp. Proj.)
Series A,
9.875%
12/1/19
Michigan Baa1 0 500,000 500,000 0 476,875 476,875
Hosp. Fin.
Auth. Rev.
Rfdg. (Pontiac
Osteopathic
Hosp.) 6%
2/1/24
Michigan -- 12,150,000 1,000,000 13,150,000 5,589,000 460,000 6,049,000
Strategic Fund
Ltd. Gen.
Oblig. Rev.
(Great Lakes
Pulp & Fiber
Proj.) 10.25%
12/1/16
Michigan -- 11,500,000 0 11,500,000 12,937,500 0 12,937,500
Strategic Fund
Ltd. Oblig.
Rev. (Mercy
Svcs. for Aging
Proj.) 9.40%
5/15/20
Royal Oak Aa 0 400,000 400,000 0 434,000 434,000
Hosp. Fin.
Auth. Rev.
Rfdg. (William
Beaumont
Hosp.) 6.25%
1/1/09
Tawas City -- 0 400,000 400,000 0 412,300 412,300
Hosp. Fin.
Auth. Hosp.
Rev. (St.
Joseph Hosp.
Proj.) Series A,
8.50% 3/15/12
Williamston Aaa 0 1,000,000 1,000,000 0 1,086,250 1,086,250
Commty.
School Dist.
6.25% 5/1/09
(MBIA
Insured)
27,599,925 5,401,925 33,001,850
MINNESOTA
Minneapolis & Aaa 4,000,000 0 4,000,000 3,515,000 0 3,515,000
St. Paul Hsg. &
Redev. Auth.
Healthcare Sys.
Rev. Rfdg.
(Healthspan
Health Sys.
Corp.) Series
A, 4.75%
11/15/18
(AMBAC
Insured)
St. Paul Hsg. & Baa 2,420,000 0 2,420,000 2,566,434 0 2,566,434
Redev. Auth.
Hosp. Rev.
(Healtheast
Proj.) Series A,
9.75% 11/1/17
St. Paul Hsg. & Baa 1,000,000 0 1,000,000 1,058,750 0 1,058,750
Redev. Auth.
Hosp. Rev.
(Healtheast
Proj.) Series B,
9.75% 11/1/17
Western Aaa 0 500,000 500,000 0 545,625 545,625
Minnesota
Muni. Pwr.
Agcy. Rev.
Rfdg. Series A,
6.25% 1/1/06
(AMBAC
Insured)
7,140,184 545,625 7,685,809
MISSISSIPPI
Claiborne Ba1 6,195,000 0 6,195,000 6,860,963 0 6,860,963
County Poll.
Cont. Rev.
(Middle South
Energy, Inc.
Proj.) Series C,
9.875%
12/1/14
6,860,963 0 6,860,963
MISSOURI
Boone County -- 2,270,000 0 2,270,000 2,752,375 0 2,752,375
Ind. Dev. Auth.
Ind. Rev. (1st
Mtg.)
(Fairview
Extended Care)
Series A,
10.125% 1/1/11
Kansas City -- 2,600,000 500,000 3,100,000 2,830,750 544,375 3,375,125
Ind. Dev. Auth.
(Kingswood
United
Methodist
Manor Proj.)
Series 1993,
9% 1 1/15/13
Kansas City -- 7,720,000 0 7,720,000 7,874,400 0 7,874,400
Ind. Dev. Auth.
Rev. (Bishop
Spencer Place
Inc. Proj.) 8%
9/1/24
Lake Ozarks -- 3,000,000 0 3,000,000 2,955,000 0 2,955,000
Commty.
Bridge Corp.
Sys. Rev.
6.40% 12/1/25
St. Louis Land -- 4,225,000 270,000 4,495,000 4,288,375 274,050 4,562,425
Clearance
Redev. Auth.
Hsg. Dev. Rev.
(Westminster
Place Apts.
Proj.) 11%
12/15/15
20,700,900 818,425 21,519,325
NEBRASKA
Nebraska Pub. A1 0 500,000 500,000 0 527,500 527,500
Pwr. Dist. Rev.
(Elec. Sys.)
Series A, 6%
1/1/06
0 527,500 527,500
NEVADA
Clark County Baa2 12,000,000 1,300,000 13,300,000 12,045,000 1,304,875 13,349,875
Ind. Dev. Rev.
(Southwest Gas
Corp.) Series
A, 6.50%
12/1/33
Las Vegas -- 0 500,000 500,000 0 492,500 492,500
Redev. Agcy.
Tax Increment
Rev. (Sub. Lien
Fremont Proj.
A) 6.10%
6/15/14
12,045,000 1,797,375 13,842,375
NEW HAMPSHIRE
New -- 3,170,000 0 3,170,000 3,451,338 0 3,451,338
Hampshire
Higher Edl. &
Health Facs.
Auth. Rev. (1st
Mtg. River
Woods at
Exeter) 9%
3/1/23
New -- 1,200,000 0 1,200,000 1,232,148 0 1,232,148
Hampshire
Higher Edl. &
Health Facs.
Auth. Rev. (1st
Mtg. River
Woods at
Exeter) 8%
3/1/01
New -- 3,645,000 0 3,645,000 3,886,481 0 3,886,481
Hampshire
Higher Edl. &
Health Facs.
Auth. Rev.
(Littleton
Hosp. Assoc.,
Inc.) Series A,
9.50% 5/1/20
8,569,967 0 8,569,967
NEW JERSEY
Camden -- 2,750,000 0 2,750,000 2,805,000 0 2,805,000
County Impt.
Auth. Lease
Rev. (Dockside
Refrigerated
Holt) 8.40%
4/1/24
Camden -- 4,000,000 600,000 4,600,000 4,020,000 603,000 4,623,000
County Impt.
Auth. Lease
Rev. (Holt
Hauling &
Warehousing)
9.625% 1/1/11
Camden -- 3,000,000 700,000 3,700,000 3,015,000 703,500 3,718,500
County Impt.
Auth. Lease
Rev. (Holt
Hauling &
Warehousing)
9.875% 1/1/21
New Jersey -- 5,000,000 0 5,000,000 5,143,750 0 5,143,750
Econ. Dev.
Auth. Econ.
Dev. Rev.
Rfdg. (Holt
Hauling &
Warehouse)
Series G,
8.40%
12/15/15
New Jersey -- 4,000,000 500,000 4,500,000 4,130,000 516,250 4,646,250
Econ. Dev.
Auth. Econ.
Dev. Rev.
Rfdg. (Holt
Hauling &
Warehouse)
8.60%
12/15/17
New Jersey -- 3,500,000 0 3,500,000 3,768,730 0 3,768,730
Econ. Dev.
Auth. Econ.
Dev. Rev.
Rfdg. (Stolt
Term. Proj.)
10.50%
1/15/18
New Jersey Aaa 4,035,000 0 4,035,000 4,332,581 0 4,332,581
Trans. Auth.
Rfdg. Series A,
6% 6/15/03
(AMBAC
Insured)
New Jersey Aaa 0 1,000,000 1,000,000 0 1,112,500 1,112,500
Trans. Fdg.
Auth. (Trans.
Sys.) Series A,
6.50% 6/15/05
(AMBAC
Insured)
New Jersey Aaa 8,900,000 0 8,900,000 9,589,750 0 9,589,750
Trans. Trust
Fund Auth.
(Trans. Sys.)
Series A, 6%
6/15/04
(AMBAC
Insured)
36,804,811 2,935,250 39,740,061
NEW MEXICO
Albuquerque Aaa 1,250,000 250,000 1,500,000 1,331,250 266,250 1,597,500
Arpt. Rev.
Rfdg. 6.50%
7/1/08
(AMBAC
Insured)
Albuquerque Aaa 1,150,000 0 1,150,000 1,244,875 0 1,244,875
Arpt. Rev.
Rfdg. 6.75%
7/1/09
(AMBAC
Insured)
Farmington Ba1 7,000,000 500,000 7,500,000 7,026,250 501,875 7,528,125
Poll. Cont.
Rev. (Pub. Svc.
Co. of New
Mexico San
Jaun Proj.)
Series A,
6.30% 12/1/16
Farmington Ba1 6,115,000 855,000 6,970,000 6,053,850 846,450 6,900,300
Poll. Cont.
Rev. (Pub. Svc.
Co. of New
Mexico San
Juan Proj.)
Series A, 6%
3/1/08
Farmington Ba1 1,490,000 275,000 1,765,000 1,490,358 275,066 1,765,424
Poll. Cont.
Rev. (Pub. Svc.
Co. of New
Mexico San
Juan Proj.)
Series A,
6.50%, 9/1/09
Farmington Aaa 4,000,000 0 4,000,000 3,995,000 0 3,995,000
Poll. Cont.
Rev. Rfdg.
5.70% 12/1/16
(AMBAC
Insured)
New Mexico A1 2,840,000 0 2,840,000 2,971,350 0 2,971,350
Univ. Rev.
Rfdg. Series A,
6% 6/1/21
24,112,933 1,889,641 26,002,574
NEW YORK
Metropolitan Baa1 0 1,000,000 1,000,000 0 1,073,750 1,073,750
Trans. Auth.
Svc. Contract
Rfdg. (Transit
Facs.) Series 5,
6.90% 7/1/05
Metropolitan Baa1 0 1,000,000 1,000,000 0 991,250 991,250
Trans. Auth.
Svc. Contract
Transit Rfdg.
Series 7, 5.40%
7/1/06
New York City Baa1 0 500,000 500,000 0 515,625 515,625
Gen. Oblig.
5.70% 8/15/02
New York City Baa1 14,000,000 0 14,000,000 15,540,000 0 15,540,000
Gen. Oblig.
7.50% 2/1/03
New York City Baa1 0 500,000 500,000 0 533,125 533,125
Gen. Oblig.
Series D,
6.50% 2/15/05
New York City -- 1,000,000 0 1,000,000 1,027,500 0 1,027,500
Ind. Dev. Agcy.
(Japan Airlines
Co. Ltd. Proj.)
Series 91,
3.70% 11/1/15,
LOC Morgan
Guaranty Trust
Co. (AMT)
New York City Aaa 0 150,000 150,000 0 154,125 154,125
Ind. Dev. Agcy.
Ind. Dev. Rev.
(Japan Airlines
Co. Ltd. Proj.)
Series 91, 6%
11/1/15 (FSA
Insured) LOC
Morgan
Guaranty Trust
Co. (AMT)
New York City Baa1 0 350,000 350,000 0 349,125 349,125
Series B,
5.60% 8/15/06
New York City Baa1 4,000,000 0 4,000,000 4,125,000 0 4,125,000
Series B,
5.70% 8/15/02
New York Ind. A 0 500,000 500,000 0 515,000 515,000
Dev. Agcy. Spl.
Facs. Rev.
(Terminal One
Group Assoc.
Proj.) 6%
1/1/08(AMT)
New York St. Aaa 4,000,000 0 4,000,000 3,940,000 0 3,940,000
Pwr. Auth.
Rev. & Gen.
Purp. Series
CC, 5.125%
1/1/11 (FGIC
Insured)
New York State Baa1 3,000,000 0 3,000,000 2,977,500 0 2,977,500
Dorm. Auth.
Rev. Rfdg.
(New York
State Univ.
Edl. Facs.)
Series B,
5.50% 5/15/08
New York State Baa1 1,500,000 0 1,500,000 1,473,750 0 1,473,750
Dorm. Auth.
Rev. Rfdg.
(Sate Univ.
Edl. Facs.)
Series A,
5.50% 5/15/10
New York State Baa1 10,000,000 0 10,000,000 9,375,000 0
9,375,000
Dorm. Auth.
Rev. Rfdg.
(State Univ.
Edl. Facs.)
Series A,
5.25% 5/15/15
New York State Baa1 3,000,000 0 3,000,000 2,958,750 0 2,958,750
Dorm. Auth.
Rev. Rfdg.
(State Univ.
Edl. Facs.)
Series A,
5.50% 5/15/09
New York State Baa1 5,250,000 0 5,250,000 5,079,375 0 5,079,375
Dorm. Auth.
Rev. Rfdg.
(State Univ.
Edl. Facs.)
Series A,
5.50% 5/15/13
New York State Baa1 0 750,000 750,000 0 757,500 757,500
Dorm. Auth.
Rev. Rfdg.
(State Univ. of
New York)
Series A,
5.50% 5/15/05
New York State Baa1 3,300,000 0 3,300,000 3,300,000 0 3,300,000
Dorm. Auth.
Rev. Rfdg.
(State Univ. of
NY) Series A,
5.875%
5/15/17
New York State Ba3 5,745,000 0 5,745,000 6,025,069 0 6,025,069
Energy
Research &
Dev. Auth.
Elec. Facs.
Rev. (Long
Island
Lighting)
Series A,
6.90% 8/1/22
New York State Ba3 0 595,000 595,000 0 624,006 624,006
Energy
Research &
Dev. Auth.
Elec. Facs.
Rev. (Long
Island
Lighting)
Series A,
6.90% 8/1/22
(AMT)
New York State Ba3 7,000,000 800,000 7,800,000 7,420,000 848,000 8,268,000
Energy
Research &
Dev. Auth.
Elec. Facs.
Rev. (Long
Island
Lighting)
Series A,
7.15% 12/1/20
(AMT)
New York State A 5,000,000 0 5,000,000 4,631,250 0 4,631,250
Local Govt.
Assistance
Corp. Rev.
Rfdg. Series E,
5% 4/1/21
New York State A 4,400,000 850,000 5,250,000 4,394,500 848,938 5,243,438
Local Govt.
Assistance
Corp. Rfdg.
Series C,
5.50% 4/1/17
New York State A 10,000,000 0 10,000,000 4,050,000 0 4,050,000
Local Govt.
Assistance
Corp.Rfdg.
(Cap.
Appreciation)
Series C, 0%
4/1/13
New York State Aa 5,000,000 0 5,000,000 5,037,500 0 5,037,500
Mtg. Agcy.
Rev.
(Homeowner
Mtg.) Series
48, 6.05%
4/1/17 (AMT)
New York State Baa1 6,930,000 0 6,930,000 6,860,700 0 6,860,700
Thruway Auth.
Rev. LOC
Hwy. & Bridge
5.75% 4/1/16
New York State Baa1 1,810,000 250,000 2,060,000 1,862,038 257,188 2,119,226
Tollway Auth.
Svc. Contract
Rev. (Local
Hwy. &
Bridges) 5.90%
4/1/07
New York State A 2,500,000 0 2,500,000 2,507,975 0 2,507,975
Tpk. Auth.
Hwy. & Bridge
5% 4/1/97
Niagara -- 4,210,000 0 4,210,000 1,894,500 0 1,894,500
County Ind.
Dev. Agcy.
Rev.
(Wintergarden
Inn Assoc.
Proj.) 10%
6/1/11
Triborough Aa 0 1,000,000 1,000,000 0 1,011,250 1,011,250
Bridge &
Tunnel Auth.
Rev. Rfdg.
(Gen. Purp.)
Series Y,
5.50% 1/1/17
94,480,407 8,478,882 102,959,289
NEW YORK& NEW
JERSEY
New York & B3 6,500,000 500,000 7,000,000 7,320,625 563,125 7,883,750
New Jersey
Port Auth. Spl.
Oblig. Rev.
(Continental
Airlines
Corp./Eastern
Airlines,
Inc./U.S. Air
Laguardia
Proj.) 9.125%
12/1/15 (AMT)
7,320,625 563,125 7,883,750
NORTH CAROLINA
North Carolina Baa1 5,000,000 0 5,000,000 5,612,500 0 5,612,500
Eastern Muni.
Pwr. Agcy.
7.25% 1/1/07
North Carolina Baa1 0 1,000,000 1,000,000 0 995,000 995,000
Eastern Muni.
Pwr. Agcy.
Pwr. Sys. Rev.
Rfdg. Series C,
5.25% 1/1/04
North Carolina Baa1 1,750,000 1,000,000 2,750,000 1,929,375 1,102,500 3,031,875
Eastern Muni.
Pwr. Agcy.
Pwr. Sys. Rev.
Rfdg. Series C,
7% 1/1/07
North Carolina Aaa 2,900,000 300,000 3,200,000 3,030,500 313,500 3,344,000
Muni. Pwr.
Agcy. Rev.
Rfdg. (No 1
Catawba Elec.)
6.25% 1/1/17
(AMBAC
Insured)
10,572,375 2,411,000 12,983,375
NORTH DAKOTA
North Dakota Aa 1,000,000 0 1,000,000 1,000,940 0 1,000,940
Hsg. Fin. Agcy.
Rev. (Fing.
Prog.- Home
Mortgage Fing.
Proj.) Series C,
3.85% 4/3/97
(FGIC Insured)
(AMT)
1,000,940 0 1,000,940
OHIO
Fairfield Econ. -- 2,000,000 0 2,000,000 2,147,500 0 2,147,500
Dev. Rev.
Rfdg. (Beverly
Enterprises
Proj.) 8.50%
1/1/03
Marion County -- 0 380,000 380,000 0 381,425 381,425
Rev. Rfdg.
(Commty.
Hosp. Impt.
Proj.) 5.60%
5/15/01
Ohio Wtr. Dev. Aaa 2,925,000 0 2,925,000 3,246,750 0 3,246,750
Auth. Pollution
Cont. Facs.
Rev. 6.50%
12/1/03 (MBIA
Insured)
Stark County Ba1 3,100,000 0 3,100,000 3,227,875 0 3,227,875
Ind. Dev. Rev.
Rfdg. (Kroger
Co.) 7.20%
9/1/12
8,622,125 381,425 9,003,550
OKLAHOMA
Oklahoma -- 2,935,000 0 2,935,000 3,147,788 0 3,147,788
County Ind.
Auth. Rev.
(Epworth
Village Proj.)
Series A,
10.25% 4/1/19
Portland Swr. A1 0 500,000 500,000 0 525,000 525,000
Sys. Rev.
Series A,
6.25% 6/1/15
Tulsa Muni. Baa2 3,600,000 0 3,600,000 3,906,000 0 3,906,000
Arpt. Trust
Rev. American
Airlines Corp.
Proj.) 7.35%
12/1/11
7,053,788 525,000 7,578,788
PENNSYLVANIA
Allegheny Ba1 885,000 0 885,000 918,188 0 918,188
County Hosp.
Dev. Auth.
Health Facs.
Rev.
(Allegheny
Valley School)
8% 2/1/02
Allegheny Ba1 3,795,000 0 3,795,000 4,017,956 0 4,017,956
County Hosp.
Dev. Auth.
Health Facs.
Rev.
(Allegheny
Valley School)
8.50% 2/1/15
Cumberland Baa 3,800,000 0 3,800,000 3,909,250 0 3,909,250
County Muni.
Auth. Rev.
(Carlisle
Hosp.) 6.80%
11/15/23
Delaware -- 6,170,000 0 6,170,000 7,573,675 0 7,573,675
County Auth.
Rev. (1st Mtg.
Riddle Village
Proj.) 9.25%
6/1/22
Delaware -- 500,000 600,000 1,100,000 516,040 619,248 1,135,288
County Auth.
Rev. (1st. Mtg.)
(Riddle Village
Proj.) 7%
6/1/00
Delaware -- 4,500,000 0 4,500,000 5,512,500 0 5,512,500
County Auth.
Rev. (1st. Mtg.)
(Riddle Village
Proj.) 8.25%
6/1/22
Delaware -- 2,000,000 0 2,000,000 2,407,500 0 2,407,500
County Auth.
Rev. (First
Mtg. Riddle
Village Proj.)
Series 1992,
8.75% 6/1/10
Lehigh County -- 5,930,000 0 5,930,000 6,308,038 0 6,308,038
Gen. Purp.
Auth. Rev.
(Wiley House)
9.50% 11/1/16
Montgomery Ba1 0 135,000 135,000 0 151,875 151,875
County Higher
Ed. & Health
Auth. Hosp.
Rev. (United
Hosp., Inc.)
Series A,
8.375% 11/1/03
Montgomery Ba1 0 165,000 165,000 0 179,025 179,025
County Higher
Ed. & Health
Auth. Hosp.
Rev. (United
Hosp., Inc.)
Series B,
7.50% 11/1/15
Pennsylvania Aaa 3,000,000 0 3,000,000 3,311,250 0 3,311,250
Convention
Ctr. Auth. Rev.
Rfdg. Series A,
6.60% 9/1/09
(MBIA
Insured)
Pennsylvania Aaa 0 1,500,000 1,500,000 0 1,661,250 1,661,250
Convention
Ctr. Auth. Rev.
Rfdg. Series A,
6.70% 9/1/14
(MBIA
Insured)
Pennsylvania Baa 4,500,000 0 4,500,000 4,758,750 0 4,758,750
Convention
Ctr. Auth. Rev.
Rfdg. Series A,
6.75% 9/1/19
Philadelphia Aaa 3,400,000 0 3,400,000 3,638,000 0 3,638,000
Gen. Oblig.
6.25% 5/15/11
(MBIA
Insured)
Philadelphia Aaa 3,835,000 0 3,835,000 4,132,213 0 4,132,213
Gen. Oblig.
6.25% 5/15/13
(MBIA
Insured)
Philadelphia Ba 2,450,000 200,000 2,650,000 2,535,750 207,000 2,742,750
Hosp. &
Higher Ed.
Facs. Auth.
Hosp. Rev.
(Graduate
Health Sys.)
7.25% 7/1/18
Philadelphia Ba 1,250,000 250,000 1,500,000 1,303,125 260,625 1,563,750
Hosp. &
Higher Ed.
Facs. Auth.
Rev. (Graduate
Health Sys.
Oblig.) Series
A&B, 7%
7/1/05
Philadelphia Baa1 3,500,000 500,000 4,000,000 3,570,000 510,000 4,080,000
Hosps. &
Higher Ed.
Facs. Auth.
Hosp. Rev.
Rfdg. 5.95%
7/1/03
Philadelphia -- 2,600,000 805,000 3,405,000 2,762,500 855,313 3,617,813
Ind. Dev. Auth.
(Philadelphia
Arpt.) 7.75%
12/1/17
Philadelphia Aaa 3,000,000 0 3,000,000 1,961,250 0 1,961,250
Wtr. & Swr.
Rev. (Cap.
Appreciation)
14th Series, 0%
10/1/05 (MBIA
Insured)
Philadelphia Aaa 1,000,000 0 1,000,000 1,128,750 0 1,128,750
Wtr. &
Wastewtr. Rev.
6.75% 8/1/04
(MBIA
Insured)
Philadelphie Aaa 1,000,000 0 1,000,000 1,136,250 0 1,136,250
Wtr. &
Wastewtr. Rev.
6.75% 8/1/05
(MBIA
Insured)
Pittsburgh Wtr. Aaa 3,000,000 0 3,000,000 1,860,000 0 1,860,000
& Swr. Auth.
Rev. Rfdg.
Series A, 0%
9/1/06 (FGIC
Insured)
(Escrowed to
Maturity)
Somerset -- 1,900,000 515,000 2,415,000 2,037,750 552,338 2,590,088
County Hosp.
Auth. (Rev.
Health Care 1st
Mortgage-GF)
8.40% 6/1/09
Somerset -- 4,305,000 0 4,305,000 4,617,113 0 4,617,113
County
Pennsylvania
Hosp. Auth.
REv. (Health
Care 1st
Mtg-gf) 8.50%
6/1/24
Southern Aaa 0 1,000,000 1,000,000 0 1,115,000 1,115,000
Pennsylvania
Trans. Auth.
Spl. 6.50%
3/1/05, (FGIC
Insured)
Warren County -- 0 125,000 125,000 0 136,406 136,406
Ind. Dev. Auth.
Specialized
Dev. Rev.
Rfdg. (Beverly
Enterprises,
Inc.) 8.75%
11/1/06
Warren County -- 0 500,000 500,000 0 550,625 550,625
Ind. Dev. Auth.
Specialized
Dev. Rev.
Rfdg. (Beverly
Enterprises,
Inc.) 9%,
11/1/12
69,915,848 6,798,705 76,714,553
SOUTH CAROLINA
Charleston -- 3,000,000 0 3,000,000 3,645,000 0 3,645,000
County Health
Facs. Rev.
Rfdg. (1st Mtg.
Episcopal
Proj.) Series A,
9.75% 4/1/16
(Pre-Refunded
to 4/1/01 @
102)
Charleston -- 2,110,000 0 2,110,000 2,563,650 0 2,563,650
County Health
Facs. Rev.
Rfdg. (1st Mtg.
Episcopal
Proj.) Series B,
9.75% 4/1/16
(Pre-Refunded
to 4/1/01 @
102)
Charleston A 4,500,000 0 4,500,000 4,811,220 0 4,811,220
County
Resource
Recovery Rev.
(Foster
Wheeler)
Series A,
9.25% 1/1/10
(AMT
South Carolina Aaa 2,565,000 0 2,565,000 2,783,025 0 2,783,025
Pub. Svc. Auth.
Rev. Rfdg.
Series A,
6.25% 1/1/04
(MBIA
Insured)
South Carolina Aaa 3,330,000 0 3,330,000 3,692,138 0 3,692,138
Pub. Svc. Auth.
Rev. Rfdg.
Series A,
6.50% 1/1/08
(MBIA
Insured)
17,495,033 0 17,495,033
TENNESSEE
Memphis-Shel Aaa 0 500,000 500,000 0 547,500 547,500
by County
Arpt. Auth.
Arpt. Rev.
Rfdg. Series B,
6.50% 2/15/09
(MBIA
Insured)
Metropolitan Aaa 1,000,000 1,000,000 2,000,000 1,081,250 1,081,250 2,162,500
Gov't.
Nashville &
Davison
County Wtr. &
Swr. Rev.
Rfdg. 6%
1/1/07
(MBIAInsured)
Springfield Ba1 3,500,000 0 3,500,000 3,736,250 0 3,736,250
Dev. Board
Ind. Dev. Rev.
Rfdg. (Kroger
Co. Proj.)
7.25% 5/1/11
Tennessee Gen. Aaa 1,000,000 0 1,000,000 1,090,000 0 1,090,000
Oblig. Rfdg.
Series B, 6%
5/1/05
Tennessee Hsg. A1 8,365,000 1,200,000 9,565,000 8,574,125 1,230,000 9,804,125
Dev. Agcy.
Mgt. Fin.
Series C,
6.45% 7/1/21
14,481,625 2,858,750 17,340,375
TEXAS
Alliance Arpt. Baa2 2,000,000 2,000,000 4,000,000 2,140,000 2,140,000 4,280,000
Auth. Spl.
Facs. Rev.
(American
Airlines, Inc.
Proj.) 7.50%
12/1/29
Alliance Arpt. Baa2 7,000,000 0 7,000,000 7,778,750 0 7,778,750
Auth. Spl.
Facs. Rev.
(American
Airlines, Inc.)
7% 12/1/11
(AMT)
Brazos River Baa2 5,620,000 0 5,620,000 6,027,450 0 6,027,450
Auth. Poll.
Cont. Rev.
(Texas Util.
Elec. Co. Proj.)
Series A,
8.25% 1/1/19
(AMT)
El Paso Prop. Aaa 0 685,000 685,000 0 736,375 736,375
Fin. Auth.
Single Family
Mtg. Rev.
Series A,
8.70% 12/1/18,
(GNMA Coll.)
(AMT)
El Paso Wtr. & Aaa 2,650,000 0 2,650,000 1,752,313 0 1,752,313
Swr. Rev. 0%
3/1/05 (MBIA
Insured)
El Paso Wtr. & Aaa 3,700,000 0 3,700,000 2,303,250 0 2,303,250
Swr. Rev. 0%
3/1/06 (MBIA
Insured)
Harris County -- 1,435,000 85,000 1,520,000 1,395,538 82,663 1,478,201
Cultural & Ed.
Facs. Fin.
Corp. Rev.
(Space Ctr.
Houston
Proj.)Series A,
9.25% 8/15/23
Harris County -- 3,630,000 215,000 3,845,000 984,638 58,319 1,042,957
Cultural & Ed.
Facs. Fin.
Corp. Rev.
(Space Ctr.
Houston
Proj.)Series B,
0% 8/15/23
Houston Hsg. A 1,020,000 0 1,020,000 1,027,262 0 1,027,262
Fin. Corp.
Single Family
Mtg. Rev.
(Verex Mtg.
Assurance,
Inc.) Series
1984 A,
10.875%
2/15/16
Lower Neches Aa2 0 1,000,000 1,000,000 0 1,035,000 1,035,000
Valley Auth.
Ind. Dev. Corp.
Swr. Facs. Rev.
(Mobil Oil
Refining Corp.
Proj.) 6.40%
3/1/30 (AMT)
Round Rock Aaa 7,430,000 0 7,430,000 3,780,013 0 3,780,013
Independent
School Dist.
Rfdg. & School
Bldg. Unltd.
Tax 0%
8/15/09 (MBIA
Insured)
Sabine River Baa2 1,250,000 0 1,250,000 1,385,938 0 1,385,938
Auth. Poll.
Cont. Rev.
(Util. Elec.
Proj.) Series B,
8.25% 10/1/20
(AMT)
San Antonio Aaa 2,000,000 0 2,000,000 1,105,000 0 1,105,000
Elec. & Gas
Rev. Rfdg.
Series B, 0%
2/1/08 (FGIC
Insured)
Texas Pub. Fin. Aaa 2,000,000 0 2,000,000 1,042,500 0 1,042,500
Auth. Bldg.
Rev. Rfdg.
(Cap.
Appreciation)
0% 2/1/09
(MBIA
Insured)
30,722,652 4,052,357 34,775,009
UTAH
Intermountain Aaa 6,500,000 1,000,000 7,500,000 6,394,375 983,750 7,378,125
Pwr Agcy. Pwr.
Supply Rev.
Rfdg. Series B,
5.75% 7/1/19
(MBIA
Insured)
Intermountain Aaa 5,500,000 1,000,000 6,500,000 5,451,875 991,250 6,443,125
Pwr. Agcy.
Pwr. Supply
Rev. Rfdg.
Series B,
5.75% 7/1/16
(MBIA
Insured)
Intermountain Aaa 1,500,000 0 1,500,000 1,646,250 0 1,646,250
Pwr. Agcy.
Pwr. Supply
Rev. Series A,
6.50% 7/1/08
(AMBAC
Insured)
Intermountain Aaa 6,000,000 0 6,000,000 6,517,500 0 6,517,500
Pwr. Agcy.
Pwr. Supply
Sys. Rev. Rfdg.
Series B,
6.25% 7/1/03
(MBIA
Insured)
South Salt -- 3,650,000 0 3,650,000 4,101,688 0 4,101,688
Lake City Ind.
Rev. (Price
Savers
Wholesale
Club Proj.) 9%
11/15/13
Utah Hsg. Fin. -- 260,004 0 260,004 35,101 0 35,101
Agcy.
(Residential
Mtg.) (Cap.
Appreciation)
Series 1983 A,
0% 7/1/16
24,146,789 1,975,000 26,121,789
VERMONT
Vermont Ind. -- 2,000,000 0 2,000,000 2,167,500 0 2,167,500
Dev. Auth. Ind.
Dev. Rev.
(Radisson
Hotel) Series
B-1, 7.75%
11/15/15
2,167,500 0 2,167,500
VIRGINIA
Charlottesville Ba1 3,250,000 0 3,250,000 3,453,125 0 3,453,125
Ind. Dev. Auth.
Ind. Dev. Rev.
Rfdg. (The
Kroger Co.
Proj.) 7.25%
5/1/10
Loudoun -- 13,900,000 1,055,000 14,955,000 14,647,125 1,111,706 15,758,831
County Ind.
Dev. Auth.
Residential
Care Facs. Rev.
(Falcons
Landing Proj.)
Series A,
8.75% 11/1/24
Loudoun -- 1,100,000 0 1,100,000 1,194,875 0 1,194,875
County Ind.
Dev. Auth.
Residential
Care Facs. Rev.
(Falcons
Landing Proj.)
Series A,
9.25% 11/1/04
Southeastern Aaa 4,000,000 0 4,000,000 4,005,000 0 4,005,000
Pub. Svc. Auth.
Rev. Rfdg. Sr.
Series A,
5.25% 7/1/10
(MBIA
Insured)
Southeastern Aaa 4,000,000 0 4,000,000 4,000,000 0 4,000,000
Pub. Svc. Auth.
Rev. Rfdg.
Sr.Series A,
5.15% 7/1/09
(MBIA
Insured)
Virginia Hsg. Aa 1,210,000 0 1,210,000 194,314 0 194,314
Dev. Auth.
Residential
Mtg. (Single
Family Mtg.)
(Cap.
Appreciation)
Series 1983 B,
0% 9/1/14
27,494,439 1,111,706 28,606,145
WASHINGTON
Douglas A 1,395,000 0 1,395,000 1,759,444 0 1,759,444
County Pub.
Util. Dist. #1
Wells
Hydroelec.
Rev. Rfdg.
(Pacific Pwr. &
Lt. Co.) 8.75%
9/1/18
Washington Aa 2,500,000 0 2,500,000 2,634,375 0 2,634,375
Gen. Oblig.
Rfdg. Series R,
5.60% 9/1/04
Washington Aa1 1,000,000 0 1,000,000 1,135,000 0 1,135,000
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#1 Rev. Rfdg.
Series B, 7%
7/1/08
Washington Aa1 0 1,000,000 1,000,000 0 948,750 948,750
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#2 Rev. 5.40%
7/1/12
Washington Aa1 11,600,000 0 11,600,000 11,005,500 0 11,005,500
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#2 Rev. 5.40%
7/1/12 INFL
Washington Aaa 5,300,000 2,700,000 8,000,000 5,187,375 2,642,625 7,830,000
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#2 Rev. Rfdg.
5.55% 7/1/10
(FGIC Insured)
INFLOS
Washington Aaa 0 1,350,000 1,350,000 0 583,875 583,875
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#2 Rev. Rfdg.
Series A, 0%
7/1/11, (MBIA
Insured)
Washington Aaa 6,500,000 0 6,500,000 6,435,000 0 6,435,000
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#2 Rev. Rfdg.
Series B,
5.625% 7/1/12
(MBIA
Insured)
Washington Aaa 3,000,000 0 3,000,000 1,586,250 0 1,586,250
Pub. Pwr.
Supply Sys.
Nuclear Proj.
#3 Rev. Rfdg.
(Cap.
Appreciation)
Series B, 0%
7/1/08 (MBIA
Insured)
Washington Aa1 10,000,000 0 10,000,000 9,325,000 0 9,325,000
Pub. Pwr.
Supply Sys.
Proj. #3 5.40%
7/1/12 INFL
39,067,944 4,175,250 43,243,194
WEST VIRGINIA
Kanawha Ba1 4,500,000 0 4,500,000 4,747,500 0 4,747,500
County Ind.
Dev. Rev.
Rfdg.
(Topvalco, Inc.
Proj.) 7.125%
11/1/12
4,747,500 0 4,747,500
WYOMING
Sweetwater A3 10,000,000 300,000 10,300,000 10,212,500 306,375 10,518,875
County Poll.
Cont. Rev.
Rfdg. (Idaho
Pwr. Co. Proj.)
Series A,
6.05% 7/15/26
10,212,500 306,375 10,518,875
TOTAL MUNICIPAL BONDS 836,736,10 88,596,601 925,332,705
4
MUNICIPA
L NOTES
ALASKA
Valdex Marine VMIG 1 1,000,000 0 1,000,000 1,000,050 0 1,000,050
Terminal Rev.
Rfdg. (Arco.
Trans. Proj.)
Series A,
3.70% 1/7/97
1,000,050 0 1,000,050
ARIZONA
Coconino P-1 1,700,000 500,000 2,200,000 1,700,000 500,000 2,200,000
County Poll.
Cont. Corp.
Rev. (Arizona
Pub. Svc. Co.
Navajo Proj.)
Series A,4%,
LOC Bank of
America Nat'l.
Trust &
Savings,
VRDN
1,700,000 500,000 2,200,000
DELAWARE
Delaware VMIG 1 1,400,000 0 1,400,000 1,400,000 0 1,400,000
Econ. Dev.
Auth. Rev.
Board
(Delmarva Pwr.
& Light Proj.)
Series 1994,
3.60% VRDN
(AMT)
1,400,000 0 1,400,000
FLORIDA
Putnam Cnty. -- 1,000,000 0 1,000,000 1,000,540 0 1,000,540
Dev. Auth.
Poll. Cont. rev.
(Semiole Elec.
Co. Proj.)
3.89% 3/15/97
1,000,540 0 1,000,540
KANSAS
Butler Cnty. VMIG 1 1,200,000 0 1,200,000 1,200,000 0 1,200,000
Solid Waste
Disp. Fac.
(TexecoCo.)
Series 1994A,
5.10% 8/1/24
1,200,000 0 1,200,000
LOUISIANA
West Baton P-1 400,000 0 400,000 400,000 0 400,000
Rouge Parish
Ind. Dist. #3
(Dow
Chemical Co.
Proj.) Series
1995, 5.10%
11/1/25
West Baton P-1 0 700,000 700,000 0 700,000 700,000
Rouge Parish
Ind. Dist. #3
Rev. (Dow
Chemical Co.)
Series 1993,
4%, VRDN
(AMT)
400,000 700,000 1,100,000
MISSOURI
Missouri VMIG 1 1,100,000 0 1,100,000 1,100,000 0 1,100,000
Higher Ed.
Loan Auth.
Student Loan
Rev. Series
1988A, 4.25%,
LOC National
Westminster
Bank PLC,
VRDN (AMT)
1,100,000 0 1,100,000
MULTI-ST. CTFS
TRUST
Clipper Aa 1,312,018 0 1,312,018 1,312,008 0 1,312,008
Tax-Exempt
Trust
(Certification
of Prtn.) Series
1995-1 Class
A, 3.54%
2/10/06
Liquidity State
Street Bank &
Trust Co.,
Boston
(AMT*)
1,312,008 0 1,312,008
NEVADA
Washoe Cnty. P-1 1,100,000 0 1,100,000 1,100,000 0 1,100,000
Wtr. Fac. Rev.
(Sierra
PacificPwr. co.
Proj.) Series
1990, LOC
Union Bankof
Switzerland
5.50% 12/1/20
1,100,000 0 1,100,000
NORTH CAROLINA
Halifax County -- 1,500,000 0 1,500,000 1,500,000 0 1,500,000
Ind. Facs. Poll.
Cont. Facs.
Auth.
(Westmoreland
Hadson
Proj.)(Roanoke
Valley Proj.)
Series 1991,
4.05%, LOC
Cr. Suisse,
VRDN*
1,500,000 0 1,500,000
SOUTH CAROLINA
South Carolina -- 0 300,000 300,000 0 300,000 300,000
Jobs-Econ.
Dev. Auth.
Econ. Dev.
Rev. (Wellman,
Inc. Proj.)
Series 1991,
4.10%, LOC
Wachovia
Bank,
VRDN**
0 300,000 300,000
TEXAS
-- 0 500,000 500,000 0 500,000 500,000
Brazos River VMIG 1 600,000 0 600,000 600,000 0 600,000
Auth. Poll.
Cont. Rev.
Rfdg. (Texas
Util Elec. Co.)
Series 1995 C,
4%, LOC
Swiss Bank,
VRDN
Brazos River VMIG 1 200,000 0 200,000 200,000 0 200,000
Auth. Poll.
Cont. Rev.
Rfdg. (Texas
Utils. Elec. Co.
Proj.) Series
1995-A,
3.80%, LOC
Morgan
Guaranty Trust
Co., VRDN
Brazos River P-1 0 600,000 600,000 0 600,000 600,000
Hbr.
Navigation
Dist. of
Brazoria
County Rev.
(Dow
Chemical
Proj.)
Series1992 A,
4%, VRDN
(AMT)
Gulf Coast VMIG 1 500,000 0 500,000 500,000 0 500,000
Waste Disp.
Auth. (Amoco
Oil Co. Proj.)
3.95%, VRDN
(AMT)
Gulf Coast VMIG 1 1,400,000 400,000 1,800,000 1,400,000 400,000 1,800,000
Waste Disp.
Auth. Poll.
Cont. and Solid
Waste Rev.
Rfdg.
(AMOCO Oil
Proj.)5.05%
5/1/24
Gulf Coast VMIG 1 0 500,000 500,000 0 500,000 500,000
Waste Disp.
Auth. Poll.
Cont. Rev.
(Amoco Oil
Co. Proj.)
3.80%, VRDN
Gulf coast VMIG 1 2,500,000 0 2,500,000 2,500,000 0 2,500,000
Waste Disp.
Auth. Rev.
(AMOCO Oil
Co. Proj.)
5.05% 7/1/27
Gulf Coast VMIG 1 2,300,000 0 2,300,000 2,301,173 0 2,301,173
Waste Disp.
Auth. Rev.
Rfdg. (Amoco
Oil Co. Proj.)
3.75% 4/1/97
Trinity River VMIG 1 1,500,000 0 1,500,000 1,500,000 0 1,500,000
Auth. Poll.
Cont. Rev.
Coll. (Texas
Utils. Elec. Co.
Proj.) Series
96-A, 3.70%
(BPA Bank of
New York)
(AMBAC
Insured),
VRDN
(AMT*)
9,001,173 2,000,000 11,001,173
WEST VIRGINIA
Grant County VMIG 1 1,200,000 1,000,000 2,200,000 1,200,924 1,000,767 2,201,691
Poll. Cont.
Series 1944
(Virginia Elec.
& Pwr. Co.
Proj.) 3.80%
3/10/97
1,200,924 1000767 2,201,691
TOTAL MUNICIPAL NOTES 21,914,695 4,500,767 26,415,462
TOTAL INVESTMENTS 858,650,79 93,097,368 951,748,167
9
</TABLE>
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 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 Plans Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Union Street Trust II
Fidelity Exchange Fund Fidelity Yen Performance Portfolio, L.P.
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust 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 President and Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and appoint
J. Gary Burkhead 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, Form N-8B-2, 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
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 January 3, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d January 3, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Treasurer and principal financial and accounting
officer 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 President and Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and appoint
John H. Costello and John E. Ferris 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 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 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 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 my hand on the date set forth below.
/s/Kenneth A. Rathgeber__________ December 19, 1996
Kenneth A. Rathgeber
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
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
"Rule 24f-2 Notice"
Fidelity Municipal Trust
(Name of Registrant)
File No. 2-55725
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Fidelity Aggressive Municipal Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at
the beginning of the fiscal year:
Number of Shares: 3,009,881
Aggregate Price: 34,598,904
8.
Number and amount of securities registered during the fiscal year other
than pursuant to rule 24f-2:
Number of Shares: 0
Aggregate Price: 0
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 13,469,408
Aggregate Price: 152,763,596
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 13,469,408
Aggregate Price: 152,763,596
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 152,763,596
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (152,763,596)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Fidelity Insured Municipal Income Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at
the beginning of the fiscal year:
Number of Shares: 7,685,109
Aggregate Price: 87,994,503
8.
Number and amount of securities registered during the fiscal year
other than pursuant to rule 24f-2:
Number of Shares: 259,067
Aggregate Price: 3,036,265
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 9,130,769
Aggregate Price: 107,719,137
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 9,130,769
Aggregate Price: 107,719,137
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 107,719,137
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (107,719,137)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Fidelity Advisor Municipal Bond Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at
the beginning of the fiscal year:
Number of Shares: 124,867,653
Aggregate Price: 1,022,973,168
8.
Number and amount of securities registered during the fiscal year
other than pursuant to rule 24f-2:
Number of Shares: 5,700,469
Aggregate Price: 46,059,786
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 14,915,221
Aggregate Price: 120,892,383
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 14,915,221
Aggregate Price: 120,892,383
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 120,892,383
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (120,892,383)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Fidelity Michigan Municipal Income Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at
the beginning of the fiscal year:
Number of Shares: 5,730,192
Aggregate Price: 63,102,762
8.
Number and amount of securities registered during the fiscal year
other than pursuant to rule 24f-2:
Number of Shares: 0
Aggregate Price: 0
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 6,794,678
Aggregate Price: 76,667,424
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 6,794,678
Aggregate Price: 76,667,424
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 76,667,424
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (76,667,424)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Fidelity Minnesota Municipal Income Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at
the beginning of the fiscal year:
Number of Shares: 2,694,274
Aggregate Price: 28,887,885
8.
Number and amount of securities registered during the fiscal year
other than pursuant to rule 24f-2:
Number of Shares: 0
Aggregate Price: 0
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 4,796,285
Aggregate Price: 52,099,922
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 4,796,285
Aggregate Price: 52,099,922
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable
(see Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 52,099,922
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (52,099,922)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf
of the issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Fidelity Ohio Municipal Income Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at the
beginning of the fiscal year:
Number of Shares: 5,218,037
Aggregate Price: 58,122,229
8.
Number and amount of securities registered during the fiscal year other
than pursuant to rule 24f-2:
Number of Shares: 0
Aggregate Price: 0
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 6,065,545
Aggregate Price: 68,873,806
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 6,065,545
Aggregate Price: 68,873,806
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 68,873,806
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (68,873,806)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
Annual Notice of Securities Sold
Pursuant to Rule 24f-2
Read instructions at end of Form Before preparing Form.
Please print or type.
1.
Name and address of issuer: Fidelity Municipal Trust
82 Devonshire Street, Boston, MA, 02109
2.
Name of each series or class of funds for which this notice is filed:
Spartan Pennsylvania Municipal Income Fund
3.
Investment Company Act File Number: 811-2720
Securities Act File Number: 2-55725
4.
Last day of fiscal year for which this notice is filed: December 31, 1996
5.
Check box if this notice is being filed more than 180 days after
the close of the issuer's fiscal year for purposes of reporting securities
sold after the close of the fiscal year but before termination of
the issuer's 24f-2 declaration:
[ ]
6.
Date of termination of issuer's declaration under rule 24f-2(a)(1),
if applicable (see Instruction A.6):
7.
Number and amount of securities of the same class or series which
had been registered under the Securites Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at
the beginning of the fiscal year:
Number of Shares: 2,346,618
Aggregate Price: 24,109,242
8.
Number and amount of securities registered during the fiscal year other
than pursuant to rule 24f-2:
Number of Shares: 0
Aggregate Price: 0
9.
Number and aggregate sale price of securities sold during the fiscal year:
Number of Shares: 3,203,579
Aggregate Price: 33,508,783
10.
Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
Number of Shares: 3,203,579
Aggregate Price: 33,508,783
11.
Number and aggregate sale price of securities issued during the fiscal year
in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
12.
Calculation of registration fee:
(i)
Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2 (from Item 10): 33,508,783
(ii)
Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable): 0
(iii)
Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable): (33,508,783)
(iv)
Aggregate price of shares redeemed or repurchased and previously applied as
a reduction to filing fees pursuant to
rule 24e-2 (if applicable): 0
(v)
Net aggregate price of securities sold and issued during the fiscal year in
reliance on rule 24f-2 [line (i), plus
line (ii), less line (iii), plus line (iv)] (if applicable): 0
(vi)
Multiplier prescribed by Section 6(b) of the Securities Act of 1933 or
other applicable law or regulation (see
Instruction C.6): 1/3300
(vii)
Fee due [line (i) or line (v) muliplied by line (vi)]: 0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v)
only if the form is being filed within 60
days after the close of the issuer's fiscal year. See Instruction C.3.
13.
Check box if fees are being remitted to the Commission's lockbox depository
as described in section 3a of the Commission's Rules of Informal and Other
Procedures (17 CFR 202.3a).
[n]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
February 20, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By (Signature and Title)* John H. Costello
Assistant Treasurer
Date February 27, 1997
* Please print the name and title of the signing officer below the
signature.
Fidelity
Investments
Fidelity Management & Research Co.
82 Devonshire Street
Boston, MA 02109
617 570 7000
February 20, 1997
Securities and Exchange Commission Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
RE: Rule 24f-2 Notice
Fidelity Municipal Trust
File No. 2-55725
Gentlemen:
Pursuant to Rule 24f-2(b)(1) under the Investment Company Act of 1940,
enclosed herewith on behalf of the above fund is a Rule 24f-2 Notice for
the fiscal year ended December 31, 1996
. In accordance with Rule 24f-2(c), the required filing fee of $0
was wired to Mellon Bank, in Pittsburgh,
Pennsylvania on February 20, 1997
.
Very truly yours,
Fidelity Municipal Trust
By John H. Costello
Assistant Treasurer
Enclosures
February 20, 1997
Mr. John Costello, Assistant Treasurer Fidelity Municipal Trust (the
trust): Fidelity Advisor Municipal Bond Fund Fidelity Aggressive Municipal
Fund Fidelity Insured Municipal Income Fund Spartan Pennsylvania Municipal
Income Fund Fidelity Michigan Municipal Income Fund Fidelity Minnesota
Municipal Income Fund
Fidelity Ohio Municipal Income Fund (the funds) 82 Devonshire Street
Boston, Massachusetts 02109
Dear Mr. Costello:
Fidelity Municipal Trust is a Massachusetts business trust created under a
written Declaration of Trust executed and delivered in Boston,
Massachusetts on June 22, 1984 and filed with the Secretary of the
Commonwealth of Massachusetts (the "Commonwealth") on July 11, 1984. The
Trust was originally organized as a Maryland Corporation ( November 22,
1976), but was reorganized to a Massachusetts business trust on August 1,
1984, at which time the Trust's name was changed from "Fidelity Municipal
Bond Fund, Inc." to "Fidelity Municipal Bond Fund." The Declaration of
Trust was supplemented by a written Supplement dated January 14, 1985 and
filed with the Secretary of the Commonwealth of Massachusetts on February
1, 1985. In addition, a Supplement to the Declaration of Trust, indicating
the name change from "Fidelity Municipal Bond Fund" to "Fidelity Municipal
Trust," dated March 1, 1986 was filed with the Secretary of the
Commonwealth of Massachusetts on March 6, 1986. A Supplement to the
Declaration of Trust dated January 16, 1987 was filed with the Secretary of
the Commonwealth of Massachusetts on January 21, 1987. A Supplement to the
Declaration of Trust dated November 30, 1988 was filed with the Secretary
of the Commonwealth of Massachusetts on that date. An Amended and Restated
Declaration of Trust, dated March 17, 1994, was filed with the Secretary of
the Commonwealth of Massachusetts on April 14, 1994.
I have conducted such legal and factual inquiry as I have deemed necessary
for the purpose of rendering this opinion.
Capitalized terms used herein, and not otherwise herein defined, are used
as defined in the Declaration of Trust.
Under Article III, Section 1, of the Declaration of Trust, the beneficial
interest in the Trust shall be divided into such transferable Shares of one
or more separate and distinct Series as the Trustees shall from time to
time create and establish. The number of Shares
is unlimited and each Share shall be without par value and shall be fully
paid and non assessable. The Trustees shall have full power and authority,
in their sole discretion and without obtaining any prior authorization or
vote of the Shareholders of the Trust to create and establish (and to
change in any manner) Shares with such preferences, voting powers, rights,
and privileges as the Trustees may from time to time determine, to divide
or combine the Shares
into a greater or lesser number, to classify or reclassify any issued
Shares into one or more Series of Shares, to abolish any one or more Series
of Shares, and to take such other action with respect to the Shares as the
Trustees may deem desirable.
Under Article III, Section 4, the Trustees shall accept investments in the
Trust from such persons and on such terms as they may from time to time
authorize. Such investments may be in the form of cash or securities in
which the appropriate Series is authorized to
invest, valued as provided in Article X, Section 3. After the date of the
initial contribution of capital, the number of Shares to represent the
initial contribution may in the Trustees' discretion be considered as
outstanding and the amount received by the Trustees on account
of the contribution shall be treated as an asset of the Trust. Subsequent
investments in the Trust shall be credited to each Shareholder's account in
the form of full Shares of the Trust at the Net Asset Value per Share next
determined after the investment is received; provided, however, that the
Trustees may, in their sole discretion, (a) impose a sales charge upon
investments in the Trust and (b) issue fractional Shares.
By a vote adopted on March 1, 1974, and amended on: February
22, 1985, the Board of Trustees authorized the issue and sale, from time to
time, of an unlimited number of shares of beneficial interest of the Trust
in accordance with the terms included in the current Registration Statement
and subject to the limitations of the Declaration of Trust and any
amendments thereto.
I understand from you that, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, the trust has registered an indefinite amount of
shares of beneficial interest under the Securities Act of 1933. I further
understand that, pursuant to the provisions of Rule 24f-2, the trust
intends to file with the Securities and Exchange Commission a Notice making
definite the registration of 58,375,485 shares of the trust (the "Shares")
sold in reliance upon Rule 24f-2 during the fiscal year ended December 31,
1996.
I am of the opinion that all necessary Trust action precedent to the issue
of Shares has been duly taken, and that all the Shares were legally and
validly issued, and are fully paid and non assessable, except as described
in the funds' Statements of Additional Information under the heading
"Shareholder and Trustee Liability." In rendering this opinion, I rely on
the representation by the Trust that it or its agent received consideration
for the Shares in accordance with the Declaration of Trust and I express no
opinion as to compliance with the Securities Act of 1933, the Investment
Company Act of 1940 or applicable state "Blue Sky" or securities laws in
connection with sales of the Shares.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission in connection with a Rule 24f-2 Notice
which you are about to file under the 1940 Act with said commission.
Sincerely,
/s/ Arthur S. Loring
Arthur S. Loring
Vice President- Legal
