SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-43757)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 21 [X]
and
REGISTRATION STATEMENT (No. 811-6452)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 21 [X]
Fidelity Union Street Trust II
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Eric D. Roiter, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b).
(x) on (October 20, 1998) pursuant to paragraph (b).
( ) 60 days after filing pursuant to paragraph (a)(1).
( ) on ( ) pursuant to paragraph (a)(1) of Rule 485.
( ) 75 days after filing pursuant to paragraph (a)(2).
( ) on ( ) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date
for a previously filed
post-effective amendment.
FIDELITY UNION STREET TRUST II
FIDELITY MUNICIPAL MONEY MARKET FUND
SPARTAN MUNICIPAL MONEY FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1...................................... Cover Page
2a.................................... Expenses
b, c............................... Contents; The Fund at a Glance; Who May Want to
Invest
3a.................................... Financial Highlights
b................................... *
c, d............................. Performance
4a i.............................. Charter
ii............................... The Fund at a Glance; Investment Principles and
Risks
b................................... Investment Principles and Risks
c................................... Who May Want to Invest; Investment Principles and
Risks
5a.................................... Charter
b i.............................. Cover Page; The Fund at a Glance; Charter; Doing
Business with Fidelity
ii.............................. Charter
iii............................. Expenses; Breakdown of Expenses
c................................ Charter
d.................................... Charter; Breakdown of Expenses
e.................................... Cover Page; Charter
f.................................... Expenses
g i.............................. Charter
ii............................... *
5A.................................. *
6a i................................. Charter
ii................................ How to Buy Shares; How to Sell Shares; Transaction
Details; Exchange Restrictions
iii................................ Charter
b.................................. Charter
c.................................. Transaction Details; Exchange Restrictions
d.................................. *
e.................................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g.............................. Dividends, Capital Gains, and Taxes
7 a.................................. Cover Page; Charter
b................................. Expenses; How to Buy Shares; Transaction Details
c.................................. *
d.................................. How to Buy Shares
e.................................. *
f................................ Breakdown of Expenses
8...................................... How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9...................................... *
</TABLE>
* Not Applicable
FIDELITY UNION STREET TRUST II
FIDELITY MUNICIPAL MONEY MARKET FUND
SPARTAN MUNICIPAL MONEY FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, 11............................. Cover Page
12.................................... Description of the Trust
13a - c............................ Investment Policies and Limitations
d.................................. Portfolio Transactions
14a - c............................ Trustees and Officers
15a,b.......................... *
c.............................. Trustees and Officers
16a i................................ FMR, Portfolio Transactions
ii.............................. Trustees and Officers
iii.............................. Management Contract
b................................. Management Contract
c, d............................. Contracts with FMR Affiliates
e ................................. *
f.................................. Distribution and Service Plan
g................................... *
h................................. Description of the Trust
i................................. Contracts with FMR Affiliates
17a -c........................... Portfolio Transactions
d,e.............................. *
18a.................................. Description of the Trust
b................................. *
19a.................................. Additional Purchase, Exchange and Redemption
Information
b................................ Additional Purchase, Exchange and Redemption
Information; Valuation
c................................. *
20.................................... Distributions and Taxes
21a, b............................ Contracts with FMR Affiliates
c................................. *
22A ............................... *
22B................................. Performance
23.................................... Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
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 report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
dated October 20, 1998. 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(registered trademark) at 1-800-544-8888.
Investments in the funds are neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that a 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.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SMM/MMM-PRO-1098
1.538332.101
FIDELITY
MUNICIPAL
MONEY MARKET
FUND
(fund number 010, trading symbol FTEXX)
and
SPARTAN(registered trademark)
MUNICIPAL MONEY
FUND
(fund number 460, trading symbol FIMXX)
Each fund seeks a high level of current income free from federal
income tax while maintaining a stable $1.00 share price by investing
in high quality, short-term municipal money market securities.
PROSPECTUS
OCTOBER 20, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 4 THE FUNDS AT A GLANCE
5 WHO MAY WANT TO INVEST
6 EXPENSES Each fund's yearly operating
expenses.
8 FINANCIAL HIGHLIGHTS A summary of
each fund's financial data.
12 PERFORMANCE How each fund has done
over time.
THE FUNDS IN DETAIL 13 CHARTER How each fund is organized.
13 INVESTMENT PRINCIPLES AND RISKS Each
fund's overall approach to investing.
14 BREAKDOWN OF EXPENSES How
operating costs are calculated and what
they include.
YOUR ACCOUNT 15 DOING BUSINESS WITH FIDELITY
15 TYPES OF ACCOUNTS Different ways to
set up your account.
17 HOW TO BUY SHARES Opening an
account and making additional
investments.
20 HOW TO SELL SHARES Taking money out
and closing your account.
23 INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND 24 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
25 TRANSACTION DETAILS Share price
calculations and the timing of purchases
and redemptions.
26 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
GOAL: Income free from federal income tax while maintaining a stable
$1.00 share price.
STRATEGY: Invest in high-quality, short-term municipal money market
securities of all types.
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. Fidelity
Investments Money Management Inc. (FIMM), a subsidiary of FMR, chooses
investments for the funds.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
MUNICIPAL MONEY MARKET
SIZE: As of August 31, 1998, the fund had over $ 5.0 billion in
assets.
SPARTAN MUNICIPAL MONEY
SIZE: As of August 31, 1998, the fund had over $ 2.2 billion in
assets.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors in higher tax brackets
who would like to earn federal tax-exempt income at current municipal
money market rates while preserving the value of their investment. The
funds are managed to keep their share price stable at $1.00. The rate
of income will vary from day to day, generally reflecting short-term
interest rates.
These funds do not constitute a balanced investment plan. However,
because they emphasize stability, they could be well-suited for a
portion of your investments.
(CHECKMARK)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 MONEY
MARKET CATEGORY.
(RIGHT ARROW) MONEY MARKET SEEKS
INCOME AND STABILITY BY
INVESTING IN HIGH-QUALITY,
SHORT-TERM INVESTMENTS.
(SOLID BULLET) INCOME SEEKS INCOME BY
INVESTING IN BONDS.
(SOLID BULLET) GROWTH AND INCOME SEEKS
LONG-TERM GROWTH AND INCOME
BY INVESTING IN STOCKS AND
BONDS.
(SOLID BULLET) GROWTH SEEKS LONG-TERM
GROWTH BY INVESTING MAINLY IN
STOCKS.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy,
sell, or exchange shares of a fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page , for an explanation of how
and when these charges apply.
Sales charge on None
purchases and
reinvested
distributions
Deferred sales None
charge on
redemptions
Exchange fee for $5.00
Spartan Municipal
Money only
Wire transaction fee $5.00
for
Spartan Municipal
Money only
Checkwriting fee, $2.00
per check written
for Spartan
Municipal Money
only
Account closeout $5.00
fee for
Spartan Municipal
Money only
Annual account $12.00
maintenance fee
(for accounts under
$2,500)
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays a management fee to FMR. FMR is responsible for the
payment of all other expenses for Spartan Municipal Money with certain
limited exceptions. Municipal Money Market also incurs other expenses
for services such as maintaining shareholder records and furnishing
shareholder statements and financial reports. A fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page ).
The following figures are based on historical expenses, adjusted to
reflect current fees, of each fund and are calculated as a percentage
of average net assets of each fund. FMR has entered into
arrangements on behalf of Spartan Municipal Money with the fund's
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances are used to reduce fund expenses. Including
these reductions, the total fund operating expenses presented in the
table would have been 0.39% for Spartan Municipal Money.
MUNICIPAL MONEY MARKET
Management fee 0.29%
12b-1 fee None
Other expenses 0.20%
Total fund 0.49%
operating
expenses
SPARTAN MUNICIPAL MONEY
Management fee 0. 40 %
(after
reimbursement)
12b-1 fee None
Other expenses None
Total fund 0. 40 %
operating
expenses
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated and, for
Spartan Municipal Money, if you leave your account open:
MUNICIPAL MONEY MARKET
1 year $ 5
3 years $ 16
5 years $ 27
10 years $ 62
SPARTAN MUNICIPAL MONEY
Account open Account closed
1 year $ 4 $ 9
3 years $ 13 $ 18
5 years $ 22 $ 27
10 years $ 51 $ 56
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
Effective August 1, 1994 , FMR has voluntarily agreed to
reimburse Spartan Municipal Money to the extent that total operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed 0.40% of its average net assets. If
this agreement were not in effect, the management fee, other expenses
and total operating expenses, as a percentage of average net assets of
the fund would have been 0.50%, 0. 0 0% and 0.50%, respectively.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow have been audited by
PricewaterhouseCoopers LLP, independent accountants. The funds'
financial highlights, financial statements, and reports of the auditor
are included in each fund's Annual Report, and are incorporated by
reference into (are legally a part of) the funds' SAI. Contact
Fidelity for a free copy of an Annual Report or the SAI.
FIDELITY MUNICIPAL MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data and Ratios
Years 1998C 1997 1996 1995 1994 1993 1992 1991 1990 1989
ended
October 31
Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
value,
beginning of
period
Income .027 .032 .031 .034 .023 .022 .031 .046 .055 .058
from
Investment
Operations
Net
interest
income
Less (.027) (.032) (.031) (.034) (.023) (.022) (.031) (.046) (.055) (.058)
Distributions
From net
interest
income
Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
value,
end of period
Total 2.70% 3.28% 3.17% 3.48% 2.33% 2.23% 3.14% 4.66% 5.63% 5.96%
returnB
Net $ 5,069 $ 4,132 $ 3,674 $ 3,606 $ 3,495 $ 2,936 $ 2,725 $ 2,721 $ 2,824 $ 2,830
assets, end
of period
(In millions)
Ratio of .49%A .49% .49% .50% .52% .49% .48% .45% .43% .44%
expenses to
average net
assets
Ratio of 3.20%A 3.23% 3.12% 3.43% 2.31% 2.21% 3.11% 4.55% 5.52% 5.82%
net interest
income
to average
net assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C TEN MONTHS ENDED AUGUST 31
SPARTAN MUNICIPAL MONEY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Selected
Per-Share
Data and
Ratios
Years 1998 1997 1996 1995 1994 1993 1992 1991E
ended August
31
Net $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
asset value,
beginning of
period
Income .033 .033 .034 .035 .025 .026 .038 .030
from
Investment
Operations
Net
interest
income
Less (.033) (.033) (0.34) (.035) (.025) (.026) (.038) (.030)
Distributions
From net
interest
income
Net $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
asset value,
end of period
Total 3.40% 3.38% 3.41% 3.59% 2.50% 2.66% 3.91% 3.03%
returnA,B
Net $ 2,277 $ 2,329 $ 2,380 $ 2,206 $ 2,288 $ 1,696 $ 1,303 $ 424
assets, end
of period
(In millions)
Ratio of .40%C .40%C .40%C .40%C .33%C .27%C .20%C .09%C,F
expenses to
average net
assets
Ratio of .39%D .40% .39%D .40% .33% .27% .20% .09%F
expenses to
average net
assets after
expense
reductions
Ratio of 3.35% 3.33% 3.36% 3.53% 2.48% 2.61% 3.67% 4.69%F
net interest
income to
average net
assets
</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, AND FOR
PERIODS OF LESS THAN ONE YEAR, ARE NOT ANNUALIZED.
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 FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
E JANUARY 14, 1991 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31
F ANNUALIZED
PERFORMANCE
Money market 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
compared to a measure of inflation and do not include the effect of
the $5 account closeout fee.
(CHECKMARK)UNDERSTANDING
PERFORMANCE
SEVEN-DAY YIELD ILLUSTRATES THE
INCOME EARNED BY A MONEY
MARKET FUND OVER A RECENT
SEVEN-DAY PERIOD. TOTAL RETURN
REFLECTS BOTH THE REINVESTMENT OF
INCOME AND THE CHANGE IN A
FUND'S SHARE PRICE. SINCE MONEY
MARKET FUNDS MAINTAIN A STABLE
$1.00 SHARE PRICE, CURRENT
SEVEN-DAY YIELDS ARE THE MOST
COMMON ILLUSTRATION OF MONEY
MARKET FUND PERFORMANCE.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal periods ended Past 1 Past 5 Past 10 years /
August 31, 1998 year years Life of Fund
Municipal Money 3.26 % 3.07 % 3.74 %
Market
Consumer Price 1.62 % 2.45 % 3.22 %
Index
Spartan Municipal 3.40% 3.26% 3.39%A
Money
Consumer Price 1.62% 2.45% n/a
Index
</TABLE>
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal periods ended Past 1 Past 5 Past 10
August 31, 1998 year years years/ Life of
Fund
Municipal Money 3.26% 16.30% 44.35%
Market
Consumer Price 1.62% 12.85% 37.31%
Index
Spartan Municipal 3.40 % 17.38 % 2 9.00% A
Money
Consumer Price 1.62 % 12.85 % n/a
Index
</TABLE>
A FROM JANUARY 14, 1991 (COMMENCEMENT OF OPERATIONS)
If FMR had not reimbursed certain fund expenses during these periods,
yields and total returns would have been lower.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
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
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.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND an investment that pools shareholders'
money and invests it toward a specified goal. Each fund is a
diversified fund of Fidelity Union Street Trust II an open-end
management investment company organized as a Delaware business trust
on June 20, 1991.
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 periodically 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
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which handles their business affairs.
FIMM, located in Merrimack, New Hampshire, has primary responsibility
for providing investment management services.
(CHECKMARK)FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 223
(solid bullet) Assets in Fidelity mutual
funds: over $546 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 250
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
UMB Bank, n.a. (UMB) is each fund's transfer agent, and is located at
1010 Grand Avenue, Kansas City, Missouri. UMB employs Fidelity Service
Company, Inc. (FSC) to perform transfer agent servicing functions for
each fund.
FMR Corp. is the ultimate parent company of FMR and FIMM. Members of
the Edward C. Johnson 3d family are the predominant owners of a class
of shares of common stock representing approximately 49% of the voting
power of FMR Corp. Under the Investment Company Act of 1940 (the 1940
Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form
a controlling group with respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out 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
MUNICIPAL MONEY MARKET seeks to earn a high level of current income
that is free from federal income tax while maintaining a stable $1.00
share price by investing in high-quality, short-term municipal
securities of all types, including securities structured so that they
are eligible investments for the fund. FMR normally invests the fund's
assets so that at least 80% of the fund's income is free from federal
income tax. FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from
these investments is a tax-preference item for purposes of the federal
alternative minimum tax.
SPARTAN MUNICIPAL MONEY MARKET seeks to earn a high level of current
income that is free from federal income tax while maintaining a stable
$1.00 share price by investing in high-quality, short-term municipal
securities of all types, including securities structured so that they
are eligible investments for the fund. FMR normally invests the fund's
assets so that at least 80% of the fund's income is free from federal
income tax. FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from
these investments is a tax-preference item for purposes of the federal
alternative minimum tax.
THE FUNDS comply with industry-standard requirements for the quality,
maturity, and diversification of their investments, which are designed
to help maintain a stable $1.00 share price. Of course, there is no
guarantee that the funds will maintain a stable $1.00 share price. The
funds will purchase only high-quality securities that FMR believes
present minimal credit risks and will observe maturity restrictions on
securities they buy. 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 funds' investments could cause their share prices (and
the value of your investment) to change.
Each fund earns income at current municipal money market rates. They
stress preservation of capital, liquidity and tax-free income and do
not seek the higher yields or capital appreciation that more
aggressive investments may provide. Each fund's yield will vary from
day to day and generally reflects current short-term interest rates
and other market conditions.
FMR normally invests each fund's assets according to its investment
strategy and does not expect to invest in federally taxable
obligations. Each fund also reserves the right to 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 funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a 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 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.
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. Money market securities may be structured to be, or
may employ a trust or other form so that they are, eligible
investments for money market funds. If a structure fails to function
as intended, adverse tax or investment consequences may result.
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 a 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 a 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.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a
benchmark rate changes. These interest rate adjustments are designed
to help stabilize the security's 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.
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 invest more than 10% of its assets in
illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
CASH MANAGEMENT. 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.
RESTRICTIONS: Each fund may not invest more than 5% of its total
assets in the securities of any one issuer, except that each fund may
invest up to 25% of its total assets in the highest quality securities
of a single issuer for up to three business days. This limitation
does not apply to U.S. Government securities or to securities of
other money market fun ds. Each 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 its affiliates, or through reverse repurchase agreements,
and may make additional investments while borrowings are outstanding.
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.
MUNICIPAL MONEY MARKET seeks as high a level of interest income exempt
from federal income tax as is consistent with a portfolio of
high-quality, short-term municipal obligations selected on the basis
of liquidity and stability of principal. The fund normally invests so
that at least 80% of its income is free from federal income tax.
SPARTAN MUNICIPAL MONEY seeks as high a 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 total assets, each fund may not invest more
than 5% in the securities of any one issuer. This limitation does not
apply to U.S. Government securities or to securities of other
investment companies .
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the 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. Municipal Money Market also
pays OTHER EXPENSES, which are explained on page .
FMR may, from time to time, agree to reimburse the funds for
management fees and other expenses above a specified limit. FMR
retains the ability to be repaid by a fund if expenses fall below the
specified limit prior to the end of the fiscal year. Reimbursement
arrangements, which may be terminated at any time without notice, can
decrease a fund's expenses and boost its performance.
MANAGEMENT FEE AND OTHER EXPENSES
Each fund's management fee is calculated and paid to FMR every month.
FMR pays all of the other expenses of Spartan Municipal Money with
limited exceptions. The annual management fee rate for Spartan
Municipal Money is 0.50 % of its average net assets. For
Municipal Money Market, 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.
For the fiscal year ended August 31, 1998, Spartan Municipal Money
paid a management fee of 0.40% , after reimbursement.
The group fee rate is based on the average net assets of all the
mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
drops as total assets under management increase.
For August 1998, the group fee rate was 0.13 %. The individual
fund fee rate is 0.15% for Municipal Money Market.
The total management fee for the fiscal year ended August 31, 1998 was
0.29 % (annualized) of the fund's average net assets for
Municipal Money Market.
FIMM is the funds' sub-adviser and has primary responsibility for
managing their investments. FMR is responsible for providing other
management services. FMR pays FIMM 50% of its management fee (before
expense reimbursements) for FIMM's services. FMR paid FIMM and FMR
Texas Inc., the predecessor company to FIMM, fees equal to
0.15 % and 0.10 %, respectively, of Spartan Municipal
Money's average net assets for the fiscal year ended August 31,
1998 and 0.07% and 0.05%, respectively, of Municipal Money
Market' s average net assets for the ten month fiscal period
ended August 31, 1998.
While the management fee is a significant component of Municipal Money
Market's annual operating costs, this fund has other expenses as well.
UMB is the transfer and service agent for each fund. UMB has entered
into sub-agreements with FSC under which FSC performs transfer agency,
dividend disbursing, shareholder servicing, and accounting functions
for the funds. These services include processing shareholder
transactions, valuing each fund's investments, and calculating each
fund's share price and dividends.
Under the terms of the sub-agreements, FSC receives all related fees
paid to UMB by Municipal Money Market and by FMR on behalf of Spartan
Municipal Money.
For the fiscal year ended August 1998, transfer agency and pricing and
bookkeeping fees paid (as a percentage of average net assets) amounted
to the following. These amounts are before expense reductions, if any.
Transfer Agency and
Pricing and Bookkeeping
Fees Paid by Fund
Municipal Money Market 0.18 % *
* ANNUALIZED
In the case of Spartan Municipal Money, FMR, not the fund, pays for
these services.
Municipal Money Market also pays other expenses, such as legal, audit,
and custodian fees; in some instances, proxy solicitation costs; and
the compensation of trustees who are not affiliated with Fidelity.
Spartan Municipal Money also pays other expenses, such as brokerage
fees and commissions, interest on borrowings, taxes, and the
compensation of trustees who are not affiliated with Fidelity.
To offset shareholder service costs, FMR or its affiliates also
collect Spartan Municipal Money's $5.00 exchange fee, $5.00 account
closeout fee, $5.00 fee for wire purchases and redemptions, and the
$2.00 checkwriting charge.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees of each fund has authorized
such payments.
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-advantaged 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 and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
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. You can choose Municipal Money Market as your core account
for your Fidelity Ultra Service Account(registered trademark) or
FidelityPlusSM brokerage account.
You may purchase 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 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 a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). Each fund is managed to keep its NAV stable at $1.00.
Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time, and also at
12:00 noon Eastern time for Municipal Money Market.
Each fund 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.
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 or visit Fidelity's
Web site at www.fidelity.com for an application.
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
For Municipal Money Market $5,000
For Spartan Municipal Money $25,000
TO ADD TO AN ACCOUNT
For Municipal Money Market $500
Through regular investment plansA $100
For Spartan Municipal Money $1,000
Through regular investment plansA $500
MINIMUM BALANCE
For Municipal Money Market $2,000
For Spartan Municipal Money $10,000
FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER TO
"INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio Advisory
ServicesSM or a qualified state tuition program. Refer to the program
materials for details. In addition, each fund reserves the right to
waive or lower investment minimums in other circumstances.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN TO ADD TO
AN AN
ACCOUNT ACCOUNT
PHONE 1-800-544-7777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM
ANOTHER FIDELITY ANOTHER FIDELITY
FUND ACCOUNT FUND ACCOUNT
WITH THE SAME WITH THE SAME
REGISTRATION, REGISTRATION,
INCLUDING NAME, INCLUDING NAME,
ADDRESS, AND ADDRESS, AND
TAXPAYER ID TAXPAYER ID
NUMBER. NUMBER.
(SMALL SOLID BULLET) USE FIDELITY
MONEY LINE TO
TRANSFER FROM
YOUR BANK
ACCOUNT. CALL
BEFORE YOUR FIRST
USE TO VERIFY
THAT THIS SERVICE
IS IN PLACE ON
YOUR ACCOUNT.
MAXIMUM
MONEY LINE: UP
TO $100,000.
THE INTERNET WWW.FIDELITY.COM
(COMPUTER GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM
SIGN THE ANOTHER FIDELITY
APPLICATION. FUND ACCOUNT
MAKE YOUR CHECK WITH THE SAME
PAYABLE TO THE REGISTRATION,
COMPLETE NAME INCLUDING NAME,
OF THE FUND. MAIL ADDRESS, AND
TO THE ADDRESS TAXPAYER ID
INDICATED ON THE NUMBER.
APPLICATION. (SMALL SOLID BULLET) USE FIDELITY
MONEY LINE TO
TRANSFER FROM
YOUR BANK
ACCOUNT. VISIT
FIDELITY'S WEB
SITE BEFORE YOUR
FIRST USE TO
VERIFY THAT THIS
SERVICE IS IN
PLACE ON YOUR
ACCOUNT.
MAXIMUM
MONEY LINE: UP
TO $100,000.
MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR
SIGN THE CHECK PAYABLE
APPLICATION. TO THE COMPLETE
MAKE YOUR NAME OF THE
CHECK PAYABLE TO FUND. INDICATE
THE COMPLETE YOUR FUND
NAME OF THE ACCOUNT NUMBER
FUND. MAIL TO THE ON YOUR CHECK
ADDRESS INDICATED AND MAIL TO THE
ON THE ADDRESS PRINTED
APPLICATION. ON YOUR ACCOUNT
STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY
MAIL: CALL
1-800-544-666
6 FOR
INSTRUCTIONS.
IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR CHECK
APPLICATION AND TO A FIDELITY
CHECK TO A INVESTOR CENTER.
FIDELITY INVESTOR CALL
CENTER. CALL 1-800-544-979
1-800-544-979 7 FOR THE CENTER
7 FOR THE CENTER NEAREST YOU.
NEAREST YOU.
WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) FOR SPARTAN (SMALL SOLID BULLET) FOR SPARTAN
MUNICIPAL MONEY MUNICIPAL
THERE MAY BE A MONEY THERE
$5.00 FEE FOR MAY BE A
EACH WIRE $5.00 FEE FOR
PURCHASE. EACH WIRE
(SMALL SOLID BULLET) CALL PURCHASE.
1-800-544-777 (SMALL SOLID BULLET) WIRE TO:
7 TO SET UP YOUR THE CHASE
ACCOUNT AND TO MANHATTAN
ARRANGE A WIRE BANK,
TRANSACTION. BANK ROUTING
(SMALL SOLID BULLET) WIRE WITHIN 24 #021000021,
HOURS TO: FFC
THE CHASE FIDELITY/SAS
MANHATTAN INST DEP
BANK, ACCOUNT
BANK ROUTING #323039502.
#021000021, SPECIFY THE
FFC COMPLETE NAME
FIDELITY/SAS OF THE FUND AND
INST DEP INCLUDE YOUR
ACCOUNT ACCOUNT NUMBER
#323039502. AND YOUR NAME.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR
ACCOUNT NUMBER
AND YOUR NAME.
AUTOMATICALLY (AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY
AUTOMATIC
ACCOUNT
BUILDER. SIGN
UP FOR THIS
SERVICE WHEN
OPENING YOUR
ACCOUNT, VISIT
FIDELITY'S WEB
SITE AT
WWW.FIDELITY.CO
M TO OBTAIN
THE FORM TO
ADD THE
SERVICE, OR CALL
1-800-544-66
66 TO ADD THE
SERVICE.
(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of each fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your order
is received in proper form. Each fund's NAV is normally calculated
each business day at 4:00 p.m. Eastern time, and also at 12:00 noon
Eastern time for Municipal Money Market.
TO SELL SHARES THROUGH YOUR FIDELITY ULTRA SERVICE OR FIDELITYPLUS
ACCOUNT, call 1-800-544-6262 to receive a handbook with instructions.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 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, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
<TABLE>
<CAPTION>
<S> <C> <C>
ACCOUNT TYPE SPECIAL REQUIREMENTS
FOR SPARTAN MUNICIPAL MONEY, 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.
PHONE 1-800-544-7777 (PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM
CHECK REQUEST:
$100,000.
(SMALL SOLID BULLET) FOR MONEY
LINE TRANSFERS
TO YOUR BANK
ACCOUNT;
MINIMUM:
$10;
MAXIMUM: UP
TO $100,000.
(SMALL SOLID BULLET) YOU MAY
EXCHANGE TO
OTHER FIDELITY
FUNDS IF BOTH
ACCOUNTS ARE
REGISTERED WITH
THE SAME
NAME(S),
ADDRESS, AND
TAXPAYER ID
NUMBER.
MAIL OR IN PERSON (MAIL_GRAPHIC)(HAND_GRAPHIC) INDIVIDUAL, JOINT (SMALL SOLID BULLET) THE LETTER OF
TENANT, INSTRUCTION
SOLE PROPRIETORSHI MUST BE
P, UGMA, UTMA SIGNED BY ALL
TRUST PERSONS
REQUIRED TO
SIGN FOR
TRANSACTIONS,
BUSINESS OR EXACTLY AS
ORGANIZATION THEIR NAMES
APPEAR ON THE
ACCOUNT.
(SMALL SOLID BULLET) THE TRUSTEE
MUST SIGN THE
EXECUTOR, LETTER INDICATING
ADMINISTRATOR, CAPACITY AS
CONSERVATOR, TRUSTEE. IF THE
GUARDIAN TRUSTEE'S NAME
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
AUTHORIZED BY
CORPORATE
RESOLUTION TO
ACT ON THE
ACCOUNT MUST
SIGN THE LETTER.
(SMALL SOLID BULLET) INCLUDE A
CORPORATE
RESOLUTION WITH
CORPORATE SEAL
OR A SIGNATURE
GUARANTEE.
(SMALL SOLID BULLET) CALL
1-800-544-66
66 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
1-800-544-66
66. MINIMUM
WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE
REDEMPTION
REQUEST MUST
BE RECEIVED IN
PROPER FORM BY
FIDELITY BEFORE
4:00 P.M.
EASTERN TIME
FOR MONEY TO
BE WIRED ON
THE NEXT
BUSINESS DAY.
CHECK (CHECK_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MINIMUM
CHECK:
$1,000 (FOR
SPARTAN
MUNICIPAL
MONEY ONLY).
(SMALL SOLID BULLET) ALL ACCOUNT
OWNERS MUST
SIGN A
SIGNATURE CARD
TO RECEIVE A
CHECKBOOK.
(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.
FIDELITY'S WEB SITE at www.fidelity.com offers product and servicing
information, customer education, planning tools, and the ability to
make certain transactions in your account.
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.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through Fidelity's
Web site. You may pay a $5.00 fee for each exchange out of Spartan
Municipal Money, unless you place your transaction through Fidelity's
automated exchange services.
Note that exchanges out of a fund are limited to four per calendar
year (except for Municipal Money Market), 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
.
FIDELITY MONEY LINE 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.
One easy way to pursue your financial goals is to invest money
regularly. Fidelity offers services that let you transfer money into
your fund account, or between fund accounts, automatically.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM $100 FOR MUNICIPAL
MONEY MARKET
$500 FOR SPARTAN
MUNICIPAL MONEY
FREQUENCY MONTHLY OR QUARTERLY
SETTING UP COMPLETE THE
APPROPRIATE SECTION ON
THE FUND APPLICATION. FOR
EXISTING ACCOUNTS, CALL
1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE AT
WWW.FIDELITY.COM FOR AN
APPLICATION.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUND
MINIMUM $100 FOR MUNICIPAL
MONEY MARKET
$500 FOR SPARTAN
MUNICIPAL MONEY
FREQUENCY EVERY PAY PERIOD
SETTING UP CHECK THE APPROPRIATE
BOX ON THE FUND
APPLICATION, OR CALL
1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE AT
WWW.FIDELITY.COM FOR AN
AUTHORIZATION FORM.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
MINIMUM $100 for Municipal
Money Market
$500 for Spartan
Municipal Money
FREQUENCY Monthly, bimonthly,
quarterly, or annually
SETTING UP To establish, call
1-800-544-6666 after
both accounts are
opened.
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.
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 three options:
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. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions, if any.
3. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
If you select distribution option 2 and the U.S. Postal Service does
not deliver your checks, your election may be converted to the
Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
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 record date of the distribution. The mailing of
distribution checks will begin within seven days.
(CHECKMARK)UNDERSTANDING
DISTRIBUTIONS
AS A FUND SHAREHOLDER, YOU ARE
ENTITLED TO YOUR SHARE OF THE
FUND'S NET INCOME AND GAINS
ON ITS INVESTMENTS. A 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.
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.
Interest income that a fund earns is distributed to shareholders as
income dividends. Interest that is federally tax-free remains tax-free
when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on
bonds purchased at a discount are distributed as dividends and taxed
as ordinary income. Capital gain distributions are taxed as long-term
capital gains. These distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were
paid on December 31. Fidelity will send you a statement showing the
tax status of distributions, and will report to the IRS the amount of
any taxable distributions, paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. 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 ten month fiscal period ended August 31, 1998 (for
Municipal Money Market) and the fiscal year ended August 31, 1998 (for
Spartan Municipal Money) , 100% of each fund's income dividends was
free from federal income tax. 66.12 % of Spartan Municipal
Money's and 50.43 % of Municipal Money Market's income dividends
were subject to the federal alternative minimum tax.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 p.m. Eastern time, and
also at 12:00 noon Eastern time for Municipal Money Market.
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.
Like most money market funds, each 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 each fund to maintain a
stable $1.00 share price.
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 OR ELECTRONICALLY.
Fidelity will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable security procedures
designed to verify the identity of the investor. Fidelity will request
personalized security codes or other information, and may also record
calls. For transactions conducted through the Internet, Fidelity
recommends the use of an Internet browser with 128-bit encryption. You
should verify the accuracy of your confirmation statements immediately
after you receive them. If you do not want the ability to redeem and
exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in proper
form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) 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 canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) For Spartan Municipal Money, shares begin to earn
dividends on the first business day following the day of purchase.
(small solid bullet) For Municipal Money Market, shares purchased
before 12:00 noon Eastern time begin to earn dividends on the day of
purchase. Shares purchased after 12:00 noon begin to earn dividends on
the first business day following the day of 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.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper form.
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) For Spartan Municipal Money, shares earn
dividends through the day of redemption; however, shares redeemed on a
Friday or prior to a holiday continue to earn dividends until the next
business day.
(small solid bullet) For Municipal Money Market, shares redeemed
before 12:00 noon Eastern time earn dividends through the business day
prior to the day of redemption. Shares redeemed after 12:00 noon earn
dividends through the day of redemption; however, shares redeemed on a
Friday or prior to a holiday continue to earn dividends until the next
business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account
balance at the time of the transaction is $50,000 or more. Otherwise,
you should note the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted
from your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the
amount of your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per 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 FOR MUNICIPAL MONEY MARKET
($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, for Spartan Municipal Money, the $5.00
account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
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, Spartan Municipal Money 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 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments and (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, Fidelity Automatic Account Builder,
Directed Dividends, Fidelity Ultra Service Account, and Spartan are
registered trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
(Recycle graphic) This prospectus is printed on recycled paper using
soy-based inks.
FIDELITY MUNICIPAL MONEY MARKET FUND
AND
SPARTAN(registered trademark) MUNICIPAL MONEY FUND
FUNDS OF FIDELITY UNION STREET TRUST II
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 20, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the funds' current Prospectus
(dated October 20, 1998). Please retain this document for future
reference. The funds' Annual Reports are separate documents supplied
with this SAI. To obtain a free additional copy of the Prospectus or
an Annual Report, please call Fidelity(registered trademark) at
1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 28
Portfolio Transactions 31
Valuation 31
Performance 32
Additional Purchase, Exchange and Redemption Information 36
Distributions and Taxes 37
FMR 37
Trustees and Officers 37
Management Contracts 40
Distribution and Service Plans 45
Contracts with FMR Affiliates 45
Description of the Trust 46
Financial Statements 46
Appendix 46
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
Fidelity Investments Money Management, Inc. (FIMM)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)
and Fidelity Service Company, Inc. (FSC)
SMM/MMM-ptb-1098
1.539256.101
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.
A 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 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF FIDELITY MUNICIPAL MONEY MARKET FUND
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, or
securities of other investment companies) 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) make short sales of securities;
(4) purchase any securities on margin, except for 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 the
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 commodities or commodity contracts;
(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 (but
this limit does not apply to purchases of debt securities or to
repurchase agreements); or
(11) invest in oil, gas, or other mineral exploration or development
programs.
(12) 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 LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to purchase a security (other
than securities issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities, or securities of other money market
funds) if, as a result, more than 5% of its total assets would be
invested in securities of a single issuer; provided that the fund may
invest up to 25% of its total assets in the first tier securities of a
single issuer for up to three business days.
(ii) 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 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.
(iii) 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.
(iv) 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.
(v) 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), (7) 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 government or other entity is
guaranteeing the security.
For purposes of limitations (1) and (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
With respect to limitation (iii), if through a change in value, 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 consider appropriate steps to protect liquidity.
INVESTMENT LIMITATIONS OF SPARTAN MUNICIPAL MONEY FUND
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, or
securities of other investment companies) 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) 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 a security (other
than securities issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities, or securities of other money market
funds) if, as a result, more than 5% of its total assets would be
invested in securities of a single issuer; provided that the fund may
invest up to 25% of its total assets in the first tier securities of a
single issuer for up to three business days.
(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 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 borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(iv) The fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(v) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vi) The fund does not currently intend to invest 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), (7) 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 government or other entity is
guaranteeing the security.
For purposes of limitations (1) and (i), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
With respect to limitation (iv), if through a change in value, 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 consider appropriate steps to protect liquidity.
For the funds' policies on quality and maturity, see the section
entitled "Quality and Maturity" 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 a 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 1940 Act. These
transactions may involve 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. Securities may be bought and sold on a
delayed-delivery or when-issued basis. These transactions involve a
commitment 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.
When purchasing securities on a delayed-delivery basis, the purchaser
assumes the rights and risks of ownership, including the risks of
price and yield fluctuations and the risk that the security will not
be issued as anticipated. Because payment for the securities is not
required until the delivery date, these risks are in addition to the
risks associated with a fund's 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, a fund
will set aside appropriate liquid assets in a segregated custodial
account to cover the 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, a fund could miss a favorable price or yield
opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may sell the
underlying securities before delivery, which may result in capital
gains or losses for the fund.
FEDERALLY TAXABLE SECURITIES. Under normal conditions, a municipal
fund does not intend to invest in securities whose interest is
federally taxable. However, from time to time on a temporary basis, a
municipal fund may invest a portion of its assets in fixed-income
securities whose interest is subject to federal income tax.
Should a municipal fund invest in federally taxable securities, it
would purchase securities that, in FMR's judgment, are of high
quality. These securities would include those issued or guaranteed by
the U.S. Government or its agencies or instrumentalities and
repurchase agreements for those securities.
A municipal money market fund will purchase taxable securities only if
they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption
for interest on municipal securities are introduced before Congress
from time to time. Proposals also may be introduced before state
legislatures that would affect the state tax treatment of a municipal
fund's distributions. If such proposals were enacted, the availability
of municipal securities and the value of a municipal fund's holdings
would be affected and the Trustees would reevaluate the fund's
investment objectives and policies.
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).
FMR may determine some restricted securities and municipal lease
obligations to be illiquid.
Investments currently considered by FMR to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However,
with respect to over-the-counter options a fund writes, all or a
portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and
terms of any agreement the fund may have to close out the option
before expiration.
In the absence of market quotations, illiquid investments are valued
for purposes of monitoring amortized cost valuation at fair value as
determined in good faith by a committee appointed by the Board of
Trustees.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates; however, municipal
funds currently intend to participate in this program only as
borrowers. A fund will borrow through the program only when the costs
are equal to or lower than the costs of bank loans. Interfund
borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. A fund may
have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. 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 a structure fails to function 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 certain 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 funds.
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,
a fund will not hold these 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 purchaser a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
issue.
Municipal leases frequently have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the
leased asset to pass to the governmental issuer) have evolved as a
means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for
the issuance of debt. Many leases and contracts include
"non-appropriation clauses" providing that the governmental issuer has
no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance
limitations.
MUNICIPAL 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 a
money market fund to maintain a stable net asset value per share.
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.
HOUSING. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They
generally are secured by the revenues derived from mortgages purchased
with the proceeds of the bond issue. It is extremely difficult to
predict the supply of available mortgages to be purchased with the
proceeds of an issue or the future cash flow from the underlying
mortgages. Consequently, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner
repayments will create an irregular cash flow. Many factors may affect
the financing of multi-family housing projects, including acceptable
completion of construction, proper management, occupancy and rent
levels, economic conditions, and changes to current laws and
regulations.
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. Pursuant to procedures adopted by the Board of
Trustees, the funds 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 SP-1), and second
tier securities are those deemed to be in the second highest rating
category (e.g., Standard & Poor's SP-2).
Each 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, each fund may look to an interest rate
reset or demand feature.
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. As
protection against the risk that the original seller will not fulfill
its obligation, the securities are held in a separate account 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),
the funds will 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 funds anticipate holding restricted securities to
maturity or selling them in an exempt transaction.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse repurchase
agreement is outstanding, a fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. The funds will enter into reverse repurchase agreements
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR. Such transactions may increase fluctuations in
the market value of fund 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 other entity in determining whether to
purchase a security supported by a letter of credit guarantee, put or
demand feature, insurance or other source of credit or liquidity. In
evaluating the credit of a foreign bank or other foreign entities, FMR
will consider whether adequate public information about the entity is
available and whether the entity may be subject to unfavorable
political or economic developments, currency controls, or other
government restrictions that might affect its ability to honor its
commitment.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments
in 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 are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
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
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; the reasonableness of any
commissions; and, if applicable, arrangements for payment of fund
expenses.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that 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
above.
Each 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; and
effect securities transactions and perform functions incidental
thereto (such as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that 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 a 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.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer 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 a 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 that fund or 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
National Financial Services Corporation (NFSC), an indirect subsidiary
of FMR Corp., if the commissions are fair, reasonable, and comparable
to commissions charged by non-affiliated, qualified brokerage firms
for similar services.
FMR may allocate brokerage transactions to broker-dealers (including
affiliates of FMR) who have entered into arrangements with FMR under
which the broker-dealer allocates a portion of the commissions paid by
a fund toward the reduction of that fund's expenses. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund 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.
A fund may pay both commissions and spreads in connection with the
placement of portfolio transactions. For the ten-month fiscal
period ended August 31, 1998, and the fiscal years ended
October 31, 1997 and 1996, Municipal Money Market paid no brokerage
commissions, and for the fiscal years ended August 31, 1998, 1997, and
1996, Spartan Municipal Money paid no brokerage commissions.
For the ten-month fiscal period ended August 31, 1998 (for
Municipal Money Market) and for the fiscal year ended August 31, 1998
(for Spartan Municipal Money), the funds paid no brokerage commissions
to firms that provided research services.
The Trustees of each fund have approved procedures in conformity with
Rule 10f-3 under the 1940 Act whereby a fund may purchase securities
that are offered in underwritings in which an affiliate of FMR
participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
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 or its affiliates,
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
FSC normally determines Spartan Municipal Money'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). FSC normally determines Municipal
Money Market's NAV at 12:00 noon and 4:00 p.m. Eastern time. The
valuation of portfolio securities is determined as of these times for
the purpose of computing each fund's NAV.
Portfolio securities and other assets are valued on the basis of
amortized cost. This technique involves initially valuing an
instrument at its cost as adjusted for amortization of premium or
accretion of discount rather than its current market value. The
amortized cost value of an instrument may be higher or lower than the
price a fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
During periods of declining interest rates, a fund's yield based on
amortized cost valuation may be higher than would result if the fund
used market valuations to determine its NAV. The converse would apply
during periods of rising interest rates.
Valuing each fund's investments on the basis of amortized cost and use
of the term "money market fund" are permitted pursuant to Rule 2a-7
under the 1940 Act. Each fund must adhere to certain conditions under
Rule 2a-7, as summarized in the section entitled "Quality and
Maturity" on page 32.
The Board of Trustees oversees FMR's adherence to the provisions of
Rule 2a-7 and has established procedures designed to stabilize each
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 a fund'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.
PERFORMANCE
A fund may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is
not intended to indicate future returns. Each fund's yield and total
return fluctuate in response to market conditions and other factors.
YIELD CALCULATIONS. To compute the yield for a fund 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. A fund also may calculate an effective yield
by compounding the base period return over a one-year period. In
addition to the current yield, a fund may quote yields in advertising
based on any historical seven-day period. Yields for a fund are
calculated on the same basis as other money market funds, as required
by applicable regulation.
Yield information may be useful in reviewing a fund's performance and
in providing a basis for comparison with other investment
alternatives. However, a 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 a 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 a fund's
current yield. In periods of rising interest rates, the opposite can
be expected to occur.
The tax-equivalent yield of a fund 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
income 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 1998. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of
hypothetical federally 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 a fund invests
principally in obligations whose interest is exempt from federal
income tax, other income received by the fund may be taxable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expected(dagger) 199 9 Tax Rates and Tax-Equivalent Yields
Federal If individual tax-exempt yield is:
Taxable Income* Marginal 2% 3% 4% 5% 6% 7% 8%
Single Return Joint Return Rate** Then taxable-equivalent yield is:
$ 25,751 - $ 62,450 $ 43,051 - $ 104,050 28% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11%
$ 61,451 - $ 130,250 $ 104,051 - $ 158,550 31% 2.90% 4.35% 5.80% 7.25% 8.70% 10.15% 11.59%
$ 130,251 - $ 283,150 $ 158,551 - $ 283,150 36% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50%
$ 283,151 + $ 283,151 + 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.
(dagger) The 1999 tax rates are not expected to be materially
different from the expected 1999 tax rates shown above.
A municipal fund may invest a portion of its assets in obligations
that are subject to federal income tax. When a municipal 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 a 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 a fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration, and may omit or include the effect of Spartan Municipal
Money's $5.00 account closeout fee.
CALCULATING HISTORICAL FUND RESULTS. The following tables show
performance for each fund calculated including certain fund expenses.
HISTORICAL FUND RESULTS. The following table shows each fund's 7-day
yield, tax-equivalent yield, and total return for the period ended
August 31, 1998. Total return figures for Spartan Municipal Money
include the effect of the $5.00 account closeout fee based on an
average size account.
The tax-equivalent yields for each fund 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
Total Returns Cumulative Total Returns
Seven-Da Tax- One Five Ten One Five Ten
y Equivalent Year Years Years/ Year Years Years/
Yield Yield Life of Life of
Fund Fund
Municipal 3.01% 4.70% 3.26% 3.07% 3.74% 3.26% 16.30% 44.35%
Money
Market
Spartan 3.11% 4.86% 3.40% 3.26% 3.39%* 3.40% 17.38% 29.00%*
Municipal
Money
</TABLE>
* From January 14, 1991 (commencement of operations).
Note: If FMR had not reimbursed certain fund expenses during these
periods, Spartan Municipal Money's total returns would have been
lower.
Note: If FMR had not reimbursed certain fund expenses during these
periods, Spartan Municipal Money's yield and tax equivalent yield
would have been 3.01 % and 4.70 % , respectively .
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 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 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 each
fund invests in short-term fixed-income securities, common stocks
represent a different type of investment from the funds. 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
fixed-income investments such as the funds. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and,
unlike each fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the past 10 fiscal years ended
1998 or life of the fund, as applicable, assuming all distributions
were reinvested. Total returns are based on past results and are not
an indication of future performance. Tax consequences of different
investments have not been factored into the figures below.
During the 10-year period ended August 31, 1998, a hypothetical
$10,000 investment in Municipal Money Market would have grown to
$ 14,312 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY MUNICIPAL MONEY MARKET FUND INDICES
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
1998 $ 10,000 $ 4,312 $ 0 $ 14,312 $ 45,050 $ 46,178 $ 13,594
1997* $ 10,000 $ 3,936 $ 0 $ 13,936 $ 42,491 $ 44,953 $ 13,444
1996* $ 10,000 $ 3,494 $ 0 $ 13,494 $ 32,162 $ 35,753 $ 13,170
1995* $ 10,000 $ 3,079 $ 0 $ 13,079 $ 25,918 $ 27,599 $ 12,787
1994* $ 10,000 $ 2,639 $ 0 $ 12,639 $ 20,498 $ 22,121 $ 12,438
1993* $ 10,000 $ 2,352 $ 0 $ 12,352 $ 19,735 $ 20,275 $ 12,121
1992* $ 10,000 $ 2,082 $ 0 $ 12,082 $ 17,169 $ 17,263 $ 11,797
1991* $ 10,000 $ 1,714 $ 0 $ 11,714 $ 15,611 $ 15,947 $ 11,431
1990* $ 10,000 $ 1,193 $ 0 $ 11,193 $ 11,693 $ 12,260 $ 11,106
1989* $ 10,000 $ 596 $ 0 $ 10,596 $ 12,640 $ 12,774 $ 10,449
</TABLE>
* Period ended October 31.
Explanatory Notes: With an initial investment of $10,000 in Municipal
Money Market on November 1, 19 88 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 $ 14,312. 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 $ 3,591 for
dividends. The fund did not distribute any capital gains during the
period.
During the period from January 14, 1991 (commencement of operations)
to August 31, 1998, a hypothetical $10,000 investment in Spartan
Municipal Money would have grown to $ 12,900 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN MUNICIPAL MONEY FUND INDICES
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
1998 $ 10,000 $ 2,900 $ 0 $ 12,900 $ 36,850 $ 36,491 $ 12,212
1997 $ 10,000 $ 2,476 $ 0 $ 12,476 $ 34,091 $ 36,281 $ 12,018
1996 $ 10,000 $ 2,068 $ 0 $ 12,068 $ 24,238 $ 26,225 $ 11,756
1995 $ 10,000 $ 1,670 $ 0 $ 11,670 $ 20,415 $ 21,062 $ 11,428
1994 $ 10,000 $ 1,265 $ 0 $ 11,265 $ 16,810 $ 17,424 $ 11,136
1993 $ 10,000 $ 990 $ 0 $ 10,990 $ 15,938 $ 15,820 $ 10,822
1992 $ 10,000 $ 705 $ 0 $ 10,705 $ 13,832 $ 13,704 $ 10,531
1991* $ 10,000 $ 303 $ 0 $ 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 in Spartan
Municipal Money 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 and capital
gain distributions for the period covered (their cash value at the
time they were reinvested) amounted to $ 12,900 . If
distributions had not been reinvested, the amount of distributions
earned from the fund over time would have been smaller, and cash
payments for the period would have amounted to $ 2,550 for
dividends. The fund did not distribute any capital gains during the
period. The figures in the table do not include the effect of the
fund's $5.00 account closeout fee.
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 trading fees into consideration, and are
prepared without regard to tax consequences. Lipper may also rank
based on yield. In addition to the mutual fund rankings, a fund's
performance may be compared to stock, bond, and money market mutual
fund performance indices prepared by Lipper or other organizations.
When comparing these indices, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry
the highest degree of share price volatility. Likewise, money market
funds may offer greater stability of principal, but generally do not
offer the higher potential returns 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, a 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; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC Financial Data, Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. IBC's MONEY FUND REPORT AVERAGES(trademark)/All
Tax-Free, which is reported in IBC's MONEY FUND REPORT(trademark),
covers over 436 tax-free money market funds.
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; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
A fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
As of August 31, 1998, FMR advised over $ 32 billion in
municipal fund assets, $ 113 billion in money market fund
assets, $ 389 billion in equity fund assets, $ 61 billion
in international fund assets, and $ 27 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, a 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, EXCHANGE AND REDEMPTION INFORMATION
Each fund is open for business and its NAV is calculated each day the
NYSE is open for trading. The NYSE has designated the following
holiday closings for 1998: New Year's Day, Martin Luther King's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule to be observed in the future,
the NYSE may modify its holiday schedule at any time. In addition, on
days when the Federal Reserve Wire System is closed, federal funds
wires cannot be sent.
FSC normally determines Spartan Municipal Money's NAV as of the close
of the NYSE (normally 4:00 p.m. Eastern time). FSC normally calculates
Municipal Money Market's NAV twice each business day, once at 12:00
noon Eastern time and once 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, 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 each fund's NAV. Shareholders receiving securities
or other property on redemption may realize a gain or loss for tax
purposes, and will incur any costs of sale, as well as the associated
inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules
and regulations thereunder, or the fund to be acquired suspends the
sale of its shares because it is unable to invest amounts effectively
in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the
fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
DISTRIBUTIONS AND TAXES
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. 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 each
fund's policies of investing so that at least 80% of its income is
free from federal income tax. Interest from private activity
securities is a tax preference item for the purposes of determining
whether a taxpayer is subject to the AMT and the amount of AMT to be
paid, if any. Private activity securities issued after August 7, 1986
to benefit a private or industrial user or to finance a private
facility are affected by this rule.
A portion of the gain on municipal bonds purchased with market
discount after April 30, 1993 and short-term capital gains distributed
by a municipal 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 each fund's policy of investing so that at least 80% of
its income is free from federal income tax. Each fund may distribute
any net realized short-term capital gains and taxable market discount
once a year or more often, as necessary, to maintain its NAV at $1.00.
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 the exempt-interest
dividend.
CAPITAL GAIN DISTRIBUTIONS. Each fund may distribute any net realized
short-term capital gains once a year or more often as necessary, to
maintain its NAV at $1.00. The funds do not anticipate distributing
long-term capital gains.
As of August 31, 1998, Municipal Money Market had a capital loss
carryforward aggregating approximately $ 486,000 . This loss
carryforward, all of which will expire on August 31,
2004 , is available to offset future capital gains.
As of August 31, 1998, Spartan Municipal Money had a capital loss
carryforward aggregating approximately $ 308,000 . This loss
carryforward, of which $ 1,000 , $ 1,000 , $46,000,
$26,000, $125,000, $14,000, and $ 95,000, will expire on
August 31, 199 9 , 2001, 2002, 2003, 2004, 2005 , and
2006 , respectively, 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, and intends to comply with
other tax rules applicable to regulated investment companies.
Each fund is treated as a separate entity from the other funds, if
any, of its 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 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (68), 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD (57), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (66), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (66), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (55), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES (70), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc. (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (65), 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, Inc., Chairman
of the Board of Trustees of the Greenwich Hospital Association,
Director of the Yale-New Haven Health Services Corp. (1998), 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 (55), Trustee, is Vice Chairman and Director of FMR.
Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.
WILLIAM O. McCOY (65), 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 (69), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board 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 Imation Corp. (imaging and
information storage, 1997).
*ROBERT C. POZEN (52), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (70), Trustee, is President of The Wales Group,
Inc. (management and financial advisory services). Prior to retiring
in 1987, Mr. Williams served as Chairman of the Board of First
Wachovia Corporation (bank holding company), and Chairman and Chief
Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a Director
of ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
BOYCE I. GREER (42), is Vice President of Money Market Funds (1997),
Group Leader of the Money Market Group (1997), Senior Vice President
of FMR (1997), and Vice President of FIMM (1998). Mr. Greer served as
the Leader of the Fixed-Income Group for Fidelity Management Trust
Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).
FRED L. HENNING, JR. (59), is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995), and
Senior Vice President of FIMM (1998). Before assuming his current
responsibilities, Mr. Henning was head of Fidelity's Money Market
Division.
DIANE McLAUGHLIN (35), is Vice President of Fidelity Municipal Money
Market (1997) and Spartan Municipal Money (1997) and an employee of
FMR (1992).
ERIC D. ROITER (50), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
STANLEY N. GRIFFITH ( 52 ), Assistant Vice President
(1998) , is Assistant Vice President of Fidelity's Fixed-Income
Funds (1998) and an employee of FMR Corp .
JOHN H. COSTELLO (52), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (52), 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 (40), Assistant Treasurer (1996) , is
Assistant Treasurer of Fidelity's Fixed-Income Funds
(199 8 ) and an employee of FMR (1996). Prior to joining FMR, Mr.
Simpson was Vice President and Fund Controller of Liberty Investment
Services (1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended August 31, 1998, or calendar
year ended December 31, 1997, as applicable.
COMPENSATION TABLE
Trustees Aggregate Aggregate Total
and Compensation Compensation Compensation
Members of the from from from the
Advisory Board Municipal Money Spartan Municipal Fund Complex*A
MarketB MoneyB
J. Gary $ 0 $ 0 $ 0
Burkhead**
Ralph F. Cox $ 1,602 $ 832 $ 214,500
Phyllis Burke $ 1,602 $ 832 $ 210,000
Davis
Robert M. $ 1,346 $ 840 $176,000
Gates***
Edward C. $ 0 $ 0 $ 0
Johnson 3d**
E. Bradley $ 1,613 $ 837 $ 211,500
Jones
Donald J. Kirk $ 1,624 $ 842 $ 211,500
Peter S. $ 0 $ 0 $ 0
Lynch**
William O. $ 1,346 $ 840 $ 214,500
McCoy****
Gerald C. $ 1,997 $ 1,037 $ 264,500
McDonough
Marvin L. $ 1,591 $ 825 $ 214,500
Mann
Robert C. $ 0 $ 0 $ 0
Pozen**
Thomas R. $ 1,613 $ 837 $214,500
Williams
* Information is for the calendar year ended December 31, 1997
for 230 funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
*** Mr. Gates was elected to the Board of Trustees Fidelity
Union Street Trust II on September 17, 1997.
**** Mr. McCoy was elected to the Board of Trustees Fidelity Union
Street Trust II on September 17, 1997.
A Compensation figures include cash, amounts required to be
deferred, and may include amounts deferred at the election of
Trustees. For the calendar year ended December 31, 1997, the Trustees
accrued required deferred compensation from the funds as follows:
Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates,
$62,500; E. Bradley Jones, $75,000; Donald J. Kirk, $75,000; William
O. McCoy, $75,000; Gerald C. McDonough, $87,500; Marvin L. Mann,
$75,000; and Thomas R. Williams, $75,000. Certain of the
non-interested Trustees elected voluntarily to defer a portion of
their compensation as follows: Ralph F. Cox, $53,699; Marvin L. Mann,
$53,699; and Thomas R. Williams, $62,462.
B Compensation figures include cash.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of August 31 , 1998, the Trustees, Members of the Advisory
Board, and officers of each fund owned, in the aggregate, less than
1 % of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant to
which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of 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 the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the fund's investments,
compensates all officers of each fund and all Trustees who are
"interested persons" of the trust 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 securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES (MUNICIPAL MONEY MARKET). In addition to
the management fee payable to FMR and the fees payable to the
transfer, dividend disbursing, and shareholder servicing agent, and
pricing and bookkeeping agent, the fund pays all of its expenses that
are not assumed by those parties. The fund pays for the typesetting,
printing, and mailing of its proxy materials to shareholders, legal
expenses, and the fees of the custodian, auditor and non-interested
Trustees. The fund's management contract further provides that the
fund will pay for typesetting, printing, and mailing prospectuses,
statements of additional information, notices, and reports to
shareholders; however, under the terms of each fund's transfer agent
agreement, the transfer agent bears the costs of providing these
services to existing shareholders. Other expenses paid by the fund
include interest, taxes, brokerage commissions, the fund's
proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal
securities laws and making necessary filings under state securities
laws. The fund is also liable for such non-recurring expenses as may
arise, including costs of any litigation to which the fund may be a
party, and any obligation it may have to indemnify its officers and
Trustees with respect to litigation.
MANAGEMENT-RELATED EXPENSES (SPARTAN MUNICIPAL MONEY). Under the terms
of its management contract with the fund, FMR is responsible for
payment of all operating expenses of the fund with certain exceptions.
Specific expenses payable by FMR include expenses for typesetting,
printing, and mailing proxy materials to shareholders, legal expenses,
fees of the custodian, auditor and interested Trustees, the fund's
proportionate share of insurance premiums and Investment Company
Institute dues, and the costs of registering shares under federal
securities laws and making necessary filings under state securities
laws. The fund's management contract further provides that FMR will
pay for typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to shareholders; however,
under the terms of the fund's transfer agent agreement, the transfer
agent bears the costs of providing these services to existing
shareholders. FMR also pays all fees associated with transfer agent,
dividend disbursing, and shareholder services, and pricing and
bookkeeping services.
FMR pays all other expenses of Spartan Municipal Money with the
following exceptions: fees and expenses of the non-interested
Trustees, interest, taxes, brokerage commissions (if any), and such
nonrecurring expenses as may arise, including costs of any litigation
to which the fund may be a party, and any obligation it may have to
indemnify its officers and Trustees with respect to litigation.
MANAGEMENT FEES. For the services of FMR under the management
contract, Spartan Municipal Money pays FMR a monthly management fee at
the annual rate of .50% of its average net assets throughout the
month.
The management fee paid to FMR by Spartan Municipal Money is reduced
by an amount equal to the fees and expenses paid by the fund to the
non-interested Trustees.
For the services of FMR under the management contract, Municipal Money
Market pays FMR a monthly management fee which has two components: a
group fee rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all
of the registered investment companies with which FMR has management
contracts.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual Fee
Assets Rate Assets 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 .1690
24 - 30 .1800 200 .1652
30 - 36 .1750 225 .1618
36 - 42 .1700 250 .1587
42 - 48 .1650 275 .1560
48 - 66 .1600 300 .1536
66 - 84 .1550 325 .1514
84 - 120 .1500 350 .1494
120 - 156 .1450 375 .1476
156 - 192 .1400 400 .1459
192 - 228 .1350 425 .1443
228 - 264 .1300 450 .1427
264 - 300 .1275 475 .1413
300 - 336 .1250 500 .1399
336 - 372 .1225 525 .1385
372 - 408 .1200 550 .1372
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
The group fee rate is calculated on a cumulative basis pursuant to the
graduated fee rate schedule shown above on the left. The schedule
above on the right shows the effective annual group fee rate at
various asset levels, which is the result of cumulatively applying the
annualized rates on the left. For example, the effective annual fee
rate at $ 618 billion of group net assets - the approximate
level for August 1998 - was 0. 1342 %, which is the weighted
average of the respective fee rates for each level of group net assets
up to $ 618 billion.
The individual fund fee rate for Municipal Money Market is 0.15%.
Based on the average group net assets of the funds advised by FMR for
August 1998, the fund's annual management fee rate would be calculated
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
Municipal Money Market 0.1342 % + 0.15% = 0 . 2842 %
</TABLE>
One-twelfth of this annual management fee rate is applied to the
fund's net assets averaged for the most recent month, giving a dollar
amount, which is the fee for that month.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years, and the amount of credits
reducing management fees for Spartan Municipal Money.
Fund Fiscal Years Ended Amount of Management Fees
August 31 Credits Reducing Paid to FMR
Management Fees
Municipal 1998 N/A $ 11,006,000
Money
Market
1997** N/A $ 11,448,000
1996** N/A $ 10,874,000
Spartan 1998 $ 188,000 $ 9,043,000 *
Municipal
Money
1997 $ 90,000 $ 9,537,000 *
1996 $ 198,000 $ 8,913,000 *
* After reimbursement and reduction of fees and expenses paid
by the fund to the non-interested Trustees.
** Fiscal years ended October 31.
FMR may, from time to time, voluntarily reimburse all or a portion of
a fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses) which is subject to revision
or termination. 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 a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
Effective August 1, 1994, FMR voluntarily agreed to reimburse Spartan
Municipal Money if and to the extent that its aggregate operating
expenses, including management fees, were in excess of an annual rate
of .40% of its average net assets. For the fiscal years ended August
31, 1998, 1997, and 1996, management fees incurred under the fund's
contract prior to reimbursement amounted to $ 11,541,000 ,
$ 12,041,000 , and $ 11,391,000 , respectively, and
management fees reimbursed by FMR amounted to $ 2,310,000 ,
$ 2,414,000 , and $ 2,280,000 , respectively.
To defray shareholder service costs, FMR or its affiliates also
collect Spartan Municipal Money's $5.00 exchange fee, $5.00 account
closeout fee, $5.00 fee for wire purchases and redemptions, and $2.00
checkwriting charge. Shareholder transaction fees and charges
collected by FMR are shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Ended Exchange Fees Account Wire Fees Checkwriting
August 31 Closeout Fees Charges
Spartan 1998 $ 6,000 $ 2,000 $ 1,000 $ 11,000
Municipal
Money
1997 $ 6,000 $ 1,000 $ 1,000 $ 9,000
1996 $ 10,000 $ 3,000 $ 2,000 $ 15,000
</TABLE>
SUB-ADVISER. FMR has entered into a sub-advisory agreement with FIMM
pursuant to which FIMM has primary responsibility for providing
portfolio investment management services to the funds. Previously, FMR
Texas Inc. (FMR Texas) had primary responsibility for providing
investment management services to the funds. On January 23, 1998, FMR
Texas was merged into FIMM, which succeeded to the operations of FMR
Texas.
Under the terms of the sub-advisory agreements, FMR pays FIMM fees
equal to 50% of the management fee payable to FMR under its management
contract with each fund. The fees paid to FIMM are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect
from time to time.
Fees paid to F MR Texas and FIMM by FMR on behalf of the funds
for the past three fiscal years are shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Year Ended August 31 Fees Paid to FIMM Fees Paid to F MR Texas
Municipal 1998 $ 3,332,000 $ 2,171,000
Money
Market
1997 * $ 0 $ 5,724,000
1996 * $ 0 $ 5,437,000
Spartan 1998 $ 3,494,000 $ 2,277,000
Municipal
Money
1997 $ 0 $ 6,021,000
1996 $ 0 $ 5,696,000
</TABLE>
* Fiscal years ended October 31.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
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 fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, each Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees has authorized such
payments for Municipal Money Market and Spartan Municipal
Money shares .
FMR made no payments either directly or through FDC to third
parties for the fiscal year ended 1998 .
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, 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.
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 other 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
Each fund has entered into a transfer agent agreement with UMB. Under
the terms of the agreements, UMB provides transfer agency, dividend
disbursing, and shareholder services for each fund. UMB in turn has
entered into sub-transfer agent agreements with FSC, an affiliate of
FMR. Under the terms of the sub-agreements, FSC performs all
processing activities associated with providing these services for
each fund and receives all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in a fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state tuition
program (QSTP), as defined under the Small Business Job Protection Act
of 1996, managed by FMR or an affiliate and each Fidelity Freedom
Fund, a fund of funds managed by an FMR affiliate, according to the
percentage of the QSTP's or Freedom Fund's assets that is invested in
a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
FSC has entered into a sub-agreement with Fidelity Brokerage Services,
Inc. (FBSI), an affiliate of FMR. Under the terms of this
sub-agreement, FBSI performs certain recordkeeping, communication, and
other services for shareholders of Municipal Money Market
participating in the Fidelity Ultra Service Account program. FBSI
directly charges a monthly administrative fee to each Ultra Service
Account client who chooses certain additional features. This fee is in
addition to the transfer agency fee received by FSC.
Each fund has also entered into a service agent agreement with UMB.
Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into
sub-service agent agreements with FSC. Under the terms of the
sub-agreements, FSC performs all processing activities associated with
providing these services, including calculating the NAV and dividends
for each fund and maintaining each fund's portfolio and general
accounting records, and receives all related pricing and bookkeeping
fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month. The annual fee rates for pricing and bookkeeping services are
.0175% of the first $500 million of average net assets and .0075% of
average net assets in excess of $500 million. The fee, not including
reimbursement for out-of-pocket expenses, is limited to a minimum of
$40,000 and a maximum of $800,000 per year.
Pricing and bookkeeping fees, including reimbursement for
out-of-pocket expenses, paid by Municipal Money Market to FSC for the
fiscal period ended August 31, 1998 and the fiscal years ended
October 31, 1997 and 1996 are shown in the table below.
Fund 1998 1997 1996
Municipal $ 415,000 $ 451,000 $ 402,000
Money
Market
For Spartan Municipal Money, FMR bears the cost of transfer agency,
dividend disbursing, and shareholder services and pricing and
bookkeeping services under the terms of its management contract with
the fund.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Municipal Money Market Fund and Spartan
Municipal Money Fund are funds of Fidelity Union Street Trust II, an
open-end management investment company organized as a Delaware
business trust on June 20, 1991. Currently, there are four funds of
Fidelity Union Street Trust II: Fidelity Municipal Money Market Fund,
Spartan Municipal Money Fund, Fidelity Daily Income Trust, and Spartan
Arizona Municipal Money Market Fund. The Trust Instrument permits the
Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote
possibility that one fund might become liable for any misstatement in
its prospectus or statement of additional information about another
fund.
The assets of 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 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 trust and requires that a disclaimer be given in each
contract entered into or executed by the trust or the 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, if they have
exercised reasonable care, shall not be personally liable to any
person other than the 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. 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 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 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, or 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 trust or the fund, as determined by the current
value of each shareholder's investment in the fund or trust; however,
the Trustees may, without prior shareholder approval, change the form
of organization of the trust by merger, consolidation, or
incorporation. If not so terminated or reorganized, the trust and its
funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder
vote, cause the trust to merge or consolidate into one or more trusts,
partnerships, or corporations, or cause the trust to be incorporated
under Delaware law, so long as the surviving entity is an open-end
management investment company that will succeed to or assume the trust
registration statement. 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 funds. 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. PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts serves as each fund's 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 period ended August 31, 1998 (for Municipal Money Market) and
for the fiscal year ended August 31, 1998 (for Spartan Municipal
Money), and reports of the auditor, are included in each fund's Annual
Report, which are separate reports supplied with this SAI. The funds'
financial statements, including the financial highlights, and reports
of the auditor are incorporated herein by reference. For a free
additional copy of a fund's Annual Report, contact Fidelity at
1-800-544-8888, 82 Devonshire Street, Boston, MA 02109.
APPENDIX
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 MUNICIPAL
OBLIGATIONS
Moody's ratings for short-term municipal obligations will be
designated Moody's Investment Grade ("MIG"). A two-component rating is
assigned to variable rate demand obligations. The first component
represents an evaluation of the degree of risk associated with
scheduled principal repayment and interest payments and is designated
by a long-term rating, e.g., "Aaa" or "A." The second component
represents an evaluation of the degree of risk associated with the
demand feature and is designated "VMIG."
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.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL NOTES
Municipal notes maturing in three years or less will likely receive a
"note" rating symbol. Notes that have a put option or demand feature
are assigned a dual rating. The first rating addresses the likelihood
of repayment of principal and payment of interest due and for
short-term obligations is designated by a note rating symbol. The
second rating addresses only the demand feature, and is designated by
a commercial paper rating symbol, e.g., "A-1" or "A-2."
SP-1 - Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are 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.
TRADEMARKS
Spartan, Fidelity , and Fidelity Focus are registered trademarks
of FMR Corp.
The third-party marks appearing above are the marks of their
respective owners.
FIDELITY UNION STREET TRUST II
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1...................................... Cover Page
2a.................................... Expenses
b, c................................ Contents; The Funds at a Glance; Who May Want to
Invest
3a.................................... Financial Highlights
b.................................... *
c, d................................ Performance
4a (i).............................. Charter
(ii)............................ The Funds at a Glance; Investment Principles and
Risks; Securities and Investment Practices;
Fundamental Investment Policies and Restrictions
b.................................... Investment Principles and Risks
c.................................... Who May Want to Invest; Investment Principles and
Risks; Securities and Investment Practices
5a.................................... Charter
b (i)............................... Cover Page; The Funds at a Glance; Charter; Doing
Business with Fidelity
(ii)............................. Charter
(iii)........................... Expenses; Breakdown of Expenses
c.................................... Charter
d.................................... Charter; Breakdown of Expenses
e.................................... Cover Page; Charter
f.................................... Expenses
g (i)................................ Charter
(ii)............................... *
5A.................................. *
6a (i).............................. Charter
(ii)............................. How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange Restrictions
(iii)............................ Charter
b................................... Charter
c.................................... Transaction Details; Exchange Restrictions
d.................................... *
e.................................... Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g................................ Dividends, Capital Gains, and Taxes
h................................ *
7a.................................... Cover Page; Charter
b.................................... Expenses; How to Buy Shares; Transaction Details
c.................................... *
d.................................... How to Buy Shares
e................................... *
f.................................... Breakdown of Expenses
8...................................... How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9...................................... *
</TABLE>
* Not Applicable
FIDELITY UNION STREET TRUST II
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10.................................... Cover Page
11................................... Cover Page
12.................................... Description of the Trust
13a- c............................ Investment Policies and Limitations
d.................................. *
14a- c............................ Trustees and Officers
15a-c.............................. Trustees and Officers
16a (i)............................ FMR; Portfolio Transactions
(ii)........................... Trustees and Officers
(iii).......................... Management Contracts
b................................. Management Contracts
c, d.............................. Contracts with FMR Affiliates
e.............................. Management Contracts
f............................... Distribution and Service Plans
g.............................. *
h.................................. Description of the Trusts
i.................................. Contracts with FMR Affiliates
17a-c.............................. Portfolio Transactions
d,e............................... *
18a.................................. Description of the Trusts
b.................................. *
19a.................................. Additional Purchase, Exchange and Redemption
Information
b.................................. Valuation; Additional Purchase, Exchange and
Redemption Information
c.................................. *
20.................................... Distributions and Taxes
21a, b.............................. Contracts with FMR Affiliates
c. ................................ *
22a.................................. Performance
b.................................. *
23.................................... Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how
each fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a
copy of each fund's most recent financial report and portfolio
listing, or a copy of the Statement of Additional Information (SAI)
d ated October 20, 1998. 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, cal l Fidelit y(registered trademark) 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.
THE MONEY MARKET FUND MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS
ASSETS IN THE SECURITIES OF A SINGLE ISSUER AND THEREFORE MAY BE
RISKIER THAN OTHER TYPES OF MONEY MARKET FUNDS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES
HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE
COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
AZI/SPZ-PRO-1098
1.536771.101
SPARTAN(REGISTERED TRADEMARK)
ARIZONA MUNICIPAL
FUNDS
Each fund seeks a high level of current income free from federal
income tax and Arizona personal income tax.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
invests in high-quality, short-term municipal money market securities
and is designed to maintain a stable $1.00 share price.
(fund number 433, trading symbol FSAXX)
SPARTAN ARIZONA MUNICIPAL INCOME FUND
seeks to provide higher yields by investing in a broader range of
municipal securities
(fund number 434, trading symbol FSAMI)
PROSPECTUS
OCTOBER 20, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 4 THE FUNDS AT A GLANCE
5 WHO MAY WANT TO INVEST
6 EXPENSES Each fund's yearly operating
expenses.
8 FINANCIAL HIGHLIGHTS A summary of
each fund's financial data.
11 PERFORMANCE How each fund has done
over time.
THE FUNDS IN DETAIL 13 CHARTER How each fund is organized.
13 INVESTMENT PRINCIPLES AND RISKS Each
fund's overall approach to investing.
15 BREAKDOWN OF EXPENSES How
operating costs are calculated and what
they include.
YOUR ACCOUNT 16 DOING BUSINESS WITH FIDELITY
16 TYPES OF ACCOUNTS Different ways to
set up your account.
17 HOW TO BUY SHARES Opening an
account and making additional
investments.
20 HOW TO SELL SHARES Taking money out
and closing your account.
23 INVESTOR SERVICES Services to help you
manage your account.
SHAREHOLDER AND 24 DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES
25 TRANSACTION DETAILS Share price
calculations and the timing of purchases
and redemptions.
26 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946
and is now America's largest mutual fund manager. Fidelity
Investments Money Management Inc. (FIMM), a subsidiary of FMR, chooses
investments for Spartan Arizona Municipal Money Market.
Beginning January 1, 1999, FIMM, will choose investments for
Spartan Arizona Municipal Income.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
SPARTAN AZ MUNI MONEY MARKET
GOAL: High current tax-free income for Arizona residents while
maintaining a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and Arizona
personal income tax.
SIZE: As of August 31, 1998 , the fund had over
$ 94 million in assets.
SPARTAN AZ MUNICIPAL INCOME
GOAL: High current tax-free income for Arizona residents.
STRATEGY: Normally invests in investment-grade municipal
securities whose interest is free from federal income tax and Arizona
personal income tax. FMR uses the Lehman Brothers Arizona Enhanced
Municipal Bond Index as a guide in structuring the fund and selecting
its investments.
SIZE: As of August 31, 1998, the fund had o ver $ 24
million in assets.
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 and Arizona
personal income taxes. Each fund's level of risk and potential
reward depend on the quality and maturity of its investments. The
money market fund is managed to keep its share price stable at $1.00.
The bond fund, with its broader range of investments, has the
potential for higher yields, but also carries a higher degree of risk.
(CHECKMARK)THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking to
maximize return must assume
greater risk. Spartan Arizona
Municipal Money Market is in
the MONEY MARKET category,
and Spartan Arizona
Municipal Income is in the
INCOME 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.
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 the bond fund, they may be worth more or
less than what you paid for them. By themselves, these funds do not
constitute a balanced investment plan.
Spartan Arizona Municipal Income is a non-diversified fund.
Non-diversified funds may invest a greater portion of their assets in
securities of individual issuers than diversified funds. As a result,
changes in the market value of a single issuer could cause greater
fluctuations in share value than would occur in a more diversified
fund.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy,
sell, or exchange shares of a fund. In addition, you may be charged an
annual account maintenance fee if your account balance falls below
$2,500. See "Transaction Details," page , for an explanation of
how and when these charges apply.
Sales charge on purchases None
and
reinvested distributions
Deferred sales charge on None
redemptions
Redemption fee 0.50%
(Short-term trading fee)
on shares held less than
180 days (as a % of
amount redeemed) for
Spartan AZ Municipal
Income only
Exchange fee $5.00
F or Spartan AZ Municipal
Money Market only
Wire transaction fee $5.00
F or Spartan AZ Municipal
Money Market only
Checkwriting fee, per $2.00
check written
F or Spartan AZ Municipal
Money Market only
Account closeout fee $5.00
F or Spartan AZ Municipal
Money Market only
A nnual account $12.00
maintenance fee
(for acc ounts under
$2,500)
THE FEES FOR INDIVIDUAL TRANSACTIONS (except the short-term trading
fee) are waived if your account balance at the time of the transaction
is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets.
Each fund pays a management fee to FMR. FMR is responsible for the
payment of all other expenses for each fund with certain limited
exceptions. Expenses are factored into each fund's share price or
dividends and are not charged directly to shareholder accounts (see
"Breakdown of Expenses" page ).
(CHECKMARK)UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
Each fund's management fee is
paid from the fund's assets,
and its effect is already
factored into any quoted share
price or return. Other expenses
are paid by FMR out of the
fund's management fee. Also,
as an investor, you may pay
certain expenses directly.
The following figures are based on historical expenses , adjusted to
reflect current fees, of each fund and are calculated as a
percentage of average net assets of each fund. FMR has entered into
arrangements on behalf of each fund with the fund's custodian and
transfer agent whereby credits realized as a result of uninvested cash
balances are used to reduce fund expenses. Including these reductions,
the total fund operating expenses presented in the table would have
been 0.5 4% for Spartan Arizona Municipal Income.
SPARTAN AZ MUNI MONEY MARKET
Management fee 0.50%
12b-1 fee None
Other expenses 0.00%
Total fund operating 0.50%
expenses
SPARTAN AZ MUNICIPAL INCOME
Management fee 0.55%
12b-1 fee None
Other expenses 0.00%
Total fund operating 0.55%
expenses
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that your shareholder transaction expenses and each fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated and, for
Spartan Arizona Municipal Money Market, if you leave your account
open:
SPARTAN AZ MUNI MONEY MARKET
Account open Account closed
1 year $ 5 $ 10
3 years $ 16 $ 21
5 years $ 28 $ 33
10 years $ 63 $ 68
SPARTAN AZ MUNICIPAL INCOME
1 year $ 6
3 years $ 18
5 years $ 31
10 years $ 69
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow have been audited by
PricewaterhouseCoopers LLP , independent accountants. The funds'
financial highlights, financial statements, and reports of the auditor
are included in the funds' Annual Report, and are incorporated by
reference into (are legally a part of) the funds' SAI. Contact
Fidelity for a free copy of the Annual Report or the SAI.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET
Selected Per-Share Data and Ratios
Years 1998 1997 1996 1995E
ended August
31
Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000
value,
beginning of
period
Income .034 .033 .035 .034
from
Investment
Operations
Net
interest
income
Less (.034) (.033) (.035) (.034)
distributions
From net
interest
income
Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000
value, end of
period
Total 3.41% 3.39% 3.52% 3.43%
returnB,C
Net $ 94,523 $ 88,134 $ 82,741 $ 52,566
assets, end
of period
(000
omitted)
Ratio of .36%D .35%D .22%D .06%A,D
expenses to
average net
assets
Ratio of 3.36% 3.34% 3.44% 3.91%A
net interest
income to
average
net assets
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 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 OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31,
1995
SPARTAN ARIZONA MUNICIPAL INCOME
Selected Per-Share Data and Ratios
Years 1998 1997 1996 1995F
ended August
31
Net $ 10.740 $ 10.460 $ 10.640 $ 10.000
asset value,
beginning of
period
Income .473 .483 .514 .504
from
Investment
Operations
Net
interest
income
Net .279 .351 (.022) .637
realized and
unrealized
gain (loss)
Total .752 .834 .492 1.141
from
investment
operations
Less (.473) (.484) (.514) (.504)
Distributions
From
net interest
income
From (.040) (.070) (.160) --
net realized
gain
Total (.513) (.554) (.674) (.504)
distributions
Redempt .001 .000 .002 .003
ion fees
added to
paid in
capital
Net $ 10.980 $ 10.740 $ 10.460 $ 10.640
asset value,
end of period
Total 7.16% 8.16% 4.72% 11.74%
returnB,C
Net $ 24,606 $ 19,766 $ 20,388 $ 13,448
assets, end
of period
(000
omitted)
Ratio of .55% .55% .30%D .06%A,D
expenses to
average net
assets
Ratio of .54%E .53%E .30% .06%A
expenses to
average net
assets after
expense
reductions
Ratio of 4.35% 4.55% 4.82% 5.54%A
net interest
to average
net assets
Portfolio 25% 27% 32% 56%A
turnover
rate
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND
FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D 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 FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
F OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31,
1995
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
compared to different measures, including a comparative index and a
competitive funds average for the bond fund and a measure of inflation
for the money market fund. The chart on page presents calendar
year performance for the bond fund.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods Past 1 Life of
ended year fundA
August 31,
1998
SPARTAN 3.41% 3.54%
ARIZONA
MUNICIPAL
MONEY
MARKETB
Consumer 1.62 % n/a
Price Index
SPARTAN 7.16% 8.15%
ARIZONA
MUNICIPAL
INCOMEB
Lehman 7.98% N/A
Brothers
Arizona
Enhanced
Municipal
Bond Index
Lipper 7.87% N/A
Arizona
Municipal
Debt Funds
Average
CUMULATIVE TOTAL RETURNS
Fiscal periods Past 1 Life of
ended year fundA
August 31,
1998
SPARTAN 3.41% 14.49%
ARIZONA
MUNICIPAL
MONEY
MARKETB
Consumer 1.62 % n/a
Price Index
SPARTAN 7.16% 35.63%
ARIZONA
MUNICIPAL
INCOMEB
Lehman 7.98% N/A
Brothers
Arizona
Enhanced
Municipal
Bond Index
Lipper 7.87% N/A
Arizona
Municipal
Debt Funds
Average
A FROM COMMENCEMENT OF OPERATIONS: OCTOBER 11, 1994
B IF FMR HAD NOT REIMBURSED CERTAIN FUND EXPENSES DURING THESE
PERIODS, YIELDS AND TOTAL RETURNS WOULD HAVE BEEN LOWER.
(CHECKMARK)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.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1995 1996 1997
SPARTAN ARIZONA
MUNICIPAL INCOME 18.49% 3.51% 7.97%
Lehman Brothers AZ Enhanced
Municipal Bond Index 17.85% 3.89% 8.42%
Lipper AZ Municipal Debt Fund
Average Funds Average 17.48% 3.39% 8.59%
Consumer Price Index 2.54% 3.32% 1.70%
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: 18.49
Row: 9, Col: 1, Value: 3.51
Row: 10, Col: 1, Value: 7.97
(LARGE SOLID BOX) Spartan AZ
Municipal Income
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in 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 fund 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 ARIZONA ENHANCED MUNICIPAL BOND INDEX is a total
return performance benchmark for Arizona investment-grade municipal
bonds with maturities of at least one year.
Unlike the fund's returns, the total returns of the comparative index
do not include the effect of any brokerage commissions, transaction
fees, or other costs of investing.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Arizona Municipal Debt
Funds Average for Spartan Arizona Municipal Income. As of August 31,
1998, the average reflected the performance of 39 mutual funds
with similar investment objectives. This average, published by Lipper
Analytical Services, Inc., excludes the effect of sales loads.
The funds' recent strategies, performance, and holdings are detailed
twice a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. Spartan Arizona
Municipal Income Fund is a non-diversified fund of Fidelity Union
Street Trust, and Spartan Arizona Municipal Money Market Fund i s a
diversified fu nd of Fidelity Union Street Trust II. Both trusts
are open-end management investment companies. Fidelity Union Street
Trust was organized as a Massachusetts business trust on March 1,
1974. Fidelity Union Street Trust II was organized as a Delaware
business trust on June 20, 1991. There is a remote possibility that
one fund might become liable for a misstatement in the prospectus
about another fund.
THE FUNDS MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The funds are managed by FMR, which chooses their investments and
handles their business affairs.
FIMM, located in Merrimack, New Hampshire, has primary
responsibility for providing investment management services for the
money market fund.
Beginning January 1, 1999, FIMM will have primary
responsibility for providing investment management services for
Spartan Arizona Municipal Income.
(CHECKMARK)FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds in
the world.
(solid bullet) Number of Fidelity mutual
funds: over 220
(solid bullet) Assets in Fidelity mutual
funds: over $ 546 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 250
Christine Thompson is Vice President and manager of Spartan Arizona
Municipal Income, which she has managed since July 1998. She also
manages several other Fidelity funds. Since joining Fidelity in 1985,
Ms. Thompson has worked as a senior analyst and portfolio manager.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
UMB Bank, n.a. (UMB) is each fund's transfer agent, and is located at
1010 Grand Avenue, Kansas City, Missouri. UMB employs Fidelity Service
Company, Inc. (FSC) to perform transfer agent servicing functions for
each fund.
FMR Corp. is the ultimate parent company of FMR and FIMM. Members of
the Edward C. Johnson 3d family are the predominant owners of a class
of shares of common stock representing approximately 49% of the voting
power of FMR Corp. Under the Investment Company Act of 1940 (the 1940
Act), control of a company is presumed where one individual or group
of individuals owns more than 25% of the voting stock of that company;
therefore, the Johnson family may be deemed under the 1940 Act to form
a controlling group with respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out 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
MONEY MARKET FUNDS IN GENERAL. The yield of a money market fund will
change daily based on changes in interest rates and market conditions.
Money market funds comply with industry-standard requirements for the
quality, maturity, and diversification of their investments, which are
designed to help maintain a stable $1.00 share price. Of course, there
is no guarantee that a money market fund will be able to maintain a
stable $1.00 share price. It is possible that a major change in
interest rates or a default on a money market fund's investments could
cause its share price (and the value of your investment) to change.
FIDELITY'S APPROACH TO MONEY MARKET FUNDS. Money market funds earn
income at current money market rates. In managing money market funds,
FMR stresses preservation of capital, liquidity, and income. The money
market fund will purchase only high-quality securities that FMR
believes present minimal credit risks and will observe maturity
restrictions on securities it buys.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET seeks to earn high current
income that is free from federal income tax and the Arizona personal
income tax while maintaining a stable $1.00 share price by investing
in high-quality, short-term municipal securities of all types,
including securities structured so that they are eligible investments
for the fund. FMR normally invests at least 65% of the fund's total
assets in state municipal securities, and normally invests at least
80% of the fund's assets in municipal securities whose interest is
free from federal income tax. FMR may invest all of the fund's assets
in municipal securities issued to finance private activities. The
interest from these investments is a tax-preference item for purposes
of the federal alternative minimum tax.
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.
The total return from a bond includes both income and 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.
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. The credit quality of many
municipal securities is enhanced by insurance guaranteeing the timely
payment of interest and repayment of principal. Due to the relatively
small number of municipal insurers, changes in the financial condition
of an individual municipal insurance provider may affect the municipal
market as a whole.
FIDELITY'S APPROACH TO BOND FUNDS. In managing bond funds, FMR selects
a benchmark index that is representative of the universe of securities
in which the fund invests. FMR uses this benchmark as a guide
in structuring the fund and selecting its investments.
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.
FMR focuses on assembling a portfolio of income-producing bonds that
it believes will provide the best balance between risk and return
within the universe of securities in which a fund may invest. 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.
SPARTAN ARIZONA MUNICIPAL INCOME seeks high current income that is
free from federal income tax and Arizona personal income tax by
investing in investment-grade municipal securities under normal
conditions. The benchmark index for the fund is the Lehman Brothers
Arizona Enhanced Municipal Bond Index, a benchmark of Arizona
investment-grade municipal bonds with maturities of one year or more.
FMR manages the fund to have similar overall interest rate risk to the
index. As of August 31, 1998, the dollar-weighted average maturity of
the fund and the index was approximately 11.2 and 12.0
years, respectively .
FMR normally invests at least 65% of the fund's total assets in state
municipal securities, and normally invests at least 80% of the fund's
assets in municipal securities whose interest is free from federal
income tax. FMR may invest all of the fund's assets in municipal
securities issued to finance private activities. The interest from
these securities is a tax preference item for purposes of the federal
alternative minimum tax.
The funds differ primarily with respect to the level of income
provided and the stability of their share price. The money market fund
seeks to provide income while maintaining a stable share price. The
bond fund seeks to provide a higher level of income by investing in a
broader range of securities. As a result, the bond fund does not seek
to maintain a stable share price. In addition, because the money
market fund concentrates its investments in Arizona municipal
securities, an investment in the money market fund may be riskier than
an investment in other types of money market funds.
Each fund's performance is affected by the economic and political
conditions within the state of Arizona. Arizona's economy recovered
from a slowdown in growth of the late 80s and early 90s with a strong
economic expansio n. However, economic conditions within the
state are expected to moderate over the next two fiscal years.
FMR may use various investment techniques to hedge a portion of the
bond fund's risks, but there is no guarantee that these strategies
will work as FMR intends. When you sell your shares of the bond fund,
they may be worth more or less than what you paid for them.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond fund does 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 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 funds' SAI. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a
subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with a 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 each fund's financial reports, which are sent to
shareholders twice a year.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers
to borrow money from investors. The issuer generally pays the investor
a fixed, variable, or floating rate of interest, and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from
their face values.
Debt securities have varying levels of sensitivity to changes in
interest rates and varying degrees of credit quality. In general, bond
prices rise when interest rates fall, and fall when interest rates
rise. Longer-term bonds and zero coupon bonds are generally more
sensitive to interest rate changes.
In addition, bond prices are also affected by the credit quality of
the issuer. Investment-grade debt securities are medium- and
high-quality securities. Some, however, may possess speculative
characteristics, and may be more sensitive to economic changes and to
changes in the financial condition of issuers.
RESTRICTIONS: Spartan Arizona Municipal Income normally invests in
investment-grade securities, but reserves the right to invest up to 5%
of its assets in below investment-grade securities (sometimes called
"junk bonds"). A security is considered to be investment-grade if it
is rated investment-grade by Moody's Investors Service, Standard &
Poor's, Duff & Phelps Credit Rating Co., or Fitch IBCA, Inc., or is
unrated but judged by FMR to be of equivalent quality.
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. Money market securities may be structured to be, or
may employ a trust or other form so that they are, eligible
investments for money market funds. If a structure fails to function
as intended, adverse tax or investment consequences may result.
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 a 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 a 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.
STATE MUNICIPAL SECURITIES include municipal obligations issued by the
state of Arizona or its counties, municipalities, authorities, or
other subdivisions. The ability of issuers to repay their debt can be
affected by many factors that impact the economic vitality of either
the state or a region within the state.
Other state municipal securities include obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, Puerto
Rico, and their political subdivisions and public corporations. The
economy of Puerto Rico is closely linked to the U.S. economy and will
be affected by the strength of the U.S. dollar, interest rates, the
price stability of oil imports, and the continued existence of
favorable tax incentives.
ASSET-BACKED SECURITIES include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. The value of these securities depends on many factors,
including changes in interest rates, the availability of information
concerning the pool and its structure, the credit quality of the
underlying assets, the market's perception of the servicer of the
pool, and any credit enhancement provided. In addition, these
securities may be subject to prepayment risk.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a
benchmark rate changes. Inverse floaters have interest rates that move
in the opposite direction from a benchmark, often making the
security's market value more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire
land, equipment, or facilities. If the municipality stops making
payments or transfers its obligations to a private entity, the
obligation could lose value or become taxable.
PUT FEATURES entitle the holder to put (sell back) a security to the
issuer or another party. In exchange for this benefit, 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, or other factors that affect security values. These
techniques may involve derivative transactions such as buying and
selling options and futures contracts, and purchasing indexed
securities.
FMR can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If FMR judges
market conditions incorrectly or employs a strategy that does not
correlate well with 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 invest more than 10% of its assets in
illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
OTHER INSTRUMENTS may include real estate-related
instruments.
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.
RESTRICTIONS: Spartan Arizona Municipal Income does not
currently intend to invest in a money market fund.
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 its total assets,
Spartan Arizona Municipal Money Market may not invest more than 5% in
the securities of any one issuer. This limitation does not apply to
U.S. Government securities or to securities of other money market
funds.
Spartan Arizona Municipal Income is considered non-diversified.
Generally, to meet federal tax requirements at the close of each
quarter, each fund 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. These limitations do not apply to U.S.
Government securities or to securities of other investment companies.
Each 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 its affiliates, 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 ARIZONA MUNICIPAL MONEY MARKET seeks as high a level of
current income exempt from federal income tax and Arizona personal
income tax, as is consistent with preservation of capital. The fund
normally invests at least 80% of its assets in municipal securities
whose interest is free from federal income tax.
SPARTAN ARIZONA MUNICIPAL INCOME seeks a high level of current income,
exempt from federal income tax and Arizona personal income tax. The
fund normally invests at least 80% of its assets in municipal
securities whose interest is free from federal income tax.
Each fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the 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 the money market fund.
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 may be
terminated at any time without notice, can decrease a fund's expenses
and boost its performance.
MANAGEMENT FEE
Each fund's management fee is calculated and paid to FMR every month.
FMR pays all of the other expenses of each fund with limited
exceptions. Each of Spartan Arizona Municipal Money Market's and
Spartan Arizona Municipal Income's annual management fee rate is 0.50%
and 0.55%, respectively, of its average net assets. For the fiscal
year ended August 31, 1998, Spartan Arizona Municipal Money Market
Fund paid a management fee of 0.36% of the fund's average net assets,
after reimbursement.
FIMM is Spartan Arizona Municipal Money Market's s sub-adviser
and has primary responsibility for managing its investments. FMR is
responsible for providing other management services. FMR pays FIMM
50% of i ts management fee (before expense reimbursements) for
FIMM's services. FMR paid FIMM and FMR Texas Inc., the predecessor
company to FIMM, fees equal to 0.17% and 0.08% , respectively, of
Spartan Arizona Municipal Money Market's average net assets for the
fiscal year ended August 31, 1998.
Beginning January 1, 1999, FIMM will have primary responsibility
for managing Spartan Arizona Municipal Income's investments. FMR will
pay FIMM 50% of its management fee (before expense reimbursements) for
FIMM's services.
UMB is the transfer and service agent for the funds. UMB has entered
into sub-agreements with FSC under which FSC performs transfer agency,
dividend disbursing, shareholder servicing, and accounting functions
for the funds. These services include processing shareholder
transactions, valuing each fund's investments, and calculating each
fund's share price and dividends. FMR, not the funds, pays for these
services.
Under the terms of the sub-agreements, FSC receives all related fees
paid to UMB on behalf of each fund.
Each fund also pays other expenses, such as brokerage fees and
commissions, interest on borrowings, taxes, and the compensation of
trustees who are not affiliated with Fidelity.
To offset shareholder service costs, FMR or its affiliates also
collect Spartan Arizona Municipal Money Market's $5.00 exchange fee,
$5.00 account closeout fee, $5.00 fee for wire purchases and
redemptions, and the $2.00 checkwriting charge.
Each fund has adopted a DISTRIBUTION AND SERVICE PLAN. Each plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has authorized such payments.
For the fiscal year ended August 31, 1998, the portfolio turnover rate
for Spartan Arizona Municipal Income was 25 %. Portfolio
turnover rate for the bond fund will vary from year to year.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of
America's first mutual funds. Today, Fidelity is the largest mutual
fund company in the country, and is known as an innovative provider of
high-quality financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage
Services, Inc. (FBSI). Fidelity is also a leader in providing
tax-advantaged 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 and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
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.
You may purchase 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 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 a fund. Certain features of
the fund, such as the minimum initial or subsequent investment
amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed in the table that follows.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of each fund is the fund's net asset value
per share (NAV). The money market fund is managed to keep its NAV
stable at $1.00. Each fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. Each fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
Each fund 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.
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 or visit Fidelity's
Web site at www.fidelity.com for an application.
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
Spartan AZ Municipal Money Market $25,000
Spartan AZ Municipal Income $10,000
TO ADD TO AN ACCOUNT $1,000
Through regular investment plansA $500
MINIMUM BALANCE
Spartan AZ Municipal Money Market $10,000
Spartan AZ Municipal Income $5,000
A FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER
TO "INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio Advisory
ServicesSM or a qualified state tuition program. Refer to the program
materials for details. In addition, each fund reserves the right to
waive or lower investment minimums in other circumstances.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN TO ADD TO
AN AN
ACCOUNT ACCOUNT
PHONE 1-800-544-7777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM
ANOTHER FIDELITY ANOTHER FIDELITY
FUND ACCOUNT FUND ACCOUNT
WITH THE SAME WITH THE SAME
REGISTRATION, REGISTRATION,
INCLUDING NAME, INCLUDING NAME,
ADDRESS, AND ADDRESS, AND
TAXPAYER ID TAXPAYER ID
NUMBER. NUMBER.
(SMALL SOLID BULLET) USE FIDELITY
MONEY LINE TO
TRANSFER FROM
YOUR BANK
ACCOUNT. CALL
BEFORE YOUR FIRST
USE TO VERIFY
THAT THIS SERVICE
IS IN PLACE ON
YOUR ACCOUNT.
MAXIMUM
MONEY LINE: UP
TO $100,000.
THE INTERNET WWW.FIDELITY.COM
(COMPUTER GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM
SIGN THE ANOTHER FIDELITY
APPLICATION. FUND ACCOUNT
MAKE YOUR WITH THE SAME
CHECK PAYABLE REGISTRATION,
TO THE COMPLETE INCLUDING NAME,
NAME OF THE ADDRESS, AND
FUND. MAIL TO TAXPAYER ID
THE ADDRESS NUMBER.
INDICATED ON THE (SMALL SOLID BULLET) USE FIDELITY
APPLICATION. MONEY LINE TO
TRANSFER FROM
YOUR BANK
ACCOUNT. VISIT
FIDELITY'S WEB
SITE BEFORE YOUR
FIRST USE TO VERIFY
THAT THIS SERVICE
IS IN PLACE ON
YOUR ACCOUNT.
MAXIMUM
MONEY LINE: UP
TO $100,000.
MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR
SIGN THE CHECK PAYABLE
APPLICATION. TO THE COMPLETE
MAKE YOUR NAME OF THE
CHECK PAYABLE FUND. INDICATE
TO THE COMPLETE YOUR FUND
NAME OF THE ACCOUNT NUMBER
FUND. MAIL TO ON YOUR CHECK
THE ADDRESS AND MAIL TO THE
INDICATED ON THE ADDRESS PRINTED
APPLICATION. ON YOUR ACCOUNT
STATEMENT.
(SMALL SOLID BULLET) EXCHANGE BY
MAIL: CALL
1-800-544-666
6 FOR INSTRUCTIONS.
IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR
APPLICATION AND CHECK TO A
CHECK TO A FIDELITY INVESTOR
FIDELITY INVESTOR CENTER. CALL
CENTER. CALL 1-800-544-979
1-800-544-979 7 FOR THE CENTER
7 FOR THE CENTER NEAREST YOU.
NEAREST YOU.
WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) THERE MAY BE A (SMALL SOLID BULLET) THERE MAY BE A
$5.00 FEE FOR $5.00 FEE FOR
EACH WIRE EACH WIRE
PURCHASE. PURCHASE.
(SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) WIRE TO:
1-800-544-777 BANKERS TRUST
7 TO SET UP YOUR COMPANY,
ACCOUNT AND TO BANK ROUTING
ARRANGE A WIRE #021001033,
TRANSACTION. ACCOUNT
(SMALL SOLID BULLET) WIRE WITHIN 24 #00163053.
HOURS TO: SPECIFY THE
BANKERS TRUST COMPLETE NAME
COMPANY, BANK OF THE FUND AND
ROUTING INCLUDE YOUR
#021001033, ACCOUNT NUMBER
ACCOUNT AND YOUR NAME.
#00163053.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR NEW
ACCOUNT NUMBER
AND YOUR NAME.
AUTOMATICALLY (AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY
AUTOMATIC
ACCOUNT BUILDER.
SIGN UP FOR THIS
SERVICE WHEN
OPENING YOUR
ACCOUNT, VISIT
FIDELITY'S WEB
SITE AT
WWW.FIDELITY.CO
M TO OBTAIN THE
FORM TO ADD THE
SERVICE, OR CALL
1-800-544-666
6 TO ADD THE
SERVICE.
(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of Spartan Arizona Municipal Money Market
is the fund's NAV. The PRICE TO SELL ONE SHARE of Spartan Arizona
Municipal Income is the fund's NAV minus the short-term trading fee,
if applicable. If you sell shares of Spartan Arizona Municipal Income
after holding them less than 180 days, the fund will deduct a
short-term trading fee equal to 0.50% of the value of those shares.
Your shares will be sold at the next NAV calculated after your order
is received in proper form, minus the short-term trading fee, if
applicable. Each fund's NAV is normally calculated each business day
at 4:00 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$5,000 worth of shares in the account ($10,000 for the money market
fund) 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 Arizona Municipal
Money Market, you may write an unlimited number of checks. Do not,
however, try to close out your account by check.
<TABLE>
<CAPTION>
<S> <C> <C>
ACCOUNT TYPE SPECIAL REQUIREMENTS
IF YOU SELL SHARES OF SPARTAN ARIZONA
MUNICIPAL INCOME AFTER HOLDING THEM LESS
THAN 180 DAYS, THE FUND WILL DEDUCT A
SHORT-TERM TRADING FEE EQUAL TO 0.50% OF THE
VALUE OF THOSE SHARES.
FOR SPARTAN ARIZONA MUNICIPAL MONEY
MARKET, 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.
PHONE 1-800-544-7777 (PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM
CHECK REQUEST:
$100,000.
(SMALL SOLID BULLET) FOR MONEY
LINE TRANSFERS
TO YOUR BANK
ACCOUNT;
MINIMUM:
$10;
MAXIMUM: UP
TO $100,000.
(SMALL SOLID BULLET) YOU MAY
EXCHANGE TO
OTHER FIDELITY
FUNDS IF BOTH
ACCOUNTS ARE
REGISTERED WITH
THE SAME
NAME(S),
ADDRESS, AND
TAXPAYER ID
NUMBER.
MAIL OR IN PERSON (MAIL_GRAPHIC)(HAND_GRAPHIC) INDIVIDUAL, JOINT (SMALL SOLID BULLET) THE LETTER OF
TENANT, INSTRUCTION
SOLE PROPRIETORSHI MUST BE
P, UGMA, UTMA SIGNED BY ALL
TRUST PERSONS
REQUIRED TO
SIGN FOR
TRANSACTIONS,
BUSINESS OR EXACTLY AS
ORGANIZATION THEIR NAMES
APPEAR ON THE
ACCOUNT.
(SMALL SOLID BULLET) THE TRUSTEE
MUST SIGN THE
EXECUTOR, LETTER INDICATING
ADMINISTRATOR, CAPACITY AS
CONSERVATOR, TRUSTEE. IF THE
GUARDIAN TRUSTEE'S NAME
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
AUTHORIZED BY
CORPORATE
RESOLUTION TO
ACT ON THE
ACCOUNT MUST
SIGN THE LETTER.
(SMALL SOLID BULLET) INCLUDE A
CORPORATE
RESOLUTION WITH
CORPORATE SEAL
OR A SIGNATURE
GUARANTEE.
(SMALL SOLID BULLET) CALL
1-800-544-66
66 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
1-800-544-66
66. MINIMUM
WIRE: $5,000.
(SMALL SOLID BULLET) YOUR WIRE
REDEMPTION
REQUEST MUST
BE RECEIVED IN
PROPER FORM BY
FIDELITY BEFORE
4:00 P.M.
EASTERN TIME
FOR MONEY TO
BE WIRED ON
THE NEXT
BUSINESS DAY.
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.
(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.
(CHECKMARK)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 XPRESS(registered trademark)
1-800-544-5555
WEB SITE
www.fidelity.com
AUTOMATED SERVICE
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
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.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through Fidelity's
Web site. You may pay a $5.00 fee for each exchange out of Spartan
Arizona Municipal Money Market, unless you place your transaction
through 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 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.
<TABLE>
<CAPTION>
<S> <C> <C>
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER(registered trademark)
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR
$500 MONTHLY OR QUARTERLY CHANGING
(SMALL SOLID BULLET) FOR A NEW ACCOUNT,
COMPLETE THE
APPROPRIATE SECTION ON
THE FUND APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS,
CALL 1-800-544-6666
OR VISIT FIDELITY'S WEB
SITE AT
WWW.FIDELITY.COM FOR
AN APPLICATION.
(SMALL SOLID BULLET) TO CHANGE THE AMOUNT
OR FREQUENCY OF YOUR
INVESTMENT, CALL
1-800-544-6666 AT
LEAST THREE BUSINESS
DAYS PRIOR TO YOUR
NEXT SCHEDULED
INVESTMENT DATE.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUNDA
MINIMUM FREQUENCY SETTING UP OR
$500 EVERY PAY PERIOD CHANGING
(SMALL SOLID BULLET) CHECK THE APPROPRIATE
BOX ON THE FUND
APPLICATION, OR CALL
1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE
AT WWW.FIDELITY.COM
FOR AN AUTHORIZATION
FORM.
(SMALL SOLID BULLET) CHANGES REQUIRE A
NEW AUTHORIZATION
FORM.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, bimonthly, (small solid bullet) To establish,
quarterly, or call 1-800-544-6666 after both accounts are opened.
annually (small solid bullet) To change the amount or
frequency of your investment, call 1-800-544-6666.
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THAT FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
</TABLE>
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The bond fund distributes substantially all of its net investment
income and capital gains to shareholders each year. For the bond fund,
income dividends are declared daily and paid monthly. Capital gains
are normally distributed in October and December.
The money market 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.
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 bond fund
offers four options, and the money market fund offers three options.
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. (bond fund only) Your capital gain
distributions, if any, 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, 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.
If you select distribution option 2 or 3 and the U.S. Postal Service
does not deliver your checks, your election may be converted to the
Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666.
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.
(CHECKMARK)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.
TAXES
As with any investment, you should consider how an investment in a
tax-free fund could affect you. Below are some of the funds' tax
implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is
distributed to shareholders as income dividends. Interest that is
federally tax-free remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on
bonds purchased at a discount are distributed as dividends and taxed
as ordinary income. Capital gain distributions are taxed as long-term
capital gains. These distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were
paid on December 31. Fidelity will send you a statement showing the
tax status of distributions, and will report to the IRS the amount of
any taxable distributions, paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. 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.
To the extent each fund's income dividends are derived from interest
on Arizona municipal securities the interest of which is exempt from
Arizona state personal income tax, the dividends will be free from
such tax.
During the fiscal year ended August 1998, 100 % of each fund's
income dividends was free from federal income tax, and 100 % and
99.93 % were free from Arizona taxes for Spartan Arizona
Municipal Income and Spartan Arizona Municipal Money Market,
respectively. 7.92 % of Spartan Arizona Municipal Income's and
46.95 % of Spartan Arizona Municipal Money Market's income
dividends 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 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 FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4:00 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's assets are valued on the basis of amortized
cost. This method minimizes the effect of changes in a security's
market value and helps the money market fund to maintain a stable
$1.00 share price.
For the bond fund, assets are valued primarily on the basis of
information furnished by a pricing service or market quotations, if
available, or by another method that the Board of Trustees believes
accurately reflects fair value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify
that your social security or taxpayer identification number is correct
and that you are not subject to 31% backup withholding for failing to
report income to the IRS. If you violate IRS regulations, the IRS can
require a fund to withhold 31% of your taxable distributions and
redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR
EL ECTRONICA LLY. Fidelity will not be responsible for any losses
resulting from unauthorized transactions if it follows reasonable
security procedures designed to verify the identity of the investor.
Fidelity will request personalized security codes or other
information, and may also record calls. For transactions conducted
through the Internet, Fidelity recommends the use of an Internet
browser with 128-bit encryption. You should verify the accuracy of
your confirmation statements immediately after you receive them. If
you do not want the ability to redeem and exchange by telephone, call
Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in proper
form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) 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 canceled and you could be liable for any losses or fees a fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on the first
business day following the day of 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 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 order is received in proper form,
minus the short-term trading fee, if applicable. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to
you on the next business day, but if making immediate payment could
adversely affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) Each fund may hold payment on redemptions until
it is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the
amount of the check is greater than the value of your account, your
check will be returned to you and you may be subject to additional
charges.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
A SHORT-TERM TRADING FEE of 0.50% will be deducted from the redemption
amount if you sell your shares of Spartan Arizona Municipal Income
after holding them less than 180 days. This fee is paid to the fund
rather than Fidelity, and is designed to offset the brokerage
commissions, market impact, and other costs associated with
fluctuations in fund asset levels and cash flow caused by short-term
shareholder trading.
The short-term trading fee, if applicable, is charged on exchanges out
of Spartan Arizona Municipal Income. If you bought shares on different
days, the shares you held longest will be redeemed first for purposes
of determining whether the short-term trading fee applies. The
short-term trading fee does not apply to shares that were acquired
through reinvestment of distributions.
THE FEES FOR INDIVIDUAL TRANSACTIONS (except the short-term trading
fee) are waived if your account balance at the time of the transaction
is $50,000 or more. Otherwise, you should note the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted
from your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the
amount of your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $24.00 per shareholder. It is expected that
accounts will be valued on the second Friday in November of each year.
Accounts opened after September 30 will not be subject to the fee for
that year. The fee, which is payable to the transfer agent, is
designed to offset in part the relatively higher costs of servicing
smaller accounts. This fee will not be deducted from Fidelity
brokerage accounts, retirement accounts (except non-prototype
retirement accounts), accounts using regular investment plans, or if
total assets with Fidelity exceed $30,000. Eligibility for the $30,000
waiver is determined by aggregating Fidelity accounts maintained by
FSC or FBSI which are registered under the same social security number
or which list the same social security number for the custodian of a
Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, ($10,000 for Spartan
Arizona Municipal Money Market), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV, minus the
short-term trading fee, if applicable, on the day your account is
closed and, for Spartan Arizona Municipal Money Market, the $5.00
account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the funds
without reimbursement from the funds. Qualified recipients are
securities dealers who have sold fund shares or others, including
banks and other financial institutions, under special arrangements in
connection with FDC's sales activities. In some instances, these
incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or
expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a
fund for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be
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, 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 1.00% and trading fees of up to 3.00% of
the amount exchanged. Check each fund's prospectus for details.
Fidelity, Fidelity Investments and (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, TouchTone Xpress, Fidelity Automatic
Account Builder, Directed Dividends, and Spartan are registered
trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
(recycle graphic)This prospectus is printed on recycled paper using
soy-based inks.
SPARTAN(registered trademark) ARIZONA MUNICIPAL MONEY MARKET FUND
A FUND OF FIDELITY UNION STREET TRUST II
SPARTAN ARIZONA MUNICIPAL INCOME FUND
A FUND OF FIDELITY UNION STREET TRUST
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 20, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction w ith the funds' current
Prospectus (dated October 20, 1998). Please retain this document for
future reference. The funds' Annual Report is a separate document
supplied with this SAI. To obtain a free ad ditional copy of the
Prospectus or an Annual Report, please call Fidelity(registered
trademark) at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 34
Special Considerations Regarding Arizona 39
Special Considerations Regarding Puerto Rico 40
Portfolio Transactions 42
Valuation 43
Performance 43
Additional Purchase, Exchange and Redemption Information 49
Distributions and Taxes 50
FMR 50
Trustees and Officers 50
Management Contracts 53
Distribution and Service Plans 55
Contracts with FMR Affiliates 55
Description of the Trusts 55
Financial Statements 56
Appendix 56
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
Fidelity Inves tments Money Management, Inc. (FIMM)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)
and Fidelity Service Company, Inc. (FSC)
A ZI/SPZ-ptb-1098
1.461772.101
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.
A 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 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer, if, as a result, the
fund would not comply with any applicable diversification requirements
for a money market fund under the Investment Company Act of 1940 and
the rules thereunder, as such may be amended from time to time;
(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 deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a
U.S. territory or possession or a state or local government, or a
political subdivision of any of the foregoing) if, as a result, more
than 25% of the fund's total assets would be invested in securities of
companies whose principal business activities are in the same
industry;
(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments; or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to purchases of debt securities or to
repurchase agreements.
(9) The fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental investment objective, policies, and limitations as
the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not
currently intend to 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 securities of other money market
funds) if, as a result, more than 5% of the fund's total assets would
be inv ested in the securities of that issuer.
(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 tre ated as borrowings for purposes of fundamental investment
limitation (3)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(v) The fund does not currently intend to purchase any security if, as
a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
with substantially the same fundamental investment objective,
policies, and limitations as the fund.
For purposes of limitations (1), (5) 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), certain securities subject to
guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
With respect to limitation (v), 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 consider appropriate steps to protect liquidity.
For the fund's policies on quality and maturity, see the section
entitled "Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF SPARTAN ARIZONA MUNICIPAL INCOME FUND
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 fun damental investment
limitation (2)). The fund will not borrow from other funds advised by
FMR or its affiliates if total outstanding borrowings immediately
after such borrowing would exceed 15% of the fund's total assets.
(v) The fund does not currently intend to purchase any security if, as
a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(vi) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to
purchases of debt securities.
(vii) The fund does not currently intend to invest all of its assets
in the securities of a single open-end management investment company
with substantially the same fundamental investment objectives,
policies, and limitations as the fund.
For purposes of limitations (i), Subchapter M generally requires the
fund to invest no more than 25% of its total assets in securities of
any one issuer and to invest at least 50% of its total assets so that
no more than 5% of the fund's total assets are invested in securities
of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter
M) and securities of other investment companies. These tax
requirements are generally applied at the end of each quarter of the
fund's taxable year.
For purposes of limitations (4) and (i), FMR identifies the issuer of
a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for
payment of interest and repayment of principal and the source of such
payments; the way in which assets and revenues of an issuing political
subdivision are separated from those of other political entities; and
whether a governmental body is guaranteeing the security.
With respect to limitation (v), 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 consider appropriate steps to protect liquidity.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
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 a 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 1940 Act. These
transactions may involve 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. Securities may be bought and sold on a
delayed-delivery or when-issued basis. These transactions involve a
commitment 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 fund may receive fees or price concessions for entering into
delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the purchaser
assumes the rights and risks of ownership, including the risks of
price and yield fluctuations and the risk that the security will not
be issued as anticipated. Because payment for the securities is not
required until the delivery date, these risks are in addition to the
risks associated with a fund's 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, a fund
will set aside appropriate liquid assets in a segregated custodial
account to cover the 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, a fund could miss a favorable price or yield
opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may sell the
underlying securities before delivery, which may result in capital
gains or losses for the fund.
FEDERALLY TAXABLE SECURITIES. Under normal conditions, a municipal
fund does not intend to invest in securities whose interest is
federally taxable. However, from time to time on a temporary basis, a
municipal fund may invest a portion of its assets in fixed-income
securities whose interest is subject to federal income tax.
Should a municipal fund invest in federally taxable securities, it
would purchase securities that, in FMR's judgment, are of high
quality. These would include securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, obligations of
domestic banks, and repurchase agreements. A municipal bond fund's
standards for high-quality, taxable securities are essentially the
same as those described by Moody's Investors Service, Inc. (Moody's)
in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's (S&P) in
rating corporate obligations within its two highest ratings of A-1 and
A-2.
A municipal money market fund will purchase taxable securities only if
they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption
for interest on municipal securities are introduced before Congress
from time to time. Proposals also may be introduced before the Arizona
legislature that would affect the state tax treatment of a municipal
fund's distributions. If such proposals were enacted, the availability
of municipal securities and the value of a municipal fund's holdings
would be affected and the Trustees would reevaluate the fund's
investment objectives and policies.
FUTURES AND OPTIONS. The following paragraphs 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 SEC with respect to coverage
of options and futures strategies by mutual funds and, if the
guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a
large percentage of a fund's assets could impede portfolio management
or the fund's ability to meet redemption requests or other current
obligations.
COMBINED POSITIONS involve purchasing and writing 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, purchasing a put option and writing a
call option on the same underlying instrument would 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, 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. A fund may invest in
options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in
which the fund 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 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. In purchasing a futures contract, the buyer agrees
to purchase a specified underlying instrument at a specified future
date. In selling a futures contract, the seller agrees to sell a
specified underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the buyer
and seller enter 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. The 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 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 bond 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 bond fund's investments in futures
contracts and options, and the fund's policies regarding futures
contracts and options discussed elsewhere in this SAI, may be changed
as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or
futures contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges
may establish daily price fluctuation limits for options and futures
contracts, and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible 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 purchaser or writer 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
purchaser 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 purchaser 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 purchaser may terminate
its position in a put option by allowing it to expire or by exercising
the option. If the option is allowed to expire, the purchaser will
lose the entire premium. If the option is exercised, the purchaser
completes the sale of the underlying instrument at the strike price. A
purchaser 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, 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. The writer of a put or call option takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the writer 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. The writer may seek
to terminate a position in a put option 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, however, the writer
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. When writing an option on a
futures contract, a fund will be required to make margin payments to
an FCM as described above for futures contracts.
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 writer 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 fund, investments currently considered by FMR to be
illiquid include over-the-counter options. Also, FMR may determine
some restricted securities and municipal lease obligations to be
illiquid. However, with respect to over-the-counter options a fund
writes, all or a portion of the value of the underlying instrument may
be illiquid depending on the assets held to cover the option and the
nature and terms of any agreement the fund may have to close out the
option before expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined in good faith by a committee appointed by
the Board of Trustees. For the money market fund, illiquid investments
are valued by this method for purposes of monitoring amortized cost
valuation.
INDEXED SECURITIES are instruments 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.
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. Indexed
securities may be more volatile than the underlying instruments.
Indexed securities are also subject to the credit risks associated
with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates; however, municipal
funds currently intend to participate in this program only as
borrowers. A fund will borrow through the program only when the costs
are equal to or lower than the costs of bank loans. Interfund
borrowings normally extend overnight, but can have a maximum duration
of seven days. Loans may be called on one day's notice. 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 movements in prevailing short-term
interest rate levels - rising when prevailing short-term interest
rates fall, and vice versa. The prices of inverse floaters can be
considerably more volatile than the prices of bonds with comparable
maturities.
LOWER-QUALITY DEBT SECURITIES. Lower-quality debt securities have poor
protection with respect to the payment of interest and repayment of
principal, or may be in default. These securities are often considered
to be speculative and involve greater risk of loss or price changes
due to changes in the issuer's capacity to pay. The market prices of
lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in
periods of general economic difficulty, which may follow periods of
rising interest rates.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the Board of
Trustees, including the use of outside pricing services. Judgment
plays a greater role in valuing high-yield debt securities than is the
case for securities for which more external sources for quotations and
last-sale information are available. Adverse publicity and changing
investor perceptions may affect the liquidity of lower-quality debt
securities and the ability of outside pricing services to value
lower-quality debt securities.
A fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it
determines this to be in the best interest of the fund's shareholders.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. 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 a structure fails to function 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 certain 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 funds.
MUNICIPAL INSURANCE. A municipal bond may be covered by
insurance that guarantees the bond's scheduled payment of interest and
repayment of principal. This type of insurance may be obtained by
either (i) the issuer at the time the bond is issued (primary market
insurance), or (ii) another party after the bond has been issued
(secondary market insurance).
Both primary and secondary market insurance guarantee timely and
scheduled repayment of all principal and payment of all interest on a
municipal bond in the event of default by the issuer, and cover a
municipal bond to its maturity, enhancing its credit quality and
value.
Municipal bond insurance does not insure against market
fluctuations or fluctuations in a fund's share price. In addition, a
municipal bond insurance policy will not cover: i) repayment of a
municipal bond before maturity (redemption), ii) prepayment or payment
of an acceleration premium (except for a mandatory sinking fund
redemption) or any other provision of a bond indenture that advances
the maturity of the bond, or iii) nonpayment of principal or interest
caused by negligence or bankruptcy of the paying agent. A mandatory
sinking fund redemption may be a provision of a municipal bond issue
whereby part of the municipal bond issue may be retired before
maturity.
Because a significant portion of the municipal securities issued
and outstanding is insured by a small number of insurance companies,
an event involving one or more of these insurance companies could have
a significant adverse effect on the value of the securities insured by
that insurance company and on the municipal markets as a whole.
FMR may decide to retain an insured municipal bond that is in
default, or, in FMR's view, in significant risk of default. While a
fund holds a defaulted, insured municipal bond, the fund collects
interest payments from the insurer and retains the right to collect
principal from the insurer when the municipal bond matures, or in
connection with a mandatory sinking fund redemption.
PRINCIPAL MUNICIPAL BOND INSURERS. The various insurance
companies providing primary and secondary market insurance policies
for municipal bonds are described below. Ratings reflect each
respective rating agency's assessment of the creditworthiness of an
insurer and the insurer's ability to pay claims on its insurance
policies at the time of the assessment.
Ambac Assurance Corp., a wholly-owned subsidiary of Ambac Financial
Group Inc., is authorized to provide bond insurance in the 50 U.S.
states, the District of Columbia, and the Commonwealth of Puerto Rico.
Bonds insured by Ambac Assurance Corp. are rated "Aaa" by Moody's
Investor Service and "AAA" by Standard & Poor's.
Connie Lee Insurance Co. is a wholly-owned subsidiary of Connie Lee
Holdings Inc., which is a wholly-owned subsidiary of Ambac Assurance
Corp. All losses incurred by Connie Lee Insurance Co. that would cause
its statutory capital to drop below $75 million would be covered by
Ambac Assurance Corp. Connie Lee Insurance Co. is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and the Commonwealth of Puerto Rico. Bonds insured by Connie Lee
Insurance Co. are rated "AAA" by Standard & Poor's.
Financial Guaranty Insurance Co. (FGIC), a wholly-owned subsidiary
of GE Capital Services, is authorized to provide bond insurance in the
50 U.S. states and the District of Columbia. Bonds insured by FGIC are
rated "Aaa" by Moody's Investor Service and "AAA" by Standard &
Poor's.
Financial Security Assurance Inc. (FSA), a wholly-owned subsidiary
of Financial Security Assurance Holdings Ltd., is authorized to
provide bond insurance in 49 U.S. states, the District of Columbia,
and three U.S. territories. Bonds insured by FSA are rated "Aaa" by
Moody's Investor Service and "AAA" by Standard & Poor's.
Municipal Bond Investors Assurance Corp. (MBIA Insurance Corp.), a
wholly-owned subsidiary of MBIA Inc., a publicly-owned company, is
authorized to provide bond insurance in the 50 U.S. states, the
District of Columbia, and the Commonwealth of Puerto Rico. Bonds
insured by MBIA Insurance Corp. are rated "Aaa" by Moody's Investor
Service and "AAA" by Standard & Poor's.
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,
a fund will not hold these 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 purchaser a specified, undivided interest in the obligation
in proportion to its purchased interest in the total amount of the
issue.
Municipal leases frequently have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must
meet to incur debt. These may include voter referenda, interest rate
limits, or public sale requirements. Leases, installment purchases, or
conditional sale contracts (which normally provide for title to the
leased asset to pass to the governmental issuer) have evolved as a
means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for
the issuance of debt. Many leases and contracts include
"non-appropriation clauses" providing that the governmental issuer has
no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance
limitations.
MUNICIPAL 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 a
money market fund to maintain a stable net asset value per share.
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.
HOUSING. Housing revenue bonds are generally issued by a state,
county, city, local housing authority, or other public agency. They
generally are secured by the revenues derived from mortgages purchased
with the proceeds of the bond issue. It is extremely difficult to
predict the supply of available mortgages to be purchased with the
proceeds of an issue or the future cash flow from the underlying
mortgages. Consequently, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner
repayments will create an irregular cash flow. Many factors may affect
the financing of multi-family housing projects, including acceptable
completion of construction, proper management, occupancy and rent
levels, economic conditions, and changes to current laws and
regulations.
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 SP-1), and second
tier securities are those deemed to be in the second highest rating
category (e.g., Standard & Poor's 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. Securities may be purchased on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and a
purchaser 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 purchaser generally will not be obligated to pay the
full purchase price if the issuer 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 purchaser 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. As
protection against the risk that the original seller will not fulfill
its obligation, the securities are held in a separate account 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),
the funds will 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 security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse repurchase
agreement is outstanding, a fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under
the agreement. The funds will enter into reverse repurchase agreements
with parties whose creditworthiness has been reviewed and found
satisfactory by FMR. Such transactions may increase fluctuations in
the market value of fund 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 other entity in determining whether to
purchase a security supported by a letter of credit guarantee, put or
demand feature, insurance or other source of credit or liquidity. In
evaluating the credit of a foreign bank or other foreign entities, FMR
will consider whether adequate public information about the entity is
available and whether the entity may be subject to unfavorable
political or economic developments, currency controls, or other
government restrictions that might affect its ability to honor its
commitment.
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. A 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 purchase 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 generally marketable; 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, municipal 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, 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 AND FLOATING RATE SECURITIES provide for periodic adjustments
in 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 are structured with put features
that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial
intermediaries.
In many instances bonds and participation interests have tender
options or demand features that permit the holder to tender (or put)
the bonds to an institution at periodic intervals and to receive the
principal amount thereof. Variable rate instruments structured in this
fashion are considered to be essentially equivalent to other variable
rate securities. The IRS has not ruled whether the interest on these
instruments is tax-exempt. Fixed-rate bonds that are subject to third
party puts and participation interests in such bonds held by a bank in
trust or otherwise may have similar features.
ZERO COUPON BONDS do not make interest payments; instead, they are
sold at a 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 more volatile than other types of
fixed-income securities when interest rates change. In calculating a
fund's dividend, a portion of the difference between a zero coupon
bond's purchase price and its face value is considered income.
SPECIAL CONSIDERATIONS AFFECTING ARIZONA
Certain Arizona constitutional amendments, legislative measures,
executive orders, administrative regulations, and voter initiatives,
as discussed below, could adversely affect the market values and
marketability of, or result in default of, existing obligations,
including obligations that may be held by the fund. Obligations of the
State or local governments may also be affected by budgetary pressures
affecting the State and economic conditions in the State. The
following highlights only some of the more significant financial
trends, and is based on information drawn from reports prepared by
State Budget officials, official statements and prospectuses
relating to securities offerings of or on behalf of the State of
Arizona, its agencies, instrumentalities and political subdivisions,
and other publicly available documents, as available on the date of
this Statement of Additional Information. FMR has not independently
verified any of the information contained in such official statements
and other publicly available documents, but is not aware of any fact
which would render such information inaccurate.
CONSTITUTIONAL LIMITATIONS ON TAXES, EXPENDITURES AND REVENUE
INCREASES
LIMITATIONS ON TAXES. Certain obligations held by the fund may be
obligations of issuers that rely in whole or in part, directly or
indirectly, on ad valorem property taxes as a source of revenue. The
taxing powers of Arizona local governments and districts are limited
by Arizona Law. Arizona's property tax system was substantially
revised by 1980 amendments to the Arizona Constitution and
implementing legislation. There are two separate tax systems: a
Primary system for taxes levied to pay current operation and
maintenance expenses; and a Secondary system for taxes levied to pay
principal and interest on bonded indebtedness, special district
assessments and tax overrides. There are specific provisions under
each system governing property value, the basis of assessment and
maximum annual tax levies.
Under the Primary system, property value is the basis for determining
primary property taxes of locally assessed real property and may
increase by more than 10% per year only under certain circumstances.
Under the Secondary system, there is no limitation on annual increases
in full cash value of any property.
Under the Primary system, annual tax levies are limited based on the
nature of the property being taxed, and the nature of the taxing
authority. Taxes levied for Primary purposes on residential property
only are limited to 1% of the full cash value of such property. In
addition, taxes levied for Primary purposes on all types of property
by counties, cities, towns and community college districts are limited
to a maximum increase of 2% over the prior year's levy, plus any
amount directly attributable to new construction and annexation and
involuntary tort judgments. The 2% limitation does not apply to taxes
levied for Primary purposes on behalf of local school districts.
Annual tax levies for bonded indebtedness and special district
assessments are unlimited under the Secondary system.
EXPENDITURES LIMITS. Provisions of the Arizona Constitution and
Arizona legislation limit increases in annual expenditures by
counties, cities and towns and community college districts and school
districts to an amount determined by the Arizona Economic Estimates
Commission. This limitation is based on the entity's actual
expenditures for fiscal year 1979-80, with this base adjusted annually
to reflect changes in population, cost of living, and boundaries.
LIMITATIONS ON REVENUE INCREASES. In November of 1992 an amendment to
the Constitution of Arizona was approved by the voters and signed by
the Governor. The amendment states that any legislation that provides
for a net increase in State revenues will be effective only on the
affirmative vote of two-thirds of the members of each house of the
State Legislature, and Gubernatorial approval. If the Governor vetoes
the measure, then the legislation shall not become effective unless
the legislation is approved by an affirmative vote of three-fourths of
the members of each house. The constitutional amendment does not apply
to the effects of inflation, increasing assessed valuation or any
other similar effect that increases State revenue but which is not
caused by an affirmative act of the Legislature.
The budgets enacted since fiscal year 1993-94 have not provided for
any increases in State revenues that required an approval from
two-thirds of the State Legislature.
OBLIGATIONS OF THE STATE OF ARIZONA
Under the Arizona Constitution, the State's power to contract debt is
limited to an amount of not more than $350,000 to supply casual
deficits or failures in revenues or to meet expenses not otherwise
provided for. In addition to that authority, the State may borrow
money to repel invasion, suppress insurrection, or defend the State in
time of war.
Certain State agencies and instrumentalities may issue debt secured by
limited special revenue sources. Additionally, obligations such as
lease-purchase agreements and Certificates of Participation that are
subject to annual appropriation are not debt within the meaning of
Arizona's constitutional and statutory limitations. As of June 30,
199 7 , various State agencies, boards, departments and
instrumentalities (including the Department of Transportation and
State educational institutions) had approximately $1. 52 billion
of bonded indebtedness. Payments for such bonded debt are projected
to be $109.8 million in fiscal year 1999. Various state agencies have
also issued $497.3 million of certificates of participation. Payments
for the fiscal year ending June 30, 1999 for outstanding
Certificates of Participation of State agencies and
instrumentalities will total approximately $52 million.
ECONOMY
Arizona has been, and is projected to continue to be, one of the
fastest growing areas in the United States. Over the last several
decades, the State has outpaced most other states in virtually every
major category of growth, including population, personal income, gross
state product, and job creation. From 1980 to 1996, the State's
population grew 64.3% and is currently estimated to be 4.5 million.
Geographically, Arizona is the nation's sixth largest state. The State
is divided into fifteen counties. Two of these counties, Maricopa
County (including Phoenix) and Pima County (including Tucson), are
more urban in nature and account for approximately 76% of total
population and 85% of total wage and salary employment in Arizona.
RECENT STATE FINANCIAL RESULTS
REVENUES AND EXPENDITURES--FISCAL YEAR 1997. For the fiscal
year ended June 30, 199 7 , general fund revenues increased by
approximately 8% and the State enjoyed a general fund balance
of approximately $ 516 million at year end. General fund
revenues for that period were approximately $5.04 billion (not
including the carry forward balance). This increase in revenues was
due in large part to 14% and 34% increases in receipts from personal
income taxes and corporate income taxes, respectively.
REVENUES AND EXPENDITURES--FISCAL YEAR 1997-1998. As of April
199 8 , the State's general fund revenues for F iscal Year
199 8 were projected to be $ 5.26 billion (not
in cluding the carry forward balance) which would be up 4.4% from
the prior year. Total general fund expenditures for that period
were projected at $ 5.26 billion resulting in a projected fund
balance of approximately $523 million.
ECONOMIC TRENDS AND RECENT TAX REFORM MEASURES. Arizona's
economy in recent years has been consistent with the national economic
cycle. The State's general fund has benefitted from robust performance
in nearly all sectors including employment, personal income, retail
sales, economic development, corporate profits and residential housing
growth. This strong growth has enabled the State L egislature to
continue to enact substantial t ax reduction measures. During the
1998 legislative session the Legislature enacted reductions in
corporate and personal income taxes and vehicle license taxes.
Current Arizona economic indicators led the State Budget officials
in January 1998 to project that Arizona's growth rate will moderate in
1999 and 2000. These slower growth rate projections are based in part
on (1) the outlook for the national economy and (2) the strengthening
of the California economy resulting in slower migrations into Arizona.
As of April 1998, the Budget staff indicated that there had been no
sign yet of any important impact on Arizona from the Asian economic
slowdown. However, the slower growth projections assume that some
impact will be felt in the next two years.
F ISCAL YEARS 1998-1999 AND 1999-2000 BUDGETS. As a result of recent
legislative changes made to the State's budgeting procedures,
beginning with Fiscal Year 2000 the entire State budgeting and program
evaluation will be on a two-year cycle. the major emphasis of the
first regular session of the Legislature will be budgetary approval.
Program authorization Reviews will be conducted in the second regular
session.
The projected revenues upon which the general fund budgets for
Fiscal Years 1998-1999 and 1999-2000 were based assume slowing
but steady growth in such fiscal years and also reflect certain
legislative revenue reductions, including reductions in the tax
rates for the individual and corporate income tax and the motor
vehicle license tax. These reductions are expected to total $120
million in Fiscal Year 1999 and $180 million in Fiscal Year 2000.
Total general fund revenues (not including the carry forward
balance) are expected to increase 4.67% in fiscal Year 1999 but after
giving effect to the tax reduction measures the increase is expected
to be 1.92%. The State Budget staff's April 1998 forecast for Fiscal
Year 1999 showed projected General Fund revenues of $5.887 billion
(including the projected carry forward balance of $523 million) and
expenditures of $5.874 billion leaving a General Fund balance as of
June 30, 1999 of $13 million. The projected expenditures represent an
increase of approximately 11.8% over Fiscal Year 1998 and include a
first time expenditure of $350 million for capital spending for public
schools. This new expenditure item is a result of anew funding program
known as "Students FIRST" enacted in 1998 to implement a court-ordered
equalization program for school capital funding. Such capital funding
requirements will continue in future fiscal years.
"RAINY DAY FUND." In 1990 the Legislature enacted a
formula-based Budget Stabilization Fund into which deposits are
required to be made during years of "above-trend" economic growth, for
use in "below-trend" periods. A deposit to the Fund was first called
for in fiscal year 1994, in the amount of $42.0 million. The
formula for withdrawal from the Fund, as amended by the Legislature in
1998, allows withdrawal from the Fund only when annual income growth
is both below 2% and below the seven-year average trend. The
Legislature by a two-thirds vote can override the formula and approve
a withdrawal. The intent of this latest revision is to avoid
withdrawals from the Fund when annual growth levels are gradually
declining after an extended high growth period. The balance in the
fund as of June 30, 1997 was approximately $246 million and as of
April 1998 the Budget staff estimated that the balance in the Fund as
of June 30, 1999 would be approximately $385 million. The April 1998
projection was for no withdrawals to occur before the end of Fiscal
Year 1999.
OBLIGATIONS OF OTHER ISSUERS
ASSESSMENT BONDS. Municipal obligations which are assessment bonds or
community facilities district bonds may be adversely affected by a
general decline in real estate values or a slowdown in real estate
sales activity. In many cases, such bonds are secured by land which is
undeveloped at the time of issuance but anticipated to be developed
within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby
increasing the risk of a default on the bonds. The lien on the
property is the only security for such bonds.
LEASE-PURCHASE OBLIGATIONS. Certain Arizona lease-purchase
obligations, though payable from the general fund of the State or
municipality, are subject to annual appropriation by the applicable
governing body in amounts sufficient to pay the lease.
Nonappropriation is legally not a default and there may be no adequate
remedies available to the holders of the certificates evidencing the
lease obligation in the event nonappropriation occurs.
OTHER CONSIDERATIONS. The repayment of mortgage revenue bonds or other
obligations secured by real property may be affected by laws limiting
creditors' rights and subject to the exercise of judicial discretion.
Health care and hospital securities may be affected by changes in
State regulations governing cost reimbursements to health care
providers under AHCCCS (the State's indigent health care program).
In the early 1990's many cities, towns and counties experienced
declines or slowing growth in the Secondary assessed valuation,
causing a reduction or slower growth in property tax receipts and
putting pressure on local budgets and capital improvement projects
supported by such receipts. Municipalities responded to these
developments by a variety of methods including increasing the
Secondary property tax rate, deferring property tax-supported bond
projects, and using other revenue sources to fund projects. More
recently, economic growth has begun to reverse the pressure on
assessed valuations, at least in the larger urbanized areas of the
State.
Legislation has been or may be introduced which would modify existing
taxes or other revenue-raising measures. It is not presently possible
to predict the extent to which any such legislation will be enacted,
or if enacted, how it would affect Arizona municipal obligations.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the
"Commonwealth" or "Puerto Rico"), and is based on information drawn
from official statements and prospectuses relating to the securities
offerings of Puerto Rico, its agencies and instrumentalities, as
available on the date of this SAI. FMR has not independently verified
any of the information contained in such official statements,
prospectuses, and other publicly available documents, but is not aware
of any fact that would render such information materially inaccurate.
The economy of Puerto Rico is fully integrated with that of the United
States. In fiscal 1997, trade with the United States accounted for
approximately 88% of Puerto Rico's exports and approximately 62% of
its imports. In this regard, in fiscal 1997 Puerto Rico experienced a
$2.7 billion positive adjusted merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita, has
increased consistently each fiscal year. In fiscal 1997, aggregate
personal income was $32.1 billion ($30.0 billion in 1992 prices) and
personal per capita income was $8,509 ($7,957 in 1992 prices). Gross
product in fiscal 1993 was $25.1 billion ($24.5 billion in 1992
prices) and gross product in fiscal 1997 was $32.1 billion ($27.7
billion in 1992 prices). This represents an increase in gross product
of 27.7% from fiscal 1993 to 1997 (13.0% in 1992 prices).
Puerto Rico's economic expansion, which has lasted over ten years,
continued throughout the five-year period from fiscal 1993 through
fiscal 1997. Almost every sector of the economy participated, and
record levels of employment were achieved. Factors behind the
continued expansion included Government-sponsored economic development
programs, periodic declines in the exchange value of the U.S. dollar,
increases in the level of federal transfers, and the relatively low
cost of borrowing funds during the period.
Average employment increased from 999,000 in fiscal 1993 to 1,128,300
in fiscal 1997. Unemployment, although at relatively low historical
levels, remains above the U.S. average. Average unemployment decreased
from 16.8% in fiscal 1993 to 13.1% in fiscal 1997.
Manufacturing is the largest sector in the economy accounting for
$19.8 billion or 41.2% of gross domestic product in fiscal 1997. The
manufacturing sector employed 153,273 workers as of March 1997.
Manufacturing in Puerto Rico is now more diversified than during
earlier phases of industrial development. In the last two decades
industrial development has tended to be more capital intensive and
dependent on skilled labor. This gradual shift is best exemplified by
heavy investment in pharmaceuticals, scientific instruments,
computers, microprocessors, and electrical products over the last
decade. The service sector, which includes wholesale and retail trade
and finance, insurance, real estate, hotels and related services, and
other services, ranks second in its contribution to gross domestic
product and is the sector that employs the greatest number of people.
In fiscal 1997, the service sector generated $18.4 billion in gross
domestic product or 38.2% of the total. Employment in this sector grew
from 467,000 in fiscal 1993 to 551,000 in fiscal 1997, a cumulative
increase of 17.8%. This increase was greater than the 12.9% cumulative
growth in employment over the same period providing 48% of total
employment. The Government sector of the Commonwealth plays an
important role in the economy of the island. In fiscal year 1997, the
Government accounted for $5.2 billion of Puerto Rico's gross domestic
product and provided 10.9% of the total employment. The construction
industry has experienced real growth since fiscal 1987. In fiscal
1997, investment in construction rose to $4.7 billion, an increase of
14.7% as compared to $4.1 billion for fiscal 1996. Tourism also
contributes significantly to the island economy, accounting for $2.0
billion of gross domestic product in fiscal 1997.
The present administration has developed and is implementing a new
economic development program which is based on the premise that the
private sector should provide the primary impetus for economic
development and growth. This new program, which is referred to as the
New Economic Model, promotes changing the role of the Government from
one of being a provider of most basic services to that of a
facilitator for private sector initiatives and encourages private
sector investment by reducing Government-imposed regulatory
restraints.
The New Economic Model contemplates the development of initiatives
that will foster private investment in, and private management of,
sectors that are served more efficiently and effectively by the
private enterprise. One of these initiatives has been the adoption of
a new tax code intended to expand the tax base, reduce top personal
and corporate tax rates, and simplify the tax system. Another
initiative is the improvement and expansion of Puerto Rico's
infrastructure to facilitate private sector development and growth,
such as the construction of the water pipeline and cogeneration
facilities described below and the construction of a light rail system
for the San Juan metropolitan area.
The New Economic Model also seeks to identify and promote areas in
which Puerto Rico can compete more effectively in the global markets.
Tourism has been identified as one such area because of its potential
for job creation and contribution to the gross product. In 1993, a new
Tourism Incentives Act and a Tourism Development Fund were implemented
in order to provide special tax incentives and financing for the
development of new hotel projects and the tourism industry. As a
result of these initiatives, new hotels have been constructed or are
under construction which have increased the number of hotel rooms on
the island from 8,415 in fiscal 1992 to 10,877 at the end of fiscal
1997 and to a projected 11,972 by the end of fiscal 1998.
The New Economic Model also seeks to reduce the size of the
Government's direct contribution to gross domestic product. As part of
this goal, the Government has transferred certain Governmental
operations and sold a number of its assets to private parties. Among
these are: (i) the Government sold the assets of the Puerto Rico
Maritime Authority; (ii) the Government executed a five-year
management agreement for the operation and management of the Aqueducts
and Sewer Authority by a private company; (iii) the Aqueducts and
Sewer Authority executed a construction and operating agreement with a
private consortium for the design, construction, and operation of an
approximately 75 million gallon per day water pipeline to the San Juan
metropolitan area from the Dos Bocas reservoir in Utuado; (iv) the
Electric Power Authority executed power purchase contracts with
private power producers under which two cogeneration plants (with a
total capacity of 800 megawatts) will be constructed; (v) the
Corrections Administration entered into operating agreements with two
private companies for the operation of three new correctional
facilities; (vi) the Government entered into a definitive agreement to
sell certain assets of a pineapple juice processing business and sold
certain mango growing operations; (vii) the Government is in the
process of transferring to local sugar cane growers certain sugar
processing facilities; (viii) the Government sold two hotel properties
and is currently negotiating the sale of a complex consisting of two
hotels and a convention center; and (ix) the Government has announced
its intention to sell the Puerto Rico Telephone Company and is
currently involved in the sale process.
One of the goals of the Rossello administration is to change Puerto
Rico's public health care system from one in which the Government
provides free health services to low income individuals through public
health facilities owned and administered by the Government to one in
which all medical services are provided by the private sector and the
Government provides comprehensive health insurance coverage for
qualifying (generally low income) Puerto Rico residents. Under this
new system, the Government selects, through a bidding system, one
private health insurance company in each of several designated regions
of the island and pays such insurance company the insurance premium
for each eligible beneficiary within such region. This new health
insurance system is now covering 61 municipalities out of a total of
78 on the island. It is expected that 11 municipalities will be added
by the end of fiscal 1998 and 5 more by the end of fiscal 1999. The
total cost of this program will depend on the number of municipalities
included in the program, the number of participants receiving
coverage, and the date coverage commences. As of December 31, 1997,
over 1.1 million persons were participating in the program at an
estimated annual cost to Puerto Rico for fiscal 1998 of approximately
$672 million. In conjunction with this program, the operation of
certain public health facilities has been transferred to private
entities. The Government's current privatization plan for health
facilities provides for the transfer of ownership of all health
facilities to private entities. The Government sold six health
facilities to private companies and is currently in negotiations with
other private companies for the sale of thirteen health facilities to
such companies.
One of the factors assisting the development of the manufacturing
sector in Puerto Rico has been the federal and Commonwealth tax
incentives available, particularly those under the Puerto Rico
Industrial Incentives Program and Sections 30A and 936 of the Internal
Revenue Code 1986, as amended (the "Code").
Since 1948, Puerto Rico has promulgated various industrial incentives
laws designed to stimulate industrial investment. Under these laws,
companies engaged in manufacturing and certain other designated
activities were eligible to receive full or partial exemption from
income, property, and other taxes. The most recent of these laws is
Act No. 135 of December 2, 1997 (the "1998 Tax Incentives Law").
The benefits provided by the 1998 Tax Incentives Law are available to
new companies as well as companies currently conducting tax-exempt
operations in Puerto Rico that choose to renegotiate their existing
tax exemption grant. Activities eligible for tax exemption include
manufacturing, certain services performed for markets outside Puerto
Rico, the production of energy from local renewable sources for
consumption in Puerto Rico, and laboratories for scientific and
industrial research. For companies qualifying thereunder, the 1998 Tax
Incentives Law imposes income tax rates ranging from 2% to 7%. In
addition, it grants 90% exemption from property taxes, 100% exemption
from municipal license taxes during the first eighteen months of
operation and between 80% and 60% thereafter, and 100% exemption from
municipal excise taxes. The 1998 Tax Incentives Law also provides
various special deductions designated to stimulate employment and
productivity, research and development, and capital investment in
Puerto Rico.
Under the 1998 Tax Incentives Law, companies are able to repatriate or
distribute their profits free of tollgate taxes. In addition, passive
income derived from designated investments will continue to be fully
exempt from income and municipal license taxes. Individual
shareholders of an exempted business will be allowed a credit against
their Puerto Rico income taxes equal to 30% of their proportionate
share in the exempted business' income tax liability. Gain from the
sale or exchange of shares of an exempted business by its shareholders
during the exemption period will be subject to a 4% income tax rate.
For many years, U.S. companies operating in Puerto Rico enjoyed a
special tax credit that was available under Section 936 of the Code.
Originally, the credit provided an effective 100% federal tax
exemption for operating and qualifying investment income from Puerto
Rico sources. Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for calculating the
tax credit and limited the amount of the credit that a qualifying
company could claim. These limitations are based on a percentage of
qualifying income (the "percentage of income limitation") and on
qualifying expenditures on wages and other wage related benefits (the
"economic activity limitation", also known as the "wage credit
limitation"). As a result of amendments incorporated in the Small
Business Job Protection Act of 1996 enacted by the U.S. Congress and
signed into law by President Clinton on August 20, 1996 (the "1996
Amendments"), the tax credit, as described below, is now being phased
out over a ten-year period for existing claimants and is no longer
available for corporations that established operations in Puerto Rico
after October 13, 1995 (including existing Section 936 Corporations
(as defined below) to the extent substantially new operations are
established in Puerto Rico). The 1996 Amendments also moved the credit
based on the economic activity limitation to Section 30A of the Code
and phased it out over 10 years. In addition, the 1996 Amendments
eliminated the credit previously available for income derived from
certain qualified investments in Puerto Rico. The Section 30A credit
and the remaining Section 936 credit are discussed below.
SECTION 30A. The 1996 Amendments added a new Section 30A to the Code.
Section 30A permits a "qualifying domestic corporation" ("QDC") that
meets certain gross income tests (which are similar to the 80% and 75%
gross income tests of Section 936 of the Code discussed below) to
claim a credit (the "Section 30A credit") against the federal income
tax imposed on taxable income derived from sources outside the United
States from the active conduct of a trade or business in Puerto Rico
or from the sale of substantially all the assets used in such business
("possession income").
A QDC is a U.S. corporation which (i) was actively conducting a trade
or business in Puerto Rico on October 13, 1995, (ii) had a Section 936
election in effect for its taxable year that included October 13,
1995, (iii) does not have in effect an election to use the percentage
limitation of Section 936(a)(4)(B) of the Code, and (iv) does not add
a "substantial new line of business."
The Section 30A credit is limited to the sum of (i) 60% of qualified
possession wages as defined in the Code, which includes wages up to
85% of the maximum earnings subject to the OASDI portion of Social
Security taxes plus an allowance for fringe benefits of 15% of
qualified possession wages, (ii) a specified percentage of
depreciation deductions ranging between 15% and 65%, based on the
class life of tangible property, and (iii) a portion of Puerto Rico
income taxes paid by the QDC, up to a 9% effective tax rate (but only
if the QDC does not elect the profit-split method for allocating
income from intangible property).
A QDC electing Section 30A of the Code may compute the amount of its
active business income, eligible for the Section 30A Credit, by using
either the cost sharing formula, the profit-split formula, or the
cost-plus formula, under the same rules and guidelines prescribed for
such formulas as provided under Section 936 (see discussion below). To
be eligible for the first two formulas, the QDC must have a
significant presence in Puerto Rico.
In the case of taxable years beginning after December 31, 2001, the
amount of possession income that would qualify for the Section 30A
credit would be subject to a cap based on the QDC's possession income
for an average adjusted base period ending before October 14, 1995.
Section 30A applies only to taxable years beginning after December 31,
1995 and before January 1, 2006.
SECTION 936. Under Section 936 of the Code, as amended by the 1996
Amendments, and as an alternative to the Section 30A credit, U.S.
corporations that meet certain requirements and elect its application
("Section 936 Corporations") are entitled to credit against their U.S.
corporate income tax, the portion of such tax attributable to income
derived from the active conduct of a trade or business within Puerto
Rico ("active business income") and from the sale or exchange of
substantially all assets used in the active conduct of such trade or
business. To qualify under Section 936 in any given taxable year, a
corporation must derive for the three-year period immediately
preceding the end of such taxable year (i) 80% or more of its gross
income from sources within Puerto Rico and (ii) 75% or more of its
gross income from the active conduct of a trade or business in Puerto
Rico.
Under Section 936, a Section 936 Corporation may elect to compute its
active business income, eligible for the Section 936 credit, under one
of three formulas: (A) a cost-sharing formula, whereby it is allowed
to claim all profits attributable to manufacturing intangibles, and
other functions carried out in Puerto Rico, provided it contributes to
the research and development expenses of its affiliated group or pays
certain royalties; (B) a profit-split formula, whereby it is allowed
to claim 50% of the net income of its affiliated group from the sale
of products manufactured in Puerto Rico; or (C) a cost-plus formula,
whereby it is allowed to claim a reasonable profit on the
manufacturing costs incurred in Puerto Rico. To be eligible for the
first two formulas, the Section 936 Corporation must have a
significant business presence in Puerto Rico for purposes of the
Section 936 rules.
As a result of the 1993 Amendments and the 1996 Amendments, the
Section 936 credit is only available to companies that elect the
percentage of income limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments, subject to a five-year
phase-in period from 1994 to 1998 during which period the percentage
of the allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be subject to
a cap based on the Section 936 Corporation's possession income for an
average adjusted base period ending on October 14, 1995. The Section
936 credit is eliminated for taxable years beginning in 2006.
PROPOSAL TO EXTEND THE PHASEOUT OF SECTION 30A. During 1997, the
Government of Puerto Rico proposed to Congress the enactment of a new
permanent federal incentive program similar to that provided under
Section 30A. Such a program would provide U.S. companies a tax credit
based on qualifying wages paid and other wage-related expenses, such
as fringe benefits, as well as depreciation expenses for certain
tangible assets and research and development expenses. Under the
Governor's proposal, the credit granted to qualifying companies would
continue in effect until Puerto Rico shows, among other things,
substantial economic improvements in terms of certain economic
parameters. The fiscal 1998 budget submitted by President Clinton to
Congress in February 1997 included a proposal to modify Section 30A to
(i) extend the availability of the Section 30A credit indefinitely;
(ii) make it available to companies establishing operations in Puerto
Rico after October 13, 1995; and (iii) eliminate the income cap.
Although this proposal, was not included in the final fiscal 1998
federal budget, President Clinton's fiscal 1999 budget submitted to
Congress again included these modifications to Section 30A. While the
Government of Puerto Rico plans to continue lobbying for this
proposal, it is not possible at this time to predict whether the
Section 30A credit will be so modified.
OUTLOOK. It is not possible at this time to determine the long-term
effect on the Puerto Rico economy of the enactment of the 1996
Amendments. The Government of Puerto Rico does not believe there will
be short-term or medium-term material adverse effects on Puerto Rico's
economy as a result of the enactment of the 1996 Amendments. The
Government of Puerto Rico further believes that during the phase-out
period sufficient time exists to implement additional incentive
programs to safeguard Puerto Rico's competitive position.
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
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.
If FMR grants investment management authority to a sub-adviser (see
the section entitled "Management Contracts"), that 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
above.
Each 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; and
effect securities transactions and perform functions incidental
thereto (such as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that 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 a 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.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws, a
fund may pay a broker-dealer 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 a 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 that fund or 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
National Financial Services Corporation (NFSC), an indirect subsidiary
of FMR Corp., if the commissions are fair, reasonable, and comparable
to commissions charged by non-affiliated, qualified brokerage firms
for similar services.
FMR may allocate brokerage transactions to broker-dealers (including
affiliates of FMR) who have entered into arrangements with FMR under
which the broker-dealer allocates a portion of the commissions paid by
a fund toward the reduction of that fund's expenses. The transaction
quality must, however, be comparable to those of other qualified
broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees of each fund periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal periods ended August 31, 1998 and 1997, the portfolio
turnover rates were 25 % and 27%, respectively, for Spartan
Arizona Municipal Income.
For the fiscal years ended August, 1998, 1997, and 1996, the funds
paid no brokerage commissions.
For the fiscal year ended August, 1998 the funds paid no brokerage
commissions to firms that provided research services.
The Trustees of each fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the funds from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the funds could purchase in the underwriting.
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 or its affiliates,
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
For Spartan Arizona Municipal Money Market, 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). For
Spartan Arizona Municipal Income, FSC normally determines the fund's
NAV as of the close of the NYSE (normally 4:00 p.m. Eastern time). The
valuation of portfolio securities is determined as of this time for
the purpose of computing each fund's NAV.
BOND FUND. Portfolio securities are valued by various methods. If
quotations are not available, fixed-income securities are usually
valued on the ba sis of information furnished by a pricing service
that uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Use of pricing
services has been approved by the Board of Trustees. A number of
pricing services are available, and the fund may use various pricing
services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market
quotations, if available. Securities of other open-end investment
companies are valued at their respective NAVs.
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.
MONEY MARKET FUND. Portfolio securities and other assets are valued on
the basis of amortized cost. This technique involves initially valuing
an instrument at its cost as adjusted for amortization of premium or
accretion of discount rather than its current market value. The
amortized cost value of an instrument may be higher or lower than the
price the fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
During periods of declining interest rates, the fund's yield based on
amortized cost valuation may be higher than would result if the fund
used market valuations to determine its NAV. The converse would apply
during periods of rising interest rates.
Valuing the fund's investments on the basis of amortized cost and use
of the term "money market fund" are permitted pursuant to Rule 2a-7
under the 1940 Act. The fund must adhere to certain conditions under
Rule 2a-7, as summarized in the section entitled "Quality and
Maturity" on page 37 .
The Board of Trustees oversees FMR's adherence to the provisions of
Rule 2a-7 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 the fund'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.
PERFORMANCE
A fund 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. The share price of a bond
fund, the yield of a bond or money market fund, 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 (MONEY MARKET FUND). To compute the yield for the
money market fund 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 an 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 bases as other money market funds, as
required by applicable regulation.
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.
YIELD CALCULATIONS (BOND FUND). Yields for the fund are computed by
dividing the fund's interest and 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 Spartan Arizona
Municipal Income's 0.50% short-term trading fee, which applies to
shares held less than 180 days. Income is calculated for purposes of
yield quotations in accordance with standardized methods applicable to
all stock and bond funds. In general, interest income is reduced with
respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation.
Income calculated for the purposes of calculating the fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, the fund's yield
may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
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 tax-equivalent yield of a municipal fund is the rate an investor
would have to earn from a fully taxable investment before taxes to
equal the fund's tax-free yield. Tax-equivalent yields are calculated
by dividing the fund's yield by the result of one minus a stated
combined federal and state income tax rate. If only a portion of the
fund's yield is tax-exempt, only that portion is adjusted in the
calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1998. The
second table shows the approximate yield a taxable security must
provide at various income brackets to produce after-tax yields
equivalent to those of hypothetical tax-exempt obligations yielding
from 2% to 7%. Of course, no assurance can be given that the fund will
achieve any specific tax-exempt yield. While the state municipal fund
invests principally in obligations whose interest is exempt from
federal and state income tax, other income received by the fund may be
taxable. The tables do not take into account local taxes, if any,
payable on fund distributions.
Use the first table to find your approximate effective tax bracket
taking into account federal and state taxes for 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1998 TAX
RATES
Taxable
Income*
Single Joint Return State Federal Combined
Return Marginal Rate Marginal Rate Federal and State
Effective Rate**
$ 0 $ 10,000 $ 0 $ 20,000 2.88% 15.00% 17.45%
$ 10,001 $ 25,000 $ 20,001 $ 42,350 3.24% 15.00% 17.75%
$ 25,001 $ 25,350 3.82% 15.00% 18.25%
$ 42,351 $ 50,000 3.24% 28.00% 30.33%
$ 25,351 $ 50,000 $ 50,001 $ 100,000 3.82% 28.00% 30.75%
$ 50,001 $ 61,400 $ 100,001 $ 102,300 4.74% 28.00% 31.41%
$ 61,401 $ 128,100 $ 102,301 $ 155,950 4.74% 31.00% 34.27%
$ 128,101 $ 150,000 $ 155,951 $ 278,450 4.74% 36.00% 39.03%
$ 150,001 $ 278,450 5.10% 36.00% 39.26%
$ 278,451 $ 300,000 4.74% 39.60% 42.46%
$ 278,451
and up $ 300,001 and up 5.10% 39.60% 42.68%
</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.
Having determined your effective tax bracket, use the following table
to determine the tax-equivalent yield for a given tax-free yield.
If your combined federal and state effective tax rate in 1998
is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17.45% 17.75% 18.25% 30.33% 30.75% 31.41% 34.27% 39.03% 39.26% 42.46% 42.68%
To match Your taxable investment would have to earn the following yield:
these
tax-free
rates:
2% 2.42% 2.43% 2.45% 2.87% 2.89% 2.92% 3.04% 3.28% 3.29% 3.48% 3.49%
3% 3.63% 3.65% 3.67% 4.31% 4.33% 4.37% 4.56% 4.92% 4.94% 5.21% 5.23%
4% 4.85% 4.86% 4.89% 5.74% 5.78% 5.83% 6.09% 6.56% 6.59% 6.95% 6.98%
5% 6.06% 6.08% 6.12% 7.18% 7.22% 7.29% 7.61% 8.20% 8.23% 8.69% 8.72%
6% 7.27% 7.30% 7.34% 8.61% 8.66% 8.75% 9.13% 9.84% 9.88% 10.43% 10.47%
7% 8.48% 8.51% 8.56% 10.05% 10.11% 10.21% 10.65% 11.48% 11.53% 12.17% 12.21%
</TABLE>
A state municipal fund may invest a portion of it s assets in
obligations that are subject to state or federal income taxes. When a
state municipal fund invests in these obligations, its tax-equivalent
yield will be lower. In the table above, the tax-equivalent yields are
calculated assuming investments are 100% federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of a fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a 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 a 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 Spartan
Arizona Municipal Income's 0.50% short-term trading fee on shares held
less than 180 days. Excluding a fund's short-term trading fee from a
total return calculation produces a higher total return figure. Total
returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration, 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.
CALCULATING HISTORICAL MONEY MARKET FUND RESULTS. The
following table shows performance for the fund calculated including
certain fund expenses.
CALCULATING HISTORICAL BOND FUND RESULTS. The following
table shows performance for the fund calculated including certain fund
expenses. Total returns do not include the effect of the fund's 0.50%
short-term trading fee, applicable to shares held less than 180
days.
HISTORICAL MONEY MARKET FUND RESULTS. The following table shows the
fund's 7-day yield, tax-equivalent yield, and total return for the
period ended August 31, 1998. Total return figures include the effect
of the $5.00 account closeout fee based on an average size account.
HISTORICAL BOND FUND RESULTS. The following table shows the fund's
yield, tax-equivalent yield and total return for the period ended
August 31, 1998.
The tax-equivalent yields for the funds are based on a combined
effective federal and state income tax rate of 39.26 % and
reflects that, as of August 31, 1998, none of each fund's income was
subject to state taxes. Note that each state municipal fund may invest
in securities whose income is subject to the federal alternative
minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Average Annual
Total Returns Cumulative Total Returns
Seven/ Tax-Equivalent One Life of One Life of
Thirty-Day Yield Year Fund* Year Fund*
Yield
Spartan 3.01 % 4.96 % 3.41% 3.54% 3.41% 14.49%
AZ
Municipal
Money
Market
Spartan 3.88 % 6.39 % 7.16% 8.15% 7.16% 35.63%
AZ
Municipal
Income
Fund
</TABLE>
* From October 11, 1994 (commencement of operations).
Note: If FMR had not reimbursed certain fund expenses during these
periods, each fund's total returns would have been lower.
The following tables show the income and capital elements of each
fund's cumulative total return. The table compares each 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 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 each
fund invests in fixed-income securities, common stocks represent a
different type of investment from the funds. 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
fixed-income investments such as the funds. The S&P 500 and DJIA
returns are based on the prices of unmanaged groups of stocks and,
unlike each fund's returns, do not include the effect of brokerage
commissions or other costs of investing.
The following tables show the growth in value of a hypothetical
$10,000 investment in each fund during the life of each fund, assuming
all distributions were reinvested. Total returns are based on past
results and are not an indication of future performance. Tax
consequences of different investments have not been factored into the
figures below.
During the period from October 11, 1994 (commen cement of
operations) to August 31, 1998, a hypothetical $10,000 investment in
Spartan A rizona Municipal Money Market would have grown to
$11,449.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN ARIZONA MUNICIPAL MONEY MARKET INDICES
Year Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 10,000 $ 1,449 $ 0 $ 11,449 $ 22,639 $ 21,3 83 $ 10,937
1997 $ 10,000 $ 1,071 $ 0 $ 11,071 $ 20,944 $ 21,26 0 $ 10,763
1996 $ 10,000 $ 708 $ 0 $ 10,708 $ 14,891 $ 15,367 $ 10,529
1995* $ 10,000 $ 343 $ 0 $ 10,343 $ 12,542 $ 12,342 $ 10,234
</TABLE>
* From October 11, 1994 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Spartan
Arizona Municipal Money Market on October 11, 1994 the net amount
invested in fund shares was $10,000. The cost of the initial
investment ($10,000) together with the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (their
cash value at the time they were reinvested) amounted to
$11, 4 49. 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, 355 for dividends. The money market fund did not distribute
any capital gains during the period. The figures in the table do not
include the effect of the fund's $5.00 account closeout fee.
During the period from October 11, 1994 (commencement of operations)
to Au gust 3 1, 1998, a hypothetical $10,000 investment in
Spartan Arizona Municipal Income wou ld have grow n to $13,563.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SPARTAN ARIZONA MUNICIPAL INCOME INDICES
Year Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 10,980 $ 2,279 $ 304 $ 13,563 $ 22, 639 $ 21, 383 $ 10,937
1997 $ 10,740 $ 1,667 $ 250 $ 12,657 $ 20,944 $ 21,26 0 $ 10,763
1996 $ 10,460 $ 1,075 $ 166 $ 11,701 $ 14,891 $ 15,367 $ 10,529
1995* $ 10,640 $ 534 $ 0 $ 11,174 $ 12,542 $ 12,342 $ 10,234
</TABLE>
* From October 11, 1994 (commencement of operations)
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 in Spartan
Arizona Municipal Income on October 11, 1994, the net amount invested
in fund shares was $10,000. The cost of the initial investment
($10,000) together with the aggregate cost of reinvested dividends and
capital gain distributions for the period covered (their cash value at
the time they were reinvested) amounted to $1 2,497 . 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, 975 for
dividends and $270 for capital gain distributions. The figures in the
table do not include the effect of the fund's 0.50% short-term trading
fee applicable to shares held 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 trading fees into consideration, and are
prepared without regard to tax consequences. Lipper may also rank
based on yield. In addition to the mutual fund rankings, a fund's
performance may be compared to stock, bond, and money market mutual
fund performance indices prepared by Lipper or other organizations.
When comparing these indices, it is important to remember the risk and
return characteristics of each type of investment. For example, while
stock mutual funds may offer higher potential returns, they also carry
the highest degree of share price volatility. Likewise, money market
funds may offer greater stability of principal, but generally do not
offer the higher potential returns 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, a 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 bond fund may advertise risk
ratings, including symbols or numbers, prepared by independent rating
agencies.
A 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 a 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 municipal 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 Arizona Municipal Income may compare its performance to that
of the Lehman Brothers Arizona Enhanced Municipal Bond Index, a total
return performance benchmark for Arizona investment-grade municipal
bonds with maturities of at least four years. Issues included in the
index have been issued as part of an offering of at least $20 million,
have an outstanding par value of at least $2 million, and have been
issued after December 31, 1990.
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; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
The money market fund may compare its performance or the performance
of securities in which it may invest to averages published by IBC
Financial Data, Inc. of Ashland, Massachusetts. These averages assume
reinvestment of distributions. IBC's MONEY FUND REPORT
AVERAGES(trademark)/All Tax-Free Money Market Funds Average which is
reported in IBC's MONEY FUND REPORT(trademark), covers over 436
tax-free money market funds.
The municipal bond fund may compare and contrast in advertising the
relative advantages of investing in a mutual fund versus an individual
municipal bond. Unlike municipal bond 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 sales
charges of many municipal bond mutual funds are lower than the
purchase cost of individual municipal bonds, which are generally
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; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
The fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
VOLATILITY. A bond 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 a 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 bond fund may also discuss or illustrate
examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate price movements over specific periods of
time for the bond fund. Each point on the momentum indicator
represents a fund's percentage change in price movements over that
period.
A bond 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, 1998, FMR advised over $ 30 billion in
municipal fund assets, $ 104 billion in money market fund
assets, $ 463 billion in equity fund assets, $ 69 billion
in international fund assets, and $ 26 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, a 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, EXCHANGE AND REDEMPTION INFORMATION
Each fund is open for business and its NAV is calculated each day the
NYSE is open for trading. The NYSE has designated the following
holiday closings for 1998: New Year's Day, Martin Luther King's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule to be observed in the future,
the NYSE may modify its holiday schedule at any time. In addition, on
days when the Federal Reserve Wire System is closed, federal funds
wires cannot be sent.
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
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 each fund's NAV. Shareholders receiving securities
or other property on redemption may realize a gain or loss for tax
purposes, and will incur any costs of sale, as well as the associated
inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the
time of an exchange, or (ii) the fund suspends the redemption of the
shares to be exchanged as permitted under the 1940 Act or the rules
and regulations thereunder, or the fund to be acquired suspends the
sale of its shares because it is unable to invest amounts effectively
in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it
reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if, in FMR's judgment, the
fund would be unable to invest effectively in accordance with its
investment objective and policies, or would otherwise potentially be
adversely affected.
DISTRIBUTIONS AND TAXES
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. 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 and state tax treatment of the structure.
As a result of the Tax Reform Act of 1986, interest on certain
"private activity" securities is subject to the federal alternative
minimum tax (AMT), although the interest continues to be excludable
from gross income for other tax purposes. Interest from private
activity securities 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 municipal bonds purchased with market
discount after April 30, 1993 and short-term capital gains distributed
by a municipal fund are taxable to shareholders as dividends, not as
capital gains. Spartan Arizona Municipal Money Market may distribute
any net realized short-term capital gains and taxable market discount
once a year or more often, as necessary, to maintain its NAV at $1.00.
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 the exempt-interest
dividend.
ARIZONA TAX MATTERS. It is the published position of the Arizona
Department of Revenue that dividends paid by a regulated investment
company are exempt from Arizona state income tax to the extent such
dividends are derived from interest on obligations the interest on
which is exempt from Arizona state income tax. For purposes of Arizona
income taxation, distributions derived from interest on other types of
obligations (i.e., obligations the interest on which is not exempt
from Arizona state income tax) will be taxable as ordinary income,
whether paid in cash or reinvested in additional shares. Distributions
of net capital gains (both short- and long-term net capital gains) are
not exempt from Arizona income taxation and are taxed at ordinary
income tax rates. Interest on indebtedness incurred or continued by a
shareholder in connection with the purchase of shares of a fund will
not be deductible for Arizona personal income tax purposes.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by 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 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 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 may distribute any net
realized short-term capital gains once a year or more often as
necessary, to maintain its NAV at $1.00. The money market fund does
not anticipate distributing long-term capital gains.
As of August 31 , 1998, Spartan Arizona Municipal Money
Market hereby designates approximately $27,000 as a capital gain
dividend for the purpose of the dividend-paid deduction. As of
August 31, 1998, Spartan Arizona Municipal Income hereby designates
approximately $ 59,000 as a capital gain dividend for the
purpose of the dividend-paid deduction.
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, and intends to comply with
other tax rules applicable to regulated investment companies.
Each fund is treated as a separate entity from the other funds, if
any, of its 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 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. All persons named as Trustees and Members of the
Advisory Board also serve in similar capacities for other funds
advised by FMR. The business address of each Trustee, Member of the
Advisory Board, and officer who is an "interested person" (as defined
in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The
business address of all the other Trustees is Fidelity Investments,
P.O. Box 9235, Boston, Massachusetts 02205-9235. Those Trustees who
are "interested persons" by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (68), 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 Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
J. GARY BURKHEAD (57), Member of the Advisory Board (1997), is Vice
Chairman and a Member of the Board of Directors of FMR Corp. (1997)
and President of Fidelity Personal Investments and Brokerage Group
(1997). Previously, Mr. Burkhead served as President of Fidelity
Management & Research Company.
RALPH F. COX (66), Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (66), Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (54), Trustee (1997), is a consultant, author, and
lecturer (1993). Mr. Gates was Director of the Central Intelligence
Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates served as
Assistant to the President of the United States and Deputy National
Security Advisor. Mr. Gates is a Director of LucasVarity PLC
(automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for International
Policy and of the Endowment Association of the College of William and
Mary. In addition, he is a member of the National Executive Board of
the Boy Scouts of America.
E. BRADLEY JONES (70), Trustee. Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company.
He is a Director of TRW Inc. (original equipment and replacement
products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (65), 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 addi tion, he serv es as Chairman of
the Board of Directors of National Arts Stabilization, Inc., Chairman
of the Board of Trustees of the Greenwich Hospital Association,
Director of the Yale-New Haven Health Services Corp. (1998), 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 (55), Trustee, is Vice Chairman and Director of FMR.
Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.
WILLIAM O. McCOY (64), 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 (69), Trustee and Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Mr. McDonough is a Director of York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp.
(hydraulic systems, building systems, and metal products, 1992), CUNO,
Inc. (liquid and gas filtration products, 1996), and Associated
Estates Realty Corporation (a real estate investment trust, 1993). Mr.
McDonough served as a Director of ACME-Cleveland Corp. (metal working,
telecommunications, and electronic products) from 1987-1996 and
Brush-Wellman Inc. (metal refining) from 1983-1997.
MARVIN L. MANN (65), Trustee (1993), is Chairman of the Board 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 Imation Corp.
(imaging and information storage, 1997).
*ROBERT C. POZEN (52), Trustee (1997) and Senior Vice President, is
also President and a Director of FMR (1997); and President and a
Director of Fidelity Investments Money Management, Inc. (1998),
Fidelity Management & Research (U.K.) Inc. (1997), and Fidelity
Management & Research (Far East) Inc. (1997). Previously, Mr. Pozen
served as General Counsel, Managing Director, and Senior Vice
President of FMR Corp.
THOMAS R. WILLIAMS (69), Trustee, is President of The Wales Group,
Inc. (management and financial advisory services). Prior to retiring
in 1987, Mr. Williams served as Chairman of the Board of First
Wachovia Corporation (bank holding company), and Chairman and Chief
Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a Director
of ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
DWIGHT D. CHURCHILL (44), is Vice President of Bond Funds, Group
Leader of the Bond Group, Senior Vice President of FMR (1997), and
Vice President of FIMM (1998). Mr. Churchill joined Fidelity in 1993
as Vice President and Group Leader of Taxable Fixed-Income
Investments.
BOYCE I. GREER (42), is Vice President of Money Market Funds (1997),
Group Leader of the Money Market Group (1997), Senior Vice President
of FMR (1997), and Vice President of FIMM (1998). Mr. Greer served as
the Leader of the Fixed-Income Group for Fidelity Management Trust
Company (1993-1995) and was Vice President and Group Leader of
Municipal Fixed-Income Investments (1996-1997).
FRED L. HENNING, JR. (59), is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995), and
Senior Vice President of FIMM (1998). Before assuming his current
responsibilities, Mr. Henning was head of Fidelity's Money Market
Division.
SCOTT A. ORR (36), is Vice President of Spartan Arizona Municipal
Money Market Fund (1997) and other funds advised by FMR. Prior to his
current responsibilities, Mr. Orr has managed a variety of Fidelity
funds.
CHRISTINE JONES THOMPSON (40), is Vice President of Spartan Arizona
Municipal Income Fund (1998) and other funds advised by FMR. Prior to
her current responsibilities, Ms. Thompson managed a variety of
Fidelity funds.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51), Treasurer (1997), is Treasurer of the Fidelity
funds and is an employee of FMR (1997). Before joining FMR, Mr. Silver
served as Executive Vice President, Fund Accounting & Administration
at First Data Investor Services Group, Inc. (1996-1997). Prior to
1996, Mr. Silver was Senior Vice President and Chief Financial Officer
at The Colonial Group, Inc. Mr. Silver also served as Chairman of the
Accounting/Treasurer's Committee of the Investment Company Institute
(1987-1993).
STANLEY N. GRIFFITH (51), Assistant Vice President (1998), is
Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and
an employee of FMR Corp.
JOHN H. COSTELLO (52), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (52), 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 (40), Assistant Treasurer (1996), is Assistant
Treasurer of Fidelity's Fixed-Income Funds (1998) and an employee of
FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and
Fund Controller of Liberty Investment Services (1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of each fund for his
or her services for the fiscal year ended August 31, 1998 or calendar
year ended December 31, 1997, as applicable.
COMPENSATION TABLE
Trustees Aggregate Aggregate Total
and Compensation from Compensation Compensation
Members of the Spartan Arizona from Spartan from
Advisory Board Municipal Money Arizona Municipal the Fund
MarketB IncomeB Complex*,A
J. Gary $ 0 $ 0 $ 0
Burkhead**
Ralph F. Cox $ 32 $ 8 $ 214,500
Phyllis Burke $ 32 $ 8 $ 210,000
Davis
Robert M. Gates $ 33 $ 8 $ 176,000
Edward C. $ 0 $ 0 $ 0
Johnson 3d**
E. Bradley $ 33 $ 8 $ 211,500
Jones
Donald J. Kirk $ 33 $ 8 $ 211,500
Peter S. $ 0 $ 0 $ 0
Lynch**
William O. $ 33 $ 8 $ 214,500
McCoy
Gerald C. $ 40 $ 9 $ 264,500
McDonough
Marvin L. $ 32 $ 8 $ 214,500
Mann
Robert C. $ 0 $ 0 $ 0
Pozen**
Thomas R. $ 33 $ 8 $ 214,500
Williams
* Information is for the calendar year ended December 31, 1997 for 230
funds in the complex.
** Interested Trustees of the funds and Mr. Burkhead are compensated
by FMR.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
B Compensation figures include cash .
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of August 31 , 1998, the Trustees, Members of the Advisory
Board, and officers of each fund owned, in the aggregate, less than
1 % of each fund's total outstanding shares.
As of August 31, 1998, the following owned of record or
beneficially 5% or more of each fund's outstanding shares: Spartan
Arizona Municipal Income: Edward J. Claussen, Scottsdale, AZ
(7.83%).
MANAGEMENT CONTRACTS
Each fund has entered into a management contract with FMR, pursuant to
which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of 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 the
fund in accordance with its investment objective, policies, and
limitations. FMR also provides each fund with all necessary office
facilities and personnel for servicing the 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 securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for each fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES. Under the terms of each fund's management
contract, FMR is responsible for payment of all operating expenses of
each fund with certain exceptions. Specific expenses payable by FMR
include expenses for typesetting, printing, and mailing proxy
materials to shareholders, legal expenses, fees of the custodian,
auditor and interested Trustees, each fund's proportionate share of
insurance premiums and Investment Company Institute dues, and the
costs of registering shares under federal securities laws and making
necessary filings under state securities laws. Each fund's management
contract further provides that FMR will pay for typesetting, printing,
and mailing prospectuses, statements of additional information,
notices, and reports to shareholders; however, under the terms of each
fund's transfer agent agreement, the transfer agent bears the costs of
providing these services to existing shareholders. FMR also pays all
fees associated with transfer agent, dividend disbursing, and
shareholder services, and pricing and bookkeeping services.
FMR pays all other expenses of each fund with the following
exceptions: fees and expenses of the non-interested Trustees,
interest, taxes, brokerage commissions (if any), and such nonrecurring
expenses as may arise, including costs of any litigation to which a
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
MANAGEMENT FEES. For the services of FMR under each management
contract, Spartan Arizona Municipal Money Market and Spartan Arizona
Municipal Income pays FMR a monthly management fee at the annual rate
of 0.50% and 0.55%, respectively, of its average net assets throughout
the month.
The management fee paid to FMR by each fund is reduced by an amount
equal to the fees and expenses paid by the fund to the non-interested
Trustees.
The following table shows the amount of management fees paid by each
fund to FMR for the past three fiscal years, and the amount of credits
reducing management fees for each fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Years Ended Amount of Management Fees
August 31 Credits Reducing Management Paid to FMR
Fees
Spartan 1998 $ 2,848 $ 453,461 *
Arizona
Municipal
Money Market
1997 $ 2,088 $ 422,730 *
1996 $ 1,797 $ 334,209 *
Spartan 1998 $ 2,189 $ 118,342 *
Arizona
Municipal
Income
1997 $ 3,361 $ 120,658 *
1996 $ 734 $ 100,646 *
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
FMR may, from time to time, voluntarily reimburse all or a portion of
a 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 a fund's total returns and
yield, and repayment of the reimbursement by a fund will lower its
total returns and yield.
During the past three fiscal years, FMR voluntarily agreed to
reimburse each fund if and to the extent that its aggregate operating
expenses, including management fees, were in excess of an annual rate
of its average net assets. The table below shows the periods of
reimbursement and levels of expense limitation for the applicable
fund; the dollar amount of management fees incurred under the fund's
contract before reimbursement; and the dollar amount of management
fees reimbursed by FMR under the expense reimbursement for each
period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Periods of Aggregate Fiscal Management Amount of
Expense Limitation Operating Years Fee Before Management
From To Expense Ended Reimbursement Fee
Limitation August 31 Reimbursement
Spartan 8/1/98 8/31/98 0.00 % 1998 $ 453,461* $ 124,133
Arizona
Municipal
Money Market
9/1/97 7/31/98 0.35 % - - -
9/1/96 8/31/97 0.35 % 1997 $ 422,730 * $ 126,962
6/1/96 8/31/96 0.35 % 1996 $ 334,209 * $ 184,361
4/1/96 5/31/96 0.20 % - - -
9/1/95 3/31/96 0.10 % - - -
Spartan 9/1/97 8/31/98 0.00 % 1998 $ 118,342 * -
Arizona
Municipal
Income
9/1/96 8/31/97 0.00 % 1997 $ 120,658 * -
6/1/96 8/31/96 0.00 % 1996 $ 100,646 * $ 44,726
4/1/96 5/31/96 0.40 % - - -
9/1/95 3/31/96 0.10 % - - -
</TABLE>
* After reduction of fees and expenses paid by the fund to the
non-interested Trustees.
To defray shareholder service costs, FMR or its affiliates also
collect Spartan Arizona Municipal Money Market's $5.00 exchange fee,
$5.00 account closeout fee, $5.00 fee for wire purchases and
redemptions, and $2.00 checkwriting charge. Shareholder transaction
fees and charges collected by FMR are shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Ended Exchange Fees Account Wire Fees Checkwriting
August 31 Closeout Fees Charges
Spartan 1998 $ 160 $ 76 $ 40 $ 594
Arizona
Municipal
Money Market
1997 $ 160 $ 39 $ 35 $ 376
1996 $ 195 $ 51 $ 45 $ 470
</TABLE>
SUB-ADVISER. On behalf of Spartan Arizona Municipal Money Market, FMR
has entered into a sub-advisory agreement with FIMM pursuant to which
FIMM has primary responsibility for providing portfolio investment
management services to the fund. Previously, FMR Texas Inc. (FMR
Texas) had primary responsibility for providing investment management
services to the funds. On January 23, 1998, FMR Texas was merged into
FIMM, which succeeded to the operations of FMR Texas.
Under the terms of the sub-advisory agreement, FMR pays FIMM fees
equal to 50% of the management fee payable to FMR under its management
contract with Spartan Arizona Municipal Money Market. The fees paid to
FIMM are not reduced by any voluntary or mandatory expense
reimbursements that may be in effect from time to time.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Fiscal Year Ended August 31 Fees Paid to FMR Texas Fees Paid to FIM M
Spartan 1998 $ 75,577 $ 151,153
Arizona
Municipal
Money Market
1997 $ 211,365 N/A
1996 $ 167,105 N/A
</TABLE>
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of
each fund (the Plans) pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
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 fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. Each Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, each Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees has authorized such
payments for shares.
FMR made no payments either directly or through FDC to third
parties for the fiscal year ended 1998.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that each Plan does not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To
the extent that each Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, 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.
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 other 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
Each fund has entered into a transfer agent agreement with UMB. Under
the terms of the agreements, UMB provides transfer agency, dividend
disbursing, and shareholder services for each fund. UMB in turn has
entered into sub-transfer agent agreements with FSC, an affiliate of
FMR. Under the terms of the sub-agreements, FSC performs all
processing activities associated with providing these services for
each fund and receives all related transfer agency fees paid to UMB.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each account
in a fund. For retail accounts and certain institutional accounts,
these fees are based on account size and fund type. For certain
institutional retirement accounts, these fees are based on fund type.
For certain other institutional retirement accounts, these fees are
based on account type (i.e., omnibus or non-omnibus) and, for
non-omnibus accounts, fund type. The account fees are subject to
increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, UMB receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state tuition
program (QSTP), as defined under the Small Business Job Protection Act
of 1996, managed by FMR or an affiliate and each Fidelity Freedom
Fund, a fund of funds managed by an FMR affiliate, according to the
percentage of the QSTP's or Freedom Fund's assets that is invested in
a fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
Each fund has also entered into a service agent agreement with UMB.
Under the terms of the agreements, UMB provides pricing and
bookkeeping services for each fund. UMB in turn has entered into
sub-service agent agreements with FSC, an affiliate of FMR. Under the
terms of the sub-agreements, FSC performs all processing activities
associated with providing these services, including calculating the
NAV and dividends for each fund and maintaining each fund's portfolio
and general accounting records, and receives all related pricing and
bookkeeping fees paid to UMB.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on each fund's average daily net assets throughout the
month.
FMR bears the cost of transfer agency, dividend disbursing, and
shareholder services and pricing and bookkeeping services under the
terms of its management contract with each fund.
Each fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreements call for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Spartan Arizona Municipal Money Market Fund is a
fund (series) of Fidelity Union Street Trust II (the Delaware trust)
is an open-end management investment company organized as a Delaware
business trust. Currently, there are four funds of the Delaware trust:
Fidelity Daily Income Trust, Fidelity Municipal Money Market Fund,
Spartan Municipal Money Fund, and Spartan Arizona Municipal Money
Market Fund. The Delaware trust's Trust Instrument permits the
Trustees to create additional funds.
Spartan Arizona Municipal Income Fund is a fund (series) of Fidelity
Union Street Trust (the Massachusetts trust) is an open-end management
investment company organized as a Massachusetts business trust on
March 1, 1974. Currently, there are five funds of the Delaware trust:
Fidelity Export and Multinational Fund, Spartan Short-Intermediate
Municipal Income Fund, Spartan Ginnie Mae Fund, Spartan Maryland
Municipal Income Fund, and Spartan Arizona Municipal Income Fund. The
Massachusetts trust's Declaration of Trust permits the Trustees to
create additional funds.
In the event that FMR ceases to be investment adviser 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 any
misstatement in its prospectus or statement of additional information
about another fund.
The assets of each trust received for the issue or sale of shares of
each of its funds and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially
allocated to such fund, and constitute the underlying assets of such
fund. The underlying assets of each fund are segregated on the books
of account, and are to be charged with the liabilities with respect to
such fund and with a share of the general expenses of their respective
trusts. Expenses with respect to 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. 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; 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 trust or the fund, as determined by the current value of each
shareholder's investment in the fund or trust; 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
Fidelity Union Street and Fidelity Union Street II Trust may also
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 funds. 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. PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts serves as the funds' 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, 1998, and reports of the auditor, are
included in the funds' Annual Report, which is a separate report
supplied with this SAI. The funds' financial statements, including the
financial highlights, and reports of the auditor are incorporated
herein by reference. For a free additional copy of the funds' 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 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 MUNICIPAL
OBLIGATIONS
Moody's ratings for short-term municipal obligations will be
designated Moody's Investment Grade ("MIG"). A two-component rating is
assigned to variable rate demand obligations. The first component
represents an evaluation of the degree of risk associated with
scheduled principal repayment and interest payments and is designated
by a long-term rating, e.g., "Aaa" or "A." The second component
represents an evaluation of the degree of risk associated with the
demand feature and is designated "VMIG."
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.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL NOTES
Municipal notes maturing in three years or less will likely receive a
"note" rating symbol. Notes that have a put option or demand feature
are assigned a dual rating. The first rating addresses the likelihood
of repayment of principal and payment of interest due and for
short-term obligations is designated by a note rating symbol. The
second rating addresses only the demand feature, and is designated by
a commercial paper rating symbol, e.g., "A-1" or "A-2."
SP-1 - Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are 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.
DESCRIPTION OF MOODY'S INVESTORS SERVICE RATINGS OF MUNICIPAL
OBLIGATIONS
Moody's ratings for long-term municipal obligations fall within nine
categories. They range from Aaa (highest quality) to C (lowest
quality). Those bonds within the Aa through B categories that Moody's
believes possess the strongest credit attributes within those
categories are designated by the symbol "1."
AAA - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA - Bonds that are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect
to principal or interest.
CA - Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked short-comings.
C - Bonds that are rated C are the lowest-rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF MUNICIPAL DEBT
Municipal debt issues may be designated by Standard & Poor's as either
investment grade ("AAA" through "BBB") or speculative grade ("BB"
through "D"). While speculative grade debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions. Ratings from
AA through CCC may be modified by the addition of a plus sign (+) or
minus sign (-) to show relative standing within the major rating
categories.
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC - Debt rated CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
D rating will also be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
TRADEMARKS
Spartan, Fidelity, and Fidelity Focus are registered trademarks of
FMR Corp.
The third-party marks appearing above are the marks of their
respective owners.
FIDELITY UNION STREET TRUST II
FIDELITY DAILY INCOME TRUST
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1...................................... COVER PAGE
2A.................................... EXPENSES
B, C................................ CONTENTS; THE FUND AT A GLANCE; WHO MAY WANT TO
INVEST
3A.................................... FINANCIAL HIGHLIGHTS
B.................................... *
C, D................................ PERFORMANCE
4A I................................. CHARTER
II............................... THE FUND AT A GLANCE; INVESTMENT PRINCIPLES AND
RISKS
B.................................... INVESTMENT PRINCIPLES AND RISKS
C.................................... WHO MAY WANT TO INVEST; INVESTMENT PRINCIPLES AND
RISKS
5A.................................... CHARTER
B I................................. COVER PAGE; THE FUND AT A GLANCE; CHARTER; DOING
BUSINESS WITH FIDELITY
II............................... CHARTER
III.............................. EXPENSES; BREAKDOWN OF EXPENSES
C.................................... CHARTER
D.................................... CHARTER; BREAKDOWN OF EXPENSES
E.................................... COVER PAGE; CHARTER
F.................................... EXPENSES
G I.................................. CHARTER
II................................. *
5A.................................. *
6A I................................. CHARTER
II............................... HOW TO BUY SHARES; HOW TO SELL SHARES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
III.............................. CHARTER
B................................... CHARTER
C.................................... TRANSACTION DETAILS; EXCHANGE RESTRICTIONS
D.................................... *
E.................................... DOING BUSINESS WITH FIDELITY; HOW TO BUY SHARES;
HOW TO SELL SHARES; INVESTOR SERVICES
F, G................................ DIVIDENDS, CAPITAL GAINS, AND TAXES
H................................ *
7A.................................... COVER PAGE; CHARTER
B.................................... EXPENSES; HOW TO BUY SHARES; TRANSACTION DETAILS
C.................................... *
D.................................... HOW TO BUY SHARES
E................................... *
F.................................... BREAKDOWN OF EXPENSES
8...................................... HOW TO SELL SHARES; INVESTOR SERVICES; TRANSACTION
DETAILS; EXCHANGE RESTRICTIONS
9...................................... *
</TABLE>
* Not Applicable
FIDELITY UNION STREET TRUST II
FIDELITY DAILY INCOME TRUST
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, 11.............................. COVER PAGE
12.................................... DESCRIPTION OF THE TRUST
13A-C............................ INVESTMENT POLICIES AND LIMITATIONS
D.................................. *
14A-C............................ TRUSTEES AND OFFICERS
15A............................... FMR
15B................................ *
15C................................ TRUSTEES AND OFFICERS
16A I............................... FMR; PORTFOLIO TRANSACTIONS
II............................. TRUSTEES AND OFFICERS
III............................ MANAGEMENT CONTRACT
B................................. MANAGEMENT CONTRACT
C, D.............................. CONTRACTS WITH FMR AFFILIATES
E.............................. MANAGEMENT CONTRACTS
F............................... DISTRIBUTION AND SERVICE PLAN
G.............................. *
H.................................. DESCRIPTION OF THE TRUST
I.................................. CONTRACTS WITH FMR AFFILIATES
17A-D.............................. PORTFOLIO TRANSACTIONS
E............................... *
18A.................................. DESCRIPTION OF THE TRUST
B.................................. *
19A.................................. ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION
INFORMATION
B.................................. VALUATION; ADDITIONAL PURCHASE, EXCHANGE, AND
REDEMPTION INFORMATION
C.................................. *
20.................................... DISTRIBUTIONS AND TAXES
21A, B.............................. CONTRACTS WITH FMR AFFILIATES
C. ................................ *
22A.................................. PERFORMANCE
B.................................. *
23.................................... FINANCIAL STATEMENTS
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the
fund invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a
copy of the fund's most recent financial report and portfolio listing,
or a copy of the Statement of Additional Information (SAI) dated
October 20, 1998. 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
Fidelit y(registered trademark) at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed
by, any depository institution. Shares are not insured by the FDIC,
Federal Reserve Board, or any other agency, and are subject to
investment risks, including possible loss of principal amount
invested.
LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FDI-pro-1098
1.536815.101
FIDELITY
DAILY INCOME
TRUST
(fund number 031, trading symbol FDTXX)
Daily Income seeks high current income while maintaining a stable
$1.00 share price by investing in high-quality, short-term money
market securities.
PROSPECTUS
OCTOBER 20, 1998
(FIDELITY_LOGO_GRAPHIC)(Registered Trademark)
82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS
KEY FACTS 4 THE FUND AT A GLANCE
4 WHO MAY WANT TO INVEST
5 EXPENSES THE FUND'S YEARLY OPERATING
EXPENSES.
7 FINANCIAL HIGHLIGHTS A SUMMARY OF
THE FUND'S FINANCIAL DATA.
8 PERFORMANCE HOW THE FUND HAS DONE
OVER TIME.
THE FUND IN DETAIL 8 CHARTER HOW THE FUND IS ORGANIZED.
9 INVESTMENT PRINCIPLES AND RISKS THE
FUND'S OVERALL APPROACH TO INVESTING.
10 BREAKDOWN OF EXPENSES HOW
OPERATING COSTS ARE CALCULATED AND
WHAT THEY INCLUDE.
YOUR ACCOUNT 10 DOING BUSINESS WITH FIDELITY
10 TYPES OF ACCOUNTS DIFFERENT WAYS TO
SET UP YOUR ACCOUNT, INCLUDING
TAX-ADVANTAGED RETIREMENT PLANS.
11 HOW TO BUY SHARES OPENING AN
ACCOUNT AND MAKING ADDITIONAL
INVESTMENTS.
13 HOW TO SELL SHARES TAKING MONEY OUT
AND CLOSING YOUR ACCOUNT.
15 INVESTOR SERVICES SERVICES TO HELP YOU
MANAGE YOUR ACCOUNT.
SHAREHOLDER AND 16 DIVIDENDS, CAPITAL GAINS,
ACCOUNT POLICIES AND TAXES
17 TRANSACTION DETAILS SHARE PRICE
CALCULATIONS AND THE TIMING OF
PURCHASES AND REDEMPTIONS.
17 EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: Income while maintaining a stable $1.00 share price. As with any
mutual fund, there is no assurance that the fund will achieve its
goal.
STRATEGY: Invests in high-quality, short-term domestic money market
securities of all types.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments (registered trademark) ,
which was established in 1946 and is now America's largest mutual fund
manager. Fidelity Investments Money Management Inc. (FIMM), a
subsidiary of FMR, chooses investments for the fund.
SIZE: As of August 31, 1998 , the fund had over $2. 6
billion in assets.
WHO MAY WANT TO
INVEST
The fund may be appropriate for investors who would like to earn
income at current money market rates while preserving the value of
their investment. The fund is managed to keep its share price stable
at $1.00. The rate of income will vary from day to day, generally
reflecting short-term interest rates.
The fund does not constitute a balanced investment plan. However,
because it emphasizes stability, it could be well-suited for a portion
of your investments. The fund offers checkwriting to give you easy
access to your money.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you may pay when you buy
or sell shares of the fund. In addition, you may be charged an annual
account maintenance fee if your account balance falls below $2,500.
See "Transaction Details," page , for an explanation of how and
when these charges apply.
SALES CHARGE ON NONE
PURCHASES
AND REINVESTED
DISTRIBUTIONS
DEFERRED SALES NONE
CHARGE ON
REDEMPTIONS
ANNUAL ACCOUNT $12.00
MAINTENANCE FEE
(FOR ACCOUNTS UNDER
$2,500)
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The
fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing
shareholder statements and financial reports. The fund's expenses are
factored into its share price or dividends and are not charged
directly to shareholder accounts (see "Breakdown of Expenses" page
).
(CHECKMARK)UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of expenses
for portfolio management,
shareholder statements, tax
reporting, and other services.
These expenses are paid from
the fund's assets, and their
effect is already factored into
any quoted share price or
return. Also, as an investor,
you may pay certain expenses
directly.
The following figures are based on historical expenses of the fund and
are calculated as a percentage of average net assets of the fund.
MANAGEMENT FEE 0.33%
12B-1 FEE NONE
O THER EXPENSE S 0.17%
TOTAL FUND OPERATING 0.50%
EXPENSES
EXAMPLES: Let's say, hypothetically, that the fund's annual return is
5% and that your shareholder transaction expenses and the fund's
annual operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses
if you close your account after the number of years indicated:
1 YEAR $ 5
3 YEARS $ 16
5 YEARS $ 28
10 YEARS $ 63
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected expenses or returns, all of which may vary.
(CHECKMARK)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. DAILY INCOME IS IN
THE MONEY MARKET CATEGORY.
(RIGHT ARROW) MONEY MARKET SEEKS
INCOME AND STABILITY BY
INVESTING IN HIGH-QUALITY,
SHORT-TERM INVESTMENTS.
(SOLID BULLET) INCOME SEEKS INCOME BY
INVESTING IN BONDS.
(SOLID BULLET) GROWTH AND INCOME SEEKS
LONG-TERM GROWTH AND INCOME
BY INVESTING IN STOCKS AND
BONDS.
(SOLID BULLET) GROWTH SEEKS LONG-TERM
GROWTH BY INVESTING MAINLY IN
STOCKS.
FINANCIAL HIGHLIGHTS
The financial highlights table that follows has been audited by
PricewaterhouseCoopers LLP, i ndependent 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> <C>
YEARS 1998 1997 1996 1995 1994 1993 1992 1991 1990A 1989B 1988B
ENDED AUGUST
31
NET ASSET $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
VALUE,
BEGINNING
OF PERIOD
INCOME .052 .051 .051 .053 .032 .028 .042 .064 .051 .087 .070
FROM
INVESTMENT
OPERATIONS
NET
INTEREST
INCOME
LESS (.052) (.051) (.051) (.053) (.032) (.028) (.042) (.064) (.051) (.087) (.070)
DISTRIBUTIONS
FROM NET
INTEREST
INCOME
NET ASSET $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
VALUE,
END OF
PERIOD
TOTAL 5.31% 5.18% 5.25% 5.43% 3.23% 2.83% 4.32% 6.64% 5.22% 8.97% 7.15%
RETURNC,E
RATIOS AND SUPPLEMENTAL DATA
NET $ 2,625 $ 2,425 $ 2,317 $ 2,256 $ 2,132 $ 2,096 $ 2,502 $ 2,802 $ 2,981 $ 2,923 $ 3,042
ASSETS, END
OF PERIOD (IN
MILLIONS)
RATIO OF .50% .50% .50% .54% .56% .57% .55% .60% .63%D .64% .66%
EXPENSES TO
AVERAGE NET
ASSETS
RATIO OF .50% .49%F .50% .54% .56% .57% .55% .60% .63%D .64% .66%
EXPENSES TO
AVERAGE NET
ASSETS AFTER
EXPENSE
REDUCTIONS
RATIO OF 5.19% 5.07% 5.11% 5.31% 3.18% 2.83% 4.22% 6.47% 7.69%D 8.68% 7.01%
NET INTEREST
INCOME TO
AVERAGE NET
ASSETS
</TABLE>
A EIGHT MONTHS ENDED AUGUST 31
B FISCAL YEARS ENDED DECEMBER 31
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D ANNUALIZED
E THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S
EXPENSES.
PERFORMANCE
Money market fund performance can be measured as TOTAL RETURN or
YIELD. The total returns that follow are based on historical fund
results and do not reflect the effect of taxes.
The fund's fiscal year runs from September 1 through August 31. The
tables below show the fund's performance over past fiscal years
compared to a measure of inflation.
AVERAGE ANNUAL TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 PAST 10
AUGUST 31, 1998 YEAR YEARS YEARS
DAILY INCOME 5.31% 4.88% 5.50%
CONSUMER PRICE INDEX 1.62 % 2.45 % 3.22 %
CUMULATIVE TOTAL RETURNS
FISCAL PERIODS ENDED PAST 1 PAST 5 PAST 10
AUGUST 31, 1998 YEAR YEARS YEARS
DAILY INCOME 5.31% 26.89% 70.79%
CONSUMER PRICE INDEX 1.62 % 12.85 % 37.31 %
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated
period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate
of return that, if achieved annually, would have produced the same
cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over
a given period of time, expressed as an annual percentage rate. When a
yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD.
(CHECKMARK)UNDERSTANDING
PERFORMANCE
SEVEN-DAY YIELD ILLUSTRATES THE
INCOME EARNED BY A MONEY
MARKET FUND OVER A RECENT
SEVEN-DAY PERIOD. TOTAL RETURN
REFLECTS BOTH THE REINVESTMENT OF
INCOME AND THE CHANGE IN A
FUND'S SHARE PRICE. SINCE MONEY
MARKET FUNDS MAINTAIN A STABLE
$1.00 SHARE PRICE, CURRENT
SEVEN-DAY YIELDS ARE THE MOST
COMMON ILLUSTRATION OF MONEY
MARKET FUND PERFORMANCE.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
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 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
DAILY INCOME IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. The fund is a
diversified fund of Fidelity Union Street Trust II, an open-end
management investment company organized as a Delaware business trust
on June 20, 1991.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet periodically throughout the year to oversee the
fund's activities, review contractual arrangements with companies that
provide services to the fund, and review the fund's performance. The
trustees serve as trustees for other Fidelity funds. The majority of
trustees are not otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL SHAREHOLDER MEETINGS AND MAIL PROXY
MATERIALS. These meetings may be called to elect or remove trustees,
change fundamental policies, approve a management contract, or for
other purposes. Shareholders not attending these meetings are
encouraged to vote by proxy. Fidelity will mail proxy materials in
advance, including a voting card and information about the proposals
to be voted on. The number of votes you are entitled to is based upon
the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which handles its business affairs.
FIMM, located in Merrimack, New Hampshire, has primary
responsibility for providing investment management services.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services.
Fidelity Service Company, Inc. (FSC) performs transfer agent servicing
functions for the fund.
FMR Corp. is the ultimate parent company of FMR and FIMM .
Members of the Edward C. Johnson 3d family are the predominant owners
of a class of shares of common stock representing approximately 49% of
the voting power of FMR Corp. Under the Investment Company Act of 1940
(the 1940 Act), control of a company is presumed where one individual
or group of individuals owns more than 25% of the voting stock of that
company; therefore, the Johnson family may be deemed under the 1940
Act to form a controlling group with respect to FMR Corp.
FMR may use its broker-dealer affiliates and other firms that sell
fund shares to carry out the fund's transactions, provided that the
fund receives brokerage services and commission rates comparable to
those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND seeks to earn a high level of current income while
maintaining a stable $1.00 share price by investing in high-quality,
short-term securities. The fund invests only in high-quality U.S.
dollar-denominated money market securities of domestic issuers,
including U.S. Government securities and repurchase agreements. The
fund also may enter into reverse repurchase agreements.
The fund complies with industry-standard requirements for the
quality, maturity, and diversification of its investments, which
are designed to help maintain a stable $1.00 share price. Of course,
there is no guarantee that the fund will 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.
The fund earns income at current money market rates. It stresses
preservation of capital, liquidity and income and does not seek the
higher yields or capital appreciation that more aggressive
investments may provide. The fund's yield will vary from day to day
and generally reflects current short-term interest rates and other
market conditions.
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.
MONEY MARKET SECURITIES are high-quality, short-term instruments
issued by the U.S. Government, corporations, financial institutions,
and other entities. These securities may carry fixed, variable, or
floating interest rates. Money market securities may be structured
to be, or may employ a trust or other form so that they
are, eligible investments for money market funds. If a structure
fails to function as intended , adverse tax or investment
consequences may result.
U.S. GOVERNMENT MONEY MARKET SECURITIES are short-term debt
instruments issued or guaranteed by the U.S. Treasury or by an agency
or instrumentality of the U.S. Government. Not all U.S. Government
securities are backed by the full faith and credit of the United
States. For example, U.S. Government securities such as those issued
by Fannie Mae are supported by the instrumentality's right to borrow
money from the U.S. Treasury under certain circumstances. Other
U.S. Government securities, such as those issued by the Federal Farm
Credit Banks Funding Corporation, are supported only by the credit
of the entity that issued them.
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
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.
ASSET-BACKED SECURITIES include interests in pools of mortgages,
loans, receivables, or other assets. Payment of principal and interest
may be largely dependent upon the cash flows generated by the assets
backing the securities.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a
benchmark rate changes. These interest rate adjustments are designed
to help stabilize the security's price.
STRIPPED SECURITIES are the separate income or principal components of
a debt security. The risks associated with stripped securities are
similar to those of other money market securities, although stripped
securities may be more volatile. U.S. Treasury securities that have
been stripped by a Federal Reserve Bank are obligations issued by the
U.S. Treasury.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a
security at one price and simultaneously agrees to sell it back at a
higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
fund temporarily transfers possession of a portfolio instrument to
another party in return for cash. This could increase the risk of
fluctuation in the fund's yield or in the market value of its assets.
OTHER MONEY MARKET SECURITIES may include commercial paper,
certificates of deposit, bankers' acceptances, and time deposits.
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. 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.
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 invest more than 10% of its
assets in illiquid securities.
WHEN-ISSUED AND FORWARD PURCHASE OR SALE TRANSACTIONS are trading
practices in which payment and delivery for the security take place at
a later date than is customary for that type of security. The market
value of the security could change during this period.
FINANCIAL SERVICES INDUSTRY. Companies in the financial services
industry are subject to various risks related to that industry, such
as government regulation, changes in interest rates, and exposure on
loans, including loans to foreign borrowers. If a fund invests
substantially in this industry, its performance may be affected by
conditions affecting the industry.
RESTRICTIONS: The fund will invest more than 25% of its total
assets in securities of companies in the financial services
industry.
CASH MANAGEMENT. The fund may invest in money market securities, in
repurchase agreements, and in a money market fund available only to
funds and accounts managed by FMR or its affiliates, whose goal is to
seek a high level of current income while maintaining a stable $1.00
share price. A major change in interest rates or a default on the
money market fund's investments could cause its share price to change.
RESTR ICTIONS: The fund does not currently intend to invest in a
money market fund.
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.
Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: The fund may not invest more than 5% of its total
assets in the securities of any one issuer, except that the
fund may invest up to 25% of its total assets in the highest
quality securities of a single issuer for up to three business days.
These limitations do not apply to U.S. Government securities
or, to securities of other investment companies.
BORROWING. The fund may borrow from banks or from other funds advised
by FMR or its affiliates , or through reverse repurchase
agreements, and may make additional investments while borrowings are
outstanding.
RESTRICTIONS: The fund may borrow only for temporary or emergency
purposes, or engage in reverse repurchase agreements, but not in an
amount exceeding 331/3% of its total assets.
LENDING. The fund may lend money to other funds advised by FMR or
its affiliates.
RESTRICTIONS: Loans, in the aggregate, may not exceed 331/3% of the
fund's total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages
are fundamental, that is, subject to change only by shareholder
approval. The following paragraphs restate all those that are
fundamental. All policies stated throughout this prospectus, other
than those identified in the following paragraphs, can be changed
without shareholder approval.
The fund seeks as high a level of current income as is
consistent with preserving capital and providing liquidity.
The fund will invest more than 25% of its total assets in the
financial services industry.
The fund may borrow only for temporary or emergency purposes, or
engage in reverse repurchase agreements, but not in an amount
exceeding 331/3% of its total assets.
Loans, in the aggregate, may not exceed 331/3% of the fund's total
assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of the fund's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services. The fund also pays OTHER EXPENSES,
which are explained on page .
FMR may, from time to time, agree to reimburse the fund for management
fees and other expenses above a specified limit. FMR retains the
ability to be repaid by the fund if expenses fall below the specified
limit prior to the end of the fiscal year. Reimbursement arrangements
which may be terminated at any time without notice, can decrease the
fund's expenses and boost its performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The
fee is calculated by dividing an asset-based fee rate by twelve
and multiplying the result by the fund's average net assets throughout
the month, and then adding an income-based fee.
The asset-based fee cannot rise above an annual rate 0.10% of the
fund's average net assets throughout the month, and it drops as assets
exceed $2 billion. The income-based fee is 4% of the fund's gross
income throughout the month, but this amount cannot rise above an
annual rate of 0.40% or fall below an annual rate of 0.20% of the
fund's average net assets throughout the month.
The total management fee for the fiscal year ended August 31, 1998
was 0.33% of the fund's average net assets.
FIMM is the fund's sub-adviser and has primary responsibility
for managing its investments. FMR is responsible for providing other
management services. FMR pays FIMM 50% of its management fee
(before expense reimbursements) for FIMM's services. FMR paid
FIMM and FMR Texas Inc., the predecessor company to FIMM, fees
equal to 0.10% and 0.06%, respectively , of the fund's average
net assets for the fiscal year ended August 31, 1998.
OTHER EXPENSES
While the management fee is a significant component of the fund's
annual operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform transfer agency, dividend
disbursing, shareholder servicing, and accounting functions. These
services include processing shareholder transactions, valuing the
fund's investments, and calculating the fund's share price and
dividends.
For the fiscal year ended August 1998, the fund paid transfer
agency and pricing and bookkeeping fees equal to 0.16 % of its
average net assets. This amount is before expense reductions, if any.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the
compensation of trustees who are not affiliated with Fidelity.
The fund has adopted a DISTRIBUTION AND SERVICE PLAN. This plan
recognizes that FMR may use its management fee revenues, as well as
its past profits or its resources from any other source, to pay FDC
for expenses incurred in connection with the distribution of fund
shares. FMR directly, or through FDC, may make payments to third
parties, such as banks or broker-dealers, that engage in the sale of,
or provide shareholder support services for, the fund's shares.
Currently, the Board of Trustees has authorized such payments.
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- advantaged 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 and Fidelity's Web site.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity
has over 75 walk-in Investor Centers across the country.
If you would prefer to access information on-line, you can visit
Fidelity's Web site at www.fidelity.com.
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.
The account guidelines that follow may not apply to certain retirement
accounts. If you are investing through a retirement account or if your
employer offers the fund through a retirement program, you may be
subject to additional fees. For more information, please refer to your
program materials, contact your employer, call your retirement
benefits number, visit Fidelity's Web site at www.fidelity.com,
or contact Fidelity directly, as appropriate.
(CHECKMARK)FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 223
(solid bullet) Assets in Fidelity mutual
funds: over $ 546 billion
(solid bullet) Number of shareholder
accounts: over 38 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 250
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have
two or more owners (tenants).
RETIREMENT
FOR TAX-ADVANTAGED RETIREMENT SAVING S
Retirement plans provide individuals with tax-advantaged ways to
save for retirement, either with tax-deductible contributions or
tax-free growth. Retirement accounts require special applications and
typically have lower minimums.
(solid bullet) TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow
individuals under age 70 with compensation to contribute up to
$2,000 per tax year. Married couples can contribute up to $4,000
per tax year, provided no more than $2,000 is contributed on behalf of
either spouse. (These limits are aggregate for Traditional and Roth
IRAs.) Contributions may be tax-deductible, subject to certain income
limits.
(solid bullet) ROTH IRAS allow individuals to make
non-deductible contributions of up to $2,000 per tax year. Married
couples can contribute up to $4,000 per tax year, provided no more
than $2,000 is contributed on behalf of either spouse. (These limits
are aggregate for Traditional and Roth IRAs.) Eligibility is subject
to certain income limits. Qualified distributions are tax-free.
(solid bullet) ROTH CONVERSION IRAS allow individuals with
assets held in a Traditional IRA or Rollover IRA to convert those
assets to a Roth Conversion IRA. Eligibility is subject to certain
income limits. Qualified distributions are tax-free.
(solid bullet) ROLLOVER IRAS help retain special tax advantages
for certain eligible rollover distributions from
employer-sponsored retirement plans.
(solid bullet) 401(K) PLANS, and certain other
401(a)-qualified plans, are employer-sponsored retirement plans that
allow employer contributions and may allow employee after-tax
contributions. In addition, 401(k) plans allow employee pre-tax
(tax-deferred) contributions. Contributions to these plans may be
tax-deductible to the employer.
(solid bullet) KEOGH PLANS are generally profit sharing or money
purchase pension plans that allow self-employed individuals or
small business owners to make tax-deductible contributions for
themselves and any eligible employees.
(solid bullet) SIMPLE IRAS provide small business owners and
those with self-employment income (and their eligible employees) with
many of the advantages of a 401(k) plan, but with fewer administrative
requirements.
(solid bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS)
provide small business owners or those with self-employment income
(and their eligible employees) with many of the same advantages as a
Keogh, bu t with fewer administrative requirements.
(solid bullet) SALARY REDUCTION SEP-IRAS (SARSEPS) allow
employees of businesses with 25 or fewer employees to contribute a
percentage of their wages on a tax-deferred basis. These plans must
have been established by the employer prior to January 1, 1997.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to
employees of 501(c)(3) tax-exempt institutions, including
schools, hospitals, and other charitable organizations.
(solid bullet) DEFERRED COMPENSATION PLANS (457 PLANS) are
available to employees of most state and local governments and their
agencies and to employees of tax-exempt institutions.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and
obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you
can set up a custodial account under the Uniform Gifts to Minors Act
(UGMA) or the Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR
OTHER GROUPS
Requires a special application.
HOW TO BUY SHARES
THE PRICE TO BUY ONE SHARE of the fund is the fund's net asset value
per share (NAV). The fund is managed to keep its NAV stable at $1.00.
The fund's shares are sold without a sales charge.
Your shares will be purchased at the next NAV calculated after your
investment is received in proper form. The fund's NAV is
normally calculated each business day at 4:00 p.m. Eastern time.
The fund 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.
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 or
visit Fidelity's Web site at www.fidelity.com for an
application.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another
Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX- ADVANTAGED RETIREMENT PLAN,
such as an IRA, for the first time, you will need a special
application. Retirement investing also involves its own investment
procedures. Call 1-800-544-8888 or visit Fidelity's Web site at
www.fidelity.com for more information and a retirement
application.
If you buy shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by
exchange to another Fidelity fund, the payment may be delayed for up
to seven business days to ensure that your previous investment has
cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $5,000
For certain Fidelity retirement accountsA $500
TO ADD TO AN ACCOUNT $500
For certain Fidelity retirement accountsA $500
Through regular investment plansB $100
MINIMUM BALANCE $2,000
For certain Fidelity retirement accounts $500
A THESE LOWER MINIMUMS APPLY TO FIDELITY TRADITIONAL IRA, ROTH IRA,
ROTH CONVERSION IRA, ROLLOVER IRA, SEP-IRA, AND KEOGH ACCOUNTS.
B FOR MORE INFORMATION ABOUT REGULAR INVESTMENT PLANS, PLEASE REFER
TO "INVESTOR SERVICES," PAGE .
There is no minimum account balance or initial or subsequent
investment minimum for investments through Fidelity Portfolio
Advisory ServicesSM, a qualified state tuition program, certain
Fidelity retirement accounts funded through salary deduction, or
accounts opened with the proceeds of distributions from such
retirement accounts.
Refer to the program materials for details. In addition, the fund
reserves the right to waive or lower investment minimums in other
circumstances.
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN TO ADD TO AN
AN ACCOUNT
ACCOUNT
PHONE 1-800-544-7777 (PHONE_GRAPHIC) (SMALL SOLID BULLET) EXCHANGE FROM (SMALL SOLID BULLET) EXCHANGE FROM
ANOTHER FIDELITY ANOTHER FIDELITY FUND
FUND ACCOUNT ACCOUNT WITH THE
WITH THE SAME SAME REGISTRATION,
REGISTRATION, INCLUDING NAME,
INCLUDING NAME, ADDRESS, AND
ADDRESS, AND TAXPAYER ID NUMBER.
TAXPAYER ID (SMALL SOLID BULLET) USE FIDELITY MONEY
NUMBER. LINE TO TRANSFER FROM
YOUR BANK ACCOUNT.
CALL BEFORE YOUR FIRST
USE TO VERIFY THAT THIS
SERVICE IS IN PLACE ON
YOUR ACCOUNT.
MAXIMUM MONEY
LINE: UP TO
$100,000.
THE INTERNET WWW.FIDELITY.COM
(COMPUTER GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) EXCHANGE FROM
SIGN THE ANOTHER FIDELITY FUND
APPLICATION. ACCOUNT WITH THE
MAKE YOUR CHECK SAME REGISTRATION,
PAYABLE TO THE INCLUDING NAME,
COMPLETE NAME ADDRESS, AND
OF THE FUND. MAIL TAXPAYER ID NUMBER.
TO THE ADDRESS (SMALL SOLID BULLET) USE FIDELITY MONEY
INDICATED ON THE LINE TO TRANSFER
APPLICATION. FROM YOUR BANK
ACCOUNT. VISIT
FIDELITY'S WEB SITE
BEFORE YOUR FIRST USE
TO VERIFY THAT THIS
SERVICE IS IN PLACE
ON YOUR ACCOUNT.
MAXIMUM MONEY
LINE: UP TO
$100,000.
MAIL (MAIL_GRAPHIC) (SMALL SOLID BULLET) COMPLETE AND (SMALL SOLID BULLET) MAKE YOUR CHECK
SIGN THE PAYABLE TO THE
APPLICATION. COMPLETE NAME OF THE
MAKE YOUR FUND . INDICATE YOUR
CHECK PAYABLE TO FUND ACCOUNT NUMBER
THE COMPLETE ON YOUR CHECK AND
NAME OF THE MAIL TO THE ADDRESS
FUND . MAIL TO THE PRINTED ON YOUR
ADDRESS INDICATED ACCOUNT STATEMENT.
ON THE (SMALL SOLID BULLET) EXCHANGE BY MAIL: CALL
APPLICATION. 1-800-544-6666 FOR
INSTRUCTIONS.
IN PERSON (HAND_GRAPHIC) (SMALL SOLID BULLET) BRING YOUR (SMALL SOLID BULLET) BRING YOUR CHECK TO A
APPLICATION AND FIDELITY INVESTOR
CHECK TO A CENTER. CALL
FIDELITY INVESTOR 1-800-544-9797 FOR
CENTER. CALL THE CENTER NEAREST
1-800-544-979 YOU.
7 FOR THE CENTER
NEAREST YOU.
WIRE (WIRE_GRAPHIC) (SMALL SOLID BULLET) CALL (SMALL SOLID BULLET) NOT AVAILABLE FOR
1-800-544-77 RETIREMENT ACCOUNTS.
77 TO SET UP (SMALL SOLID BULLET) WIRE TO:
YOUR ACCOUNT BANKERS TRUST
AND TO ARRANGE COMPANY,
A WIRE BANK ROUTING
TRANSACTION. NOT #021001033,
AVAILABLE FOR ACCOUNT
RETIREMENT #00163053.
ACCOUNTS. SPECIFY THE
(SMALL SOLID BULLET) WIRE WITHIN 24 COMPLETE NAME OF
HOURS TO: THE FUND AND INCLUDE
BANKERS TRUST YOUR ACCOUNT
COMPANY, NUMBER AND YOUR
BANK ROUTING NAME.
#021001033,
ACCOUNT
#00163053.
SPECIFY THE
COMPLETE NAME
OF THE FUND AND
INCLUDE YOUR
NEW ACCOUNT
NUMBER AND
YOUR NAME.
AUTOMATICALLY (AUTOMATIC_GRAPHIC) (SMALL SOLID BULLET) NOT AVAILABLE. (SMALL SOLID BULLET) USE FIDELITY
AUTOMATIC ACCOUNT
BUILDER (REGISTERED TRADEMARK) . SIGN UP
FOR THIS SERVICE
WHEN OPENING YOUR
ACCOUNT, VISIT
FIDELITY'S WEB SITE
AT
WWW.FIDELITY.COM
TO OBTAIN THE FORM
TO ADD THE SERVICE,
OR CALL
1-800-544-6666
TO ADD THE SERVICE.
(TDD_GRAPHIC) TDD - SERVICE FOR THE DEAF AND HEARING IMPAIRED: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares.
THE PRICE TO SELL ONE SHARE of the fund is the fund's NAV.
Your shares will be sold at the next NAV calculated after your
order is received in proper form. The fund's NAV is normally
calculated each business day at 4:00 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the
methods described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be
made in writing, except for exchanges to other Fidelity funds, which
can be requested by phone, in writing, or through Fidelity's Web
site. Call 1-800-544-6666 for a retirement distribution form.
TO SELL SHARES THROUGH YOUR FIDELITY ULTRA SERVICE (registered
trademark) OR FIDELITYPLUS(registered trademark) ACCOUNT, call
1-800-544-6262 to receive a handbook with instructions.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least
$2,000 worth of shares in the account to keep it open ($500 for
retirement accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to
sign up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in
writing and include a signature guarantee if any of the following
situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of
shares,
(small solid bullet) Your account registration has changed within the
last 30 days,
(small solid bullet) The check is being mailed to a different address
than the one on your account (record address),
(small solid bullet) The check is being made payable to someone other
than the account owner, or
(small solid bullet) The redemption proceeds are being transferred to
a Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, and
(small solid bullet) Any other applicable requirements listed in the
table that follows.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it
to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited
number of checks. Do not, however, try to close out your account by
check.
<TABLE>
<CAPTION>
<S> <C> <C>
ACCOUNT SPECIAL
TYPE REQUIREMENTS
PHONE 1-800-544-7777 (PHONE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) MAXIMUM CHECK
EXCEPT RETIREMENT REQUEST: $100,000.
(SMALL SOLID BULLET) FOR MONEY LINE
ALL ACCOUNT TYPES TRANSFERS TO YOUR
BANK ACCOUNT;
MINIMUM: $10;
MAXIMUM: UP TO
$100,000.
(SMALL SOLID BULLET) YOU MAY EXCHANGE
TO OTHER FIDELITY
FUNDS IF BOTH
ACCOUNTS ARE
REGISTERED WITH THE
SAME NAME(S),
ADDRESS, AND
TAXPAYER ID NUMBER.
MAIL OR IN PERSON (MAIL_GRAPHIC)(HAND_GRAPHIC) INDIVIDUAL, JOINT (SMALL SOLID BULLET) THE LETTER OF
TENANT, INSTRUCTION MUST BE
SOLE PROPRIETORSHI SIGNED BY ALL PERSONS
P, UGMA, UTMA REQUIRED TO SIGN FOR
RETIREMENT TRANSACTIONS, EXACTLY
ACCOUNT AS THEIR NAMES
APPEAR ON THE
ACCOUNT.
TRUST (SMALL SOLID BULLET) THE ACCOUNT OWNER
SHOULD COMPLETE A
RETIREMENT
DISTRIBUTION FORM.
BUSINESS OR CALL
ORGANIZATION 1-800-544-6666 TO
REQUEST ONE.
(SMALL SOLID BULLET) THE TRUSTEE MUST SIGN
THE LETTER INDICATING
CAPACITY AS TRUSTEE. IF
EXECUTOR, THE TRUSTEE'S NAME IS
ADMINISTRATOR, NOT IN THE ACCOUNT
CONSERVATOR, REGISTRATION, PROVIDE A
GUARDIAN COPY OF THE TRUST
DOCUMENT CERTIFIED
WITHIN THE LAST 60
DAYS.
(SMALL SOLID BULLET) AT LEAST ONE PERSON
AUTHORIZED BY
CORPORATE RESOLUTION
TO ACT ON THE ACCOUNT
MUST SIGN THE LETTER.
(SMALL SOLID BULLET) INCLUDE A CORPORATE
RESOLUTION WITH
CORPORATE SEAL OR A
SIGNATURE GUARANTEE.
(SMALL SOLID BULLET) CALL
1-800-544-6666 FOR
INSTRUCTIONS.
WIRE (WIRE_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) YOU MUST SIGN UP FOR
EXCEPT RETIREMENT THE WIRE FEATURE
BEFORE USING IT. TO
VERIFY THAT IT IS IN
PLACE, CALL
1-800-544-6666.
MINIMUM WIRE:
$5,000.
(SMALL SOLID BULLET) YOUR WIRE REDEMPTION
REQUEST MUST BE
RECEIVED IN PROPER
FORM BY FIDELITY
BEFORE 4: 00 P.M.
EASTERN TIME FOR
MONEY TO BE WIRED
ON THE NEXT BUSINESS
DAY.
CHECK (CHECK_GRAPHIC) ALL ACCOUNT TYPES (SMALL SOLID BULLET) IF YOUR ACCOUNT IS NOT
EXCEPT RETIREMENT AN ULTRA SERVICE
ACCOUNT, THERE IS A
$1.00 CHARGE FOR
EACH CHECK WRITTEN
UNDER $500.
(SMALL SOLID BULLET) ALL ACCOUNT OWNERS
MUST SIGN A
SIGNATURE CARD TO
RECEIVE A CHECKBOOK.
(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.
FIDELITY'S WEB SITE at www.fidelity.com offers product and
servicing information, customer education, planning tools, and the
ability to make certain transactions in your account.
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.
Electronic copies of most financial reports and prospectuses are
available at Fidelity's Web site. To participate in our electronic
delivery program, call 1-800-544-6666 or visit Fidelity's Web site at
www.fidelity.com for more information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of
other Fidelity funds by telephone, in writing, or through
Fidelity's Web site.
Exchanges 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 .
FIDELITY MONEY LINE 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.
Fidelity offers services that let you transfer money into your fund
account, or between fund accounts, automatically. Certain restrictions
apply for retirement accounts. Call 1-800-544-6666 or visit
Fidelity's Web site at www.fidelity.com for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDER
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR
$100 MONTHLY OR QUARTERLY CHANGING
(SMALL SOLID BULLET) FOR A NEW ACCOUNT,
COMPLETE THE
APPROPRIATE SECTION ON
THE FUND APPLICATION.
(SMALL SOLID BULLET) FOR EXISTING ACCOUNTS,
CALL 1-800-544-6666
OR VISIT FIDELITY'S WEB
SITE AT
WWW.FIDELITY.COM FOR
AN APPLICATION.
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A
FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR
$100 EVERY PAY PERIOD CHANGING
(SMALL SOLID BULLET) CHECK THE APPROPRIATE
BOX ON THE FUND
APPLICATION, OR CALL
1-800-544-6666 OR
VISIT FIDELITY'S WEB SITE
AT WWW.FIDELITY.COM
FOR AN AUTHORIZATION
FORM.
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY
FUND
MINIMUM FREQUENCY SETTING UP OR
$100 MONTHLY, BIMONTHLY, CHANGING
QUARTERLY, OR (SMALL SOLID BULLET) TO ESTABLISH, CALL
ANNUALLY 1-800-544-6666
AFTER BOTH ACCOUNTS
ARE OPENED.
</TABLE>
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The 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.
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
three options:
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. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions, if any.
3. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
If you select distribution option 2 and the U.S. Postal Service
does not deliver your checks, your election may be converted to the
Reinvestment Option. You will not receive interest on amounts
represented by uncashed distribution checks. To change your
distribution option, call Fidelity at 1-800-544-6666 .
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 record date of the distribution. The mailing of
distribution checks will begin within seven days.
(CHECKMARK)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. MONEY
MARKET FUNDS USUALLY DON'T
MAKE CAPITAL GAIN DISTRIBUTIONS.
TAXES
As with any investment, you should consider how your investment in the
fund will be taxed. If your account is not a tax- advantaged
retirement account, you should be aware of these tax implications.
Distributions are subject to federal income tax, and may also be
subject to state or local taxes. If you live outside the United
States, your distributions could also be taxed by the country in which
you reside. Your distributions are taxable when they are paid, whether
you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were
paid on December 31.
For federal tax purposes, the fund's income and short-term capital
gains are distributed as dividends and taxed as ordinary income;
capital gain distributions, if any, are taxed as long-term capital
gains. Every January, Fidelity will send you and the IRS a statement
showing the tax characterization of distributions paid to you in the
previous year.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
(NYSE) is open. FSC normally calculates the fund's NAV as of the close
of business of the NYSE, normally 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the
number of shares outstanding.
Like most money market funds, the 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.
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 t he fund to withhold 31% of your taxable
distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE OR
ELECTRONICALLY. Fidelity will not be responsible for any losses
resulting from unauthorized transactions if it follows reasonable
security procedures designed to verify the identity of the investor.
Fidelity will request personalized security codes or other
information, and may also record calls. For transactions conducted
through the Internet, Fidelity recommends the use of an Internet
browser with 128-bit encryption. You should verify the accuracy of
your confirmation statements immediately after you receive them. If
you do not want the ability to redeem and exchange by telephone, call
Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during
periods of unusual market activity), consider placing your order by
mail or by visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT to suspend the offering of shares for a
period of time.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased
at the next NAV calculated after your investment is received in
proper form. Note the following:
(small solid bullet) All of your purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check,
each check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number
of checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will
be canceled and you could be liable for any losses or fees the fund or
its transfer agent has incurred.
(small solid bullet) Shares begin to earn dividends on
the first business day following the day of 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.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at
the next NAV calculated after your order is received in proper
form . 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 earn dividends through the day of
redemption; however, shares redeemed on a Friday or prior to a holiday
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day
after your phone call.
(small solid bullet) The fund may hold payment on redemptions until it
is reasonably satisfied that investments made by check or Fidelity
Money Line have been collected, which can take up to seven business
days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the
amount of the check is greater than the value of your account, your
check will be returned to you and you may be subject to additional
charges.
(small solid bullet) You will not receive interest on amounts
represented by uncashed redemption checks.
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) 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 1.00% and trading fees of up to 3.00%
of the amount exchanged . Check each fund's prospectus for details.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity
Investments, Fidelity Money Line, Fidelity Ultra Service Account,
Fidelity Plus Account, Fidelity Automatic Account Builder, and
Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services is a service mark of FMR Corp.
(RECYCLE GRAPHIC)This prospectus is printed on recycled paper using
soy-based inks.
FIDELITY DAILY INCOME TRUST
A FUND OF FIDELITY UNION STREET TRUST II
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 20, 1998
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current Prospectus
(dated October 20, 1998). 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(registered trademark) at
1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations 27
Portfolio Transactions 29
Valuation 29
Performance 30
Additional Purchase, Exchange and Redemption Information 32
Distributions and Taxes 32
FMR 32
Trustees and Officers 32
Management Contract 35
Distribution and Service Plan 35
Contracts with FMR Affiliates 36
Description of the Trust 36
Financial Statements 37
Appendix 37
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
Fidelity Investments Money Management, Inc. (FIMM)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company, Inc. (FSC)
FDI-ptb-1098
1.461742.101
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 (the
1940 Act)) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations
described in this SAI are not fundamental and may be changed without
shareholder approval.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET
FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) 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, or
securities of other investment companies) 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) purchase securities on margin (but the trust may obtain such
credits as may be necessary for the clearance of purchases and sales
of securities);
(4) borrow money, except that the fund may (i) borrow money for
temporary or emergency purposes (not for leveraging or investment) and
(ii) engage in reverse repurchase agreements for any purpose; provided
that (i) and (ii) in combination do not exceed 33 1/3% of the fund's
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;
(5) act as an underwriter (except as it may be deemed such in a sale
of restricted securities);
(6) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry, except that
the fund will invest more than 25% of its total assets in the
financial services industry;
(7) 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);
(8) buy or sell commodities or commodity (futures) contracts unless
acquired as a result of ownership of securities;
(9) 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; or
(10) invest in companies for the purpose of exercising control or
management.
(11) The fund may, not withstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the
same fundamental 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 a security (other
than securities issued or guaranteed by the U.S. G overnment or
any of its agencies or instrumentalities , or securities of other
money market funds ) if, as a result, more than 5% of its total
assets would be invested in securities of a single issuer; provided
that the fund may invest up to 25% of its total assets in the first
tier securities of a single issuer for up to three business days.
(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 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. 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 lend assets other than
securities to other parties, except by lending money (up to 10% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser. (This
limitation does not apply to purchases of debt securities or to
repurchase agreements.)
(vi) 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 (i), certain securities subject
to guarantees (including insurance, letters of credit and demand
features) are not considered securities of their issuer, but are
subject to separate diversification requirements, in accordance with
industry standard requirements for money market funds.
With respect to limitation (iv), 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 consider appropriate steps to protect liquidity.
For the fund's policies on quality and maturity, see the section
entitled "Quality and Maturity" on page .
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. 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 1940 Act . These
transactions may involve 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.
ASSET-BACKED SECURITIES represent interests in pools of
mortgages, loans, receivables or other assets. Payment of interest and
repayment of principal may be largely dependent upon the cash flows
generated by the assets backing the securities and, in certain cases,
supported by letters of credit, surety bonds, or other credit
enhancements. Asset-backed security values may also be affected by
the creditworthiness of the servicing agent for the pool, the
originator of the loans or receivables, or the entities providing
the credit enhancement. In addition, these securities may be
subject to prepayment risk.
DELAYED-DELIVERY TRANSACTIONS. Securities may be bought and
sold on a delayed-delivery or when-issued basis. These transactions
involve a commitment 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.
When purchasing securities on a delayed-delivery basis, the
purchaser assumes the rights and risks of ownership, including the
risks of price and yield fluctuations and the risk that the security
will not be issued as anticipated. Because payment for the securities
is not required until the delivery date, these risks are in addition
to the risks associated with a fund's 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, a fund
will set aside appropriate liquid assets in a segregated custodial
account to cover the 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, a fund could miss a favorable price or yield
opportunity or suffer a loss.
A fund may renegotiate a delayed delivery transaction and may sell the
underlying securities before delivery, which may result in capital
gains or losses for the fund.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees,
FMR determines the liquidity of a fund's investments and,
through reports from FMR, the Board monitors investments in illiquid
instruments. In determining the liquidity of a fund's investments, FMR
may consider various factors, including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or tender features), and
(5) the nature of the marketplace for trades (including the ability to
assign or offset the fund's rights and obligations relating to the
investment).
Investments currently considered by FMR to be illiquid include
repurchase agreements not entitling the holder to repayment of
principal and payment of interest within seven days. Also, FMR may
determine some restricted securities and time deposits to be
illiquid.
In the absence of market quotations, illiquid investments are
valued for purposes of monitoring amortized cost valuation at fair
value as determined in good faith by a committee appointed by the
Board of Trustees.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, a fund may lend money to, and borrow money
from, other funds advised by FMR or its affiliates. A fund will lend
through the program only when the returns are higher than those
available from an investment in repurchase agreements, and will borrow
through the program only when the costs are equal to or lower than the
cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. A fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a
lost investment opportunity or additional borrowing costs.
MONEY MARKET SECURITIES are high-quality, short-term obligations.
Money market securities may be structured to be, or may employ a trust
or other form so that they are, eligible investments for money market
funds. 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 a structure fails to
function 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 certain 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 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 municipal security may be owned directly
or through a participation interest.
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. 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), and second tier
securities are those deemed to be in the second highest rating
category (e.g., Standard & Poor's A-2). Split-rated securities may be
determined to be either first tier or second tier based on applicable
regulations.
The fund may not invest more than 5% of its total assets in second
tier securities. In addition, the fund may not invest more than 1% of
its total assets or $1 million (whichever is greater) in the second
tier securities of a single issuer.
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.
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. As protection against the risk that the original
seller will not fulfill its obligation, the securities are held in
a separate account 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), the fund will 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 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 security to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase that
security at an agreed-upon price and time. While a reverse
repurchase agreement is outstanding, a fund will maintain appropriate
liquid assets in a segregated custodial account to cover its
obligation under the agreement. The fund will enter into reverse
repurchase agreements with parties whose creditworthiness has been
reviewed and found satisfactory by FMR. Such transactions may
increase fluctuations in the market value of fund assets and may be
viewed as a form of leverage.
SHORT SALES "AGAINST THE BOX." A fund may sell securities short
when it owns or has the right to obtain securities equivalent in kind
or amount to the securities sold short. Such short sales are known as
short sales "against the box" and could be used to protect the net
asset value per share of the fund in anticipation of increased
interest rates, without sacrificing the current yield of the
securities sold short. If a fund enters into a short sale
against the box, it will be required to set aside securities
equivalent in kind and amount to the securities sold short (or
securities convertible or exchangeable into such securities) and will
be required to hold such securities while the short sale is
outstanding. The fund will incur transaction costs in connection with
opening and closing short sales against the box.
SOURCES OF CREDIT OR LIQUIDITY SUPPORT. FMR may rely on its evaluation
of the credit of a bank or other entity in determining whether to
purchase a security supported by a letter of credit guarantee, put or
demand feature, insurance or other source of credit or liquidity.
STRIPPED GOVERNMENT SECURITIES. Stripped government securities are
created by separating the income and principal components of a U.S.
Government security and selling them separately. STRIPS (Separate
Trading of Registered Interest and Principal of Securities) are
created when the coupon payments and the principal payment are
stripped from an outstanding U.S. Treasury security by a Federal
Reserve Bank.
Privately stripped government securities are created when a dealer
deposits a U.S. Treasury security or other U.S. Government security
with a custodian for safekeeping. The custodian issues separate
receipts for the coupon payments and the principal payment, which the
dealer then sells.
Because the SEC does not consider privately stripped government
securities to be U.S. Government securities for purposes of Rule 2a-7,
a fund must evaluate them as it would non-government securities
pursuant to regulatory guidelines applicable to money market funds.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments in 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 are structured with put
features that permit holders to demand payment of the unpaid principal
balance plus accrued interest from the issuers or certain financial
intermediaries.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the fund by FMR pursuant to authority contained in the
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for
which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including,
but not limited to : the size and type of the transaction; the
nature and character of the markets for the security to be purchased
or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer firm; the broker-dealer's
execution services rendered on a continuing basis; the reasonableness
of any commissions; and, if applicable, arrangements for payment of
fund expenses.
If FMR grants investment management authority to a sub-adviser
(see the section entitled "Management Contract"), that 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 above.
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; and
effect securities transactions and perform functions incidental
thereto (such as clearance and settlement).
For transactions in fixed-income securities, FMR's selection of
broker-dealers is generally based on the availability of a security
and its price and, to a lesser extent, on the overall quality of
execution and other services, including research, provided by the
broker-dealer.
The receipt of research from broker-dealers that execute transactions
on behalf of a fund may be useful to FMR in rendering investment
management services to that 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 a 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.
Fixed-income securities are generally purchased from an issuer or
underwriter acting as principal for the securities, on a net basis
with no brokerage commission paid. However, the dealer is compensated
by a difference between the security's original purchase price and the
selling price, the so-called "bid-asked spread." Securities may also
be purchased from underwriters at prices that include underwriting
fees.
Subject to applicable limitations of the federal securities laws,
the fund may pay a broker-dealer 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 that
fund or its other clients. In reaching this determination,
FMR will not attempt to place a specific dollar value on the brokerage
and research services provided, or to determine what portion of the
compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the fund or shares
of other Fidelity funds to the extent permitted by law. FMR may use
research services provided by and place agency transactions with
National Financial Services Corporation (NFSC) and Fidelity
Brokerage Services Japan LLC (FBSJ), indirect subsidiaries of FMR
Corp., if the commissions are fair, reasonable, and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. P rior to December 9, 1997, FMR used research
services provided by and placed agency transactions with Fidelity
Brokerage Services (FBS), an indirect subsidiary of FMR Corp.
FMR may allocate brokerage transactions to broker-dealers
(including affiliates of FMR) who have entered into arrangements with
FMR under which the broker-dealer allocates a portion of the
commissions paid by a fund toward the reduction of that fund's
expenses. The transaction quality must, however, be comparable to
those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions
for accounts which they or their affiliates manage, unless certain
requirements are satisfied. Pursuant to such requirements, the Board
of Trustees has authorized NFSC to execute portfolio transactions on
national securities exchanges in accordance with approved procedures
and applicable SEC rules.
The Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of the fund and review the commissions paid by
the fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the fund.
For the fiscal years ended August 1998, 1997, and 1996, the fund
paid no brokerage commissions.
During the fiscal year ended August 1998, the fund paid no
brokerage commissions to firms that provided research services.
The Trustees of the fund have approved procedures in conformity
with Rule 10f-3 under the 1940 Act whereby a fund may purchase
securities that are offered in underwritings in which an affiliate of
FMR participates. These procedures prohibit the fund from directly or
indirectly benefiting an FMR affiliate in connection with such
underwritings. In addition, for underwritings where an FMR affiliate
participates as a principal underwriter, certain restrictions may
apply that could, among other things, limit the amount of securities
that the fund could purchase in the underwriting.
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 or its affiliates ,
investment decisions for the fund are made independently from those of
other funds managed by FMR or accounts managed by FMR affiliates. It
sometimes happens that the same security is held in the portfolio of
more than one of these funds or accounts. Simultaneous transactions
are inevitable when several funds and accounts are managed by the same
investment adviser, particularly when the same security is suitable
for the investment objective of more than one fund or account.
When two or more funds are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in
accordance with procedures believed to be appropriate and equitable
for each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the fund is
concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
VALUATION
Fidelity Service Company, Inc. (FSC) normally determines the fund's
net asset value per share (NAV) as of the close of the New York Stock
Exchange (NYSE) (normally 4:00 p.m. Eastern time). The valuation of
portfolio securities is determined as of this time for the purpose of
computing the fund's NAV.
Portfolio securities and other assets are valued on the basis of
amortized cost. This technique involves initially valuing an
instrument at its cost as adjusted for amortization of premium or
accretion of discount rather than its current market value. The
amortized cost value of an instrument may be higher or lower than the
price the fund would receive if it sold the instrument.
Securities of other open-end investment companies are valued at their
respective NAVs.
During periods of declining interest rates, the fund's yield based on
amortized cost valuation may be higher than would result if the fund
used market valuations to determine its NAV. The converse would apply
during periods of rising interest rates.
Valuing the fund's investments on the basis of amortized cost and use
of the term "money market fund" are permitted pursuant to Rule 2a-7
under the 1940 Act. The fund must adhere to certain conditions under
Rule 2a-7, as summarized in the section entitled "Quality and
Maturity" on page 4.
The Board of Trustees oversees FMR's adherence to the provisions of
Rule 2a-7 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 the fund'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.
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 yield and total
return fluctuate in response to market conditions and other factors.
YIELD CALCULATIONS. To compute the yield for the fund 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 fund also may calculate an
effective yield by compounding the base period return over a one-year
period. In addition to the current yield, fund may quote yields in
advertising based on any historical seven-day period. Yields for the
fund are calculated on the same basis as other money market funds, as
required by applicable regulation.
Yield information may be useful in reviewing the fund's performance
and in providing a basis for comparison with other investment
alternatives. However, the fund's yield fluctuates, unlike investments
that pay a fixed interest rate over a stated period of time. When
comparing investment alternatives, investors should also note the
quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
the fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the fund from the continuous sale of
its shares will likely be invested in instruments producing lower
yields than the balance of the fund's holdings, thereby reducing the
fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of the fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the fund's
NAV over a stated period. Average annual total returns are calculated
by determining the growth or decline in value of a hypothetical
historical investment in the fund over a stated period, and then
calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had
been constant over the period. For example, a cumulative total return
of 100% over ten years would produce an average annual total return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual total
returns are a convenient means of comparing investment alternatives,
investors should realize that the fund's performance is not constant
over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance of the fund.
In addition to average annual total returns, the fund may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions
to total return. Total returns may be quoted on a before-tax or
after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
CALCULATING HISTORICAL FUND RESULTS. The following table
shows performance for the fund calculated including certain fund
expenses.
HISTORICAL FUND RESULTS. The following table shows the fund's 7-day
yield and total return for the period ended August 31, 1998.
Average Annual
Total Returns Cumulative Total Returns
Seven-Day One Five Ten One Five Ten
Yield Year Years Years Year Years Years
Daily 5.17% 5.31% 4.88% 5.50% 5.31% 26.89% 70.79%
Income
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 short-term fixed-income securities, common stocks
represent a different type of investment from the fund. Common stocks
generally offer greater growth potential than the fund, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than a
fixed-income investment such as the fund. The S&P 500 and DJIA returns
are based on the prices of unmanaged groups of stocks and, unlike the
fund's returns, do not include the effect of brokerage commissions or
other costs of investing.
During the 10-year period ended August 31, 1998 , a hypothetical
$10,000 investment in Daily Income would have grown to $17,079,
assuming all distributions were reinvested. Total returns are
based on past results and are not an indication of future performance.
Tax consequences of different investments have not been factored
into the figures below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY DAILY INCOME TRUST INDICES
Year Ended Value of Value of Value of Total S&P 500 DJIA Cost of
Initial Reinvested Reinvested Value Living
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1998 $ 10,000 $ 7,079 $ 0 $ 17,079 $ 48,274 $ 49,133 $ 13,731
1997 $ 10,000 $ 6,219 $ 0 $ 16,219 $ 44,660 $ 48,850 $ 13,513
1996 $ 10,000 $ 5,419 $ 0 $ 15,419 $ 31,753 $ 35,310 $ 13,218
1995 $ 10,000 $ 4,651 $ 0 $ 14,651 $ 26,744 $ 28,358 $ 12,849
1994 $ 10,000 $ 3,896 $ 0 $ 13,896 $ 22,022 $ 23,460 $ 12,521
1993 $ 10,000 $ 3,460 $ 0 $ 13,460 $ 20,879 $ 21,301 $ 12,168
1992 $ 10,000 $ 3,090 $ 0 $ 13,090 $ 18,120 $ 18,452 $ 11,840
1991 $ 10,000 $ 2,547 $ 0 $ 12,547 $ 16,788 $ 16,738 $ 11,479
1990 $ 10,000 $ 1,766 $ 0 $ 11,766 $ 13,228 $ 13,870 $ 11,059
1989 $ 10,000 $ 874 $ 0 $ 10,874 $ 13,923 $ 13,979 $ 10,471
</TABLE>
Explanatory Notes: With an initial investment of $10,000 in the
fund on September 1, 1988, 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 $17,079. 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 $5,366 for dividends. The fund did not distribute any
capital gains during the period.
PERFORMANCE COMPARISONS. The fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed
as mutual fund rankings prepared by Lipper Analytical Services, Inc.
(Lipper), an independent service located in Summit, New Jersey that
monitors the performance of mutual funds. Generally, Lipper rankings
are based on total return, assume reinvestment of distributions, do
not take sales charges or trading fees into consideration, and are
prepared without regard to tax consequences. Lipper may also rank
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 may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, the fund may offer greater liquidity or higher
potential returns than CDs, the fund does not guarantee your principal
or your return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals
understand their investment goals and explore various financial
strategies. Such information may include information about current
economic, market, and political conditions; materials that describe
general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires
designed to help create a personal financial profile; worksheets used
to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and action plans offering investment
alternatives. Materials may also include discussions of Fidelity's
asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with
the security types in any capital market may or may not correspond
directly to those of the funds. Ibbotson calculates total returns in
the same method as the funds. The funds may also compare performance
to that of other compilations or indices that may be developed and
made available in the future.
The fund may compare its performance or the performance of securities
in which it may invest to averages published by IBC Financial Data,
Inc. of Ashland, Massachusetts. These averages assume reinvestment of
distributions. IBC's MONEY FUND REPORT AVERAGES(trademark)/All
Taxable, which is reported in IBC's MONEY FUND REPORT(trademark),
covers over 883 taxable money market funds.
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; and
charitable giving. In addition, Fidelity may quote or reprint
financial or business publications and periodicals as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the
desirability of owning a particular mutual fund, and Fidelity services
and products. Fidelity may also reprint, and use as advertising and
sales literature, articles from Fidelity Focus(Registered trademark),
a quarterly magazine provided free of charge to Fidelity fund
shareholders.
The fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
The fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes,
which may produce superior after-tax returns over time. For example, a
$1,000 investment earning a taxable return of 10% annually would have
an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent
tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
As of August 31, 1998 , FMR advised over $32 billion in
municipal fund assets, $113 billion in money market fund
assets, $389 billion in equity fund assets, $61 billion
in international fund assets, and $27 billion in Spartan fund
assets. The fund may reference the growth and variety of money market
mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the
purpose of researching and managing investments abroad.
In addition to performance rankings, the fund may compare its total
expense ratio to the average total expense ratio of similar funds
tracked by Lipper. The fund's total expense ratio is a significant
factor in comparing bond and money market investments because of its
effect on yield.
ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV)
is calculated each day the New York Stock Exchange (NYSE) is open for
trading. The NYSE has designated the following holiday closings for
1998: New Year's Day, Martin Luther King's Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day (observed), Labor Day,
Thanksgiving Day, and Christmas Day. Although FMR expects the same
holiday schedule to be observed in the future, the NYSE may modify its
holiday schedule at any time. In addition, on days when the Federal
Reserve Wire System is closed, federal funds wires cannot be
sent.
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 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 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
DIVIDENDS. Because the fund's income is primarily derived from
interest, dividends from the fund generally will not qualify for the
dividends-received deduction available to corporate shareholders.
Short-term capital gains are distributed as dividend income, but do
not qualify for the dividends-received deduction. A portion of the
fund's dividends derived from certain U.S. Government
securities may be exempt from state and local taxation. 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.
CAPITAL GAIN DISTRIBUTIONS. The fund may distribute any net realized
short-term capital gains once a year or more often as necessary, to
maintain its NAV at $1.00. The fund does not anticipate
distributing long-term capital gains.
As of August 31 , 1998, the fund had a capital loss
carryforward aggregating approximately $1,099,000. This loss
carryforward, of which $336,000, $536,000, $19,000, $99,000 and
$109,000 will expire on August 31 , 2001, 2002, 2003, 2004, and
2006, respectively, is available to offset future capital gains.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company
and avoid being subject to federal income or excise taxes at the fund
level, the fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar
year as well as on a fiscal year basis, and intends to comply with
other tax rules applicable to regulated investment companies.
The fund is treated as a separate entity from the other funds of
Fidelity Union Street Trust II 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 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 1940 Act, control of a company is presumed where one individual or
group of individuals owns more than 25% of the voting stock of that
company. Therefore, through their ownership of voting common stock and
the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the 1940 Act, to form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by its division, Fidelity Investments Retail Marketing
Company, which provides marketing services to various companies within
the Fidelity organization.
Fidelity investment personnel may invest in securities for their own
accounts pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance,
and participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing in relation
to trades by Fidelity funds and on short-term trading have been
adopted.
TRUSTEES AND OFFICERS
The Trustees, Members of the Advisory Board, and executive officers of
the trust are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company for the
last five years. Trustees and officers elected or appointed to
Fidelity Union Street Trust II prior to the fund's conversion from a
series of 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, Member of the Advisory Board,
and officer who is an "interested person" (as defined in the
Investment Company Act of 1940) is 82 Devonshire Street, Boston,
Massachusetts 02109, which is also the address of FMR. The business
address of all the other Trustees is Fidelity Investments, P.O. Box
9235, Boston, Massachusetts 02205-9235. Those Trustees who are
"interested persons" by virtue of their affiliation with either the
trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d ( 68) , 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 Fidelity Investments Money Management, Inc.
(1998), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
J. GARY BURKHEAD (57) , Member of the Advisory Board (1997), is
Vice Chairman and a Member of the Board of Directors of FMR Corp.
(1997) and President of Fidelity Personal Investments and Brokerage
Group (1997) . Previously, Mr. Burkhead served as President of
Fidelity Management & Research Company.
RALPH F. COX (66) , Trustee, is President of RABAR Enterprises
(management consulting-engineering industry, 1994). Prior to February
1994, he was President of Greenhill Petroleum Corporation (petroleum
exploration and production). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of USA Waste Services,
Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering),
Rio Grande, Inc. (oil and gas production), and Daniel Industries
(petroleum measurement equipment manufacturer). In addition, he is a
member of advisory boards of Texas A&M University and the University
of Texas at Austin.
PHYLLIS BURKE DAVIS (65) , Trustee. Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of
BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores),
and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she is a member of
the President's Advisory Council of The University of Vermont School
of Business Administration.
ROBERT M. GATES (54) , Trustee (1997), is a consultant, author,
and lecturer (1993). Mr. Gates was Director of the Central
Intelligence Agency (CIA) from 1991-1993. From 1989 to 1991, Mr. Gates
served as Assistant to the President of the United States and Deputy
National Security Advisor. Mr. Gates is a Director of LucasVarity
PLC (automotive components and diesel engines), Charles Stark Draper
Laboratory (non-profit), NACCO Industries, Inc. (mining and
manufacturing), and TRW Inc. (original equipment and replacement
products). Mr. Gates also is a Trustee of the Forum for
International Policy and of the Endowment Association of the
College of William and Mary. In addition, he is a member of the
National Executive Board of the Boy Scouts of America.
E. BRADLEY JONES (70) , Trustee. Prior to his retirement in
1984, Mr. Jones was Chairman and Chief Executive Officer of LTV Steel
Company. He is a Director of TRW Inc. (original equipment and
replacement products), Consolidated Rail Corporation, Birmingham Steel
Corporation, and RPM, Inc. (manufacturer of chemical products), and he
previously served as a Director of NACCO Industries, Inc. (mining and
manufacturing, 1985-1995), Hyster-Yale Materials Handling, Inc.
(1985-1995), and Cleveland-Cliffs Inc (mining), and as a Trustee of
First Union Real Estate Investments. In addition, he serves as a
Trustee of the Cleveland Clinic Foundation, where he has also been a
member of the Executive Committee as well as Chairman of the Board and
President, a Trustee and member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic
Florida.
DONALD J. KIRK (65) , 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 N ational Arts Stabilization Inc. ,
Chairman of the Board of Trustees of the Greenwich Hospital
Association, Director of the Yale-New Haven Health Services Corp.
(1998), 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 (55 ), Trustee, is Vice Chairman and Director of
FMR. Prior to May 31, 1990, he was a Director of FMR and Executive
Vice President of FMR (a position he held until March 31, 1991); Vice
President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). In addition, he
serves as a Trustee of Boston College, Massachusetts Eye & Ear
Infirmary, Historic Deerfield (1989) and Society for the Preservation
of New England Antiquities, and as an Overseer of the Museum of Fine
Arts of Boston.
WILLIAM O. McCOY (64) , 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 (69) , Trustee and Chairman of the
non-interested Trustees, is Chairman of G.M. Management Group
(strategic advisory services). Mr. McDonough is a Director of York
International Corp. (air conditioning and refrigeration), Commercial
Intertech Corp. (hydraulic systems, building systems, and metal
products, 1992), CUNO, Inc. (liquid and gas filtration products,
1996), and Associated Estates Realty Corporation (a real estate
investment trust, 1993). Mr. McDonough served as a Director of
ACME-Cleveland Corp. (metal working, telecommunications, and
electronic products) from 1987-1996 and Brush-Wellman Inc. (metal
refining) from 1983-1997.
MARVIN L. MANN (65) , Trustee (1993), is Chairman of the Board
of Lexmark International, Inc. (office machines, 1991). Prior to
1991, he held 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 Imation Corp. (imaging and
information storage, 1997).
*ROBERT C. POZEN (52) , Trustee (1997) and Senior Vice
President, is also President and a Director of FMR (1997); and
President and a Director of Fidelity Investments Money Management,
Inc. (1998), Fidelity Management & Research (U.K.) Inc. (1997),
and Fidelity Management & Research (Far East) Inc. (1997). Previously,
Mr. Pozen served as General Counsel, Managing Director, and Senior
Vice President of FMR Corp.
THOMAS R. WILLIAMS (68), Trustee, is President of The Wales Group,
Inc. (management and financial advisory services). Prior to retiring
in 1987, Mr. Williams served as Chairman of the Board of First
Wachovia Corporation (bank holding company), and Chairman and Chief
Executive Officer of The First National Bank of Atlanta and First
Atlanta Corporation (bank holding company). He is currently a Director
of ConAgra, Inc. (agricultural products), Georgia Power Company
(electric utility), National Life Insurance Company of Vermont,
American Software, Inc., and AppleSouth, Inc. (restaurants, 1992).
BOYCE I. GREER (42), is Vice President of Money Market Funds
(1997), Group Leader of the Money Market Group (1997), Senior Vice
President of FMR (1997), and Vice President of FIMM (1998) . Mr.
Greer served as the Leader of the Fixed-Income Group for Fidelity
Management Trust Company (1993-1995) and was Vice President and Group
Leader of Municipal Fixed-Income Investments (1996-1997).
FRED L. HENNING, JR. (59) , is Vice President of Fidelity's
Fixed-Income Group (1995), Senior Vice President of FMR (1995),
and Senior Vice President of FIMM (1998) . Before assuming his
current responsibilities, Mr. Henning was head of Fidelity's Money
Market Division.
ROBERT K. DUBY (52), is Vice President of Fidelity Daily Income
Trust (1998), and other funds advised by FMR. Prior to his current
responsibilities, Mr. Duby has managed a variety of Fidelity
funds.
ERIC D. ROITER (49), Secretary (1998), is Vice President (1998) and
General Counsel of FMR (1998). Mr. Roiter was an Adjunct Member,
Faculty of Law, at Columbia University Law School (1996-1997). Prior
to joining Fidelity, Mr. Roiter was a partner at Debevoise & Plimpton
(1981-1997) and served as an Assistant General Counsel of the U.S.
Securities and Exchange Commission (1979-1981).
RICHARD A. SILVER (51 ), Treasurer (1997), is Treasurer of the
Fidelity funds and is an employee of FMR (1997). Before joining
FMR, Mr. Silver served as Executive Vice President, Fund Accounting &
Administration at First Data Investor Services Group, Inc.
(1996-1997). Prior to 1996, Mr. Silver was Senior Vice President and
Chief Financial Officer at The Colonial Group, Inc. Mr. Silver also
served as Chairman of the Accounting/Treasurer's Committee of the
Investment Company Institute (1987-1993).
STANLEY N. GRIFFITH ( 52 ), Assistant Vice President
(1998) , is Assistant Vice President of Fidelity's
Fixed - Income Funds (1998) and an employee of FMR Corp .
JOHN H. COSTELLO (52) , Assistant Treasurer, is an employee of
FMR.
LEONARD M. RUSH (52), 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 (40) , Assistant Treasurer (1996) , is
Assistant Treasurer of Fidelity's Fixed-Income Funds
(199 8 ) and an employee of FMR (1996). Prior to joining FMR, Mr.
Simpson was Vice President and Fund Controller of Liberty Investment
Services (1987-1995).
The following table sets forth information describing the compensation
of each Trustee and Member of the Advisory Board of the fund for
his or her services for the fiscal year ended August 31, 1998.
COMPENSATION TABLE
Trustees and Aggregate Total
Members of the Compensation Compensation
Advisory Board from from the
Daily IncomeB, C,D Fund Complex *,A
J. Gary $ 0 $ 0
Burkhead**
Ralph F. Cox $ 885 $ 214,500
Phyllis Burke $ 885 $ 210,000
Davis
Robert M. $ 894 $176,000
Gates***
Edward C. $ 0 $ 0
Johnson 3d**
E. Bradley $ 896 $ 211,500
Jones
Donald J. Kirk $ 891 $ 211,500
Peter S. $ 0 $ 0
Lynch**
William O. $ 894 $ 214,500
McCoy****
Gerald C. $ 1,103 $ 264,500
McDonough
Marvin L. $ 878 $ 214,500
Mann
Robert C. $ 0 $ 0
Pozen**
Thomas R. $ 891 $214,500
Williams
* Information is for the calendar year ended December 31, 1997 for
230 funds in the complex.
** Interested Trustees of the fund and Mr. Burkhead are compensated by
FMR.
*** Mr. Gates was elected to the Board of Trustees on September 17,
1997.
**** Mr. McCoy was elected to the Board of Trustees on September 17,
1997.
A Compensation figures include cash, amounts required to be deferred,
and may include amounts deferred at the election of Trustees. For the
calendar year ended December 31, 1997, the Trustees accrued required
deferred compensation from the funds as follows: Ralph F. Cox,
$75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $62,500; E.
Bradley Jones, $75,000; Donald J. Kirk, $75,000; William O. McCoy,
$75,000; Gerald C. McDonough, $87,500; Marvin L. Mann, $75,000; and
Thomas R. Williams, $75,000. Certain of the non-interested Trustees
elected voluntarily to defer a portion of their compensation as
follows: Ralph F. Cox, $53,699; Marvin L. Mann, $53,699; and Thomas R.
Williams, $62,462.
B Compensation figures include cash, and may include amounts
required to be deferred and amounts deferred at the election of
Trustees.
C The following amounts are required to be deferred by each
non-interested Trustee: Ralph F. Cox, $414; Phyllis Burke Davis, $414;
Robert M. Gates, $414; E. Bradley Jones, $414; Donald J. Kirk, $414;
William O. McCoy, $414; Gerald C. McDonough, $483; Marvin L. Mann,
$414; and Thomas R. Williams, $414.
D Certain of the non-interested Trustees' aggregate compensation
from the fund includes accrued voluntary deferred compensation as
follows: Williams, $352.
Under a deferred compensation plan adopted in September 1995 and
amended in November 1996 (the Plan), non-interested Trustees must
defer receipt of a portion of, and may elect to defer receipt of an
additional portion of, their annual fees. Amounts deferred under the
Plan are subject to vesting and are treated as though equivalent
dollar amounts had been invested in shares of a cross-section of
Fidelity funds including funds in each major investment discipline and
representing a majority of Fidelity's assets under management (the
Reference Funds). The amounts ultimately received by the Trustees
under the Plan will be directly linked to the investment performance
of the Reference Funds. Deferral of fees in accordance with the Plan
will have a negligible effect on a fund's assets, liabilities, and net
income per share, and will not obligate a fund to retain the services
of any Trustee or to pay any particular level of compensation to the
Trustee. A fund may invest in the Reference Funds under the Plan
without shareholder approval.
As of August 31, 1998 , the Trustees, Members of the Advisory
Board, and officers of the fund owned, in the aggregate, less than
1 % of the fund's total outstanding shares.
MANAGEMENT CONTRACT
The fund has entered into a management contract with FMR, pursuant
to which FMR furnishes investment advisory and other services.
MANAGEMENT SERVICES. Under the terms of its management
contract with the fund, FMR acts as investment adviser and,
subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all
necessary office facilities and personnel for servicing the fund's
investments, compensates all officers of the fund and all Trustees who
are "interested persons" of the trust or of FMR, and all personnel of
the fund or FMR performing services relating to research, statistical,
and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal securities laws and
making necessary filings under state securities laws; developing
management and shareholder services for the fund; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
MANAGEMENT-RELATED EXPENSES. In addition to the management fee payable
to FMR and the fees payable to the transfer, dividend disbursing, and
shareholder servicing agent, and pricing and bookkeeping agent, the
fund pays all of its expenses that are not assumed by those parties.
The fund pays for the typesetting, printing, and mailing of its proxy
materials to shareholders, legal expenses, and the fees of the
custodian, auditor and non-interested Trustees. The fund's management
contract further provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders; however, under the
terms of the fund's transfer agent agreement, the transfer agent bears
the costs of providing these services to existing shareholders. Other
expenses paid by the fund include interest, taxes, brokerage
commissions, the fund's proportionate share of insurance premiums and
Investment Company Institute dues, and the costs of registering shares
under federal securities laws and making necessary filings under state
securities laws. The fund is also liable for such non-recurring
expenses as may arise, including costs of any litigation to which the
fund may be a party, and any obligation it may have to indemnify its
officers and Trustees with respect to litigation.
MANAGEMENT FEE. For the services of FMR under the management
contract, the fund pays FMR a monthly management fee which has two
components. The first component is an amount based upon the fund's
average net assets throughout the month in accordance with the
following schedule.
Average Net Assets Annualized Fee Rate For Each Level
from $0 - 2 billion 0.10%
2 - 3 0.09
3 - 4 0.08
4 - 5 0.07
5 - 6 0.06
6 and over 0.05
That amount is then added to an amount equal to 4% of the fund's
gross income throughout the month. The gross income amount will not be
less than an annual rate of 0.20% or more than an annual rate 0.40% of
the fund's average net assets throughout the month. For this purpose,
gross income includes interest accrued and/or discount earned
(including both original issue discount and market discount) on
portfolio obligations, less amortization of premium on portfolio
obligations, computed in accordance with generally accepted accounting
principles.
For the fiscal years ended August 31 , 1998, 1997, and 1996,
the fund paid FMR management fees of $8,065,000, $7,571,000, and
$7,441,000, respectively.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses ), which is subject to
revision or termination. 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.
SUB-ADVISER. FMR has entered into a sub-advisory agreement with
FIMM pursuant to which FIMM has primary responsibility
for providing portfolio investment management services to the fund.
Previously, FMR Texas Inc. (FMR Texas) had primary responsibility
for providing investment management services to the funds. On January
23, 1998, FMR Texas was merged into FIMM, which succeeded to the
operations of FMR Texas.
Under the terms of the sub-advisory agreement, FMR pays FIMM
fees equal to 50% of the management fee payable to FMR under its
management contract with the fund. The fees paid to FIMM are
not reduced by any voluntary or mandatory expense reimbursements that
may be in effect from time to time.
On behalf of the fund, for the fiscal years ended August 31 , 1998,
1997, and 1996, FMR paid FMR Texas fees of $ 1,591,000 ,
$3,786,000, and $3,721,000, respectively. On behalf of the fund, for
the fiscal year ended August 31 , 1998, FMR paid FIMM fees of
$2,442,000.
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on behalf
of the fund (the Plan) pursuant to Rule 12b-1 under the 1940 Act (the
Rule). The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of the fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plan, as approved by the Trustees, allows the fund and FMR to incur
certain expenses that might be considered to constitute indirect
payment by the fund of distribution expenses.
Under the Plan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of
its shares, such payment is authorized by the Plan. The Plan
specifically recognizes that FMR may use its management fee revenue,
as well as its past profits or its other resources, to pay FDC for
expenses incurred in connection with the distribution of fund shares.
In addition, the Plan provides that FMR, directly or through FDC, may
make payments to third parties, such as banks or broker-dealers, that
engage in the sale of fund shares, or provide shareholder support
services. Currently, the Board of Trustees has authorized such
payments for Daily Income shares.
FMR made no payments either directly or through FDC to third parties
for the fiscal year ended 1998.
Prior to approving the Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and
determined that there is a reasonable likelihood that the Plan will
benefit the fund and its shareholders. In particular, the Trustees
noted that the Plan does not authorize payments by the fund other than
those made to FMR under its management contract with the fund. To the
extent that the Plan gives FMR and FDC greater flexibility in
connection with the distribution of fund shares, additional sales of
fund shares may result. Furthermore, certain shareholder support
services may be provided more effectively under the Plan by local
entities with whom shareholders have other relationships .
T he Glass-Steagall Act generally prohibits federally and state
chartered or supervised banks from engaging in the business of
underwriting, selling, or distributing securities. Although the scope
of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, FDC believes
that the Glass-Steagall Act should not preclude a bank from performing
shareholder support services, or servicing and recordkeeping
functions. FDC intends to engage banks only to perform such functions.
However, changes in federal or state statutes and regulations
pertaining to the permissible activities of banks and their affiliates
or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the
operation of the fund might occur, including possible termination of
any automatic investment or redemption or other services then provided
by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase
securities issued by, depository institutions that receive payments
under the Plan. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
The fund has entered into a transfer agent agreement with FSC, an
affiliate of FMR. Under the terms of the agreement, FSC performs
transfer agency, dividend disbursing, and shareholder services for the
fund.
For providing transfer agency services, FSC receives an account fee
and an asset-based fee each paid monthly with respect to each
account in the fund. For retail accounts and certain institutional
accounts, these fees are based on account size and fund type. For
certain institutional retirement accounts, these fees are based on
fund type. For certain other institutional retirement accounts,
these fees are based on account type (i.e., omnibus or non-omnibus)
and, for non-omnibus accounts, fund type. The account fees are
subject to increase based on postage rate changes.
FSC also collects small account fees from certain accounts with
balances of less than $2,500.
In addition, FSC receives the pro rata portion of the transfer agency
fees applicable to shareholder accounts in a qualified state
tuition program (QSTP), as defined under the Small Business Job
Protection Act of 1996, managed by FMR or an affiliate and each
Fidelity Freedom Fund, a fund of funds managed by an FMR
affiliate, according to the percentage of the QSTP's or Freedom Fund's
assets that is invested in the fund.
FSC pays out-of-pocket expenses associated with providing transfer
agent services. In addition, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
existing shareholders, with the exception of proxy statements.
FSC has entered into a sub-agreement with Fidelity Brokerage Services,
Inc. (FBSI), an affiliate of FMR. Under the terms of this
sub-agreement, FBSI performs certain recordkeeping, communication, and
other services for shareholders participating in the Fidelity Ultra
Service Account program. FBSI directly charges a monthly
administrative fee to each Ultra Service Account client who chooses
certain additional features. This fee is in addition to the transfer
agency fee received by FSC.
The fund has also entered into a service agent agreement with FSC.
Under the terms of the agreement, FSC calculates the NAV and dividends
for the fund and maintains the fund's portfolio and general accounting
records.
For providing pricing and bookkeeping services, FSC receives a monthly
fee based on the fund's average daily net assets throughout the month.
The annual fee rates for pricing and bookkeeping services are 0.0175%
of the first $500 million of average net assets and 0.0075% of average
net assets in excess of $500 million. The fee, not including
reimbursement for out-of-pocket expenses, is limited to a minimum of
$40,000 and a maximum of $800,000 per year.
For the fiscal years ended August 31 1998, 1997, and 1996,
the fund paid FSC pricing and bookkeeping fees, including
reimbursement for related out-of-pocket expenses, of $238,000,
$228,000, and $224,000, respectively.
The fund has entered into a distribution agreement with FDC, an
affiliate of FMR organized as a Massachusetts corporation on July 18,
1960. FDC is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities
Dealers, Inc. The distribution agreement calls for FDC to use all
reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at
NAV. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Daily Income Trust is a fund of Fidelity
Union Street Trust II, an open-end management investment company
organized as a Delaware business trust on June 20, 1991. The fund
acquired all of the assets of Fidelity Daily Income Trust, a series of
Fidelity Union Street Trust pursuant to an agreement approved by
shareholders on January 20, 1993. Currently, there are four funds
of Fidelity Union Street Trust II: Fidelity Daily Income Trust,
Fidelity Municipal Money Market Fund, Spartan Arizona Municipal Money
Market Fund, and Spartan Municipal Money Fund. The Trust Instrument
permits th e Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust
or a fund, the right of the trust or fund to use the identifying
names "Fidelity" or "Spartan(registered trademark)" 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 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 trust and requires that a disclaimer be given in each
contract entered into or executed by the trust or the 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, if they have
exercised reasonable care, shall not be personally liable to any
person other than the 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. 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 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 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, or 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 trust or the fund, as determined by the current
value of each shareholder's investment in the fund or trust; however,
the Trustees may, without prior shareholder approval, change the form
of organization of the trust by merger, consolidation, or
incorporation. If not so terminated or reorganized, the trust and its
funds will continue indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder
vote, cause the trust to merge or consolidate into one or more trusts,
partnerships, or corporations, or cause the trust to be incorporated
under Delaware law, so long as the surviving entity is an open-end
management investment company that will succeed to or assume the trust
registration statement. Each fund may invest all of its assets in
another investment company.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of a fund's assets and the appointment
of any subcustodian banks and clearing agencies. The custodian takes
no part in determining the investment policies of a fund or in
deciding which securities are purchased or sold by a fund. However, a
fund may invest in obligations of the custodian and may purchase
securities from or sell securities to the custodian. The Chase
Manhattan Bank, headquartered in New York, also may serve as a special
purpose custodian of certain assets in connection with repurchase
agreement transactions.
FMR, its officers and directors, its affiliated companies, and the
Board of Trustees may, from time to time, conduct transactions with
various banks, including banks serving as custodians for certain funds
advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of
FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund
relationships.
AUDITOR. PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts serves as the fund's independent accountant.
The auditor examines financial statements for the fund and provides
other audit, tax, and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the
fiscal year ended August 31, 1998 , 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
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 COMMERCIAL PAPER
Moody's assigns short-term debt ratings to obligations which have an
original maturity not exceeding one year.
Issuers rated PRIME-1 (or related supporting institutions) have a
superior ability for repayment of principal and payment of interest.
Issuers rated PRIME-2 (or related supporting institutions) have a
strong ability for repayment of principal and payment of interest.
DESCRIPTION OF STANDARD & POOR'S RATINGS OF COMMERCIAL PAPER
Debt issues considered short-term in the relevant market may be
assigned a Standard & Poor's commercial paper rating.
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
Fidelity, Spartan and Fidelity Focus are registered trademarks of
FMR Corp.
The third party marks appearing above are the marks of their
respective owners.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements and Financial Highlights, included in the
Annual Report for Fidelity Daily Income Trust for the fiscal year
ended August 31, 1998 are incorporated herein by reference into the
fund's Statement of Additional Information and were filed on October
14, 1998 for Fidelity Union Street II Trust (File No. 811-642)
pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
(a)(1) Financial Statements and Financial Highlights, included in the
Annual Report for Fidelity Municipal Money Market Fund for the fiscal
year ended August 31, 1998 are incorporated herein by reference into
the fund's Statement of Additional Information and were filed on
October 14, 1998 for Fidelity Union Street II Trust (File No. 811-642)
pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
(a)(1) Financial Statements and Financial Highlights, included in the
Annual Report for Spartan Municipal Money Fund for the fiscal year
ended August 31, 1998 are incorporated herein by reference into the
fund's Statement of Additional Information and were filed on October
14, 1998 for Fidelity Union Street II Trust (File No. 811-649)
pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
(a)(1) Financial Statements and Financial Highlights, included in the
Annual Report for Spartan Arizona Municipal Money Market Fund for the
fiscal year ended August 31, 1998 are incorporated herein by reference
into the fund's Statement of Additional Information and were filed on
October 14, 1998 for Fidelity Union Street II Trust (File No. 811-642)
pursuant to Rule 30d-1 under the Investment Company Act of 1940 and
are incorporated herein by reference.
(b) Exhibits:
(1) Trust Instrument dated June 20, 1991 is incorporated herein by
reference to Exhibit 1 of Post-Effective Amendment No. 11.
(1)(a) Supplement dated September 26, 1997 to the July 20, 1991
Trust Instrument is incorporated herein by reference to Exhibit 1(a)
of Post-Effective Amendment No. 18.
(2) Bylaws of the Trust are incorporated by reference to Exhibit 2(a)
of Post-Effective Amendment No. 10.
(3) Not applicable.
(4) Not applicable.
(5)(a) Management Contract between Fidelity Union Street Trust II on
behalf of Spartan Arizona Municipal Money Market Portfolio (currently
known as Spartan Arizona Municipal Money Market Fund) and Fidelity
Management & Research Company, dated September 16, 1994, is
incorporated herein by reference to Exhibit 5(g) of Post-Effective
Amendment No. 11.
(b) Sub-Advisory Agreement between FMR Texas Inc., (currently
known as Fidelity Investments Money Management Inc. (FIMM)), and
Fidelity Management & Research Company with respect to Spartan Arizona
Municipal Money Market Portfolio (currently known as Spartan Arizona
Municipal Money Market Fund), dated September 16, 1994, is
incorporated herein by reference to Exhibit 5(h) of Post-Effective
Amendment No. 11.
(c) Management Contract between Fidelity Union Street Trust II on
behalf of Fidelity Daily Income Trust and Fidelity Management &
Research Company, dated January 28, 1993, is incorporated herein by
reference to Exhibit 5(c) of Post-Effective Amendment No. 11.
(d) Sub-Advisory Agreement between FMR Texas Inc. (currently
known as Fidelity Investments Money Management Inc. (FIMM)), and
Fidelity Management & Research Company with respect to Fidelity Daily
Income Trust, dated January 28,1993, is incorporated herein by
reference to Exhibit 5(d) of Post-Effective Amendment No. 11.
(e) Management Contract between Fidelity Union Street Trust II on
behalf of Spartan Municipal Money Fund and Fidelity Management &
Research Company, dated February 28, 1992 is incorporated herein by
reference to Exhibit 5(a) of Post-Effective Amendment No. 11.
(f) Sub-Advisory Agreement between FMR Texas Inc. (currently
known as Fidelity Investments Money Management Inc. (FIMM)), and
Fidelity Management & Research Company with respect to Spartan
Municipal Money Fund, dated February 28, 1992, is incorporated herein
by reference to Exhibit 5(b) of Post-Effective Amendment No. 11.
(g) Form of Management Contract between Fidelity Union Street
Trust II on behalf of Fidelity Municipal Money Market Fund and
Fidelity Management & Research Co. dated December 19, 1997 is filed
herein as Exhibit 5(g).
(h) Form of Sub-Advisory Agreement between Fidelity Management &
Research Co. and FMR Texas Inc., (currently known as Fidelity
Investments Money Management Inc. (FIMM)), on behalf of Fidelity
Municipal Money Market Fund dated December 19, 1997 is filed herein as
Exhibit 5(h).
(6)(a) General Distribution Agreement between Fidelity Union Street
Trust II on behalf of Spartan Arizona Municipal Money Market Portfolio
(currently known as Spartan Arizona Municipal Money Market Fund),
Fidelity Daily Income Trust, and Spartan Municipal Money Fund, and
Fidelity Distributors Corporation, dated February 28, 1992 is
incorporated herein by reference to Exhibit 6(c) of Post-Effective
Amendment No.12.
(6)(b) Amendments to the General Distribution Agreement between
Fidelity Union Street Trust II on behalf of Spartan Arizona Municipal
Money Market Fund, Fidelity Daily Income Trust, and Spartan Municipal
Money Fund and Fidelity Distributors Corporation, dated March 14, 1996
and July 15, 1996, are incorporated herein by reference to Exhibit
6(a) of Fidelity Court Street Trust's Post-Effective Amendment No. 61
(File No. 2-58774).
(6)(c) Form of General Distribution Agreement, between Fidelity
Municipal Money Market Fund and Fidelity Distributors Corporation is
filed herein as Exhibit 6(c).
(7)(a) Retirement Plan for Non-Interested Person Trustees, Directors
or General Partners, as amended on November 16, 1995, is incorporated
herein by reference to Exhibit 7(a) of Fidelity Select Portfolio's
(File No. 2-69972) Post-Effective Amendment No. 54.
(7)(b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of September 14, 1995 and
amended through November 14, 1996, is incorporated herein by reference
to Exhibit 7(b) of Fidelity Aberdeen Street Trust's (File No.
33-43529) Post-Effective Amendment No. 19.
(8)(a) Custodian Agreement, Appendix B, and Appendix C, dated
December 1, 1994, between UMB Bank, n.a. and Fidelity Union Street
Trust II, on behalf of Spartan Arizona Municipal Money Market Fund and
Spartan Municipal Money Fund, is incorporated herein by reference to
Exhibit 8 of Fidelity California Municipal Trust's Post-Effective
Amendment No. 28 (File No. 2-83367).
(small solid bullet) (b) Appendix A, dated September 18, 1997, to
the Custodian Agreement, dated December 1, 1994, between UMB Bank,
n.a. and Fidelity Union Street Trust II, on behalf of Spartan Arizona
Municipal Money Market Fund and Spartan Municipal Money Fund, is
incorporated herein by reference to Exhibit 8(b) of Fidelity Municipal
Trust II's Post-Effective Amendment No. 17 (File No. 33-43986).
(small solid bullet) (c) Custodian Agreement and Appendix C, dated
December 1, 1994, between The Bank of New York and Fidelity Union
Street Trust II on behalf of Fidelity Daily Income Trust is
incorporated herein by reference to Exhibit 8(a) of Fidelity Hereford
Street Trust's Post-Effective Amendment No. 4 (File No. 33-52577).
(small solid bullet) (d) Appendix A, dated September 18, 1997, to
the Custodian Agreement, dated December 1, 1994, between The Bank of
New York and Fidelity Union Street Trust II on behalf of Fidelity
Daily Income Trust is incorporated herein by reference to Exhibit 8(e)
of Fidelity Charles Street Trust's Post-Effective Amendment No. 62
(File No. 2-73133).
(small solid bullet) (e) Appendix B, dated September 18, 1997, to
the Custodian Agreement, dated December 1, 1994, between The Bank of
New York and Fidelity Union Street Trust II on behalf of Fidelity
Daily Income Trust is incorporated herein by reference to Exhibit 8(f)
of Fidelity Charles Street Trust's Post-Effective Amendment No. 62
(File No. 2-73133).
(f) Fidelity Group Repo Custodian Agreement among The Bank of New
York, J. P. Morgan Securities, Inc., and Fidelity Union Street Trust
II, on behalf of Fidelity Daily Income Trust, dated February 12, 1996,
is incorporated herein by reference to Exhibit 8(d) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(g) Schedule 1 to the Fidelity Group Repo Custodian Agreement
between The Bank of New York and Fidelity Union Street Trust II, on
behalf of Fidelity Daily Income Trust, dated February 12, 1996, is
incorporated herein by reference to Exhibit 8(e) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(h) Fidelity Group Repo Custodian Agreement among Chemical Bank,
Greenwich Capital Markets, Inc., and Fidelity Union Street Trust II,
on behalf of Fidelity Daily Income Trust, dated November 13, 1995, is
incorporated herein by reference to Exhibit 8(f) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(i) Schedule 1 to the Fidelity Group Repo Custodian Agreement
between Chemical Bank and Fidelity Union Street Trust II, on behalf of
Fidelity Daily Income Trust dated November 13, 1995, is incorporated
herein by reference to Exhibit 8(g) of Fidelity Institutional Cash
Portfolios' (File No. 2-74808) Post-Effective Amendment No. 31.
(j) Joint Trading Account Custody Agreement between The Bank of
New York and Fidelity Union Street Trust II, on behalf of Fidelity
Daily Income Trust, dated May 11, 1995, is incorporated herein by
reference to Exhibit 8(h) of Fidelity Institutional Cash Portfolios'
(File No. 2-74808) Post-Effective Amendment No. 31.
(k) First Amendment to Joint Trading Account Custody Agreement
between The Bank of New York and Fidelity Union Street Trust II, on
behalf Fidelity Daily Income Trust, dated July 14, 1995, is
incorporated herein by reference to Exhibit 8(i) of Fidelity
Institutional Cash Portfolios' (File No. 2-74808) Post-Effective
Amendment No. 31.
(l) Form of Custodian Agreement, Appendix B, and Appendix C,
between UMB Bank, n.a. and Fidelity Union Street Trust II, on behalf
of Fidelity Municipal Money Market Trust, is filed herein as Exhibit
8(l).
(9) Not applicable.
(10) Not applicable.
(11) Consent of PricewaterhouseCoopers LLP is filed herein as Exhibit
11.
(12) Not applicable.
(13) Not applicable.
(14) (a) Fidelity Individual Retirement Account Custodial Agreement
and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(a) of Fidelity Union Street Trust's
(File No. 2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(i) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) of
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) of Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATE plan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(l) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(h) The CORPORATE plan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit
14(m) of Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No.
57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) of Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document,
Standardized Adoption Agreement, and Non-Standardized Adoption
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(o) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k)
Basic Plan Document, Standardized Adoption Agreement, and
Non-Standardized Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan
Adoption Agreement, Non-Standardized Discretionary Contribution Plan
No. 002 Adoption Agreement, and Non-Standardized Discretionary
Contribution Plan No. 003 Adoption Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(g) of Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) of Fidelity Securities Fund's (File No.
2-93601) Post-Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust
Agreement, as currently in effect, is incorporated herein by reference
to Exhibit 14(c) of Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(q) Fidelity SIMPLE-IRA Plan Adoption Agreement, Company Profile
Form, and Plan Document, as currently in effect, is incorporated
herein by reference to Exhibit 14(q) of Fidelity Aberdeen Street
Trust's (File No. 33-43529) Post-Effective Amendment No. 19.
(15)(a) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Union Street Trust II on behalf of Spartan Arizona Municipal
Money Portfolio (currently known as Spartan Arizona Municipal Money
Market Fund) is incorporated herein by reference to Exhibit 15(c) of
Post-Effective Amendment No. 13.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Union Street Trust II on behalf of Fidelity Daily Income
Trust is incorporated herein by reference to Exhibit 15(b) of
Post-Effective Amendment No. 11.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for
Fidelity Union Street Trust II on behalf of Spartan Municipal Money
Fund is incorporated herein by reference to Exhibit 15(a) of
Post-Effective Amendment No. 11.
(d) Form of Distribution and Service Plan pursuant to Rule
12b-1 for Fidelity Union Street Trust II on behalf of Fidelity
Municipal Money Market Fund is filed herein as Exhibit 15(d).
(16)(a) A schedule for the computation of 7-day yields and total
returns on behalf of Fidelity Daily Income Trust, Spartan Arizona
Municipal Money Market Fund and Spartan Municipal Money Fund is
incorporated herein by reference to Exhibit 16 of Post-Effective
Amendment No. 13
(b) A schedule for the computation of total returns for Fidelity
Tax-Exempt Money Market Trust (currently known as Fidelity Municipal
Money Market Fund) if incorporated herein by reference to Exhibit
16(a) of Fidelity Beacon Street Trust's Post-Effective Amendment No.
39 (File No. 2-64791).
(c) A schedule for the computation of 7-day yields for Fidelity
Tax-Exempt Money Market Trust (currently known as Fidelity Municipal
Money Market Fund) if incorporated herein by reference to Exhibit
16(b) of Fidelity Beacon Street Trust's Post-Effective Amendment No.
39 (File No. 2-64791).
(17) Financial Data Schedules for the funds are filed herein as
Exhibit 27.
(18) Not applicable.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is the same as the board of
other funds advised by FMR, each of which has Fidelity Management &
Research Company as its investment adviser. In addition, the officers
of these funds are substantially identical. Nonetheless, the
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards
and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities: As of August 31, 1998
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Daily Income Trust 64,358
Spartan Arizona Municipal Money Market Fund 549
Spartan Municipal Money Fund 14,515
Fidelity Municipal Money Market Fund 163,733
Item 27. Indemnification
Pursuant to Del. Code Ann. title 12 (sub-section) 3817, a Delaware
business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and
all claims and demands whatsoever. Article X, Section 10.02 of the
Trust Instrument states that the Registrant shall indemnify any
present trustee or officer to the fullest extent permitted by law
against liability, and all expenses reasonably incurred by him or her
in connection with any claim, action, suit or proceeding in which he
or she is involved by virtue of his or her service as a trustee,
officer, or both, and against any amount incurred in settlement
thereof. Indemnification will not be provided to a person adjudged by
a court or other adjudicatory body to be liable to the Registrant or
its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his or her duties (collectively,
"disabling conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of
the Registrant. In the event of a settlement, no indemnification may
be provided unless there has been a determination, as specified in the
Trust Instrument, that the officer or trustee did not engage in
disabling conduct.
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
their own disabling conduct.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed sub-transfer agent, the Transfer Agent agrees
to indemnify Service for Service's losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and
expenses) (losses) to the extent that the Transfer Agent is entitled
to and receives indemnification from the Portfolio for the same
events. Under the Transfer Agency Agreement, the Registrant agrees to
indemnify and hold the Transfer Agent harmless against any losses,
claims, damages, liabilities, or expenses (including reasonable
counsel fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder which names the
Transfer Agent and/or the Registrant as a party and is not based on
and does not result from the Transfer Agent's willful misfeasance, bad
faith or negligence or reckless disregard of duties, and arises out of
or in connection with the Transfer Agent's performance under the
Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by the Transfer Agent's willful misfeasance, bad faith
or negligence or reckless disregard of duties) which results from the
negligence of the Registrant, or from the Transfer Agent's acting upon
any instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of the Transfer Agent's acting in reliance upon advice
reasonably believed by the Transfer Agent to have been given by
counsel for the Registrant, or as a result of the Transfer Agent's
acting in reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or
executed by the proper person.
Pursuant to the agreement by which Fidelity Service Company, Inc.
("Service") is appointed transfer agent, the Registrant agrees to
indemnify and hold Service harmless against any losses, claims,
damages, liabilities or expenses (including reasonable counsel fees
and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other
than the Registrant, including by a shareholder, which names the
Service and/or the Registrant as a party and is not based on and does
not result from Service's willful misfeasance, bad faith or negligence
or reckless disregard of duties, and arises out of or in connection
with Service's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent
contributed to by Service's willful misfeasance, bad faith or
negligence or reckless disregard of duties) which results from the
negligence of the Registrant, or from Service's acting upon any
instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a
result of Service's acting in reliance upon advice reasonably believed
by Service to have been given by counsel for the Registrant, or as a
result of Service's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY (FMR)
82 Devonshire Street, Boston, MA 02109
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held,
during the past two fiscal years, the following positions of a
substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Board and Director of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman
of the Board and Director of FMR Corp., Fidelity
Investments Money Management, Inc. (FIMM), Fidelity
Management & Research (U.K.) Inc. (FMR U.K.), and
Fidelity Management & Research (Far East) Inc. (FMR
Far East); Chairman of the Executive Committee of
FMR; Director of Fidelity Investments Japan Limited
(FIJ); President and Trustee of funds advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice President
and Trustee of funds advised by FMR; President and
Director of FIMM, FMR U.K., and FMR Far East;
Previously, General Counsel, Managing Director, and
Senior Vice President of FMR Corp.
Peter S. Lynch Vice Chairman of the Board and Director of FMR.
John H. Carlson Vice President of FMR and of funds advised by FMR.
Dwight D. Churchill Senior Vice President of FMR and Vice President of
Bond Funds advised by FMR; Vice President of FIMM.
Brian Clancy Vice President of FMR and Treasurer of FMR, FIMM,
FMR U.K., and FMR Far East.
Barry Coffman Vice President of FMR.
Arieh Coll Vice President of FMR.
Frederic G. Corneel Tax Counsel of FMR.
Stephen G. Manning Assistant Treasurer of FMR, FIMM, FMR U.K., FMR
Far East; Vice President and Treasurer of FMR Corp.;
Treasurer of Strategic Advisers, Inc.
William Danoff Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott E. DeSano Vice President of FMR.
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Walter C. Donovan Vice President of FMR.
Bettina Doulton Vice President of FMR and of funds advised by FMR.
Margaret L. Eagle Vice President of FMR and of funds advised by FMR.
William R. Ebsworth Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Gregory Fraser Vice President of FMR and of a fund advised by FMR.
Jay Freedman Assistant Clerk of FMR; Clerk of FMR Corp., FMR
U.K., FMR Far East, and Strategic Advisers, Inc.;
Secretary of FIMM; Associate General Counsel FMR
Corp.
David L. Glancy Vice President of FMR and of a fund advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
Boyce I. Greer Senior Vice President of FMR and Vice President of
Money Market Funds advised by FMR; Vice President
of FIMM.
Bart A. Grenier Senior Vice President of FMR; Vice President of
High-Income Funds advised by FMR.
Robert Haber Vice President of FMR.
Richard C. Habermann Senior Vice President of FMR; Vice President of funds
advised by FMR.
Fred L. Henning Jr. Senior Vice President of FMR and Vice President of
Fixed-Income Funds advised by FMR.
Bruce T. Herring Vice President of FMR.
Robert F. Hill Vice President of FMR; Director of Technical Research.
Abigail P. Johnson Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.;
Associate Director and Senior Vice President of Equity
Funds advised by FMR.
David B. Jones Vice President of FMR.
Steven Kaye Vice President of FMR and of a fund advised by FMR.
Francis V. Knox Vice President of FMR; Compliance Officer of FMR
U.K.
Harris Leviton Vice President of FMR and of a fund advised by FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Richard R. Mace Jr. Vice President of FMR and of funds advised by FMR.
Charles A. Mangum Vice President of FMR and of a fund advised by FMR.
Kevin McCarey Vice President of FMR and of a fund advised by FMR.
Neal P. Miller Vice President of FMR.
Jacques Perold Vice President of FMR.
Alan Radlo Vice President of FMR.
Eric D. Roiter Senior Vice President and General Counsel of FMR and
Secretary of funds advised by FMR.
Lee H. Sandwen Vice President of FMR.
Patricia A. Satterthwaite Vice President of FMR and of a fund advised by FMR.
Fergus Shiel Vice President of FMR.
Richard A. Silver Vice President of FMR.
Carol A. Smith-Fachetti Vice President of FMR.
Steven J. Snider Vice President of FMR and of funds advised by FMR.
Thomas T. Soviero Vice President of FMR and of a fund advised by FMR.
Richard Spillane Senior Vice President of FMR; Associate Director and
Senior Vice President of Equity Funds advised by FMR;
Previously, Senior Vice President and Director of
Operations and Compliance of FMR U.K.
Thomas M. Sprague Vice President of FMR and of funds advised by FMR.
Robert E. Stansky Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Scott D. Stewart Vice President of FMR.
Thomas Sweeney Vice President of FMR.
Beth F. Terrana Senior Vice President of FMR and Vice President of a
fund advised by FMR.
Yoko Tilley Vice President of FMR.
Joel C. Tillinghast Vice President of FMR and of a fund advised by FMR.
Robert Tuckett Vice President of FMR.
Jennifer Uhrig Vice President of FMR and of funds advised by FMR.
George A. Vanderheiden Senior Vice President of FMR and Vice President of
funds advised by FMR; Director of FMR Corp.
Steven S. Wymer Vice President of FMR and of a fund advised by FMR.
</TABLE>
(2) FIDELITY INVESTMENTS MONEY MANAGEMENT, INC. (FIMM)
Contra Way, Merrimack, NH 03054
FIMM provides investment advisory services to Fidelity Management &
Research Company. The directors and officers of the Sub-Adviser have
held the following positions of a substantial nature during the past
two fiscal years.
Edward C. Johnson 3d Chairman of the Board and Director of FIMM,
FMR, FMR Corp., FMR Far East, and FMR
U.K.; Chairman of the Executive Committee of
FMR; President and Chief Executive Officer of
FMR Corp.; Director of Fidelity Investments
Japan Limited (FIJ); President and Trustee of
funds advised by FMR.
Robert C. Pozen President and Director of FMR; Senior Vice
President and Trustee of funds advised by FMR;
President and Director of FIMM, FMR U.K., and
FMR Far East; Previously, General Counsel,
Managing Director, and Senior Vice President of
FMR Corp.
Fred L. Henning Jr. Senior Vice President of FIMM; Senior Vice
President of FMR and Vice President of
Fixed-Income Funds advised by FMR.
Boyce I. Greer Vice President of FIMM; Senior Vice President
of FMR and Vice President of Money Market
Funds advised by FMR.
Dwight D. Churchill Vice President of FIMM; Senior Vice President
of FMR and Vice President of Bond Funds
advised by FMR.
Brian Clancy Treasurer of FIMM, FMR Far East, FMR U.K.,
and FMR and Vice President of FMR.
Jay Freedman Secretary of FIMM; Clerk of FMR U.K., FMR
Far East, FMR Corp. and Strategic Advisers,
Inc.; Assistant Clerk of FMR; Secretary of
FIMM; Associate General Counsel FMR Corp.
Stephen G. Manning Assistant Treasurer of FIMM, FMR U.K., FMR
Far East, and FMR; Vice President and Treasurer
of FMR Corp.; Treasurer of Strategic Advisers,
Inc.
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for
all funds advised by FMR or an affiliate.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Fund
Edward C. Johnson 3d Director Trustee and President
Michael Mlinac Director None
James Curvey Director None
Martha B. Willis President None
Eric D. Roiter Senior Vice President Secretary
Caron Ketchum Treasurer and Controller None
Gary Greenstein Assistant Treasurer None
Jay Freedman Assistant Clerk None
Linda Holland Compliance Officer None
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the
funds' respective custodian, The Bank of New York, 110 Washington
Street, New York, NY (Fidelity Daily Income Trust) and UMB Bank, n.a.,
1010 Grand Avenue, Kansas City, MO (Spartan Municipal Money Fund,
Spartan Arizona Municipal Money Market Fund and Fidelity Municipal
Money Market Fund).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for the effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 21 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and Commonwealth of
Massachusetts, on the 14th day of October 1998.
Fidelity Union Street Trust II
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.
<TABLE>
<CAPTION>
<S> <C> <C>
(Signature) (Title) (Date)
/s/Edward C. Johnson 3d (dagger) President and Trustee October 14, 1998
Edward C. Johnson 3d (Principal Executive Officer)
/s/Richard A. Silver Treasurer October 14, 1998
Richard A. Silver
/s/Robert C. Pozen Trustee October 14, 1998
Robert C. Pozen
/s/Ralph F. Cox * Trustee October 14, 1998
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee October 14, 1998
Phyllis Burke Davis
/s/Robert M. Gates ** Trustee October 14, 1998
Robert M. Gates
/s/E. Bradley Jones * Trustee October 14, 1998
E. Bradley Jones
/s/Donald J. Kirk * Trustee October 14, 1998
Donald J. Kirk
/s/Peter S. Lynch * Trustee October 14, 1998
Peter S. Lynch
/s/Marvin L. Mann * Trustee October 14, 1998
Marvin L. Mann
/s/William O. McCoy * Trustee October 14, 1998
William O. McCoy
/s/Gerald C. McDonough * Trustee October 14, 1998
Gerald C. McDonough
/s/Thomas R. Williams * Trustee October 14, 1998
Thomas R. Williams
</TABLE>
(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of
attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated December 19, 1996 and filed herewith.
** Signature affixed by Robert C. Hacker pursuant to a power of
attorney dated March 6, 1997 and filed herewith.
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee, or General
Partner, as the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Hereford Street Trust
Fidelity Advisor Series I Fidelity Income Fund
Fidelity Advisor Series II Fidelity Institutional Cash Portfolios
Fidelity Advisor Series III Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series IV Fidelity Investment Trust
Fidelity Advisor Series V Fidelity Magellan Fund
Fidelity Advisor Series VI Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series VII Fidelity Money Market Trust
Fidelity Advisor Series VIII Fidelity Mt. Vernon Street Trust
Fidelity Beacon Street Trust Fidelity Municipal Trust
Fidelity Boston Street Trust Fidelity Municipal Trust II
Fidelity California Municipal Trust Fidelity New York Municipal Trust
Fidelity California Municipal Trust II Fidelity New York Municipal Trust II
Fidelity Capital Trust Fidelity Phillips Street Trust
Fidelity Charles Street Trust Fidelity Puritan Trust
Fidelity Commonwealth Trust Fidelity Revere Street Trust
Fidelity Concord Street Trust Fidelity School Street Trust
Fidelity Congress Street Fund Fidelity Securities Fund
Fidelity Contrafund Fidelity Select Portfolios
Fidelity Corporate Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Court Street Trust Fidelity Summer Street Trust
Fidelity Court Street Trust II Fidelity Trend Fund
Fidelity Covington Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Daily Money Fund Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Union Street Trust II
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Newbury Street Trust
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund Variable Insurance Products Fund III
Fidelity Hastings Street Trust
</TABLE>
in addition to any other investment company for which Fidelity
Management & Research Company or an affiliate acts as investment
adviser and for which the undersigned individual serves as President
and Director, Trustee, or General Partner (collectively, the "Funds"),
hereby constitute and appoint Robert C. Pozen my true and lawful
attorney-in-fact, with full power of substitution, and with full power
to him to sign for me and in my name in the appropriate capacity, all
Registration Statements of the Funds on Form N-1A, Form N-8A, or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A, Form N-8A, or any successor thereto, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such
things in my name and on my behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, and all related requirements of the Securities and
Exchange Commission. I hereby ratify and confirm all that said
attorney-in-fact or his substitutes may do or cause to be done by
virtue hereof. This power of attorney is effective for all documents
filed on or after August 1, 1997.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d_ July 17, 1997
Edward C. Johnson 3d
POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the
case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Directors, Trustees, or
General Partners (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, our true and lawful attorneys-in-fact,
with full power of substitution, and with full power to each of them,
to sign for us and in our names in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in our names
and behalf in connection therewith as said attorneys-in-fact deems
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after January
1, 1997.
WITNESS our hands on this nineteenth day of December, 1996.
/s/Edward C. Johnson 3d___________ /s/Peter S. Lynch________________
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead_______________ /s/William O. McCoy______________
J. Gary Burkhead William O. McCoy
/s/Ralph F. Cox __________________ /s/Gerald C. McDonough___________
Ralph F. Cox Gerald C. McDonough
/s/Phyllis Burke Davis_____________ /s/Marvin L. Mann________________
Phyllis Burke Davis Marvin L. Mann
/s/E. Bradley Jones________________ /s/Thomas R. Williams ____________
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk __________________
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned Director, Trustee, or General Partner, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Aberdeen Street Trust Fidelity Government Securities Fund
Fidelity Advisor Annuity Fund Fidelity Hastings Street Trust
Fidelity Advisor Series I Fidelity Hereford Street Trust
Fidelity Advisor Series II Fidelity Income Fund
Fidelity Advisor Series III Fidelity Institutional Cash Portfolios
Fidelity Advisor Series IV Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Advisor Series V Fidelity Institutional Trust
Fidelity Advisor Series VI Fidelity Investment Trust
Fidelity Advisor Series VII Fidelity Magellan Fund
Fidelity Advisor Series VIII Fidelity Massachusetts Municipal Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust
Fidelity Boston Street Trust Fidelity Mt. Vernon Street Trust
Fidelity California Municipal Trust Fidelity Municipal Trust
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Capital Trust Fidelity New York Municipal Trust
Fidelity Charles Street Trust Fidelity New York Municipal Trust II
Fidelity Commonwealth Trust Fidelity Phillips Street Trust
Fidelity Congress Street Fund Fidelity Puritan Trust
Fidelity Contrafund Fidelity Revere Street Trust
Fidelity Corporate Trust Fidelity School Street Trust
Fidelity Court Street Trust Fidelity Securities Fund
Fidelity Court Street Trust II Fidelity Select Portfolios
Fidelity Covington Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Daily Money Fund Fidelity Summer Street Trust
Fidelity Daily Tax-Exempt Fund Fidelity Trend Fund
Fidelity Destiny Portfolios Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity U.S. Investments-Government Securities
Portfolio, L.P. Fund, L.P.
Fidelity Devonshire Trust Fidelity Union Street Trust
Fidelity Exchange Fund Fidelity Union Street Trust II
Fidelity Financial Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Variable Insurance Products Fund II
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company or an affiliate acts as investment adviser and for
which the undersigned individual serves as Director, Trustee, or
General Partner (collectively, the "Funds"), hereby constitute and
appoint Arthur J. Brown, Arthur C. Delibert, Stephanie A. Djinis,
Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, and Dana L.
Platt, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to
sign for me and in my name in the appropriate capacities, all
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Amendments, Pre-Effective
Amendments, or Post-Effective Amendments to said Registration
Statements on Form N-1A or any successor thereto, any Registration
Statements on Form N-14, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission. I
hereby ratify and confirm all that said attorneys-in-fact or their
substitutes may do or cause to be done by virtue hereof. This power
of attorney is effective for all documents filed on or after March 1,
1997.
WITNESS my hand on the date set forth below.
/s/Robert M. Gates March 6, 1997
Robert M. Gates
Exhibit 5(g)
FORM OF
MANAGEMENT CONTRACT
BETWEEN
FIDELITY UNION STREET TRUST II:
FIDELITY MUNICIPAL MONEY MARKET FUND
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT as of this 19th day of December 1997, by and between
Fidelity Union Street Trust II, a Delaware business trust which may
issue one or more series of shares of beneficial interest (hereinafter
called the "Fund"), on behalf of Fidelity Municipal Money Market Fund
(hereinafter called the "Portfolio"), and Fidelity Management &
Research Company, a Massachusetts corporation (hereinafter called the
"Adviser") as set forth in its entirety below.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio's Prospectus or other
governing instruments, as amended from time to time, the Investment
Company Act of 1940 and rules thereunder, as amended from time to time
(the "1940 Act"), and such other limitations as the Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; and shall pay the salaries and fees of
all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all
personnel of the Fund or the Adviser performing services relating to
research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for
the performance by its affiliates of) the management and
administrative services necessary for the operation of the Fund. The
Adviser shall, subject to the supervision of the Board of Trustees,
perform various services for the Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, custodians, depositories, transfer and
pricing agents, accountants, attorneys, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be
necessary or desirable; (iii) preparing all general shareholder
communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered,
maintaining the registration and qualification of the Portfolio's
shares under federal and state law; and (vii) investigating the
development of and developing and implementing, if appropriate,
management and shareholder services designed to enhance the value or
convenience of the Portfolio as an investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
or analyses to the Fund as the Fund's Board of Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Fund's Board of Trustees
with respect to Fund policies, and shall carry out such policies as
are adopted by the Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Contract.
(c) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with brokers or
dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are
reasonable in relation to the benefits received. In selecting brokers
or dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Adviser or its affiliates exercise investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities which the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Trustees of the Fund shall
periodically review the commissions paid by the Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of
the Fund are or may be or become interested in the Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser are or may be or become similarly
interested in the Fund, and that the Adviser may be or become
interested in the Fund as a shareholder or otherwise.
3. The Adviser will be compensated on the following basis for the
services and facilities to be furnished hereunder. The Adviser shall
receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Group Fee
and an Individual Fund Fee.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the
monthly average of the net assets of the registered investment
companies having Advisory and Service or Management Contracts with the
Adviser (computed in the manner set forth in the fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month. The Group Fee Rate
shall be determined on a cumulative basis pursuant to the following
schedule:
Average Net Annualized Fee Rate
Assets (for each level)
0 - $3 billion .3700%
3 - 6 .3400
6 - 9 .3100
9 - 12 .2800
12 - 15 .2500
15 - 18 .2200
18 - 21 .2000
21 - 24 .1900
24 - 30 .1800
30 - 36 .1750
36 - 42 .1700
42 - 48 .1650
48 - 66 .1600
66 - 84 .1550
84 - 120 .1500.
120 - 156 .1450
156 - 192 .1400
192 - 228 .1350
228 - 264 .1300
264 - 300 .1275
300 - 336 .1250
336 - 372 .1225
372 - 408 .1200
408 - 444 .1175
444 - 480 .1150
480 - 516 .1125
Over 516 .1100
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
0.15%.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee Rate shall constitute
the Annual Management Fee Rate. One-twelfth of the Annual Management
Fee Rate shall be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration
of Trust or other organizational document) determined as of the close
of business on each business day throughout the month.
(c)In case of termination of this Contract during any month, the fee
for that month shall be reduced proportionately on the basis of the
number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and
other investment instruments; (iii) fees and expenses of the Fund's
Trustees other than those who are "interested persons" of the Fund or
the Adviser (iv) legal and audit expenses; (v) custodian, registrar
and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Fund and the Portfolio's
shares for distribution under state and federal securities laws; (vii)
expenses of printing and mailing reports and notices and proxy
material to shareholders of the Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management
Contracts with the Adviser, of 50% of insurance premiums for fidelity
and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xii) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other
services and activities do not, during the term of this Contract,
interfere, in a material manner, with the Adviser's ability to meet
all of its obligations with respect to rendering services to the
Portfolio hereunder. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Portfolio or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security or other investment
instrument.
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Contract shall continue in force until May
31, 1998 and indefinitely thereafter, but only so long as the
continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority
of the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on
the part of the Fund to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment
of any penalty, by action of its Trustees or Board of Directors, as
the case may be, or with respect to the Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
or other organizational document and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all
cases to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other Portfolios of the Fund. In
addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
The terms "vote of a majority of the outstanding securities,"
"assignment," and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, as now in effect or
as hereafter amended, and subject to such orders as may be granted by
the Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
SIGNATURE LINES OMITTED
Exhibit 5(h)
FORM OF
SUB-ADVISORY AGREEMENT
between
FMR Texas Inc.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 19th day of December, 1997, by and between FMR
Texas Inc., a Texas corporation with principal offices at 400 East Las
Colinas Boulevard, Irving, Texas (hereinafter called the
"Sub-Adviser") and Fidelity Management & Research Company, a
Massachusetts corporation with principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with
Fidelity Union Street Trust II, a Delaware business trust which may
issue one or more series of shares of beneficial interest (hereinafter
called the "Fund"), on behalf of Fidelity Municipal Money Market Fund
(hereinafter called the "Portfolio"), pursuant to which the Adviser is
to act as investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing
investment management of money market mutual funds, both taxable and
tax-exempt, advising generally with respect to money market
instruments, and managing or providing advice with respect to cash
management.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the Adviser and the Sub-Adviser agree
as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the
Adviser, direct the investments of the Portfolio in accordance with
the investment objective, policies and limitations as provided in the
Portfolio's Prospectus or other governing instruments, as amended from
time to time, the Investment Company Act of l940 and rules thereunder,
as amended from time to time (the "l940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser or Sub-Adviser. The Sub-Adviser shall also furnish for the
use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the
Portfolio; and shall pay the salaries and fees of all personnel of the
Sub-Adviser performing services for the Portfolio relating to
research, statistical and investment activities. The Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio or the Adviser, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other
actions of the Portfolio are and shall at all times be subject to the
control and direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's
Board of Trustees or the Adviser may request from time to time or as
the Sub-Adviser may deem to be desirable. The Sub-Adviser shall make
recommendations to the Fund's Board of Trustees with respect to
Portfolio policies, and shall carry out such policies as are adopted
by the Trustees. The Sub-Adviser shall, subject to review by the
Board of Trustees, furnish such other services as the Sub-Adviser
shall from time to time determine to be necessary or useful to perform
its obligations under this Agreement and which are not otherwise
furnished by the Adviser.
(c) The Sub-Adviser, at its own expense, shall place all orders for
the purchase and sale of portfolio securities for the Portfolio's
account with brokers or dealers selected by the Sub-Adviser, which may
include brokers or dealers affiliated with the Adviser or Sub-Adviser.
The Sub-Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to
the benefits received. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected
who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of l934) to
the Portfolio and/or the other accounts over which the Sub-Adviser,
Adviser or their affiliates exercise investment discretion. The
Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting
that transaction if the Sub-Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits to the Portfolio.
2. The Sub-Adviser will be compensated by the Adviser on the
following basis for the services to be furnished hereunder: the
Adviser agrees to pay the Sub-Adviser a monthly fee equal to 50% of
the management fee which the Portfolio is obligated to pay the Adviser
under the Portfolio's Management Contract with the Adviser. Such fee
shall not be reduced to reflect expense reimbursements or fee waivers
by the Adviser, if any, in effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the
Fund are or may be or become interested in the Adviser or the
Sub-Adviser as directors, officers or otherwise and that directors,
officers and stockholders of the Adviser or the Sub-Adviser are or may
be or become similarly interested in the Fund, and that the Adviser or
the Sub-Adviser may be or become interested in the Fund as a
shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses
other than those expressly stated to be payable by the Sub-Adviser
hereunder or by the Adviser under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions
and other costs in connection with the purchase or sale of securities
and other investment instruments; (iii) fees and expenses of the
Fund's Trustees other than those who are "interested persons" of the
Fund, the Sub-Adviser or the Adviser; (iv) legal and audit expenses;
(v) custodian, registrar and transfer agent fees and expenses; (vi)
fees and expenses related to the registration and qualification of the
Fund and the Portfolio's shares for distribution under state and
federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the
Portfolio; (viii) all other expenses incidental to holding meetings of
the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio
and other registered investment companies having Advisory and Service
or Management Contracts with the Adviser, of 50% of insurance premiums
for fidelity and other coverage; (x) its proportionate share of
association membership dues; (xi) expenses of typesetting for printing
Prospectuses and Statements of Additional Information and supplements
thereto; (xi) expenses of printing and mailing Prospectuses and
Statements of Additional Information and supplements thereto sent to
existing shareholders; and (xiii) such non-recurring or extraordinary
expenses as may arise, including those relating to actions, suits or
proceedings to which the Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be
deemed to be exclusive, the Sub-Adviser being free to render services
to others and engage in other activities, provided, however, that such
other services and activities do not, during the term of this
Agreement, interfere, in a material manner, with the Sub-Adviser's
ability to meet all of its obligations with respect to rendering
investment advice hereunder. The Sub-Adviser shall for all purposes
be an independent contractor and not an agent or employee of the
Adviser or the Fund. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, the Sub-Adviser shall not be
subject to liability to the Adviser, the Fund or to any shareholder of
the Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d)
of this paragraph 6, this Agreement shall continue in force until
______ and indefinitely thereafter, but only so long as the
continuance after such period shall be specifically approved at least
annually by vote of the Fund's Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser,
the Sub-Adviser and the Portfolio, such consent on the part of the
Portfolio to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of the
Agreement must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to such Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of
its Board of Trustees or Directors, or by vote of a majority of its
outstanding voting securities. This Agreement shall terminate
automatically in the event of its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Fund and agrees that any
obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio.
Nor shall the Sub-Adviser seek satisfaction of any such obligation
from the Trustees or any individual Trustee.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING
EFFECT TO THE CHOICE OF LAWS PROVISIONS THEREOF.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested
persons," when used herein, shall have the respective meanings
specified in the Investment Company Act of 1940 as now in effect or as
hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as
of the date written above.
SIGNATURE LINES OMITTED
Exhibit 6(c)
FORM OF
GENERAL DISTRIBUTION AGREEMENT
between
Fidelity Union Street Trust II
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 19th day of December, 1997, between Fidelity
Union Street Trust II, a Delaware business trust having its principal
place of business in Boston, Massachusetts and which may issue one or
more series of beneficial interest ("Issuer"), with respect to shares
of Fidelity Municipal Money Market Fund, a series of the Issuer, and
Fidelity Distributors Corporation, a Massachusetts corporation having
its principal place of business in Boston, Massachusetts
("Distributors").
In consideration of the mutual promises and undertakings herein
contained, the parties agree as follows:
1. Sale of Shares - The Issuer grants to Distributors the right to
sell shares on behalf of the Issuer during the term of this Agreement
and subject to the registration requirements of the Securities Act of
1933, as amended ("1933 Act"), and of the laws governing the sale of
securities in the various states ("Blue Sky Laws") under the following
terms and conditions: Distributors (i) shall have the right to sell,
as agent on behalf of the Issuer, shares authorized for issue and
registered under the 1933 Act, and (ii) may sell shares under offers
of exchange, if available, between and among the funds advised by
Fidelity Management & Research Company ("FMR") or any of affiliates.
2. Sale of Shares by the Issuer - The rights granted to the
Distributor shall be nonexclusive in that the Issuer reserves the
right to sell its shares to investors on applications received and
accepted by the Issuer. Further, the Issuer reserves the right to
issue shares in connection with the merger or consolidation, or
acquisition by the Issuer through purchase or otherwise, with any
other investment company, trust, or personal holding company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its
treasury in the event that in the discretion of the Issuer treasury
shares shall be sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all
shares sold to investors by the Distributor or the Issuer will be sold
at the public offering price. The public offering price for all
accepted subscriptions will be the net asset value per share, as
determined in the manner described in the Issuer's current Prospectus
and/or Statement of Additional Information, plus a sales charge (if
any) described in the Issuer's current Prospectus and/or Statement of
Additional Information. The Issuer shall in all cases receive the net
asset value per share on all sales. If a sales charge is in effect,
the Distributor shall have the right subject to such rules or
regulations of the Securities and Exchange Commission as may then be
in effect pursuant to Section 22 of the Investment Company Act of 1940
to pay a portion of the sales charge to dealers who have sold shares
of the Issuer. If a fee in connection with shareholder redemptions is
in effect, the Issuer shall collect the fee on behalf of Distributors
and, unless otherwise agreed upon by the Issuer and Distributors,
Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net
asset value is suspended and until such suspension is terminated, no
further orders for shares shall be processed by the Distributor except
such unconditional orders as may have been placed with the Distributor
before it had knowledge of the suspension. In addition, the Issuer
reserves the right to suspend sales and the Distributor's authority to
process orders for shares on behalf of the Issuer if, in the judgment
of the Issuer, it is in the best interests of the Issuer to do so.
Suspension will continue for such period as may be determined by the
Issuer.
6. Solicitation of Sales - In consideration of these rights granted to
the Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of
the Issuer. This shall not prevent the Distributor from entering into
like arrangements (including arrangements involving the payment of
underwriting commissions) with other issuers. This does not obligate
the Distributor to register as a broker or dealer under the Blue Sky
Laws of any jurisdiction in which it is not now registered or to
maintain its registration in any jurisdiction in which it is now
registered. If a sales charge is in effect, the Distributor shall
have the right to enter into sales agreements with dealers of its
choice for the sale of shares of the Issuer to the public at the
public offering price only and fix in such agreements the portion of
the sales charge which may be retained by dealers, provided that the
Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing
said form of dealer agreement and amendments thereto as an exhibit to
its currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by
the Issuer to give any information or to make any representations
other than those contained in the appropriate registration statements
or Prospectuses and Statements of Additional Information filed with
the Securities and Exchange Commission under the 1933 Act (as these
registration statements, Prospectuses and Statements of Additional
Information may be amended from time to time), or contained in
shareholder reports or other material that may be prepared by or on
behalf of the Issuer for the Distributor's use. This shall not be
construed to prevent the Distributor from preparing and distributing
sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be
bought or sold by or through the Distributor, and the Distributor may
participate directly or indirectly in brokerage commissions or
"spreads" for transactions in portfolio securities of the Issuer.
However, all sums of money received by the Distributor as a result of
such purchases and sales or as a result of such participation must,
after reimbursement of actual expenses of the Distributor in
connection with such activity, be paid over by the Distributor for the
benefit of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all
action necessary to register shares under the 1933 Act (subject to the
necessary approval of its shareholders) so that there will be
available for sale the number of shares the Distributor may reasonably
be expected to sell. The Issuer shall make available to the
Distributor such number of copies of its currently effective
Prospectus and Statement of Additional Information as the Distributor
may reasonably request. The Issuer shall furnish to the Distributor
copies of all information, financial statements and other papers which
the Distributor may reasonably request for use in connection with the
distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in
connection with the preparation, setting in type and filing of any
registration statement, Prospectus and Statement of Additional
Information under the 1933 Act and amendments for the issue of its
shares, (b) in connection with the registration and qualification of
shares for sale in the various states in which the Board of Trustees
of the Issuer shall determine it advisable to qualify such shares for
sale (including registering the Issuer as a broker or dealer or any
officer of the Issuer as agent or salesman in any state), (c) of
preparing, setting in type, printing and mailing any report or other
communication to shareholders of the Issuer in their capacity as such,
and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the
Issuer, it is recognized by the Issuer that FMR may make payment to
Distributors with respect to any expenses incurred in the distribution
of shares of the Issuer, such payments payable from the past profits
or other resources of FMR including management fees paid to it by the
Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless
the Distributor and each of its directors and officers and each
person, if any, who controls the Distributor within the meaning of
Section 15 of the 1933 Act against any loss, liability, claim, damages
or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damages, or expense and
reasonable counsel fees incurred in connection therewith) arising by
reason of any person acquiring any shares, based upon the ground that
the registration statement, Prospectus, Statement of Additional
Information, shareholder reports or other information filed or made
public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading under the 1933 Act, or any other statute or the common law.
However, the Issuer does not agree to indemnify the Distributor or
hold it harmless to the extent that the statement or omission was made
in reliance upon, and in conformity with, information furnished to the
Issuer by or on behalf of the Distributor. In no case (i) is the
indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person
against any liability to the Issuer or its security holders to which
the Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Issuer to
be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against the Distributor or any person
indemnified unless the Distributor or person, as the case may be,
shall have notified the Issuer in writing of the claim within a
reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served
upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated
agent). However, failure to notify the Issuer of any claim shall not
relieve the Issuer from any liability which it may have to the
Distributor or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. The Issuer shall be entitled to participate at its own
expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any claims, but if the Issuer elects to
assume the defense, the defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Issuer elects
to assume the defense of any suit and retain counsel, the Distributor,
officers or directors or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor,
officers or directors or controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Issuer agrees to notify the Distributor
promptly of the commencement of any litigation or proceedings against
it or any of its officers or trustees in connection with the issuance
or sale of any of the shares.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Issuer and each of its Board members and officers
and each person, if any, who controls the Issuer within the meaning of
Section 15 of the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, damages, claim or expense and
reasonable counsel fees incurred in connection therewith) arising by
reason of any person acquiring any shares, based upon the 1933 Act or
any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, Statement of Additional Information,
shareholder reports or other information filed or made public by the
Issuer (as from time to time amended) included an untrue statement of
a material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of
the Distributor. In no case (i) is the indemnity of the Distributor
in favor of the Issuer or any person indemnified to be deemed to
protect the Issuer or any person against any liability to which the
Issuer or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Distributor to be liable
under its indemnity agreement contained in this paragraph with respect
to any claim made against the Issuer or any person indemnified unless
the Issuer or person, as the case may be, shall have notified the
Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Issuer or any such
person (or after the Issuer or such person shall have received notice
of service on any designated agent). However, failure to notify the
Distributor of any claim shall not relieve the Distributor from any
liability which it may have to the Issuer or any person against whom
the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to
the Distributor, it shall be entitled to participate, at its own
expense, in the defense or, if it so elects, to assume the defense of
any suit brought to enforce the claim, but if the Distributor elects
to assume the defense, the defense shall be conducted by counsel
chosen by it and satisfactory to the Issuer, to its officers and Board
and to any controlling person or persons, defendant or defendants in
the suit. In the event that the Distributor elects to assume the
defense of any suit and retain counsel, the Issuer or controlling
persons, defendant or defendants in the suit, shall bear the fees and
expense of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will
reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees
and expenses of any counsel retained by them. The Distributor agrees
to notify the Issuer promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of
the shares.
12. Effective Date - This agreement shall be effective upon its
execution, and unless terminated as provided, shall continue in force
until _____ and thereafter from year to year, provided continuance is
approved annually by the vote of a majority of the Board members of
the Issuer, and by the vote of those Board members of the Issuer who
are not "interested persons" of the Issuer and, if a plan under Rule
12b-1 under the Investment Company Act of 1940 is in effect, by the
vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and who are not parties to the Distribution and
Service Plan or this Agreement and have no financial interest in the
operation of the Distribution and Service Plan or in any agreements
related to the Distribution and Service Plan, cast in person at a
meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its
assignment. As used in this paragraph, the terms "assignment" and
"interested persons" shall have the respective meanings specified in
the Investment Company Act of 1940 as now in effect or as hereafter
amended. In addition to termination by failure to approve continuance
or by assignment, this Agreement may at any time be terminated by
either party upon not less than sixty days' prior written notice to
the other party.
13. Notice - Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Issuer, at 82 Devonshire Street,
Boston, Massachusetts, and if to the Distributor, at 82 Devonshire
Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Issuer
and agrees that the obligations assumed by the Issuer under this
contract shall be limited in all cases to the Issuer and its assets.
The Distributor shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Issuer. Nor shall the
Distributor seek satisfaction of any such obligation from the Trustees
or any individual Trustee of the Issuer. The Distributor understands
that the rights and obligations of each series of shares of the Issuer
under the Issuer's Declaration of Trust or other organizational
document are separate and distinct from those of any and all other
series.
15. This agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provisions thereof.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its
name and behalf, and its seal affixed, by one of its officers duly
authorized, and the Distributor has executed this instrument in its
name and behalf by one of its officers duly authorized, as of the day
and year first above written.
SIGNATURE LINES OMITTED
Exhibit 8(l)
FORM OF
CUSTODIAN AGREEMENT
Dated as of: __________
Between
Each of the Investment Companies
Listed on Appendix "A" Attached Hereto
and
UMB Bank, n.a.
TABLE OF CONTENTS
ARTICLE
Page
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping 1
2.02 Manner of Holding Securities 1
2.03 Security Purchases 2
2.04 Exchanges of Securities 2
2.05 Sales of Securities 3
2.06 Depositary Receipts 3
2.07 Exercise of Rights; Tender Offers 3
2.08 Stock Dividends, Rights, Etc. 3
2.09 Options 4
2.10 Futures Contracts 4
2.11 Borrowing 4
2.12 Interest Bearing Deposits 5
2.13 Foreign Exchange Transactions 5
2.14 Securities Loans 5
2.15 Collections 6
2.16 Dividends, Distributions and Redemptions 6
2.17 Proceeds from Shares Sold 6
2.18 Proxies, Notices, Etc. 6
2.19 Bills and Other Disbursements 7
2.20 Nondiscretionary Functions 7
2.21 Bank Accounts 7
2.22 Deposit of Fund Assets in Securities Systems 7
2.23 Other Transfers 8
2.24 Establishment of Segregated Account 9
2.25 Custodian's Books and Records . 9
2.26 Opinion of Fund's Independent Certified Public
Accountants 9
2.27 Reports of Independent Certified Public Accountants 10
2.28 Overdraft Facility 10
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 10
3.01 Proper Instructions and Special Instructions 10
3.02 Authorized Persons 11
3.03 Persons Having Access to Assets of the Portfolios 11
3.04 Actions of the Custodian Based on Proper Instructions
and Special Instructions 11
IV. SUBCUSTODIANS 11
4.01 Domestic Subcustodians 12
4.02 Foreign Subcustodians and Interim Subcustodians 12
4.03 Special Subcustodians 13
4.04 Termination of a Subcustodian 13
4.05 Certification Regarding Foreign Subcustodians 13
V. STANDARD OF CARE; INDEMNIFICATION 14
5.01 Standard of Care 14
5.02 Liability of Custodian for Actions of Other Persons 15
5.03 Indemnification 15
5.04 Investment Limitations 16
5.05 Fund's Right to Proceed 16
VI. COMPENSATION 17
VII. TERMINATION 17
7.01 Termination of Agreement as to One or More Funds 17
7.02 Termination as to One or More Portfolios 18
VIII.DEFINED TERMS 18
IX. MISCELLANEOUS 19
9.01 Execution of Documents, Etc 19
9.02 Representative Capacity; Nonrecourse Obligations 19
9.03 Several Obligations of the Funds and the Portfolios 19
9.04 Representations and Warranties 19
9.05 Entire Agreement 20
9.06 Waivers and Amendments 20
9.07 Interpretation 20
9.08 Captions 20
9.09 Governing Law 20
9.10 Notices 21
IX. MISCELLANEOUS 21
9.11 Assignment 21
9.12 Counterparts 21
9.13 Confidentiality; Survival of Obligations 21
APPENDICES
Appendix "A" - List of Funds and Portfolios
Appendix "B" - List of Additional Custodians,
Special Subcustodians and Foreign Subcustodians
Appendix "C" - Procedures Relating to
Custodian's Security Interest
Exhibit 8(l)
FORM OF
CUSTODIAN AGREEMENT
AGREEMENT made as of the ___ day of _________ between each of the
Investment Companies Listed on Appendix "A" hereto, as the same may be
amended from time to time (each a "Fund" and collectively the "Funds")
and UMB Bank, n.a. (the "Custodian").
W I T N E S S E T H
WHEREAS, each Fund is or may be organized with one or more series of
shares, each of which shall represent an interest in a separate
portfolio of cash, securities and other assets (all such existing and
additional series now or hereafter listed on Appendix "A" being
hereinafter referred to individually, as a "Portfolio," and
collectively, as the "Portfolios"); and
WHEREAS, each Fund desires to appoint the Custodian as custodian on
behalf of each of its Portfolios in accordance with the provisions of
the Investment Company Act of 1940, as amended (the "1940 Act"), and
the rules and regulations thereunder, under the terms and conditions
set forth in this Agreement, and the Custodian has agreed so to act as
custodian.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of each of its Portfolios, each Fund hereby employs and
appoints the Custodian as a custodian, subject to the terms and
provisions of this Agreement. Each Fund shall deliver to the
Custodian, or shall cause to be delivered to the Custodian, cash,
securities and other assets owned by each of its Portfolios from time
to time during the term of this Agreement and shall specify to which
of its Portfolios such cash, securities and other assets are to be
specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and
duties set forth in this Article II. Pursuant to and in accordance
with Article IV hereof, the Custodian may appoint one or more
Subcustodians (as hereinafter defined) to exercise the powers and
perform the duties of the Custodian set forth in this Article II and
references to the Custodian in this Article II shall include any
Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all
cash, securities and other assets of each Fund's Portfolios delivered
to the Custodian and, on behalf of such Portfolios, the Custodian
shall, from time to time, accept delivery of cash, securities and
other assets for safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of each Fund's
Portfolios either: (i) by physical possession of the share
certificates or other instruments representing such securities in
registered or bearer form; or (ii) in book-entry form by a Securities
System (as hereinafter defined) in accordance with the provisions of
Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of
each Portfolio in the name of the Custodian, the Portfolio or a
nominee of either of them, unless specifically directed by Proper
Instructions to hold such registered securities in so-called street
name; provided that, in any event, all such securities and other
assets shall be held in an account of the Custodian containing only
assets of a Portfolio, or only assets held by the Custodian as a
fiduciary or custodian for customers; and provided further, that the
records of the Custodian shall indicate at all times the Portfolio or
other customer for which such securities and other assets are held in
such account and the respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper
Instructions (as hereinafter defined), the Custodian shall pay for and
receive securities purchased for the account of a Portfolio, provided
that payment shall be made by the Custodian only upon receipt of the
securities: (a) by the Custodian; (b) by a clearing corporation of a
national securities exchange of which the Custodian is a member; or
(c) by a Securities System. Notwithstanding the foregoing, upon
receipt of Proper Instructions: (i) in the case of a repurchase
agreement, the Custodian may release funds to a Securities System
prior to the receipt of advice from the Securities System that the
securities underlying such repurchase agreement have been transferred
by book-entry into the Account (as hereinafter defined) maintained
with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the
Securities System may make payment of such funds to the other party to
the repurchase agreement only upon transfer by book-entry of the
securities underlying the repurchase agreement into the Account; (ii)
in the case of time deposits, call account deposits, currency
deposits, and other deposits, foreign exchange transactions, futures
contracts or options, pursuant to Sections 2.09, 2.10, 2.12 and 2.13
hereof, the Custodian may make payment therefor before receipt of an
advice or confirmation evidencing said deposit or entry into such
transaction; (iii) in the case of the purchase of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make payment therefor and receive delivery of such
securities in accordance with local custom and practice generally
accepted by Institutional Clients (as hereinafter defined) in the
country in which the settlement occurs, but in all events subject to
the standard of care set forth in Article V hereof; and (iv) in the
case of the purchase of securities in which, in accordance with
standard industry custom and practice generally accepted by
Institutional Clients with respect to such securities, the receipt of
such securities and the payment therefor take place in different
countries, the Custodian may receive delivery of such securities and
make payment therefor in accordance with standard industry custom and
practice for such securities generally accepted by Institutional
Clients, but in all events subject to the standard of care set forth
in Article V hereof. For purposes of this Agreement, an
"Institutional Client" shall mean a major commercial bank,
corporation, insurance company, or substantially similar institution,
which, as a substantial part of its business operations, purchases or
sells securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for
the account of a Portfolio for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par
value, conversion or other event relating to the securities or the
issuer of such securities, and shall deposit any such securities in
accordance with the terms of any reorganization or protective plan.
The Custodian shall, without receiving Proper Instructions: surrender
securities in temporary form for definitive securities; surrender
securities for transfer into the name of the Custodian, a Portfolio or
a nominee of either of them, as permitted by Section 2.02(b); and
surrender securities for a different number of certificates or
instruments representing the same number of shares or same principal
amount of indebtedness, provided that the securities to be issued will
be delivered to the Custodian or a nominee of the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper
Instructions, the Custodian shall make delivery of securities which
have been sold for the account of a Portfolio, but only against
payment therefor in the form of: (a) cash, certified check, bank
cashier's check, bank credit, or bank wire transfer; (b) credit to the
account of the Custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c) credit
to the Account of the Custodian with a Securities System, in
accordance with the provisions of Section 2.22 hereof.
Notwithstanding the foregoing: (i) in the case of the sale of
securities, the settlement of which occurs outside of the United
States of America, such securities shall be delivered and paid for in
accordance with local custom and practice generally accepted by
Institutional Clients in the country in which the settlement occurs,
but in all events subject to the standard of care set forth in Article
V hereof; (ii) in the case of the sale of securities in which, in
accordance with standard industry custom and practice generally
accepted by Institutional Clients with respect to such securities, the
delivery of such securities and receipt of payment therefor take place
in different countries, the Custodian may deliver such securities and
receive payment therefor in accordance with standard industry custom
and practice for such securities generally accepted by Institutional
Clients, but in all events subject to the standard of care set forth
in Article V hereof; and (iii) in the case of securities held in
physical form, such securities shall be delivered and paid for in
accordance with "street delivery custom" to a broker or its clearing
agent, against delivery to the Custodian of a receipt for such
securities, provided that the Custodian shall have taken reasonable
steps to ensure prompt collection of the payment for, or the return
of, such securities by the broker or its clearing agent, and provided
further that the Custodian shall not be responsible for the selection
of or the failure or inability to perform of such broker or its
clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper
Instructions, the Custodian shall surrender securities to the
depositary used for such securities by an issuer of American
Depositary Receipts or International Depositary Receipts (hereinafter
referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such securities and written evidence
satisfactory to the Custodian that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such securities
in the name of the Custodian or a nominee of the Custodian, for
delivery to the Custodian at such place as the Custodian may from time
to time designate. Upon receipt of Proper Instructions, the Custodian
shall surrender ADRs to the issuer thereof, against a written receipt
therefor adequately describing the ADRs surrendered and written
evidence satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to
deliver the securities underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of
Proper Instructions, the Custodian shall: (a) deliver warrants, puts,
calls, rights or similar securities to the issuer or trustee thereof,
or to the agent of such issuer or trustee, for the purpose of exercise
or sale, provided that the new securities, cash or other assets, if
any, acquired as a result of such actions are to be delivered to the
Custodian; and (b) deposit securities upon invitations for tenders
thereof, provided that the consideration for such securities is to be
paid or delivered to the Custodian, or the tendered securities are to
be returned to the Custodian. Notwithstanding any provision of this
Agreement to the contrary, the Custodian shall take all necessary
action, unless otherwise directed to the contrary in Proper
Instructions, to comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall promptly notify each applicable Fund of such
action in writing by facsimile transmission or in such other manner as
such Fund and the Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall
receive and collect all stock dividends, rights and other items of
like nature and, upon receipt of Proper Instructions, take action with
respect to the same as directed in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian,
any registered broker-dealer and, if necessary, a Fund on behalf of
any applicable Portfolio relating to compliance with the rules of the
Options Clearing Corporation or of any registered national securities
exchange or similar organization(s), the Custodian shall: (a) receive
and retain confirmations or other documents, if any, evidencing the
purchase or writing of an option on a security or securities index by
the applicable Portfolio; (b) deposit and maintain in a segregated
account, securities (either physically or by book-entry in a
Securities System), cash or other assets; and (c) pay, release and/or
transfer such securities, cash or other assets in accordance with
notices or other communications evidencing the expiration, termination
or exercise of such options furnished by the Options Clearing
Corporation, the securities or options exchange on which such options
are traded, or such other organization as may be responsible for
handling such option transactions. Each Fund, on behalf of its
applicable Portfolios, and the broker-dealer shall be responsible for
the sufficiency of assets held in any segregated account established
in compliance with applicable margin maintenance requirements and the
performance of other terms of any option contract.
Section 2.10. Futures Contracts. Upon receipt of Proper
Instructions, or pursuant to the provisions of any futures margin
procedural agreement among a Fund, on behalf of any applicable
Portfolio, the Custodian and any futures commission merchant (a
"Procedural Agreement"), the Custodian shall: (a) receive and retain
confirmations, if any, evidencing the purchase or sale of a futures
contract or an option on a futures contract by the applicable
Portfolio; (b) deposit and maintain in a segregated account, cash,
securities and other assets designated as initial, maintenance or
variation "margin" deposits intended to secure the applicable
Portfolio's performance of its obligations under any futures contracts
purchased or sold or any options on futures contracts written by the
Portfolio, in accordance with the provisions of any Procedural
Agreement designed to comply with the rules of the Commodity Futures
Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release assets from and/or
transfer assets into such margin accounts only in accordance with any
such Procedural Agreements. Each Fund, on behalf of its applicable
Portfolios, and such futures commission merchant shall be responsible
for the sufficiency of assets held in the segregated account in
compliance with applicable margin maintenance requirements and the
performance of any futures contract or option on a futures contract in
accordance with its terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of a Portfolio to lenders or their
agents, or otherwise establish a segregated account as agreed to by
the applicable Fund on behalf of such Portfolio and the Custodian, as
collateral for borrowings effected by such Portfolio, provided that
such borrowed money is payable by the lender (a) to or upon the
Custodian's order, as Custodian for such Portfolio, and (b)
concurrently with delivery of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to
purchase interest bearing fixed term and call deposits (hereinafter
referred to collectively, as "Interest Bearing Deposits") for the
account of a Portfolio, the Custodian shall purchase such Interest
Bearing Deposits in the name of the Portfolio with such banks or trust
companies (including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian) (hereinafter referred to as "Banking
Institutions") and in such amounts as the applicable Fund may direct
pursuant to Proper Instructions. Such Interest Bearing Deposits may
be denominated in U.S. Dollars or other currencies, as the applicable
Fund on behalf of its Portfolio may determine and direct pursuant to
Proper Instructions. The Custodian shall include in its records with
respect to the assets of each Portfolio appropriate notation as to the
amount and currency of each such Interest Bearing Bank Deposit, the
accepting Banking Institution and all other appropriate details, and
shall retain such forms of advice or receipt evidencing such account,
if any, as may be forwarded to the Custodian by the Banking
Institution. The responsibilities of the Custodian to each Fund for
Interest Bearing Deposits accepted on the Custodian's books in the
United States on behalf of the Fund's Portfolios shall be that of a
U.S. bank for a similar deposit. With respect to Interest Bearing
Deposits other than those accepted on the Custodian's books, (a) the
Custodian shall be responsible for the collection of income as set
forth in Section 2.15 and the transmission of cash and instructions to
and from such accounts; and (b) the Custodian shall have no duty with
respect to the selection of the Banking Institution or, so long as the
Custodian acts in accordance with Proper Instructions, for the failure
of such Banking Institution to pay upon demand. Upon receipt of
Proper Instructions, the Custodian shall take such reasonable actions
as the applicable Fund deems necessary or appropriate to cause each
such Interest Bearing Deposit Account to be insured to the maximum
extent possible by all applicable deposit insurers including, without
limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other Than as Principal. Upon
receipt of Proper Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery on behalf of and for the account of a
Portfolio with such currency brokers or Banking Institutions as the
applicable Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall be responsible for the transmission
of cash and instructions to and from the currency broker or Banking
Institution with which the contract or option is made, the safekeeping
of all certificates and other documents and agreements evidencing or
relating to such foreign exchange transactions and the maintenance of
proper records as set forth in Section 2.25. The Custodian shall have
no duty with respect to the selection of the currency brokers or
Banking Institutions with which a Fund deals on behalf of its
Portfolios or, so long as the Custodian acts in accordance with Proper
Instructions, for the failure of such brokers or Banking Institutions
to comply with the terms of any contract or option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall
not be obligated to enter into foreign exchange transactions as
principal. However, if the Custodian has made available to a Fund its
services as a principal in foreign exchange transactions, upon receipt
of Proper Instructions, the Custodian shall enter into foreign
exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery on behalf of and for the account of a
Portfolio of such Fund with the Custodian as principal. The Custodian
shall be responsible for the selection of the currency brokers or
Banking Institutions and the failure of such currency brokers or
Banking Institutions to comply with the terms of any contract or
option.
(c) Payments. Notwithstanding anything to the contrary contained
herein, upon receipt of Proper Instructions the Custodian may, in
connection with a foreign exchange contract, make free outgoing
payments of cash in the form of U.S. Dollars or foreign currency prior
to receipt of confirmation of such foreign exchange contract or
confirmation that the countervalue currency completing such contract
has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper
Instructions, the Custodian shall, in connection with loans of
securities by a Portfolio, deliver securities of such Portfolio to the
borrower thereof prior to receipt of the collateral, if any, for such
borrowing; provided that, in cases of loans of securities secured by
cash collateral, the Custodian's instructions to the Securities System
shall require that the Securities System deliver the securities of the
Portfolio to the borrower thereof only upon receipt of the collateral
for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to each Fund
with respect to portfolio securities and other assets of each of such
Fund's Portfolios; (b) promptly credit to the account of each
applicable Portfolio all income and other payments relating to
portfolio securities and other assets held by the Custodian hereunder
upon Custodian's receipt of such income or payments or as otherwise
agreed in writing by the Custodian and the applicable Fund; (c)
promptly endorse and deliver any instruments required to effect such
collections; (d) promptly execute ownership and other certificates and
affidavits for all federal, state and foreign tax purposes in
connection with receipt of income, capital gains or other payments
with respect to portfolio securities and other assets of each
applicable Portfolio, or in connection with the purchase, sale or
transfer of such securities or other assets; and (e) promptly file any
certificates or other affidavits for the refund or reclaim of foreign
taxes paid, and promptly notify each applicable Fund of any changes to
law, interpretative rulings or procedures regarding such reclaims, and
otherwise use all available measures customarily used to minimize the
imposition of foreign taxes at source, and promptly inform each
applicable Fund of alternative means of minimizing such taxes of which
the Custodian shall become aware (or with the exercise of reasonable
care should have become aware); provided, however, that with respect
to portfolio securities registered in so-called street name, the
Custodian shall use its best efforts to collect amounts due and
payable to each Fund with respect to its Portfolios. The Custodian
shall promptly notify each applicable Fund in writing by facsimile
transmission or in such other manner as each such Fund and the
Custodian may agree in writing if any amount payable with respect to
portfolio securities or other assets of the Portfolios of such Fund(s)
is not received by the Custodian when due. The Custodian shall not be
responsible for the collection of amounts due and payable with respect
to portfolio securities or other assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. The
Custodian shall promptly release funds or securities: (a) upon
receipt of Proper Instructions, to one or more Distribution Accounts
designated by the applicable Fund or Funds in such Proper
Instructions; or (b) upon receipt of Special Instructions, as
otherwise directed by the applicable Fund or Funds, for the purpose of
the payment of dividends or other distributions to shareholders of
each applicable Portfolio, and payment to shareholders who have
requested repurchase or redemption of their shares of the Portfolio(s)
(collectively, the "Shares"). For purposes of this Agreement, a
"Distribution Account" shall mean an account established at a Banking
Institution designated by the applicable Fund on behalf of one or more
of its Portfolios in Special Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall
receive funds representing cash payments received for Shares issued or
sold from time to time by the Funds, and shall promptly credit such
funds to the account(s) of the applicable Portfolio(s). The Custodian
shall promptly notify each applicable Fund of Custodian's receipt of
cash in payment for Shares issued by such Fund by facsimile
transmission or in such other manner as the Fund and Custodian may
agree in writing. Upon receipt of Proper Instructions, the Custodian
shall: (a) deliver all federal funds received by the Custodian in
payment for Shares in payment for such investments as may be set forth
in such Proper Instructions and at a time agreed upon between the
Custodian and the applicable Fund; and (b) make federal funds
available to the applicable Fund as of specified times agreed upon
from time to time by the applicable Fund and the Custodian, in the
amount of checks received in payment for Shares which are deposited to
the accounts of each applicable Portfolio.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to
each applicable Fund, in the most expeditious manner practicable, all
forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to securities owned by one or more
of the applicable Fund's Portfolios that are received by the
Custodian, any Subcustodian, or any nominee of either of them, and,
upon receipt of Proper Instructions, the Custodian shall execute and
deliver, or cause such Subcustodian or nominee to execute and deliver,
such proxies or other authorizations as may be required. Except as
directed pursuant to Proper Instructions, neither the Custodian nor
any Subcustodian or nominee shall vote upon any such securities, or
execute any proxy to vote thereon, or give any consent or take any
other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of each Portfolio.
Section 2.20. Nondiscretionary Functions. The Custodian shall
attend to all nondiscretionary details in connection with the sale,
exchange, substitution, purchase, transfer or other dealings with
securities or other assets of each Portfolio held by the Custodian,
except as otherwise directed from time to time pursuant to Proper
Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian
shall open and operate a bank account or accounts (hereinafter
referred to collectively, as "Bank Accounts") on the books of the
Custodian or any Subcustodian provided that such account(s) shall be
in the name of the Custodian or a nominee of the Custodian, for the
account of a Portfolio, and shall be subject only to the draft or
order of the Custodian; provided however, that such Bank Accounts in
countries other than the United States may be held in an account of
the Custodian containing only assets held by the Custodian as a
fiduciary or custodian for customers, and provided further, that the
records of the Custodian shall indicate at all times the Portfolio or
other customer for which such securities and other assets are held in
such account and the respective interests therein. Such Bank Accounts
may be denominated in either U.S. Dollars or other currencies. The
responsibilities of the Custodian to each applicable Fund for deposits
accepted on the Custodian's books in the United States shall be that
of a U.S. bank for a similar deposit. The responsibilities of the
Custodian to each applicable Fund for deposits accepted on any
Subcustodian's books shall be governed by the provisions of Section
5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open
and operate Bank Accounts on behalf of a Portfolio, in the name of the
Custodian or a nominee of the Custodian, at a Banking Institution
other than the Custodian or any Subcustodian, provided that such
account(s) shall be in the name of the Custodian or a nominee of the
Custodian, for the account of a Portfolio, and shall be subject only
to the draft or order of the Custodian; provided however, that such
Bank Accounts may be held in an account of the Custodian containing
only assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian
shall indicate at all times the Portfolio or other customer for which
such securities and other assets are held in such account and the
respective interests therein. Such Bank Accounts may be denominated
in either U.S. Dollars or other currencies. Subject to the provisions
of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such
Banking Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the
Custodian shall take such reasonable actions as the applicable Fund
deems necessary or appropriate to cause each deposit account
established by the Custodian pursuant to this Section 2.21 to be
insured to the maximum extent possible by all applicable deposit
insurers including, without limitation, the Federal Deposit Insurance
Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by a
Portfolio in: (a) The Depository Trust Company; (b) the Participants
Trust Company; (c) any book-entry system as provided in (i) Subpart O
of Treasury Circular No. 300, 31 CFR 306.115, (ii) Subpart B of
Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or (iii)
the book-entry regulations of federal agencies substantially in the
form of 31 CFR 306.115; or (d) any other domestic clearing agency
registered with the Securities and Exchange Commission ("SEC") under
Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the Securities and Exchange Commission to
serve in the capacity of depository or clearing agent for the
securities or other assets of investment companies) which acts as a
securities depository and the use of which each applicable Fund has
previously approved by Special Instructions (as hereinafter defined)
(each of the foregoing being referred to in this Agreement as a
"Securities System"). Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held
hereunder in a Securities System, provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which Account shall not contain any assets of the
Custodian other than assets held as a fiduciary, custodian, or
otherwise for customers and shall be so designated on the books and
records of the Securities System.
(B) The Securities System shall be obligated to comply with the
Custodian's directions with respect to the securities held in such
Account and shall not be entitled to a lien against the assets in such
Account for extensions of credit to the Custodian other than for
payment of the purchase price of such assets.
(C) Each Fund hereby designates the Custodian as the party in whose
name any securities deposited by the Custodian in the Account are to
be registered.
(D) The books and records of the Custodian shall at all times
identify those securities belonging to each Portfolio which are
maintained in a Securities System.
(E) The Custodian shall pay for securities purchased for the account
of a Portfolio only upon (w) receipt of advice from the Securities
System that such securities have been transferred to the Account of
the Custodian, and (x) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of such
Portfolio. The Custodian shall transfer securities sold for the
account of a Portfolio only upon (y) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account of the Custodian, and (z) the making of an
entry on the records of the Custodian to reflect such transfer and
payment for the account of such Portfolio. Copies of all advices from
the Securities System relating to transfers of securities for the
account of a Portfolio shall identify such Portfolio and shall be
maintained for such Portfolio by the Custodian. The Custodian shall
deliver to each applicable Fund on the next succeeding business day
daily transaction reports which shall include each day's transactions
in the Securities System for the account of each applicable Portfolio.
Such transaction reports shall be delivered to each applicable Fund or
any agent designated by such Fund pursuant to Proper Instructions, by
computer or in such other manner as such Fund and the Custodian may
agree in writing.
(F) The Custodian shall, if requested by a Fund pursuant to Proper
Instructions, provide such Fund with all reports obtained by the
Custodian or any Subcustodian with respect to a Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System.
(G) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System (except the federal
book-entry system) on behalf of any Portfolio as promptly as
practicable and shall take all actions reasonably practicable to
safeguard the securities of any Portfolio maintained with such
Securities System.
Section 2.23. Other Transfers.
(a) Upon receipt of Proper Instructions, the Custodian shall transfer
to or receive from a third party that has been appointed to serve as
an additional custodian of one or more Portfolios (an "Additional
Custodian") securities, cash and other assets of such Portfolio(s) in
accordance with such Proper Instructions. Each Additional Custodian
shall be identified as such on Appendix B, as the same may be amended
from time to time in accordance with the provisions of Section
9.06(c).
(b) Upon receipt of Special Instructions, the Custodian shall make
such other dispositions of securities, funds or other property of a
Portfolio in a manner or for purposes other than as expressly set
forth in this Agreement, provided that the Special Instructions
relating to such disposition shall include a statement of the purpose
for which the delivery is to be made, the amount of funds and/or
securities to be delivered, and the name of the person or persons to
whom delivery is to be made, and shall otherwise comply with the
provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its
books a segregated account or accounts for and on behalf of a
Portfolio, into which account or accounts may be transferred cash
and/or securities or other assets of such Portfolio, including
securities maintained by the Custodian in a Securities System pursuant
to Section 2.22 hereof, said account or accounts to be maintained:
(a) for the purposes set forth in Sections 2.09, 2.10 and 2.11 hereof;
(b) for the purposes of compliance by the Portfolio with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the SEC relating to the
maintenance of segregated accounts by registered investment companies;
or (c) for such other purposes as set forth, from time to time, in
Special Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall
provide any assistance reasonably requested by a Fund in the
preparation of reports to such Fund's shareholders and others, audits
of accounts, and other ministerial matters of like nature. The
Custodian shall maintain complete and accurate records with respect to
securities and other assets held for the accounts of each Portfolio as
required by the rules and regulations of the SEC applicable to
investment companies registered under the 1940 Act, including: (a)
journals or other records of original entry containing a detailed and
itemized daily record of all receipts and deliveries of securities
(including certificate and transaction identification numbers, if
any), and all receipts and disbursements of cash; (b) ledgers or other
records reflecting (i) securities in transfer, (ii) securities in
physical possession, (iii) securities borrowed, loaned or
collateralizing obligations of each Portfolio, (iv) monies borrowed
and monies loaned (together with a record of the collateral therefor
and substitutions of such collateral), (v) dividends and interest
received, (vi) the amount of tax withheld by any person in respect of
any collection made by the Custodian or any Subcustodian, and (vii)
the amount of reclaims or refunds for foreign taxes paid; and (c)
cancelled checks and bank records related thereto. The Custodian
shall keep such other books and records of each Fund as such Fund
shall reasonably request. All such books and records maintained by
the Custodian shall be maintained in a form acceptable to the
applicable Fund and in compliance with the rules and regulations of
the SEC, including, but not limited to, books and records required to
be maintained by Section 31(a) of the 1940 Act and the rules and
regulations from time to time adopted thereunder. All books and
records maintained by the Custodian pursuant to this Agreement shall
at all times be the property of each applicable Fund and shall be
available during normal business hours for inspection and use by such
Fund and its agents, including, without limitation, its independent
certified public accountants. Notwithstanding the preceding sentence,
no Fund shall take any actions or cause the Custodian to take any
actions which would cause, either directly or indirectly, the
Custodian to violate any applicable laws, regulations or orders.
Section 2.26. Opinion of Fund's Independent Certified Public
Accountants. The Custodian shall take all reasonable action as a Fund
may request to obtain from year to year favorable opinions from such
Fund's independent certified public accountants with respect to the
Custodian's activities hereunder in connection with the preparation of
the Fund's Form N-1A and the Fund's Form N-SAR or other periodic
reports to the SEC and with respect to any other requirements of the
SEC.
Section 2.27. Reports by Independent Certified Public Accountants.
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the
Custodian under this Agreement, including, without limitation, the
Custodian's accounting system, internal accounting control and
procedures for safeguarding cash, securities and other assets,
including cash, securities and other assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report
shall be of sufficient scope and in sufficient detail as may
reasonably be required by any Fund and as may reasonably be obtained
by the Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian
is directed by Proper Instructions to make any payment or transfer of
funds on behalf of a Portfolio for which there would be, at the close
of business on the date of such payment or transfer, insufficient
funds held by the Custodian on behalf of such Portfolio, the Custodian
may, in its discretion, provide an overdraft (an "Overdraft") to the
applicable Fund on behalf of such Portfolio, in an amount sufficient
to allow the completion of such payment. Any Overdraft provided
hereunder: (a) shall be payable on the next Business Day, unless
otherwise agreed by the applicable Fund and the Custodian; and (b)
shall accrue interest from the date of the Overdraft to the date of
payment in full by the applicable Fund on behalf of the applicable
Portfolio at a rate agreed upon in writing, from time to time, by the
Custodian and the applicable Fund. The Custodian and each Fund
acknowledge that the purpose of such Overdrafts is to temporarily
finance the purchase or sale of securities for prompt delivery in
accordance with the terms hereof, or to meet emergency expenses not
reasonably foreseeable by such Fund. The Custodian shall promptly
notify each applicable Fund in writing (an "Overdraft Notice") of any
Overdraft by facsimile transmission or in such other manner as such
Fund and the Custodian may agree in writing. At the request of the
Custodian, each applicable Fund, on behalf of one or more of its
Portfolios, shall pledge, assign and grant to the Custodian a security
interest in certain specified securities of the applicable Portfolio,
as security for Overdrafts provided to such Portfolio, under the terms
and conditions set forth in Appendix "C" attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper
Instructions" shall mean: (i) a tested telex, a written (including,
without limitation, facsimile transmission) request, direction,
instruction or certification signed or initialed by or on behalf of
the applicable Fund by one or more Authorized Persons (as hereinafter
defined); (ii) a telephonic or other oral communication by one or more
Authorized Persons; or (iii) a communication effected directly between
an electro-mechanical or electronic device or system (including,
without limitation, computers) by or on behalf of the applicable Fund
by one or more Authorized Persons; provided, however, that
communications of the types described in clauses (ii) and (iii) above
purporting to be given by an Authorized Person shall be considered
Proper Instructions only if the Custodian reasonably believes such
communications to have been given by an Authorized Person with respect
to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the applicable Fund by tested
telex or in writing in the manner set forth in clause (i) above, but
the lack of such confirmation shall in no way affect any action taken
by the Custodian in reliance upon such oral instructions prior to the
Custodian's receipt of such confirmation. Each Fund and the Custodian
are hereby authorized to record any and all telephonic or other oral
instructions communicated to the Custodian. Proper Instructions may
relate to specific transactions or to types or classes of
transactions, and may be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special
Instructions" shall mean Proper Instructions countersigned or
confirmed in writing by the Treasurer or any Assistant Treasurer of
the applicable Fund or any other person designated by the Treasurer of
such Fund in writing, which countersignature or confirmation shall be
(i) included on the same instrument containing the Proper Instructions
or on a separate instrument relating thereto, and (ii) delivered by
hand, by facsimile transmission, or in such other manner as the
applicable Fund and the Custodian agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, telecopy or telex number
agreed upon from time to time by the Custodian and the applicable
Fund.
Section 3.02. Authorized Persons. Concurrently with the execution
of this Agreement and from time to time thereafter, as appropriate,
each Fund shall deliver to the Custodian, duly certified as
appropriate by a Treasurer or Assistant Treasurer of such Fund, a
certificate setting forth: (a) the names, titles, signatures and
scope of authority of all persons authorized to give Proper
Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of such Fund (collectively, the
"Authorized Persons" and individually, an "Authorized Person"); and
(b) the names, titles and signatures of those persons authorized to
issue Special Instructions. Such certificate may be accepted and
relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect
until delivery to the Custodian of a similar certificate to the
contrary. Upon delivery of a certificate which deletes the name(s) of
a person previously authorized by a Fund to give Proper Instructions
or to issue Special Instructions, such persons shall no longer be
considered an Authorized Person or authorized to issue Special
Instructions for that Fund.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement,
no Authorized Person, Trustee, officer, employee or agent of any Fund
shall have physical access to the assets of any Portfolio of that Fund
held by the Custodian nor shall the Custodian deliver any assets of a
Portfolio for delivery to an account of such person; provided,
however, that nothing in this Section 3.03 shall prohibit (a) any
Authorized Person from giving Proper Instructions, or any person
authorized to issue Special Instructions from issuing Special
Instructions, so long as such action does not result in delivery of or
access to assets of any Portfolio prohibited by this Section 3.03; or
(b) each Fund's independent certified public accountants from
examining or reviewing the assets of the Portfolios of the Fund held
by the Custodian. Each Fund shall deliver to the Custodian a written
certificate identifying such Authorized Persons, Trustees, officers,
employees and agents of such Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian
acts in accordance with (a) Proper Instructions or Special
Instructions, as the case may be, and (b) the terms of this Agreement,
the Custodian shall not be responsible for the title, validity or
genuineness of any property, or evidence of title thereof, received by
it or delivered by it pursuant to this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic
Subcustodians, Foreign Subcustodians, Interim Subcustodians and
Special Subcustodians to act on behalf of a Portfolio. (For purposes
of this Agreement, all duly appointed Domestic Subcustodians, Foreign
Subcustodians, Interim Subcustodians, and Special Subcustodians are
hereinafter referred to collectively, as "Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any
time and from time to time, appoint any bank as defined in Section
2(a)(5) of the 1940 Act meeting the requirements of a custodian under
Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act on behalf of one or more Portfolios as a
subcustodian for purposes of holding cash, securities and other assets
of such Portfolios and performing other functions of the Custodian
within the United States (a "Domestic Subcustodian"); provided, that,
the Custodian shall notify each applicable Fund in writing of the
identity and qualifications of any proposed Domestic Subcustodian at
least thirty (30) days prior to appointment of such Domestic
Subcustodian, and such Fund may, in its sole discretion, by written
notice to the Custodian executed by an Authorized Person disapprove of
the appointment of such Domestic Subcustodian. If, following notice
by the Custodian to each applicable Fund regarding appointment of a
Domestic Subcustodian and the expiration of thirty (30) days after the
date of such notice, such Fund shall have failed to notify the
Custodian of its disapproval thereof, the Custodian may, in its
discretion, appoint such proposed Domestic Subcustodian as its
subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from
time to time, appoint: (i) any bank, trust company or other entity
meeting the requirements of an "eligible foreign custodian" under
Section 17(f) of the 1940 Act and the rules and regulations thereunder
or by order of the Securities and Exchange Commission exempted
therefrom, or (ii) any bank as defined in Section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder to act on behalf of
one or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other
functions of the Custodian in countries other than the United States
of America (a "Foreign Subcustodian"); provided, that, prior to the
appointment of any Foreign Subcustodian, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees
or other governing body or entity of each applicable Fund on behalf of
its applicable Portfolio(s) (which approval may be withheld in the
sole discretion of such Board of Trustees or other governing body or
entity) with respect to (i) the identity and qualifications of any
proposed Foreign Subcustodian, (ii) the country or countries in which,
and the securities depositories or clearing agencies, if any, through
which, any proposed Foreign Subcustodian is authorized to hold
securities and other assets of the applicable Portfolio(s), and (iii)
the form and terms of the subcustodian agreement to be entered into
between such proposed Foreign Subcustodian and the Custodian. Each
such duly approved Foreign Subcustodian and the countries where and
the securities depositories and clearing agencies through which they
may hold securities and other assets of the applicable Portfolios
shall be listed on Appendix "B" attached hereto, as it may be amended,
from time to time, in accordance with the provisions of Section
9.05(c) hereof. Each Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment by one of
its Portfolios which is to be held in a country in which no Foreign
Subcustodian is authorized to act, in order that there shall be
sufficient time for the Custodian to effect the appropriate
arrangements with a proposed foreign subcustodian, including obtaining
approval as provided in this Section 4.02(a). The Custodian shall not
amend any subcustodian agreement entered into with a Foreign
Subcustodian, or agree to change or permit any changes thereunder, or
waive any rights under such agreement, which materially affect a
Fund's rights or the Foreign Subcustodian's obligations or duties to
a Fund under such agreement, except upon prior approval pursuant to
Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the
event that a Portfolio shall invest in a security or other asset to be
held in a country in which no Foreign Subcustodian is authorized to
act, the Custodian shall promptly notify the applicable Fund in
writing by facsimile transmission or in such other manner as such Fund
and Custodian shall agree in writing of the unavailability of an
approved Foreign Subcustodian in such country; and the Custodian
shall, upon receipt of Special Instructions, appoint any Person
designated by the applicable Fund in such Special Instructions to hold
such security or other asset. (Any Person appointed as a subcustodian
pursuant to this Section 4.02(b) is hereinafter referred to as an
"Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of one or more
Portfolios, appoint one or more banks, trust companies or other
entities designated in such Special Instructions to act as a
subcustodian for purposes of: (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities through
the use of a common custodian or subcustodian; (ii) establishing a
joint trading account for the applicable Portfolio(s) and other
registered open-end management investment companies for which Fidelity
Management & Research Company serves as investment adviser, through
which such Portfolios and such other investment companies shall
collectively participate in certain repurchase transactions; (iii)
providing depository and clearing agency services with respect to
certain variable rate demand note securities; and (iv) effecting any
other transactions designated by each applicable Fund in Special
Instructions. (Each such designated subcustodian is hereinafter
referred to as a "Special Subcustodian.") Each such duly appointed
Special Subcustodian shall be listed on Appendix "B" attached hereto,
as it may be amended from time to time in accordance with the
provisions of Section 9.05(c) hereof. In connection with the
appointment of any Special Subcustodian, the Custodian shall enter
into a subcustodian agreement with the Special Subcustodian in form
and substance approved by each applicable Fund, provided that such
agreement shall in all events comply with the provisions of the 1940
Act and the rules and regulations thereunder and the terms and
provisions of this Agreement. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or
agree to change or permit any changes thereunder, or waive any rights
under such agreement, except upon prior approval pursuant to Special
Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall
(i) cause each Domestic Subcustodian and Foreign Subcustodian to, and
(ii) use its best efforts to cause each Interim Subcustodian and
Special Subcustodian to, perform all of its obligations in accordance
with the terms and conditions of the subcustodian agreement between
the Custodian and such Subcustodian. In the event that the Custodian
is unable to cause such Subcustodian to fully perform its obligations
thereunder, the Custodian shall forthwith, upon the receipt of Special
Instructions, terminate such Subcustodian with respect to each
applicable Fund and, if necessary or desirable, appoint a replacement
Subcustodian in accordance with the provisions of Section 4.01 or
Section 4.02, as the case may be. In addition to the foregoing, the
Custodian (A) may, at any time in its discretion, upon written
notification to each applicable Fund, terminate any Domestic
Subcustodian, Foreign Subcustodian or Interim Subcustodian, and (B)
shall, upon receipt of Special Instructions, terminate any
Subcustodian with respect to each applicable Fund, in accordance with
the termination provisions under the applicable subcustodian
agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon
request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian
then acting on behalf of the Custodian for such Fund and its
Portfolios; (ii) the countries in which and the securities
depositories and clearing agents through which each such Foreign
Subcustodian is then holding cash, securities and other assets of any
Portfolio of such Fund; and (iii) such other information as may be
requested by such Fund to ensure compliance with Rule 17(f)-5 under
the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise
reasonable care and diligence in carrying out all of its duties and
obligations under this Agreement, and shall be liable to each Fund for
all loss, damage and expense suffered or incurred by such Fund or its
Portfolios resulting from the failure of the Custodian to exercise
such reasonable care and diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any
Subcustodian or Securities System, or any subcustodian, securities
depository or securities system utilized by any such Subcustodian, or
any nominee of the Custodian or any Subcustodian (individually, a
"Person") is prevented, forbidden or delayed from performing, or omits
to perform, any act or thing which this Agreement provides shall be
performed or omitted to be performed, by reason of: (i) any provision
of any present or future law or regulation or order of the United
States of America, or any state thereof, or of any foreign country, or
political subdivision thereof or of any court of competent
jurisdiction; or (ii) any act of God or war or other similar
circumstance beyond the control of the Custodian, unless, in each
case, such delay or nonperformance is caused by (A) the negligence,
misfeasance or misconduct of the applicable Person, or (B) a
malfunction or failure of equipment operated or utilized by the
applicable Person other than a malfunction or failure beyond such
Person's control and which could not reasonably be anticipated and/or
prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to any Fund or
Portfolio, (i) the Custodian shall, (ii) the Custodian shall cause any
applicable Domestic Subcustodian or Foreign Subcustodian to, and (iii)
the Custodian shall use its best efforts to cause any applicable
Interim Subcustodian or Special Subcustodian to, use all commercially
reasonable efforts and take all reasonable steps under the
circumstances to mitigate the effects of such event and to avoid
continuing harm to the Funds and the Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive
and act upon advice of counsel on all matters. The Custodian shall be
without liability for any action reasonably taken or omitted in good
faith pursuant to the advice of (i) counsel for the applicable Fund or
Funds, or (ii) at the expense of the Custodian, such other counsel as
the applicable Fund(s) and the Custodian may agree upon; provided,
however, with respect to the performance of any action or omission of
any action upon such advice, the Custodian shall be required to
conform to the standard of care set forth in Section 5.01(a).
(e) Expenses of the Funds. In addition to the liability of the
Custodian under this Article V, the Custodian shall be liable to each
applicable Fund for all reasonable costs and expenses incurred by such
Fund in connection with any claim by such Fund against the Custodian
arising from the obligations of the Custodian hereunder, including,
without limitation, all reasonable attorneys' fees and expenses
incurred by such Fund in asserting any such claim, and all expenses
incurred by such Fund in connection with any investigations, lawsuits
or proceedings relating to such claim; provided, that such Fund has
recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no
liability in respect of any loss, damage or expense suffered by a
Fund, insofar as such loss, damage or expense arises from the
performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for such Fund
by entities other than the Custodian prior to the Custodian's
appointment as custodian for such Fund.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian
shall be liable for the actions or omissions of any Domestic
Subcustodian or any Foreign Subcustodian to the same extent as if such
action or omission were performed by the Custodian itself. In the
event of any loss, damage or expense suffered or incurred by a Fund
caused by or resulting from the actions or omissions of any Domestic
Subcustodian or Foreign Subcustodian for which the Custodian would
otherwise be liable, the Custodian shall promptly reimburse such Fund
in the amount of any such loss, damage or expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section
5.01 to the contrary, the Custodian shall not be liable to a Fund for
any loss, damage or expense suffered or incurred by such Fund or any
of its Portfolios resulting from the actions or omissions of an
Interim Subcustodian unless such loss, damage or expense is caused by,
or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, in the event of any such loss, damage or
expense, the Custodian shall take all reasonable steps to enforce such
rights as it may have against such Interim Subcustodian to protect the
interests of the Funds and the Portfolios.
(c) Special Subcustodians and Additional Custodians. Notwithstanding
the provisions of Section 5.01 to the contrary and except as otherwise
provided in any subcustodian agreement to which the Custodian, a Fund
and any Special Subcustodian or Additional Custodian are parties, the
Custodian shall not be liable to a Fund for any loss, damage or
expense suffered or incurred by such Fund or any of its Portfolios
resulting from the actions or omissions of a Special Subcustodian or
Additional Subcustodian, unless such loss, damage or expense is caused
by, or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss,
damage or expense, the Custodian shall take all reasonable steps to
enforce such rights as it may have against any Special Subcustodian or
Additional Custodian to protect the interests of the Funds and the
Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section
5.01 to the contrary, the Custodian shall not be liable to a Fund for
any loss, damage or expense suffered or incurred by such Fund or any
of its Portfolios resulting from the use by the Custodian of a
Securities System, unless such loss, damage or expense is caused by,
or results from, the negligence, misfeasance or misconduct of the
Custodian; provided, however, that in the event of any such loss,
damage or expense, the Custodian shall take all reasonable steps to
enforce such rights as it may have against the Securities System to
protect the interests of the Funds and the Portfolios.
(e) Reimbursement of Expenses. Each Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian on behalf of such Fund in connection with the fulfillment of
its obligations under this Section 5.02; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting
from the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set
forth in this Agreement, each Fund severally and not jointly agrees to
indemnify and hold harmless the Custodian and its nominees from all
loss, damage and expense (including reasonable attorneys' fees)
suffered or incurred by the Custodian or its nominee caused by or
arising from actions taken by the Custodian on behalf of such Fund in
the performance of its duties and obligations under this Agreement;
provided, however, that such indemnity shall not apply to loss, damage
and expense occasioned by or resulting from the negligence,
misfeasance or misconduct of the Custodian or its nominee. In
addition, each Fund agrees severally and not jointly to indemnify any
Person against any liability incurred by reason of taxes assessed to
such Person, or other loss, damage or expenses incurred by such
Person, resulting from the fact that securities and other property of
such Fund's Portfolios are registered in the name of such Person;
provided, however, that in no event shall such indemnification be
applicable to income, franchise or similar taxes which may be imposed
or assessed against any Person.
(b) Notice of Litigation, Right to Prosecute, Etc. No Fund shall be
liable for indemnification under this Section 5.03 unless a Person
shall have promptly notified such Fund in writing of the commencement
of any litigation or proceeding brought against such Person in respect
of which indemnity may be sought under this Section 5.03. With
respect to claims in such litigation or proceedings for which
indemnity by a Fund may be sought and subject to applicable law and
the ruling of any court of competent jurisdiction, such Fund shall be
entitled to participate in any such litigation or proceeding and,
after written notice from such Fund to any Person, such Fund may
assume the defense of such litigation or proceeding with counsel of
its choice at its own expense in respect of that portion of the
litigation for which such Fund may be subject to an indemnification
obligation; provided, however, a Person shall be entitled to
participate in (but not control) at its own cost and expense, the
defense of any such litigation or proceeding if such Fund has not
acknowledged in writing its obligation to indemnify the Person with
respect to such litigation or proceeding. If such Fund is not
permitted to participate or control such litigation or proceeding
under applicable law or by a ruling of a court of competent
jurisdiction, such Person shall reasonably prosecute such litigation
or proceeding. A Person shall not consent to the entry of any
judgment or enter into any settlement in any such litigation or
proceeding without providing each applicable Fund with adequate notice
of any such settlement or judgment, and without each such Fund's prior
written consent. All Persons shall submit written evidence to each
applicable Fund with respect to any cost or expense for which they are
seeking indemnification in such form and detail as such Fund may
reasonably request.
Section 5.04. Investment Limitations. If the Custodian has
otherwise complied with the terms and conditions of this Agreement in
performing its duties generally, and more particularly in connection
with the purchase, sale or exchange of securities made by or for a
Portfolio, the Custodian shall not be liable to the applicable Fund
and such Fund agrees to indemnify the Custodian and its nominees, for
any loss, damage or expense suffered or incurred by the Custodian and
its nominees arising out of any violation of any investment or other
limitation to which such Fund is subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to
the contrary contained herein, each Fund shall have, at its election
upon reasonable notice to the Custodian, the right to enforce, to the
extent permitted by any applicable agreement and applicable law, the
Custodian's rights against any Subcustodian, Securities System, or
other Person for loss, damage or expense caused such Fund by such
Subcustodian, Securities System, or other Person, and shall be
entitled to enforce the rights of the Custodian with respect to any
claim against such Subcustodian, Securities System or other Person,
which the Custodian may have as a consequence of any such loss, damage
or expense, if and to the extent that such Fund has not been made
whole for any such loss or damage. If the Custodian makes such Fund
whole for any such loss or damage, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian,
Securities System or other Person. Upon such Fund's election to
enforce any rights of the Custodian under this Section 5.05, such Fund
shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Custodian in respect of the loss, damage
or expense incurred by such Fund; provided that, so long as such Fund
has acknowledged in writing its obligation to indemnify the Custodian
under Section 5.03 hereof with respect to such claim, such Fund shall
retain the right to settle, compromise and/or terminate any action or
proceeding in respect of the loss, damage or expense incurred by such
Fund without the Custodian's consent and provided further, that if
such Fund has not made an acknowledgement of its obligation to
indemnify, such Fund shall not settle, compromise or terminate any
such action or proceeding without the written consent of the
Custodian, which consent shall not be unreasonably withheld or
delayed. The Custodian agrees to cooperate with each Fund and take
all actions reasonably requested by such Fund in connection with such
Fund's enforcement of any rights of the Custodian. Each Fund agrees
to reimburse the Custodian for all reasonable out-of-pocket expenses
incurred by the Custodian on behalf of such Fund in connection with
the fulfillment of its obligations under this Section 5.05; provided,
however, that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian.
ARTICLE VI
COMPENSATION
On behalf of each of its Portfolios, each Fund shall compensate the
Custodian in an amount, and at such times, as may be agreed upon in
writing, from time to time, by the Custodian and such Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement as to One or More Funds.
With respect to each Fund, this Agreement shall continue in full force
and effect until the first to occur of: (a) termination by the
Custodian by an instrument in writing delivered or mailed to such
Fund, such termination to take effect not sooner than ninety (90) days
after the date of such delivery; (b) termination by such Fund by an
instrument in writing delivered or mailed to the Custodian, such
termination to take effect not sooner than thirty (30) days after the
date of such delivery; or (c) termination by such Fund by written
notice delivered to the Custodian, based upon such Fund's
determination that there is a reasonable basis to conclude that the
Custodian is insolvent or that the financial condition of the
Custodian is deteriorating in any material respect, in which case
termination shall take effect upon the Custodian's receipt of such
notice or at such later time as such Fund shall designate. In the
event of termination pursuant to this Section 7.01 by any Fund (a
"Terminating Fund"), each Terminating Fund shall make payment of all
accrued fees and unreimbursed expenses with respect to such
Terminating Fund within a reasonable time following termination and
delivery of a statement to the Terminating Fund setting forth such
fees and expenses. Each Terminating Fund shall identify in any notice
of termination a successor custodian or custodians to which the cash,
securities and other assets of its Portfolios shall, upon termination
of this Agreement with respect to such Terminating Fund, be delivered.
In the event that no written notice designating a successor custodian
shall have been delivered to the Custodian on or before the date when
termination of this Agreement as to a Terminating Fund shall become
effective, the Custodian may deliver to a bank or trust company doing
business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities
and other assets of such Terminating Fund's Portfolios held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property of the Terminating Fund's Portfolios held by
the Custodian under this Agreement. Thereafter, such bank or trust
company shall be the successor of the Custodian with respect to such
Terminating Fund under this Agreement. In the event that securities
and other assets of such Terminating Fund's Portfolios remain in the
possession of the Custodian after the date of termination hereof with
respect to such Terminating Fund owing to failure of the Terminating
Fund to appoint a successor custodian, the Custodian shall be entitled
to compensation for its services in accordance with the fee schedule
most recently in effect, for such period as the Custodian retains
possession of such securities and other assets, and the provisions of
this Agreement relating to the duties and obligations of the Custodian
and the Terminating Fund shall remain in full force and effect. In
the event of the appointment of a successor custodian, it is agreed
that the cash, securities and other property owned by a Terminating
Fund and held by the Custodian, any Subcustodian or nominee shall be
delivered to the successor custodian; and the Custodian agrees to
cooperate with such Terminating Fund in the execution of documents and
performance of other actions necessary or desirable in order to
substitute the successor custodian for the Custodian under this
Agreement.
Section 7.02. Termination as to One or More Portfolios. This
Agreement may be terminated as to one or more of a Fund's Portfolios
(but less than all of its Portfolios) by delivery of an amended
Appendix "A" deleting such Portfolios pursuant to Section 9.05(b)
hereof, in which case termination as to such deleted Portfolios shall
take effect thirty (30) days after the date of such delivery. The
execution and delivery of an amended Appendix "A" which deletes one or
more Portfolios shall constitute a termination of this Agreement only
with respect to such deleted Portfolio(s), shall be governed by the
preceding provisions of Section 7.01 as to the identification of a
successor custodian and the delivery of cash, securities and other
assets of the Portfolio(s) so deleted, and shall not affect the
obligations of the Custodian and any Fund hereunder with respect to
the other Portfolios set forth in Appendix "A," as amended from time
to time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Additional Custodian 2.23(a)
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Fund Preamble
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
Terminating Fund 7.01
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by each Fund. Upon request, each Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in
connection with the performance by the Custodian or any Subcustodian
of their respective obligations to such Fund under this Agreement or
any applicable subcustodian agreement with respect to such Fund,
provided that the exercise by the Custodian or any Subcustodian of any
such rights shall in all events be in compliance with the terms of
this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to each applicable Fund or to such
other parties as such Fund(s) may designate in such Proper
Instructions, all such documents, instruments or agreements as may be
reasonable and necessary or desirable in order to effectuate any of
the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A
COPY OF THE DECLARATION OF TRUST OR OTHER ORGANIZATIONAL DOCUMENT OF
EACH FUND IS ON FILE WITH THE SECRETARY OF THE STATE OF THE FUND'S
FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT IS NOT
EXECUTED ON BEHALF OF THE TRUSTEES OF ANY FUND AS INDIVIDUALS, AND THE
OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY OF THE
TRUSTEES, OFFICERS, SHAREHOLDERS OR PARTNERS OF ANY FUND INDIVIDUALLY,
BUT ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF EACH FUND'S
RESPECTIVE PORTFOLIOS. THE CUSTODIAN AGREES THAT NO SHAREHOLDER,
TRUSTEE, OFFICER OR PARTNER OF ANY FUND MAY BE HELD PERSONALLY LIABLE
OR RESPONSIBLE FOR ANY OBLIGATIONS OF ANY FUND ARISING OUT OF THIS
AGREEMENT.
Section 9.03. Several Obligations of the Funds and the Portfolios.
WITH RESPECT TO ANY OBLIGATIONS OF A FUND ON BEHALF OF ANY OF ITS
PORTFOLIOS ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE OBLIGATIONS ARISING UNDER SECTIONS 2.28, 5.03, 5.05
and ARTICLE VI HEREOF, THE CUSTODIAN SHALL LOOK FOR PAYMENT OR
SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND PROPERTY OF
THE PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH EACH FUND HAD
SEPARATELY CONTRACTED WITH THE CUSTODIAN BY SEPARATE WRITTEN
INSTRUMENT WITH RESPECT TO EACH OF ITS PORTFOLIOS.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of Each Fund. Each Fund hereby
severally and not jointly represents and warrants that each of the
following shall be true, correct and complete with respect to each
Fund at all times during the term of this Agreement: (i) the Fund is
duly organized under the laws of its jurisdiction of organization and
is registered as an open-end management investment company under the
1940 Act; and (ii) the execution, delivery and performance by the Fund
of this Agreement are (w) within its power, (x) have been duly
authorized by all necessary action, and (y) will not (A) contribute to
or result in a breach of or default under or conflict with any
existing law, order, regulation or ruling of any governmental or
regulatory agency or authority, or (B) violate any provision of the
Fund's corporate charter, Declaration of Trust or other organizational
document, or bylaws, or any amendment thereof or any provision of its
most recent Prospectus or Statement of Additional Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants to each Fund that each of the following
shall be true, correct and complete at all times during the term of
this Agreement: (i) the Custodian is duly organized under the laws of
its jurisdiction of organization and qualifies to act as a custodian
to open-end management investment companies under the provisions of
the 1940 Act; and (ii) the execution, delivery and performance by the
Custodian of this Agreement are (w) within its power, (x) have been
duly authorized by all necessary action, and (y) will not (A)
contribute to or result in a breach of or default under or conflict
with any existing law, order, regulation or ruling of any governmental
or regulatory agency or authority, or (B) violate any provision of the
Custodian's corporate charter, or other organizational document, or
bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the Fund, on the one hand, and
the Custodian, on the other, with respect to the subject matter hereof
and accordingly, supersedes as of the effective date of this Agreement
any custodian agreement heretofore in effect between each Fund and the
Custodian.
Section 9.06. Waivers and Amendments. No provision of this
Agreement may be waived, amended or terminated except by a statement
in writing signed by the party against which enforcement of such
waiver, amendment or termination is sought; provided, however: (a)
Appendix "A" listing the Portfolios of each Fund for which the
Custodian serves as custodian may be amended from time to time to add
one or more Portfolios for one or more Funds, by each applicable
Fund's execution and delivery to the Custodian of an amended Appendix
"A", and the execution of such amended Appendix by the Custodian, in
which case such amendment shall take effect immediately upon execution
by the Custodian; (b) Appendix "A" may be amended from time to time to
delete one or more Portfolios (but less than all of the Portfolios) of
one or more of the Funds, by each applicable Fund's execution and
delivery to the Custodian of an amended Appendix "A", in which case
such amendment shall take effect thirty (30) days after such delivery,
unless otherwise agreed by the Custodian and each applicable Fund in
writing; (c) Appendix "B" listing Foreign Subcustodians, Special
Subcustodians and Additional Custodians approved by any Fund may be
amended from time to time to add or delete one or more Foreign
Subcustodians, Special Subcustodians or Additional Custodians for a
Fund or Funds by each applicable Fund's execution and delivery to the
Custodian of an amended Appendix "B", in which case such amendment
shall take effect immediately upon execution by the Custodian; and (d)
Appendix "C" setting forth the procedures relating to the Custodian's
security interest with respect to each Fund may be amended only by an
instrument in writing executed by each applicable Fund and the
Custodian.
Section 9.07. Interpretation. In connection with the operation of
this Agreement, the Custodian and any Fund may agree in writing from
time to time on such provisions interpretative of or in addition to
the provisions of this Agreement with respect to such Fund as may in
their joint opinion be consistent with the general tenor of this
Agreement. No interpretative or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment
of this Agreement or affect any other Fund.
Section 9.08. Captions. Headings contained in this Agreement, which
are included as convenient references only, shall have no bearing upon
the interpretation of the terms of the Agreement or the obligations of
the parties hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may
arise in connection with the custodianship of foreign securities
pursuant to an agreement with a Foreign Subcustodian that is governed
by the laws of the State of New York, the provisions of this Agreement
shall be construed in accordance with and governed by the laws of the
State of New York, provided that in all other instances this Agreement
shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts, in each case without giving effect to
principles of conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or
Special Instructions, notices and other writings contemplated by this
Agreement shall be delivered by hand or by facsimile transmission
(provided that in the case of delivery by facsimile transmission,
notice shall also be mailed postage prepaid to the parties at the
following addresses:
(a) If to any Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Treasurer of the Fidelity Funds
Telephone: (617) 563-7000
Telefax: (617) 476-4195
(b) If to the Custodian:
UMB Bank, n.a.
928 Grand Avenue, 10th Floor
Kansas City, Missouri 61406
Attn: Patricia Peterson, Senior Vice President
Telephone: (816) 860-7770
Telefax: (816) 860-4869
or to such other address as a Fund or the Custodian may have
designated in writing to the other.
Section 9.11. Assignment. This Agreement shall be binding on and
shall inure to the benefit of each Fund severally and the Custodian
and their respective successors and assigns, provided that, subject to
the provisions of Section 7.01 hereof, neither the Custodian nor any
Fund may assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the other party.
Section 9.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
With respect to each Fund, this Agreement shall become effective when
one or more counterparts have been signed and delivered by such Fund
and the Custodian.
Section 9.13. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and
conditions of this Agreement and all information provided by each
party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by
any other party hereto solely for the purpose of rendering services
pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided
or thereafter becomes publicly available other than through a breach
of this Agreement, or that is required to be disclosed by any bank
examiner of the Custodian or any Subcustodian, any auditor of the
parties hereto, by judicial or administrative process or otherwise by
applicable law or regulation. The provisions of this Section 9.13 and
Sections 9.01, 9.02, 9.03, 9.09, Section 2.28, Section 3.04, Section
7.01, Article V and Article VI hereof and any other rights or
obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and behalf on the day and year first above
written.
Each of the Investment Companies Listed on UMB Bank, n.a.
Appendix "A" Attached Hereto, on Behalf
of each of Their Respective Portfolios
[Signature Lines Omitted]
FORM Of
Appendix "B"
To
Custodian Agreement
Between
UMB Bank, n.a. and Each of the Investment
Companies Listed on Appendix "A" thereto
Dated as of ______________-
The following is a list of Additional Custodians, Special
Subcustodians and Foreign Subcustodians under the Custodian Agreement
dated as of ___________ (the "Custodian Agreement"):
A. Additional Custodians
CUSTODIAN PURPOSE
None
B. Special Subcustodian
SUBCUSTODIAN PURPOSE
Morgan Guaranty Trust Co. of New York FICASH
Bank of New York Variable Rate Demand Notes
Chemical Bank, N.A. Variable Rate Demand Notes
Bankers Trust Company Variable Rate Demand Notes
NCNB National Bank of North Carolina Variable Rate Demand Notes
NationsBank of Virginia Variable Rate Demand Notes
C. Foreign Subcustodians
None
Each of the Investment Companies listed on
Appendix "A" to the Custodian Agreement,
on behalf of each of their respective portfolios
[Signature Lines Omitted]
Form of Appendix "C" to the
Custodian Agreement
Between
Each of the Investment Companies
Listed on Appendix "A" Thereto
And
UMB BANK, n.a.
Dated as of _____________
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian
Agreement) of any Portfolio, the applicable Fund, on behalf of such
Portfolio, shall pledge, assign and grant to the Custodian a security
interest in Collateral (as hereinafter defined), under the terms,
circumstances and conditions set forth in this Appendix "C".
Section 1. Defined Terms. As used in this Appendix "C" the
following terms shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which the Custodian is closed for business.
(b) "Collateral" shall mean, with respect to any Portfolio,
securities held by the Custodian on behalf of the Portfolio having a
fair market value (as determined in accordance with the procedures set
forth in the prospectus for the Portfolio) equal to the aggregate of
all Overdraft Obligations of such Portfolio: (i) identified in any
Pledge Certificate executed on behalf of such Portfolio; or (ii)
designated by the Custodian for such Portfolio pursuant to Section 3
of this Appendix C. Such securities shall consist of marketable
securities held by the Custodian on behalf of such Portfolio or, if no
such marketable securities are held by the Custodian on behalf of such
Portfolio, such other securities designated by the applicable Fund in
the applicable Pledge Certificate or by the Custodian pursuant to
Section 3 of this Appendix C.
(c) "Overdraft Obligations" shall mean, with respect to any
Portfolio, the amount of any outstanding Overdraft(s) provided by the
Custodian to such Portfolio together with all accrued interest
thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached to this Appendix "C" as Schedule 1 executed by a duly
authorized officer of the applicable Fund and delivered by such Fund
to the Custodian by facsimile transmission or in such other manner as
the applicable Fund and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the
form attached to this Appendix "C" as Schedule 2 executed by a duly
authorized officer of the Custodian and delivered by the Custodian to
the applicable Fund by facsimile transmission or in such other manner
as such Fund and the Custodian may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by
facsimile transmission or in such other manner as the applicable Fund
and the Custodian shall agree in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft
Obligations of a Portfolio are not satisfied by the close of business
on the first Business Day following the Business Day on which the
applicable Fund receives Written Notice requesting security for such
Overdraft Obligation and stating the amount of such Overdraft
Obligation, the applicable Fund, on behalf of such Portfolio, shall
pledge, assign and grant to the Custodian a first priority security
interest, by delivering to the Custodian, a Pledge Certificate
executed by such Fund on behalf of such Portfolio describing the
applicable Collateral. Such Written Notice may, in the discretion of
the Custodian, be included within or accompany the Overdraft Notice
relating to the applicable Overdraft Obligations.
Section 3. Failure to Pledge Collateral. In the event that the
applicable Fund shall fail: (a) to pay, on behalf of the applicable
Portfolio, the Overdraft Obligation described in such Written Notice;
(b) to deliver to the Custodian a Pledge Certificate pursuant to
Section 2; or (c) to identify substitute securities pursuant to
Section 6 upon the sale or maturity of any securities identified as
Collateral, the Custodian may, by Written Notice to the applicable
Fund specify Collateral which shall secure the applicable Overdraft
Obligation. Such Fund, on behalf of any applicable Portfolio, hereby
pledges, assigns and grants to the Custodian a first priority security
interest in any and all Collateral specified in such Written Notice;
provided that such pledge, assignment and grant of security shall be
deemed to be effective only upon receipt by the applicable Fund of
such Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the
Custodian shall notify a Fund by Written Notice that the fair market
value of the Collateral securing any Overdraft Obligation of one of
such Fund's Portfolios is less than the amount of such Overdraft
Obligation, such Fund, on behalf of the applicable Portfolio, shall
deliver to the Custodian, within one (1) Business Day following the
Fund's receipt of such Written Notice, an additional Pledge
Certificate describing additional Collateral. If such Fund shall fail
to deliver such additional Pledge Certificate, the Custodian may
specify Collateral which shall secure the unsecured amount of the
applicable Overdraft Obligation in accordance with Section 3 of this
Appendix C.
Section 5. Release of Collateral. Upon payment by a Fund, on behalf
of one of its Portfolios, of any Overdraft Obligation secured by the
pledge of Collateral, the Custodian shall promptly deliver to such
Fund a Release Certificate pursuant to which the Custodian shall
release Collateral from the lien under the applicable Pledge
Certificate or Written Notice pursuant to Section 3 having a fair
market value equal to the amount paid by such Fund on account of such
Overdraft Obligation. In addition, if at any time a Fund shall notify
the Custodian by Written Notice that such Fund desires that specified
Collateral be released and: (a) that the fair market value of the
Collateral securing any Overdraft Obligation shall exceed the amount
of such Overdraft Obligation; or (b) that the Fund has delivered a
Pledge Certificate substituting Collateral for such Overdraft
Obligation, the Custodian shall deliver to such Fund, within one (1)
Business Day following the Custodian's receipt of such Written Notice,
a Release Certificate relating to the Collateral specified in such
Written Notice.
Section 6. Substitution of Collateral. A Fund may substitute
securities for any securities identified as Collateral by delivery to
the Custodian of a Pledge Certificate executed by such Fund on behalf
of the applicable Portfolio, indicating the securities pledged as
Collateral.
Section 7. Security for Individual Portfolios' Overdraft
Obligations. The pledge of Collateral by a Fund on behalf of any of
its individual Portfolios shall secure only the Overdraft Obligations
of such Portfolio. In no event shall the pledge of Collateral by one
of a Fund's Portfolios be deemed or considered to be security for the
Overdraft Obligations of any other Portfolio of such Fund or of any
other Fund.
Section 8. Custodian's Remedies. Upon (a) a Fund's failure to pay
any Overdraft Obligation of an applicable Portfolio within thirty (30)
days after receipt by such Fund of a Written Notice demanding security
therefore, and (b) one (1) Business Day's prior Written Notice to such
Fund, the Custodian may elect to enforce its security interest in the
Collateral securing such Overdraft Obligation, by taking title to (at
the then prevailing fair market value), or selling in a commercially
reasonable manner, so much of the Collateral as shall be required to
pay such Overdraft Obligation in full. Notwithstanding the provisions
of any applicable law, including, without limitation, the Uniform
Commercial Code, the remedy set forth in the preceding sentence shall
be the only right or remedy to which the Custodian is entitled with
respect to the pledge and security interest granted pursuant to any
Pledge Certificate or Section 3. Without limiting the foregoing, the
Custodian hereby waives and relinquishes all contractual and common
law rights of set off to which it may now or hereafter be or become
entitled with respect to any obligations of any Fund to the Custodian
arising under this Appendix "C" to the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to
be executed in its name and behalf on the day and year first above
written.
Each of the Investment Companies Listed on UMB BANK, n.a.
Schedule "A" to the Custodian Agreement, on
Behalf of Each of Their Respective Portfolios
[Signature Lines Omitted]
SCHEDULE 1
TO
APPENDIX "C"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian
Agreement dated as of [ ] (the "Agreement"), between [
] (the "Fund") and [ ] (the "Custodian"). Capitalized terms
used herein without definition shall have the respective meanings
ascribed to them in the Agreement. Pursuant to [Section 2 or Section
4] of Appendix "C" attached to the Agreement, the Fund, on behalf of [
] (the "Portfolio"), hereby pledges, assigns and grants to the
Custodian a first priority security interest in the securities listed
on Exhibit "A" attached to this Pledge Certificate (collectively, the
"Pledged Securities"). Upon delivery of this Pledge Certificate, the
Pledged Securities shall constitute Collateral, and shall secure all
Overdraft Obligations of the Portfolio described in that certain
Written Notice dated , 19 , delivered by the Custodian to
the Fund. The pledge, assignment and grant of security in the Pledged
Securities hereunder shall be subject in all respect to the terms and
conditions of the Agreement, including, without limitation, Sections 7
and 8 of Appendix "C" attached thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be
executed in its name, on behalf of the Portfolio this day of
19 .
[FUND], on Behalf of [Portfolio]
By: _____________________
Name: _____________________
Title: _____________________
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
SCHEDULE 2
TO
APPENDIX "C"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian
Agreement dated as of [ ] (the "Agreement"), between [
] (the "Fund") and [ ] (the "Custodian"). Capitalized terms
used herein without definition shall have the respective meanings
ascribed to them in the Agreement. Pursuant to Section 5 of Appendix
"C" attached to the Agreement, the Custodian hereby releases the
securities listed on Exhibit "A" attached to this Release Certificate
from the lien under the [Pledge Certificate dated ___________, 19 or
the Written Notice delivered pursuant to Section 3 of Appendix "C"
dated _________, 19 ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate
to be executed in its name and on its behalf this day of 19 .
umb bank, n.a.
By: _____________________
Name: _____________________
Title: _____________________
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the
Prospectuses and Statements of Additional Information in
Post-Effective Amendment No. 21 to the Registration Statement on Form
N-1A of Fidelity Union Street Trust II: Fidelity Daily Income Trust,
Fidelity Municipal Money Market Fund, Spartan Arizona Municipal Money
Market Fund and Spartan Municipal Money Fund, of our reports dated
October 12, 1998 on the financial statements and financial highlights
included in the August 31, 1998 Annual Reports to Shareholders of
Fidelity Daily Income Trust, Fidelity Municipal Money Market Fund,
Spartan Arizona Municipal Money Market Fund and Spartan Municipal
Money Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the
Statements of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 14, 1998
Exhibit 15(d)
FORM OF
DISTRIBUTION AND SERVICE PLAN
of Fidelity Union Street Trust II:
of Fidelity Municipal Money Market Fund
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") of
Fidelity Municipal Money Market Fund (the "Portfolio"), a series of
shares of Fidelity Union Street Trust II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with
respect to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management &
Research Company (the "Adviser"), under which the Distributor uses all
reasonable efforts, consistent with its other business, to secure
purchasers for the Portfolio's shares of beneficial interest
("shares"). Under the agreement, the Distributor pays the expenses of
printing and distributing any prospectuses, reports and other
literature used by the Distributor, advertising, and other promotional
activities in connection with the offering of shares of the Portfolio
for sale to the public. It is recognized that the Adviser may use its
management fee revenues as well as past profits or its resources from
any other source, to make payment to the Distributor with respect to
any expenses incurred in connection with the distribution of Portfolio
shares, including the activities referred to above.
3. The Adviser directly, or through the Distributor, may, subject to
the approval of the Trustees, make payments to securities dealers and
other third parties who engage in the sale of shares or who render
shareholder support services, including but not limited to providing
office space, equipment and telephone facilities, answering routine
inquiries regarding the Portfolio, processing shareholder transactions
and providing such other shareholder services as the Fund may
reasonably request.
4. The Portfolio will not make separate payments as a result of this
Plan to the Adviser, Distributor or any other party, it being
recognized that the Portfolio presently pays, and will continue to
pay, a management fee to the Adviser. To the extent that any payments
made by the Portfolio to the Adviser, including payment of management
fees, should be deemed to be indirect financing of any activity
primarily intended to result in the sale of shares of the Portfolio
within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of
the month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the
Act), the plan having been approved by a vote of a majority of the
Trustees of the Fund, including a majority of Trustees who are not
"interested persons" of the Fund (as defined in the Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements related to this Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain
in effect from the date specified above until _____, and from year to
year thereafter, provided, however, that such continuance is subject
to approval annually by a vote of a majority of the Trustees of the
Fund, including a majority of the Independent Trustees, cast in person
at a meeting called for the purpose of voting on this Plan. This Plan
may be amended at any time by the Board of Trustees, provided that (a)
any amendment to authorize direct payments by the Portfolio to finance
any activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio
for distribution, or any amendment of the Management Contract to
increase the amount to be paid by the Portfolio thereunder shall be
effective only upon approval by a vote of a majority of the
outstanding voting securities of the Portfolio, and (b) any material
amendments of this Plan shall be effective only upon approval in the
manner provided in the first sentence in this paragraph.
7. This Plan may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Independent Trustees or by a
vote of a majority of the outstanding voting securities of the
Portfolio.
8. During the existence of this Plan, the Fund shall require the
Adviser and/or Distributor to provide the Fund, for review by the
Fund's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report of the amounts expended in connection with
financing any activity primarily intended to result in the sale of
shares of the Portfolio (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures
were made.
9. This Plan does not require the Adviser or Distributor to perform
any specific type or level of distribution activities or to incur any
specific level of expenses for activities primarily intended to result
in the sale of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set
forth in the Fund's Declaration of Trust or other organizational
document, any obligations assumed by the Portfolio pursuant to this
Plan and any agreements related to this Plan shall be limited in all
cases to the Portfolio and its assets, and shall not constitute
obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000880797
<NAME> Fidelity Union Street Trust II
<SERIES>
<NUMBER> 11
<NAME> Spartan Municipal Money Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> aug-31-1998
<PERIOD-END> aug-31-1998
<INVESTMENTS-AT-COST> 2,295,878
<INVESTMENTS-AT-VALUE> 2,295,878
<RECEIVABLES> 24,600
<ASSETS-OTHER> 3,342
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,323,820
<PAYABLE-FOR-SECURITIES> 29,348
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,172
<TOTAL-LIABILITIES> 46,520
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,277,630
<SHARES-COMMON-STOCK> 2,277,628
<SHARES-COMMON-PRIOR> 2,329,438
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (330)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,277,300
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 86,344
<OTHER-INCOME> 0
<EXPENSES-NET> 9,051
<NET-INVESTMENT-INCOME> 77,293
<REALIZED-GAINS-CURRENT> (7)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 77,286
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 77,293
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,264,344
<NUMBER-OF-SHARES-REDEEMED> 3,391,043
<SHARES-REINVESTED> 74,889
<NET-CHANGE-IN-ASSETS> (51,817)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (323)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,541
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,549
<AVERAGE-NET-ASSETS> 2,309,912
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .033
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .033
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000880797
<NAME> Fidelity Union Street Trust II
<SERIES>
<NUMBER> 21
<NAME> Fidelity Daily Income Trust
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> aug-31-1998
<PERIOD-END> aug-31-1998
<INVESTMENTS-AT-COST> 2,727,032
<INVESTMENTS-AT-VALUE> 2,727,032
<RECEIVABLES> 76,628
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,803,660
<PAYABLE-FOR-SECURITIES> 153,414
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,070
<TOTAL-LIABILITIES> 178,484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,626,286
<SHARES-COMMON-STOCK> 2,625,659
<SHARES-COMMON-PRIOR> 2,425,518
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,110)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,625,176
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 140,914
<OTHER-INCOME> 0
<EXPENSES-NET> 12,290
<NET-INVESTMENT-INCOME> 128,624
<REALIZED-GAINS-CURRENT> (12)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 128,612
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 128,624
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,931,413
<NUMBER-OF-SHARES-REDEEMED> 11,856,534
<SHARES-REINVESTED> 125,262
<NET-CHANGE-IN-ASSETS> 200,129
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,098)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,065
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,415
<AVERAGE-NET-ASSETS> 2,480,285
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .052
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000880797
<NAME> Fidelity Union Street Trust II
<SERIES>
<NUMBER> 31
<NAME> Spartan Arizona Municipal Money Market Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> aug-31-1998
<PERIOD-END> aug-31-1998
<INVESTMENTS-AT-COST> 93,706
<INVESTMENTS-AT-VALUE> 93,706
<RECEIVABLES> 1,448
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 95,154
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 631
<TOTAL-LIABILITIES> 631
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94,497
<SHARES-COMMON-STOCK> 94,497
<SHARES-COMMON-PRIOR> 88,147
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 94,523
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,376
<OTHER-INCOME> 0
<EXPENSES-NET> 326
<NET-INVESTMENT-INCOME> 3,050
<REALIZED-GAINS-CURRENT> 39
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,050
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86,116
<NUMBER-OF-SHARES-REDEEMED> 82,735
<SHARES-REINVESTED> 2,969
<NET-CHANGE-IN-ASSETS> 6,389
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (13)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 453
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 454
<AVERAGE-NET-ASSETS> 90,759
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .034
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .034
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000880797
<NAME> Fidelity Union Street Trust II
<SERIES>
<NUMBER> 51
<NAME> Fidelity Municipal Money Market Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> aug-31-1998
<PERIOD-END> aug-31-1998
<INVESTMENTS-AT-COST> 5,084,293
<INVESTMENTS-AT-VALUE> 5,084,293
<RECEIVABLES> 134,415
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,218,708
<PAYABLE-FOR-SECURITIES> 81,494
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,433
<TOTAL-LIABILITIES> 149,927
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,069,280
<SHARES-COMMON-STOCK> 5,069,272
<SHARES-COMMON-PRIOR> 4,132,503
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (500)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1
<NET-ASSETS> 5,068,781
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 142,326
<OTHER-INCOME> 0
<EXPENSES-NET> 18,808
<NET-INVESTMENT-INCOME> 123,518
<REALIZED-GAINS-CURRENT> (7)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 123,511
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 123,518
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,582,627
<NUMBER-OF-SHARES-REDEEMED> 13,765,101
<SHARES-REINVESTED> 119,242
<NET-CHANGE-IN-ASSETS> 936,762
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (493)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,827
<AVERAGE-NET-ASSETS> 4,634,159
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .027
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .027
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
