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Previous: DENDRITE INTERNATIONAL INC, S-8, EX-23.2, 2000-10-20 |
Next: FIDELITY UNION STREET TRUST II, 485BPOS, EX-99.ACHARTER, 2000-10-20 |
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SECURITIES AND EXCHANGE COMMISSION |
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Washington, D.C. 20549 |
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FORM N-1A |
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REGISTRATION STATEMENT (No. 33-43757) |
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UNDER THE SECURITIES ACT OF 1933 |
[X] |
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Pre-Effective Amendment No. |
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Post-Effective Amendment No. 24 |
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and |
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REGISTRATION STATEMENT (No. 811-6452) |
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UNDER THE INVESTMENT COMPANY ACT OF 1940 |
[X] |
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Amendment No. 24 |
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Fidelity Union Street Trust II |
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(Exact Name of Registrant as Specified in Charter) |
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82 Devonshire St., Boston, Massachusetts 02109 |
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(Address Of Principal Executive Offices) (Zip Code) |
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Registrant's Telephone Number: 617-563-7000 |
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Eric D. Roiter, Secretary |
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82 Devonshire Street |
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Boston, Massachusetts 02109 |
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(Name and Address of Agent for Service) |
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It is proposed that this filing will become effective |
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immediately upon filing pursuant to paragraph (b). |
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on October 23, 2000 pursuant to paragraph (b). |
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60 days after filing pursuant to paragraph (a)(1). |
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on ( ) pursuant to paragraph (a)(1) of Rule 485. |
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75 days after filing pursuant to paragraph (a)(2). |
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on ( ) pursuant to paragraph (a)(2) of Rule 485. |
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If appropriate, check the following box: |
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this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
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Like securities of all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
Spartan®
Funds
Spartan Arizona Municipal Income Fund
(fund number 434, trading symbol FSAZX)
Spartan Arizona Municipal Money Market Fund
(fund number 433, trading symbol FSAXX)
Prospectus
October 23, 2000
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109
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Fund Summary |
Investment Summary |
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Performance |
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Fee Table |
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Fund Basics |
Investment Details |
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Valuing Shares |
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Shareholder Information |
Buying and Selling Shares |
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Exchanging Shares |
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Account Features and Policies |
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Dividends and Capital Gain Distributions |
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Tax Consequences |
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Fund Services |
Fund Management |
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Fund Distribution |
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Appendix |
Financial Highlights |
Prospectus
Investment Objective
Spartan Arizona Municipal Income Fund seeks a high level of current income, exempt from federal income tax and Arizona personal income tax.
Principal Investment Strategies
Fidelity Management & Research Company (FMR)'s principal investment strategies include:
Principal Investment Risks
The fund is subject to the following principal investment risks:
In addition, the fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single issuer could cause greater fluctuations in share price than would occur in a more diversified fund.
An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
When you sell your shares of the fund, they could be worth more or less than what you paid for them.
Prospectus
Fund Summary - continued
Investment Objective
Spartan Arizona Municipal Money Market Fund 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.
Principal Investment Strategies
<R>FMR's</R> principal investment strategies include:
Principal Investment Risks
The fund is subject to the following principal investment risks:
An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
The following information illustrates the changes in each fund's performance from year to year and compares the bond fund's performance to the performance of a market index and an average of the performance of similar funds over various periods of time. Spartan Arizona Municipal Income also compares its performance to the performance of an additional index over various periods of time. <R>Data for the additional index for Spartan Arizona Municipal Income is available only from April 30, 1996 to the present.</R> Returns are based on past results and are not an indication of future performance.
Prospectus
Fund Summary - continued
<R>The returns in the chart do not include the effect of Spartan Arizona Municipal Money Market's account closeout fee. If the effect of the fee were reflected, returns would be lower than those shown.</R>
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Spartan AZ Municipal Income |
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<R>Calendar Years |
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1995 |
1996 |
1997 |
1998 |
1999</R> |
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<R> |
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18.49% |
3.51% |
7.97% |
5.30% |
-1.83%</R> |
<R>
</R>
<R>During the periods shown in the chart for Spartan Arizona Municipal Income, the highest return for a quarter was </R>7.97% (quarter ended March 31, 1995) and the lowest return for a quarter was -1.63% (quarter ended June 30, 1999).
<R>The year-to-date return as of September 30, 2000 for Spartan Arizona Municipal Income was 6.70%.</R>
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Spartan AZ Municipal Money Market |
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<R>Calendar Years |
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1995 |
1996 |
1997 |
1998 |
1999</R> |
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<R> |
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3.93% |
3.35% |
3.47% |
3.22% |
2.91%</R> |
<R>
</R>
<R>During the periods shown in the chart for Spartan Arizona Municipal Money Market, the highest return for a quarter was 1.02% (quarter ended June 30, 1995) and the lowest return for a quarter was 0.63% (quarter ended March 31, 1999).</R>
<R>The year-to-date return as of September 30, 2000 for Spartan Arizona Municipal Money Market was 2.75%.</R>
Prospectus
Fund Summary - continued
The returns in the following table do not include the effect of the $5 account closeout fee for Spartan Arizona Municipal Money Market.
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<R>For the periods ended |
Past 1 |
Past 5 |
Life of |
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<R>Spartan Arizona Municipal Income |
-1.83% |
6.48% |
5.97%</R> |
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<R>Lehman Brothers Municipal Bond Index |
-2.06% |
6.91% |
6.76%</R> |
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<R>Lehman Brothers Arizona 4 Plus Year Enhanced Municipal Bond Index |
-2.11% |
3.62% |
n/aB</R> |
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<R>Lipper Arizona Municipal Debt Funds Average |
-4.29% |
5.95% |
n/aB</R> |
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<R>Spartan Arizona Municipal Money Market |
2.91% |
3.38% |
3.38%</R> |
A From October 11, 1994.
<R>B Not Available</R>
If FMR had not reimbursed certain fund expenses during these periods, each fund's returns would have been lower.
The Lehman Brothers Municipal Bond Index is a market value-weighted index of investment-grade municipal bonds with maturities of one year or more.
The<R> Lehman Brothers Arizona 4 Plus Year Enhanced Municipal Bond Index </R>is a market value-weighted index of Arizona investment-grade municipal bonds with maturities of <R>four years or more.</R>
The Lipper Funds Average reflects the performance (excluding sales charges) of mutual funds with similar objectives.
<R>The following table describes the fees and expenses that are incurred when you buy, hold, or sell shares of a fund. The annual fund operating expenses provided below for Spartan Arizona Municipal Income do not reflect the effect of any reduction of certain expenses during the period. The annual fund operating expenses provided below for Spartan Arizona Municipal Money Market are based on historical expenses.</R>
Prospectus
Fund Summary - continued
Shareholder fees (paid by the investor directly)
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Sales charge (load) on purchases and reinvested distributions |
None |
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Deferred sales charge (load) on redemptions |
None |
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Redemption fee on shares held less than 180 days (as a % of amount redeemed) |
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for Spartan Arizona Municipal Income only |
0.50% |
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Exchange fee |
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for Spartan Arizona Municipal Money Market onlyA,B |
$5.00 |
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Wire transaction fee |
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for Spartan Arizona Municipal Money Market onlyA |
$5.00 |
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Checkwriting fee, per check written |
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for Spartan Arizona Municipal Money Market onlyA |
$2.00 |
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Account closeout fee |
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for Spartan Arizona Municipal Money Market onlyA |
$5.00 |
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Annual account maintenance fee (for accounts under $2,500) |
$12.00 |
A The fees for individual transactions are waived if your account balance at the time of the transaction is $50,000 or more.
B You will not pay an exchange fee if you exchange through any of Fidelity's automated exchange services.
Annual fund operating expenses (paid from fund assets)
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<R>Spartan AZ Municipal Income |
Management fee |
0.55%</R> |
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<R> |
Distribution and Service (12b-1) fee |
None</R> |
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<R> |
Other expenses |
0.00%</R> |
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<R> |
Total annual fund operating expenses |
0.55%</R> |
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<R>Spartan AZ Municipal Money Market |
Management fee |
0.50%</R> |
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<R> |
Distribution and Service (12b-1) fee |
None</R> |
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<R> |
Other expenses |
0.00%</R> |
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<R> |
Total annual fund operating expenses |
0.50%</R> |
<R>Through</R> arrangements with each fund's custodian and transfer agent, credits realized as a result of uninvested cash balances are used to reduce fund expenses. Including these reductions, the total fund operating expenses would have been<R> 0.48% for Spartan Arizona Munici</R>pal Income.
This example helps you compare the cost of investing in the funds with the cost of investing in other mutual funds.
Let's say, hypothetically, that each fund's annual return is 5% and that your shareholder fees and each fund's annual operating expenses are exactly as described in the fee table. This example illustrates the effect of fees and expenses, but is not meant to suggest actual or expected fees and expenses or returns, all of which may vary. For every $10,000 you invested, here's how much you would pay in total expenses if you <R>close your account at the end of each time period indicated and if yo</R>u leave your account open:
Prospectus
Fund Summary - continued
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Account open |
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Account closed |
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<R>Spartan AZ Municipal Income |
1 year |
$ 56 |
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$ 56</R> |
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<R> |
3 years |
$ 176 |
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$ 176</R> |
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<R> |
5 years |
$ 307 |
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$ 307</R> |
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<R> |
10 years |
$ 689 |
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$ 689</R> |
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<R>Spartan AZ Municipal Money Market |
1 year |
$ 51 |
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$ 56</R> |
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<R> |
3 years |
$ 160 |
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$ 165</R> |
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<R> |
5 years |
$ 280 |
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$ 285</R> |
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<R> |
10 years |
$ 628 |
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$ 633</R> |
Prospectus
Investment Objective
Spartan Arizona Municipal Income Fund seeks a high level of current income, exempt from federal income tax and Arizona personal income tax.
Principal Investment Strategies
FMR normally invests the fund's assets in investment-grade municipal debt securities (those of medium and high quality).
FMR normally invests at least 65% of the fund's total assets in municipal securities whose interest is exempt from Arizona personal income tax and at least 80% of the fund's assets in municipal securities whose interest is exempt from federal income tax. Municipal securities whose interest is exempt from federal and Arizona income taxes include securities issued by U.S. territories and possessions, such as Guam, the Virgin Islands, and Puerto Rico, and their political subdivisions and public corporations.
FMR may invest the fund's assets in municipal securities whose interest is subject to Arizona personal income tax. Although FMR does not currently intend to invest the fund's assets in municipal securities whose interest is subject to federal income tax, FMR may invest all of the fund's assets in municipal securities whose interest is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal securities that finance similar projects, such as those relating to education, health care, transportation, and utilities.
FMR uses <R>an index that represents the market for the types of securities in which the fund invests </R>as a guide in structuring the fund and selecting its investments. FMR manages the fund to have similar overall interest rate risk to the index. <R>As of August 31, 2000, FMR was using the Lehman Brothers Arizona 4 Plus Year Enhanced Municipal Bond Index in managing the fund's investments.</R> As of <R>August 31, 2000</R>, the dollar-weighted average maturity of the fund and the index was approximately<R> 13.0 and 14.2 years</R>, respectively.
FMR allocates the fund's 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 and maturity.
Because the fund is considered non-diversified, FMR may invest a significant percentage of the fund's assets in a single issuer.
In buying and selling securities for the fund, FMR analyzes a security's structural features and current price compared to its estimated long-term value, any short-term trading opportunities resulting from market inefficiencies, and the credit quality of its issuer.
FMR may use various techniques, such as buying and selling futures contracts, to increase or decrease the fund's exposure to changing security prices, interest rates, or other factors that affect security values. If FMR's strategies do not work as intended, the fund may not achieve its objective.
Prospectus
Fund Basics - continued
Investment Objective
Spartan Arizona Municipal Money Market Fund 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.
Principal Investment Strategies
FMR normally invests the fund's assets in municipal money market securities, including shares of a municipal money market fund managed by an affiliate of FMR.
FMR normally invests at least 65% of the fund's total assets in municipal securities whose interest is exempt from Arizona personal income tax and at least 80% of the fund's assets in municipal securities whose interest is exempt from federal income tax. Municipal securities whose interest is exempt from federal and Arizona income taxes include securities issued by U.S. territories and possessions, such as Guam, the Virgin Islands, and Puerto Rico, and their political subdivisions and public corporations.
FMR may invest the fund's assets in municipal securities whose interest is subject to Arizona personal income tax. Although FMR does not currently intend to invest the fund's assets in municipal securities whose interest is subject to federal income tax, FMR may invest all of the fund's assets in municipal securities whose interest is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal securities that finance similar projects, such as those relating to education, health care, transportation, and utilities.
In buying and selling securities for the fund, FMR complies with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of the fund's investments. FMR stresses maintaining a stable $1.00 share price, liquidity, and income.
Description of Principal Security Types
Debt securities are used by issuers to borrow money. The issuer usually pays a fixed, variable, or floating rate of interest, and must repay the amount borrowed at the maturity of the security. Some debt securities, such as zero coupon bonds, do not pay current interest but are sold at a discount from their face values. Municipal debt securities include general obligation bonds of municipalities, local or state governments, project or revenue-specific bonds, or pre-refunded or escrowed bonds.
Money market securities are high-quality, short-term securities that pay a fixed, variable, or floating interest rate. Securities are often specifically structured so that they are eligible investments for a money market fund. For example, in order to satisfy the maturity restrictions for a money market fund, some money market securities have demand or put features, which have the effect of shortening the security's maturity. Municipal money market securities include variable rate demand notes, commercial paper, municipal notes, and shares of municipal money market funds.
Prospectus
Fund Basics - continued
Municipal securities are issued to raise money for a variety of public and private purposes, including general financing for state and local governments, or financing for a specific project or public facility. Municipal securities may be fully or partially backed by the local government, by the credit of a private issuer, by the current or anticipated revenues from a specific project or specific assets, or by domestic or foreign entities providing credit support such as letters of credit, guarantees, or insurance.
Principal Investment Risks
Many factors affect each fund's performance. Because FMR concentrates each fund's investments in Arizona, the fund's performance is expected to be closely tied to economic and political conditions within that state and to be more volatile than the performance of a more geographically diversified fund.
The bond fund's yield and share price change daily based on changes in interest rates and market conditions and in response to other economic, political, or financial developments. The fund's reaction to these developments will be affected by the types and maturities of securities in which the fund invests, the financial condition, industry and economic sector, and geographic location of an issuer, and the fund's level of investment in the securities of that issuer. Because FMR may invest a significant percentage of the fund's assets in a single issuer, the fund's performance could be closely tied to the market value of that one issuer and could be more volatile than the performance of more diversified funds. When you sell your shares of the fund, they could be worth more or less than what you paid for them.
The money market fund's yields will change daily based on changes in interest rates and other market conditions. Although the fund is managed to maintain a stable $1.00 share price, there is no guarantee that the fund will be able to do so. For example, a major increase in interest rates or a decrease in the credit quality of the issuer of one of the fund's investments could cause the fund's share price to decrease. While the fund will be charged premiums by a mutual insurance company for coverage of specified types of losses related to default or bankruptcy on certain securities, the fund may incur losses regardless of the insurance.
The following factors can significantly affect a fund's performance:
Municipal Market Volatility. Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders. Because many municipal securities are issued to finance similar projects, especially those relating to education, health care, transportation, and utilities, conditions in those sectors can affect the overall municipal market. In addition, changes in the financial condition of an individual municipal insurer can affect the overall municipal market.
Interest Rate Changes. Debt and money market securities have varying levels of sensitivity to changes in interest rates. In general, the price of a debt or money market security can fall when interest rates rise and can rise when interest rates fall. Securities with longer maturities can be more sensitive to interest rate changes. In other words, the longer the maturity of a security, the greater the impact a change in interest rates could have on the security's price. In addition, short-term and long-term interest rates do not necessarily move in the same amount or the same direction. Short-term securities tend to react to changes in short-term interest rates, and long-term securities tend to react to changes in long-term interest rates.
Prospectus
Fund Basics - continued
Foreign Exposure. Entities located in foreign countries that provide credit support or a maturity-shortening structure can involve increased risks. Extensive public information about the provider may not be available and unfavorable political, economic, or governmental developments could affect the value of the security.
Geographic Concentration. Arizona's economy recovered from a slow-down in growth in the late 80's and early 90's with an expansion that is now in its <R>seventh</R> year.
Issuer-Specific Changes. Changes in the financial condition of an issuer, changes in specific economic or political conditions that affect a particular type of security or issuer, and changes in general economic or political conditions can affect the credit quality or value of an issuer's securities. Lower-quality debt securities (those of less than investment-grade quality) tend to be more sensitive to these changes than higher-quality debt securities. Entities providing credit support or a maturity-shortening structure also can be affected by these types of changes. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the taxation supporting the project or assets or the inability to collect revenues for the project or from the assets. If the Internal Revenue Service determines an issuer of a municipal security has not complied with applicable tax requirements, interest from the security could become taxable and the security could decline significantly in value. In addition, if the structure of a security fails to function as intended, interest from the security could become taxable or the security could decline in value.
In response to market, economic, political, or other conditions, FMR may temporarily use a different investment strategy for defensive purposes. If FMR does so, different factors could affect a fund's performance, <R>and a fund</R> could distribute income subject to federal or Arizona personal income tax.
Fundamental Investment Policies
The policies discussed below are fundamental, that is, subject to change only by shareholder approval.
Spartan Arizona Municipal Income Fund 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.
Prospectus
Fund Basics - continued
Spartan Arizona Municipal Money Market Fund 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.
Each fund is open for business each day the New York Stock Exchange (NYSE) is open.
Each fund's net asset value per share (NAV) is the value of a single share. Fidelity normally calculates each fund's NAV as of the close of business of the NYSE, normally 4:00 p.m. Eastern time. However, NAV may be calculated earlier if trading on the NYSE is restricted or as permitted by the Securities and Exchange Commission (SEC). Each fund's assets are valued as of this time for the purpose of computing the fund's NAV.
To the extent that each fund's assets are traded in other markets on days when the NYSE is closed, the value of the fund's assets may be affected on days when the fund is not open for business. In addition, trading in some of a fund's assets may not occur on days when the fund is open for business.
The bond fund's assets are valued primarily on the basis of information furnished by a pricing service or market quotations. If market quotations or information furnished by a pricing service is not readily available<R> or does not accurately reflect fair value for a security</R> or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value.
The money market fund's assets are valued on the basis of amortized cost.
Prospectus
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, <R>Fidelity Brokerage Services LLC (FBS LLC)</R>. Fidelity is also a leader in providing tax-advantaged retirement plans for individuals investing on their own or through their employer.
For account, product, and service information, please use the following<R> web</R> site and phone numbers:
Please use the following addresses:
Buying Shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
Overnight Express
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
Selling Shares
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Overnight Express
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
You may buy or sell shares of the funds through an investment professional. If you invest through an investment professional, the procedures for buying, selling, and exchanging shares of a fund and the account features and policies may differ. Additional fees may also apply to your investment in a fund, including a transaction fee if you buy or sell shares of the fund through a broker or other investment professional.
Certain methods of contacting Fidelity, such as by telephone or electronically, may be unavailable or delayed (for example, during periods of unusual market activity). In addition, the level and type of service available may be restricted based on criteria established by Fidelity.
Prospectus
Shareholder Information - continued
The different ways to set up (register) your account with Fidelity are listed in the following table.
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Ways to Set Up Your Account |
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Individual or Joint Tenant For your general investment needs |
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Gifts or Transfers to a Minor (UGMA, UTMA) To invest for a child's education or other future needs |
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Trust For money being invested by a trust |
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Business or Organization For investment needs of corporations, associations, partnerships, or other groups |
The price to buy one share of each fund is the fund's NAV. Each fund's shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your investment is received in proper form.
Short-term or excessive trading into and out of a fund may harm performance by disrupting portfolio management strategies and by increasing expenses. Accordingly, a fund may reject any purchase orders, including exchanges, particularly from market timers or investors who, in FMR's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to that fund. For these purposes, FMR may consider an investor's trading history in that fund or other Fidelity funds, and accounts under common ownership or control.
Each fund may stop offering shares completely or may offer shares only on a limited basis, for a period of time or permanently.
When you place an order to buy shares, note the following:
Certain financial institutions that have entered into sales agreements with Fidelity Distributors Corporation (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 order will be canceled and the financial institution could be held liable for resulting fees or losses.
Prospectus
Shareholder Information - continued
Minimums
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To Open an Account |
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Spartan AZ Municipal Income |
$10,000 |
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Spartan AZ Municipal Money Market |
$25,000 |
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To Add to an Account |
$1,000 |
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Through regular investment plans |
$500 |
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Minimum Balance |
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Spartan AZ Municipal Income |
$5,000 |
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Spartan AZ Municipal Money Market |
$10,000 |
There is no minimum account balance or initial or subsequent purchase minimum for investments through Fidelity Portfolio Advisory ServicesSM or a qualified state tuition program.
In addition, each fund may waive or lower purchase minimums in other circumstances.
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Key Information |
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<R>Phone |
To Open an Account</R>
To Add to an Account
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Internet |
To Open an Account
To Add to an Account
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Mail |
To Open an Account
To Add to an Account
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In Person |
To Open an Account
To Add to an Account
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Wire |
To Open an Account
To Add to an Account
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Automatically |
To Open an Account
To Add to an Account
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The price to sell one share of Spartan Arizona Municipal Income is the fund's NAV, minus the redemption fee (short-term trading fee), if applicable. The price to sell one share of Spartan Arizona Municipal Money Market is the fund's NAV.
Spartan Arizona Municipal Income will deduct a short-term trading fee of 0.50% from the redemption amount if you sell your shares after holding them less than 180 days. This fee is paid to the fund rather than Fidelity, and is designed to offset the brokerage commissions, market impact, and other costs associated with fluctuations in fund asset levels and cash flow caused by short-term shareholder trading.
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.
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.
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:
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.
Prospectus
Shareholder Information - continued
When you place an order to sell shares, note the following:
Prospectus
Shareholder Information - continued
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Key Information |
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<R>Phone |
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Internet |
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Mail |
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
Trust
Business or Organization
Executor, Administrator, Conservator, Guardian
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In Person |
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
Trust
Business or Organization
Executor, Administrator, Conservator, Guardian
|
|
Automatically |
|
|
Check |
|
Prospectus
Shareholder Information - continued
An exchange involves the redemption of all or a portion of the shares of one fund and the purchase of shares of another fund.
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 policies and restrictions governing exchanges:
The funds may terminate or modify the exchange privileges in the future.
Other funds may have different exchange restrictions, and may impose trading fees of up to 2.00% of the amount exchanged. Check each fund's prospectus for details.
The following features are available to buy and sell shares of the funds.
Automatic Investment and Withdrawal Programs. Fidelity offers convenient services that let you automatically transfer money into your account, between accounts, or out of your account. While automatic investment programs do not guarantee a profit and will not protect you against loss in a declining market, they can be an excellent way to invest for retirement, a home, educational expenses, and other long-term financial goals. Automatic withdrawal or exchange programs can be a convenient way to provide a consistent income flow or to move money between your investments.
Prospectus
Shareholder Information - continued
|
Fidelity Automatic Account Builder |
||
|
<R>Minimum $500 |
Frequency Monthly or quarterly |
Procedures</R>
|
|
Direct Deposit |
||
|
<R>Minimum $500 |
Frequency Every pay period |
Procedures</R>
|
|
A Because bond fund share prices fluctuate, that fund may not be an appropriate choice for direct deposit of your entire check. |
||
|
Fidelity Automatic Exchange Service |
||
|
Minimum $500 |
Frequency Monthly, bimonthly, quarterly, or annually |
Procedures
|
|
Personal Withdrawal Service |
||
|
Frequency Monthly |
Procedures
|
|
Prospectus
Shareholder Information - continued
Other Features. The following other features are also available to buy and sell shares of the funds.
|
Wire |
|
|
Fidelity Money Line |
|
|
Fidelity On-Line Xpress+® |
|
<R>Call 1-800-544-0240 or visit Fidelity's web site for more information.</R>
|
|
Fidelity Online Trading |
|
|
FAST |
|
Call 1-800-544-5555.
|
|
Checkwriting |
|
The following policies apply to you as a shareholder.
Statements and reports that Fidelity sends to you include the following:
Prospectus
Shareholder Information - continued
To reduce expenses, only one copy of most financial reports and prospectuses <R>may</R> be mailed to<R> households</R>, even if more than one <R>person</R> in <R>the household holds shares of</R> a fund. Call Fidelity at 1-800-544-8544 if you need additional copies of financial reports or prospectuses. If you do not want the mailing of these documents to be combined with those for other members of your household, contact Fidelity in writing at P.O. Box 5000, Cincinnati, Ohio 45273-8692.
Electronic copies of most financial reports and prospectuses are available at Fidelity's web site. To participate in Fidelity's electronic delivery program, call Fidelity or visit Fidelity's web site for more information.
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 sell and exchange by telephone, call Fidelity for instructions.
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.
Fidelity may 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 Fidelity, 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 accounts with Fidelity maintained by Fidelity Service Company, Inc. or <R>FBS LLC</R> 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 for Spartan Arizona Municipal Income or $10,000 for Spartan Arizona Municipal Money Market (except accounts not subject to account minimums), you will be given 30 days' notice to reestablish the minimum balance. If you do not increase your balance, Fidelity may close your account and send the proceeds to you. Your shares will be sold 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.
Prospectus
Shareholder Information - continued
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:
Fidelity may charge a fee for certain services, such as providing historical account documents.
Dividends and Capital Gain Distributions
Each fund earns interest, dividends, and other income from its investments, and distributes this income (less expenses) to shareholders as dividends. Each fund may also realize capital gains from its investments, and distributes these gains (less losses), if any, to shareholders as capital gain distributions.
Spartan Arizona Municipal Income normally declares dividends daily and pays them monthly. The bond fund normally pays capital gain distributions in October and December.
Distributions you receive from Spartan Arizona Municipal Money Market consist primarily of dividends. The money market fund normally declares dividends daily and pays them monthly.
Earning Dividends
Shares begin to earn dividends on the first business day following the day of purchase.
Shares earn dividends until, but not including, the next business day following the day of redemption.
When you open an account, specify on your application how you want to receive your distributions. The following options may be available for each fund's distributions:
1. Reinvestment Option. Your dividends 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 will be automatically reinvested in additional shares of the fund. Your dividends will be paid in cash.
Prospectus
Shareholder Information - continued
3. Cash Option. Your dividends and capital gain distributions, if any, will be paid in cash.
4. Directed Dividends® Option. Your dividends will be automatically invested in shares of another identically registered Fidelity fund. Your capital gain distributions, if any, will be automatically invested in shares of another identically registered Fidelity fund, automatically reinvested in additional shares of the fund, or paid in cash.
Not all distribution options are available for every account. If the option you prefer is not listed on your account application, or if you want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the U.S. Postal Service does not deliver your checks, your distribution option may be converted to the Reinvestment Option. You will not receive interest on amounts represented by uncashed distribution checks.
As with any investment, your investment in a fund could have tax consequences for you.
Taxes on distributions. Each fund seeks to earn income and pay dividends exempt from federal income tax and Arizona personal income tax.
A portion of the dividends you receive may be subject to federal, state, or local income tax or may be subject to the federal alternative minimum tax. You may also receive taxable distributions attributable to a fund's sale of municipal bonds.
For federal tax purposes, each fund's distributions of short-term capital gains and gains on the sale of bonds characterized as market discount are taxable to you as ordinary income, while each fund's distributions of long-term capital gains, if any, are taxable to you generally as capital gains.
For Arizona personal income tax purposes, distributions derived from interest on municipal securities of Arizona issuers and from interest on qualifying securities issued by U.S. territories and possessions are generally exempt from tax. Distributions that are federally taxable as ordinary income or capital gains are generally subject to Arizona personal income tax.
If a fund's distributions exceed its income and capital gains realized in any year, all or a portion of those distributions may be treated as a return of capital to shareholders for federal income tax or Arizona personal income tax purposes. A return of capital generally will not be taxable to you but will reduce the cost basis of your shares and result in a higher reported capital gain or a lower reported capital loss when you sell your shares.
If you buy shares when a fund has realized but not yet distributed income or capital gains, you will be "buying a dividend" by paying the full price for the shares and then receiving a portion of the price back in the form of a potentially taxable distribution.
Prospectus
Shareholder Information - continued
Any taxable distributions you receive from a fund will normally be taxable to you when you receive them, regardless of your distribution option. If you elect to receive distributions in cash or to invest distributions automatically in shares of another Fidelity fund, you will receive certain December distributions in January, but those distributions will be taxable as if you received them on December 31.
Taxes on transactions. Your bond fund redemptions, including exchanges, may result in a capital gain or loss for federal and Arizona personal income tax purposes. A capital gain or loss on your investment in a fund generally is the difference between the cost of your shares and the price you receive when you sell them.
Prospectus
Each fund is a mutual fund, an investment that pools shareholders' money and invests it toward a specified goal.
FMR is each fund's manager.
As of <R>March 31, 2000, FMR had approximately $639.1 billion</R> in discretionary assets under management.
As the manager, FMR is responsible for choosing each fund's investments and handling its business affairs.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New Hampshire, serves as a sub-adviser for each fund. FIMM is primarily responsible for choosing investments for each fund.
FIMM is an affiliate of FMR. As of <R>March 31, 2000, FIMM had approximately $206.8 billion</R> in discretionary assets under management.
Christine Thompson is <R>Vice President</R> and manager of Spartan Arizona Municipal Income Fund, which she has managed since July 1998. She also <R>manages other Fidelity funds whose shares are not offered through this prospectus.</R> Since joining Fidelity in 1985, Ms. Thompson has worked as a senior research analyst and manager.
From time to time a manager, analyst, or other Fidelity employee may express views regarding a particular company, security, industry, or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Each fund pays a management fee to FMR. The management fee is calculated and paid to FMR every month. FMR pays all of the other expenses of each fund with limited exceptions.
Spartan Arizona Municipal Income's and Spartan Arizona Municipal Money Market's annual management fee rate is <R>0.55% and 0.50%</R>, respectively, of its average net assets.
FMR pays FIMM for providing sub-advisory services.
FMR may, from time to time, agree to reimburse the funds for management fees above a specified limit. FMR retains the ability to be repaid by a fund if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be discontinued by FMR at any time, can decrease a fund's expenses and boost its performance.
Fidelity Distributors Corporation (FDC) distributes each fund's shares.
Each fund has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 that 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 providing services intended to result in the sale of fund shares and/or shareholder support services. FMR, directly or through FDC, may pay <R>significant</R> amounts to intermediaries, such as banks, broker-dealers, and other service-providers, that provide those services. Currently, the Board of Trustees of each fund has authorized such payments.
Prospectus
Fund Services - continued
If payments made by FMR to FDC or to intermediaries under a Distribution and Service Plan were considered to be paid out of a fund's assets on an ongoing basis, they might increase the cost of your investment and might cost you more than paying other types of sales charges.
To receive payments made pursuant to a Distribution and Service Plan, intermediaries must sign the appropriate agreement with FDC in advance.
<R>From time to time, FDC may offer special promotional programs to investors who purchase shares of Fidelity funds. For example, FDC may offer merchandise, discounts, vouchers, or similar items to investors who purchase shares of certain Fidelity funds during certain periods. To determine if you qualify for any such programs, contact Fidelity or visit our web site at www.fidelity.com.</R>
FMR may allocate brokerage transactions in a manner that takes into account the sale of shares of a fund, provided that the fund receives brokerage services and commission rates comparable to those of other broker-dealers.
No dealer, sales representative, or any other person has been authorized to give any information or to make any representations, other than those contained in this prospectus and in the related statement of additional information (SAI), in connection with the offer contained in this prospectus. If given or made, such other information or representations must not be relied upon as having been authorized by the funds or FDC. This prospectus and the related SAI do not constitute an offer by the funds or by FDC to sell shares of the funds to or to buy shares of the funds from any person to whom it is unlawful to make such offer.
Prospectus
The financial highlights tables are intended to help you understand each fund's financial history for <R>the past 5 years.</R> Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, independent accountants, whose reports, along with each fund's financial highlights and financial statements, are included in each fund's annual report. A free copy of each annual report is available upon request.
<R>Spartan Arizona Municipal Income</R>
|
<R>Years ended August 31, |
2000 |
1999 |
1998 |
1997 |
1996</R> |
|
<R>Selected Per-Share Data |
|
|
|
|
</R> |
|
<R>Net asset value, beginning of period |
$ 10.530 |
$ 10.980 |
$ 10.740 |
$ 10.460 |
$ 10.640</R> |
|
<R>Income from Investment Operations |
|
|
|
|
</R> |
|
<R> Net interest income |
.486 B |
.458 |
.473 |
.483 |
.514</R> |
|
<R> Net realized and unrealized gain (loss) |
.189 |
(.412) |
.279 |
.351 |
(.022)</R> |
|
<R> Total from investment operations |
.675 |
.046 |
.752 |
.834 |
.492</R> |
|
<R>Less Distributions |
|
|
|
|
</R> |
|
<R> From net interest income |
(.485) |
(.458) |
(.473) |
(.484) |
(.514)</R> |
|
<R> From net realized gain |
(.001) |
(.016) |
(.040) |
(.070) |
(.160)</R> |
|
<R> In excess of net realized gain |
(.003) |
(.024) |
- |
- |
-</R> |
|
<R> Total distributions |
(.489) |
(.498) |
(.513) |
(.554) |
(.674)</R> |
|
<R>Redemption fees added to paid in capital |
.004 |
.002 |
.001 |
.000 |
.002</R> |
|
<R>Net asset value, end of period |
$ 10.720 |
$ 10.530 |
$ 10.980 |
$ 10.740 |
$ 10.460</R> |
|
<R>Total Return A |
6.69% |
0.38% |
7.16% |
8.16% |
4.72%</R> |
|
<R>Ratios and Supplemental Data |
|
|
|
|
</R> |
|
<R>Net assets, end of period (000 omitted) |
$ 34,221 |
$ 29,642 |
$ 24,606 |
$ 19,766 |
$ 20,388</R> |
|
<R>Ratio of expenses to average net assets |
.55% |
.55% |
.55% |
.55% |
.30% C</R> |
|
<R>Ratio of expenses to average net assets |
.48% D |
.54% D |
.54% D |
.53% D |
.30%</R> |
|
<R>Ratio of net interest income to |
4.67% |
4.21% |
4.35% |
4.55% |
4.82%</R> |
|
<R>Portfolio turnover rate |
37% |
12% |
25% |
27% |
32%</R> |
<R>A The total returns would have been lower had certain expenses not been reduced during the periods shown.</R>
<R>B Net interest income per share has been calculated based on average shares outstanding during the period.</R>
<R>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.</R>
<R>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.</R>
Prospectus
Appendix - continued
<R>Spartan Arizona Municipal Money Market </R>
|
<R>Years ended August 31, |
2000 |
1999 |
1998 |
1997 |
1996</R> |
|
<R>Selected Per-Share Data |
|
|
|
|
</R> |
|
<R>Net asset value, beginning of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Income from Investment Operations |
|
|
|
|
</R> |
|
<R> Net interest income |
.034 |
.028 |
.034 |
.033 |
.035</R> |
|
<R>Less Distributions |
|
|
|
|
</R> |
|
<R> From net interest income |
(.034) |
(.028) |
(.034) |
(.033) |
(.035)</R> |
|
<R>Net asset value, end of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Total Return A, B |
3.50% |
2.84% |
3.41% |
3.39% |
3.52%</R> |
|
<R>Ratios and Supplemental Data |
|
|
|
|
</R> |
|
<R>Net assets, end of period (000 omitted) |
$ 105,704 |
$ 90,657 |
$ 94,523 |
$ 88,134 |
$ 82,741</R> |
|
<R>Ratio of expenses to average net assets |
.50% |
.50% |
.36% C |
.35% C |
.22% C</R> |
|
<R>Ratio of net interest income to |
3.46% |
2.79% |
3.36% |
3.34% |
3.44%</R> |
<R>A The total returns would have been lower had certain expenses not been reduced during the periods shown.</R>
<R>B Total returns do not include the account closeout fee.</R>
<R>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.</R>
Prospectus
You can obtain additional information about the funds. The funds' SAI includes more detailed information about each fund and its investments. The SAI is incorporated herein by reference (legally forms a part of the prospectus). Each fund's annual and semi-annual reports include a discussion of the fund's holdings and recent market conditions and the fund's investment strategies that affected performance.
For a free copy of any of these documents or to request other information or ask questions about a fund, call Fidelity at 1-800-544-8544. In addition, you may visit Fidelity's web site at www.fidelity.com for a free copy of a prospectus or an annual or semi-annual report or to request other information.
|
<R>The SAI, the funds' annual and semi-annual reports and other related materials are available from the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) Database on the SEC's web site (http://www.sec.gov). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to [email protected] or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102. You can also review and copy information about the funds, including the funds' SAI, at the SEC's Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the operation of the SEC's Public Reference Room.</R> Investment Company Act of 1940, File Numbers, 811-2460 and 811-6452. |
Spartan, Fidelity Investments & (Pyramid) Design, <R>FAST,</R> Fidelity Money Line, Fidelity Automatic Account Builder, Fidelity On-Line Xpress+, and Directed Dividends are registered trademarks of FMR Corp.
<R>Fidelity Portfolio Advisory Services is a registered service mark of FMR Corp.</R>
<R>1.536771.103 AZI/SPZ-pro-</R>1000
´SPARTAN® ARIZONA MUNICIPAL INCOME FUND
A Fund of <R>Fidelity</R> Union Street Trust
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
A Fund of Fidelity Union Street Trust II
STATEMENT OF ADDITIONAL INFORMATION
<R>October 23, 2000</R>
This statement of additional information (SAI) is not a prospectus. Portions of each fund's annual report are incorporated herein. The annual <R>report is</R> supplied with this SAI.
To obtain a free additional copy of<R> the</R> prospectus, dated October<R> 23, 2000</R>, or an annual report, please call Fidelity at 1-800-544-8544 or visit Fidelity's <R>web</R> site at www.fidelity.com.
|
TABLE OF CONTENTS |
PAGE |
|
Investment Policies and Limitations |
|
|
Special Considerations Regarding Arizona |
|
|
Special Considerations Regarding Puerto Rico |
|
|
Portfolio Transactions |
|
|
Valuation |
|
|
Performance |
|
|
Additional Purchase, Exchange and Redemption Information |
|
|
Distributions and Taxes |
|
|
Trustees and Officers |
|
|
Control of Investment Advisers |
|
|
Management Contracts |
|
|
Distribution Services |
|
|
Transfer and Service Agent Agreements |
|
|
Description of the Trusts |
|
|
Financial Statements |
|
|
Appendix |
AZI/SPZ-<R>ptb</R>-1000
1.461772.103
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109
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 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 in connection with the insurance program established by the fund pursuant to an exemptive order issued by the Securities and Exchange Commission or as otherwise 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<R> or in connection with investments in other investment companies</R>;
(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; <R>securities of other investment companies;</R> 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;
(5) purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities); or
(7) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements.
(8) The fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and limitations as the fund.
The following investment limitations are not fundamental and may be changed without shareholder approval.
(i) In order to qualify as a "regulated investment company" under subchapter M of the Internal Revenue Code of 1986, as amended, the fund currently intends to comply with certain diversification limits imposed by subchapter M.
(ii) The fund does not currently intend to sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short.
(iii) The fund does not currently intend to purchase securities on margin, except that the fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) by engaging in reverse repurchase agreements with any party (reverse repurchase agreements are treated as borrowings for purposes of fundamental investment limitation (2)).
(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 limitation (i), Subchapter M generally requires the fund to invest no more than 25% of its total assets in securities of any one issuer and to invest at least 50% of its total assets so that no more than 5% of the fund's total assets are invested in securities of any one issuer. However, Subchapter M allows unlimited investments in cash, cash items, government securities (as defined in Subchapter M) and securities of other investment companies. These tax requirements are generally applied at the end of each quarter of the fund's taxable year.
For purposes of 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 were 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 <R><Click Here></R>.
For purposes of normally investing at least 65% of the fund's total assets in municipal securities whose interest is exempt from Arizona personal income tax, FMR interprets "total assets" to exclude collateral received for securities lending transactions.
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 in connection with the insurance program established by the fund pursuant to an exemptive order issued by the Securities and Exchange Commission or as otherwise 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 invested 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 treated as borrowings for purposes of fundamental investment limitation (3)).
(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 <R>(1) and (5)</R> 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 <R>limitations</R> (5) 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 (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 were invested in illiquid securities, it would consider appropriate steps to protect liquidity.
For purposes of normally investing at least 65% of the fund's total assets in municipal securities<R> whose interest is exempt from Arizona personal income tax,</R> FMR interprets "total assets" to exclude collateral received for securities lending transactions.
The following pages contain more detailed information about types of instruments in which a fund may invest, strategies <R>Fidelity Management & Research Company (FMR)</R> 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.
Asset-Backed Securities represent interests in pools of purchase contracts, financing leases, or sales agreements entered into by municipalities. 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 other factors including changes in interest rates, the availability of information concerning the pool and its structure, 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.
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.
<R>Cash Management. A fund can hold uninvested cash or can invest it in cash equivalents such as money market securities, repurchase agreements or shares of money market funds. Generally, these securities offer less potential for gains than other types of securities. A municipal fund's uninvested cash may earn credits that reduce fund expenses.</R>
Central Cash Funds are money market funds managed by FMR or its affiliates that seek to earn a high level of current income (free from federal income tax in the case of a municipal money market fund) while maintaining a stable $1.00 share price. The funds comply with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of their investments.
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.
Futures and Options. The following paragraphs pertain to futures and options: 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.
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 fund <R>(other than the money market fund)</R> 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 fund's <R>(other than the money market fund's)</R> 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. 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 Securities cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. Difficulty in selling securities may result in a loss or may be costly to a fund. 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 securities. In determining the liquidity of a fund's investments, FMR may consider various factors, including (1) the frequency and volume of trades and quotations, (2) the number of dealers and prospective purchasers in the marketplace, (3) dealer undertakings to make a market, and (4) the nature of the security and the market in which it trades (including any demand, put or tender features, the mechanics and other requirements for transfer, any letters of credit or other credit enhancement features, any ratings, the number of holders, the method of soliciting offers, the time required to dispose of the security, and the ability to assign or offset the rights and obligations of the security).
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<R> - </R>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.
Investment-Grade Debt Securities. Investment-grade debt securities are medium and high-quality securities. Some may possess speculative characteristics and may be more sensitive to economic changes and to changes in the financial conditions of issuers. A debt security is considered to be investment-grade if it is rated investment-grade by Moody's Investors Service, <R>Standard & Poor's, or Fitch Inc.,</R> or is unrated but considered to be of equivalent quality by FMR.
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. 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 Insurance. The money market fund participates in a mutual insurance company solely with other funds advised by FMR or its affiliates. This company provides insurance coverage for <R>specified types of</R> losses on certain money market instruments held by a participating fund, including losses from nonpayment of principal or interest or a bankruptcy or insolvency of the issuer or credit support provider, if any. The insurance does not cover losses resulting from changes in interest rates or other market developments. <R>A participating</R> fund is charged an annual premium for the insurance coverage and may be subject to a special assessment if covered losses exceed certain levels. A participating fund <R>is subject to limits on the amount it</R> may recover and may incur losses regardless of the insurance.
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 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 <R>Investors</R> 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 <R>Investors</R> 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 <R>Investors</R> 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 <R>Investors</R> 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. If a municipality stops making payments or transfers its obligations to a private entity, the obligation could lose value or become taxable.
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. 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. 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 (NAV).
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. In exchange for this benefit, a fund may accept a lower interest rate. Securities with put features 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.
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. 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.
Repurchase Agreements involve an agreement to purchase a security and 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. The value of the security purchased may be more or less than the price at which the counterparty has agreed to purchase the security. In addition, delays or losses could result if the other party to the agreement defaults or becomes insolvent. The funds will engage in repurchase agreement transactions with parties whose creditworthiness has been reviewed and found satisfactory by FMR.
Restricted Securities are subject to legal restrictions on their sale. Difficulty in selling securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security.
Reverse Repurchase Agreements. In a reverse repurchase agreement, 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. 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 a fund's yield and may be viewed as a form of leverage.
Sources of Liquidity or Credit Support. Issuers may employ various forms of credit and liquidity enhancements, including letters of credit, guarantees, puts, and demand features, and insurance provided by domestic or foreign entities such as banks and other financial institutions. FMR may rely on its evaluation of the credit of the liquidity or credit enhancement provider in determining whether to purchase a security supported by such enhancement. 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. Changes in the credit quality of the entity providing the enhancement could affect the value of the security or a fund's share price.
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.
Temporary Defensive Policies. Each fund reserves the right to invest without limitation in short-term instruments, to hold a substantial amount of uninvested cash, or to invest more than normally permitted in taxable obligations for temporary, defensive purposes.
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.
When-Issued and Forward Purchase or Sale Transactions involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take 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 pursuant to one of these transactions, 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 a purchase is outstanding, the purchases may result in a form of leverage. When a fund has sold a security pursuant to one of these transactions, 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 when-issued or forward transaction and may sell the underlying securities before delivery, which may result in capital gains or losses for the fund.
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 REGARDING 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 funds. 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 funds 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. Payments for the fiscal year ending June 30, 2000 for the bonded indebtedness of various State agencies, boards, departments and instrumentalities (including the Department of Transportation and State educational institutions) will total approximately $108.26 million. Payments for the fiscal year ending June 30, 2000 for outstanding Certificates of Participation of State agencies and instrumentalities will total approximately $39.25 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 1998, the State's population grew 75.4% and is currently estimated to be 4.76 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 1998. For the fiscal year ended June 30, 1998, general fund revenues increased by approximately 3.8% and the State enjoyed a general fund balance of approximately $525.8 million at year end. General fund revenues for that period were approximately $5.23 billion (not including the carry forward balance).
Revenues and Expenditures - Fiscal Year 1999. As of April 1999, the State's general fund revenues for Fiscal Year 1999 were projected to be $5.54 billion (not including the carry forward balance) which would be up 6.0% from the prior year. Total general fund expenditures for that period were projected to be $5.89 billion resulting in a projected fund balance of approximately $179.3 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 Legislature to continue to enact substantial tax reduction measures. During the 1999 legislative session the Legislature enacted reductions in corporate income and motor vehicle license taxes.
Current Arizona economic indicators led the State Budget officials in April 1999 to project that Arizona's growth should continue but at a slower pace through year 2001. Personal income which grew at a rate of 7.5% in calendar year 1998 (second fastest among the 50 states) is expected to grow 7.4% in calendar year 1999, 7.2% in calendar year 2000 and 7.1% in calendar year 2001.
Employment growth in Arizona showed an increase of 4.7% in calendar year 1998 and is expected to show an increase of 3.5% in calendar year 1999, 2.9% in calendar year 2000 and 3% in calendar year 2001.
Average unemployment in Arizona in calendar year 1998 was 4.0% and is expected to drop to 3.8% in calendar year 1999 and then rise to 4.9% in calendar year 2000 and 5.3% in calendar year year 2001.
Fiscal Years 2000 and 2001 Budgets. As a result of recent legislative changes made to the State's budgeting procedures, the entire State budgeting and program evaluation is now on a two-year cycle. The major emphasis of the first regular session of the Legislature during a two-year cycle 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 2000 and 2001 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 corporate income tax and the motor vehicle license tax. These reductions are expected to total $16 million in Fiscal Year 2000 and $43 million in Fiscal Year 2001. Total general fund revenues (not including the carry forward balance but including the tax reduction measures) are expected to increase 4.6% in Fiscal Year 2000 and 5.4% in Fiscal Year 2001. The State Budget staff's April 1999 forecast for Fiscal Year 2000 showed projected General Fund revenues of $5.974 billion (including the projected carry forward balance of $179 million) and expenditures of $5.918 billion leaving a General Fund balance as of June 30, 2000 of $56.3 million. The forecast for Fiscal Year 2001 showed projected General Fund revenues of $6.166 billion (including the projected carry forward balance of $56.3 million) and expenditures of $6.155 billion leaving a General Fund balance as of June 30, 2001 of $10.6 million. The projected expenditures for Fiscal Year 2000 represent an increase of approximately 0.53% over Fiscal Year 1999. The expenditures for Fiscal Years 2000 and 2001 include approximately $443 million and $339 million, respectively, for the 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, 1998 was approximately $91.6 million and as of April 1999 the Budget staff estimated that the balance in the Fund as of June 30, 2000 would be approximately $402.4 million.
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
<R>The fiscal year of the Government of Puerto Rico begins each July 1. The Governor is constitutionally required to submit to the Legislature an annual balanced budget of capital improvements and operating expenses of the central government for the ensuing fiscal year. The annual budget is prepared by the Office of Management and Budget ("OMB"), working with the Planning Board, the Department of the Treasury, and other government offices and agencies. Section 7 of Article VI of the Constitution provides that "The appropriations made for any fiscal year shall not exceed the total revenues, including available surplus, estimated for said fiscal year unless the imposition of taxes sufficient to cover said appropriations is provided by law."</R>
<R>The annual budget, which is developed utilizing elements of program budgeting and zero-base budgeting, includes an estimate of revenues and other resources for the ensuing fiscal year under: (i) laws existing at the time the budget is submitted; and (ii) legislative measures proposed by the Governor and submitted with the proposed budget, as well as the Governor's recommendations as to appropriations that in his judgment are necessary, convenient, and in conformity with the four-year investment plan prepared by the Planning Board.</R>
<R>A Budgetary Fund was created by Act No. 147 of June 18, 1980, as amended (the "Budgetary Fund Act"), to cover the appropriations approved in any fiscal year in which the revenues available for such fiscal year are insufficient, honor the public debt, and provide for unforeseen circumstances in the provision of public services. The Budgetary Fund Act was amended in 1994 to require that an annual legislative appropriation equal to one third of one percent (.33%) of the total budgeted appropriations for each fiscal year be deposited in the Budgetary Fund. In 1997, the Budgetary Fund Act was further amended to increase the annual legislative appropriation required to be deposited in the Budgetary Fund to one percent (1%) of the total revenues of the preceding fiscal year, beginning in fiscal year 2000. In addition, other income (not classified as revenues) that is not assigned by law to a specific purpose is also required to be deposited in the Budgetary Fund. The maximum balance of the Budgetary Fund may not exceed six percent (6%) of the total appropriations included in the budget for the preceding fiscal year.</R>
<R>In Puerto Rico, the central government has many functions which in the fifty states are the responsibility of local government, such as providing public education and police and fire protection. The central government also makes large annual grants to the University of Puerto Rico and to the municipalities. Debt service on Sugar Corporation notes paid by the Government of Puerto Rico is included in current expenses for economic development, and debt service on Urban Renewal and Housing Corporation bonds and notes and on Housing Bank and Finance Agency mortgage subsidy bonds paid by the Government of Puerto Rico is included in current expenses for housing.</R>
<R>Approximately 25.2% of the General Fund is committed, including debt service on direct debt of the Commonwealth and on the debt of the Sugar Corporation, municipal subsidies, grants to the University of Puerto Rico, contributions to Aqueduct and Sewer Authority, and rental payments to Public Building Authority, among others.</R>
<R>In the fiscal 1999 budget revenues and other resources of all budgetary funds total $10,308,078,000 excluding balances from the previous fiscal year and general obligation bonds authorized. The estimated net increase in General Fund revenues in fiscal 1999 is accounted for by increases in personal income taxes (up $258,354,000), retained non-resident income tax (up $176,921,000), general excise tax of 5% (up $60,259,000), motor vehicles and accessories (up $61,569,000), federal excise taxes on off-shore shipments (up $33,033,000), special excise tax on certain petroleum products (up $20,282,000), corporation income taxes (up $17,347,000), registration and document certification fees (up $13,433,000), alcoholic beverages (up $5,347,000), licenses (up $4,681,000), electronic lottery (up $4,965,000) and decreases in property taxes (down $3,460,000), customs (down $11,864,000) and tollgate taxes (down $56,420,000).</R>
<R>Current expenses and capital improvements of all budgetary funds total $10,687,869,000, an increase of $951,255,000 from fiscal 1998. The major changes in General Fund expenditures by program in fiscal 1999 are: public safety and protection (up $187,444,000), education (up $165,661,000), health (up $160,256,000), general government (up $77,714,000), other debts (up $69,721,000), welfare (up $24,182,000), economic development (up $15,865,000), special pension contributions (up $6,115,000), and decreases in transportation and communications (down $83,000), housing (down $620,000), debt service (down $13,849,000), and contributions to municipalities (down $37,969,000).</R>
<R>The general obligation bond authorization for the fiscal 1999 budget was $475,000,000.</R>
<R>In the fiscal 2000 budget proposal revenues and other resources of all budgetary funds total $10,426,475,000 excluding balances from the previous fiscal year and general obligation bonds authorized. The estimated net increase in General Fund revenues in fiscal 2000 is accounted for by increases in personal income taxes (up $199,000,000), corporation income taxes (up $102,000,000), general excise tax of 5% (up $65,000,000), income tax withheld from non-residents (up $44,000,000), motor vehicles and accessories (up $22,000,000), alcoholic beverages (up $13,000,000), registration and document certification fees (up $10,000,000), and decreases in property taxes (down $2,000,000), special excise tax on certain petroleum products (down $3,000,000), cigarettes (down $6,000,000), federal excise taxes on off-shore shipments (down $24,000,000), and tollgate taxes (down $14,000,000).</R>
<R>Current expenses and capital improvements of all budgetary funds total $11,012,166,000, an increase of $324,297,000 from fiscal 1999. The major changes in General Fund expenditures by program in fiscal 2000 are: general government (up $157,265,000), health (up $83,310,000), debt service (up $94,550,000), contributions to municipalities (up $66,296,000), education (up $75,035,000), transportation and communications (up $13,636,000), special pension contributions (up $3,792,000), housing (down $4,645,000), economic development (down $30,201,000), public safety and protection (down $26,999,000), and other debts service (down $106,488,000).</R>
<R>The general obligation bond authorization for the fiscal 2000 budget was $475,000,000.</R>
<R>The Government of Puerto Rico is required to contribute directly to three retirement systems for public employees. The Government of Puerto Rico is responsible for approximately 66% of total employer contributions to Employees Retirement System and 100% and 99% of total employer contributions to the Judiciary and Teachers Retirement Systems, respectively. As of July 1, 1998 the total pension benefit obligation for the Employees Retirement System and the Judiciary Retirement System was $7,638,000,000 and $95,500,000, respectively, and the unfunded pension benefit obligation for the same period was $5,963,000,000 and $28,400,000, respectively. As of June 30, 1998, the accrued pension liability of the Teachers Retirement System was $3,154,678,299, the value of assets amounted to $2,135,436,000, and the resulting unfunded accrued liability was $1,019,242,299, an increase of $48,437,260 from the prior valuation made as of June 30, 1997. </R>
<R>On February 1, 1990, the Legislature of Puerto Rico enacted Act No. 1 amending the organic act of the Employees Retirement System to reduce the future pension liabilities of the Employees Retirement System. Also, Act No. 305 of September 24, 1999, further amends the organic act of the Employees Retirement System to change it, prospectively, from a defined benefit system to a defined contribution system. Based on actuarial studies conducted by the actuary of the Employees Retirement System, it is expected that the implementation of the defined contribution system will allow the Government of Puerto Rico to reduce the current actuarial deficit of the Employees Retirement System. Also, the law approving the sale of a controlling interest in PRTC to a consortium led by GTE International Telecommunications Incorporated provides that any future proceeds received by the Government from the sale of its remaining stock ownership in PRTC will be transferred to the Employees Retirement System to reduce its accumulated unfunded pension benefit obligation. It is recognized that it will be necessary to further strengthen the finances of the Teachers Retirement System in order to assure that combined contributions and investment income continue to exceed benefit payments, avoiding the possible future drawdown of assets.</R>
The economy of Puerto Rico is fully integrated with that of the United States. In fiscal <R>1998</R>, trade with the United States accounted for approximately <R>90%</R> of Puerto Rico's exports and approximately <R>61%</R> of its imports. In this regard, in fiscal <R>1998</R> Puerto Rico experienced a <R>$8.5</R> billion positive adjusted merchandise trade balance.
Since fiscal 1985, personal income, both aggregate and per capita, has increased consistently each fiscal year. In fiscal <R>1998</R>, aggregate personal income was <R>$33.7</R> billion (<R>$30.8</R> billion in 1992 prices) and personal per capita income was <R>$8,817 ($8,063</R> in 1992 prices). Gross product in fiscal <R>1995</R> was <R>$28.4</R> billion <R>($25.9</R> billion in 1992 prices) and gross product in fiscal <R>1999</R> was <R>$38.1</R> billion (<R>$29.7</R> billion in 1992 prices). This represents an increase in gross product of <R>34%</R> from fiscal <R>1995</R> to <R>1999 (14.5%</R> in 1992 prices).
Puerto Rico's economic expansion, which has lasted over ten years, continued throughout the <R>five year</R> period from fiscal<R> 1995</R> through fiscal <R>1999</R>. 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, <R>low oil prices</R> and the relatively low cost of borrowing funds during the period.
Average employment increased from<R> 1,051,000</R> in fiscal <R>1995</R>, to <R>1,147,000</R> in fiscal <R>1999</R>. Unemployment, although at relatively low historical levels, remains above the U.S. average. Average unemployment decreased from <R>13.8%</R> in fiscal <R>1995</R>, to <R>12.5%</R> in fiscal <R>1999</R>.
Manufacturing is the largest sector in the economy, accounting for <R>$23.0 </R>billion or <R>42.8%</R> of gross domestic product in fiscal <R>1998</R>. The manufacturing sector employed <R>141,068</R> workers as of March <R>1999</R>. 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.<R> While total employment in the manufacturing sector decreased by 12,205 from March 1997 to March 1999, other indicators suggest that manufacturing production did not decrease. Average weekly hours worked increased 5.2%, industrial energy consumption increased 0.7% and exports increased 45.7% from fiscal 1997 to fiscal 1999. Most of the decreases in employment have been concentrated in the labor intensive industries, particularly apparel, textile and tuna manufacturing. </R>The <R>services</R> 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 <R>it</R> is the sector that employs the greatest number of people. In fiscal <R>1998</R>, the service sector generated <R>$19.6</R> billion in gross domestic product or <R>36.5%</R> of the total. Employment in this sector grew from <R>478,079</R> in fiscal <R>1994</R> to <R>572,765</R> in fiscal <R>1998</R>, a cumulative increase of<R> 19.8%</R>. This increase was greater than the <R>12.5%</R> cumulative growth in employment over the same period. The Government sector of the Commonwealth plays an important role in the economy of the island. In fiscal year <R>1998</R>, the Government accounted for $5.2 billion of Puerto Rico's gross domestic product, <R>or 9.8% of the total,</R> and provided <R>21.5%</R> of the total employment. The construction industry has experienced real growth since fiscal 1987. In fiscal <R>1999</R>, investment in construction rose to <R>an unprecedented $6.6</R> billion, an increase of <R>23.9%</R> as compared to <R>$5.4</R> billion for fiscal <R>1998</R>. Tourism also contributes significantly to the island economy, accounting for <R>6.4%</R> of the island's gross domestic product in fiscal <R>1998</R>.
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 <R>11,095</R> at the end of fiscal <R>1999</R> and to a projected <R>12,650</R> by the end of fiscal <R>2000</R>.
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 <R>governmental</R> 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 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; (iii) the Electric Power Authority executed power purchase contracts with private power producers under which two cogeneration plants (with a total capacity of <R>approximately 874</R> megawatts),<R> using fuels other than oil,</R> will be constructed; (iv) the Corrections Administration entered into operating agreements with two private companies for the operation of three new correctional facilities; (v) the Government entered into a definitive agreement to sell certain assets of a pineapple juice processing business and sold certain mango growing operations; (vi) the Government is in the process of transferring to local sugar cane growers certain sugar processing facilities; (vii) the Government sold <R>three</R> hotel properties and is currently negotiating the sale of a complex consisting of two hotels and a convention center; and (viii) the Government <R>sold a controlling interest in</R> the Puerto Rico Telephone Company,<R> a subsidiary of</R> the <R>Telephone Authority, to a consortium led by GTE International Telecommunications Incorporated</R>.
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 <R>77 </R>municipalities out of a total of 78 on the island. It is expected that <R>the last municipality</R> will be added <R>in July 2000</R>. 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 <R>August 1, 1999</R>, over <R>1.7</R> million persons were participating in the program at an estimated annual cost to Puerto Rico for fiscal <R>2000</R> of approximately <R>$994</R> 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 <R>has</R> sold <R>forty-four</R> health facilities to private companies and is currently in <R>the process of closing </R>the sale of <R>fourteen additional</R> 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 <R>incentive</R> 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 <R>dividend</R> 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 <R>are</R> 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 <R>Bill</R> 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 <R>establish</R> 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 <R>Credit</R> 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 <R>Credit</R>") 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 <R>Credit</R> 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 <R>Credit</R> 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 <R>Credit</R>, 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<R> that were operating in Puerto Rico on October 13, 1995, and had elected</R> 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 <R>1998, fiscal 1999 and</R> fiscal <R>2000</R> budgets submitted by President Clinton to Congress included a proposal to modify Section 30A to (i) extend the availability of the Section 30A <R>Credit</R> indefinitely; (ii) make it available to companies establishing operations in Puerto Rico after October 13, 1995; and (iii) eliminate the income cap. This proposal was not included in the 1998 or 1999 <R>budgets approved by Congress</R>. 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 <R>Credit</R> 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.
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 investment 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.
Futures transactions are executed and cleared through FCMs who receive commissions for their services.
Each fund may execute portfolio transactions with broker-dealers who provide research and execution services to the fund or other investment 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 investment 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.
To the extent permitted by applicable law, FMR is authorized to allocate portfolio transactions in a manner that takes into account assistance received in the distribution of shares of the funds or other Fidelity funds and to use the research services of brokerage and other firms that have provided such assistance. FMR may use research services provided by and place agency transactions with National Financial Services <R>LLC (NFS)</R>, 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. Prior to August 28, 2000, FMR used research services provided by and placed agency transactions with National Financial Services Corporation (NFSC), 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 <R>that</R> 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 investment accounts which they or their affiliates manage, unless certain requirements are satisfied. Pursuant to such requirements, the Board of Trustees has authorized <R>NFS</R> 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, <R>2000 and 1999</R>, the portfolio turnover rates were 37<R>%</R> and 12%, respectively, for Spartan Arizona Municipal Income. Variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions, or changes in FMR's investment outlook.
A fund may pay both commissions and spreads in connection with the placement of portfolio transactions. <R>The following table shows the brokerage commissions paid by Spartan Arizona Municipal Income Fund. Significant changes in brokerage commissions paid by a fund from year to year may result from changing asset levels throughout the year. </R>For the fiscal years ended August 31, <R>2000</R>, 1999, and 1998, Spartan <R>Arizona Municipal Money Market</R> paid no brokerage commissions.
The following table shows the total amount of brokerage commissions paid by <R>Spartan Arizona Municipal Income Fund</R>.
|
<R> |
Fiscal Year |
Total |
|
<R>Spartan Arizona Municipal Income |
August 31 |
</R> |
|
<R>2000 |
|
$ 36</R> |
|
<R>1999 |
|
$ 42</R> |
|
<R>1998 |
|
$ 299</R> |
For the fiscal <R>year</R> ended August <R>31, 2000</R> the funds paid no brokerage commissions to firms for providing 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 <R>underwritings</R>.
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 or investment accounts managed by FMR <R>or its</R> affiliates. It sometimes happens that the same security is held in the portfolio of more than one of these funds or investment accounts. Simultaneous transactions are inevitable when several funds and investment 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 investment 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.
Each fund's NAV is the value of a single share. The NAV of each fund is computed by adding the value of the fund's investments, cash, and other assets, subtracting its liabilities, and dividing the result by the number of shares outstanding.
Tax-Free Bond Fund. Portfolio securities are valued by various methods. If quotations are not available, fixed-income securities are usually valued on the basis of information furnished by a pricing service that uses a valuation matrix which incorporates both dealer-supplied valuations and electronic data processing techniques. Use of pricing services has been approved by the Board of Trustees. A number of pricing services are available, and the fund may use various pricing services or discontinue the use of any pricing service.
Futures contracts and options are valued on the basis of market quotations, if available. Securities of other open-end investment companies are valued at their respective NAVs.
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 value of such securities. For example, securities and other assets for which there is no readily available market value may be valued in good faith by a committee appointed by the Board of Trustees. In making a good faith determination of the value of a security, the committee may review price movements in futures contracts and American Depositary Receipts (ADRs), market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading.
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.
At such intervals as they deem appropriate, the Trustees consider the extent to which NAV calculated by using market valuations would deviate from the $1.00 per share calculated using amortized cost valuation. 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.
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 fund <R>(other than the money market fund),</R> the yield of a fund, and return fluctuate in response to market conditions and other factors, and the value of a fund's <R>(other than the money market fund's)</R> shares when redeemed may be more or less than their original cost.
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 <R>the fund's</R> short-term trading fee. 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 <R>an investor's</R> account, or the income reported in the fund's financial statements.
Yield information may be useful in reviewing the fund's performance and in providing a basis for comparison with other investment alternatives. However, the fund's yield fluctuates, unlike investments that pay a fixed interest rate over a stated period of time. When comparing investment alternatives, investors should also note the quality and maturity of the portfolio securities of respective investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates the fund's yield will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates the fund's yield will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the fund from the continuous sale of its shares will likely be invested in instruments producing lower yields than the balance of the fund's holdings, thereby reducing the fund's current yield. In periods of rising interest rates, the opposite can be expected to occur.
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.<R> In calculating the money market fund's yield and effective yield, the yield quoted is reduced by the effect of applicable income taxes payable on the shareholder's dividends, using the maximum rate for individual income taxation.</R> In addition to the current yield, the money market fund may quote yields in advertising based on any historical seven-day period. Yields for the money market fund are calculated on the same basis as other money market funds, as required by 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.
Tax-equivalent yields are calculated by dividing <R>that portion of </R>a fund's yield <R>that is tax-exempt</R> by the result of one minus <R>the applicable </R>specified combined federal <R>and/or</R> state income tax rate <R>and adding the quotient to that portion, if any,</R> of <R>the</R> fund's yield that is <R>not tax-exempt</R>.
The following tables show the effect of a shareholder's tax <R>bracket </R>on <R>tax-equivalent </R>yield under federal and state income tax laws <R>for 2000. The first table shows applicable effective income tax rates at various income brackets for 2000</R>. The second table shows<R>, for tax-exempt securities with different yields,</R> the yield <R>on</R> a taxable security <R>that is approximately</R> equivalent to <R>the tax-exempt security's yield after taking into account the effect of various effective income tax rates on the taxable security. </R>Of course, no assurance can be given that a fund will <R>have</R> any specific <R>yield.</R> While <R>each</R> fund invests principally in <R>securities</R> whose interest is exempt from federal and <R>applicable</R> state income tax, <R>some portion of the distributions paid </R>by the fund may be taxable.
Use the first table to find your approximate effective income tax rate taking into account federal and state income taxes for 2000.
|
<R>2000 TAX RATES***</R> |
||||||||
|
<R>Taxable Income* |
|
|
|
|||||
|
<R>Single Return |
Joint Return |
Federal |
Arizona State |
Combined |
||||
|
<R> |
|
|
$ 43,851 |
|
$ 50,000 |
28.00% |
3.20% |
30.3040%</R> |
|
<R>$ 26,251 |
- |
$ 50,000 |
$ 50,001 |
- |
$ 100,000 |
28.00% |
3.74% |
30.6928%</R> |
|
<R>$ 50,001 |
- |
$ 63,550 |
$ 100,001 |
- |
$ 105,950 |
28.00% |
4.72% |
31.3984%</R> |
|
<R>$ 63,551 |
- |
$ 132,600 |
$ 105,951 |
- |
$ 161,450 |
31.00% |
4.72% |
34.2568%</R> |
|
<R>$ 132,601 |
- |
$ 150,000 |
$ 161,451 |
- |
$ 288,350 |
36.00% |
4.72% |
39.0208%</R> |
|
<R>$ 150,001 |
- |
$ 288,350 |
|
- |
|
36.00% |
5.04% |
39.2256%</R> |
|
<R> |
|
|
$ 288,351 |
- |
$ 300,000 |
39.60% |
4.72% |
42.4509%</R> |
|
<R>$ 288,351 |
- |
and up |
$ 300,001 |
- |
and up |
39.60% |
5.04% |
42.6442%</R> |
* Net amount subject to federal income tax after deductions and exemptions. Assumes ordinary income only.
** <R>Assumes a shareholder itemizes deductions. </R>Excludes the impact of <R>any alternative minimum tax,</R> the phaseout of personal exemptions, limitations on itemized deductions, and other credits, exclusions, and adjustments which may increase a taxpayer's marginal <R>income</R> tax rate. An increase in a shareholder's marginal <R>income</R> tax rate would increase that shareholder's tax-equivalent yield.
*** Does not take into account local income taxes, if any, payable on fund distributions.
Having determined your effective <R>income </R>tax <R>rate</R>, use the following table to determine the tax-equivalent yield for a given<R> tax-exempt security's</R> yield.
|
<R>If your combined federal and state effective income tax rate in 2000 is:</R> |
|
|||||||
|
<R> |
30.30% |
30.69% |
31.40% |
34.26% |
39.02% |
39.23% |
42.45% |
42.64%</R> |
|
<R>If a tax-exempt |
</R> |
|||||||
|
<R>security's yield is: |
The tax-equivalent yield would be:</R> |
|
<R>2.0% |
2.87% |
2.89% |
2.92% |
3.04% |
3.28%
|
3.29% |
3.48% |
3.49%</R> |
|
<R>3.0% |
4.30% |
4.33% |
4.37% |
4.56% |
4.92% |
4.94% |
5.21% |
5.23%</R> |
|
<R>4.0% |
5.74% |
5.77% |
5.83% |
6.08% |
6.56% |
6.58% |
6.95% |
6.97%</R> |
|
<R>5.0% |
7.17% |
7.21% |
7.29% |
7.61% |
8.20% |
8.23% |
8.69% |
8.72%</R> |
|
<R>6.0% |
8.61% |
8.66% |
8.75% |
9.13% |
9.84% |
9.87% |
10.43% |
10.46%</R> |
|
<R>7.0% |
10.04% |
10.10% |
10.20% |
10.65% |
11.48% |
11.52% |
12.16% |
12.20%</R> |
|
<R>8.0% |
8.0% |
11.54% |
11.66% |
12.17% |
13.12% |
13.16% |
13.90% |
13.95%</R> |
A fund may invest a portion of its assets in<R> securities </R>that are subject to federal <R>and/or state</R> income taxes. When a fund invests in these <R>securities</R>, its tax-equivalent yield <R>may</R> be lower. In the table above, the tax-equivalent yields are calculated assuming <R>securities</R> are 100% <R>exempt from federal and state income taxes</R>.
Return Calculations. 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. A cumulative return reflects actual performance over a stated period of time. Average annual 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 return of 100% over ten years would produce an average annual 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 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 returns represent averaged figures as opposed to the actual year-to-year performance of a fund.
In addition to average annual returns, <R>a</R> fund may quote unaveraged or cumulative returns reflecting the simple change in value of an investment over a stated period. Average annual and cumulative 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. Returns may be broken down into their components of income and capital (including capital gains and changes in share price) to illustrate the relationship of these factors and their contributions to return. Returns may be quoted on a before-tax or after-tax basis.<R> After-tax returns reflect the return of a hypothetical account after payment of federal and/or state taxes using assumed tax rates. After-tax returns may assume that taxes are paid at the time of distribution or once a year or are paid in cash or by selling shares, that shares are held through the entire period, sold on the last day of the period, or sold at a future date, and distributions are reinvested or paid in cash.</R> Returns may or may not include the effect of <R>a fund's short-term trading fee, the effect of a fund's small account fee, or the effect of a fund's account closeout fee.</R> Excluding a fund's <R>short-term trading fee,</R> small account fee, or account closeout fee from a return calculation produces a higher return figure. Returns, yields and other performance information may be quoted numerically or in a table, graph, or similar illustration.
Net Asset Value. Charts and graphs using a fund's NAVs, adjusted NAVs, and benchmark indexes may be used to exhibit performance. An adjusted NAV includes any distributions paid by a fund and reflects all elements of its return. Unless otherwise indicated, a fund's adjusted NAVs are not adjusted for sales charges, if any.
<R>Historical Bond Fund Results. The following table shows the fund's yield, tax-equivalent yield, and returns for the fiscal period ended August 31, 2000.</R>
<R>Historical Money Market Fund Results. The following table shows the fund's 7-day yield, tax-equivalent yield, and returns for the fiscal period ended August 31, 2000.</R>
<R>For Spartan Arizona Municipal Income, returns include the effect of the fund's 0.50% trading fee, applicable to shares held less than 180 days.</R>
<R>The tax-equivalent yields for Spartan Arizona Municipal Income and Spartan Arizona Municipal Money Market are based on a combined effective federal and state income tax rate of 39.23%.</R>
<R>As of August 31, 2000, none of Spartan Arizona Municipal Income's income was subject to state income taxes. Note that Spartan Arizona Municipal Income may invest in securities whose income is subject to the federal alternative minimum tax.</R>
<R>As of August 31, 2000, an estimated 6.09% of Spartan Arizona Municipal Money Market's income was subject to state income taxes. Note that Spartan Arizona Municipal Money Market may invest in securities whose income is subject to the federal alternative minimum tax.</R>
|
|
|
|
Average Annual Returns |
Cumulative Returns |
||||
|
|
Thirty-/Seven-Day |
Tax- |
One |
Five |
Life of |
One |
Five |
Life of |
|
<R>Spartan AZ Municipal Income |
4.53 |
7.45 |
6.69% |
5.39% |
6.54% |
6.69% |
29.99% |
45.26</R> |
|
<R>Spartan AZ Municipal Money Market |
3.82 |
6.28 |
3.50% |
3.33% |
3.41% |
3.50% |
17.81% |
21.86</R> |
* From October 11, 1994 (commencement of operations).
The returns in the preceding table do not include the effect of the $5 account closeout fee for Spartan Arizona Municipal Money Market.
Note: If FMR had not reimbursed certain fund expenses during these periods, <R>each fund</R>'s returns would have been lower.
The following tables show the income and capital elements of each fund's cumulative return. The tables compare each fund's return to the record of the Standard & Poor's 500SM Index (S&P 500<R>®</R>), the Dow Jones Industrial Average (DJIA), and the cost of living, as measured by the Consumer Price Index (CPI), over the same period. The S&P 500 and DJIA comparisons are provided to show how each fund's return compared to the record of a market capitalization-weighted 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. 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 (commencement of operations) to August 31, <R>2000, a hypothetical $10,000 investment in Spartan Arizona Municipal Income would have grown to $</R>14,526<R>.</R>
|
<R>SPARTAN ARIZONA MUNICIPAL INCOME |
INDEXES</R> |
||||||
|
<R>Fiscal Year Ended |
Value of |
Value of |
Value of |
Total |
S&P 500 |
DJIA |
Cost of |
|
<R>2000 |
$ 10,720 |
$ 3,456 |
$ 350 |
$ 14,526 |
$ 36,286 |
$ 32,345 |
$ 11,560</R> |
|
<R>1999 |
$ 10,530 |
$ 2,746 |
$ 339 |
$ 13,615 |
$ 31,195 |
$ 30,758 |
$ 11,185</R> |
|
<R>1998 |
$ 10,980 |
$ 2,279 |
$ 304 |
$ 13,563 |
$ 22,310 |
$ 21,075 |
$ 10,937</R> |
|
<R>1997 |
$ 10,740 |
$ 1,667 |
$ 250 |
$ 12,657 |
$ 20,639 |
$ 20,954 |
$ 10,763</R> |
|
<R>1996 |
$ 10,460 |
$ 1,075 |
$ 166 |
$ 11,701 |
$ 14,674 |
$ 15,146 |
$ 10,529</R> |
|
<R>1995* |
$ 10,640 |
$ 534 |
$ 0 |
$ 11,174 |
$ 12,360 |
$ 12,164 |
$ 10,234</R> |
* 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 <R>$13,772.</R> 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 <R>$2,918</R> for dividends and <R>$314 </R>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 less than 180 days.
During the period from October 11, 1994 (commencement of operations) to August 31<R>, 2000, a hypothetical $10,000 investment in Spartan Arizona Municipal Money Market would have grown to $</R>12,186<R>.</R>
|
<R>SPARTAN ARIZONA MUNICIPAL MONEY MARKET |
INDEXES</R> |
||||||
|
<R>Fiscal Year Ended |
Value of |
Value of |
Value of |
Total |
S&P 500 |
DJIA |
Cost of |
|
<R>2000 |
$ 10,000 |
$ 2,186 |
$ 0 |
$ 12,186 |
$ 36,286 |
$ 32,345 |
$ 11,560</R> |
|
<R>1999 |
$ 10,000 |
$ 1,774 |
$ 0 |
$ 11,774 |
$ 31,195 |
$ 30,758 |
$ 11,185</R> |
|
<R>1998 |
$ 10,000 |
$ 1,449 |
$ 0 |
$ 11,449 |
$ 22,310 |
$ 21,075 |
$ 10,937</R> |
|
<R>1997 |
$ 10,000 |
$ 1,071 |
$ 0 |
$ 11,071 |
$ 20,639 |
$ 20,954 |
$ 10,763</R> |
|
<R>1996 |
$ 10,000 |
$ 708 |
$ 0 |
$ 10,708 |
$ 14,674 |
$ 15,146 |
$ 10,529</R> |
|
<R>1995* |
$ 10,000 |
$ 343 |
$ 0 |
$ 10,343 |
$ 12,360 |
$ 12,164 |
$ 10,234</R> |
* 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 <R>$12,186</R>. 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,<R>980 </R>for dividends and<R> $0 for capital gain distributions. The figures in the table do not include the effect of the fund's account closeout fee.</R>
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 Inc. (Lipper), an independent service located in Summit, New Jersey that monitors the performance of mutual funds. Generally, Lipper rankings are based on 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 indexes prepared by Lipper or other organizations. When comparing these indexes, 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 each benchmark index representing the universe of securities in which the fund may invest. The return of each index reflects reinvestment of all dividends and capital gains paid by securities included in each index. Unlike a fund's returns, however, each index's returns do not reflect brokerage commissions, transaction fees, or other costs of investing directly in the securities included in the index.
<R>The bond fund</R> may compare its performance to the Lehman Brothers Municipal Bond Index, a market value-weighted index for investment-grade municipal bonds with maturities of one year or more. Issues included in the index have been issued after December 31, 1990 and have been issued as part of an offering of at least $50 million. <R>After </R>December 31, 1995, zero coupon bonds and issues subject to the alternative minimum tax are included in the index.<R> Issues included in the index prior to January 1, 2000 have an outstanding par value of at least $3 million; while issues included in the index after </R>January 1, 2000 have an outstanding par value of at least $5 million.
Spartan Arizona Municipal Income may also compare its performance to that of the Lehman Brothers Arizona 4 Plus Year Enhanced Municipal Bond Index, a market value-weighted index of Arizona investment-grade municipal bonds with maturities of four years or more. 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, <R>1990</R>.
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 <R>an investor's</R> principal or 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 indexes.
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 returns in the same method as the funds. The funds may also compare performance to that of other compilations or indexes that may be developed and made available in the future.
The 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.
The money market fund may compare its performance or the performance of securities in which it may invest to averages published by iMoneyNet, Inc. of Westborough, Massachusetts. These averages assume reinvestment of distributions. iMoneyNet's MONEY FUND REPORT AVERAGES(TM)/All Tax-Free Money Market Funds Average, which is reported in iMoneyNet's MONEY FUND REPORT(TM), covers <R>461 </R>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®, a quarterly magazine provided free of charge to Fidelity fund shareholders.
A fund may present its fund number, Quotron(TM) number, and CUSIP number, and discuss or quote its current portfolio manager.
Volatility. A fund <R>(other than the money market fund)</R> may quote various measures of volatility and benchmark correlation in advertising. In addition, the fund may compare these measures to those of other funds. Measures of volatility seek to compare the fund's historical share price fluctuations or 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 a fund <R>(other than the money market fund)</R>. Each point on the momentum indicator represents the fund's percentage change in price movements over that period.
A fund <R>(other than the money market fund)</R> 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,<R> 2000</R>, FMR advised over <R>$36 </R>billion in municipal fund assets,<R> $146 </R>billion in taxable fixed-income fund assets, <R>$153</R> billion in money market fund assets,<R> $674</R> billion in equity fund assets, <R>$20</R> billion in international fund assets, and <R>$43</R> 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
<R>A fund may</R> make redemption payments in whole or in part in <R>readily marketable</R> securities or other property, valued for this purpose as they are valued in computing each fund's NAV, <R>if FMR determines it is in the best interests of the fund.</R> Shareholders <R>that receive </R>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.
Dividends. To the extent that each fund's income is designated as federally tax-exempt interest, the dividends declared by the fund are also federally tax-exempt. Short-term capital gains are taxable as dividends, but do not qualify for the dividends-received deduction.
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.
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 the fund's assets whose interest is exempt 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.
A portion of the gain on municipal bonds purchased at market discount after April 30, 1993 is taxable to shareholders as ordinary income, not as capital gains. Dividends resulting from a recharacterization of gain from the sale of bonds purchased at 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 the fund's assets whose interest is exempt from federal income tax.
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. Each fund's long-term capital gain distributions are federally taxable to shareholders generally as capital gains. The money market fund may distribute any net realized capital gains once a year or more often, as necessary.
As of August 31, 2000, <R>Spartan Arizona Municipal Income Fund</R> had an aggregate capital loss carryforward of approximately $<R>94,000</R>. This loss carryforward, all of which will expire on August 31, <R>2008</R>, is available to offset future capital gains.
<R>As of August 31, 2000 Spartan Arizona Municipal Money Market Fund had an aggregate capital loss carry forward of approximately $34,000. This loss carryforward, all of which will expire on August 31, 2008, is available to offset future capital gains.</R>
Tax Status of the Funds. Each fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code 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.
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. It is up to you or your tax preparer to determine whether the sale of shares of a fund resulted in a capital gain or loss or other tax consequence to you. 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.
The Trustees, Members of the Advisory Board, and executive officers of the trusts <R>and funds, as applicable,</R> are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. 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 or its affiliates. The business address of each Trustee, Member of the Advisory Board, and officer who is an "interested person" (as defined in the 1940 Act) 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 trusts or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d <R>(70), Trustee, is President of Spartan Arizona Municipal Income Fund and Spartan Arizona Municipal Money Market Fund. Mr. Johnson also serves as President of other Fidelity funds. He</R> is Chief Executive Officer, <R>Chairman, </R>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 Management & Research (U.K.) <R>Inc. and of </R>Fidelity Management & Research (Far East) <R>Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, </R>Inc.; <R>Chairman and Representative Director of Fidelity Investments Japan Limited (1997)</R>; and a Director of<R> FDC and of FMR Co., Inc. (2000)</R>. Abigail Johnson, Member of the Advisory Board of Fidelity Union Street Trust II, is Mr. Johnson's daughter.
ABIGAIL P. JOHNSON <R>(38)</R>, Member of the Advisory Board of Fidelity Union Street Trust II (1999), is Vice President of certain Equity Funds (1997), and is a Director of FMR Corp. (1994). Before assuming her current responsibilities, Ms. Johnson managed a number of Fidelity funds. Edward C. Johnson 3d, Trustee and President of the Funds, is Ms. Johnson's father.
<R>J. MICHAEL COOK (57), Member of the Advisory Board (2000). Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP, Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Dow Chemical Company (2000), HCA - The Healthcare Company (1999), and Children First (1999). He is a member of the Executive Committee of the Securities Regulation Institute, past chairman and a member of the Board of Catalyst (a leading organization for the advancement of women in business), and a Director of the STAR Foundation (Society to Advance the Retarded and Handicapped). He also serves as a member of the Board and Executive Committee and as Co-Chairman of the Audit and Finance Committee of the Center for Strategic & International Studies, a member of the Board of Overseers of the Columbia Business School, and a Member of the Advisory Board of the Graduate School of Business of the University of Florida.</R>
RALPH F. COX <R>(68)</R>, Trustee, is President of RABAR Enterprises (management consulting-<R>petroleum</R> 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 Waste<R> Management </R>Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering), and <R>Abraxas Petroleum (petroleum exploration and production, 1999)</R>. In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS <R>(68)</R>, Trustee. Mrs. Davis <R>is retired from Avon Products, Inc. where she held various positions including</R> Senior Vice President of Corporate Affairs <R>and Group Vice President of U.S. sales, distribution, and manufacturing. </R>She is currently a Director of BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing), and the TJX Companies, Inc. (retail stores), and previously served as a Director of Hallmark Cards, <R>Inc., Nabisco Brands, Inc.</R>, and <R>Standard</R> Brands, Inc. In addition, she is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998).
ROBERT M. GATES <R>(56)</R>, 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 Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), and TRW Inc. (automotive, space, defense, and information technology). Mr. Gates previously served as a Director of LucasVarity PLC <R>(automotive components and diesel engines). He is currently serving as Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). </R>Mr. Gates also is a Trustee of the Forum for International Policy and of the Endowment Association of the College of William and Mary.
DONALD J. KIRK <R>(67)</R>, Trustee, is Chairman of the Board of Directors of National Arts Stabilization Inc., Chairman of the Board of Trustees of the Greenwich Hospital Association,<R> a</R> Director of the Yale-New Haven Health Services Corp. (1998), <R>Vice Chairman </R>of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995), and a Public Governor of the National Association of Securities Dealers, Inc. (1996). Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Mr. Kirk previously served as a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations, 1993-1995).
<R>MARIE L. KNOWLES (53), Member of the Advisory Board (2000). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994), URS Corporation (multidisciplinary engineering, 1999), and America West Holdings Corporation (aviation and travel services, 1999) and previously served as a Director of ARCO Chemical Corporation and Vastar Resources, Inc. Ms. Knowles serves as a member of the National Board of the Smithsonian Institution, she is a Trustee of the Brookings Institution and serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.</R>
<R>NED C. LAUTENBACH (56), Trustee (2000), has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the IBM Corporation from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach has served as Chairman and Chief Executive Officer of Acterna Corporation (global communications equipment) since 1999 and as a Director since 1998. He is also co-Chairman and a Director of Complete Business Solutions, Inc. (global provider of business and technology solutions , 2000). In addition, he is a Director of Eaton Corporation (global manufacturer of highly engineered products, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.</R>
<R>*PETER S. LYNCH (57), Trustee, is Vice Chairman and a Director of FMR; and a Director of FMR Co., Inc. (2000). 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.</R>
WILLIAM O. McCOY (66), Trustee (1997). Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke-Weeks Realty Corporation (real estate, 1994), Carolina Power and Light Company (electric utility, 1996), the Kenan Transport Company (trucking, 1996), and Dynatech Corporation (electronics, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997). Previously, he was a Director of First American Corporation (bank holding company, 1979-1996). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flager Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).
GERALD C. McDONOUGH <R>(72)</R>, Trustee and Chairman of the non-interested Trustees, is Chairman of G.M. Management Group (strategic advisory services). Mr. McDonough is a Director <R>and Chairman of the Board</R> of York International Corp. (air conditioning and refrigeration), a Director of Associated Estates Realty Corporation (a real estate investment trust), <R>and a Director of Barpoint.com (online and wireless product information service, 2000).</R> 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. He also served as a Director of Commercial Intertech Corp. (hydraulic systems, building systems, and metal products) from 1992-2000 and CUNO, Inc. (liquid and gas filtration products) from 1996-2000.
MARVIN L. MANN <R>(67)</R>, Trustee, is Chairman <R>Emeritus</R> of Lexmark International, Inc. (office machines, 1991) <R>where he still remains a member of the Board</R>. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation ("IBM") and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993), Imation Corp. (imaging and information storage, 1997). He is a Board member of Dynatech Corporation (electronics, 1999).
*ROBERT C. POZEN <R>(54)</R>, Trustee (1997), <R>is Senior Vice President of Spartan Arizona Municipal Income Fund (1997) and Spartan Arizona Municipal Money Market Fund (1997). Mr. Pozen also serves as Senior Vice President of other Fidelity funds (1997)</R>. He is President and a Director of FMR <R>(1997),</R> Fidelity Management & Research (U.K.) Inc. (1997), Fidelity Management & Research (Far East) Inc.<R> (1997), Fidelity Investments Money Management, Inc. (1998), and FMR Co., Inc. (2000); a Director of Strategic Advisers, Inc. (1999); and Vice Chairman of Fidelity Investments (2000).</R> Previously, Mr. Pozen served as General Counsel, Managing Director, and Senior Vice President of FMR Corp.
THOMAS R. WILLIAMS<R> (71)</R>, 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 <R>National Life Insurance Company of Vermont and American Software, Inc. Mr. Williams was previously a Director of </R>ConAgra, Inc. (agricultural products), Georgia Power Company (electric utility), and <R>Avado</R>, Inc. (restaurants).
DWIGHT D. CHURCHILL <R>(46)</R> is Vice President of <R>Spartan Arizona Municipal Money Market Fund (2000) and Spartan Arizona Municipal Income Fund (2000). He serves as President of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's </R>Bond Funds, 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 <R>(44) </R>is Vice President of <R>Spartan Arizona Municipal Money Market Fund (1997) and Spartan Arizona Municipal Income Fund (2000). He serves as Vice President of Fidelity's Municipal Bond Funds (2000), Group Leader of Fidelity's Municipal Bond Group (2000), Vice President of Fidelity's Money Market </R>Funds (1997), Group Leader of Fidelity's 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).
CHRISTINE JONES THOMPSON <R>(42)</R> 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.
NORMAN U. LIND (44) is Vice President of Spartan Arizona Municipal Money Market Fund (2000) and other funds advised by FMR. Prior to his current responsibilities, Mr. Lind managed a variety of Fidelity funds.
ERIC D. ROITER <R>(51) is Secretary of Spartan Arizona Municipal Income Fund (1998) and Spartan Arizona Municipal Money Market Fund (1998). He also serves </R>as Secretary <R>of other Fidelity funds (1998); Vice President, General Counsel, and Clerk</R> of FMR (1998); and Vice President and Clerk of FDC (1998). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).
<R>ROBERT A. DWIGHT (42) is Treasurer of Spartan Arizona Municipal Income Fund (2000) and Spartan Arizona Municipal Money Market Fund (2000). Mr. Dwight also serves as Treasurer of other Fidelity funds (2000) and is an employee of FMR. Prior to becoming Treasurer of the Fidelity funds, he served as President of Fidelity Accounting and Custody Services (FACS). Before joining Fidelity, Mr. Dwight was Senior Vice President of fund accounting operations for The Boston Company.</R>
<R>MARIA F. DWYER (41) is Deputy Treasurer of Spartan Arizona Municipal Income Fund (2000) and Spartan Arizona Municipal Money Market Fund (2000). She also serves as Deputy Treasurer of other Fidelity funds (2000) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.</R>
STANLEY N. GRIFFITH <R>(53)</R> is <R>Assistant Vice President of Spartan Arizona Municipal Money Market Fund (1998) and Spartan Arizona Municipal Income Fund (1998). Mr. Griffith</R> is Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and <R>is</R> an employee of FMR Corp.
JOHN H. COSTELLO<R> (54)</R> <R>is Assistant Treasurer of Spartan Arizona Municipal Income Fund and Spartan Arizona Municipal Money Market Fund. Mr. Costello also serves as Assistant Treasurer of Fidelity funds and </R>is an employee of FMR.
THOMAS J. SIMPSON <R>(42)</R> <R>is Assistant Treasurer of Spartan Arizona Municipal Money Market Fund (1996) and Spartan Arizona Municipal Income Fund (1997). Mr. Simpson</R> is Assistant Treasurer of <R>Other Fidelity funds (2000)</R> 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, <R>2000</R>, or calendar year ended December 31, <R>1999</R>, as applicable.
|
Compensation Table |
|||
|
<R>Trustees |
Aggregate |
Aggregate |
Total |
|
Edward C. Johnson 3d** |
$ 0 |
$ 0 |
$ 0 |
|
Abigail P. Johnson** |
$ 0 |
$ 0 |
$ 0 |
|
<R>J. Michael Cook***** |
$ 4 |
$ 15 |
$ 0</R> |
|
<R>Ralph F. Cox |
$ 8 |
$ 28 |
$ 217,500</R> |
|
<R>Phyllis Burke Davis |
$ 8 |
$ 28 |
$ 211,500</R> |
|
<R>Robert M. Gates |
$ 8 |
$ 28 |
$ 217,500</R> |
|
<R>E. Bradley Jones**** |
$ 3 |
$ 8 |
$ 217,500</R> |
|
<R>Donald J. Kirk |
$ 8 |
$ 28 |
$ 217,500</R> |
|
<R>Marie L. Knowles****** |
$ 1 |
$ 5 |
$ 0</R> |
|
<R>Ned C. Lautenbach*** |
$ 7 |
$ 25 |
$ 54,000</R> |
|
Peter S. Lynch** |
$ 0 |
$ 0 |
$ 0 |
|
<R>William O. McCoy |
$ 8 |
$ 27 |
$ 214,500</R> |
|
<R>Gerald C. McDonough |
$ 10 |
$ 34 |
$ 269,000</R> |
|
<R>Marvin L. Mann |
$ 8 |
$ 28 |
$ 217,500</R> |
|
Robert C. Pozen** |
$ 0 |
$ 0 |
$ 0 |
|
<R>Thomas R. Williams |
$ 8 |
$ 28 |
$ 213,000</R> |
* Information is for the calendar year ended December 31, 1999 for 236 funds in the complex.
** Interested Trustees of the funds and Ms. Johnson are compensated by FMR.
<R>*** During the period from October 14, 1999 through December 31, 1999, Mr. Lautenbach served as a Member of the Advisory Board. Effective January 1, 2000, Mr. Lautenbach serves as a Member of the Board of Trustees.</R>
**** Mr. Jones served on the Board of Trustees through December 31, 1999.
***** Effective March 16, 2000, Mr. Cook serves as a Member of the Advisory Board.
****** Effective June 15, 2000, Ms. Knowles serves as a Member of the Advisory Board.
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, <R>1999, </R>the Trustees accrued required deferred compensation from the funds as follows: Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $75,000; 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, $53,735; William O. McCoy, $53,735; and Thomas R. Williams, $62,319.
B Compensation figures include cash, and may include amounts required to be deferred and amounts deferred at the election of Trustees.
Under a deferred compensation plan adopted in September 1995 and amended in November 1996 and January 2000 (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual fees. Amounts deferred under the Plan are treated as though equivalent dollar amounts had been invested in shares of a cross-section of Fidelity funds including funds in each major investment discipline and representing a majority of Fidelity's assets under management (the Reference Funds). The amounts ultimately received by the Trustees under the Plan will be directly linked to the investment performance of the Reference Funds. Deferral of fees in accordance with the Plan will have a negligible effect on a fund's assets, liabilities, and net income per share, and will not obligate a fund to retain the services of any Trustee or to pay any particular level of compensation to the Trustee. A fund may invest in the Reference Funds under the Plan without shareholder approval.
As of August 31, <R>2000,</R> the Trustees, Members of the Advisory Board, and officers of each fund owned, in the aggregate, less than 1% of the fund's total outstanding shares.
<R>As of August 31, 2000, the following owned of record or beneficially 5% or more (up to and including 25%) of each fund's outstanding shares:</R>
<R>Spartan Arizona Municipal Money Market Fund: David C. Stoup, Carrollton, Virginia (12.18%).</R>
<R>Spartan Arizona Municipal Income Fund: Edward J. Claussen, Scottsdale, Arizona (6.05%).</R>
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of FMR and <R>Fidelity Investments Money Management, Inc. (FIMM)</R>. 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.
<R>At present, the primary business activities of FMR Corp. and its subsidiaries are: (i) the provision of investment advisory, management, shareholder, investment information and assistance and certain fiduciary services for individual and institutional investors; (ii) the provision of securities brokerage services; (iii) the management and development of real estate; and (iv) the investment in and operation of a number of emerging businesses.</R>
<R>The funds, FMR, FIMM, and</R> Fidelity Distributors Corporation (FDC) have adopted a code of ethics<R> under Rule 17j-1 of the 1940 Act</R> that sets forth employees' fiduciary responsibilities regarding the funds, establishes procedures for personal investing, and restricts certain transactions. Employees subject to the code of ethics, including Fidelity investment personnel, may invest in securities for their own investment accounts, including securities that may be purchased or held by the funds.
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 non-recurring 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 Income and Spartan Arizona Municipal Money Market each pays FMR a monthly management fee at the annual rate of 0.55% and 0.50%, respectively, of the fund's 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.
|
Fund |
Fiscal Years |
Amount of |
Management Fees |
|
<R>Spartan Arizona Municipal Income |
2000 |
$ 20,244 |
$ 161,912</R> |
|
|
1999 |
$ 2,881 |
$ 150,884 |
|
|
1998 |
$ 2,189 |
$ 118,342 |
|
<R>Spartan Arizona Municipal Money Market |
2000 |
$ 638 |
$ 499,571</R> |
|
|
1999 |
$ 1,649 |
$ 461,858 |
|
|
1998 |
$ 2,848 |
$ 453,461 |
* 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)<R> which</R> is subject to revision or discontinuance. 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 returns and yield, and repayment of the reimbursement by a fund will lower its returns and yield.
FMR voluntarily agreed to reimburse Spartan Arizona Municipal Money Market if and to the extent that its aggregate operating expenses, including management fees, were in excess of an annual rate of its average net assets. The table below shows the periods of reimbursement and levels of expense limitations 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.
|
|
Periods of From To |
Aggregate |
Fiscal Years |
Management Fee
Before |
Amount of |
|
|
<R>Spartan Arizona |
September 1, 1999 |
August 31, 2000 |
N/A |
2000 |
$ 499,571 |
$ -</R> |
|
<R> |
September 1, 1998 |
August 31, 1999 |
N/A |
1999 |
$ 461,858 |
$ -</R> |
|
<R> |
August 1, 1998 |
August 31, 1998 |
N/A |
1998 |
$ 453,461 |
$ 124,133</R> |
|
<R> |
September 1, 1997 |
July 31, 1998 |
0.35% |
- |
$ - |
$ -</R> |
* After reduction of fees and expenses paid by the fund to the non-interested Trustees.
Sub-Adviser. FMR has entered into a sub-advisory agreement with FIMM pursuant to which FIMM has primary responsibility for choosing investments for each fund. Prior to January 23, 1998, FMR Texas Inc. (FMR Texas) had primary responsibility for providing investment management services to the money market fund. 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.
<R>On behalf of Spartan Arizona Municipal Income, for the fiscal years ended August 31, 2000 and 1999, FMR paid FIMM fees of $80,956 and $51,895, respectively.</R>
On behalf of the money market fund, for the fiscal year ended August 31, 1998, FMR paid FMR Texas fees of $<R>75,577</R>. On behalf of the money market fund, for the fiscal years ended August 31, 2000, 1999, and 1998, FMR paid FIMM fees of $<R>249,786</R> , $<R>230,929</R>, and $151,153, respectively.
Each fund has entered into a distribution agreement with FDC, an affiliate of FMR. 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 <R>the</R> fund<R>s</R>, which are continuously offered at NAV. Promotional and administrative expenses in connection with the offer and sale of shares are paid by FMR.
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 providing services intended to result in the sale of fund shares and/or shareholder support services. In addition, each Plan provides that FMR, directly or through<R> FDC</R>, may pay <R>significant amounts to</R> intermediaries, such as banks, broker-dealers and other service-providers, that provide those services. Currently, the Board of Trustees has authorized such payments for Spartan Arizona Municipal Income and Spartan Arizona Municipal Money Market shares.
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 or stabilization of cash flows 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 <R>directly</R> engaging in the business of underwriting, selling or distributing securities. 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, 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.
FDC may compensate intermediaries that satisfy certain criteria established from time to time by FDC relating to the level or type of services provided by the intermediary, the sale or expected sale of significant amounts of shares, or other factors.
TRANSFER AND SERVICE AGENT AGREEMENTS
Each fund has entered into a transfer agent agreement with Citibank, N.A. (Citibank), which is located at 111 Wall Street, New York, New York. Under the terms of the agreements, Citibank provides transfer agency, dividend disbursing, and shareholder services for each fund. Citibank 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 Citibank.
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 and 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 collects a $5.00 exchange fee for each exchange out of Spartan Arizona Municipal Money Market.
FSC also collects Spartan Arizona Municipal Money Market's $5.00 wire transaction fee.
FSC also collects Spartan Arizona Municipal Money Market's $5.00 account closeout fee.
FSC also collects Spartan Arizona Municipal Money Market's $2.00 checkwriting fee.
In addition, Citibank 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 in each Fidelity Freedom Fund and Fidelity Four-in-One Index Fund, funds of funds managed by an FMR affiliate, according to the percentage of the QSTP's, Freedom Fund's or Fidelity Four-in-One Index Fund's assets that is invested in a fund, subject to certain limitations in the case of Fidelity Four-in-One Index 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 Citibank. Under the terms of the agreements, Citibank provides pricing and bookkeeping services for each fund. Citibank 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 Citibank.
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.
<R>Trust Organization. Spartan Arizona Municipal Income Fund is a fund of Fidelity Union Street Trust, an open-end management investment company organized as a Massachusetts business trust on March 1, 1974. Currently, there are four funds in Fidelity Union Street Trust: Fidelity Export and Multinational Fund, Spartan Arizona Municipal Income Fund, Spartan Maryland Municipal Income Fund, and Spartan Short-Intermediate Municipal Income Fund. Spartan Arizona Municipal Money Market Fund 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. Currently, there are four funds in 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 Trustees are permitted to create additional funds in the trusts and to create additional classes of the funds.</R>
The assets of the Massachusetts trust received for the issue or sale of shares of each of its funds and all income, earnings, profits, and proceeds thereof, subject to the rights of creditors, are allocated to such fund, and constitute the underlying assets of such fund. The underlying assets of each fund in the Massachusetts trust shall be charged with the liabilities and expenses attributable to such fund. Any general expenses of the Massachusetts trust shall be allocated between or among any one or more of its funds.
The assets of the Delaware trust received for the issue or sale of shares of each of its funds and all income, earnings, profits, and proceeds thereof, subject to the rights of creditors, are allocated to such fund, and constitute the underlying assets of such fund. The underlying assets of each fund in the Delaware trust shall be charged with the liabilities and expenses attributable to such fund. Any general expenses of the Delaware trust shall be allocated between or among any one or more of its funds.
Shareholder Liability - Massachusetts Trust. The Massachusetts trust is an entity commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust may, under certain circumstances, be held personally liable for the obligations of the trust.
The Declaration of Trust <R>contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses of the trust or fund. The Declaration of Trust</R> 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<R> the</R> Trustees relating to the trust <R>or to a fund</R> shall include a provision limiting the obligations created thereby to the Massachusetts trust or to one or more funds and its or their assets. The Declaration of Trust further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.
The Declaration of Trust provides for indemnification out of each fund's property of any shareholder or former shareholder held personally liable for the obligations of the fund solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason. The Declaration of Trust also provides that each fund shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the fund and satisfy any judgment thereon. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which a fund itself would be unable to meet its obligations. FMR believes that, in view of the above, the risk of personal liability to shareholders is remote.
Shareholder 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. The Trust Instrument provides that the trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the trust or the Trustees relating to the trust or to a fund shall include a provision limiting the obligations created thereby to the trust or to one or more funds and its or their assets. The Trust Instrument further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.
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 solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason. 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 a 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.
Voting Rights - Massachusetts Trust. The fund's capital consists of shares of beneficial interest. As a shareholder, you are entitled to one vote for each dollar of net asset value you own. The voting rights of shareholders can be changed only by a shareholder vote. Shares may be voted in the aggregate, by fund, and by class.
The shares have no preemptive or conversion rights. Shares are fully paid and nonassessable, except as set forth under the heading "Shareholder Liability" above.
<R>Fidelity Union Street Trust or a fund or a class</R> may be terminated upon the sale of its assets to,<R> or merger with,</R> another open-end management investment company,<R> series, or class thereof,</R> or upon liquidation and distribution of its assets. <R>Generally, the merger of the trust or a fund or a class with another operating mutual fund or the sale of all or a portion of the assets of the trust or a fund or a class to another operating mutual fund requires approval by a vote of shareholders of the trust or the fund or the class. The Trustees may, however, reorganize or terminate the trust or a fund or a class without prior shareholder approval.</R> In the event of the dissolution or liquidation of the trust, shareholders of each of its funds are entitled to receive the underlying assets of such fund available for distribution. In the event of the dissolution or liquidation of a fund<R> or a class,</R> shareholders of that fund <R>or that class</R> are entitled to receive the underlying assets of the fund <R>or class</R> available for distribution.
Voting Rights - Delaware Trust. <R>The</R> fund's capital consists of shares of beneficial interest. As a shareholder, you are entitled to one vote for each dollar of net asset value you own. The voting rights of shareholders can be changed only by a shareholder vote. Shares may be voted in the aggregate, by fund, and by class.
The shares have no preemptive or conversion rights. Shares are fully paid and nonassessable, except as set forth under the heading "Shareholder Liability" above.
<R>Fidelity Union Street Trust II or a fund </R>may be terminated upon the sale of its assets to another open-end management investment company or series thereof, or upon liquidation and distribution of its assets. Generally such terminations must be approved by a vote of shareholders. In the event of the dissolution or liquidation of the trust, shareholders of each of its funds are entitled to receive the underlying assets of such fund available for distribution. In the event of the dissolution or liquidation of a fund, shareholders of that fund are entitled to receive the underlying assets of the fund available for distribution.
Under the Trust Instrument, the Trustees may, without shareholder vote, in order to change the form of organization of the trust cause the trust to merge or consolidate with one or more trusts, partnerships, associations, limited liability companies, or corporations, as long as the surviving entity is an open-end management investment company, or is a fund thereof, that will succeed to or assume the trust's registration statement, or cause the trust to incorporate under Delaware law.
Custodian. Citibank, N.A., 111 Wall Street, New York, New York, 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.
FMR, its officers and directors, its affiliated companies, <R>Members of the Advisory Board, and Members </R>of 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 independent accountant for each fund. The auditor examines financial statements for the funds and provides other audit, tax, and related services.
Each fund's financial statements and financial highlights for the fiscal year ended August 31, <R>2000,</R> and report of the auditor, are included in the fund's annual report and are incorporated herein by reference.
Spartan, Fidelity Investments & (Pyramid) Design, Fidelity Focus, Fidelity, and Magellan are registered trademarks of FMR Corp.
The third party marks appearing above are the marks of their respective owners.
Like securities of all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
Fidelity®
Trust
(fund number 031, trading symbol FDTXX)
Prospectus
<R>October 23, 2000</R>
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109
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Fund Summary |
Investment Summary |
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Performance |
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Fee Table |
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Fund Basics |
Investment Details |
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Valuing Shares |
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Shareholder Information |
Buying and Selling Shares |
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Exchanging Shares |
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Account Features and Policies |
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Dividends and Capital Gain Distributions |
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Tax Consequences |
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Fund Services |
Fund Management |
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Fund Distribution |
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Appendix |
Financial Highlights |
Prospectus
Investment Objective
Daily Income Trust seeks as high a level of current income as is consistent with preserving capital and providing liquidity.
Principal Investment Strategies
Fidelity Management & Research Company (FMR)'s principal investment strategies include:
Principal Investment Risks
The fund is subject to the following principal investment risks:
An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
The following information illustrates the changes in the fund's performance from year to year. Returns are based on past results and are not an indication of future performance.
Prospectus
Fund Summary - continued
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Daily Income |
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<R>Calendar Years |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999</R> |
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<R> |
7.83% |
5.83% |
3.59% |
2.79% |
3.89% |
5.65% |
5.12% |
5.27% |
5.22% |
4.91%</R> |
<R>
</R>
During the periods shown in the chart for Daily Income, the highest return for a quarter wa<R>s 1.94% (quarter ended March 31, 1990</R>) and the lowest return for a quarter was<R> </R>0.65%< R> (quarter ended </R>June 30, 1993<R>).</R>
<R>The year-to-date return as of September 30, 2000 for Daily Income was 4.48%.</R>
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For the periods ended |
Past 1 |
Past 5 |
Past 10 |
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<R>Daily Income |
4.91% |
5.23% |
5.00%</R> |
The following table describes the fees and expenses that are incurred when you buy, hold, or sell shares of the fund. The annual fund operating expenses provided below for the fund are based on historical expenses.
Shareholder fees (paid by the investor directly)
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Sales charge (load) on purchases and reinvested distributions |
None |
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Deferred sales charge (load) on redemptions |
None |
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Annual account maintenance fee (for accounts under $2,500) |
$12.00 |
Annual fund operating expenses (paid from fund assets)
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<R>Management fee |
0.34%</R> |
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Distribution and Service (12b-1) fee |
None |
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<R>Other expenses |
0.16%</R> |
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<R>Total annual fund operating expenses |
0.50%</R> |
Prospectus
Fund Summary - continued
This example helps you compare the cost of investing in the fund with the cost of investing in other mutual funds.
Let's say, hypothetically, that the fund's annual return is 5% and that your shareholder fees and the fund's annual operating expenses are exactly as described in the fee table. This example illustrates the effect of fees and expenses, but is not meant to suggest actual or expected fees and expenses or returns, all of which may vary. For every $10,000 you invested, here's how much you would pay in total expenses if you close your account <R>at the end</R> of <R>each time period</R> indicated:
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<R>1 year |
$ 51</R> |
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<R>3 years |
$ 160</R> |
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<R>5 years |
$ 280</R> |
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<R>10 years |
$ 628</R> |
Prospectus
Investment Objective
Daily Income Trust seeks as high a level of current income as is consistent with preserving capital and providing liquidity.
Principal Investment Strategies
FMR invests the fund's assets in U.S. dollar-denominated money market securities of domestic issuers and repurchase agreements. FMR also may enter into reverse repurchase agreements for the fund.
FMR will invest more than 25% of the fund's total assets in the financial services <R>industries</R>.
In buying and selling securities for the fund, FMR complies with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of the fund's investments. FMR stresses maintaining a stable $1.00 share price, liquidity, and income.
Description of Principal Security Types
Money market securities are high-quality, short-term securities that pay a fixed, variable, or floating interest rate. Securities are often specifically structured so that they are eligible investments for a money market fund. For example, in order to satisfy the maturity restrictions for a money market fund, some money market securities have demand or put features, which have the effect of shortening the security's maturity. Money market securities include bank certificates of deposit, bankers' acceptances, bank time deposits, notes, commercial paper, and U.S. Government securities.
A repurchase agreement is an agreement to buy a security at one price and a simultaneous agreement to sell it back at an agreed-upon price.
Principal Investment Risks
Many factors affect the fund's performance. The fund's yield will change daily based on changes in interest rates and other market conditions. Although the fund is managed to maintain a stable $1.00 share price, there is no guarantee that the fund will be able to do so. For example, a major increase in interest rates or a decrease in the credit quality of the issuer of one of the fund's investments could cause the fund's share price to decrease. While the fund will be charged premiums by a mutual insurance company for coverage of specified types of losses related to default or bankruptcy on certain securities, the fund may incur losses regardless of the insurance.
The following factors can significantly affect the fund's performance:
Interest Rate Changes. Money market securities have varying levels of sensitivity to changes in interest rates. In general, the price of a money market security can fall when interest rates rise and can rise when interest rates fall. Securities with longer maturities and the securities of issuers in the financial services sector can be more sensitive to interest rate changes. Short-term securities tend to react to changes in short-term interest rates.
Prospectus
Fund Basics - continued
Foreign Exposure. Entities located in foreign countries that provide credit support or a maturity-shortening structure can involve increased risks. Extensive public information about the provider may not be available and unfavorable political, economic, or governmental developments could affect the value of the security.
Financial Services Exposure. Financial services companies are highly dependent on the supply of short-term financing. The value of securities of issuers in the financial services sector can be sensitive to changes in government regulation and interest rates and to economic downturns in the United States and abroad.
Issuer-Specific Changes. Changes in the financial condition of an issuer, changes in specific economic or political conditions that affect a particular type of issuer, and changes in general economic or political conditions can affect the credit quality or value of an issuer's securities. Entities providing credit support or a maturity-shortening structure also can be affected by these types of changes. If the structure of a security fails to function as intended, the security could decline in value.
Fundamental Investment Policies
The policy discussed below is fundamental, that is, subject to change only by shareholder approval.
Fidelity Daily Income Trust seeks as high a level of current income as is consistent with preserving capital and providing liquidity.
The fund is open for business each day the New York Stock Exchange (NYSE) is open.
The fund's net asset value per share (NAV) is the value of a single share. Fidelity normally calculates the fund's NAV as of the close of business of the NYSE, normally 4:00 p.m. Eastern time. However, NAV may be calculated earlier if trading on the NYSE is restricted or as permitted by the Securities and Exchange Commission (SEC). The fund's assets are valued as of this time for the purpose of computing the fund's NAV.
To the extent that the fund's assets are traded in other markets on days when the NYSE is closed, the value of the fund's assets may be affected on days when the fund is not open for business. In addition, trading in some of the fund's assets may not occur on days when the fund is open for business.
The fund's assets are valued on the basis of amortized cost.
Prospectus
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<R> LLC (FBS LLC)</R>. Fidelity is also a leader in providing tax-advantaged retirement plans for individuals investing on their own or through their employer.
For account, product, and service information, please use the following web site and phone numbers:
Please use the following addresses:
Buying Shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
Overnight Express
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
Selling Shares
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Overnight Express
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
You may buy or sell shares of the fund through a retirement account or an investment professional. If you invest through a retirement account or an investment professional, the procedures for buying, selling, and exchanging shares of the fund and the account features and policies may differ. Additional fees may also apply to your investment in the fund, including a transaction fee if you buy or sell shares of the fund through a broker or other investment professional.
Certain methods of contacting Fidelity, such as by telephone or electronically, may be unavailable or delayed (for example, during periods of unusual market activity). In addition, the level and type of service available may be restricted based on criteria established by Fidelity.
Prospectus
Shareholder Information - continued
The different ways to set up (register) your account with Fidelity are listed in the following table.
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Ways to Set Up Your Account |
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Individual or Joint Tenant For your general investment needs |
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Retirement For tax-advantaged retirement savings |
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Gifts or Transfers to a Minor (UGMA, UTMA) To invest for a child's education or other future needs |
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Trust For money being invested by a trust |
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Business or Organization For investment needs of corporations, associations, partnerships, or other groups |
The price to buy one share of the fund is the fund's NAV. The fund's shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your investment is received in proper form.
Short-term or excessive trading into and out of the fund may harm performance by disrupting portfolio management strategies and by increasing expenses. Accordingly, the fund may reject any purchase orders, including exchanges, particularly from market timers or investors who, in FMR's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the fund. For these purposes, FMR may consider an investor's trading history in the fund or other Fidelity funds, and accounts under common ownership or control.
The fund may stop offering shares completely or may offer shares only on a limited basis, for a period of time or permanently.
When you place an order to buy shares, note the following:
Prospectus
Shareholder Information - continued
Minimums
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To Open an Account |
$5,000 |
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For certain Fidelity retirement accountsA |
$500 |
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To Add to an Account |
$500 |
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For certain Fidelity retirement accountsA |
$250 |
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Through regular investment plans |
$100 |
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Minimum Balance |
$2,000 |
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For certain Fidelity retirement accountsA |
$500 |
A Fidelity Traditional IRA, Roth IRA, Rollover IRA, SEP-IRA, and Keogh accounts.
There is no minimum account balance or initial or subsequent purchase 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. In addition, the fund may waive or lower purchase minimums in other circumstances.
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Key Information |
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<R>Phone |
To Open an Account</R>
To Add to an Account
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Internet |
To Open an Account
To Add to an Account
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<R>Mail |
To Open an Account</R>
To Add to an Account
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In Person |
To Open an Account
To Add to an Account
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<R>Wire |
To Open an Account</R>
To Add to an Account
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Automatically |
To Open an Account
To Add to an Account
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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.
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:
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.
When you place an order to sell shares, note the following:
Prospectus
Shareholder Information - continued
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Key Information |
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<R>Phone |
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Internet |
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Mail |
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
Retirement Account
Trust
Business or Organization
Executor, Administrator, Conservator, Guardian
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In Person |
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
Retirement Account
Trust
Business or Organization
Executor, Administrator, Conservator, Guardian
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Automatically |
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Check |
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An exchange involves the redemption of all or a portion of the shares of one fund and the purchase of shares of another fund.
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 policies and restrictions governing exchanges:
The fund may terminate or modify the exchange privilege in the future.
Other funds may have different exchange restrictions, and may impose trading fees of up to 2.00% of the amount exchanged. Check each fund's prospectus for details.
Prospectus
Shareholder Information - continued
The following features are available to buy and sell shares of the fund.
Automatic Investment Programs. Fidelity offers convenient services that let you automatically transfer money into your account or between accounts. While automatic investment programs do not guarantee a profit and will not protect you against loss in a declining market, they can be an excellent way to invest for retirement, a home, educational expenses, and other long-term financial goals. Automatic exchange programs can be a convenient way to move money between your investments.
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Fidelity Automatic Account Builder |
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Minimum $100 |
Frequency Monthly or quarterly |
Procedures
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Direct Deposit |
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Minimum $100 |
Frequency Every pay period |
Procedures
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Fidelity Automatic Exchange Service |
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Minimum $100 |
Frequency Monthly, bimonthly, quarterly, or annually |
Procedures
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Prospectus
Shareholder Information - continued
Other Features. The following other features are also available to buy and sell shares of the fund.
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Wire |
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Fidelity Money Line |
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Fidelity On-Line Xpress+® |
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Call 1-800-544-0240 or visit Fidelity's web site for more information.
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Fidelity Online Trading |
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FAST |
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Call 1-800-544-5555.
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Checkwriting |
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The following policies apply to you as a shareholder.
Statements and reports that Fidelity sends to you include the following:
To reduce expenses, only one copy of most financial reports and prospectuses <R>may </R>be mailed to household<R>s</R>, even if more than one<R> person in the household holds shares of</R> the fund. Call Fidelity at 1-800-544-8544 if you need additional copies of financial reports or prospectuses. If you do not want the mailing of these documents to be combined with those for other members of your household, contact Fidelity in writing at P.O. Box 5000, Cincinnati, Ohio 45273-8692.
Electronic copies of most financial reports and prospectuses are available at Fidelity's web site. To participate in Fidelity's electronic delivery program, call Fidelity or visit Fidelity's web site for more information.
Prospectus
Shareholder Information - continued
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 sell and exchange by telephone, call Fidelity for instructions.
When you sign your account application, you will be asked to certify that your social security or taxpayer identification number is correct and that you are not subject to 31% backup withholding for failing to report income to the IRS. If you violate IRS regulations, the IRS can require the fund to withhold 31% of your taxable distributions and redemptions.
Fidelity may 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 Fidelity, 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 accounts with Fidelity maintained by Fidelity Service Company, Inc. or FBS <R>LLC </R>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 (except accounts not subject to account minimums), you will be given 30 days' notice to reestablish the minimum balance. If you do not increase your balance, Fidelity may close your account and send the proceeds to you. Your shares will be sold at the NAV on the day your account is closed.
Fidelity may charge a fee for certain services, such as providing historical account documents.
Dividends and Capital Gain Distributions
The fund earns interest, dividends, and other income from its investments, and distributes this income (less expenses) to shareholders as dividends. The fund may also realize capital gains from its investments, and distributes these gains (less losses), if any, to shareholders as capital gain distributions.
Prospectus
Shareholder Information - continued
Distributions you receive from the fund consist primarily of dividends. The fund normally declares dividends daily and pays them monthly.
Earning Dividends
Shares begin to earn dividends on the first business day following the day of purchase.
Shares earn dividends until, but not including, the next business day following the day of redemption.
When you open an account, specify on your application how you want to receive your distributions. The following options may be available for the fund's distributions:
5. Reinvestment Option. Your dividends 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.
6. Cash Option. Your dividends and capital gain distributions, if any, will be paid in cash.
7. Directed Dividends® Option. Your dividends will be automatically invested in shares of another identically registered Fidelity fund. Your capital gain distributions, if any, will be automatically invested in shares of another identically registered Fidelity fund, automatically reinvested in additional shares of the fund, or paid in cash.
Not all distribution options are available for every account. If the option you prefer is not listed on your account application, or if you want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the U.S. Postal Service does not deliver your checks, your distribution option may be converted to the Reinvestment Option. You will not receive interest on amounts represented by uncashed distribution checks.
As with any investment, your investment in the fund could have tax consequences for you. If you are not investing through a tax-advantaged retirement account, you should consider these tax consequences.
Distributions you receive from the fund are subject to federal income tax, and may also be subject to state or local taxes.
For federal tax purposes, the fund's dividends and distributions of short-term capital gains are taxable to you as ordinary income, while the fund's distributions of long-term capital gains, if any, are taxable to you generally as capital gains.
Any taxable distributions you receive from the fund will normally be taxable to you when you receive them, regardless of your distribution option. If you elect to receive distributions in cash or to invest distributions automatically in shares of another Fidelity fund, you will receive certain December distributions in January, but those distributions will be taxable as if you received them on December 31.
Prospectus
Daily Income is a mutual fund, an investment that pools shareholders' money and invests it toward a specified goal.
FMR is the fund's manager.
As of <R>March 31, 2000</R>, FMR had approximately $<R>639.1</R> billion in discretionary assets under management.
As the manager, FMR is responsible for choosing the fund's investments and handling its business affairs.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New Hampshire, serves as <R>a</R> sub-adviser for the fund. FIMM is primarily responsible for choosing investments for the fund.
FIMM is an affiliate of FMR. As of March 31, 2000, FIMM had approximately $<R>206.8</R> billion in discretionary assets under management.
From time to time a manager, analyst, or other Fidelity employee may express views regarding a particular company, security, industry, or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
The fund pays a management fee to FMR. 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 of 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, <R>2000</R> was<R> 0.34</R>% of the fund's average net assets.
FMR pays FIMM for providing <R>sub-advisory</R> services.
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 discontinued by FMR at any time, can decrease the fund's expenses and boost its performance.
Fidelity Distributors Corporation (FDC) distributes the fund's shares.
Prospectus
Fund Services - continued
The fund has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 that 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 providing services intended to result in the sale of fund shares and/or shareholder support services. FMR, directly or through FDC, may pay <R>significant amounts</R> to intermediaries, such as banks, broker-dealers, and other service-providers, that provide those services. Currently, the Board of Trustees of the fund has authorized such payments.
<R>If payments made by FMR to FDC or to intermediaries under the Distribution and Service Plan were considered to be paid out of the fund's assets on an ongoing basis, they might increase the cost of your investment and might cost you more than paying other types of sales charges.</R>
To receive payments made pursuant to a Distribution and Service Plan, intermediaries must sign the appropriate agreement with FDC in advance.
<R>From time to time, FDC may offer special promotional programs to investors who purchase shares of Fidelity funds. For example, FDC may offer merchandise, discounts, vouchers, or similar items to investors who purchase shares of certain Fidelity funds during certain periods. To determine if you qualify for any such programs, contact Fidelity or visit our web site at www.fidelity.com.</R>
FMR may allocate brokerage transactions in a manner that takes into account the sale of shares of the fund, provided that the fund receives brokerage services and commission rates comparable to those of other broker-dealers.
No dealer, sales representative, or any other person has been authorized to give any information or to make any representations, other than those contained in this prospectus and in the related statement of additional information (SAI), in connection with the offer contained in this prospectus. If given or made, such other information or representations must not be relied upon as having been authorized by the fund or FDC. This prospectus and the related SAI do not constitute an offer by the fund or by FDC to sell shares of the fund to or to buy shares of the fund from any person to whom it is unlawful to make such offer.
Prospectus
The financial highlights table is intended to help you understand the fund's financial history for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, independent accountants, whose report, along with the fund's financial highlights and financial statements, are included in the fund's annual report. A free copy of the annual report is available upon request.
<R>Selected Per-Share Data and Ratios</R>
|
<R>Years ended August 31, |
2000 |
1999 |
1998 |
1997 |
1996</R> |
|
<R>Selected Per-Share Data |
|
|
|
|
</R> |
|
<R>Net asset value, beginning of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Income from Investment Operations |
|
|
|
|
</R> |
|
<R> Net interest income |
.056 |
.047 |
.052 |
.051 |
.051</R> |
|
<R>Less Distributions |
|
|
|
|
</R> |
|
<R> From net interest income |
(.056) |
(.047) |
(.052) |
(.051) |
(.051)</R> |
|
<R>Net asset value, end of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Total Return A |
5.76% |
4.84% |
5.31% |
5.18% |
5.25%</R> |
|
<R>Ratios and Supplemental Data |
|
|
|
|
</R> |
|
<R>Net assets, end of period (in millions) |
$ 3,006 |
$ 2,758 |
$ 2,625 |
$ 2,425 |
$ 2,317</R> |
|
<R>Ratio of expenses to average net assets |
.50% |
.48% |
.50% |
.50% |
.50%</R> |
|
<R>Ratio of expenses to average net assets |
.50% |
.48% |
.50% |
.49% B |
.50%</R> |
|
<R>Ratio of net interest income to |
5.62% |
4.74% |
5.19% |
5.07% |
5.11%</R> |
<R>A The total returns would have been lower had certain expenses not been reduced during the periods shown.</R>
<R>B FMR or the fund has entered into varying arrangements with third parties who either paid or reduced a portion of the fund's expenses.</R>
Prospectus
Notes
Notes
You can obtain additional information about the fund. The fund's SAI includes more detailed information about the fund and its investments. The SAI is incorporated herein by reference (legally forms a part of the prospectus). The fund's annual and semi-annual reports include a discussion of the fund's holdings and recent market conditions and the fund's investment strategies that affected performance.
For a free copy of any of these documents or to request other information or ask questions about the fund, call Fidelity at 1-800-544-8544. In addition, you may visit Fidelity's web site at www.fidelity.com for a free copy of a prospectus or an annual or semi-annual report or to request other information.
|
<R>The SAI, the fund's annual and semi-annual reports and other related materials are available from the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) Database on the SEC's web site (http://www.sec.gov). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to [email protected] or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102. You can also review and copy information about the fund, including the fund's SAI, at the SEC's Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the operation of the SEC's Public Reference Room.</R> Investment Company Act of 1940, File Number, 811-6452 |
<R>Fidelity, Fidelity Investments & (Pyramid) Design, FAST, Fidelity Money Line, Fidelity Automatic Account Builder, Fidelity On-Line Xpress+, and Directed Dividends are registered trademarks of FMR Corp.</R>
<R>Portfolio Advisory Services is a service mark of FMR Corp.</R>
1.536815.103 FDI-pro-1000
FIDELITY® DAILY INCOME TRUST
A Fund of Fidelity Union Street Trust II
STATEMENT OF ADDITIONAL INFORMATION
<R>October 23, 2000</R>
This statement of additional information (SAI) is not a prospectus. Portions of the fund's annual report are incorporated herein. The annual report is supplied with this SAI.
To obtain a free additional copy of the prospectus, dated October 23, 2000, or an annual report, please call Fidelity at 1-800-544-8544 or visit Fidelity's <R>web</R> site at www.fidelity.com.
|
TABLE OF CONTENTS |
PAGE |
|
Investment Policies and Limitations |
|
|
Portfolio Transactions |
|
|
Valuation |
|
|
Performance |
|
|
Additional Purchase, Exchange and Redemption Information |
|
|
Distributions and Taxes |
|
|
Trustees and Officers |
|
|
Control of Investment Advisers |
|
|
Management Contract |
|
|
Distribution Services |
|
|
Transfer and Service Agent Agreements |
|
|
Description of the Trust |
|
|
Financial Statements |
|
|
Appendix |
FDI-ptb-1000
1.461742.103
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109
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 in connection with the insurance program established by the fund pursuant to an exemptive order issued by the Securities and Exchange Commission or as otherwise 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. 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.
(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 15% 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 were invested in illiquid securities, it would consider appropriate steps to protect liquidity.
The following pages contain more detailed information about types of instruments in which the fund may invest, strategies Fidelity Management & Research Company (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 other factors including changes in interest rates, the availability of information concerning the pool and its structure, 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.
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.
Central Cash Funds are money market funds managed by FMR or its affiliates that seek to earn a high level of current income (free from federal income tax in the case of a municipal money market fund) while maintaining a stable $1.00 share price. The funds comply with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of their investments.
Illiquid Securities cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. Difficulty in selling securities may result in a loss or may be costly to a fund. 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 securities. In determining the liquidity of a fund's investments, FMR may consider various factors, including (1) the frequency and volume of trades and quotations, (2) the number of dealers and prospective purchasers in the marketplace, (3) dealer undertakings to make a market, and (4) the nature of the security and the market in which it trades (including any demand, put or tender features, the mechanics and other requirements for transfer, any letters of credit or other credit enhancement features, any ratings, the number of holders, the method of soliciting offers, the time required to dispose of the security, and the ability to assign or offset the rights and obligations of the security).
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 Insurance. The fund participates in a mutual insurance company solely with other funds advised by FMR or its affiliates. This company provides insurance coverage for specified types of losses on certain money market instruments held by a participating fund, including losses from nonpayment of principal or interest or a bankruptcy or insolvency of the issuer or credit support provider, if any. The insurance does not cover losses resulting from changes in interest rates or other market developments. A participating fund is charged an annual premium for the insurance coverage and may be subject to a special assessment if covered losses exceed certain levels. A participating fund is subject to limits on the amount it may recover and may incur losses regardless of the insurance.
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. In exchange for this benefit, a fund may accept a lower interest rate. Securities with put features 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.
Repurchase Agreements involve an agreement to purchase a security and 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. The value of the security purchased may be more or less than the price at which the counterparty has agreed to purchase the security. In addition, delays or losses could result if the other party to the agreement defaults or becomes insolvent. The fund will engage in repurchase agreement transactions with parties whose creditworthiness has been reviewed and found satisfactory by FMR.
Restricted Securities are subject to legal restrictions on their sale. Difficulty in selling securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security.
Reverse Repurchase Agreements. In a reverse repurchase agreement, 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. 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 a fund's yield and may be viewed as a form of leverage.
Short Sales "Against the Box" are short sales of securities that a fund owns or has the right to obtain (equivalent in kind or amount to the securities sold short). Short sales against the box could be used to protect the net asset value per share (NAV) 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 Liquidity or Credit Support. Issuers may employ various forms of credit and liquidity enhancements, including letters of credit, guarantees, puts, and demand features, and insurance provided by domestic or foreign entities such as banks and other financial institutions. FMR may rely on its evaluation of the credit of the liquidity or credit enhancement provider in determining whether to purchase a security supported by such enhancement. 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. Changes in the credit quality of the entity providing the enhancement could affect the value of the security or a fund's share 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.
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.
When-Issued and Forward Purchase or Sale Transactions involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take 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 pursuant to one of these transactions, 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 a purchase is outstanding, the purchases may result in a form of leverage. When a fund has sold a security pursuant to one of these transactions, 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 when-issued or forward transaction and may sell the underlying securities before delivery, which may result in capital gains or losses for the fund.
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 investment 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 investment 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 investment 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.
<R>To the extent permitted by applicable law, FMR is authorized to allocate portfolio transactions in a manner that takes into account assistance received in the distribution of shares of the fund or other Fidelity funds and to use the research services of brokerage and other firms that have provided such assistance. FMR may use research services provided by and place agency transactions with National Financial Services LLC (NFS) 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. FMR may also place agency transactions with REDIBook ECN LLC (REDIBook), an electronic communication network (ECN) in which a wholly-owned subsidiary of FMR Corp. has an equity ownership interest, if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. </R>
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 that 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 investment accounts which they or their affiliates manage, unless certain requirements are satisfied. Pursuant to such requirements, the Board of Trustees has authorized NFS 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.
The fund may pay both commissions and spreads in connection with the placement of portfolio transactions. For the fiscal years ended August 31, 2000, 1999, and 1998, the fund paid no brokerage commissions.
<R>During the fiscal year ended August 31, 2000, the fund paid no brokerage commissions to firms for providing research services.</R>
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 <R>underwritings</R>.
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 or investment accounts managed by FMR<R> or its</R> affiliates. It sometimes happens that the same security is held in the portfolio of more than one of these funds or investment accounts. Simultaneous transactions are inevitable when several funds and investment 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 investment 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.
The fund's NAV is the value of a single share. The NAV of the fund is computed by adding the value of the fund's investments, cash, and other assets, subtracting its liabilities, and dividing the result by the number of shares outstanding.
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.
At such intervals as they deem appropriate, the Trustees consider the extent to which NAV calculated by using market valuations would deviate from the $1.00 per share calculated using amortized cost valuation. 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.
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 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, the 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.
Return Calculations. 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. A cumulative return reflects actual performance over a stated period of time. Average annual 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 return of 100% over ten years would produce an average annual 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 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 returns represent averaged figures as opposed to the actual year-to-year performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or cumulative returns reflecting the simple change in value of an investment over a stated period. Average annual and cumulative 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. Returns may be broken down into their components of income and capital (including capital gains and changes in share price) to illustrate the relationship of these factors and their contributions to return. Returns may be quoted on a before-tax or after-tax basis. <R>After-tax returns reflect the return of a hypothetical account after payment of federal and/or state taxes using assumed tax rates. After-tax returns may assume that taxes are paid at the time of distribution or once a year or are paid in cash or by selling shares, that shares are held through the entire period, sold on the last day of the period, or sold at a future date, and distributions are reinvested or paid in cash. </R>Returns may or may not include the effect of the fund's small account fee. Excluding the fund's small account fee from a return calculation produces a higher return figure. Returns, yields and other performance information may be quoted numerically or in a table, graph, or similar illustration.
Historical Fund Results. The following table shows the fund's 7-day yield and returns for the fiscal periods ended August 31, <R>2000</R>.
|
|
|
Average Annual Returns |
Cumulative Returns |
||||
|
|
Seven-Day |
One |
Five |
Ten |
One |
Five |
Ten |
|
<R>Daily Income |
6.21% |
5.76% |
5.27% |
4.87% |
5.76% |
29.26% |
60.95%</R> |
The following table shows the income and capital elements of the fund's cumulative return. The table compares the fund's return to the record of the Standard & Poor's <R>500SM </R> 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 S&P 500 and DJIA comparisons are provided to show how the fund's return compared to the record of a market capitalization-weighted 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, 2000, a hypothetical $10,000 investment in Daily Income would have grown to $1<R>6,09</R>5, assuming all distributions were reinvested. 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.
|
FIDELITY DAILY INCOME TRUST |
INDEXES |
||||||
|
FiscalYearEnded |
Value of |
Value of |
Value of |
Total |
S&P 500 |
DJIA |
Cost of |
|
<R>2000 |
$ 10,000 |
$ 6,095 |
$ 0 |
$ 16,095 |
$ 59,354 |
$ 54,368 |
$ 13,123</R> |
|
<R>1999 |
$ 10,000 |
$ 5,218 |
$ 0 |
$ 15,218 |
$ 51,027 |
$ 51,701 |
$ 12,698</R> |
|
<R>1998 |
$ 10,000 |
$ 4,516 |
$ 0 |
$ 14,516 |
$ 36,493 |
$ 35,425 |
$ 12,416</R> |
|
<R>1997 |
$ 10,000 |
$ 3,784 |
$ 0 |
$ 13,784 |
$ 33,761 |
$ 35,221 |
$ 12,219</R> |
|
<R>1996 |
$ 10,000 |
$ 3,105 |
$ 0 |
$ 13,105 |
$ 24,004 |
$ 25,459 |
$ 11,953</R> |
|
<R>1995 |
$ 10,000 |
$ 2,452 |
$ 0 |
$ 12,452 |
$ 20,217 |
$ 20,446 |
$ 11,619</R> |
|
<R>1994 |
$ 10,000 |
$ 1,810 |
$ 0 |
$ 11,810 |
$ 16,647 |
$ 16,915 |
$ 11,322</R> |
|
<R>1993 |
$ 10,000 |
$ 1,440 |
$ 0 |
$ 11,440 |
$ 15,784 |
$ 15,358 |
$ 11,003</R> |
|
<R>1992 |
$ 10,000 |
$ 1,125 |
$ 0 |
$ 11,125 |
$ 13,698 |
$ 13,304 |
$ 10,707</R> |
|
<R>1991 |
$ 10,000 |
$ 664 |
$ 0 |
$ 10,664 |
$ 12,691 |
$ 12,068 |
$ 10,380</R> |
Explanatory Notes: With an initial investment of $10,000 in the fund on September 1, 1990, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000) together with the aggregate cost of reinvested dividends and capital gain distributions for the period covered (their cash value at the time they were reinvested) amounted to<R> $16,095.</R> 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 <R>$4,769</R> for dividends<R>. </R>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 Inc. (Lipper), an independent service located in Summit, New Jersey that monitors the performance of mutual funds. Generally, Lipper rankings are based on 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 indexes prepared by Lipper or other organizations. When comparing these indexes, 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<R> an investor'</R>s principal or 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 indexes.
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 returns in the same method as the funds. The funds may also compare performance to that of other compilations or indexes that may be developed and made available in the future.
<R>The money market fund may compare its performance or the performance of securities in which it may invest to averages published by iMoneyNet, Inc. of Westborough, Massachusetts. These averages assume reinvestment of distributions. iMoneyNet's MONEY FUND REPORT AVERAGES(TM)/All Taxable, which is reported in iMoneyNet's MONEY FUND REPORT(TM), covers 974 taxable money market funds. </R>
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®, a quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(TM) number, and CUSIP number, and discuss or quote its current portfolio manager.
<R>As of August 31, 2000, FMR advised over $36 billion in municipal fund assets, $146 billion in taxable fixed-income fund assets, $153 billion in money market fund assets, $674 billion in equity fund assets, $20 billion in international fund assets, and $43 billion in Sparta</R>n® 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
<R>The fund may make redemption payments in whole or in part in readily marketable securities or other property, valued for this purpose a</R>s they are valued in computing the fund's NAV, if FMR determines it is in the best interests of the fund. Shareholders that r<R>eceiv</R>e 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.
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 taxable as dividends, but do not qualify for the dividends-received deduction. A portion of the fund's dividends derived from certain U.S. Government securities and securities of certain other investment companies may be exempt from state and local taxation.
Capital Gain Distributions. The fund may distribute any net realized capital gains once a year or more often, as necessary.
As of August 31, 2000, the fund had an aggregate capital loss carryforward of approximately $<R>1,128,000</R>. This loss carryforward, of which $<R>336,000</R>, $<R>536,000, $19,000, $99,000, $109,000, $15,000</R>, and $<R>14,000 </R>will expire on August 31,<R> 2001</R>, <R>2002</R>,<R> 2003, 2004, 2006, 2007,</R> and <R>2008</R>, 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" under Subchapter M of the Internal Revenue Code 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.
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. It is up to you or your tax preparer to determine whether the sale of shares of the fund resulted in a capital gain or loss or other tax consequence to you. 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.
The Trustees, Members of the Advisory Board, and executive officers of the trust <R>and fund, as applicable</R>, are listed below. The Board of Trustees governs the fund and 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. Except as indicated, each individual has held the office shown or other offices in the same company for the <R>p</R>ast five years. All persons named as Trustees and Members of the Advisory Board also serve in similar capacities for other funds advised by FMR or its affiliates. The business address of each Trustee, Member of the Advisory Board, and officer who is an "interested person" (as defined in the 1940 Act) 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 (70), Trustee, is President of Daily Income. Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, 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 Management & Research (U.K.) Inc. and of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; Chairman and Representative Director of Fidelity Investments Japan Limited (1997); and a Director of FDC and of FMR Co., Inc. (2000). Abigail Johnson, Member of the Advisory Board of Fidelity Union Street Trust II, is Mr. Johnson's daughter.
ABIGAIL P. JOHNSON (38), Member of the Advisory Board of Fidelity Union Street Trust II (1999), is Vice President of certain Equity Funds (1997), and is a Director of FMR Corp. (1994). Before assuming her current responsibilities, Ms. Johnson managed a number of Fidelity funds. Edward C. Johnson 3d, Trustee and President of the Funds, is Ms. Johnson's father.
<R>J. MICHAEL COOK (57), Member of the Advisory Board (2000). Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP, Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Dow Chemical Company (2000), HCA - The Healthcare Company (1999), and Children First (1999). He is a member of the Executive Committee of the Securities Regulation Institute, past chairman and a member of the Board of Catalyst (a leading organization for the advancement of women in business), and a Director of the STAR Foundation (Society to Advance the Retarded and Handicapped). He also serves as a member of the Board and Executive Committee and as Co-Chairman of the Audit and Finance Committee of the Center for Strategic & International Studies, a member of the Board of Overseers of the Columbia Business School, and a Member of the Advisory Board of the Graduate School of Business of the University of Florida.</R>
RALPH F. COX (68), Trustee, is President of RABAR Enterprises (management consulting-petroleum 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 Waste <R>Management </R>Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering), and Abraxas Petroleum (p<R>etroleum exploration and production, 1999</R>). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (68), Trustee. Mrs. Davis is retired from Avon Products, Inc. where she held <R>various positions including</R> Senior Vice President of Corporate Affairs and <R>Group Vice President o</R>f U.S. sales, distribution, and manufacturing. She is currently a Director of BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing), and the TJX Companies, Inc. (retail stores), and previously served as a Director of Hallmark Cards, Inc.,<R> Nabisco Brands, </R>Inc., and Standard Brands, Inc. In addition, she is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998).
ROBERT M. GATES (56), 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 Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), and TRW Inc. (<R>automotive, space, defense, and information technology). Mr. Gates previously served as a Director of LucasVarity PLC (automotive components and diesel engines). He is currently serving as Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). M</R>r. Gates also is a Trustee of the Forum for International Policy and of the Endowment Association of the College of William and Mary.
DONALD J. KIRK (67), Trustee, is Chairman of the Board of Directors of National Arts Stabilization Inc., Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995), and a Public Governor of the National Association of Securities Dealers, Inc. (1996). Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995<R>)</R> at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Mr. Kirk previously served as a Director of General Re Corporation<R> (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations, </R>1993-1995).
<R>MARIE L. KNOWLES (53), Member of the Advisory Board (2000). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994), URS Corporation (multidisciplinary engineering, 1999), and America West Holdings Corporation (aviation and travel services, 1999) and previously served as a Director of ARCO Chemical Corporation and Vastar Resources, Inc. Ms. Knowles serves as a member of the National Board of the Smithsonian Institution, she is a Trustee of the Brookings Institution and serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.</R>
<R>NED C. LAUTENBACH (56), Trustee (2000), has been a partner of Clayton, Dublier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the IBM Corporation from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach has served as Chairman and Chief Executive Officer of Acterna Corporation (global communications equipment) since 1999 and as a Director since 1998. He is also co-Chairman and a Director of Complete Business Solutions, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (global manufacturer of highly engineered products, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.</R>
<R>*PETER S. LYNCH (57), Trustee, is Vice Chairman and a Director of FMR; and a Director of FMR Co., Inc. (2000). 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.</R>
<R>WILLIAM O. McCOY (66), Trustee (1997). Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke-Weeks Realty Corporation (real estate, 1994), Carolina Power and Light Company (electric utility, 1996), the Kenan Transport Company (trucking, 1996), and Dynatech Corporation (electronics, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997). Previously, he was a Director of First American Corporation (bank holding company, 1979-1996). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flager Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).</R>
GERALD C. McDONOUGH (72), Trustee and Chairman of the non-interested Trustees, is Chairman of G.M. Management Group (strategic advisory services). Mr. McDonough is a Director and <R>Chairman of the Board </R>of York International Corp. (air conditioning and <R>refrigeration</R>), a Director of Associated Estates Realty Corporation (a real estate investment trust), and a Director of Barpoint.com (online and wireless product information service, 2000). 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. He also served as a Director of Commercial Intertech Corp. (hydraulic systems, building systems, and metal products) from 1992-2000 and CUNO, Inc. (liquid and gas filtration products) from 1996-2000.
<R>MARVIN L. MANN (67), Trustee, is Chairman Emeritus of Lexmark International, Inc. (office machines, 1991) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation ("IBM") and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993), Imation Corp. (imaging and information storage, 1997). He is a Board member of Dynatech Corporation (electronics, 1999).</R>
<R>*ROBERT C. POZEN (54), Trustee (1997), is Senior Vice President of Daily Income (1997). Mr. Pozen also serves as Senior Vice President of other Fidelity funds (1997). He is President and a Director of FMR (1997), Fidelity Management & Research (U.K.) Inc. (1997), Fidelity Management & Research (Far East) Inc. (1997), Fidelity Investments Money Management, Inc. (1998), and FMR Co., Inc. (2000); a Director of Strategic Advisers, Inc. (1999); and Vice Chairman of Fidelity Investments (2000). Previously, Mr. Pozen served as General Counsel, Managing Director, and Senior Vice President of FMR Corp.</R>
THOMAS R. WILLIAMS<R> (71),</R> 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 <R>National Life Insurance Company of Vermont and American Software, Inc. Mr. Williams was previously a Director of </R>ConAgra, Inc. (agricultural products), Georgia Power Company (electric utility), and Avado, Inc. (restaurants).
<R>DWIGHT D. CHURCHILL (46) is Vice President of Daily Income (2000). He serves as President of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds, 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.</R>
BOYCE I. GREER (44) is Vice President of <R>Daily Income (1997). He serves as Vice President of Fidelity's Municipal Bond Funds (2000), Group Leader of Fidelity's Municipal Bond Group (2000), Vice President of Fidelity's Money Market Funds (1997), Group Leader of Fidelity's </R>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<R> Fidelity's</R> Municipal Fixed-Income Investments (1996-1997).
<R>ROBERT K. DUBY (54) is Vice President of Daily Income (1998), and other funds advised by FMR. Prior to his current responsibilities, Mr. Duby managed a variety of Fidelity funds.</R>
<R>ERIC D. ROITER (51) is Secretary of Daily Income (1998). He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR (1998); and Vice Preside</R>nt and Clerk of FDC (1998). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).
<R>ROBERT A. DWIGHT (42) is Treasurer of Daily Income (2000). Mr. Dwight also serves as Treasurer of other Fidelity funds (2000) and is an employee of FMR. Prior to becoming Treasurer of the Fidelity funds, he served as President of Fidelity Accounting and Custody Services (FACS). Before joining Fidelity, Mr. Dwight was Senior Vice President of fund accounting operations for The Boston Company.</R>
<R>MARIA F. DWYER (41) is Deputy Treasurer of Daily Income (2000). She also serves as Deputy Treasurer of other Fidelity funds (2000) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.</R>
<R>STANLEY N. GRIFFITH (53) is Assistant Vice President of Daily Income. Mr. Griffith is Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and is an employee of FMR Corp.</R>
<R>JOHN H. COSTELLO (54) is Assistant Treasurer of Daily Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is a</R>n employee of FMR.
THOMAS J. SIMPSON (42) is Assistant Treasurer of Daily Income (1996). Mr. Simpson is Assistant Treasurer of<R> other </R>Fidelity <R>f</R>unds (<R>2000</R>) 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, <R>2000, or</R> calendar year ended December 31, 1999, as applicable.
|
Compensation Table |
||
|
Trustees |
Aggregate |
Total |
|
Edward C. Johnson 3d** |
$ 0 |
$ 0 |
|
Abigail P. Johnson** |
$ 0 |
$ 0 |
|
<R>J. Michael Cook***** |
$ 422 |
$ 0</R> |
|
<R>Ralph F. Cox |
$ 811 |
$ 217,500</R> |
|
<R>Phyllis Burke Davis |
$ 821 |
$ 211,500</R> |
|
<R>Robert M. Gates |
$ 811 |
$ 217,500</R> |
|
<R>E. Bradley Jones**** |
$ 250 |
$ 217,500</R> |
|
<R>Donald J. Kirk |
$ 811 |
$ 217,500</R> |
|
<R>Marie L. Knowles****** |
$ 129 |
$ 0</R> |
|
<R>Ned C. Lautenbach*** |
$ 742 |
$ 54,000</R> |
|
Peter S. Lynch** |
$ 0 |
$ 0 |
|
<R>William O. McCoy |
$ 800 |
$ 214,500</R> |
|
<R>Gerald C. McDonough |
$ 1,011 |
$ 269,000</R> |
|
<R>Marvin L. Mann |
$ 816 |
$ 217,500</R> |
|
Robert C. Pozen** |
$ 0 |
$ 0 |
|
<R>Thomas R. Williams |
$ 811 |
$ 213,000</R> |
* Information is for the calendar year ended December 31, 1999 for 236 funds in the complex.
** Interested Trustees of the fund and Ms. Johnson are compensated by FMR.
*** During the period from October 14, 1999 through December 31, 1999, Mr. Lautenbach served as a Member of the Advisory Board. Effective January 1, 2000, Mr. Lautenbach serves as a Member of the Board of Trustees.
**** Mr. Jones served on the Board of Trustees through December 31, 1999.
***** Effective March 16, 2000, Mr. Cook serves as a Member of the Advisory Board.
****** Effect<R>ive</R> June 15, 2000, Ms. Knowles serves as a Member of the Advisory Board.
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, 1999, the Trustees accrued required deferred compensation from the funds as follows: Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $75,000; 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, $53,735; William O. McCoy, $53,735; and Thomas R. Williams, $62,319.
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, $<R>462</R>; Phyllis Burke Davis, $<R>462</R>; Robert M. Gates, $<R>462</R>; E. Bradley Jones, $<R>118</R>; Donald J. Kirk, $<R>462</R>; Ned C. Lautenbach, $<R>344</R>; William O. McCoy, $<R>462</R>; Gerald C. McDonough, $<R>575</R>; Marvin L. Mann, $<R>462</R>; and Thomas R. Williams, $<R>462</R>.
<R>D Certain of the non-interested Trustees' aggregate compensation from the fund includes accrued voluntary deferred compensation as follows: Ned C. Lautenbach, $146 and Thomas R. Williams, $242.</R>
Under a deferred compensation plan adopted in September 1995 and amended in November 1996 and January 2000 (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual fees. Amounts deferred under the Plan are treated as though equivalent dollar amounts had been invested in shares of a cross-section of Fidelity funds including funds in each major investment discipline and representing a majority of Fidelity's assets under management (the Reference Funds). The amounts ultimately received by the Trustees under the Plan will be directly linked to the investment performance of the Reference Funds. Deferral of fees in accordance with the Plan will have a negligible effect on a fund's assets, liabilities, and net income per share, and will not obligate a fund to retain the services of any Trustee or to pay any particular level of compensation to the Trustee. A fund may invest in the Reference Funds under the Plan without shareholder approval.
As of August 31, 2000, the Trustees, Members of the Advisory Board, and officers of the fund owned, in the aggregate, less than<R> 1</R>% of the fund's total outstanding shares.
CONTROL OF INVESTMENT ADVISERS
FMR Corp., organized in 1972, is the ultimate parent company of FMR and Fidelity Investments Money Management, Inc. (FIMM). 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.
<R>At present, the primary business activities of FMR Corp. and its subsidiaries are: (i) the provision of investment advisory, management, shareholder, investment information and assistance and certain fiduciary services for individual and institutional investors; (ii) the provision of securities brokerage services; (iii) the management and development of real estate; and (iv) the investment in and operation of a number of emerging businesses.</R>
<R>The fund, FMR, FIMM, and Fidelity Distributors Corporation (FDC) have adopted a code of ethics under Rule 17j-1 of the 1940 Act that sets forth employees' fiduciary responsibilities regarding the fund, establishes procedures for personal investing, and restricts certain transactions. Employees subject to the code of ethics, including Fidelity investment personnel, may invest in securities for their own investment accounts, including securities that may be purchased or held by the fund.</R>
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 mand's averanagement contract, the fund pays FMR a monthly management fee which has two components. The first component is an amount based upon the fuge 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 of 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, <R>2000</R>, 1999, and 1998, the fund paid FMR management fees of $<R>9,952,000</R>, $<R>8,369,000</R>, and $<R>8,065,000</R>, 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 discontinuance. 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 returns and yield, and repayment of the reimbursement by the fund will lower its returns and yield.
Sub-Adviser. FMR has entered into a sub-advisory agreement with FIMM pursuant to which FIMM has primary responsibility for choosing investments for the fund. Prior to January 23, 1998, FMR Texas Inc. (FMR Texas) had primary responsibility for providing investment management services to the fund. 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 year ended August 31, 1998, FMR paid FMR Texas a fee of $<R>1,591,000</R>. On behalf of the fund, for the fiscal years ended August 31, 2000, 1999, and 1998, FMR paid FIMM fees of $<R>4,976,000</R>, $<R>4,185,000</R>, and $<R>2,442,000</R>, respectively.
The fund has entered into a distribution agreement with FDC, an affiliate of FMR. 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.
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 providing services intended to result in the sale of fund shares and/or shareholder support services. In addition, the Plan provides that FMR, directly or through FDC, may pay<R> significant amounts to </R>intermediaries, such as banks, broker-dealers and other service-providers, that provide those services. Currently, the Board of Trustees has authorized such payments for Daily Income shares.
Prior to approving the Plan, the Trustees carefully considered all pertinent factors relating to the implementation of the Plan, and determined that there is a reasonable likelihood that the Plan will benefit the fund and its shareholders. In particular, the Trustees noted that the Plan does not authorize payments by the fund other than those made to FMR under its management contract with the fund. To the extent that the Plan gives FMR and FDC greater flexibility in connection with the distribution of fund shares, additional sales of fund shares or stabilization of cash flows may result. Furthermore, certain shareholder support services may be provided more effectively under the Plan by local entities with whom shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state chartered or supervised banks from directly engaging in the business of underwriting, selling or distributing securities. 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, 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.
FDC may compensate intermediaries that satisfy certain criteria established from time to time by FDC relating to the level or type of services provided by the intermediary, the sale or expected sale of significant amounts of shares, or other factors.
TRANSFER AND SERVICE AGENT AGREEMENTS
The fund has entered into a<R> tra</R>nsfer agent agreement with<R> Fidelity Service Company, Inc. (</R>FSC<R>)</R>, 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 and 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.
<R>FSC also collects the fund's $1.00 checkwriting fee.</R>
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 in each Fidelity Freedom Fund and Fidelity Four-in-One Index Fund, funds of funds managed by an FMR affiliate, according to the percentage of the QSTP's, Freedom Fund's or Fidelity Four-in-One Index Fund's assets that is invested in the fund, subject to certain limitations in the case of Fidelity Four-in-One Index Fund.
FSC pays out-of-pocket expenses associated with providing transfer agent services. In addition, FSC bears the expense of typesetting, printing, and mailing prospectuses, statements of additional information, and all other reports, notices, and statements to existing shareholders, with the exception of proxy statements.
The fund has also entered into a service agent agreement with FSC. Under the terms of the agreement, FSC calculates the NAV and dividends for the fund 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 rates for pricing and bookkeeping services for the fund are 0.0150% of the first $500 million of average net assets, <R>0.0075% of average net assets between $500 million and $10 billion, 0.0021% of average net assets between $10 billion and $25 billion, and 0.00075% of average net assets in excess of $25 billion. The fee, not including reimbursement for out-of-pocket expenses, is limited to a m</R>inimum of $40,000 per year.
For the fiscal<R> year</R>s ended August 31, 2000, 1999, and 1998, the fund paid FSC pricing and bookkeeping fees, including reimbursement for related ou<R>t-of</R>-pocket expenses, of $<R>261,000</R>, $<R>252,000</R>, and $<R>238,000</R>, respectively.
<R>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. Currently, there are four funds in the trust: Fidelity Daily Income Trust, Fidelity Municipal Money Market Fund, Spartan Arizona Municipal Money Market Fund, and Spartan Municipal Money Fund. The Trustees are permitted to create additional funds in the trust and to create additional classes of the fund.</R>
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 to the rights of creditors, are allocated to such fund, and constitute the underlying assets of such fund. The underlying assets of each fund in the trust shall be charged with the liabilities and expenses attributable to such fund. Any general expenses of the trust shall be allocated between or among any one or more of the funds.
Shareholder 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. The Trust Instrument provides that the trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the trust or the Trustees relating to the trust or to a fund shall include a provision limiting the obligations created thereby to the trust or to one or more funds and its or their assets. The Trust Instrument further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.
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 solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason. 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 a 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.
Voting Rights. Each fund's capital consists of shares of beneficial interest. As a shareholder, you are entitled to one vote for each dollar of net asset value you own. The voting rights of shareholders can be changed only by a shareholder vote. Shares may be voted in the aggregate, by fund, and by class.
The shares have no preemptive or conversion rights. Shares are fully paid and nonassessable, except as set forth under the heading "Shareholder Liability" above.
The trust or <R>a fund </R>may be terminated upon the sale of its assets to another open-end management investment company or series thereof, or upon liquidation and distribution of its assets. Generally such terminations must be approved by a vote of shareholders. In the event of the dissolution or liquidation of the trust, shareholders of each of its funds are entitled to receive the underlying assets of such fund available for distribution. In the event of the dissolution or liquidation of a fund, shareholders of that fund are entitled to receive the underlying assets of the fund available for distribution.
Under the Trust Instrument, the Trustees may, without shareholder vote, in order to change the form of organization of the trust cause the trust to merge or consolidate with one or more trusts, partnerships, associations, limited liability companies, or corporations, as long as the surviving entity is an open-end management investment company, or is a fund thereof, that will succeed to or assume the trust's registration statement, or cause the trust to incorporate under Delaware law.
Custodians. 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 <R>th</R>e fund's assets and the appointment of any subcustodian banks and clearing agencies. 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, <R>Members of the Advisory Boar</R>d, and Members of 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 independent accountant for the fund. The auditor examines financial statements for the fund and provides other audit, tax, and related services.
The fund's financial statements and financial highlights for the fiscal year ended August 31, <R>200</R>0, and report of the auditor, are included in the fund's annual report and are incorporated herein by reference.
Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity Focus, Spartan, and Magellan are registered trademarks of FMR Corp.
<R>The third party marks appearing above are the marks of their respective owners.</R>
Like securities of all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
<R>Fidelity®<M®>
Fund
(fund number 010, trading symbol FTEXX)
<R>Spartan®<M®>
Fund
(fund number 460, trading symbol FIMXX)
Prospectus
<R>October 23, 2000</R>
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109
|
Fund Summary |
Investment Summary |
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Performance |
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Fee Table |
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Fund Basics |
Investment Details |
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Valuing Shares |
|
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Shareholder Information |
Buying and Selling Shares |
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Exchanging Shares |
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Account Features and Policies |
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Dividends and Capital Gain Distributions |
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Tax Consequences |
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Fund Services |
Fund Management |
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Fund Distribution |
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Appendix |
Financial Highlights |
Prospectus
Investment Objective
Municipal Money Market Fund seeks as high a level of interest income exempt from federal income tax as is consistent with liquidity and stability of principal.
Principal Investment Strategies
Fidelity Management & Research Company (FMR)'s principal investment strategies include:
Principal Investment Risks
The fund is subject to the following principal investment risks:
An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Investment Objective
Spartan<R>®</R> Municipal Money Fund seeks as high a level of federally tax-exempt income as is consistent with the preservation of capital and liquidity.
Principal Investment Strategies
<R>FMR's</R> principal investment strategies include:
Prospectus
Fund Summary - continued
Principal Investment Risks
The fund is subject to the following principal investment risks:
An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
The following information illustrates the changes in each fund's performance from year to year. Returns are based on past results and are not an indication of future performance.
The returns in the chart do not include the effect of Spartan Municipal Money's account closeout fee. If the effect of the fee were reflected, returns would be lower than those shown.
|
Municipal Money Market |
||||||||||
|
Calendar Years |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
|
<R> |
5.61% |
4.39% |
2.88% |
2.17% |
2.53% |
3.50% |
3.12% |
3.32% |
3.13% |
2.91%</R> |
<R>
</R>
During the periods shown in the chart for Municipal Money Market, the highest return for a quarter was 1.42% (quarter <R>ended </R>December 31, 1990) and the lowest return for a quarter was <R>0.49%< /R> (quarter <R>ended </R>March 31, 1994).
The year-to-date return as of September 30, 2000 for Municipal Money Market was <R>2.78%</R>.
Prospectus
Fund Summary - continued
|
Spartan Municipal Money |
||||||||||
|
Calendar Years |
|
|
1992 |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
|
<R> |
|
|
3.32% |
2.49% |
2.78% |
3.70% |
3.30% |
3.45% |
3.26% |
3.02%</R> |
<R>
</R>
During the periods shown in the chart for Spartan Municipal Money, the highest return for a quarter was 0.96% (quarter <R>ended June 30, 1995</R>) and the lowest return for a quarter was <R>0.57%< /R> (quarter <R>ended March 31, 1994</R>).
The year-to-date return as of <R>September 30, 2000</R> for Spartan Municipal Money was <R>2.84</R>%.
The returns in the following table do not include the effect of the $5 account closeout fee for Spartan Municipal Money.
|
<R>For the periods ended |
Past 1 |
Past 5 |
Past 10 |
|
<R>Municipal Money Market |
2.91% |
3.20% |
3.35%</R> |
|
<R>Spartan Municipal Money |
3.02% |
3.35% |
3.34%A</R> |
<R>A</R> From January 14, 1991.
If FMR had not reimbursed certain fund expenses during these periods, <R>Spartan Municipal Money'</R>s returns would have been lower.
The following table describes the fees and expenses that are incurred when you buy, hold, or sell shares of a fund. The annual fund operating expenses provided below for <R>Municipal Money Market and Spartan Municipal Money</R> are based on historical expenses.
Prospectus
Fund Summary - continued
Shareholder fees (paid by the investor directly)
|
Sales charge (load) on purchases and reinvested distributions |
None |
|
Deferred sales charge (load) on redemptions |
None |
|
Exchange fee |
|
|
for Spartan Municipal Money onlyA,B |
$5.00 |
|
Wire transaction fee |
|
|
for Spartan Municipal Money onlyA |
$5.00 |
|
Checkwriting fee, per check written |
|
|
for Spartan Municipal Money onlyA |
$2.00 |
|
Account closeout fee |
|
|
for Spartan Municipal Money onlyA |
$5.00 |
|
Annual account maintenance fee (for accounts under $2,500) |
$12.00 |
A The fees for individual transactions are waived if your account balance at the time of the transaction is $50,000 or more.
B You will not pay an exchange fee if you exchange through any of Fidelity's automated exchange services.
Annual fund operating expenses (paid from fund assets)
|
<R>Municipal Money Market |
Management fee |
0.28%</R> |
|
|
Distribution and Service (12b-1) fee |
None |
|
<R> |
Other expenses |
0.18%</R> |
|
<R> |
Total annual fund operating expenses |
0.46%</R> |
|
<R>Spartan Municipal Money |
Management fee |
0.50%</R> |
|
|
Distribution and Service (12b-1) fee |
None |
|
<R> |
Other expenses |
0.00%</R> |
|
<R> |
Total annual fund operating expensesA |
0.50%</R> |
A 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<R>, </R> and extraordinary expenses, as a percentage of its average net assets, exceed 0.40%. This arrangement can be discontinued by FMR at any time.
This example helps you compare the cost of investing in the funds with the cost of investing in other mutual funds.
Let's say, hypothetically, that each fund's annual return is 5% and that your shareholder fees and each fund's annual operating expenses are exactly as described in the fee table. This example illustrates the effect of fees and expenses, but is not meant to suggest actual or expected fees and expenses or returns, all of which may vary. For every $10,000 you invested, here's how much you would pay in total expenses if you close your account <R>at</R> the <R>end</R> of <R>each time period</R> indicated and if you leave your account open:
Prospectus
Fund Summary - continued
|
|
|
Account open |
|
Account closed |
|
<R>Municipal Money Market |
1 year |
$ 47 |
|
$ 47</R> |
|
<R> |
3 years |
$ 148 |
|
$ 148</R> |
|
<R> |
5 years |
$ 258 |
|
$ 258</R> |
|
<R> |
10 years |
$ 579 |
|
$ 579</R> |
|
<R>Spartan Municipal Money |
1 year |
$ 51 |
|
$ 56</R> |
|
<R> |
3 years |
$ 160 |
|
$ 165</R> |
|
<R> |
5 years |
$ 280 |
|
$ 285</R> |
|
<R> |
10 years |
$ 628 |
|
$ 633</R> |
Prospectus
Investment Objective
Municipal Money Market Fund seeks as high a level of interest income exempt from federal income tax as is consistent with liquidity and stability of principal.
Principal Investment Strategies
FMR normally invests the fund's assets in municipal money market securities.
FMR normally invests the fund's assets so that at least 80% of the fund's income is exempt from federal income tax. Although FMR does not currently intend to invest the fund's assets in municipal securities whose interest is subject to federal income tax, FMR may invest all of the fund's assets in municipal securities whose interest is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal securities that finance similar projects, such as those relating to education, health care, transportation, and utilities.
In buying and selling securities for the fund, FMR complies with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of the fund's investments. FMR stresses maintaining a stable $1.00 share price, liquidity, and income.
Investment Objective
Spartan Municipal Money Fund seeks as high a level of federally tax-exempt income as is consistent with the preservation of capital and liquidity.
Principal Investment Strategies
FMR normally invests the fund's assets in municipal money market securities.
FMR normally invests the fund's assets so that at least 80% of the fund's income is exempt from federal income tax. Although FMR does not currently intend to invest the fund's assets in municipal securities whose interest is subject to federal income tax, FMR may invest all of the fund's assets in municipal securities whose interest is subject to the federal alternative minimum tax.
FMR may invest more than 25% of the fund's total assets in municipal securities that finance similar projects, such as those relating to education, health care, transportation, and utilities.
In buying and selling securities for the fund, FMR complies with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of the fund's investments. FMR stresses maintaining a stable $1.00 share price, liquidity, and income.
Description of Principal Security Types
Money market securities are high-quality, short-term securities that pay a fixed, variable, or floating interest rate. Securities are often specifically structured so that they are eligible investments for a money market fund. For example, in order to satisfy the maturity restrictions for a money market fund, some money market securities have demand or put features<R>,</R> which have the effect of shortening the security's maturity. Municipal money market securities include variable rate demand notes, commercial paper, and municipal notes.
Prospectus
Fund Basics - continued
Municipal securities are issued to raise money for a variety of public and private purposes, including general financing for state and local governments, or financing for a specific project or public facility. Municipal securities may be fully or partially backed by the local government, by the credit of a private issuer, by the current or anticipated revenues from a specific project or specific assets, or by domestic or foreign entities providing credit support such as letters of credit, guarantees, or insurance.
Principal Investment Risks
Many factors affect each fund's performance. A fund's yield will change daily based on changes in interest rates and other market conditions. Although each fund is managed to maintain a stable $1.00 share price, there is no guarantee that the fund will be able to do so. For example, a major increase in interest rates or a decrease in the credit quality of the issuer of one of a fund's investments could cause the fund's share price to decrease. While the funds will be charged premiums by a mutual insurance company for coverage of specified types of losses related to default or bankruptcy on certain securities, a fund may incur losses regardless of the insurance.
The following factors <R>can</R> significantly affect a fund's performance:
Municipal Market Volatility. Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders. Because many municipal securities are issued to finance similar projects, especially those relating to education, health care, transportation, and utilities, conditions in those sectors can affect the overall municipal market. In addition, changes in the financial condition of an individual municipal insurer can affect the overall municipal market.
Interest Rate Changes. Money market securities have varying levels of sensitivity to changes in interest rates. In general, the price of a money market security can fall when interest rates rise and can rise when interest rates fall. Securities with longer maturities can be more sensitive to interest rate changes. Short-term securities tend to react to changes in short-term interest rates.
Foreign Exposure. Entities located in foreign countries that provide credit support or a maturity-shortening structure can involve increased risks. Extensive public information about the provider may not be available and unfavorable political, economic, or governmental developments could affect the value of the security.
Issuer-Specific Changes. Changes in the financial condition of an issuer, changes in specific economic or political conditions that affect a particular type of issuer, and changes in general economic or political conditions can affect the credit quality or value of an issuer's securities. Entities providing credit support or a maturity-shortening structure also can be affected by these types of changes. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the taxation supporting the project or assets or the inability to collect revenues for the project or from the assets. If the Internal Revenue Service determines an issuer of a municipal security has not complied with applicable tax requirements, interest from the security could become taxable and the security could decline significantly in value. In addition, if the structure of a security fails to function as intended, interest from the security could become taxable or the security could decline in value.
Prospectus
Fund Basics - continued
In response to market, economic, political, or other conditions, FMR may temporarily use a different investment strategy for defensive purposes. If FMR does so, different factors <R>could</R> affect a fund's performance, and a fund could distribute income subject to federal income tax.
Fundamental Investment Policies
The policies discussed below are fundamental, that is, subject to change only by shareholder approval.
Municipal Money Market Fund 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 Fund 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.
Each fund is open for business each day the New York Stock Exchange (NYSE) is open.
Each fund's net asset value per share (NAV) is the value of a single share. Fidelity normally calculates each fund's NAV as of the close of business of the NYSE, normally 4:00 p.m. Eastern time. However, NAV may be calculated earlier if trading on the NYSE is restricted or as permitted by the Securities and Exchange Commission (SEC). Each fund's assets are valued as of this time for the purpose of computing the fund's NAV.
To the extent that each fund's assets are traded in other markets on days when the NYSE is closed, the value of the fund's assets may be affected on days when the fund is not open for business. In addition, trading in some of a fund's assets may not occur on days when the fund is open for business.
Each fund's assets are valued on the basis of amortized cost.
Prospectus
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, <R>Fidelity Brokerage Services LLC (FBS LLC)</R>. Fidelity is also a leader in providing tax-advantaged retirement plans for individuals investing on their own or through their employer.
For account, product<R>, and service information, please use the following w</R>eb site and phone numbers:
Please use the following addresses:
Buying Shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
Overnight Express
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
Selling Shares
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Overnight Express
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
You may buy or sell shares of the funds through an investment professional. If you invest through an investment professional, the procedures for buying, selling, and exchanging shares of a fund and the account features and policies may differ. Additional fees may also apply to your investment in a fund, including a transaction fee if you buy or sell shares of the fund through a broker or other investment professional.
Certain methods of contacting Fidelity, such as by telephone or electronically, may be unavailable or delayed (for example, during periods of unusual market activity). In addition, the level and type of service available may be restricted based on criteria established by Fidelity.
Prospectus
Shareholder Information - continued
The different ways to set up (register) your account with Fidelity are listed in the following table.
|
Ways to Set Up Your Account |
|
Individual or Joint Tenant For your general investment needs |
|
Gifts or Transfers to a Minor (UGMA, UTMA) To invest for a child's education or other future needs |
|
Trust For money being invested by a trust |
|
<R>Business or Organization </R> For investment needs of corporations, associations, partnerships, or other groups |
The price to buy one share of each fund is the fund's NAV. Each fund's shares are sold without a sales charge.
Your shares will be bought at the next NAV calculated after your investment is received in proper form.
Short-term or excessive trading into and out of a fund may harm performance by disrupting portfolio management strategies and by increasing expenses. Accordingly, a fund may reject any purchase orders, including exchanges, particularly from market timers or investors who, in FMR's opinion, have a pattern of short-term or excessive trading or whose trading has been or may be disruptive to that fund. For these purposes, FMR may consider an investor's trading history in that fund or other Fidelity funds, and accounts under common ownership or control.
Each fund may stop offering shares completely or may offer shares only on a limited basis, for a period of time or permanently.
When you place an order to buy shares, note the following:
Minimums
|
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 plans |
$100 |
|
For Spartan Municipal Money |
$1,000 |
|
Through regular investment plans |
$500 |
|
Minimum Balance |
|
|
For Municipal Money Market |
$2,000 |
|
For Spartan Municipal Money |
$10,000 |
There is no minimum account balance or initial or subsequent purchase minimum for investments through Fidelity Portfolio Advisory ServicesSM or a qualified state tuition program. In addition, each fund may waive or lower purchase minimums in other circumstances.
Prospectus
Shareholder Information - continued
|
Key Information |
|
|
<R>Phone |
To Open an Account</R>
To Add to an Account
|
|
Internet |
To Open an Account
To Add to an Account
|
|
Mail |
To Open an Account
To Add to an Account
|
|
In Person |
To Open an Account
To Add to an Account
|
|
<R>Wire |
To Open an Account</R>
To Add to an Account
|
|
Automatically |
To Open an Account
To Add to an Account
|
Prospectus
Shareholder Information - continued
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.
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:
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.
When you place an order to sell shares, note the following:
Prospectus
Shareholder Information - continued
|
Key Information |
|
|
<R>Phone |
|
|
Internet |
|
|
Mail |
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
Trust
Business or Organization
Executor, Administrator, Conservator, Guardian
|
|
In Person |
Individual, Joint Tenant, Sole Proprietorship, UGMA, UTMA
Trust
Business or Organization
Executor, Administrator, Conservator, Guardian
|
|
Automatically |
|
|
Check |
|
Prospectus
Shareholder Information - continued
An exchange involves the redemption of all or a portion of the shares of one fund and the purchase of shares of another fund.
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 policies and restrictions governing exchanges:
The funds may terminate or modify the exchange privileges in the future.
Other funds may have different exchange restrictions, and may impose trading fees of up to <R>2.00</R>% of the amount exchanged. Check each fund's prospectus for details.
The following features are available to buy and sell shares of the funds.
Automatic Investment Programs. Fidelity offers convenient services that let you automatically transfer money into your account or between accounts. While automatic investment programs do not guarantee a profit and will not protect you against loss in a declining market, they can be an excellent way to invest for retirement, a home, educational expenses, and other long-term financial goals. Automatic exchange programs can be a convenient way to move money between your investments.
Prospectus
Shareholder Information - continued
|
Fidelity Automatic Account Builder |
||
|
<R>Minimum $100 for Municipal Money Market $500 for Spartan Municipal Money |
Frequency Monthly or quarterly |
Procedures</R>
|
|
Direct Deposit To send all or a portion of your paycheck or government check to a Fidelity fund. |
||
|
<R>Minimum $100 for Municipal Money Market $500 for Spartan Municipal Money |
Frequency Every pay period |
Procedures</R>
|
|
Fidelity Automatic Exchange Service |
||
|
Minimum $100 for Municipal Money Market $500 for Spartan Municipal Money |
Frequency Monthly, bimonthly, quarterly, or annually |
Procedures
|
Prospectus
Shareholder Information - continued
Other Features. The following other features are also available to buy and sell shares of the funds.
|
Wire |
|
|
Fidelity Money Line |
|
|
Fidelity On-Line Xpress+ |
|
<R>Call 1-800-544-0240 or visit Fidelity's web site for more information.</R>
|
|
<R>Fidelity Online Trading |
|
|
FAST |
|
Call 1-800-544-5555.
|
|
Checkwriting |
|
The following policies apply to you as a shareholder.
Statements and reports that Fidelity sends to you include the following:
Prospectus
Shareholder Information - continued
To reduce expenses, only one copy of most financial reports and prospectuses <R>may</R> be mailed to households, even if more than one <R>person</R> in the household <R>holds shares of a fund</R>. Call Fidelity at 1-800-544-8544 if you need additional copies of financial reports or prospectuses. <R>If you do not want the mailing of these documents to be combined with those for other members of your house</R>hold, contact Fidelity in writing at P.O. Box 5000, Cincinnati, Ohio 45273-8692.
Electronic copies of most financial reports and prospectuses are available at Fidelity's <R>w</R>eb site. To participate in Fidelity's electronic delivery program, call Fidelity or visit Fidelity's <R>w</R>eb site for more information.
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 sell and exchange by telephone, call Fidelity for instructions.
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.
Fidelity may 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 Fidelity, 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 accounts with Fidelity maintained by Fidelity Service Company, Inc. or <R>FBS LLC</R> 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 or $10,000 for Spartan Municipal Money (except accounts not subject to account minimums), you will be given 30 days' notice to reestablish the minimum balance. If you do not increase your balance, Fidelity may close your account and send the proceeds to you. Your shares will be sold at the NAV on the day your account is closed and, for Spartan Municipal Money, the $5.00 account closeout fee will be charged.
Prospectus
Shareholder Information - continued
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:
Fidelity may charge a fee for certain services, such as providing historical account documents.
Dividends and Capital Gain Distributions
Each fund earns interest, dividends, and other income from its investments, and distributes this income (less expenses) to shareholders as dividends. Each fund may also realize capital gains from its investments, and distributes these gains (less losses), if any, to shareholders as capital gain distributions.
Distributions you receive from each fund consist primarily of dividends. Each<R> fund</R> normally declares dividends daily and pays them monthly.
Earning Dividends
For Spartan Municipal Money, shares begin to earn dividends on the first business day following the day of purchase.
For Municipal Money Market, shares purchased by a wire order prior to 12:00 noon Eastern time, with receipt of the wire in proper form before the close of the Federal Reserve Wire System on that day, generally begin to earn dividends on the day of purchase. Shares purchased by all other orders begin to earn dividends on the first business day following the day of purchase.
However, on any day that the principal bond markets close early (as recommended by the Bond Market Association) or the Federal Reserve Bank of New York (New York Fed) closes early, Municipal Money Market may advance the time on that day by which wire purchase orders must be placed so that shares earn dividends on the day of purchase. In addition, on any day that the principal bond markets do not open (as recommended by the Bond Market Association) or the New York Fed does not open, shares begin to earn dividends on the first business day following the day of purchase.
For Spartan Municipal Money, shares earn dividends until, but not including, the next business day following the day of redemption.
Prospectus
Shareholder Information - continued
For Municipal Money Market, shares redeemed by a wire order prior to 12:00 noon Eastern time generally earn dividends through the day prior to the day of redemption. Shares redeemed by all other orders earn dividends until, but not including, the next business day following the day of redemption.
However, on any day that the principal bond markets close early (as recommended by the Bond Market Association) or the New York Fed closes early, Municipal Money Market may set a time after which shares redeemed by wire order earn dividends until, but not including, the next business day following the day of redemption. On any day that the principal bond markets do not open (as recommended by the Bond Market Association) or the New York Fed does not open, shares earn dividends until, but not including, the next business day following the day of redemption.
When you open an account, specify on your application how you want to receive your distributions. The following options may be available for each fund's distributions:
8. Reinvestment Option. Your dividends 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.
9. Cash Option. Your dividends and capital gain distributions, if any, will be paid in cash.
10. Directed Dividends® Option. Your dividends will be automatically invested in shares of another identically registered Fidelity fund. Your capital gain distributions, if any, will be automatically invested in shares of another identically registered Fidelity fund, automatically reinvested in additional shares of the fund, or paid in cash.
Not all distribution options are available for every account. If the option you prefer is not listed on your account application, or if you want to change your current option, call Fidelity.
If you elect to receive distributions paid in cash by check and the U.S. Postal Service does not deliver your checks, your distribution option may be converted to the Reinvestment Option. You will not receive interest on amounts represented by uncashed distribution checks.
As with any investment, your investment in a fund could have tax consequences for you.
Each fund seeks to earn income and pay dividends exempt from federal income tax.
Income exempt from federal income tax may be subject to state or local <R>tax</R>. A portion of the dividends you receive may be subject to federal and state income taxes <R>and also</R> may be subject to the federal alternative minimum tax. <R>You</R> may also <R>receive</R> taxable <R>distributions attributable to a fund's sale</R> of municipal <R>bonds</R>.
For federal tax purposes, each fund's distributions of short-term capital gains and gains on the sale of bonds characterized as market discount are taxable to you as ordinary income, <R>while e</R>ach fund's distributions of long-term capital gains, if any, are taxable to you generally as capital gains.
Prospectus
Shareholder Information - continued
Any taxable distributions you receive from a fund will normally be taxable to you when you receive them, regardless of your distribution option. If you elect to receive distributions in cash or to invest distributions automatically in shares of another Fidelity fund, you will receive certain December distributions in January, but those distributions will be taxable as if you received them on December 31.
Prospectus
Each fund is a mutual fund, an investment that pools shareholders' money and invests it toward a specified goal.
FMR is each fund's manager.
As of March 31, <R>2000</R>, FMR had approximately $<R>639.1</R> billion in discretionary assets under management.
As the manager, FMR is responsible for choosing each fund's investments and handling its business affairs.
Fidelity Investments Money Management, Inc. (FIMM), in Merrimack, New Hampshire, serves as <R>a</R> sub-adviser for each fund. FIMM is primarily responsible for choosing investments for each fund.
FIMM is an affiliate of FMR. As of March 31, <R>2000</R>, FIMM had approximately $<R>206.8</R> <R>billion </R>in discretionary assets under management.
From time to time a manager, analyst, or other Fidelity employee may express views regarding a particular company, security, industry, or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Each fund pays a management fee to FMR. The management fee is calculated and paid to FMR every month. FMR pays all of the other expenses of Spartan Municipal Money with limited exceptions.
Spartan Municipal Money's annual management fee rate is 0.50% of its average net assets.
For the fiscal year ended August 31, <R>2000</R>, Spartan Municipal Money paid a management fee of <R>0.40</R>% of the fund's average net assets, after reimbursement.
For Municipal Money Market, the fee is calculated by adding a group fee rate to an individual fund fee rate, dividing by twelve, and multiplying the result by the fund's average net assets throughout the month.
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 <R>2000</R>, the group fee rate was <R>0.1250</R>% for Municipal Money Market. The individual fund fee rate is 0.15% for Municipal Money Market.
The total management fee for the fiscal year ended August 31, <R>2000</R>, was <R>0.28</R>% of the fund's average net assets for Municipal Money Market.
FMR pays FIMM for providing <R>sub-advisory</R> services.
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 discontinued by FMR at any time, can decrease a fund's expenses and boost its performance.
Prospectus
Fund Services - continued
Fidelity Distributors Corporation (FDC) distributes each fund's shares.
Each fund has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 that 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 providing services intended to result in the sale of fund shares and/or shareholder support services. FMR, directly or through FDC, may pay <R>significant amounts to</R> intermediaries, such as banks, broker-dealers<R>,</R> and other service-providers, that provide those services. Currently, the Board of Trustees of each fund has authorized such payments.
<R>If payments made by FMR to FDC or to intermediaries under a Distribution and Service Plan were considered to be paid out of a fund's assets on an ongoing basis, they might increase the cost of your investment and might cost you more than paying other types of sales charges.</R>
To receive payments made pursuant to a Distribution and Service Plan, intermediaries must sign the appropriate agreement with FDC in advance.
<R>From time to time, FDC may offer special promotional programs to investors who purchase shares of Fidelity funds. For example, FDC may offer merchandise, discounts, vouchers, or similar items to investors who purchase shares of certain Fidelity funds during certain periods. To determine if you qualify for any such programs, contact Fidelity or visit our web site at www.fidelity.com.</R>
FMR may allocate brokerage transactions in a manner that takes into account the sale of shares of a fund, provided that the fund receives brokerage services and commission rates comparable to those of other broker-dealers.
No dealer, sales representative, or any other person has been authorized to give any information or to make any representations, other than those contained in this prospectus and in the related statement of additional information (SAI), in connection with the offer contained in this prospectus. If given or made, such other information or representations must not be relied upon as having been authorized by the funds or FDC. This prospectus and the related SAI do not constitute an offer by the funds or by FDC to sell shares of the funds to or to buy shares of the funds from any person to whom it is unlawful to make such offer.
Prospectus
The financial highlights tables are intended to help you understand each fund's financial history for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by <R>PricewaterhouseCoopers LLP</R>, independent accountants, whose reports, along with each fund's financial highlights and financial statements, are included in each fund's annual report. A free copy of each annual report is available upon request.
<R>Municipal Money Market</R>
|
<R>Years ended August 31, |
2000 |
1999 |
1998 C |
1997 D |
1996 D |
1995 D</R> |
|
<R>Selected Per-Share Data |
|
|
|
|
|
</R> |
|
<R>Net asset value, |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Income from Investment Operations |
|
|
|
|
|
</R> |
|
<R> Net interest income |
.035 |
.028 |
.027 |
.032 |
.031 |
.034</R> |
|
<R>Less Distributions |
|
|
|
|
|
</R> |
|
<R> From net interest income |
(.035) |
(.028) |
(.027) |
(.032) |
(.031) |
(.034)</R> |
|
<R>Net asset value, end of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Total Return B |
3.55% |
2.83% |
2.70% |
3.28% |
3.17% |
3.48%</R> |
|
<R>Ratios and Supplemental Data |
|
|
|
|
|
</R> |
|
<R>Net assets, end of period |
$ 7,902 |
$ 6,313 |
$ 5,069 |
$ 4,132 |
$ 3,674 |
$ 3,606</R> |
|
<R>Ratio of expenses to |
.46% |
.47% |
.49% A |
.49% |
.49% |
.50%</R> |
|
<R>Ratio of net interest income to |
3.51% |
2.79% |
3.20% A |
3.23% |
3.12% |
3.43%</R> |
<R>A Annualized</R>
<R>B Total returns for periods of less than one year are not annualized.</R>
<R>C Ten months ended August 31</R>
<R>D For the year ended October 31</R>
Prospectus
Appendix - continued
<R>Spartan Municipal Money</R>
|
<R>Years ended August 31, |
2000 |
1999 |
1998 |
1997 |
1996</R> |
|
<R>Selected Per-Share Data |
|
|
|
|
</R> |
|
<R>Net asset value, beginning of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Income from Investment Operations |
|
|
|
|
</R> |
|
<R> Net interest income |
.036 |
.029 |
.033 |
.033 |
.034</R> |
|
<R>Less Distributions |
|
|
|
|
</R> |
|
<R>From net interest income |
(.036) |
(.029) |
(.033) |
(.033) |
(.034)</R> |
|
<R>Net asset value, end of period |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000 |
$ 1.000</R> |
|
<R>Total Return A, B |
3.63% |
2.95% |
3.40% |
3.38% |
3.41%</R> |
|
<R>Ratios and Supplemental Data |
|
|
|
|
</R> |
|
<R>Net assets, end of period (in millions) |
$ 2,214 |
$ 2,216 |
$ 2,277 |
$ 2,329 |
$ 2,380</R> |
|
<R>Ratio of expenses to average net assets |
.40% C |
.40% C |
.40% C |
.40% C |
.40% C</R> |
|
<R>Ratio of expenses to average net assets |
.40% |
.39% D |
.39% D |
.40% |
.39% D</R> |
|
<R>Ratio of net interest income to average |
3.56% |
2.91% |
3.35% |
3.33% |
3.36%</R> |
<R>A The total returns would have been lower had certain expenses not been reduced during the periods shown.</R>
<R>B Total returns do not include the account closeout fee.</R>
<R>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.</R>
<R>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.</R>
Prospectus
Notes
Notes
Notes
Notes
You can obtain additional information about the funds. The funds' SAI includes more detailed information about each fund and its investments. The SAI is incorporated herein by reference (legally forms a part of the prospectus). Each fund's annual and semi-annual reports include a discussion of the fund's holdings and recent market conditions and the fund's investment strategies that affected performance.
For a free copy of any of these documents or to request other information or ask questions about a fund, call Fidelity at 1-800-544-8544. In addition, you may visit Fidelity's <R>w</R>eb site at www.fidelity.com for a free copy of a prospectus or an annual or semi-annual report or to request other information.
|
<R>The SAI, the funds' annual and semi-annual reports and other related materials are available from the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) Database on the SEC's web site (http://www.sec.gov). You can obtain copies of this information, after paying a duplicating fee, by sending a request by e-mail to [email protected] or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102. You can also review and copy information about the funds, including the funds' SAI, at the SEC's Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the operation of the SEC's Public Reference Room.</R> Investment Company Act of 1940, File Number, 811-6452 |
Fidelity, Spartan, Fidelity Investments and (Pyramid) Design,<R> FAS</R>T, Fidelity Money Line, Fidelity Automatic Account Builder, Fidelity On-Line Xpress+, and Directed Dividends are registered trademarks of FMR Corp.
Portfolio Advisory Services<R> is a</R> service mark of FMR Corp.
The third party marks appearing above are the marks of their respective owners.
<R>1.538332.103</R> SMM/MMM-pro-1000
<R>FIDELITY® MUNICIPAL MONEY MARKET FUND
and
SPARTAN® MUNICIPAL MONEY FUND</R>
<R>Funds of Fidelity Union Street Trust II</R>
<R>STATEMENT OF ADDITIONAL INFORMATION</R>
<R>October 23, 2000</R>
<R>This statement of additional information (SAI) is not a prospectus. Portions of each fund's annual report are incorporated herein. The annual reports are supplied with this SAI.</R>
<R>To obtain a free additional copy of the prospectus, dated October 23, 2000, or an annual report, please call Fidelity at 1-800-544-8544 or visit Fidelity's web site at www.fidelity.com.</R>
|
TABLE OF CONTENTS |
PAGE |
|
Investment Policies and Limitations |
|
|
Portfolio Transactions |
|
|
Valuation |
|
|
Performance |
|
|
Additional Purchase, Exchange and Redemption Information |
|
|
Distributions and Taxes |
|
|
Trustees and Officers |
|
|
Control of Investment Advisers |
|
|
Management Contracts |
|
|
Distribution Services |
|
|
Transfer and Service Agent Agreements |
|
|
Description of the Trust |
|
|
Financial Statements |
|
|
Appendix |
<R>SMM/MMM-ptb-1000
1.539256.103</R>
(fidelity_logo_graphic)
82 Devonshire Street, Boston, MA 02109
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 in connection with the insurance program established by the fund pursuant to an exemptive order issued by the Securities and Exchange Commission or as otherwise 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)).
(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 governmental body 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 values, net assets, or other circumstances, the fund were in a position where more than 10% of its net assets were 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 in connection with the insurance program established by the fund pursuant to an exemptive order issued by the Securities and Exchange Commission or as otherwise 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)).
(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 governmental body is guaranteeing the security.
For purposes of limitation (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 were invested in illiquid securities, it would consider appropriate steps to protect liquidity.
<R>The following pages contain more detailed information about types of instruments in which a fund may invest, strategies Fidelity Management & Research Company (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.</R>
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.
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.
<R>Cash Management. A fund can hold uninvested cash. A municipal fund's uninvested cash may earn credits that reduce fund expenses.</R>
<R>Central Cash Funds are money market funds managed by FMR or its affiliates that seek to earn a high level of current income (free from federal income tax in the case of a municipal money market fund) while maintaining a stable $1.00 share price. The funds comply with industry-standard requirements for money market funds regarding the quality, maturity, and diversification of their investments.</R>
Illiquid Securities cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. Difficulty in selling securities may result in a loss or may be costly to a fund. 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 securities. In determining the liquidity of a fund's investments, FMR may consider various factors, including (1) the frequency and volume of trades and quotations, (2) the number of dealers and prospective purchasers in the marketplace, (3) dealer undertakings to make a market, and (4) the nature of the security and the market in which it trades (including any demand, put or tender features, the mechanics and other requirements for transfer, any letters of credit or other credit enhancement features, any ratings, the number of holders, the method of soliciting offers, the time required to dispose of the security, and the ability to assign or offset the rights and obligations of the security).
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.
<R>Money Market Insurance. Each fund participates in a mutual insurance company solely with other funds advised by FMR or its affiliates. This company provides insurance coverage for specified types of losses on certain money market instruments held by a participating fund, including losses from nonpayment of principal or interest or a bankruptcy or insolvency of the issuer or credit support provider, if any. The insurance does not cover losses resulting from changes in interest rates or other market developments. A participating fund is charged an annual premium for the insurance coverage and may be subject to a special assessment if covered losses exceed certain levels. A participating fund is subject to limits on the amount it may recover and may incur losses regardless of the insurance.</R>
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. If a municipality stops making payments or transfers its obligations to a private entity, the obligation could lose value or become taxable.
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. 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. 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 fund to maintain a stable net asset value per share (NAV).
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. In exchange for this benefit, a fund may accept a lower interest rate. Securities with put features 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.
Repurchase Agreements involve an agreement to purchase a security and 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. The value of the security purchased may be more or less than the price at which the counterparty has agreed to purchase the security. In addition, delays or losses could result if the other party to the agreement defaults or becomes insolvent. The funds will engage in repurchase agreement transactions with parties whose creditworthiness has been reviewed and found satisfactory by FMR.
Restricted Securities are subject to legal restrictions on their sale. Difficulty in selling securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the holder might obtain a less favorable price than prevailed when it decided to seek registration of the security.
Reverse Repurchase Agreements. In a reverse repurchase agreement, 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. 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 a fund's yield and may be viewed as a form of leverage.
Sources of Liquidity or Credit Support. Issuers may employ various forms of credit and liquidity enhancements, including letters of credit, guarantees, puts, and demand features, and insurance provided by domestic or foreign entities such as banks and other financial institutions. FMR may rely on its evaluation of the credit of the liquidity or credit enhancement provider in determining whether to purchase a security supported by such enhancement. 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. Changes in the credit quality of the entity providing the enhancement could affect the value of the security or a fund's share price.
Temporary Defensive Policies. Each fund 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.
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.
When-Issued and Forward Purchase or Sale Transactions involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take 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 pursuant to one of these transactions, 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 a purchase is outstanding, the purchases may result in a form of leverage. When a fund has sold a security pursuant to one of these transactions, 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 when-issued or forward transaction and may sell the underlying securities before delivery, which may result in capital gains or losses for the fund.
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 investment 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 investment 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 investment 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.
<R>To the extent permitted by applicable law, FMR is authorized to allocate portfolio transactions in a manner that takes into account assistance received in the distribution of shares of the funds or other Fidelity funds and to use the research services of brokerage and other firms that have provided such assistance. FMR may use research services provided by and place agency transactions with National Financial Services LLC (NFS), 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. </R>
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 that 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 investment accounts which they or their affiliates manage, unless certain requirements are satisfied. Pursuant to such requirements, the Board of Trustees has authorized NFS 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.
<R>A fund may pay both commissions and spreads in connection with the placement of portfolio transactions.</R>
<R>For the fiscal years ended August 31, 2000, 1999, and 1998, Spartan Municipal Money paid no brokerage commissions.</R>
<R>For the fiscal years ended August 31, 2000 and 1999, and the ten month period ended August 31, 1998, Municipal Money Market paid no brokerage commissions.</R>
<R>For the fiscal year ended August 31, 2000 the funds paid no brokerage commissions to firms for providing research services.</R>
<R>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 underwritings.</R>
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.
<R>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 or investment accounts managed by FMR or its affiliates. It sometimes happens that the same security is held in the portfolio of more than one of these funds or investment accounts. Simultaneous transactions are inevitable when several funds and investment 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 investment account.</R>
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.
Each fund's net asset value per share (NAV) is the value of a single share. The NAV of each fund is computed by adding the value of the fund's investments, cash, and other assets, subtracting its liabilities, and dividing the result by the number of shares outstanding.
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.
At such intervals as they deem appropriate, the Trustees consider the extent to which NAV calculated by using market valuations would deviate from the $1.00 per share calculated using amortized cost valuation. 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.
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 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.
<R>Tax-equivalent yields are calculated by dividing that portion of a fund's yield that is tax-exempt by the result of one minus the applicable specified federal income tax rate and adding the quotient to that portion, if any, of the fund's yield that is not tax-exempt.</R>
<R>The following table shows the effect of a shareholder's tax bracket on tax-equivalent yield under federal income tax laws for 2000. It shows, for tax-exempt securities with different yields, the yield on a taxable security that is approximately equivalent to the tax-exempt security's yield after taking into account the effect of various effective income tax rates on the taxable security. Of course, no assurance can be given that a fund will have any specific yield. While each fund invests principally in securities whose interest is exempt from federal income tax, some portion of the distributions paid by the fund may be taxable.</R>
|
<R>2000 TAX RATES AND TAX-EQUIVALENT YIELDS</R> |
|||||||||
|
<R> |
|
If a tax-exempt security's yield is: |
|
</R> |
|||||
|
<R>Taxable Income* |
|
2% |
3% |
4% |
5% |
6% |
7% |
8%</R> |
|
|
<R>Single Return |
Joint Return |
Federal |
Then tax-equivalent yield would be: |
|
</R> |
||||
|
<R>$ 0 - $26,250 |
$0 - $43,850 |
15.0% |
2.35% |
3.53% |
4.71% |
5.88% |
7.06% |
8.24% |
9.41%</R> |
|
<R>$26,251 - $63,550 |
$43,851 - $105,950 |
28.0% |
2.78% |
4.17% |
5.56% |
6.94% |
8.33% |
9.72% |
11.11%</R> |
|
<R>$63,551 - $132,600 |
$105,951 - $161,450 |
31.0% |
2.90% |
4.35% |
5.80% |
7.25% |
8.70% |
10.14% |
11.59%</R> |
|
<R>$132,601 - $288,350 |
$161,451 - $288,350 |
36.0% |
3.13% |
4.69% |
6.25% |
7.81% |
9.38% |
10.94% |
12.50%</R> |
|
<R>$288,351 + |
$288,351 + |
39.6% |
3.31% |
4.97% |
6.62% |
8.28% |
9.93% |
11.59% |
13.25%</R> |
* Net amount subject to federal income tax after deductions and exemptions. Assumes ordinary income only.
<R>** Excludes the impact of any alternative minimum tax, the phaseout of personal exemptions, limitations on itemized deductions, and other credits, exclusions, and adjustments which may increase a taxpayer's marginal income tax rate. An increase in a shareholder's marginal income tax rate would increase that shareholder's tax-equivalent yield.</R>
<R>A fund may invest a portion of its assets in securities that are subject to federal income tax. When a fund invests in these securities, its tax-equivalent yields may be lower. In the table above, tax-equivalent yields are calculated assuming securities are 100% exempt from federal income tax.</R>
Return Calculations. 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. A cumulative return reflects actual performance over a stated period of time. Average annual 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 return of 100% over ten years would produce an average annual 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 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 returns represent averaged figures as opposed to the actual year-to-year performance of a fund.
<R>In addition to average annual returns, a fund may quote unaveraged or cumulative returns reflecting the simple change in value of an investment over a stated period. Average annual and cumulative 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. Returns may be broken down into their components of income and capital (including capital gains and changes in share price) to illustrate the relationship of these factors and their contributions to return. Returns may be quoted on a before-tax or after-tax basis. Returns may or may not include the effect of a fund's small account fee or the effect of a fund's account closeout fee. Excluding a fund's small account fee or account closeout fee from a return calculation produces a higher return figure. Returns, yields and other performance information may be quoted numerically or in a table, graph, or similar illustration.</R>
<R>Historical Fund Results. The following table shows each fund's 7-day yield, tax-equivalent yield, and returns for the fiscal period ended August 31, 2000.</R>
<R>The tax-equivalent yields for each fund are 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.</R>
|
<R> |
|
|
Average Annual Returns |
Cumulative Returns</R> |
||||
|
<R> |
Seven-Day |
Tax- |
One |
Five |
Ten |
One |
Five |
Ten |
|
<R>Municipal Money Market |
3.82% |
5.97% |
3.55% |
3.22% |
3.23% |
3.55% |
17.17% |
37.44%</R> |
|
<R>Spartan Municipal Money |
3.91% |
6.11% |
3.63% |
3.35% |
3.37%* |
3.63% |
17.93% |
37.63%*</R> |
<R>* From January 14, 1991 (commencement of operations).</R>
<R>The returns in the preceding table do not include the effect of the $5 account closeout fee for Spartan Municipal Money.</R>
<R>Note: If FMR had not reimbursed certain fund expenses during these periods, Spartan Municipal Money's returns would have been lower.</R>
<R>Note: If FMR had not reimbursed certain fund expenses during these periods, Spartan Municipal Money's yield and tax equivalent yield would have been 3.81% and 5.95%, respectively.</R>
<R>The following tables show the income and capital elements of each fund's cumulative 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 S&P 500 and DJIA comparisons are provided to show how each fund's return compared to the record of a market capitalization-weighted 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.</R>
<R>The following tables show the growth in value of a hypothetical $10,000 investment in each fund during the 10-year period ended August 31, 2000 or life of fund, as applicable, assuming all distributions were reinvested. 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.</R>
<R>During the 10-year period ended August 31, 2000, a hypothetical $10,000 investment in Municipal Money Market would have grown to $13,744.</R>
|
<R>MUNICIPAL MONEY MARKET |
INDEXES</R> |
||||||
|
<R>Fiscal |
Value of |
Value of |
Value of |
Total |
S&P 500 |
DJIA |
Cost of |
|
<R>2000 |
$ 10,000 |
$ 3,744 |
$ 0 |
$ 13,744 |
$ 59,354 |
$ 54,368 |
$ 13,123</R> |
|
<R>1999 |
$ 10,000 |
$ 3,274 |
$ 0 |
$ 13,274 |
$ 51,027 |
$ 51,701 |
$ 12,698</R> |
|
<R>1998 |
$ 10,000 |
$ 2,908 |
$ 0 |
$ 12,908 |
$ 36,493 |
$ 35,425 |
$ 12,416</R> |
|
<R>1997* |
$ 10,000 |
$ 2,500 |
$ 0 |
$ 12,500 |
$ 33,761 |
$ 35,221 |
$ 12,219</R> |
|
<R>1996* |
$ 10,000 |
$ 2,106 |
$ 0 |
$ 12,106 |
$ 24,004 |
$ 25,459 |
$ 11,953</R> |
|
<R>1995* |
$ 10,000 |
$ 1,730 |
$ 0 |
$ 11,730 |
$ 20,217 |
$ 20,446 |
$ 11,619</R> |
|
<R>1994* |
$ 10,000 |
$ 1,345 |
$ 0 |
$ 11,345 |
$ 16,647 |
$ 16,915 |
$ 11,322</R> |
|
<R>1993* |
$ 10,000 |
$ 1,099 |
$ 0 |
$ 11,099 |
$ 15,784 |
$ 15,358 |
$ 11,003</R> |
|
<R>1992* |
$ 10,000 |
$ 850 |
$ 0 |
$ 10,850 |
$ 13,698 |
$ 13,304 |
$ 10,707</R> |
|
<R>1991* |
$ 10,000 |
$ 491 |
$ 0 |
$ 10,491 |
$ 12,691 |
$ 12,068 |
$ 10,380</R> |
<R>* Fiscal Year Ended October 31.</R>
<R>Explanatory Notes: With an initial investment of $10,000 in Municipal Money Market on November 1, 1990, the net amount invested in fund shares was $10,000. The cost of the initial investment ($10,000) together with the aggregate cost of reinvested dividends and capital gain distributions for the period covered (their cash value at the time they were reinvested) amounted to $13,744. 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 $3,185 for dividends. The fund did not distribute any capital gains during the period.</R>
<R>During the period from January 14, 1991 (commencement of operations) to August 31, 2000, a hypothetical $10,000 investment in Spartan Municipal Money would have grown to $13,763.</R>
|
<R>SPARTAN MUNICIPAL MONEY FUND |
INDEXES</R> |
||||||
|
<R>Fiscal |
Value of |
Value of |
Value of |
Total |
S&P 500 |
DJIA |
Cost of |
|
<R>2000 |
$ 10,000 |
$ 3,763 |
$ 0 |
$ 13,763 |
$ 59,935 |
$ 56,005 |
$ 12,907</R> |
|
<R>1999 |
$ 10,000 |
$ 3,281 |
$ 0 |
$ 13,281 |
$ 51,526 |
$ 53,257 |
$ 12,489</R> |
|
<R>1998 |
$ 10,000 |
$ 2,900 |
$ 0 |
$ 12,900 |
$ 36,850 |
$ 36,491 |
$ 12,212</R> |
|
<R>1997 |
$ 10,000 |
$ 2,476 |
$ 0 |
$ 12,476 |
$ 34,091 |
$ 36,281 |
$ 12,018</R> |
|
<R>1996 |
$ 10,000 |
$ 2,068 |
$ 0 |
$ 12,068 |
$ 24,238 |
$ 26,225 |
$ 11,756</R> |
|
<R>1995 |
$ 10,000 |
$ 1,670 |
$ 0 |
$ 11,670 |
$ 20,415 |
$ 21,062 |
$ 11,428</R> |
|
<R>1994 |
$ 10,000 |
$ 1,265 |
$ 0 |
$ 11,265 |
$ 16,810 |
$ 17,424 |
$ 11,136</R> |
|
<R>1993 |
$ 10,000 |
$ 990 |
$ 0 |
$ 10,990 |
$ 15,938 |
$ 15,820 |
$ 10,822</R> |
|
<R>1992 |
$ 10,000 |
$ 705 |
$ 0 |
$ 10,705 |
$ 13,832 |
$ 13,704 |
$ 10,531</R> |
|
<R>1991* |
$ 10,000 |
$ 303 |
$ 0 |
$ 10,303 |
$ 12,815 |
$ 12,431 |
$ 10,209</R> |
* From January 14, 1991 (commencement of operations).
** From month-end closest to initial investment date.
<R>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 $13,763. 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 $3,198 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 account closeout fee.</R>
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 Inc. (Lipper), an independent service located in Summit, New Jersey that monitors the performance of mutual funds. Generally, Lipper rankings are based on 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 indexes prepared by Lipper or other organizations. When comparing these indexes, 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.
<R>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 an investor's principal or return, and fund shares are not FDIC insured.</R>
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 indexes.
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 returns in the same method as the funds. The funds may also compare performance to that of other compilations or indexes that may be developed and made available in the future.
<R>A money market fund may compare its performance or the performance of securities in which it may invest to averages published by iMoneyNet, Inc. of Westborough, Massachusetts. These averages assume reinvestment of distributions. iMoneyNet's MONEY FUND REPORT AVERAGES(TM)/All Tax-Free, which is reported in iMoneyNet's MONEY FUND REPORT(TM), covers 461 money market funds.</R>
<R>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®, a quarterly magazine provided free of charge to Fidelity fund shareholders.</R>
A fund may present its fund number, Quotron(TM) number, and CUSIP number, and discuss or quote its current portfolio manager.
<R>As of August 31, 2000, FMR advised over $36 billion in municipal fund assets, $146 billion in taxable fixed-income fund assets, $153 billion in money market fund assets, $674 billion in equity fund assets, $20 billion in international fund assets, and $43 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.</R>
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
<R>A fund may make redemption payments in whole or in part in readily marketable securities or other property, valued for this purpose as they are valued in computing each fund's NAV, if FMR determines it is in the best interests of the fund. Shareholders that receive 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.</R>
Dividends. To the extent that each fund's income is designated as federally tax-exempt interest, the dividends declared by the fund are also federally tax-exempt. Short-term capital gains are taxable as dividends, but do not qualify for the dividends-received deduction.
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.
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.
A portion of the gain on municipal bonds purchased at market discount after April 30, 1993 is taxable to shareholders as ordinary income, not as capital gains. Dividends resulting from a recharacterization of gain from the sale of bonds purchased at 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.
Capital Gain Distributions. Each fund may distribute any net realized capital gains once a year or more often, as necessary.
<R>As of August 31, 2000, Municipal Money Market had an aggregate capital loss carryforward of approximately $517,000. This loss carryforward, of which $489,000 and $28,000 will expire on August 31, 2004 and 2008, respectively, is available to offset future capital gains. </R>
<R>As of August 31, 2000, Spartan Municipal Money had an aggregate capital loss carryforward of approximately $320,000. This loss carryforward, of which $1,000, $46,000, $26,000, $125,000, $14,000, $95,000, $9,000, and $4,000 will expire on August 31, 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008, respectively, is available to offset future capital gains.</R>
Tax Status of the Funds. Each fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code 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.
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. It is up to you or your tax preparer to determine whether the sale of shares of a fund resulted in a capital gain or loss or other tax consequence to you. 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.
<R>The Trustees, Members of the Advisory Board, and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years. All persons named as Trustees and Members of the Advisory Board also serve in similar capacities for other funds advised by FMR or its affiliates. The business address of each Trustee, Member of the Advisory Board, and officer who is an "interested person" (as defined in the 1940 Act) 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 (*).</R>
<R>*EDWARD C. JOHNSON 3d (70), Trustee, is President of Municipal Money Market and Spartan Municipal Money. Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, 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 Management & Research (U.K.) Inc. and of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; Chairman and Representative Director of Fidelity Investments Japan Limited (1997); and a Director of FDC and of FMR Co., Inc. (2000). Abigail Johnson, Member of the Advisory Board of Fidelity Union Street Trust II, is Mr. Johnson's daughter.</R>
<R>ABIGAIL P. JOHNSON (38), Member of the Advisory Board of Fidelity Union Street Trust II (1999), is Vice President of certain Equity Funds (1997), and is a Director of FMR Corp. (1994). Before assuming her current responsibilities, Ms. Johnson managed a number of Fidelity funds. Edward C. Johnson 3d, Trustee and President of the Funds, is Ms. Johnson's father.</R>
<R>J. MICHAEL COOK (57), Member of the Advisory Board (2000). Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP, Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Dow Chemical Company (2000), HCA-The Healthcare Company (1999), and Children First (1999). He is a member of the Executive Committee of the Securities Regulation Institute, past chairman and a member of the Board of Catalyst (a leading organization for the advancement of women in business), and a Director of the STAR Foundation (Society to Advance the Retarded and Handicapped). He also serves as a member of the Board and Executive Committee and as Co-Chairman of the Audit and Finance Committee of the Center for Strategic & International Studies, a member of the Board of Overseers of the Columbia Business School, and a Member of the Advisory Board of the Graduate School of Business of the University of Florida.</R>
<R>RALPH F. COX (68), Trustee, is President of RABAR Enterprises (management consulting-petroleum 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 Waste Management Inc. (non-hazardous waste, 1993), CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.</R>
<R>PHYLLIS BURKE DAVIS (68), Trustee. Mrs. Davis is retired from Avon Products, Inc. where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. sales, distribution, and manufacturing. She is currently a Director of BellSouth Corporation (telecommunications), Eaton Corporation (manufacturing), and the TJX Companies, Inc. (retail stores), and previously served as a Director of Hallmark Cards, Inc., Nabisco Brands, Inc., and Standard Brands, Inc. In addition, she is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998).</R>
<R>ROBERT M. GATES (56), 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 Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), and TRW Inc. (automotive, space, defense, and information technology). Mr. Gates previously served as a Director of LucasVarity PLC (automotive components and diesel engines). He is currently serving as Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Mr. Gates also is a Trustee of the Forum for International Policy and of the Endowment Association of the College of William and Mary.</R>
<R>DONALD J. KIRK (67), Trustee, is Chairman of the Board of Directors of National Arts Stabilization Inc., Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995), and a Public Governor of the National Association of Securities Dealers, Inc. (1996). Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Mr. Kirk previously served as a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations, 1993-1995).</R>
<R>MARIE L. KNOWLES (53), Member of the Advisory Board (2000). Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994), URS Corporation (multidisciplinary engineering, 1999), and America West Holdings Corporation (aviation and travel services, 1999) and previously served as a Director of ARCO Chemical Corporation and Vastar Resources, Inc. Ms. Knowles serves as a member of the National Board of the Smithsonian Institution, she is a Trustee of the Brookings Institution and serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.</R>
<R>NED C. LAUTENBACH (56), Trustee (2000), has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the IBM Corporation from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach has served as Chairman and Chief Executive Officer of Acterna Corporation (global communications equipment) since 1999 and as a Director since 1998. He is also co-Chairman and a Director of Complete Business Solutions, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (global manufacturer of highly engineered products, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.</R>
<R>*PETER S. LYNCH (57), Trustee, is Vice Chairman and a Director of FMR; and a Director of FMR Co., Inc. (2000). 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.</R>
<R>WILLIAM O. McCOY (66), Trustee (1997). Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke-Weeks Realty Corporation (real estate, 1994), Carolina Power and Light Company (electric utility, 1996), the Kenan Transport Company (trucking, 1996), and Dynatech Corporation (electronics, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997). Previously, he was a Director of First American Corporation (bank holding company, 1979-1996). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flager Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).</R>
<R>GERALD C. McDONOUGH (72), Trustee and Chairman of the non-interested Trustees, is Chairman of G.M. Management Group (strategic advisory services). Mr. McDonough is a Director and Chairman of the Board of York International Corp. (air conditioning and refrigeration), a Director of Associated Estates Realty Corporation (a real estate investment trust), and a Director of Barpoint.com (online and wireless product information service, 2000). 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. He also served as a Director of Commercial Intertech Corp. (hydraulic systems, building systems, and metal products) from 1992-2000 and CUNO, Inc. (liquid and gas filtration products) from 1996-2000.</R>
<R>MARVIN L. MANN (67), Trustee, is Chairman Emeritus of Lexmark International, Inc. (office machines, 1991) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation ("IBM") and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993), Imation Corp. (imaging and information storage, 1997). He is a Board member of Dynatech Corporation (electronics, 1999).</R>
<R>*ROBERT C. POZEN (54), Trustee (1997), is Senior Vice President of Municipal Money Market (1997) and Spartan Municipal Money (1997). Mr. Pozen also serves as Senior Vice President of other Fidelity funds (1997). He is President and a Director of FMR (1997), Fidelity Management & Research (U.K.) Inc. (1997), Fidelity Management & Research (Far East) Inc. (1997), Fidelity Investments Money Management, Inc. (1998), and FMR Co., Inc. (2000); a Director of Strategic Advisers, Inc. (1999); and Vice Chairman of Fidelity Investments (2000). Previously, Mr. Pozen served as General Counsel, Managing Director, and Senior Vice President of FMR Corp.</R>
<R>THOMAS R. WILLIAMS (71), 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 National Life Insurance Company of Vermont and American Software, Inc. Mr. Williams was previously a Director of ConAgra, Inc. (agricultural products), Georgia Power Company (electric utility), and Avado, Inc. (restaurants).</R>
<R>DWIGHT D. CHURCHILL (46) is Vice President of Municipal Money Market (2000) and Spartan Municipal Money (2000). He serves as President of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds, 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.</R>
<R>BOYCE I. GREER (44) is Vice President of Municipal Money Market (1997) and Spartan Municipal Money (1997). He serves as Vice President of Fidelity's Municipal Bond Funds (2000), Group Leader of Fidelity's Municipal Bond Group (2000), Vice President of Fidelity's Money Market Funds (1997), Group Leader of Fidelity's 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 Fidelity's Municipal Fixed-Income Investments (1996-1997).</R>
<R>DIANE M. MCLAUGHLIN (37) is Vice President of Fidelity Municipal Money Market Fund (1996) and Spartan Municipal Money Fund (1997). Prior to her current responsibilities, Ms. McLaughlin managed a variety of funds.</R>
<R>ERIC D. ROITER (51) is Secretary of Municipal Money Market (1998) and Spartan Municipal Money (1998). He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR (1998); and Vice President and Clerk of FDC (1998). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).</R>
<R>ROBERT A. DWIGHT (42) is Treasurer of Municipal Money Market (2000) and Spartan Municipal Money (2000). Mr. Dwight also serves as Treasurer of other Fidelity funds (2000) and is an employee of FMR. Prior to becoming Treasurer of the Fidelity funds, he served as President of Fidelity Accounting and Custody Services (FACS). Before joining Fidelity, Mr. Dwight was Senior Vice President of fund accounting operations for The Boston Company.</R>
<R>MARIA F. DWYER (41) is Deputy Treasurer of Municipal Money Market (2000) and Spartan Municipal Money (2000). She also serves as Deputy Treasurer of other Fidelity funds (2000) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.</R>
<R>STANLEY N. GRIFFITH (53) is Assistant Vice President of Municipal Money Market (1998) and Spartan Municipal Money (1998). Mr. Griffith is Assistant Vice President of Fidelity's Fixed-Income Funds (1998) and is an employee of FMR Corp.</R>
<R>JOHN H. COSTELLO (54) is Assistant Treasurer of Municipal Money Market and Spartan Municipal Money. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.</R>
<R>THOMAS J. SIMPSON (42) is Assistant Treasurer of Municipal Money (1996) Market and Spartan Municipal Money (1996). Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995).</R>
<R>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, 2000, or calendar year ended December 31, 1999, as applicable.</R>
|
Compensation Table |
|||
|
Trustees |
Aggregate |
Aggregate |
Total |
|
Edward C. Johnson 3d** |
$ 0 |
$ 0 |
$ 0 |
|
Abigail P. Johnson** |
$ 0 |
$ 0 |
$ 0 |
|
<R>J. Michael Cook***** |
$ 1,074 |
$ 309 |
$ 0</R> |
|
<R>Ralph F. Cox |
$ 1,996 |
$ 614 |
$ 217,500</R> |
|
<R>Phyllis Burke Davis |
$ 2,020 |
$ 622 |
$ 211,500</R> |
|
<R>Robert M. Gates |
$ 1,996 |
$ 614 |
$ 217,500</R> |
|
<R>E. Bradley Jones**** |
$ 581 |
$ 200 |
$ 217,500</R> |
|
<R>Donald J. Kirk |
$ 1,996 |
$ 614 |
$ 54,000</R> |
|
<R>Marie L. Knowles****** |
$ 337 |
$ 97 |
$ 0</R> |
|
<R>Ned C. Lautenbach*** |
$ 1,838 |
$ 558 |
$ 217,500</R> |
|
Peter S. Lynch** |
$ 0 |
$ 0 |
$ 0 |
|
<R>William O. McCoy |
$ 1,971 |
$ 605 |
$ 214,500</R> |
|
<R>Gerald C. McDonough |
$ 2,488 |
$ 766 |
$ 269,000</R> |
|
<R>Marvin L. Mann |
$ 2,008 |
$ 618 |
$ 217,500</R> |
|
<R>Robert C. Pozen** |
$ 0 |
$ 0 |
$ 0</R> |
|
<R>Thomas R. Williams |
$ 1,996 |
$ 614 |
$ 213,000</R> |
<R>* Information is for the calendar year ended December 31, 1999 for 236 funds in the complex.</R>
<R>** Interested Trustees of the funds and Ms. Johnson are compensated by FMR.</R>
<R>*** During the period from October 14, 1999 through December 31, 1999, Mr. Lautenbach served as a Member of the Advisory Board. Effective January 1, 2000, Mr. Lautenbach serves as a Member of the Board of Trustees.</R>
<R>**** Mr. Jones served on the Board of Trustees through December 31, 1999.</R>
<R>***** Effective March 16, 2000, Mr. Cook serves as a Member of the Advisory Board.</R>
<R>****** Effective June 15, 2000, Ms. Knowles serves as a Member of the Advisory Board.</R>
<R>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, 1999, the Trustees accrued required deferred compensation from the funds as follows: Ralph F. Cox, $75,000; Phyllis Burke Davis, $75,000; Robert M. Gates, $75,000; 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, $53,735; William O. McCoy, $53,735; and Thomas R. Williams, $62,319.</R>
<R>B Compensation figures include cash, and may include amounts required to be deferred and amounts deferred at the election of Trustees.</R>
<R>Under a deferred compensation plan adopted in September 1995 and amended in November 1996 and January 2000 (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual fees. Amounts deferred under the Plan are treated as though equivalent dollar amounts had been invested in shares of a cross-section of Fidelity funds including funds in each major investment discipline and representing a majority of Fidelity's assets under management (the Reference Funds). The amounts ultimately received by the Trustees under the Plan will be directly linked to the investment performance of the Reference Funds. Deferral of fees in accordance with the Plan will have a negligible effect on a fund's assets, liabilities, and net income per share, and will not obligate a fund to retain the services of any Trustee or to pay any particular level of compensation to the Trustee. A fund may invest in the Reference Funds under the Plan without shareholder approval.</R>
<R>As of August 31, 2000, 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.</R>
CONTROL OF INVESTMENT ADVISERS
<R>FMR Corp., organized in 1972, is the ultimate parent company of FMR and Fidelity Investments Money Management, Inc. (FIMM). 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.</R>
<R>At present, the primary business activities of FMR Corp., and its subsidiaries are: (i) the provision of investment advisory, management, shareholder, investment information and assistance and certain fiduciary services for individual and institutional investors; (ii) the provision of securities brokerage services; (iii) the management and development of real estate; and (iv) the investment in and operation of emerging businesses.</R>
<R>The funds, FMR, FIMM, and Fidelity Distributors Corporation (FDC) have adopted a code of ethics under Rule 17j-1 of the 1940 Act that sets forth employees' fiduciary responsibilities regarding the funds, establishes procedures for personal investing, and restricts certain transactions. Employees subject to the code of ethics, including Fidelity investment personnel, may invest in securities for their own investment accounts, including securities that may be purchased or held by the funds.</R>
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 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.
<R>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.</R>
<R>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 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.</R>
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 0.50% of the fund's 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.
|
<R>GROUP FEE RATE SCHEDULE |
EFFECTIVE ANNUAL FEE RATES</R> |
||
|
<R>Average Group |
Annualized |
Group Net |
Effective Annual Fee |
|
<R> 0 - $3 billion |
.3700% |
$ 1 billion |
.3700%</R> |
|
<R> 3 - 6 |
.3400 |
50 |
.2188</R> |
|
<R> 6 - 9 |
.3100 |
350 |
.1869</R> |
|
<R> 9 - 12 |
.2800 |
150 |
.1736</R> |
|
<R> 12 - 15 |
.2500 |
200 |
.1652</R> |
|
<R> 15 - 18 |
.2200 |
250 |
.1587</R> |
|
<R> 18 - 21 |
.2000 |
300 |
.1536</R> |
|
<R> 21 - 24 |
.1900 |
350 |
.1494</R> |
|
<R> 24 - 30 |
.1800 |
400 |
.1459</R> |
|
<R> 30 - 36 |
.1750 |
450 |
.1427</R> |
|
<R> 36 - 42 |
.1700 |
500 |
.1399</R> |
|
<R> 42 - 48 |
.1650 |
550 |
.1372</R> |
|
<R> 48 - 66 |
.1600 |
600 |
.1349</R> |
|
<R> 66 - 84 |
.1550 |
650 |
.1328</R> |
|
<R> 84 - 120 |
.1500 |
700 |
.1309</R> |
|
<R> 120 - 156 |
.1450 |
750 |
.1291</R> |
|
<R> 156 - 192 |
.1400 |
800 |
.1275</R> |
|
<R> 192 - 228 |
.1350 |
850 |
.1260</R> |
|
<R> 228 - 264 |
.1300 |
900 |
.1246</R> |
|
<R> 264 - 300 |
.1275 |
950 |
.1233</R> |
|
<R> 300 - 336 |
.1250 |
1,000 |
.1220</R> |
|
<R> 336 - 372 |
.1225 |
1,050 |
.1209</R> |
|
<R> 372 - 408 |
.1200 |
1,100 |
.1197</R> |
|
<R> 408 - 444 |
.1175 |
1,150 |
.1187</R> |
|
<R> 444 - 480 |
.1150 |
1,200 |
.1177</R> |
|
<R> 480 - 516 |
.1125 |
1,250 |
.1167</R> |
|
<R> 516 - 587 |
.1100 |
1,300 |
.1158</R> |
|
<R> 587 - 646 |
.1080 |
1,350 |
.1149</R> |
|
<R> 646 - 711 |
.1060 |
1,400 |
.1141</R> |
|
<R> 711 - 782 |
.1040 |
|
</R> |
|
<R> 782 - 860 |
.1020 |
|
</R> |
|
<R> 860 - 946 |
.1000 |
|
</R> |
|
<R> 946 - 1,041 |
.0980 |
|
</R> |
|
<R> 1,041 - 1,145 |
.0960 |
|
</R> |
|
<R> 1,145 - 1,260 |
.0940 |
|
</R> |
|
<R>Over 1,260 |
.0920 |
|
</R> |
<R>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 $884 billion of group net assets - the approximate level for August 2000 - was 0.1250%, which is the weighted average of the respective fee rates for each level of group net assets up to $884 billion.</R>
<R>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 2000, the fund's annual management fee rate would be calculated as follows:</R>
|
<R> |
Group Fee Rate |
|
Individual Fund Fee Rate |
|
Management Fee Rate</R> |
|
<R>Municipal Money Market |
0.1250% |
+ |
0.15% |
= |
0.2750%</R> |
One-twelfth of the management fee rate is applied to the fund's average net assets for the 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.
|
<R>Fund |
Fiscal Years Ended |
Amount of |
Management Fees |
|
<R>Municipal Money Market |
2000 |
N/A** |
$ 20,057,000</R> |
|
<R> |
1999 |
N/A** |
$ 16,161,000</R> |
|
<R> |
1998 |
N/A** |
$ 11,006,000</R> |
|
<R>Spartan Municipal Money |
2000 |
$ 104,000 |
$ 10,945,000*</R> |
|
<R> |
1999 |
$ 148,000 |
$ 11,105,000*</R> |
|
<R> |
1998 |
$ 188,000 |
$ 11,541,000*</R> |
* After reduction of fees and expenses paid by the fund to the non-interested Trustees.
** Not applicable
<R>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 discontinuance. 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.</R>
Expense reimbursements by FMR will increase a fund's returns and yield, and repayment of the reimbursement by a fund will lower its returns and yield.
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 its average net assets. The table below shows the periods of reimbursement and level 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.
|
<R> |
Aggregate |
Fiscal Years |
Management Fee
Before |
Amount of |
|
<R>Spartan Municipal Money |
0.40% |
2000 |
$ 10,945,000* |
$ 2,190,000</R> |
|
<R> |
0.40% |
1999 |
$ 11,105,000* |
$ 2,225,000</R> |
|
<R> |
0.40% |
1998 |
$ 11,541,000* |
$ 2,310,000</R> |
* After reduction of fees and expenses paid by the fund to the non-interested Trustees.
Sub-Adviser. FMR has entered into a sub-advisory agreement with FIMM pursuant to which FIMM has primary responsibility for choosing investments for each fund. Prior to January 23, 1998, FMR Texas Inc. (FMR Texas) had primary responsibility for providing investment management services to each fund. 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 FMR Texas and FIMM by FMR on behalf of the funds for the past three fiscal years are shown in the table below.
|
<R>Fund |
Fiscal Year Ended August 31 |
Fees Paid to FMR Texas |
Fees Paid to FIMM</R> |
|
<R>Municipal Money Market |
2000 |
N/A* |
$ 10,029,000</R> |
|
<R> |
1999 |
N/A* |
$ 8,081,000</R> |
|
<R> |
1998 |
$ 2,171,000 |
$ 3,332,000</R> |
|
<R>Spartan Municipal Money |
2000 |
N/A* |
$ 5,473,000</R> |
|
<R> |
1999 |
N/A* |
$ 5,553,000</R> |
|
<R> |
1998 |
2,277,000 |
$ 3,494,000</R> |
<R>* Not applicable</R>
<R>Each fund has entered into a distribution agreement with FDC, an affiliate of FMR. 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 funds, which are continuously offered at NAV. Promotional and administrative expenses in connection with the offer and sale of shares are paid by FMR.</R>
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.
<R>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 providing services intended to result in the sale of fund shares and/or shareholder support services. In addition, each Plan provides that FMR, directly or through FDC, may pay significant amounts to intermediaries, such as banks, broker-dealers and other service-providers, that provide those services. Currently, the Board of Trustees has authorized such payments for Municipal Money Market and Spartan Municipal Money shares.</R>
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 or stabilization of cash flows may result. Furthermore, certain shareholder support services may be provided more effectively under the Plans by local entities with whom shareholders have other relationships.
<R>The Glass-Steagall Act generally prohibits federally and state chartered or supervised banks from directly engaging in the business of underwriting, selling or distributing securities. 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, 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.</R>
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.
FDC may compensate intermediaries that satisfy certain criteria established from time to time by FDC relating to the level or type of services provided by the intermediary, the sale or expected sale of significant amounts of shares, or other factors.
TRANSFER AND SERVICE AGENT AGREEMENTS
<R>Each fund has entered into a transfer agent agreement with Citibank, N.A. (Citibank), which is located at 111 Wall Street, New York, New York. Under the terms of the agreements, Citibank provides transfer agency, dividend disbursing, and shareholder services for each fund. Citibank in turn has entered into sub-transfer agent agreements with Fidelity Service Company, Inc. (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 Citibank.</R>
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 and 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 collects a $5.00 exchange fee for each exchange out of Spartan Municipal Money.
FSC also collects Spartan Municipal Money's $5.00 wire transaction fee.
FSC also collects Spartan Municipal Money's $5.00 account closeout fee.
FSC also collects Spartan Municipal Money's $2.00 checkwriting fee.
In addition, Citibank, N.A. 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 in each Fidelity Freedom Fund and Fidelity Four-in-One Index Fund, funds of funds managed by an FMR affiliate, according to the percentage of the QSTP's, Freedom Fund's or Fidelity Four-in-One Index Fund's assets that is invested in a fund, subject to certain limitations in the case of Fidelity Four-in-One Index 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 Citibank. Under the terms of the agreements, Citibank provides pricing and bookkeeping services for each fund. Citibank 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 Citibank.
For providing pricing and bookkeeping services, FSC receives a monthly fee based on each fund's average daily net assets throughout the month.
<R>The annual rates for pricing and bookkeeping services for the funds are 0.0150% of the first $500 million of average net assets, 0.0075% of average net assets between $500 million and $10 billion, 0.0021% of average net assets between $10 billion and $25 billion, and 0.00075% of average net assets in excess of $25 billion. The fee, not including reimbursement for out-of-pocket expenses, is limited to a minimum of $40,000 per year.</R>
<R>Pricing and bookkeeping fees, including reimbursement for out-of-pocket expenses, paid by Municipal Money Market to FSC for the past three fiscal years are shown in the table below.</R>
|
<R>Fund |
2000 |
1999 |
1998</R> |
|
<R>Municipal Money Market |
$ 702,000 |
$ 581,000 |
$ 415,000</R> |
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.
<R>Trust Organization. Municipal Money Market and Spartan Municipal Money 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 in the trust: Fidelity Municipal Money Market Fund, Spartan Municipal Money Fund, Fidelity Daily Income Trust, and Spartan Arizona Municipal Money Market Fund. The Trustees are permitted to create additional funds in the trust and to create additional classes of the funds.</R>
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 to the rights of creditors, are allocated to such fund, and constitute the underlying assets of such fund. The underlying assets of each fund in the trust shall be charged with the liabilities and expenses attributable to such fund. Any general expenses of the trust shall be allocated between or among any one or more of the funds.
Shareholder 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. The Trust Instrument provides that the trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the trust or the Trustees relating to the trust or to a fund shall include a provision limiting the obligations created thereby to the trust or to one or more funds and its or their assets. The Trust Instrument further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.
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 solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason. 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 a 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.
<R>Voting Rights. Each fund's capital consists of shares of beneficial interest. As a shareholder, you are entitled to one vote for each dollar of net asset value you own. The voting rights of shareholders can be changed only by a shareholder vote. Shares may be voted in the aggregate, by fund, and by class.</R>
The shares have no preemptive or conversion rights. Shares are fully paid and nonassessable, except as set forth under the heading "Shareholder Liability" above.
<R>Under the Trust Instrument, the Trustees may, without shareholder vote, in order to change the form of organization of the trust cause the trust to merge or consolidate with one or more trusts, partnerships, associations, limited liability companies, or corporations, as long as the surviving entity is an open-end management investment company, or is a fund thereof, that will succeed to or assume the trust's registration statement, or cause the trust to incorporate under Delaware law.</R>
<R>The trust or a fund may be terminated upon the sale of its assets to another open-end management investment company or series thereof, or upon liquidation and distribution of its assets. Generally such terminations must be approved by a vote of shareholders. In the event of the dissolution or liquidation of the trust, shareholders of each of its funds are entitled to receive the underlying assets of such fund available for distribution. In the event of the dissolution or liquidation of a fund, shareholders of that fund are entitled to receive the underlying assets of the fund available for distribution.</R>
<R>Under the Trust Instrument, the Trustees may, without shareholder vote, in order to change the form of organization of the trust cause the trust to merge or consolidate with one or more trusts, partnerships, associations, limited liability companies, or corporations, as long as the surviving entity is an open-end management investment company, or is a fund thereof, that will succeed to or assume the trust's registration statement, or cause the trust to incorporate under Delaware law.</R>
Custodian. Citibank, N.A., 111 Wall Street, New York, New York, 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.
<R>FMR, its officers and directors, its affiliated companies, Members of the Advisory Board, and Members of 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.</R>
<R>Auditor. PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts, serves as independent accountant for each fund. The auditor examines financial statements for the funds and provides other audit, tax, and related services.</R>
<R>Each fund's financial statements and financial highlights for the fiscal year ended August 31, 2000, and report of the auditor, are included in the fund's annual report and are incorporated herein by reference.</R>
Spartan, Fidelity, Fidelity Investments & (Pyramid) Design, Fidelity Focus, and Magellan are registered trademarks of FMR Corp.</R>
The third party marks appearing above are the marks of their respective owners.
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Trust Instrument, dated September 14, 2000 is filed herein as Exhibit a(1).
(b) Bylaws of the Trust, as amended and dated May 19, 1994, are incorporated herein by reference to Exhibit 2(a) of Post-Effective Amendment No. 10.
(c) Not applicable.
(d) (1) Management Contract, dated September 16, 1994, 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 is incorporated herein by reference to Exhibit 5(g) of Post-Effective Amendment No. 11.
(2) Management Contract, dated January 28, 1993, between Fidelity Union Street Trust II on behalf of Fidelity Daily Income Trust and Fidelity Management & Research Company is incorporated herein by reference to Exhibit 5(c) of Post-Effective Amendment No. 11.
(3) Management Contract, dated February 28, 1992, between Fidelity Union Street Trust II on behalf of Spartan Municipal Money Fund and Fidelity Management & Research Company is incorporated herein by reference to Exhibit 5(a) of Post-Effective Amendment No. 11.
(4) Management Contract, dated December 19, 1997, between Fidelity Union Street Trust II on behalf of Fidelity Municipal Money Market Fund and Fidelity Management & Research Company is incorporated herein by reference to Exhibit d(4) of Post-Effective Amendment No. 22.
(5) Sub-Advisory Agreement, dated September 16, 1994, 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) is incorporated herein by reference to Exhibit 5(h) of Post-Effective Amendment No. 11.
(6) Sub-Advisory Agreement, dated January 28, 1993, 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 is incorporated herein by reference to Exhibit 5(d) of Post-Effective Amendment No. 11.
(7) Sub-Advisory Agreement, dated February 28, 1992, 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 is incorporated herein by reference to Exhibit 5(b) of Post-Effective Amendment No. 11.
(8) Sub-Advisory Agreement, dated December 19, 1997, between FMR Texas Inc. (currently known as Fidelity Investments Money Management Inc. (FIMM)), and Fidelity Management & Research Company with respect to Fidelity Municipal Money Market Fund is incorporated herein by reference to Exhibit d(8) of Post-Effective Amendment No. 23.
(e) (1) General Distribution Agreement, dated September 16, 1994, 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 Distributors Corporation is incorporated herein by reference to Exhibit e(1) of Post-Effective Amendment No. 22.
(2) General Distribution Agreement, dated February 28, 1992, between Fidelity Union Street Trust II on behalf of Spartan Municipal Money Fund and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(a) of Post-Effective Amendment No. 11.
(3) General Distribution Agreement, dated January 28, 1993, between Fidelity Daily Income Trust and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit 6(b) of Post-Effective Amendment No. 11.
(4) General Distribution Agreement, dated December 19, 1997, between Fidelity Union Street Trust II on behalf of Fidelity Municipal Money Market Fund and Fidelity Distributors Corporation is incorporated herein by reference to Exhibit e(4) of Post-Effective Amendment No. 23.
(5) 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 (File No. 2-58774) Post-Effective Amendment No. 61.
(f) (1) The Fee Deferral Plan for Non-Interested Person Directors and Trustees of the Fidelity Funds, effective as of September 15, 1995 and amended through January 1, 2000, is incorporated herein by reference to Exhibit (f)(1) of Fidelity Massachusetts Municipal Trust's (File No. 2-75537) Post-Effective Amendment No. 39.
(g) (1) 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 are incorporated herein by reference to Exhibit 8(a) of Fidelity Hereford Street Trust's (File No. 33-52577) Post-Effective Amendment No. 4.
(2) Appendix A, dated August 8, 2000, 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 g(10) of Fidelity Commonwealth Trust's (File No. 2-52322) Post-Effective Amendment No. 72.
(3) Appendix B, dated March 16, 2000, 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 g(3) of Fidelity Summer Street Trust's (File No. 2-58542) Post-Effective Amendment No. 58.
(4) Addendum, dated June 6, 2000, 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 filed herein as Exhibit g(4).
(5) Amendment, dated July 14, 1999, to the Fee Schedule 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 g(5) of Fidelity Summer Street Trust's (File No. 2-58542) Post-Effective Amendment No. 58.
(6) Custodian Agreement, Appendix A, Appendix B, and Appendix C, dated May 1, 1998, between Citibank, N.A. and Fidelity Union Street Trust II on behalf of Fidelity Municipal Money Market Fund, Spartan Arizona Municipal Money Market Fund, and Spartan Municipal Money Fund are incorporated herein by reference to Exhibit g(5) of Fidelity Union Street Trust's (File No. 2-50318) Post-Effective Amendment No. 102.
(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) First Amendment to 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 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.
(13) Schedule A-1, dated March 29, 2000, to the Fidelity Group Repo Custodian Agreements, Schedule 1s to the Fidelity Group Repo Custodian Agreements, Joint Trading Account Custody Agreement, and First Amendment to the Joint Trading Account Custody Agreement, between the respective parties and Fidelity Union Street Trust II on behalf of Fidelity Daily Income Trust, is incorporated herein by reference to Exhibit g(11) of Fidelity Magellan Fund's (File No. 2-21461) Post-Effective Amendment No. 48.
(h) Not applicable.
(i) Legal Opinion of Kirkpatrick & Lockhart LLP for Fidelity Daily Income Trust, Fidelity Municipal Money Market Fund, Spartan Arizona Municipal Money Market Fund, and Spartan Municipal Money Fund, dated October 13, 1999, is incorporated herein by reference to Exhibit i(1) of Post-Effective Amendment No. 23.
(j) Consent of PricewaterhouseCoopers LLP, dated October 17, 2000, is filed herein as Exhibit j(1).
(k) Not applicable.
(l) Not applicable.
(m) (1) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity Daily Income Trust is incorporated herein by reference to Exhibit m(1) of Post-Effective Amendment No. 23.
(2) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity Municipal Money Market Fund is incorporated herein by reference to Exhibit m(2) of Post-Effective Amendment No. 22.
(3) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan Arizona Municipal Money Market Fund is incorporated herein by reference to Exhibit m(3) of Post-Effective Amendment No. 22.
(4) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan Municipal Money Fund is incorporated herein by reference to Exhibit m(4) of Post-Effective Amendment No. 22.
(n) Not applicable.
(p)(1) Code of Ethics, dated July 20, 2000, adopted by each fund, Fidelity Management & Research Company, Fidelity Investments Money Management, Inc., FMR Co., Inc., and Fidelity Distributors Corporation pursuant to Rule 17j-1 is incorporated herein by reference to Exhibit (p)(1) of Fidelity Hastings Street Trust's (File No. 2-11517) Post-Effective Amendment No. 107.
Item 24. Trusts Controlled by or under Common Control with this Trust
The Board of Trustees of the Trust is the same as the board of other Fidelity funds, each of which has Fidelity Management & Research Company, or an affiliate, as its investment adviser. In addition, the officers of the Trust are substantially identical to those of the other Fidelity funds. Nonetheless, the Trust takes the position that it is not under common control with other Fidelity funds because the power residing in the respective boards and officers arises as the result of an official position with the respective trusts.
Item 25. Indemnification
Pursuant to Del. Code Ann. title 12 § 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 sets forth the reasonable and fair means for determining whether indemnification shall be provided to any past or present Trustee or officer. It states that the Trust shall indemnify any present or past trustee or officer to the fullest extent permitted by law against liability, and all expenses reasonably incurred by him 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 or officer 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 Trust 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 Trust. 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 Trust 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 Trust (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 Trust 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 Trust by or on behalf of the Distributor. In no case is the indemnity of the Trust 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.
Pursuant to the agreement by which Fidelity Service Company, Inc. ("FSC") is appointed transfer agent, the Trust agrees to indemnify and hold FSC 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 Trust, including by a shareholder, which names FSC and/or the Trust as a party and is not based on and does not result from FSC's willful misfeasance, bad faith or negligence or reckless disregard of duties, and arises out of or in connection with FSC's performance under the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to by FSC's willful misfeasance, bad faith or negligence or reckless disregard of its duties) which results from the negligence of the Trust, or from FSC's acting upon any instruction(s) reasonably believed by it to have been executed or communicated by any person duly authorized by the Trust, or as a result of FSC's acting in reliance upon advice reasonably believed by FSC to have been given by counsel for the Trust, or as a result of FSC'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. ("FSC") is appointed sub-transfer agent, the Transfer Agent agrees to indemnify FSC for FSC'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 Fund for the same events. Under the Transfer Agency Agreement, the Trust 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 Trust, including by a shareholder, which names the Transfer Agent and/or the Trust 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 its duties) which results from the negligence of the Trust, 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 Trust, 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 Trust, or as a result of the Transfer Agent's acting in reliance upon any instrument or stock certificate reasonably believed by it to have been genuine and signed, countersigned or executed by the proper person.
Item 26. Business and Other Connections of Investment Advisers
(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.
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Edward C. Johnson 3d |
Chairman of the Board and Director of FMR; Chief Executive Officer, Chairman of the Board, and Director of FMR Corp.; Chairman of the Board and Director of 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); Director of Fidelity Management & Research Co., Inc. (FMRC); Chairman of the Executive Committee of FMR; President and Trustee of funds advised by FMR. |
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Robert C. Pozen |
President and Director of FMR; Senior Vice President and Trustee of funds advised by FMR; President and Director of FIMM, FMRC, FMR U.K., and FMR Far East; Director of Strategic Advisers, Inc.; Previously, General Counsel, Managing Director, and Senior Vice President of FMR Corp. |
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Paul Antico |
Vice President of FMR and of a fund advised by FMR. |
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John Avery |
Vice President of FMR and of funds advised by FMR. |
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Robert Bertelson |
Vice President of FMR and of a fund advised by FMR. |
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William Bower |
Vice President of FMR and of a fund advised by FMR. |
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Steve Buller |
Vice President of FMR and of a fund advised by FMR. |
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John H. Carlson |
Vice President of FMR and of funds advised by FMR. |
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Robert C. Chow |
Vice President of FMR and of a fund advised by FMR. |
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Dwight D. Churchill |
Senior Vice President of FMR and Vice President of Fixed-Income Funds advised by FMR; Senior Vice President of FIMM. |
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Barry Coffman |
Vice President of FMR and of a fund advised by FMR. |
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Michael Connolly |
Vice President of FMR. |
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Frederic G. Corneel |
Tax Counsel of FMR. |
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Laura B. Cronin |
Vice President of FMR and Treasurer of FMR, FIMM, FMR U.K., FMRC and FMR Far East. |
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William Danoff |
Senior Vice President of FMR and Vice President of funds advised by FMR. |
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Scott E. DeSano |
Vice President of FMR. |
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Penelope Dobkin |
Vice President of FMR and of a fund advised by FMR. |
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Walter C. Donovan |
Vice President of FMR. |
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Bettina Doulton |
Senior Vice President of FMR and of funds advised by FMR. |
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Stephen DuFour |
Vice President of FMR and of a fund advised by FMR. |
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Robert Dwight |
Vice President of FMR and Treasurer of funds advised by FMR. |
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Margaret L. Eagle |
Vice President of FMR. |
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William R. Ebsworth |
Senior Vice President of FMR. |
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Bahaa Fam |
Vice President of FMR. |
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David Felman |
Vice President of FMR and of funds advised by FMR. |
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Richard B. Fentin |
Senior Vice President of FMR and Vice President of a fund advised by FMR. |
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Karen Firestone |
Vice President of FMR and of funds advised by FMR. |
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Michael B. Fox |
Assistant Treasurer of FMR, FIMM, FMR U.K., and FMR Far East; Vice President and Treasurer of FMR Corp. and Strategic Advisers, Inc.; Vice President of FMR U.K., FMR Far East, and FIMM. |
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Gregory Fraser |
Vice President of FMR and of funds advised by FMR. |
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Jay Freedman |
Assistant Clerk of FMR; Clerk of FMR Corp., FMR U.K., FMR Far East, FMRC, and Strategic Advisers, Inc.; Secretary of FIMM; Vice President and Deputy General Counsel of FMR Corp. |
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David L. Glancy |
Vice President of FMR and of funds advised by FMR. |
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Boyce I. Greer |
Senior Vice President of FMR and Vice President of Money Market Funds and Municipal Bond Funds advised by FMR; Vice President of FIMM. |
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Bart A. Grenier |
Senior Vice President of FMR. |
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Robert J. Haber |
Vice President of FMR. |
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Richard C. Habermann |
Senior Vice President of FMR and Vice President of funds advised by FMR. |
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Thomas Hense |
Vice President of FMR. |
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Bruce T. Herring |
Vice President of FMR. |
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Adam Hetnarski |
Vice President of FMR and of funds advised by FMR. |
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Frederick Hoff |
Vice President of FMR. |
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Abigail P. Johnson |
Senior Vice President of FMR and Vice President of certain Equity Funds advised by FMR; Director of FMR Corp. |
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David B. Jones |
Vice President of FMR. |
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Steven Kaye |
Senior Vice President of FMR and of a fund advised by FMR. |
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William Kennedy |
Vice President of FMR and of funds advised by FMR. |
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Francis V. Knox |
Vice President of FMR; Compliance Officer of FMR U.K. and FMR Far East. |
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Timothy Krochuk |
Vice President of FMR and of funds advised by FMR. |
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Harry W. Lange |
Vice President of FMR and of funds advised by FMR. |
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Robert Lawrence |
Senior Vice President of FMR and Vice President of certain Equity and High Income Funds advised by FMR. |
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Harris Leviton |
Vice President of FMR and of a fund advised by FMR. |
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Peter S. Lynch |
Vice Chairman of the Board and Director of FMR and FMRC. |
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Richard R. Mace Jr. |
Vice President of FMR and of funds advised by FMR. |
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Shigeki Makino |
Vice President of FMR. |
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Charles A. Mangum |
Vice President of FMR and of funds advised by FMR. |
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Kevin McCarey |
Vice President of FMR and of funds advised by FMR. |
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John McDowell |
Senior Vice President of FMR and of a fund advised by FMR. |
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Neal P. Miller |
Vice President of FMR and of a fund advised by FMR. |
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John Muresianu |
Vice President of FMR and of funds advised by FMR. |
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David L. Murphy |
Vice President of FMR and Vice President of Taxable Bond Funds advised by FMR; Vice President of FIMM. |
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Jacques Perold |
Vice President of FMR. |
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Stephen Petersen |
Senior Vice President of FMR and Vice President of funds advised by FMR. |
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Alan Radlo |
Vice President of FMR. |
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Eric D. Roiter |
Vice President, General Counsel, and Clerk of FMR and Secretary of funds advised by FMR. |
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Louis Salemy |
Vice President of FMR and of a fund advised by FMR. |
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Lee H. Sandwen |
Vice President of FMR. |
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Patricia A. Satterthwaite |
Vice President of FMR and of funds advised by FMR. |
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Michael Seay |
Vice President of FMR. |
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Fergus Shiel |
Vice President of FMR and of funds advised by FMR. |
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Beso Sikharulidze |
Vice President of FMR and of a fund advised by FMR. |
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Carol A. Smith-Fachetti |
Vice President of FMR. |
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Steven J. Snider |
Vice President of FMR and of funds advised by FMR. |
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Thomas T. Soviero |
Vice President of FMR and of a fund advised by FMR. |
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Richard A. Spillane, Jr. |
Senior Vice President of FMR; Vice President of certain Equity Funds advised by FMR; Previously, Senior Vice President and Director of Operations and Compliance of FMR U.K. |
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Thomas M. Sprague |
Vice President of FMR and of funds advised by FMR. |
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Robert E. Stansky |
Senior Vice President of FMR and Vice President of a fund advised by FMR. |
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Scott D. Stewart |
Vice President of FMR. |
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Nick Thakore |
Vice President of FMR and of a fund advised by FMR. |
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Yoko Tilley |
Vice President of FMR. |
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Joel C. Tillinghast |
Vice President of FMR and of a fund advised by FMR. |
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Robert Tuckett |
Vice President of FMR. |
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Jennifer Uhrig |
Vice President of FMR and of funds advised by FMR. |
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George A. Vanderheiden |
Senior Vice President of FMR. |
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Judy Verhave |
Vice President of FMR. |
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William P. Wall |
Vice President of FMR. |
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Jason Weiner |
Vice President of FMR and of a fund advised by FMR. |
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Steven S. Wymer |
Vice President of FMR and of a fund advised by FMR. |
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(2) FIDELITY INVESTMENTS MONEY MANAGEMENT, INC. (FIMM)
1 Spartan 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.
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Edward C. Johnson 3d |
Chairman of the Board and Director of FIMM, FMR, FMR Corp., FMR Far East, and FMR U.K.; Director of FMRC; Chairman of the Executive Committee of FMR; Chief Executive Officer of FMR Corp.; and President and Trustee of funds advised by FMR. |
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Robert C. Pozen |
President and Director of FIMM; Senior Vice President and Trustee of funds advised by FMR; President and Director of FMR, FMR U.K., FMRC, and FMR Far East; Director of Strategic Advisers, Inc.; Previously, General Counsel, Managing Director, and Senior Vice President of FMR Corp. |
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Dwight D. Churchill |
Senior Vice President of FIMM; Senior Vice President of FMR and Vice President of Fixed-Income Funds. |
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Laura B. Cronin |
Treasurer of FIMM, FMR Far East, FMR U.K., FMRC, and FMR and Vice President of FMR. |
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Michael B. Fox |
Assistant Treasurer of FIMM, FMR U.K., FMR Far East, and FMR; Vice President and Treasurer of FMR Corp. and Strategic Advisers, Inc.; Vice President of FIMM, FMR U.K., and FMR Far East. |
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Jay Freedman |
Secretary of FIMM; Clerk of FMR U.K., FMR Far East, FMR Corp., FMRC, and Strategic Advisers, Inc.; Assistant Clerk of FMR; Vice President and Deputy General Counsel of FMR Corp. |
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Boyce I. Greer |
Vice President of FIMM; Senior Vice President of FMR and Vice President of Money Market Funds and Municipal Bond Funds advised by FMR. |
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Stanley N. Griffith |
Assistant Secretary of FIMM. |
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Susan Englander Hislop |
Assistant Secretary of FIMM; Assistant Clerk of FMR U.K., FMR Far East, and Strategic Advisers, Inc. |
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David L. Murphy |
Vice President of FIMM; Vice President of Taxable Bond Funds advised by FMR; and Vice President of FMR. |
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Item 27. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for all funds advised by FMR or an affiliate.
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(b) |
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Name and Principal |
Positions and Offices |
Positions and Offices |
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Business Address* |
with Underwriter |
with Fund |
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Edward L. McCartney |
Director and President |
None |
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Jay Freedman |
Assistant Clerk |
None |
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Paul J. Gallagher |
Director |
None |
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Daniel T. Geraci |
Executive Vice President |
None |
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Jane Greene |
Treasurer and Controller |
None |
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Linda Capps Holland |
Assistant Clerk and Compliance Officer |
None |
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Kevin J. Kelly |
Director |
None |
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Gail McGovern |
Director |
None |
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Jean Raymond |
Chief Financial Officer |
None |
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J. Gregory Wass |
Assistant Treasurer |
None |
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are maintained by Fidelity Management & Research Company, Fidelity Service Company, Inc. or Fidelity Investments Institutional Operations Company, Inc., 82 Devonshire Street, Boston, MA 02109, or the funds' respective custodians, The Bank of New York, 110 Washington Street, New York, NY and Citibank, N.A., 111 Wall Street, New York, NY.
Item 29. Management Services
Not applicable.
Item 30. 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. 24 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 17th day of October 2000.
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Fidelity Union Street Trust II |
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By |
/s/Edward C. Johnson 3d (dagger) |
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Edward C. Johnson 3d, President |
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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.
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(Signature) |
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(Title) |
(Date) |
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/s/Edward C. Johnson 3d |
(dagger) |
President and Trustee |
October 17, 2000 |
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Edward C. Johnson 3d |
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(Principal Executive Officer) |
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/s/Robert A. Dwight |
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Treasurer |
October 17, 2000 |
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Robert A. Dwight |
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/s/Robert C. Pozen |
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Trustee |
October 17, 2000 |
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Robert C. Pozen |
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/s/Ralph F. Cox |
* |
Trustee |
October 17, 2000 |
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Ralph F. Cox |
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/s/Phyllis Burke Davis |
* |
Trustee |
October 17, 2000 |
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Phyllis Burke Davis |
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/s/Robert M. Gates |
* |
Trustee |
October 17, 2000 |
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Robert M. Gates |
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/s/Donald J. Kirk |
* |
Trustee |
October 17, 2000 |
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Donald J. Kirk |
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/s/Ned C. Lautenbach |
* |
Trustee |
October 17, 2000 |
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Ned C. Lautenbach |
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/s/Peter S. Lynch |
* |
Trustee |
October 17, 2000 |
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Peter S. Lynch |
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/s/Marvin L. Mann |
* |
Trustee |
October 17, 2000 |
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Marvin L. Mann |
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/s/William O. McCoy |
* |
Trustee |
October 17, 2000 |
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William O. McCoy |
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/s/Gerald C. McDonough |
* |
Trustee |
October 17, 2000 |
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Gerald C. McDonough |
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/s/Thomas R. Williams |
* |
Trustee |
October 17, 2000 |
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Thomas R. Williams |
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(dagger) Signatures affixed by Robert C. Pozen pursuant to a power of attorney dated July 17, 1997 and filed herewith.
* Signature affixed by Alan C. Porter pursuant to a power of attorney dated July 20, 2000 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:
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Fidelity Aberdeen Street Trust Fidelity Advisor Series I Fidelity Advisor Series II Fidelity Advisor Series III Fidelity Advisor Series IV Fidelity Advisor Series V Fidelity Advisor Series VI Fidelity Advisor Series VII Fidelity Advisor Series VIII Fidelity Beacon Street Trust Fidelity Boston Street Trust Fidelity California Municipal Trust Fidelity California Municipal Trust II Fidelity Capital Trust Fidelity Charles Street Trust Fidelity Commonwealth Trust Fidelity Concord Street Trust Fidelity Congress Street Fund Fidelity Contrafund Fidelity Corporate Trust Fidelity Court Street Trust Fidelity Court Street Trust II Fidelity Covington Trust Fidelity Daily Money Fund Fidelity Destiny Portfolios Fidelity Deutsche Mark Performance Portfolio, L.P. Fidelity Devonshire Trust Fidelity Exchange Fund Fidelity Financial Trust Fidelity Fixed-Income Trust Fidelity Government Securities Fund Fidelity Hastings Street Trust |
Fidelity Hereford Street Trust Fidelity Income Fund Fidelity Institutional Cash Portfolios Fidelity Institutional Tax-Exempt Cash Portfolios Fidelity Investment Trust Fidelity Magellan Fund Fidelity Massachusetts Municipal Trust Fidelity Money Market Trust Fidelity Mt. Vernon Street Trust Fidelity Municipal Trust Fidelity Municipal Trust II Fidelity New York Municipal Trust Fidelity New York Municipal Trust II Fidelity Phillips Street Trust Fidelity Puritan Trust Fidelity Revere Street Trust Fidelity School Street Trust Fidelity Securities Fund Fidelity Select Portfolios Fidelity Sterling Performance Portfolio, L.P. Fidelity Summer Street Trust Fidelity Trend Fund Fidelity U.S. Investments-Bond Fund, L.P. Fidelity U.S. Investments-Government Securities Fund, L.P. Fidelity Union Street Trust Fidelity Union Street Trust II Fidelity Yen Performance Portfolio, L.P. Newbury Street Trust Variable Insurance Products Fund Variable Insurance Products Fund II Variable Insurance Products Fund III |
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.
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/s/Edward C. Johnson 3d |
July 17, 1997 |
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Edward C. Johnson 3d |
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POWER OF ATTORNEY
We, the undersigned Directors, Trustees, or General Partners, as the case may be, of the following investment companies:
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Colchester Street Trust Fidelity Aberdeen Street Trust Fidelity Advisor Series I Fidelity Advisor Series II Fidelity Advisor Series III Fidelity Advisor Series IV Fidelity Advisor Series VI Fidelity Advisor Series VII Fidelity Advisor Series VIII Fidelity Beacon Street Trust Fidelity Boston Street Trust Fidelity California Municipal Trust Fidelity California Municipal Trust II Fidelity Capital Trust Fidelity Charles Street Trust Fidelity Commonwealth Trust Fidelity Concord Street Trust Fidelity Congress Street Fund Fidelity Contrafund Fidelity Court Street Trust Fidelity Court Street Trust II Fidelity Covington Trust Fidelity Destiny Portfolios Fidelity Devonshire Trust Fidelity Exchange Fund Fidelity Financial Trust Fidelity Fixed-Income Trust Fidelity Garrison Street Trust Fidelity Government Securities Fund Fidelity Hastings Street Trust |
Fidelity Hereford Street Trust Fidelity Income Fund Fidelity Institutional Tax-Exempt Cash Portfolios Fidelity Investment Trust Fidelity Magellan Fund Fidelity Massachusetts Municipal Trust Fidelity Money Market Trust Fidelity Mt. Vernon Street Trust Fidelity Municipal Trust Fidelity Municipal Trust II Fidelity New York Municipal Trust Fidelity New York Municipal Trust II Fidelity Oxford Street Trust Fidelity Phillips Street Trust Fidelity Puritan Trust Fidelity Revere Street Trust Fidelity School Street Trust Fidelity Securities Fund Fidelity Select Portfolios Fidelity Summer Street Trust Fidelity Trend Fund Fidelity U.S. Investments-Bond Fund, L.P. Fidelity U.S. Investments-Government Securities Fund, L.P. Fidelity Union Street Trust Fidelity Union Street Trust II Newbury Street Trust Variable Insurance Products Fund Variable Insurance Products Fund II Variable Insurance Products Fund III |
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, Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, Dana L. Platt, and Alan C. Porter, 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 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 August 1, 2000.
WITNESS our hands on this twentieth day of July, 2000.
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/s/Edward C. Johnson 3d |
/s/Peter S. Lynch |
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Edward C. Johnson 3d |
Peter S. Lynch |
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/s/Ralph F. Cox |
/s/Marvin L. Mann |
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Ralph F. Cox |
Marvin L. Mann |
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/s/Phyllis Burke Davis |
/s/William O. McCoy |
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Phyllis Burke Davis |
William O. McCoy |
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/s/Robert M. Gates |
/s/Gerald C. McDonough |
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Robert M. Gates |
Gerald C. McDonough |
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/s/Donald J. Kirk |
/s/Robert C. Pozen |
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Donald J. Kirk |
Robert C. Pozen |
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/s/Ned C. Lautenbach |
/s/Thomas R. Williams |
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Ned C. Lautenbach |
Thomas R. Williams |
POWER OF ATTORNEY
I, the undersigned Secretary of the investment companies for which Fidelity Management & Research Company or an affiliate acts as investment adviser (collectively, the "Funds"), hereby severally constitute and appoint Arthur J. Brown, Arthur C. Delibert, Robert C. Hacker, Thomas M. Leahey, Richard M. Phillips, Dana L. Platt, and Alan C. Porter, each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, any and all representations with respect to the consistency of foreign language translation prospectuses with the original prospectuses filed in connection with the Post-Effective Amendments for the Funds 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 August 1, 2000.
WITNESS my hand on this 1st day of August, 2000.
/s/Eric D. Roiter
Eric D. Roiter
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