SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 33-43986)
UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 11 [x]
and
REGISTRATION STATEMENT (No. 811-6454)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. [ ]
Fidelity Municipal Trust II
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-570-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
(x) on February 19, 1995 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on ( ) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the Notice required by
such Rule before February 28, 1995.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FIDELITY MINNESOTA TAX-FREE FUND
FIDELITY OHIO TAX-FREE HIGH YIELD PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; The Funds at a Glance; Charter;
Doing Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
ii............................ *
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Cover Page; Charter
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FIDELITY MINNESOTA TAX-FREE FUND
FIDELITY OHIO TAX-FREE HIGH YIELD PORTFOLIO
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ Trustees and Officers
c ............................ Trustees and Officers
16 a i ............................ FMR; Portfolio Transactions
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Interest of FMR affiliates
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Interest of FMR affiliates
17 a ............................ Portfolio Transactions
b ............................ Portfolio Transactions
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interest of FMR affiliates
c ............................ *
22 a ............................ Performance
b ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about the funds and their investments, you can obtain a copy
of each fund ' s most recent financial report and portfolio
listing, and a copy of the Statement of Additional Information (SAI)
dated February 19, 1995. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is incorporated herein by reference (legally
forms a part of the prospectus). For a free copy of either document, call
Fidelity at 1-800-544-8888.
Investments in the money market funds are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that a fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
Each of these funds seeks a high level of current income free from federal
income tax and the income tax of its state. The MONEY MARKET FUNDS are
designed to maintain a stable $1.00 share price. The BOND FUNDS seek to
provide higher yield s by investing in a broader range of
municipal securities.
FIDELITY
MICHIGAN,
MINNESOTA,
AND OHIO
FUNDS
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FIDELITY MINNESOTA
TAX-FREE PORTFOLIO
FIDELITY OHIO TAX-FREE
HIGH YIELD PORTFOLIO
PROSPECTUS
FEBRUARY 19, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR
HAS THE SECURITIES
AND EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
OMM-pro-295
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary
of FMR, chooses investments for the money market funds.
As with any mutual fund, there is no assurance that a fund will achieve its
goal.
MICHIGAN MONEY MARKET
GOAL: High current tax-free income for Michigan residents while maintaining
a stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and Michigan
income tax.
OHIO MONEY MARKET
GOAL: High current tax-free income for Ohio residents while maintaining a
stable $1.00 share price.
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and Ohio
individual income tax.
MICHIGAN HIGH YIELD
GOAL: High current tax-free income for Michigan residents.
STRATEGY: Invests mainly in longer-term, investment grade municipal
securities whose interest is free from federal income tax and Michigan
income tax.
MINNESOTA TAX-FREE
GOAL: High current tax-free income for Minnesota residents.
STRATEGY: Invests mainly in longer-term, investment grade municipal
securities whose interest is free from federal income tax and Minnesota
personal income tax.
OHIO HIGH YIELD
GOAL: High current tax-free income for Ohio residents.
STRATEGY: Invests mainly in longer-term, investment grade municipal
securities whose interest is free from federal income tax and Ohio
individual income tax.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal income tax
and Ohio, Michigan, or Minnesota income taxes . Each fund's level of
risk and potential reward, depend on the quality and maturity of its
investments. Each money market fund is managed to keep its share
price stable at $1.00. The bond funds, with their broader range of
investments, have the potential for higher yields, but also carry a higher
degree of risk. You should consider your investment objective and tolerance
for risk when making an investment decision.
The value of the funds' investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions,
and other federal and state political and economic news. When you sell your
bond fund shares they may be worth more or less than what you paid for
them. By themselves, these funds do not constitute a balanced investment
plan.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
or hold shares of a fund. See page 34 for more information about these
fees.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee
(for accounts under $2,500) $12.00
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. It also incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports. A fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The operating expenses on page 5 are projections based on historical
expenses, and are calculated as a percentage of average net assets.
EXAMPLES: Let's say, hypothetically, that each fund's annual return is
5% and that its operating expenses are exactly as described on page 5. For
every $1,000 you invested, the chart shows how much you would pay in total
expenses if you close your account after the number of years indicated.
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
MICHIGAN MONEY MARKET
Operating expenses Example
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fee .41% After 1 year $ 6
12b-1 fee None After 3 $20
years
Other expenses .20% After 5 $34
years
Total fund operating expenses .61% After 10 $76
years
</TABLE>
OHIO MONEY MARKET
Operating expenses Example
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fee .41% After 1 year $ 6
12b-1 fee None After 3 $18
years
Other expenses .16% After 5 $32
years
Total fund operating expenses .57% After 10 $71
years
</TABLE>
MICHIGAN HIGH YIELD
Operating expenses Example
s
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fee .41% After 1 year $ 6
12b-1 fee None After 3 $18
years
Other expenses .16% After 5 $32
years
Total fund operating expenses .57% After 10 $71
years
</TABLE>
MINNESOTA TAX-FREE
Operating expenses Example
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fee .41% After 1 year $ 6
12b-1 fee None After 3 $19
years
Other expenses .18% After 5 $33
years
Total fund operating expenses .59% After 10 $74
years
</TABLE>
OHIO HIGH YIELD
Operating expenses Example
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management fee 41% After 1 year $6
12b-1 fee None After 3 $18
years
Other expenses .16% After 5 $32
years
Total fund operating expenses .57% After 10 $71
years
</TABLE>
FINANCIAL HIGHLIGHTS
The tables that follow are included in each fund's Annual Report and have
been audited by Coopers & Lybrand L.L.P., independent accountants. Their
reports on the financial statements and financial highlights are included
in the Annual Reports. The financial statements and financial highlights
are incorporated by reference into (are legally a part of) the funds'
Statement of Additional Information.
MICHIGAN MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1.Selected Per-Share Data and
Ratios
2.Years ended December 31 1990C 1991 1992 1993 1994
3.Net asset value, beginning of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
4.Income from Investment .055 .044 .026 .020 .024
Operations
Net interest income
5. Dividends from net interest (.055) (.044) (.026) (.020) (.024)
income
6.Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
7.Total returnB 5.66% 4.46% 2.66% 1.98% 2.44%
8.Net assets, end of period $ 169,397 $ 175,150 $ 160,817 $ 175,190 $ 221,735
(000 omitted)
9.Ratio of expenses to average .22% .21% .49% .62% .61%
net assets A
10.Ratio of expenses to .77% .65% .61% .62% .61%
average net assets before A
expense reductions
11.Ratio of net interest income 5.78% 4.38% 2.64% 1.96% 2.45%
to average net assets A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C FROM JANUARY 12, 1990 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1990
OHIO MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12.Selected Per-Share Data
and Ratios
13.Years ended December 1989C 1990 1991 1992 1993 1994
31
14.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
15.Income from Investment .021 .058 .044 .028 .021 .025
Operations
Net interest income
16. Dividends from net (.021) (.058) (.044) (.028) (.021) (.025)
interest income
17.Net asset value, end of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
18.Total returnB 2.15% 5.90% 4.50% 2.81% 2.09% 2.50%
19.Net assets, end of period $ 57,748 $ 213,65 $ 247,88 $ 270,24 $ 262,37 $ 301,69
(000 omitted) 8 5 8 1 1
20.Ratio of expenses to -- .23% .47% .58% .59% .57%
average net assets
21.Ratio of expenses to 1.14% .69% .64% .59% .59% .57%
average net assets before A
expense reductions
22.Ratio of net interest 6.37% 5.77% 4.41% 2.78% 2.07% 2.48%
income to average A
net assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C FROM AUGUST 29, 1989 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1989
MICHIGAN HIGH YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
23.Selected Per-Share
Data and Ratios
24.Years ended 1985C 1986 1987 1988 1989 1990 1991 1992 1993 1994
December 31
25.Net asset $ 10.0 $ 10.2 $ 11.3 $ 10.2 $ 10.7 $ 11.1 $ 10.8 $ 11.4 $ 11.7 $ 12.3
value, 00 70 80 50 90 00 90 10 10 40
beginning of
period
26.Income .095 .792 .774 .754 .759 .758 .745 .733 .709 .687
from
Investment
Operations
Net interest
income
27. Net .270 1.110 (1.090 .540 .310 (.210 .520 .320 .870 (1.590
realized and ) ) )
unrealized
gain (loss)
on
investments
28. Total from .365 1.902 (.316) 1.294 1.069 .548 1.265 1.053 1.579 (.903)
investment
operations
29.Less (.095) (.792) (.774) (.754) (.759) (.758) (.745) (.733) (.709) (.687)
Distributions
From net
interest
income
30. From net -- -- (.040) -- -- -- -- (.020) (.240) (. 080 )
realized
gain on
investments
31. In excess
-- -- -- -- -- -- -- -- -- (.090)
of net
realized gain
on
investments.
32. Total (.095) (.792) (.814) (.754) (.759) (.758) (.745) (.753) (.949) (.857)
distributions
33.Net asset $ 10.2 $ 11.3 $ 10.2 $ 10.7 $ 11.1 $ 10.8 $ 11.4 $ 11.7 $ 12.3 $ 10.5
value, end 70 80 50 90 00 90 10 10 40 80
of period
34.Total returnB 3.65 19.03 (2.81) 13.01 10.21 5.15 12.04 9.54 13.83 (7.50)
% % % % % % % % % %
35.Net assets, $ 7 $ 128 $ 128 $ 171 $ 234 $ 279 $ 379 $ 464 $ 563 $ 434
end of period
(in millions)
36.Ratio of .60 .60 .72 .75 .69 .64 .62 .61 .59 .57
expenses to %A % % % % % % % % %
average net
assets
37.Ratio of 5.59 .89 .80 .75 .69 .64 .62 .61 .59 .57
expenses to %A % % % % % % % % %
average net
assets before
expense
reductions
38.Ratio of net 8.43 7.03 7.25 7.12 6.92 6.98 6.73 6.36 5.79 6.04
interest income %A % % % % % % % % %
to average
net assets
39.Portfolio 9 24 44 24 19 18 12 15 33 18
turnover rate %A % % % % % % % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C FROM NOVEMBER 12, 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1985
MINNESOTA TAX-FREE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40.Selected Per-Share
Data and Ratios
41.Years ended 1985C 1986 1987 1988 1989 1990 1991 1992 1993 1994
December 31
42.Net asset $ 10.0 $ 10.0 $ 10.9 $ 9.82 $ 10.3 $ 10.5 $ 10.5 $ 10.7 $ 10.8 $ 11.5
value, 00 90 90 0 10 20 50 30 50 20
beginning of
period
43.Income .075 .773 .722 .711 .711 .699 .690 .674 .647 .633
from
Investment
Operations
Net interest
income
44. Net .090 .900 (1.140 .490 .210 .030 .180 .120 .670 (1.310
realized and ) )
unrealized
gain (loss)
on
investments
45. Total from .165 1.673 (.418) 1.201 .921 .729 .870 .794 1.317 (.677)
investment
operations
46.Less (.075) (.773) (.722) (.711) (.711) (.699) (.690) (.674) (.647) (.633)
Distributions
From net
interest
income
47. From net -- -- (.030) -- -- -- -- -- -- (.0 60 )
realized
gain on
investments
48. In excess -- -- -- -- -- -- -- -- -- (.020)
of net
realized gain
on
investments.
49. Total (.075) (.773) (.752) (.711) (.711) (.699) (.690) (.674) (.647) (.713)
distributions
50.Net asset $ 10.0 $ 10.9 $ 9.82 $ 10.3 $ 10.5 $ 10.5 $ 10.7 $ 10.8 $ 11.5 $ 10.1
value, 90 90 0 10 20 50 30 50 20 30
end of period
51.Total returnB 1.65 17.04 (3.83) 12.61 9.24 7.22 8.50 7.63 12.42 (6.01)
% % % % % % % % % %
52.Net assets, $ 5 $ 94 $ 79 $ 100 $ 131 $ 167 $ 222 $ 281 $ 342 $ 277
end of
period (in
millions)
53.Ratio of .60 .60 .79 .82 .80 .76 .72 .67 .61 .59
expenses to %A % % % % % % % % %
average net
assets
54.Ratio of 7.70 1.01 .93 .82 .80 .76 .72 .67 .61 .59
expenses to %A % % % % % % % % %
average net
assets before
expense
reductions
55.Ratio of net 8.06 7.05 7.04 7.06 6.84 6.72 6.47 6.25 5.73 5.97
interest income %A % % % % % % % % %
to average
net assets
56.Portfolio -- 23 63 31 25 29 14 12 37 26
turnover rate % % % % % % % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C FROM NOVEMBER 21, 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1985
OHIO HIGH YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
57.Selected Per-Share
Data and Ratios
58.Years ended 1985C 1986 1987 1988 1989 1990 1991 1992 1993 1994
December 31
59.Net asset $ 10.0 $ 10.1 $ 10.9 $ 9.97 $ 10.5 $ 10.7 $ 10.8 $ 11.3 $ 11.5 $ 12.0
value, 00 20 70 0 00 90 40 20 50 20
beginning of
period
60.Income .094 .773 .740 .722 .725 .726 .719 .718 .693 .657
from
Investment
Operations
Net interest
income
61. Net .120 .850 (1.000 .530 .290 .050 .480 .230 .720 (1.310
realized and ) )
unrealized
gain (loss)
on
investments
62. Total from .214 1.623 (.260) 1.252 1.015 .776 1.199 .948 1.413 (.653)
investment
operations
63.Less (.094) (.773) (.740) (.722) (.725) (.726) (.719) (.718) (.693) (.657)
Distributions
From net
interest
income
64. From net -- -- -- -- -- -- -- -- (.250) (.190)
realized
gain on
investments
65. Total (.094) (.773) (.740) (.722) (.725) (.726) (.719) (.718) (.943) (.847)
distributions
66.Net asset $ 10.1 $ 10.9 $ 9.97 $ 10.5 $ 10.7 $ 10.8 $ 11.3 $ 11.5 $ 12.0 $ 10.5
value, 20 70 0 00 90 40 20 50 20 20
end of period
67.Total returnB 2.15 16.46 (2.38) 12.93 9.99 7.50 11.45 8.66 12.56 (5.55)
% % % % % % % % % %
68.Net assets, $ 4 $ 107 $ 117 $ 153 $ 201 $ 242 $ 328 $ 385 $ 458 $ 350
end of
period (in
millions)
69.Ratio of .60% .60 .79 .73 .71 .66 .64 .61 .57 .57
expenses to A % % % % % % % % %
average net
assets
70.Ratio of 6.94% .97 .87 .73 .71 .66 .64 .61 .57 .57
expenses to A % % % % % % % % %
average net
assets before
expense
reductions
71.Ratio of net 8.74% 7.01 7.09 7.08 6.79 6.82 6.53 6.31 5.67 5.88
interest income A % % % % % % % % %
to average
net assets
72.Portfolio 54% 32 36 23 22 12 11 20 41 22
turnover rate A % % % % % % % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C FROM NOVEMBER 15, 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1985
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results.
Each fund's fiscal year runs from January 1 through December 31. The table
below shows each fund's performance over past fiscal years compared to a
measure of inflation. The charts beginning on page 12
illustrate the yields of these funds.
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
TOTAL RETURNS
Average Annual Total Return Cumulative Total Return
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal periods Past 1 Past 5 Life of Past 1 Past 5 Life of
ended year years fund year years fund
December 31,
1994
Michigan 2.44 % n/a 3.45 2.44 % n/a 18.39
Municipal %A %A
Money Market
Ohio Municipal 2.50 % 3.55 % 3.73 2.50 % 19.05 21.61
%B % %B
Money Market
Michigan (7.50) 6.32 % 8.05 (7.50) 35.86 102.93
Tax-Free % %C % % %C
High Yield
Minnesota (6.01) 5.76 % 7.06 (6.01) 32.30 86.19
Tax-Free % %D % % %D
Ohio Tax-Free (5.55) 6.72 % 7.86 (5.55) 38.40 99.63
High Yield % % E % % % E
Consumer 2.67 % 3.49 % n/a 2.67 % 18.72 n/a
Price %
Index
</TABLE>
A FROM COMMENCEMENT OF OPERATIONS (JANUARY 12, 1990)
B FROM COMMENCEMENT OF OPERATIONS (AUGUST 29, 1989)
C FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 12, 1985)
D FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 21, 1985)
E FROM COMMENCEMENT OF OPERATIONS (NOVEMBER 15, 1985)
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond funds
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
MICHIGAN MUNICIPAL MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: 1.93
Row: 1, Col: 2, Value: 1.81
Row: 2, Col: 1, Value: 1.97
Row: 2, Col: 2, Value: 1.87
Row: 3, Col: 1, Value: 2.04
Row: 3, Col: 2, Value: 1.96
Row: 4, Col: 1, Value: 2.03
Row: 4, Col: 2, Value: 1.98
Row: 5, Col: 1, Value: 2.16
Row: 5, Col: 2, Value: 2.123
Row: 6, Col: 1, Value: 1.72
Row: 6, Col: 2, Value: 1.79
Row: 7, Col: 1, Value: 1.88
Row: 7, Col: 2, Value: 1.86
Row: 8, Col: 1, Value: 1.96
Row: 8, Col: 2, Value: 1.97
Row: 9, Col: 1, Value: 2.2
Row: 9, Col: 2, Value: 2.16
Row: 10, Col: 1, Value: 2.08
Row: 10, Col: 2, Value: 1.95
Row: 11, Col: 1, Value: 1.95
Row: 11, Col: 2, Value: 1.91
Row: 12, Col: 1, Value: 2.24
Row: 12, Col: 2, Value: 2.13
Row: 13, Col: 1, Value: 1.8
Row: 13, Col: 2, Value: 1.71
Row: 14, Col: 1, Value: 2.01
Row: 14, Col: 2, Value: 1.93
Row: 15, Col: 1, Value: 1.87
Row: 15, Col: 2, Value: 1.74
Row: 16, Col: 1, Value: 2.2
Row: 16, Col: 2, Value: 2.15
Row: 17, Col: 1, Value: 2.42
Row: 17, Col: 2, Value: 2.55
Row: 18, Col: 1, Value: 2.22
Row: 18, Col: 2, Value: 2.22
Row: 19, Col: 1, Value: 2.4
Row: 19, Col: 2, Value: 2.25
Row: 20, Col: 1, Value: 2.63
Row: 20, Col: 2, Value: 2.56
Row: 21, Col: 1, Value: 2.81
Row: 21, Col: 2, Value: 2.78
Row: 22, Col: 1, Value: 2.76
Row: 22, Col: 2, Value: 2.6
Row: 23, Col: 1, Value: 3.19
Row: 23, Col: 2, Value: 3.09
Row: 24, Col: 1, Value: 3.98
Row: 24, Col: 2, Value: 3.83
Michigan
Money Market
1993
1994
OHIO MUNICIPAL MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: 2.05
Row: 1, Col: 2, Value: 1.81
Row: 2, Col: 1, Value: 2.06
Row: 2, Col: 2, Value: 1.87
Row: 3, Col: 1, Value: 2.21
Row: 3, Col: 2, Value: 1.96
Row: 4, Col: 1, Value: 2.16
Row: 4, Col: 2, Value: 1.98
Row: 5, Col: 1, Value: 2.28
Row: 5, Col: 2, Value: 2.13
Row: 6, Col: 1, Value: 1.89
Row: 6, Col: 2, Value: 1.79
Row: 7, Col: 1, Value: 2.02
Row: 7, Col: 2, Value: 1.86
Row: 8, Col: 1, Value: 2.11
Row: 8, Col: 2, Value: 1.97
Row: 9, Col: 1, Value: 2.24
Row: 9, Col: 2, Value: 2.16
Row: 10, Col: 1, Value: 2.08
Row: 10, Col: 2, Value: 1.95
Row: 11, Col: 1, Value: 2.05
Row: 11, Col: 2, Value: 1.91
Row: 12, Col: 1, Value: 2.37
Row: 12, Col: 2, Value: 2.13
Row: 13, Col: 1, Value: 1.92
Row: 13, Col: 2, Value: 1.71
Row: 14, Col: 1, Value: 2.03
Row: 14, Col: 2, Value: 1.93
Row: 15, Col: 1, Value: 1.91
Row: 15, Col: 2, Value: 1.74
Row: 16, Col: 1, Value: 2.34
Row: 16, Col: 2, Value: 2.15
Row: 17, Col: 1, Value: 2.48
Row: 17, Col: 2, Value: 2.31
Row: 18, Col: 1, Value: 2.33
Row: 18, Col: 2, Value: 2.22
Row: 19, Col: 1, Value: 2.41
Row: 19, Col: 2, Value: 2.25
Row: 20, Col: 1, Value: 2.63
Row: 20, Col: 2, Value: 2.56
Row: 21, Col: 1, Value: 2.86
Row: 21, Col: 2, Value: 2.78
Row: 22, Col: 1, Value: 2.88
Row: 22, Col: 2, Value: 2.6
Row: 23, Col: 1, Value: 3.24
Row: 23, Col: 2, Value: 3.09
Row: 24, Col: 1, Value: 4.04
Row: 24, Col: 2, Value: 3.83
Ohio
Municipal
Money Market
1993
1994
MICHIGAN TAX-FREE HIGH YIELD
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 5.77
Row: 1, Col: 2, Value: 1.19
Row: 2, Col: 1, Value: 5.39
Row: 2, Col: 2, Value: 3.64
Row: 3, Col: 1, Value: 5.35
Row: 3, Col: 2, Value: -1.19
Row: 4, Col: 1, Value: 5.359999999999999
Row: 4, Col: 2, Value: 1.14
Row: 5, Col: 1, Value: 5.35
Row: 5, Col: 2, Value: 0.59
Row: 6, Col: 1, Value: 5.18
Row: 6, Col: 2, Value: 1.77
Row: 7, Col: 1, Value: 5.28
Row: 7, Col: 2, Value: -0.03
Row: 8, Col: 1, Value: 5.05
Row: 8, Col: 2, Value: 2.12
Row: 9, Col: 1, Value: 4.96
Row: 9, Col: 2, Value: 1.21
Row: 10, Col: 1, Value: 4.96
Row: 10, Col: 2, Value: 0.19
Row: 11, Col: 1, Value: 5.22
Row: 11, Col: 2, Value: -0.92
Row: 12, Col: 1, Value: 5.09
Row: 12, Col: 2, Value: 1.97
Row: 13, Col: 1, Value: 4.91
Row: 13, Col: 2, Value: 1.23
Row: 14, Col: 1, Value: 5.119999999999999
Row: 14, Col: 2, Value: -2.65
Row: 15, Col: 1, Value: 5.77
Row: 15, Col: 2, Value: -4.22
Row: 16, Col: 1, Value: 5.91
Row: 16, Col: 2, Value: 0.54
Row: 17, Col: 1, Value: 5.9
Row: 17, Col: 2, Value: 0.92
Row: 18, Col: 1, Value: 5.83
Row: 18, Col: 2, Value: -0.6500000000000001
Row: 19, Col: 1, Value: 5.88
Row: 19, Col: 2, Value: 1.81
Row: 20, Col: 1, Value: 5.87
Row: 20, Col: 2, Value: 0.26
Row: 21, Col: 1, Value: 6.01
Row: 21, Col: 2, Value: -1.68
Row: 22, Col: 1, Value: 6.25
Row: 22, Col: 2, Value: -2.14
Row: 23, Col: 1, Value: 6.68
Row: 23, Col: 2, Value: -2.18
Row: 24, Col: 1, Value: 6.52
Row: 24, Col: 2, Value: 2.76
Michigan
Tax-Free
High YIeld
1993
1994
MINNESOTA TAX-FREE
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 5.64
Row: 1, Col: 2, Value: 1.18
Row: 2, Col: 1, Value: 5.19
Row: 2, Col: 2, Value: 3.18
Row: 3, Col: 1, Value: 5.24
Row: 3, Col: 2, Value: -0.8600000000000001
Row: 4, Col: 1, Value: 5.38
Row: 4, Col: 2, Value: 1.08
Row: 5, Col: 1, Value: 5.37
Row: 5, Col: 2, Value: 0.58
Row: 6, Col: 1, Value: 5.17
Row: 6, Col: 2, Value: 1.58
Row: 7, Col: 1, Value: 5.17
Row: 7, Col: 2, Value: 0.1
Row: 8, Col: 1, Value: 5.21
Row: 8, Col: 2, Value: 2.01
Row: 9, Col: 1, Value: 4.98
Row: 9, Col: 2, Value: 1.21
Row: 10, Col: 1, Value: 4.96
Row: 10, Col: 2, Value: 0.22
Row: 11, Col: 1, Value: 5.24
Row: 11, Col: 2, Value: -0.8100000000000001
Row: 12, Col: 1, Value: 5.08
Row: 12, Col: 2, Value: 1.85
Row: 13, Col: 1, Value: 4.98
Row: 13, Col: 2, Value: 1.07
Row: 14, Col: 1, Value: 5.19
Row: 14, Col: 2, Value: -2.37
Row: 15, Col: 1, Value: 5.74
Row: 15, Col: 2, Value: -4.03
Row: 16, Col: 1, Value: 5.75
Row: 16, Col: 2, Value: 0.28
Row: 17, Col: 1, Value: 5.76
Row: 17, Col: 2, Value: 1.06
Row: 18, Col: 1, Value: 5.74
Row: 18, Col: 2, Value: -0.54
Row: 19, Col: 1, Value: 5.74
Row: 19, Col: 2, Value: 1.69
Row: 20, Col: 1, Value: 5.78
Row: 20, Col: 2, Value: 0.21
Row: 21, Col: 1, Value: 5.81
Row: 21, Col: 2, Value: -1.42
Row: 22, Col: 1, Value: 6.0
Row: 22, Col: 2, Value: -1.96
Row: 23, Col: 1, Value: 6.5
Row: 23, Col: 2, Value: -2.42
Row: 24, Col: 1, Value: 6.38
Row: 24, Col: 2, Value: 2.53
Minnesota
Tax-Free
1993
1994
OHIO TAX-FREE HIGH YIELD
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 5.67
Row: 1, Col: 2, Value: 1.04
Row: 2, Col: 1, Value: 5.319999999999999
Row: 2, Col: 2, Value: 3.68
Row: 3, Col: 1, Value: 5.33
Row: 3, Col: 2, Value: -1.04
Row: 4, Col: 1, Value: 5.359999999999999
Row: 4, Col: 2, Value: 1.22
Row: 5, Col: 1, Value: 5.37
Row: 5, Col: 2, Value: 0.6300000000000001
Row: 6, Col: 1, Value: 5.17
Row: 6, Col: 2, Value: 1.73
Row: 7, Col: 1, Value: 5.159999999999999
Row: 7, Col: 2, Value: -0.03
Row: 8, Col: 1, Value: 5.02
Row: 8, Col: 2, Value: 2.2
Row: 9, Col: 1, Value: 4.9
Row: 9, Col: 2, Value: 1.25
Row: 10, Col: 1, Value: 4.819999999999999
Row: 10, Col: 2, Value: 0.07000000000000001
Row: 11, Col: 1, Value: 5.109999999999999
Row: 11, Col: 2, Value: -0.99
Row: 12, Col: 1, Value: 4.96
Row: 12, Col: 2, Value: 2.02
Row: 13, Col: 1, Value: 4.83
Row: 13, Col: 2, Value: 1.19
Row: 14, Col: 1, Value: 5.0
Row: 14, Col: 2, Value: -2.73
Row: 15, Col: 1, Value: 5.6
Row: 15, Col: 2, Value: -4.23
Row: 16, Col: 1, Value: 5.74
Row: 16, Col: 2, Value: 0.41
Row: 17, Col: 1, Value: 5.73
Row: 17, Col: 2, Value: 1.05
Row: 18, Col: 1, Value: 5.649999999999999
Row: 18, Col: 2, Value: -0.6200000000000001
Row: 19, Col: 1, Value: 5.7
Row: 19, Col: 2, Value: 1.84
Row: 20, Col: 1, Value: 5.71
Row: 20, Col: 2, Value: 0.19
Row: 21, Col: 1, Value: 5.8
Row: 21, Col: 2, Value: -1.76
Row: 22, Col: 1, Value: 6.06
Row: 22, Col: 2, Value: -2.05
Row: 23, Col: 1, Value: 6.44
Row: 23, Col: 2, Value: -2.02
Row: 24, Col: 1, Value: 6.359999999999999
Row: 24, Col: 2, Value: 2.65
Ohio Tax-Free
High Yield
1993
1994
THE CHART FOR EACH MONEY MARKET FUND SHOWS THE 7-DAY EFFECTIVE YIELDS
FOR THE FUND AS OF THE LAST TUESDAY OF EACH MONTH FROM JANUARY 1993
THROUGH DECEMBER 1994. THE CHART FOR EACH BOND FUND SHOWS THE
30-DAY ANNUALIZED NET YIELDS FOR THE FUND AS OF THE LAST DAY OF EACH
MONTH FROM JANUARY 1993 THROUGH DECEMBER 1994.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, Ohio Tax-Free
High Yield, Michigan Tax-Free High Yield, and Minnesota Tax-Free are
currently non-diversified funds of Fidelity Municipal Trust. Michigan
Municipal Money Market and Ohio Municipal Money Market are currently
non-diversified funds of Fidelity Municipal Trust II. Both trusts are
open-end management investment companies. Fidelity Municipal Trust was
organized as a Maryland corporation on November 22, 1976, and reorganized
as a Massachusetts business trust on June 22, 1984. Fidelity Municipal
Trust II was organized as a Delaware business trust on June 20, 1991. There
is a remote possibility that one fund might become liable for a
misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. For the money market
fund s you are entitled to one vote for each share you own. For bond
funds the number of votes you are entitled to is based upon the
dollar value of your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $ 250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for the money market funds.
Maureen Newman is manager of Michigan Tax-Free High Yield, which she has
managed since July 1994. She also manages Spartan Aggressive Municipal
Income, Spartan Arizona Municipal Income, and Spartan Connecticut Municipal
High Yield. Previously, she was a bond analyst for the fixed-income
department. Ms. Newman joined Fidelity in 1985.
Steven Harvey is manager of Minnesota Tax-Free and Ohio Tax-Free High
Yield, which he has managed since October 1993 and July 1994, respectively.
Mr. Harvey also manages Spartan Maryland Municipal Income and Spartan
Pennsylvania Municipal High Yield. Previously, he was an analyst following
tax-free bonds. Mr. Harvey joined Fidelity in 1986.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR Corp. is the parent company of FMR and FTX. Through ownership of voting
common stock, members of the Edward C. Johnson 3d family form a controlling
group with respect to FMR Corp. Changes may occur in the Johnson family
group, through death or disability, which would result in changes in each
individual family member's holding of stock. Such changes could result in
one or more family members becoming holders of over 25% of the stock. FMR
Corp. has received an opinion of counsel that changes in the composition of
the Johnson family group under these circumstances would not result in the
termination of the funds' management or distribution contracts and,
accordingly, would not require a shareholder vote to continue operation
under those contracts.
United Missouri Bank, N.A., is each fund's transfer agent, although it
employs FSC to perform these functions for the funds. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
MICHIGAN MUNICIPAL MONEY MARKET and OHIO MUNICIPAL MONEY MARKET seek to
earn high current income that is free from federal income tax, its
state income tax, and other taxes in Michigan and Ohio, while maintaining a
stable $1.00 share price by investing in high-quality, short-term municipal
money market securities of all types. FMR normally invests so that at least
80% of each fund's income distributions are free from federal and state
income taxes.
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the funds will maintain
a stable $1.00 share price. The funds follow industry-standard guidelines
on the quality and maturity of their investments, which are designed
to help maintain a stable $1.00 share price. Each fund will purchase
only high-quality securities that FMR believes present minimal credit
risks and will observe maturity restrictions on securities it buys. In
general , securities with longer maturities are more vulnerable to
price changes, although they may provide higher yields. It is possible that
a major change in interest rates or a default on a fund's investments could
cause its share price (and the value of your investment) to change.
MICHIGAN TAX-FREE HIGH YIELD, MINNESOTA TAX-FREE, and OHIO TAX-FREE HIGH
YIELD seek high current income that is free from federal income tax, its
state income tax, and other taxes in Michigan, Minnesota, and Ohio by
investing mainly in municipal securities judged by FMR to be of
investment-grade quality, although they can also invest in lower-quality
securities. The funds have no restrictions on maturity, but generally
invest in medium- and long-term bonds and maintain a dollar- weighted
average maturity of 15 years or longer. FMR normally invests so that at
least 80% of each fund's income is free from both federal and state income
taxes.
EACH FUND'S performance is affected by the economic and political
conditions within its respective state. Michigan's economy is dominated by
automobile-related industries, which tend to be especially vulnerable to
economic downturns. Also, the state's unemployment rate is typically higher
than average, although this was not the case in 1994. Minnesota has been
experiencing a decline in jobs in mining and agriculture, but accompanied
by an increase in the service sector and the maintenance of a strong
manufacturing base. Ohio's economy, like that of other industrially
developed states, tends to be more cyclical and vulnerable to economic
downturns than the economies of some other states and the United States as
a whole.
The money market funds stress income, preservation of capital, and
liquidity. The bond funds seek to provide a higher level of income by
investing in a broader range of securities. Each fund's yield and each bond
fund's share price change daily and are based on interest rates, market
conditions, other economic and political news, and on the quality and
maturity of its investments. In general, bond prices rise when interest
rates fall and vice versa. This effect is usually more pronounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk. FMR may use various investment techniques to hedge
the bond funds' risks, but there is no guarantee that these strategies will
work as intended. When you sell your shares of the bond funds, they may be
worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that each money market fund may invest 100% of its assets in municipal
securities issued to finance private activities. Each bond fund may invest
so that up to 20% of its income is derived from private activity
securities. The interest from these investments is a tax-preference item
for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and the bond funds do not expect to invest in state taxable
obligations. The money market funds also reserve the right to hold a
substantial amount of uninvested cash or to invest more than normally
permitted in taxable obligations for temporary, defensive purposes. The
bond funds also reserve the right to invest without limitation in
short-term instruments or to invest more than normally permitted in state
taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about the funds' investments
is contained in the funds' SAI. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. Current holdings and recent investment
strategies are de tailed in the funds' financial reports which are
sent to shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk bonds")
often have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness.
The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general or regional economic difficulty.
The tables on pages 18 and 19 provide a summary of ratings
assigned to debt holdings (not including money market instruments) in each
bond fund's portfolio. These figures are dollar-weighted averages of
month-end portfolio holdings during fiscal 1994, and are presented as a
percentage of total security investments. These percentages are historical
and do not necessarily indicate the funds' current or future debt holdings.
RESTRICTIONS: Each bond fund may not invest more than one-third of its
assets in bonds judged by FMR to be equivalent to those rated Ba or lower
by Moody's or BB or lower by S&P, and may not invest in securities of
equivalent quality to those rated lower than B. The funds do not currently
intend to invest in bonds rated below Caa by Moody's or CCC by S&P.
MONEY MARKET SECURITIES are high-quality, short-term investments issued
by municipalities, local and state governments, and other entities. These
investments may carry fixed, variable, or floating interest rates.
MICHIGAN HIGH YIELD
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 52.1% AA 63.2%
Upper-medium grade A A
Medium grade Baa 14.8% BBB 10.3%
LOWER QUALITY
Moderately speculative Ba 1.0% BB 0.1%
Speculative B 3.9% B 5.8%
Highly speculative Caa 0.0% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
71.8% 79.4%
MINNESOTA TAX-FREE
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 58.1% AA 74.1%
Upper-medium grade A A
Medium grade Baa 12.5% BBB 8.7%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.0%
Speculative B 0.0% B 0.0%
Highly speculative Caa 0.0% CCC 3.5%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
70.6% 86.3%
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S
OR
S&P AMOUNTED TO 10.8% FOR MICHIGAN HIGH YIELD AND 5.2% FOR MINNESOTA
TAX-FREE. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED
RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR HAS DETERMINED THAT
UNRATED SECURITIES THAT ARE LOWER-QUALITY ACCOUNT FOR 8.7% AND 3.6%,
RESPECTIVELY OF EACH FUND'S TOTAL SECURITY INVESTMENTS. REFER TO THE
FUNDS'
STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF
THESE RATINGS.
OHIO HIGH YIELD
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 50.4% AA 50.0%
Upper-medium grade A A
Medium grade Baa 16.7% BBB 9.7%
LOWER QUALITY
Moderately speculative Ba 5.1% BB 2.8%
Speculative B 0.0% B 0.0%
Highly speculative Caa 0.0% CCC 0.0%
Poor quality Ca 0.0% CC 0.0%
Lowest quality, no interest C C
In default, in arrears -- D 0.0%
72.2% 62.5%
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S
OR
S&P AMOUNTED TO 18.2% FOR OHIO HIGH YIELD. THIS MAY INCLUDE SECURITIES
RATED BY OTHER NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED
SECURITIES. FMR HAS DETERMINED THAT UNRATED SECURITIES THAT ARE
LOWER-QUALITY ACCOUNT FOR 14.7% OF THE FUND'S SECURITY INVESTMENTS.
REFER
TO THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
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. A security's credit may be enhanced
by a bank, insurance company, or other entity . A fund may own a
municipal security directly or through a participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by a state
or its counties, municipalities, authorities, or other subdivisions. The
ability of issuers to repay their debt can be affected by many factors that
impact the economic vitality of either the state or a region within the
state.
Other state tax-free securities include obligations of the U.S. territories
and possessions such as Guam, the Virgin Islands, and Puerto Rico, and
their political subdivisions and public corporations. The economy of Puerto
Rico is closely linked to the U.S. economy, and will be affected by the
strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
STRUCTURED SECURITIES employ a trust or other similar structure to modify
the maturity, price characteristics or quality of financial assets. If the
structure does not perform as intended, adverse tax or investment
consequences may result.
RESTRICTIONS: The money market fund s may not purchase
structured securities which are inconsistent with each fund's goal of
maintaining a stable share price.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that
are periodically adjusted either at specific intervals or whenever a
benchmark rate changes. Inverse floaters have interest rates that move
in the opposite direction from a benchmark, making the
security's market value more volatile.
RESTRICTIONS: The money market funds may not purchase certain types of
variable and floating rate securities which are
inconsistent with each fund's goal of maintaining a stable share
price.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include zero coupon bonds and commercial
paper.
PUT FEATURES entitle the holder to put (sell back) a security to the
issuer or a financial intermediary. In exchange for this benefit,
the fund s may pay periodic fees or accept a lower interest
rate. The credit quality of the investment may be affected by the
creditworthiness of the put provider. Demand features, standby
commitments, and tender options are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. These securities usually rely on continued payments by a
municipality, and may also be subject to prepayment risk.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options
and futures contracts, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well a
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of a fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to
the transaction does not perform as promised.
RESTRICTIONS: The money market funds may not use investment techniques
which are inconsistent with each fund's goal of maintaining a stable
share price.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, a fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. A fund may invest more than 25% of its total assets in tax-free
securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
MICHIGAN MUNICIPAL MONEY MARKET seeks as high a level of current income,
exempt from federal income tax and Michigan personal income tax, as is
consistent with the preservation of capital. The fund will normally invest
so that at least 80% of its income distributions are exempt from federal
and state income tax.
OHIO MUNICIPAL MONEY MARKET seeks a s high a level of current
income, exempt from federal income tax and from Ohio personal income tax,
as is consistent with the preservation of capital. The fund will normally
invest so that at least 80% of its income distributions are exempt from
federal and state income tax.
MICHIGAN TAX-FREE HIGH YIELD seeks a high level of current income exempt
from federal income tax and Michigan personal income tax by investing
primarily in investment-grade municipal bonds. The fund also seeks income
exempt from certain business or corporate taxes. The fund will normally
invest so that at least 80% of its income is exempt from federal and state
income taxes. During periods when FMR believes that state tax-free
obligations that meet the fund's standards are not available, the fund may
invest up to 20% of its assets in obligations whose interest payments are
only federally tax-exempt. The fund may invest up to one-third of its
assets in bonds judged by FMR to be of equivalent quality to those rated
lower than BBB or Baa but not lower than B.
MINNESOTA TAX-FREE seeks a high level of current income exempt from federal
income tax and Minnesota personal income tax by investing primarily in
investment-grade municipal bonds. The fund will normally invest so that at
least 80% of its income is exempt from federal and state income taxes.
During periods when FMR believes that state tax-free obligations that meet
the fund's standards are not available, the fund may invest up to 20% of
its assets in obligations whose interest payments are only federally
tax-exempt. The fund may invest up to one-third of its assets in bonds
judged by FMR to be of equivalent quality to those rated lower than BBB or
Baa but not lower than B.
OHIO TAX-FREE HIGH YIELD seeks a high level of current income exempt from
federal income tax and Ohio personal income tax by investing primarily in
investment-grade municipal bonds. The fund also seeks income exempt from
certain business or corporate taxes. The fund will normally invest so that
at least 80% of its income is exempt from federal and state income taxes.
During periods when FMR believes that state tax-free obligations that meet
the fund's standards are not available, the fund may invest up to 20% of
its assets in obligations whose interest payments are only federally
tax-exempt. The fund may invest up to one-third of its assets in bonds
judged by FMR to be of equivalent quality to those rated lower than BBB or
Baa but not lower than B.
Each fund may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services. Each fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse the funds for management
fees and other expenses above a specified limit. FMR retains the ability to
be repaid by a fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .37%, and it drops as
total assets under management increase.
For December 1994, the group fee rate was .1563 %. Each fund's
individual fund fee rate is .25%. The total management fee rates for
fiscal 1994 are presented in the following table.
MANAGEMENT FEES
Michigan Municipal . 41
Money Market %
Ohio Municipal Money . 41
Market %
Michigan Tax-Free High . 41
Yield %
Minnesota Tax-Free . 41
%
Ohio Tax-Free High . 41
Yield %
FMR HAS SUB-ADVISORY AGREEMENTS with FTX, which has primary responsibility
for providing investment management for the money market funds, while FMR
retains responsibility for providing other management services. FMR pays
FTX 50% of its management fee (before expense reimbursements) for these
services. FMR pays FTX .20 % of each money market fund ' s
average net assets for fiscal 1994.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in
FMR's total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
(checkmark)
OTHER EXPENSES
While the management fee is a significant component of the funds' annual
operating costs, the funds have other expenses as well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing each fund's
investments, and handling securities loans. In fiscal 1994, FSC received
fees equal to the following percentage of each fund's average net
assets :
Michigan Municipal . 19
Money Market %
Ohio Municipal Money . 14
Market %
Michigan Tax-Free High . 15
Yield %
Minnesota Tax-Free . 17
%
Ohio Tax-Free High . 15
Yield %
The funds also pay other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
The table below shows each bond fund's portfolio turnover rate for fiscal
1994. These rates vary from year to year.
PORTFOLIO TURNOVER RATES
Michigan Tax-Free High 18 %
Yield
Minnesota Tax-Free 26 %
Ohio Tax-Free High 22 %
Yield
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account. You can
choose a money market fund as your core account for your Fidelity Ultra
Service Account(registered trademark) or FidelityPlusSM brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Each money market fund is managed to keep its share price
stable at $1.00. Each fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For the money m arket funds $5,000
TO ADD TO AN ACCOUNT $250
For the money m arket funds $500
Through automatic investment plans $100
MINIMUM BALANCE $1,000
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES THROUGH YOUR FIDELITY ULTRA SERVICE OR FIDELITYPLUS ACCOUNT,
call 1-800-544-6262 to receive a handbook with instructions.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (small solid bullet) Minimum check: $500.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of a fund are limited to four per calendar year
(except for the money market funds), and that they may have tax
consequences for you. For details on policies and restrictions governing
exchanges, including circumstances under which a shareholder's exchange
privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THOSE FUNDS MAY NOT BE
APPROPRIATE CHOICES FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond funds are
normally distributed in February and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for the money market funds):
1. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
2. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for the money market funds.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
4. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days, or longer for a December
ex-dividend date.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments.
Each fund passes its
earnings along to its investors
as DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each money market fund may invest up to 100%, and
each bond fund may invest up to 20%, of its assets in these securities.
Individuals who are subject to the tax must report this interest on their
tax returns.
To the extent that each fund's distributions are derived from state
tax-free obligations of its respective state, its income dividends will be
exempt from state taxes. For Ohio residents, dividends will be free from
the Ohio individual income tax, a school district tax, and the net income
base of the Ohio corporation franchise tax. For Michigan residents,
dividends will be free from the Michigan income, intangibles, and
single business taxes . For Minnesota residents dividends will be
free from the Minnesota personal income tax.
Unless 95% or more of Minnesota Tax-Free's tax-exempt dividends are derived
from obligations of the State of Minnesota or its political subdivisions,
all of the fund's dividends will be subject to the Minnesota tax. FMR
intends to meet the 95% requirement, but there is no assurance it will do
so.
Each year, Fidelity will send you a breakdown of your fund's income from
each state to help you calculate your taxes.
During fiscal 1994, 100% of each fund's income dividends was free from
federal and state income taxes . T he table below shows the
percentage of each fund's income dividends that w as subject to the
federal alternative minimum tax.
ALTERNATIVE MINIMUM TAX
Michigan Municipal Money Market 47.5
%
Ohio Municipal Money Market 41.6
%
Michigan Tax-Free High Yield 4.9
%
Minnesota Tax-Free 10.6
%
Ohio Tax-Free High Yield 6.4
%
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the
close of business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market funds value the securities they own on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond funds, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
core accounts for a Fidelity Ultra Service Account or a FidelityPlus
brokerage account, or if total assets in Fidelity funds exceed $50,000.
Eligibility for the $50,000 waiver is determined by aggregating Fidelity
mutual fund accounts maintained by FSC or FBSI which are registered under
the same social security number or which list the same social security
number for the custodian of a Uniform Gifts/Transfers to Minors Act
account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the funds without
reimbursement from the funds. Qualified recipients are securities dealers
who have sold fund shares or others, including banks and other financial
institutions, under special arrangements in connection with FDC's sales
activities. In some instances, these incentives may be offered only to
certain institutions whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each bond fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FUNDS OF FIDELITY MUNICIPAL TRUST II
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FIDELITY MINNESOTA TAX-FREE PORTFOLIO
FIDELITY OHIO TAX-FREE HIGH YIELD PORTFOLIO
FUNDS OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated February 19, 1995). Please
retain this document for future reference. The funds' financial
statements and financial highlights, included in the Annual
Reports for the fiscal year ended December 31, 1994 ,
are incorporated herein by reference. To obtain an additional copy
of the Prospectus or an Annual Report, please call Fidelity
Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting Michigan
Special Factors Affecting Minnesota
Special Factors Affecting Ohio
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER
FMR Texas Inc. ( FTX) (money market fund s)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
OMM-ptb-295
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 outstanding voting securities" (as
defined in the Investment Company Act of 1940) of that fund. However,
with respect to the money market funds, except for the fundamental
investment limitations set forth below, the investment policies and
limitations described in this Statement of Additional Information are not
fundamental and may be changed without shareholder approval.
INVESTMENT LIMITATIONS OF THE MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
(THE MICHIGAN MONEY MARKET FUND)
THE FOLLOWING ARE THE MICHIGAN MONEY MARKET F UND'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE F UND MAY
NOT:
(1) issue bonds or any other class of securities preferred over shares of
the fund in respect of the fund's assets or earnings, provided that
Fidelity Municipal Trust II may issue additional series of shares in
accordance with the Trust Instrument;
(2) sell securities short, unless it owns, or by virtue of ownership of
other securities has the right to obtain, securities equivalent in kind and
amount to the securities sold short;
(3) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions;
(4) 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 the value of its total assets (less liabilities other
than borrowings). Any borrowings that come to exceed 33 1/3% of the value
of the fund's total assets by reason of a decline in total assets will be
reduced within three days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(5) 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);
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies,
instrumentalities, territories, or possessions, or issued or guaranteed by
a state government or political subdivision thereof) if, as a result, more
than 25% of the value of its total assets would be invested in securities
of companies having their principal business activities in the same
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) purchase or sell physical commodities unless acquired as a result of
ownership of securities; or
(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 the purchase of debt securities or to
repurchase agreements).
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-ended 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) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer; and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund may borrow money only (a) from a bank or from a registered
investment company or fund 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 (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(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 invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies,
and limitations as the fund.
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments;
the way in which assets and revenues of an issuing political subdivision
are separated from those of other political entities; and whether a
government body is guaranteeing the security.
For the fund's policies on quality and maturity, see the
section entitled "Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
(THE OHIO MONEY MARKET FUND)
THE FOLLOWING ARE THE OHIO MONEY MARKET FUND'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY
NOT:
(1) issue bonds or any other class of securities preferred over shares of
the fund in respect of the fund's assets or earnings, provided that
Fidelity Municipal Trust II may issue additional series of shares in
accordance with the Trust Instrument;
(2) sell securities short, unless it owns, or by virtue of ownership of
other securities has the right to obtain, securities equivalent in kind and
amount to the securities sold short;
(3) purchase securities on margin, except that the fund may obtain such
short-term credits as are necessary for the clearance of transactions;
(4) 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 the value of its total assets (less liabilities other
than borrowings). Any borrowings that come to exceed 33 1/3% of the value
of the fund's total assets by reason of a decline in total assets will be
reduced within three days (exclusive of Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(5) 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);
(6) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies,
instrumentalities, territories, or possessions, or issued or guaranteed by
a state government or political subdivision thereof) if, as a result, more
than 25% of the value of its total assets would be invested in securities
of companies having their principal business activities in the same
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) purchase or sell physical commodities unless acquired as a result of
ownership of securities; or
(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).
(10) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-ended 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) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund may borrow money only (a) from a bank or from a registered
investment company or fund 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 (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(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 invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For purposes of limitations (6) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments;
the way in which assets and revenues of an issuing political subdivision
are separated from those of other political entities; and whether a
government body is guaranteeing the security.
For the fund's policies on quality and maturity, see the
section entitled "Quality and Maturity" on page .
INVESTMENT LIMITATIONS OF FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
(THE MICHIGAN HIGH YIELD FUND)
THE FOLLOWING ARE THE MICHIGAN HIGH YIELD FUND'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY
NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(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, or
(8) invest in companies for the purpose of exercising control or
management.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(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 fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)) . The fund will
not borrow from other funds advised by FMR or its affiliates if total
outstanding borrowings immediately after such borrowing would exceed 15% of
the fund's total assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal, or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases;
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (4) and (ii), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments;
the way in which assets and revenues of an issuing political subdivision
are separated from those of other political entities; and whether a
government body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
INVESTMENT LIMITATIONS OF FIDELITY MINNESOTA TAX-FREE PORTFOLIO
(THE MINNESOTA TAX-FREE FUND)
THE FOLLOWING ARE THE MINNESOTA TAX-FREE FUND'S FUNDAMENTAL
INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY
NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(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, or
(8) invest in companies for the purpose of exercising control or
management.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(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 fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2) ). The fund will
not borrow from other funds advised by FMR or its affiliates if total
outstanding borrowings immediately after such borrowing would exceed 15% of
the fund's total assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal, or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (4) and ( i ), FMR identifies the issuer
of a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments;
the way in which assets and revenues of an issuing political subdivision
are separated from those of other political entities; and whether a
government body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
INVESTMENT LIMITATIONS OF FIDELITY OHIO TAX-FREE HIGH YIELD PORTFOLIO
(THE OHIO HIGH YIELD FUND)
THE FOLLOWING ARE THE OHIO HIGH YIELD FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities);
(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, or
(8) invest in companies for the purpose of exercising control or
management.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(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 fund for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2) ). The fund will
not borrow from other funds advised by FMR or its affiliates if total
outstanding borrowings immediately after such borrowing would exceed 15% of
the fund's total assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal, or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (4) and ( i ), FMR identifies the issuer
of a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments;
the way in which assets and revenues of an issuing political subdivision
are separated from those of other political entities; and whether a
government body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
Each fund's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the funds.
INVESTMENT POLICIES AND LIMITATIONS
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
QUALITY AND MATURITY (MONEY MARKET FUNDS ONLY) . Pursuant to
procedures adopted by the Board of Trustees, the funds may purchase
only high-quality securities that FMR believes present minimal credit
risks. To be considered high - quality, a security must be rated in
accordance with applicable rules in one of the two highest categories for
short-term securities by at least two nationally recognized rating services
(or by one, if only one rating service has rated the security); or, if
unrated, judged to be of equivalent quality by FMR.
The funds currently intend to limit their investments
to securities with remaining maturities of 397 days or less, and to
maintain a dollar-weighted average maturity of 90 days or less. When
determining the maturity of a security, the funds may look to an interest
rate reset or demand feature.
LOWER-QUALITY MUNICIPAL SECURITIES. The bond funds may invest a
portion of their assets in lower-quality municipal securities as
described in the Prospectus.
While the markets for Michigan, Minnesota, and Ohio municipals
are considered to be adequate, adverse publicity and changing
investor perceptions may affect the ability of outside pricing services
used by a fund to value its portfolio securities, and the fund's
ability to dispose of lower-quality bonds. The outside pricing services are
monitored by FMR and reported to the Board to determine whether the
services are furnishing prices that accurately reflect fair value. The
impact of changing investor perceptions may be especially pronounced in
markets where municipal securities are thinly traded.
Each fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines
this to be in the best interest of the fund's shareholders.
INDEXED SECURITIES. A fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices, or other financial
indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined
by reference to a specific instrument or statistic. Indexed securities may
have principal payments as well as coupon payments that depend on the
performance of one or more interest rates. Their coupon rates or principal
payments may change by several percentage points for every 1% interest rate
change. One example of indexed securities is inverse floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. A fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. Because a fund is not required to pay for securities
until the delivery date, these risks are in addition to the risks
associated with the fund's other investments. If a fund remains
substantially fully invested at a time when delayed-delivery purchases are
outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, the fund will
set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When a fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. A fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The funds generally will not be obligated to pay the full purchase price if
they fail to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). A fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, each fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS. A fund may invest in inverse floaters which are
instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
STRUCTURED SECURITIES employ a trust or other similar structure
to modify the maturity, price characteristics, or quality of financial
assets. For example, structural features can be used to modify the maturity
of a security or interest rate adjustment features can be used to enhance
price stability. If the structure does not perform as intended, adverse tax
or investment consequences may result. Neither the Internal Revenue Service
(IRS) nor any other regulatory authority has ruled definitively on certain
legal issues presented by structured securities. Future tax or other
regulatory determinations could adversely affect the value, liquidity, or
tax treatment of the income received from these securities or the nature
and timing of distributions made by the funds. The payment of principal and
interest on structured securities may be largely dependent on the cash
flows generated by the underlying financial assets.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic
adjustments of the interest rate paid. Variable rate securities provide for
a specified periodic adjustment in the interest rate, while floating rate
securities have interest rates that change whenever there is a change in a
designated benchmark rate. Some variable or floating rate securities have
put features.
PUT FEATURES entitle the holder to sell a security back to the
issuer or a third party at any time or at specified intervals. They are
subject to the risk that the put provider is unable to honor the put
feature (purchase the security). Put providers often support their ability
to buy securities on demand by obtaining letters of credit or other
guarantees from domestic or foreign banks. FMR may rely on its evaluation
of a bank's credit in determining whether to purchase a security supported
by a letter of credit. Demand features, standby commitments, and tender
options are types of put features.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the money market funds
may buy tender option bonds if the agreement gives the fund the right to
tender the bond to its sponsor no less frequently than once every 397 days.
In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund
may acquire standby commitments to enhance the liquidity of portfolio
securities , but, in the case of the money market funds, only when the
issuers of the commitments present minimal risk of default.
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. Standby commitments will
not affect the dollar-weighted average maturity of the money market funds,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its
assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, the funds will not hold such obligations
directly as a lessor of the property, but will purchase a participation
interest in a municipal obligation from a bank or other third party. A
participation interest gives the fund a specified, undivided interest in
the obligation in proportion to its purchased interest in the total amount
of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These would
include obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The bond funds' standards for high-quality,
taxable obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard & Poor's Corporation (S&P) in rating corporate obligations within
its two highest ratings of A-1 and A-2. The money market funds' will
purchase taxable obligations only if they meet their quality
requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the Michigan, Minnesota,
and Ohio legislatures that would affect the state tax treatment of
the funds' distributions. If such proposals were enacted, the availability
of municipal obligations and the value of the funds' holdings would be
affected and the Trustees would reevaluate the funds' investment
objectives and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning
income. In addition, there may be occasions when, in order to raise cash to
meet redemptions, a fund may be required to sell securities at a
loss.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR,
the Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
For the money market funds, FMR may determine some restricted securities
and municipal lease obligations to be illiquid. For the bond fund's
investments currently considered to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However, with
respect to over-the-counter options a fund writes, all or a portion
of the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments for the money
market funds are valued for purposes of monitoring amortized cost
valuation, and for the bond funds, are valued at fair value as determined
in good faith by a committee appointed by the Board of Trustees. If through
a change in values, net assets, or other circumstances the fund were in a
position where more than 10% of its net assets was invested in illiquid
securities, it would seek to take appropriate steps to protect
liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part
of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time it may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, a fund
might obtain a less favorable price than prevailed when it decided to seek
registration of the security. However, in general, the money market funds
anticipate holding restricted securities to maturity or selling them in an
exempt transaction.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to a fund
in connection with bankruptcy proceedings), it is each fund's current
policy to engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
A fund will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. Each fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates, but will participate in the interfund borrowing program only as
a borrower. Interfund loans normally will extend overnight, but can have a
maximum duration of seven days. A fund will borrow through the program only
when the costs are equal to or lower than the costs of bank loans. Loans
may be called on one day's notice, and the fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not
renewed.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each bond fund has
filed a notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The funds intend to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, each fund will not: (a) sell futures contracts,
purchase put options, or write call options if, as a result, more than 25%
of the fund's total assets would be hedged with futures and options under
normal conditions; (b) purchase futures contracts or write put options if,
as a result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the funds' investments in futures contracts and
options, and the funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When a fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
a fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a fund sells a
futures contract, by contrast, the value of its futures position will tend
to move in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of a fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of a fund, the fund
may be entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers, potentially resulting in
losses to the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a fund obtains
the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. A fund may also terminate a put option position by closing it out in
the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When a fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the
option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. A fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates a fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. A fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, a fund may purchase a put option and write a call option on
the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call
option at one strike price and buying a call option at a lower price, in
order to reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a fund's current or
anticipated investments exactly. The funds may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which they typically
invest , which involves a risk that the options or futures position will
not track the performance of a fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. A fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in a fund's options or futures positions are poorly correlated with
its other investments, the positions may fail to produce anticipated gains
or result in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions,
and potentially could require a fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
fund's access to other assets held to cover its options or futures
positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter (OTC) options (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows a
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The funds will
comply with guidelines established by the Securities and Exchange
Commission with respect to coverage of options and futures strategies by
mutual funds, and if the guidelines so require will set aside appropriate
liquid assets in a segregated custodial account in the amount prescribed.
Securities held in a segregated account cannot be sold while the futures or
option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a
large percentage of the fund's assets could impede portfolio management or
the fund's ability to meet redemption requests or other current
obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow. Many factors
may affect the financing of multi-family housing projects, including
acceptable completion of construction, proper management, occupancy and
rent levels, economic conditions, and changes to current laws and
regulations.
EDUCATION. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state and
federal funding, and general economic conditions. Student loan revenue
bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans. Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education (DOE)
through its guaranteed student loan program. Others may be private,
uninsured loans made to parents or students which are supported by reserves
or other forms of credit enhancement. Recoveries of principal due to loan
defaults may be applied to redemption of bonds or may be used to re-lend,
depending on program latitude and demand for loans. Cash flows supporting
student loan revenue bonds are impacted by numerous factors, including the
rate of student loan defaults, seasoning of the loan portfolio, and student
repayment deferral periods of forbearance. Other risks associated with
student loan revenue bonds include potential changes in federal legislation
regarding student loan revenue bonds, state guarantee agency reimbursement
and continued federal interest and other program subsidies currently in
effect.
WATER AND SEWER. Water and sewer revenue bonds are often considered to have
relatively secure credit as a result of their issuer's importance, monopoly
status, and generally unimpeded ability to raise rates. Despite this, lack
of water supply due to insufficient rain, run-off, or snow pack is a
concern that has led to past defaults. Further, costly environmental
litigation and Federal environmental mandates are challenges faced by
issuers of water and sewer bonds.
TRANSPORTATION. Transportation debt may be issued to finance the
construction of airports, toll roads, or highways. Airport bonds are
dependent on the general stability of the airline industry and on the
stability of a specific carrier who uses the airport as a hub. Air traffic
generally tracks broader economic trends and is also affected by the price
and availability of fuel. Toll road bonds are also affected by the cost and
availability of fuel as well as toll levels, the presence of competing
roads, and the general economic health of the area. Fuel costs and
availability also affect other transportation-related securities, as does
the presence of alternate forms of transportation, such as public
transportation.
SPECIAL FACTORS AFFECTING MICHIGAN
The following only highlights some of Michigan's more significant
financial trends and problems, and is based in part on information drawn
from official statements and prospectuses relating to securities offerings
of the State of Michigan, its agencies and instrumentalities 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 that would render such information inaccurate.
CONSTITUTIONAL STATE REVENUE LIMITATIONS. In 1978 the Michigan
Constitution was amended to limit the amount of total State revenues raised
from taxes and other sources. State revenues (excluding federal aid and
revenues for payment of principal and interest on general obligation bonds)
in any fiscal year are limited to a fixed percentage of State personal
income in the prior calendar year or average of the prior three calendar
years, whichever is greater. The percentage is fixed by the amendment to
equal the ratio of the 1978-79 fiscal year revenues to total 1977 State
personal income.
If any fiscal year revenues exceed the revenue limitation by one percent
or more, the entire amount of such excess shall be rebated in the following
fiscal year's personal income tax or single business tax. Any excess of
less than one percent may be transferred to the State's Budget
Stabilization Fund.
The State may raise taxes in excess of the limit for emergencies when
deemed necessary by the Governor and two-thirds of the members of each
house of the Legislature. The foregoing revenue limit does not apply to
taxes imposed for the payment of principal of and interest on bonds of the
State, if the bonds are approved by voters and authorized by a vote at the
request of two-thirds of the members of each House of the Legislature.
The State Constitution provides that the proportion of State spending
paid to all units of local government to total State spending may not be
reduced below the proportion in effect in the 1978-79 fiscal year. The
State has determined that proportion to be 41.6 percent. If such spending
does not meet the required level in a given year, an additional
appropriation for local government units is required by the "following
fiscal year," which means the year following the determination of the
shortfall, according to an opinion issued by the State's Attorney
General.
The State Constitution also requires the State to finance any new or
expanded activity of local governments mandated by State law. Any
expenditures required by this provision would be counted as State spending
for local units of government for purposes of determining compliance with
the provision cited above.
CONSTITUTIONAL LOCAL TAX LIMITATIONS. Under the Michigan
Constitution, the total amount of general ad valorem taxes imposed on
taxable property in any year cannot exceed certain millage limitations
specified by the Constitution, statute or charter. The Constitution was
amended by popular vote in November 1978 (effective December 23, 1978) to
prohibit local units of government from levying any tax not authorized by
law or charter, or from increasing the rate of an existing tax above the
rate authorized by law or charter, at the time the amendments were
ratified, without the approval of a majority of the electors of the local
unit voting on the question.
Local units of government and local authorities are authorized to issue
bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy
taxes for the payment of such obligations is subject to the foregoing
limitations unless the obligations were authorized before December 23, 1978
or approved by the electors.
The 1978 amendments to the Constitution also contain millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the
maximum authorized tax rate would be reduced by a factor which would result
in the same maximum potential tax revenues to the local taxing unit as if
the valuation of taxable property (less new construction and improvements)
had grown only at the Consumer Price Index rate instead of at the higher
actual growth rate. Thus, if taxable property values rise faster than
consumer prices, the maximum authorized tax rate would be reduced
accordingly.
RECENT MICHIGAN SCHOOL FINANCE AND PROPERTY TAX CHANGES. On
August 19, 1993, the Governor of Michigan signed into law Act 145, Public
Acts of Michigan, 1993 ("Act 145"), a measure which would have
significantly impacted financing of primary and secondary school operations
and which has resulted in additional property tax and school finance reform
legislation. Act 145 would have exempted all property in the State of
Michigan from millage levied for local and intermediate school districts
operating purposes, other than millage levied for community colleges,
effectively July 1, 1994. In order to replace local property tax revenues
lost as a result of Act 145, the Michigan Legislature, in December 1993,
enacted several statutes which address property tax and school finance
reform. Education reform legislation not dealing with school finance was
also enacted.
The property tax and school finance reform measures included a ballot
proposal ("Proposal A") which was subject to voter approval and in fact
approved on March 15, 1994, and a statutory proposal which would have
automatically taken effect if Proposal A had not been approved. Under
Proposal A as approved, effective May 1, 1994, the State sales and use tax
was increased from 4% to 6%, the State income tax was decreased from 4.6%
to 4.4%, the cigarette tax was increased from $.25 to $.75 per pack and an
additional tax of 16% of the wholesale price was imposed on certain other
tobacco products. A 0.75% real estate transfer tax was effective January
1, 1995. Beginning in 1994, a State property tax of 6 mills will be
imposed on all real and personal property currently subject to the general
property tax. The ability of school districts to levy property taxes for
school operating purposes will be partially restored. A school board will,
with voter approval, be able to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes, on
non-homestead property. Proposal A contains additional provisions
regarding the ability of local school districts to levy taxes as well as a
limit on assessment increases for each parcel of property, beginning in
1995 to the lesser of 5% or the rate of inflation. When property is
subsequently sold, its assessed value will revert to the current assessment
level of 50% of true cash value. Under Proposal A, much of the additional
revenue generated by the new taxes will be dedicated to the State School
Aid Fund.
Proposal A contains a system of financing local school operating costs
which relies upon a foundation allowance amount which may vary by district
based upon historical spending levels. State funding will provide each
school district an amount equal to the difference between its foundation
allowance and the revenues generated by its local property tax levy. Under
Proposal A, a local school district will also be entitled to levy
supplemental property taxes to generate additional revenues if its
foundation allowance is less than its historical per pupil expenditures.
Proposal A also contains provisions which allow for the levy of a limited
number of enhancement mills on regional and local district bases.
Proposal A shifts significant portions of the cost of local school
operations from local districts to the State and raises additional State
revenues to fund these additional State expenses. These additional
revenues will be included within the State's constitutional revenue
limitations and may impact the State's ability to raise additional revenues
in the future. See, "Constitutional State Revenue Limitations."
EFFECT OF LIMITATIONS ON ABILITY TO PAY BONDS. The ability of
the State of Michigan to pay the principal of and interest on its general
obligation bonds may be affected by the limitations described above under
"Constitutional State Revenue Limitations:" and "Recent Michigan School
Finance and Property Tax Changes." Similarly, the ability of local units
of government to levy taxes to pay the principal of and interest on their
general obligation bonds is subject to the constitutional, statutory, and
charter limitations described above under "Constitutional Local Tax
Limitations" and "Recent Michigan School Finance and Property Tax
Changes."
In general, revenue bonds issued by the State, by local units of
government, or by authorities created by the State or local units of
government are payable solely from such specified revenues (other than tax
revenues) as are pledged for that purpose, and such authorities generally
have no taxing power.
EFFECT OF GENERAL ECONOMIC CONDITIONS IN MICHIGAN. Michigan is
an industrialized state, whose economy is dominated by the automobile
industry and related industries. It tends to be more vulnerable to
economic downturns than the economies of many other states and the nation
as a whole. Over the past fifteen years, during recessions these
industries have been characterized as having excess capacity, resulting in
plant closings and reductions in the work force, many of which have
occurred in Michigan. Tourism and agriculture are two other important, but
less significant industries in the State, both of which have been affected
adversely by prior recessions.
Over the past fifteen years the Michigan unemployment rate typically has
been higher than the national rate, however, this was not the case for 1994
and in particular the State's seasonally adjusted December 1994
unemployment rate was 4.5% compared to the seasonally adjusted national
rate of 5.4%. The table below shows the State and national unemployment
rates published by the Michigan Employment Security Commission and the U.S.
Bureau of Labor Statistics, respectively, for the years indicated.
Period Michigan United States
1984 11.2% 7.4%
1985 9.9% 7.1%
1986 8.8% 6.9%
1987 8.2% 6.1%
1988 7.6% 5.5%
1989 7.1% 5.3%
1990 7.5% 5.5%
1991 9.2% 6.7%
1992 8.8% 7.4%
1993 7.0% 6.8%
1994 5.9% 6.1%
Although most of the bonds in the Michigan fund are expected to be
obligations of local units of government or local authorities in the State,
rather than general obligations of the State itself, there can be no
assurance that the same factors that adversely affect the economy of the
State generally will not also affect adversely the market value or
marketability of obligations issued by local units of government or local
authorities in the State or the ability of the obligors to pay the
principal of or interest on such obligations.
STATE LITIGATION. A significant number of lawsuits, involving
substantial dollars, have been filed against the State and are pending.
These include tax refund claims, including claims for Single Business
Taxes, condemnation actions, claims relating to funding for county courts,
and other types of actions. The extent to which parties will ultimately
prevail against the State cannot be predicted at this time.
SPECIAL FACTORS AFFECTING MINNESOTA
The following only highlights some of the more significant financial
trends and problems affecting Minnesota, and is based on information drawn
from official statements and prospectuses relating to securities offerings
of the State of Minnesota, its agencies, and instrumentalities 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 STATE REVENUE LIMITATIONS. Minnesota's
constitutionally prescribed fiscal period is a biennium, and the state
operates on a biennial budget basis. An agency or other entity may not
expend monies in excess of its allotment. If revenues are insufficient to
balance total available resources and expenditures, the State's
Commissioner of Finance, with the approval of the Governor, is required to
reduce allotments to the extent necessary to balance expenditures and
forecast available resources for the then current biennium. The Governor
may seek legislative action when a large reduction in expenditures appears
necessary, and if the State's legislature is not in session the Governor is
empowered to convene a special session.
EFFECT OF LIMITATIONS ON ABILITY TO PAY BONDS. There are no
constitutional or statutory provisions which would impair the ability of
Minnesota municipalities to meet their bond obligations if the bonds have
been properly issued.
MINNESOTA'S ECONOMY. Minnesota's seasonally adjusted October
1994 unemployment rate was 3.7 percent which was lower than the seasonally
adjusted national rate of 5.8 percent for the month. Non-agricultural
employment in the state increased 20.3% from 1980 to 1990 but only
increased 5.3% from 1990 to 1993. A major continuing trend for Minnesota,
as for the nation, is the large employment gain in the service industries.
In 1993, almost all private sector jobs added had been in services and in
finance, insurance and real estate. Accompanying this was a decline in
jobs in construction and mining.
Minnesota resident population grew from 4,142,000 in 1983 or, at an
average annual compound rate of .8 percent. In comparison, U.S. population
grew at an annual compound rate of 1 percent during this period. Minnesota
population is currently forecast to grow at an annual compound rate of .6
percent between 1990 and 2000. In the period 1990 to 1993, Minnesota's
overall employment growth increased 4.3% compared to national growth of
.9%.
Manufacturing has proven to be a strong sector, with Minnesota
employment growth in this area outperforming its U.S. counterpart in both
the 1980-1990 and 1990-1993 periods. Minnesota's manufacturing industries
accounted for 17.4 percent of the state's employment mix in 1993. In the
durable goods industries, the state's employment in 1993 was highly
concentrated in the industrial machinery, fabricated metals, instrument and
miscellaneous categories. Of particular importance is the industrial
machinery category in which 32.8% of the state's durable goods employment
was concentrated in 1993, as compared to 18.9% for the United States as a
whole. The emphasis is partly explained by the location in the state of
Ceridian, Unisys, IBM, Cray Research, and other computer equipment
manufacturers which are included in the industrial machinery
classification.
The importance of the state's rich resource base for overall employment
is apparent in the employment mix in non-durable goods industries. In
1993, 29.4% of the state's non-durable goods employment was concentrated in
food and kindred industries, and 19.1% in paper and allied industries.
This compares to 21.5% and 8.9%, respectively, for comparable sectors in
the national economy. Both of these rely heavily on renewable resources in
the state. Over half of the state's acreage is devoted to agricultural
purposes, and nearly one-third to forestry. Printing and publishing is
also relatively more important in Minnesota than in the U.S.
The state is situated in the midst of the family farm belt. Although a
decline in jobs in agriculture is forecasted due to technological
improvements and the trend away from small family farms, in 1993 Minnesota
ranked seventh among all states in total cash receipts derived from
agricultural products and seventh among all states in percentage of income
derived from farming. In order of receipts, the six major agricultural
products in 1993 were dairy, corn, soybeans, cattle and calves, hogs and
wheat.
Minnesota ranks seventh among all states in agricultural exports. The
state's major agricultural commodities exported in 1993, were in order of
value, feed grains and products, soybeans and products, wheat and wheat
products, live animals and meat, vegetables and feed and fodder. The
average Minnesota farm had gross farm income of $81,671 in 1993; however,
expenses used up $79,457 of the income leaving the average farm net income
in 1993 at $2,214, compared to the 1992 average farm net income of
$17,352.
Mining is currently a less significant factor in the state economy than
it once was. Mining employment, primarily in the iron ore or taconite
industry, dropped from 17.3 thousand in 1979 to 7.5 thousand in 1993. It
is not expected that mining employment will return to 1979 levels.
However, Minnesota retains vast quantities of taconite as well as copper,
nickel, cobalt, and peat, which may be utilized in the future.
The fastest growing sector of the economy in Minnesota and the rest of
the country is the service sector. Business services employment is
projected to increase by 23% from 1989 to 1996, and health care services
(exclusive of hospitals and nursing homes) is projected to grow by 18%.
In 1993, 29 Minnesota based public companies and nine private companies
reported revenues of $600 million or more. These companies are involved in
a varied group of industries including agricultural and industrial
commodities, manufacturing, food and kindred products and services.
Since 1980, state per capita personal income has been within three
percentage points of national per capita personal income. In 1993,
Minnesota per capita personal income was 101.1 percent of its U.S.
counterpart.
Minnesota's economy has been strong during 1994 and that strength is
expected to continue through the end of the current biennium. The State's
budget is also expected to be strong during this time period in that slight
improvements in the Fiscal Year 1994-95 forecast increase the expected June
30, 1995 ending balance by $138 million, over the end-of-session estimate.
This gain, along with a $160 million net improvement in the Fiscal Year
1996-97 outlook results in a total improvement of $298 million.
SPECIAL FACTORS AFFECTING OHIO
The following only highlights some of Ohio's more significant financial
trends and problems, and is based on information drawn from official
statements and prospectuses relating to securities offerings of the State
of Ohio, its agencies, and instrumentalities 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 that would
render such information inaccurate.
The State of Ohio operates on the basis of a fiscal biennium for its
appropriations and expenditures. Under current law the biennium for
operating purposes runs from July 1 in an odd-numbered year to June 30 in
the next odd-numbered year with fiscal years within a fiscal biennium
running from July 1 to June 30 (references to a particular fiscal year
refer to the fiscal year ending on June 30 of each year). The State is
effectively precluded by law from ending a fiscal year or a biennium in a
deficit position. The Governor has the power to order state agencies to
operate within their means. The State carries out most of its operations
through the general revenue fund (GRF) which receives general State
revenues not otherwise dedicated. GRF revenues are derived mainly from
personal income, sales/use, corporate, and corporation franchise taxes.
There is no present constitutional limit on the rates of state-levied
taxes, except for taxes on intangible property.
Economic activity in Ohio, as in many other industrially developed
states, tends to be more cyclical than in some other states and the nation
as a whole. In the 1980's Ohio experienced an unemployment rate generally
higher than the United States average, largely due to the importance of
heavy industry and manufacturing to Ohio's economy. This trend has not
continued in the 1990's. Although manufacturing (including
automobile-related manufacturing) in Ohio remains an important part of the
state's economy, the greatest growth in employment in Ohio in recent years,
consistent with national trends, has been in the non-manufacturing areas.
The State's experience is similar to that of other midwestern states with
comparable economic structures.
Budgetary shortfalls in recessionary periods have required emergency
spending reductions by the Governor and the adoption of temporary and
permanent tax increases and/or new tax measures by the General Assembly to
meet the State's constitutional requirement that the State end each year
without a deficit. No appropriations for debt service, however, were
affected by the spending reductions, and the State has, in fact, ended each
fiscal year with a budget surplus.
The 1989-91 recession in the United States has had an adverse effect on
both the economy in Ohio and the financial condition of the State of Ohio
and its underlying municipalities. In December of 1991, the Ohio Office of
Budget and Management (OBM) projected a 1992 fiscal year imbalance in the
GRF. As an initial action, the Governor ordered most state agencies to
reduce GRF appropriations spending in the final six months of fiscal year
1992, by approximately $184 million and the General Assembly authorized the
OBM to transfer to the GRF the $100.4 million balance in the Budget
Stabilization Fund. Other revenue and spending actions, legislative and
administrative, resolved the remaining GRF imbalance for fiscal year
1992.
In response to OBM's projections of a $520 million GRF shortfall for
fiscal year 1993, the Governor ordered, effective July 1, 1992; selected
GRF appropriations reductions totalling $300 million. Subsequent executive
and legislative actions - including tax revisions that produced an
additional $194.5 million in fiscal 1993, and an additional $50 million in
appropriations spending reductions - resulted in positive biennium-ending
GRF balances. Appropriations for debt service were expressly excluded from
the Governor's appropriation orders.
The GRF appropriations bill for the 1994-95 biennium was passed on June
30, 1993, and signed, with selective vetoes, by the Governor. The
appropriations acts as passed and signed include all necessary
appropriations for debt service on State obligations.
A number of local Ohio communities and school districts have also faced
significant financial problems. The State has established procedures for
municipal fiscal emergencies, under which joint state/local commissions are
established to monitor the fiscal affairs of a financially troubled
municipality, and the municipality must develop a financial plan to
eliminate deficits and cure any defaults. Since their adoption in 1979,
these procedures have been applied to twenty-three cities and villages,
including the City of Cleveland; in eighteen of these communities, the
fiscal situation has been resolved and the procedures terminated.
Local school districts in Ohio receive a major portion of their
operational funds from state subsidies, but are dependent upon local taxes
for significant portions of their budgets. Local school districts are also
authorized to submit for voter approval an income tax on the district
income of individuals and estates. In part because of provisions of some
State laws, such as the law partially limiting (without voter approval) the
increase in property tax collections that would otherwise result from
increased assessed valuations, some school districts in recent years have
experienced difficulty in meeting mandated and discretionary increased
costs. In addition, the Governor's appropriations reduction orders
described above have, in some instances, included reductions in
appropriations for state school subsidy programs. A small number of local
school districts have required emergency advances from the State in order
to prevent year-end deficits. The number of districts applying for aid has
fluctuated over the years; during the 1979 fiscal year through the 1989
fiscal year, a total of 143 loans totaling $137.4 million had been made to
school districts (with enhanced provisions for individual district
borrowing) replaced the emergency advance loan program for fiscal years
subsequent to fiscal year 1989. In fiscal year 1993, there were 43 loans
made for an aggregate amount of $94.5 million (including one loan of $75
million to the Cleveland City School District). As of December 30, 1993,
twelve school districts have approval for loans totaling $5.7 million in
fiscal 1994.
Litigation contesting the Ohio system of school funding is pending in
two Ohio courts. One case, brought by among others, the Cleveland City
School District, is stated to be in the nature of a class action on behalf
of all similarly situated Ohio school districts. Named as defendants in
both actions are the state and several state agencies and officials. Among
other relief sought, the complaints request decrees as may be required to
compel the State and the General Assembly to devise and enact a
constitutionally acceptable system of school funding. In one of the
pending cases, the Perry County Common Pleas Court issued a judgment
declaring Ohio's method of funding public education to be unconstitutional.
The State has appealed that judgment to the Perry County Court of Appeals.
It is not possible at this time to predict the outcome of the appeal or,
should the judgment be upheld on appeal, the effect on the State's present
school funding system.
Ohio's general obligation bonds are currently rated Aa and AA by Moody's
Investors Service, Inc. and Standard & Poor's Corporation, respectively,
except that Highway Obligations are rated AAA by Standard & Poor's
Corporation.
Although most of the bonds in the Ohio fund are expected to be
obligations of local units of government or local authorities in the State,
rather than general obligations of the State itself, there can be no
assurance that the same factors that adversely affect the economy of the
State generally will not also affect adversely the market value or
marketability of obligations issued by local units of government or local
authorities in the State, or the ability of the obligors to pay the
principal of or interest on such obligations. Investment policies of local
units of government or local authorities may also effect adversely the
ratings of obligations of current or future issues.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth"
or "Puerto Rico"), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico and its agencies and instrumentalities, 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,
prospectuses, and other publicly available documents, but is not aware of
any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors, there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession primarily because of its strong manufacturing base,
which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $14.1 billion or 39.4% of gross
domestic product in fiscal 1993. However, manufacturing has experienced a
basic change over the years as a result of the influx of higher wages, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro processors, scientific instruments, and high technology
machinery. The service sector, which employs the largest number of people,
includes wholesale and retail trade, finance, and real estate, and ranks
second in its contribution to gross domestic product. In fiscal 1993, the
service sector generated $14.0 billion in gross domestic product or 39.1%
of the total and employed over 467,000 workers providing 46.7% of total
employment. The government sector of the Commonwealth plays an important
role in Puerto Rico's economy. In fiscal year 1993, the government
accounted for $3.9 billion of Puerto Rico's gross domestic product and
provided 21.7% of the total employment. Tourism also contributes
significantly to the island economy, accounting for $1.6 billion of gross
domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both external and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private sector development and growth which would be realized
through a reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code (the
"Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the fund's
management contract. In the case of the money market funds, FMR has
granted investment management authority to the sub-adviser (see the section
entitled "Management Contracts"), and the sub-adviser is authorized to
place orders for the purchase and sale of portfolio securities, and will do
so in accordance with the policies described below. FMR is also
responsible for the placement of transaction orders for other investment
companies and accounts for which it or its affiliates act as investment
adviser. Securities purchased and sold by the money market funds generally
will be traded on a net basis (i.e., without commission). In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, FMR considers various relevant factors, including, but not limited
to, the size and type of the transaction; the nature and character of the
markets for the security to be purchased or sold; the execution efficiency,
settlement capability, and financial condition of the broker-dealer firm;
the broker-dealer's execution services rendered on a continuing basis; and
the reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market funds are placed with broker-dealers (including
broker-dealers on the list) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers generally is
made by FMR (to the extent possible consistent with execution
considerations) based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients, and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such requirements, the Board of
Trustees has authorized FBSI to execute portfolio transactions on national
securities exchanges in accordance with approved procedures and applicable
SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
The bond funds' annual portfolio turnover rates for the fiscal years
ended December 31, 1994 and 1993 are shown in the following table:
ANNUAL PORTFOLIO TURNOVER RATE FOR HIGH YIELD FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year Michigan High Minnesota Tax- Ohio High
Ended 12/31 Yield Fund Free Fund Yield Fund
1994 18 % 26 % 22 %
1993 33% 37% 41%
</TABLE>
For fiscal 1994, 1993, and 1992 the funds paid no brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
MONEY MARKET FUNDS . The money market fund s value
their investments on the basis of amortized cost. This technique
involves valuing an instrument at its cost as adjusted for amortization of
premium or accretion of discount rather than its value based on current
market quotations or appropriate substitutes which reflect current market
conditions. The amortized cost value of an instrument may be higher or
lower than the price the money market fund would receive if it sold
the instrument.
Valuing a fund's instruments on the basis of amortized cost and use
of the term "money market fund" are permitted by Rule 2a-7 under the
1940 Act . Each money market fund must adhere to certain
conditions under Rule 2a-7.
The Board of Trustees of the money market funds oversee FMR's
adherence to SEC rules concerning money market funds, and has established
procedures designed to stabilize each fund's NAV at $1.00. At such
intervals as they deem appropriate, the Trustees consider the extent to
which NAV calculated by using market valuations would deviate from $1.00
per share. If the Trustees believe that a deviation from 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.
During periods of declining interest rates, each money market fund's
yield based on amortized cost may be higher than the yield based on market
valuations. Under these circumstances, a shareholder in the fund would be
able to obtain a somewhat higher yield than would result if the fund
utilized market valuations to determine its NAV. The converse would apply
in a period of rising interest rates.
BOND FUNDS . Valuations of portfolio securities furnished by
the pricing service employed by the bond funds are based upon a
computerized matrix system or appraisals by the pricing service, in each
case in reliance upon information concerning market transactions and
quotations from recognized municipal securities dealers. The methods used
by the pricing service and the quality of valuations so established are
reviewed by officers of the funds and FSC under the general supervision of
the Board of Trustees. There are a number of pricing services
available and the Trustees, or officers acting on behalf of the
Trustees, on the basis of on-going evaluation of these services,
may use other pricing services or discontinue the use of any pricing
service in whole or in part.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. A bond fund's share price, and each
fund's yield and total return fluctuate in response to market conditions
and other factors, and the value of a bond fund's shares when redeemed may
be more or less than their original cost.
YIELD CALCULATIONS. To compute a money market fund's yield for a
period, the net change in value of a hypothetical account containing one
share reflects the value of additional shares purchased with dividends from
the one original share and dividends declared on both the original share
and any additional shares. The net change is then divided by the value of
the account at the beginning of the period to obtain a base period return.
This base period return is annualized to obtain a current annualized yield.
The money market fund s also may calculate a compound effective yield
by compounding the base period return over a one-year period. In addition
to the current yield, the money market fund s may quote yields in
advertising based on any historical seven-day period. Yields for the money
market fund s are calculated on the same basis as other money market
funds, as required by regulation.
For the bond funds, yields are computed by dividing the fund's interest
income for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive dividends during the period,
dividing this figure by the fund's net asset value per share (NAV)
at the end of the period, and annualizing the result (assuming compounding
of income) in order to arrive at an annual percentage rate. Income is
calculated for purposes of a bond fund's yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. In general, interest income is reduced with respect to bonds trading
at a premium over their par value by subtracting a portion of the premium
from income on a daily basis, and is increased with respect to bonds
trading at a discount by adding a portion of the discount to daily income.
Capital gains and losses generally are excluded from the calculation.
Income calculated for the purposes of determining a bond fund's
yield differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding of income assumed in yield calculations, a bond fund's
yield may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives.
However, each fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates a
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to a fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federal and state and
city tax rate. If only a portion of a fund's yield is tax-exempt, only that
portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 2% to 7%. Of course, no
assurance can be given that a fund will achieve any specific tax-exempt
yield. While the funds invest principally in obligations whose interest is
exempt from federal and state income tax, other income received by the
funds may be taxable. The tables do not take into account local taxes, if
any, payable on fund distributions.
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1995.
1995 TAX RATES FOR MICHIGAN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Combined
Federal State Michigan and
Taxable Income* Income Tax Marginal Federal Effective
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Single Return Joint Return Bracket Rate Tax Bracket**
$ 23,351 to 56,550 $ 39,001 to 94,250 28.0% 4.4% 31.17%
$ 56,551 to 117,950 $ 94,251 to 143,600 31.0% 4.4% 34.04%
$ 117,951 to 256,500 $ 143,601 to 256,500 36.0% 4.4% 38.82%
$ 256,501 + Above $ 256,501 + Above 39.6% 4.4% 42.26%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
If your effective combined federal and state personal tax rate in 1995 is:
31.17 % 34.04 % 38.82 % 42.26 %
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
2% 2.91% 3.03% 3.27% 3.46%
3% 4.36% 4.55% 4.90% 5.20%
4% 5.81% 6.06% 6.54% 6.93%
5% 7.26% 7.58% 8.17% 8.66%
6% 8.72% 9.10% 9.81% 10.39%
7% 10.17% 10.61% 11.44% 12.12%
1995 TAX RATES FOR MINNESOTA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Combined
Federal State Minnesota and
Taxable Income* Income Tax Marginal Federal Effective
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Single Return Joint Return Bracket Rate Tax Bracket**
$ 23,351 to 51,330 $ 39,001 to 90,760 28.0% 8.0% 33.76%
$ 51,331 to 56,550 $ 90,761 to 94,250 28.0% 8.5% 34.12%
$ 56,551 to 117,950 $ 94,251 to 143,600 31.0% 8.5% 36.87%
$ 117,951 to 256,500 $ 143,601 to 256,500 36.0% 8.5% 41.44%
$ 256,501 + Above $ 256,501 + Above 39.6% 8.5% 44.73%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
If your effective combined federal and state personal tax rate in 1995
is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
33.76% 34.12% 36.87% 41.44% 44.73%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
2% 3.02% 3.04% 3.17% 3.42% 3.62%
3% 4.53% 4.55% 4.75% 5.12% 5.43%
4% 6.04% 6.07% 6.34% 6.83% 7.24%
5% 7.55% 7.59% 7.92% 8.54% 9.05%
6% 9.06% 9.11% 9.50% 10.25% 10.86%
7% 10.57% 10.63% 11.09% 11.95% 12.67%
</TABLE>
1995 TAX RATES FOR OHIO
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Combined
Federal State Ohio and
Taxable Income* Income Tax Marginal Federal Effective
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Single Return Joint Return Bracket Rate Tax Bracket**
$ 23,351 to 40,000 $ 39,001 to 40,000 28.0% 4.457% 31.21%
$ 40,001 to 56,550 $ 40,001 to 80,000 28.0% 5.201% 31.74%
$ 80,001 to 94,250 28.0% 5.943% 32.28%
$ 56,551 to 80,000 28.0% 5.201% 34.59%
$ 80,001 to 100,000 $ 94,251 to 100,000 31.0% 5.943% 35.10%
$ 100,001 to 117,950 $ 100,001 to 143,600 31.0% 6.900% 36.78%
$ 117,951 to 200,000 $ 143,601 to 200,000 36.0% 6.900% 40.42%
$ 200,001 to 256,500 $ 200,001 to 256,500 36.0% 7.500% 40.80%
$ 256,501 + Above $ 256,501 + Above 39.6% 7.500% 44.13%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
If your effective combined federal and state personal tax rate in 1995 is:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.21 % 31.74 % 32.28 % 34.59 % 35.10% 36.78% 40.42% 40.80% 44.13 %
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2% 2.91% 2.93% 2.95% 3.06% 3.08% 3.11% 3.36% 3.38% 3.58%
3% 4.35% 4.39% 4.43% 4.59% 4.62% 4.67% 5.04% 5.07% 5.37%
4% 5.81% 5.86% 5.91% 6.12% 6.16% 6.23% 6.71% 6.76% 7.16%
5% 7.27% 7.32% 7.38% 7.64% 7.70% 7.78% 8.39% 8.45% 8.95%
6% 8.72% 8.79% 8.86% 9.17% 9.24% 9.34% 10.07% 10.14% 10.74%
7% 10.18% 10.25% 10.34% 10.70% 10.79% 10.90% 11.75% 11.82% 12.53%
</TABLE>
Each fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When a fund invests in these
obligations, its tax-equivalent yield will be lower. In the tables above,
the tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV
over a stated period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual 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 the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis . Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by a fund and
reflects all elements of its return. Unless otherwise indicated, a fund's
adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following tables show each money market
fund's 7-day yields, each bond fund's 30-day yields, each fund's
tax-equivalent yields, and total returns for periods ended December 31,
1994 .
The t ax-equivalent yield's are based on combined federal and
state income tax brackets of 40.80 % (Ohio), 38.86 %
(Michigan), and 41.44 % (Minnesota), and reflects that , on
December 31, 1994, an estimated 3.9% of the Ohio Money Market fund's income
w as subject to state taxes. Note that each fund may invest in
securities whose income is subject to the federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Seven-Day Tax- One Five Life of One Five Life of
Yield Equivalent Year Years Fund Year Years Fund
Yield
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michigan Money 4.15% 6.79% 2.44% n/a 3.45%* 2.44% n/a 18.39%*
Market
Ohio Money 4.15% 6.99% 2.50% 3.55% 3.73%** 2.50% 19.05% 21.61%**
Market
</TABLE>
* From commencement of operations, January 12, 1990.
** From commencement of operations, August 29, 1989.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thirty-Da Tax- One Five Life of One Five Life of
y Equivalent Year Years Fund Year Years Fund
Yield Yield
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michigan 6.52% 10.66% -7.50% 6.32% 8.05%* -7.50% 35.86% 102.93%*
High Yield
Minnesota 6.38% 10.89% -6.01% 5.76% 7.06%** -6.01% 32.30% 86.19%**
Tax-Free
Ohio High 6.36% 10.74% -5.55% 6.72% 7.86%*** -5.55% 38.40% 99.63%***
Yield
</TABLE>
* From commencement of operations, November 12, 1985.
** From commencement of operations, November 21, 1985.
*** From commencement of operations, November 15, 1985.
The following table s show the income and capital elements of each
fund's cumulative total return. Each table compares the
fund's return to the record of the Standard & Poor's Composite Index of 500
Stocks (S&P 500), the Dow Jones Industrial Average (DJIA), and the cost of
living (measured by the Consumer Price Index, or CPI) over the same period.
The CPI information is as of the month end closest to the initial
investment date for each fund. The S&P 500 and DJIA comparisons are
provided to show how each fund's total return compared to the record of a
broad average of common stocks and a narrower set of stocks of major
industrial companies, respectively, over the same period. Of course, since
each money market fund invests in short-term fixed-income
securities , and the bond funds invest in fixed-income
securities, common stocks represent a different type of investment from the
fund s . Common stocks generally offer greater growth potential than
the funds, but generally experience greater price volatility, which means
greater potential for loss. In addition, common stocks generally provide
lower income than a fixed-income investment such as the funds. Figures for
the S&P 500 and DJIA are based on the prices of unmanaged groups of stocks
and, unlike the funds' returns, do not include the effect of paying
brokerage commissions or other costs of investing.
MICHIGAN MONEY MARKET FUND. During the period from January 12, 1990
(commencement of operations) to December 31, 1994, a hypothetical
$10,000 investment in th e f und would have grown to
$ 11,839 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures
below should not be considered representative of the dividend income or
capital gain or loss that could be realized from an investment in the fund
today.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MICHIGAN MONEY MARKET INDICES
Value of Value of Value of
Year Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1990* $10,000
$ 566 $ 0 $ 10,566 $ 9,871 9,908 10,611
1991 10,000 1,038 0 11,038 12,810 12,320 10,936
1992 10,000 1,332 0 11,332 13,789 13,219 11,253
1993 10,000 1,557 0 11,557 15,179 15,465 11,562
1994 10,000 1,839 0 11,839 15,399 16,232 11,872
</TABLE>
* From January 12, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January
12, 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
$ 11,839 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments (dividends) for the period would have amounted to
$ 1,691 . The fund did not distribute any capital gains during the
period. Tax consequences of different investments have not been factored
into the above figures.
OHIO MONEY MARKET FUND. During the period from August 29, 1989
(commencement of operations) t o December 31, 1994, a hypothetical
$10,000 investment in the Ohio Money Market f und would have
grown to $ 12,161 , assuming all distributions were reinvested. This
was a period of fluctuating interest rates and bond prices and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the fund today.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
OHIO MONEY MARKET INDICES
Value of Value of Value of
Year Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1989* $ 10,000 $ 215 $ 0 $ 10,215 10,150 10,164 10,120
1990 10,000 817 0 10,817 9,834 10,109 10,738
1991 10,000 1,304 0 11,304 12,831 12,570 11,067
1992 10,000 1,622 0 11,622 13,812 13,487 11,388
1993 10,000 1,865 0 11,865 15,204 15,779 11,701
1994 10,000 2,161 0 12,161 15,405 16,564 12,014
</TABLE>
* From August 29, 1989 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August 29,
1989, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested), amounted to
$ 12,161 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments (dividends) for the period would have amounted to
$ 1,960 . The fund did not distribute any capital gains during the
period. Tax consequences of different investments have not been factored
into the above figures.
MICHIGAN TAX-FREE HIGH YIELD FUND. During the period from November 12, 1985
(commencement of operations) to December 31, 1994, a hypothetical
$10,000 investment in the fund would have grown to
$ 20,293 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures below
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MICHIGAN HIGH YIELD FUND INDICES
Value of Value of Value of
Year Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985* $ 10, 270 $ 95 $0 $ 10,365 $ 10,766 $ 10,861 $10,055
1986 11,380 958 0 12,338 12,777 13,796 10,161
1987 10,250 1,703 39 11,992 13,449 14,546 10,616
1988 10,790 2,722 41 13,552 15,683 16,862 10,086
1989 11,100 3,795 42 14,936 20,652 22,217 11,601
1990 10,890 4,775 41 15,706 20,000 22,098 12,309
1991 11,410 6,143 43 17,596 26,108 27,477 12,686
1992 11,710 7,487 77 19,274 28,104 29,482 13,054
1993 12,340 9,100 500 21,940 30,936 34,492 13,413
1994 10,580 8,987 726 20,293 31,344 35,203 13,772
</TABLE>
* From November 12, 1985 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
12, 1985, 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
$ 20,293 . 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 $ 6,804 for
dividends and $ 470 for capital gain distributions. Tax consequences
of different investments have not been factored into the above figures.
MINNESOTA TAX-FREE FUND. During the period from November 21, 1985
(commencement of operations) to December 31, 1994, a hypothetical
$10,000 investment in the fund would have grown to
$ 18,619 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures below
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MINNESOTA TAX-FREE FUND INDICES
Value of Value of Value of
Year Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985* $10,0 90 $ 75 $ 0 $10,165 $10,663 $10,801 $ 10,028
1986 $10, 990 907 0 11,897 12,655 13,721 10,138
1987 $ 9,820 1,592 29 11,441 13,321 14,467 10,587
1988 $ 10,310 2,544 30 12,884 15,534 16,771 11,055
1989 $ 10,520 3,523 31 14,074 20,456 22,097 11,569
1990 $ 10,550 4,509 31 15,090 19,818 21,978 12,275
1991 $ 10,730 5,611 31 16,372 25,859 27,328 12,651
1992 $ 10,850 6,739 32 17,621 27,836 29,322 13,018
1993 $ 11,520 8,256 34 19,810 30,641 34,305 13,376
1994 $ 10,130 8,335 155 18,619 31,045 36,007 13,734
</TABLE>
* From November 21, 1985 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
21, 1985, 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
$18,619 . 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 $ 6,334 for
income dividends and $ 110 for capital gain distributions. Tax
consequences of different investments have not been factored into the above
figures.
OHIO TAX-FREE HIGH YIELD FUND. During the period from November 15, 1985
(commencement of operations) to December 31, 1994, a hypothetical
$10,000 investment in the Ohio High Yield Fund would have grown to
$ 19,963 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and bond prices and the figures below
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
OHIO HIGH YIELD FUND INDICES
Value of Value of Value of
Year Initial Reinvested Reinvested Cost
Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985* $10,120 95 $ 0 $ 10,215 $ 10,667 $ 10,801 $10,028
1986 10,970 926 0 11,896 12,639 13,721 10,138
1987 9,970 1,643 0 11,613 13,325 14,467 10,587
1988 10,500 2,614 0 13,114 15,539 16,771 11,055
1989 10,790 3,634 0 14,424 20,462 22,097 11,569
1990 10,840 4,665 0 15,505 19,824 21,978 12,275
1991 11,320 5,960 0 17,280 25,867 27,328 12,651
1992 11,550 7,227 0 18,777 27,844 29,322 13,018
1993 12,020 8,684 431 21,135 30,651 34,305 13,379
1994 10,520 8,735 708 19,963 31,055 36,010 13,734
</TABLE>
* From November 15, 1985 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
15, 1985, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $ 19,963 . 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 $ 6,568 for income dividends and $ 440 for capital
gain s distributions. Tax consequences of different investments have
not been factored into the above figures.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 375 ta x-free money market funds. The Bond Fund
Report AverageS(trademark)/Tax-Free, which is reported in the BOND FUND
REPORT(registered trademark), covers over 432 tax-free bond funds.
When evaluating comparisons to money market funds, investors should
consider the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price. Bond
fund s , however, invest in longer-term instruments and their
share price changes daily in response to a variety of factors.
A fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Fidelity may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus, a quarterly magazine provided free of charge
to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, a fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a fund's price movements over specific periods
of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
A fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of December 31, 1994 , FMR advised over $ 25 billion in
tax-free fund assets, $ 65 billion in money market fund assets,
$ 165 billion in equity fund assets, $ 35 billion in
international fund assets, and $ 20 billion in Spartan fund assets.
The funds may reference the growth and variety of money market mutual funds
and the adviser's innovation and participation in the industry. The equity
funds under management figure represents the largest amount of equity fund
assets under management by a mutual fund investment adviser in the United
States, making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1995:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule to be observed in the future, the
NYSE may modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the Securities and
Exchange Commission (SEC). To the extent that portfolio securities are
traded in other markets on days when the NYSE is closed, a fund's
NAV may be affected on days when investors do not have access to the fund
to purchase or redeem shares. In addition, trading in some of a
fund's portfolio securities may not occur on days when the fund is open for
business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the Prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. Each fund will send each
shareholder a notice in January describing the tax status of dividend and
capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenant at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of each fund's policies of investing so
that at least 80% of its income is free from federal income tax. Interest
from private activity securities is a tax preference item for the purposes
of determining whether a taxpayer is subject to the AMT and the amount of
AMT to be paid, if any. Private activity securities issued after August 7,
1986 to benefit a private or industrial user or to finance a private
facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by each fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for purposes of each fund's policy of investing so that at least 80%
of its income is free from federal income tax. The money market funds may
distribute any net realized short-term capital gains and taxable market
discount once a year or more often, as necessary, to maintain its net asset
value at $1.00 per share.
It is the current position of the staff of the Securities and Exchange
Commission that a fund which uses the word "tax-free" in its name may not
derive more than 20% of its income from municipal obligations that pay
interest that is a preference item for purposes of the AMT. According to
this position, at least 80% of each bond fund's income distributions
would have to be exempt from the AMT as well as exempt from federal income
taxes.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of exempt-interest dividend.
MICHIGAN TAXES. Under a ruling of the Michigan Department of Treasury,
shareholders of the Michigan Money Market F und and the
Michigan high yield fund who are subject to the Michigan income tax or
single business tax will not be subject to the Michigan income tax or
single business tax on their Michigan fund dividends to the extent that
such distributions are exempt-interest dividends for federal income tax
purposes and are attributable to interest on tax-exempt obligations of the
State of Michigan, its political or governmental subdivisions, or its
governmental agencies or instrumentalities (as well as certain federally
tax-exempt obligations of territories and possessions of the United
States). Such distributions will also not be subject to city income taxes
imposed by certain Michigan cities. Any distributions with respect to
shares of each Michigan fund other than those described in the
preceding sentence, including, but not limited to, long or short-term
capital gains, will be subject to the Michigan income tax or single
business tax and may be subject to the city income taxes imposed by certain
Michigan cities. The Michigan Court of Appeals has ruled that shares of a
mutual fund such as the Michigan money market and high yield
funds are exempt from the Michigan intangibles tax to the extent the
fund s invest in obligations exempt from the intangibles tax.
MINNESOTA TAXES. FMR understands that shareholders of the Minnesota
tax-free fund who are individuals, estates or trusts and who are
subject to Minnesota personal income tax will not be subject to such tax on
distributions with respect to shares of the Minnesota tax-free fund
to the extent that such distributions are exempt-interest dividends for
federal income tax purposes, are attributable to interest on tax-exempt
obligations of the State of Minnesota, or its political or governmental
subdivisions, or any of its municipalities or its governmental agencies or
instrumentalities and the portion of the exempt-interest dividends from
Minnesota that are paid equals or exceeds 95% of all exempt-interest
dividends paid. In addition, distributions with respect to interest derived
from obligations of the United States will not be subject to the Minnesota
personal income tax. Any distributions with respect to shares of the
Minnesota tax-free fund other than those described in the preceding
sentences, including, but not limited to, long or short-term capital gains,
may be subject to the Minnesota personal income tax. Capital gain
distributions paid will be taxed in Minnesota at the same rate as other
income. Distributions derived from private activity bonds included in
federal minimum taxable income and tax-exempt dividends may generate
Minnesota alternative minimum tax. The Minnesota tax-free fund will
not be subject to the Minnesota corporate franchise tax except to the
extent that it has federal taxable income.
OHIO TAXES. FMR understands that shareholders of the Ohio Money market
and the Ohio high yield fund who are otherwise subject to Ohio personal
income tax, a school district income tax, or the net income base of the
Ohio corporation franchise tax will not be subject to such taxes on
distributions with respect to shares of each Ohio fund to the extent
that such distributions are exempt-interest dividends for federal income
tax purposes and are attributable to interest on tax-exempt obligations of
the State of Ohio or its political subdivisions or authorities (as well as
any tax-exempt obligations of territories or possessions of the United
States). Any distributions with respect to shares of each Ohio fund
other than those described in the preceding sentence may be subject to the
Ohio personal income tax or the net income base of the Ohio corporation
franchise tax.
Distributions received by shareholders will be exempt from an income tax
levied by an Ohio municipal corporation unless the shareholder is subject
to a municipal income tax that includes "intangible income" in the tax base
in accordance with Ohio Revenue Code (sub-section)718.02(G). Distributions
represented by interest from obligations held by each Ohio fund,
which interest is specifically exempt under Ohio law from an income tax
imposed by a political subdivision of the State of Ohio, will be exempt
from a municipal income tax that includes "intangible income" in the tax
base in accordance with Ohio Revenue Code (sub-section)718.02(G) when
received by a shareholder.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each
fund on the sale of securities and distributed to shareholders are
federally taxable as long-term capital gains, regardless of the length of
time shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of a fund, and such shares
are held six months or less and are sold at a loss, the portion of the loss
equal to the amount of the long-term capital gain distribution will be
considered a long-term loss for tax purposes. Short-term capital gains
distributed by each fund are taxable to shareholders as dividends, not as
capital gains.
As of December 31, 1994, the Minnesota Tax-Free Fund hereby designates
approximately $164,201 as a capital gain dividend for the purpose of the
dividend-paid deduction.
For the year ended December 31, 1994, the money market funds had capital
loss carryforwards aggregating approximately $52,800 (Michigan) and $22,200
(Ohio) of which $1,600, $1,700, $10,300 and $39,200 will expire on December
31, 1998, 1999, 2001 and 2002, respectively (Michigan) and of which $5,100,
$6,100 and $11,000 will expire on December 31, 1998, 2000 and 2002,
respectively (Ohio). These amounts are available to offset any future
capital gains.
To the extent that capital loss carryovers are used to offset any future
capital gains, it is unlikely that the gains so offset will be distributed
to shareholders since any such distributions may be taxable to shareholders
as ordinary income.
STATE AND LOCAL TAX ISSUES. For mutual funds organized as business
trusts, state law provides for a pass-through of the state and local income
tax exemption afforded to direct owners of U.S. government securities. Some
states limit this to mutual funds that invest a certain amount in U.S.
government securities, and some types of securities, such as repurchase
agreements and some agency backed securities, may not qualify for this
benefit. The tax treatment of your dividend distributions from a fund will
be the same as if you directly owned your proportionate share of the U.S.
government securities in each fund's portfolio. Because the income earned
on most U.S. government securities in which each fund invests is exempt
from state and local income taxes, the portion of your dividends from each
fund attributable to these securities will also be free from income taxes.
The exemption from state and local income taxation does not preclude states
from assessing other taxes on the ownership of U.S. government securities.
In a number of states, corporate franchise (income) tax laws do not exempt
interest earned on U.S. government securities whether such securities are
held directly or through a fund.
TAX STATUS OF THE FUNDS. Each fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
each fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. Each bond fund intends to comply with other
tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some futures contracts and options are included in
this 30% calculation, which may limit the fund's investments in such
instruments.
Each money market fund is treated as a separate entity from the other
funds of Fidelity Municipal Trust II and each bond fund is treated as a
separate entity from the other funds of Fidelity Municipal Trust for tax
purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trusts are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Trustees and officers
elected or appointed to Fidelity Municipal Trust II prior to the money
market funds' conversion from series of Fidelity Municipal Trust in
identical capacities. All persons named as Trustees also serve in similar
capacities for other funds advised by FMR. Unless otherwise noted, the
business address of each Trustee and officer is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. Those
Trustees who are "interested persons" (as defined in the Investment Company
Act of 1940) by virtue of their affiliation with either the trust or FMR
are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. , Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. , Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous waste,
1993) and CH2M Hill Companies (engineering). In addition, he served on the
Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior
to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside 680 Steamboat Road, Greenwich,
CT, Trustee, is Executive-in-Residence (1995) at Columbia University
Graduate School of Business and a financial consultant. From 1987 to
January 1995, Mr. Kirk was a Professor at Columbia University Graduate
School of Business . Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership
Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. (1989), and AppleSouth, Inc. (restaurants,
1992).
FRED L. HENNING, JR., Vice President (1994) (money market funds
only) , is Vice President of Fidelity's money market funds and Senior
Vice President of FMR Texas Inc.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
THOMAS D. MAHER, Assistant Vice President (1990) (money market funds
only), is Assistant Vice President of Fidelity's money market funds and
Vice President and Associate General Counsel of FMR Texas Inc. (1990).
Prior to 1990, Mr. Maher was an employee of FMR.
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity F unds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
FOR MULTIPLE FUND
The following table sets forth information describing the compensation
of each current non-interested trustee of each fund for his or her services
as trustee for the fiscal year ended December 31, 1994.
COMPENSATION TABLE
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Phyllis Richard E. Donald Gerald C. Edward Marvin Thomas
Cox Burke J. Flynn Bradley J. Kirk McDonough H. L. Mann R.
Davis Jones Malone Williams
Michigan Money
$ 96 $ 93 $ 119 $ 95 $ 95 $ 96 $ 98 $ 96 $ 97
Market
Ohio Money
139 136 172 138 138 139 143 139 141
Market
Michigan
254 250 314 252 252 255 261 255 258
High Yield
Minnesota
157 154 193 155 155 157 161 157 159
Tax Free
Ohio
202 199 250 201 201 203 207 203 205
High Yield
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
from the Fund the Fund Complex*
Complex* Complex*
Ralph F. Cox $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABLE>
* Information is as of December 31, 1994 for the 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
On December 31, 1994, the Trustees and officers of each fund owned, in
the aggregate, less than 1% of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides each fund with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of each fund , all Trustees who are
"interested persons" of the trusts or of FMR, and all personnel
of each fund or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of each fund . These services include providing
facilities for maintaining each fund's organization ;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters and other persons dealing with each fund ;
preparing all general shareholder communications and conducting shareholder
relations; maintaining each fund's records and the registration of
each fund's shares under federal and state laws ; developing
management and shareholder services for each fund ; and furnishing
reports, evaluations, and analyses on a variety of subjects to the
Trustees.
In addition to the management fee payable to FMR and the fees payable to
United Missouri , each fund pays all of its expenses, without
limitation, that are not assumed by those parties. Each fund pays for
typesetting, printing, and mailing of its proxy materials to
shareholders, legal expenses, and the fees of the custodian, auditor, and
non-interested Trustees. Although each fund's management contract provides
that the fund will pay for typesetting, printing, and mailing
prospectuses, statements of additional information, notices, and reports
to shareholders, the trusts, on behalf of each fund have entered
into a revised transfer agent agreement with United Missouri, pursuant
to which United Missouri bears the cost of providing these services
to existing shareholders. Other expenses paid by each fund include
interest, taxes, brokerage commissions, each fund's proportionate
share of insurance premiums and Investment Company Institute dues .
Each fund is also liable for such non recurring expenses as may arise,
including costs of any litigation to which it may be party , and any
obligation it may have to indemnify its officers and Trustees
with respect to litigation.
FMR is each money market fund's manager pursuant to management contracts
dated February 28, 1992. The contracts were approved by Fidelity Municipal
Trust as sole shareholder of each fund on February 28, 1992, in conjunction
with an Agreement and Plan to convert each fund from a series of a
Massachusetts business trust to a series of a Delaware business trust. The
Agreement and Plan of Conversion was approved by public shareholders of the
fund on December 11, 1991. The contracts are identical to the funds' prior
contracts with FMR, which were approved by shareholders on September 19,
1990. FMR is each bond fund's manager pursuant to management
contracts which were approved by shareholders on December 15,
1993 .
For the services of FMR under the contracts, each fund pays FMR a
monthly management fee composed of the sum of two elements: a group fee
rate and an individual fund fee rate. The group fee rate is based on
the monthly average net assets of all of the registered investment
companies with which FMR has management contracts and is calculated on a
cumulative basis pursuant to the graduated fee rate schedule shown on the
left of the following table . The schedule o n the right
shows the effective annual group fee rate at varying asset levels, which
is the result of cu m ulatively applying the annualized
rates on the left . For example, the effective annual fee rate at
$ 271.8 billion of group net assets - the approximate level
for December 1994 - was . 1563 %, which is the weighted average of the
respective fee rates for each level of group net assets up to $ 271.8
billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
AVERAGE GROUP ANNUALIZED GROUP NET EFFECTIVE ANNUAL
ASSETS RATE ASSETS FEE RATE
0 - $3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450 400 .1507
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
Under each money market fund's current management contract with FMR, the
group fee rate is based on a schedule with breakpoints ending at .1500% for
average group assets in excess of $84 billion. The group fee rate
breakpoints shown above for average group assets in excess of $120 billion
and under $228 billion were voluntarily adopted by FMR on January 1, 1992.
The additional breakpoints shown above for average group assets in excess
of $228 billion were voluntarily adopted by FMR on November 1, 1993.
Under each bond fund's current management contract with FMR, the group
fee rate is based on a schedule with breakpoints ending at .1400% for
average group assets in excess of $174 billion. Prior to January 1, 1994,
the group fee rate breakpoints shown above for average group assets in
excess of $120 billion and under $228 billion were voluntarily adopted by
FMR, and went into effect on January 1, 1992. The additional breakpoints
shown above for average group assets in excess of $228 billion were
voluntarily adopted by FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule provides for lower management fee rates as FMR's assets under
management increase. The revised group fee rate schedule is identical to
the above schedule for average group assets under $156 billion. For average
group assets in excess of $156 billion, the group fee rate schedule
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
AVERAGE GROUP ANNUALIZED GROUP NET EFFECTIVE ANNUAL
ASSETS RATE ASSETS FEE RATE
$ 120 - 156 billion .1450% $150 billion .1736%
156 - 192 .1400 175 .1690
192 - 228 .1350 200 .1652
228 - 264 .1300 225 .1618
264 - 300 .1275 250 .1587
300 - 336 .1250 275 .1560
336 - 372 .1225 300 .1536
Over 372 .1200 325 .1514
350 .1494
375 .1476
400 .1459
Each fund's individual fund fee rate is .25%. Based on the average group
net assets of the funds advised by FMR for December 1994, the annual
management fee rate for each fund would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
. 1563 % + .25% = .4063 %
One-twelfth of this annual management fee rate is applied to
each fund's average net assets averaged for the most recent
month, giving a dollar amount , which is the fee for that
month.
FMR may, from time to time, voluntarily reimbursed all or a portion of a
fund's operations expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses).
The tables below show the m anagement fees paid to FMR by each
market fund for the last three fiscal years . The columns labeled
"Reimbursements" indicate the sum of reimbursements assumed by FMR during
the fiscal periods indicated. Beneath each fund's management fee table is a
table indicating the fund expense limitations that FMR voluntarily agreed
to and the periods during which those limitations applied.
MICHIGAN MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management Fee as
a % of Average
Years Ended Gross Net Assets (Before
December 31 Management Fees Reimbursements Net Fees Reimbursement)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1994 $ 803,963 $ 0 $ 803,963 .4082
1993 670,133 3,437 666,696 .4155
1992 717,736 198,592 519,144 .4219
</TABLE>
From: To: Expense Limitation
December 1, 1991 January 31, 1992 .35%
February 1, 1992 March 31, 1992 .40%
April 1, 1992 May 31, 1992 .45%
June 1, 1992 July 31, 1992 .50%
August 1, 1992 September 30, 1992 .55%
October 1, 1992 January 31, 1993 .60%
February 1, 1993 -- --
OHIO MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management Fee
as % of Average
Years ended Gross Net Assets (Before
December 31 Management Fees Reimbursements Net Fees Reimbursement)
December 31, 1994 $ 1,161,251 $ 0 $ 1,161,251 .4078
</TABLE>
December 31, 1993 1,015,231 0 1,015,231 .4154
December 31, 1992 1,083,999 29,042 1,054,957 . .4218
From: To: Expense Limitation
November 1, 1991 February 31, 1992 .55%
March 1, 1992 July 31, 1992 .60%
August 1, 1992 -- --
The table below shows the management fees paid to FMR by each
bond fund and the net management fee as a percentage of the funds' average
net assets for the periods ending December 31, 1994, 1993, and 1992.
Management Fees as a %
Michigan High Yield Management Fees of Average Net Assets
1994 $ 2,071,121 .4090
1993 2,196,049 .4152
1992 1,769,110 .4216
Management Fees as a %
Minnesota Tax-Free Management Fees of Average Net Assets
1994 $ 1,277,538 .4089
1993 1,328,626 .4152
1992 1,075,503 .4216
Management Fees as a %
Ohio High Yield Management Fees of Average Net Assets
1994 $ 1,643,714 .4090
1993 1,801,750 .4076
1992 1,514,871 .4217
FMR may, from time to time, voluntarily reimburse all or a portion of
each fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase each fund's total returns and yield, and repayment of
the reimbursement by each fund will lower its total returns and yield.
SUB-ADVISER. On behalf of the money market funds, FMR has
entered into sub-advisory agreements with FTX pursuant to which FTX has
primary responsibility for providing portfolio investment management
services to each fund . Under the sub-advisory agreement s dated
February 28, 1992, which were approved by Fidelity Municipal Trust as the
sole shareholder of each fund on February 28, 1992 in conjunction with an
Agreement and Plan of Conversion , FMR pays FTX fees equal to 50%
of the management fee payable to FMR under its management
contract with each fund. The fees paid to FTX are not reduced by any
voluntary or mandatory expense reimbursements that may be in effect from
time to time. For fiscal 1994, 1993, and 1992 , FMR paid FTX total
fees of $392,312 , $335,067, and $476,532 (Michigan money market fund)
and $ 535,819 , $507,616, and $348,861, (Ohio money market fund),
respectively.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a distribution and service plan (the plan) pursuant
to Rule 12b-1 of the Investment Company Act of 1940 (the Rule). The Rule
provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by
each fund under the Rule. Each fund's Board of Trustees has
adopted the p lan to allow the funds and FMR to incur certain
expenses that might be considered to constitute indirect payment by the
fund of distribution expenses. Under each p lan, if the payment of
management fees by a fund to FMR is deemed to be indirect financing
by the fund of the distribution of its shares, such payment is authorized
by the p lan.
Each plan also specifically recognize s that FMR,
either directly or through FDC, may use its management fee revenue, past
profits , or other resources, without limitation, to pay promotional
and administrative expenses in connection with the offer and sale of shares
of the funds. In addition, each plan provide s that FMR may
use its resources, including its management fee revenues, to make payments
to third parties that provide assistance in selling shares of the fund, or
to third parties, including banks, that render shareholder support
services.
Payments made by FMR to third parties during the fiscal years ended
December 31, 1994, 1993, and 1992 amounted to the following:
Third Party Payments
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
Michigan Money Market $ 19,339 $ 20 , 701 $ 20,015
Ohio Money Market $ 89,613 $ 101,895 $ 130,936
Michigan High Yield $ 31,879 $ 28,862 $ 15,924
Minnesota Tax-Free $ 28,477 $ 36,021 $ 49,450
Ohio High Yield $ 3,073 $ 2,753 $ 4,673
</TABLE>
Each fund's plan ha s been approved by the Trustees. As
required by the Rule, the Trustees carefully considered all pertinent
factors relating to the implementation of each p lan prior to its
approval, and have determined that there is a reasonable likelihood that
the p lan will benefit the fund and its shareholders. In
particular, the Trustees noted that each plan does not
authorize payments by the funds other than those made to FMR under its
management contract with the fund. To the extent that each
p lan give s FMR and FDC greater flexibility in
connection with the distribution of shares of the fund, additional sales of
the funds' shares may result. Additionally, certain shareholder
support services may be provided more effectively under each plan by
local entities with whom shareholders have other relationships.
The plans for the money market funds were approved by Fidelity Municipal
Trust on February 28, 1992, as sole shareholder of each fund, pursuant to
an Agreement and Plan of Conversion approved by public shareholders of each
fund on December 11, 1991. The plans for the bond funds were approved by
shareholders of each fund at a special meeting of shareholders on December
30, 1986.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services
or servicing and recordkeeping functions. FDC intends to engage
banks only t o perform such functions. However, changes in federal or
state statutes and regulations pertaining to the permissible activities of
banks and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a bank
were prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the funds
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
Each fund may execute fund 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. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein, and banks and other financial institution s may be
required to register as dealers pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United
Missouri has entered into sub-contracts with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with providing transfer agent and shareholder servicing functions for each
fund . Under the sub-contracts, FSC bears the expense of typesetting,
printing, and mailing prospectuses, statements of additional information,
and all other reports, notices, and statements to shareholders, except
proxy statements. FSC also pays all out-of-pocket expenses associated with
transfer agent services.
United Missouri pays FSC an annual fee of $14.04 (money market funds)
and $26.03 (bond funds) per regular account with a balance of $5,000 or
more, $10.21 (money market funds) and $15.31 (bond funds) per
regular account with a balance of less than $5,000, and a supplemental
activity charge of $2.25 for standing order transactions and $6.11 for
other monetary transactions. The account fee and monetary transaction
charge for accounts set up as Core Accounts in the Fidelity Ultra Service
Account program are $12.61 and $.76, respectively. These fees and charges
are subject to annual cost escalation based on postal rate changes and
changes in wage and price levels as measured by the National Consumer Price
Index for Urban Areas. With respect to institutional client master
accounts, United Missouri pays FSC a per account fees of $95 and monetary
transaction charges of $20 or $17.50, respectively, depending on the nature
of services provided.
Transfer agent fees, including reimbursement for out-of-pocket expenses,
paid to FSC for the fiscal years ended December 31, 1994, 1993, and 1992
are indicated in the table below .
Transfer Agent Fees
1994 1993 1992
Michigan Money Market $ 299,975 $ 254,135 $ 225,456
Ohio Money Market 338,604 305,272 280,459
Michigan High Yield 553,386 578,539 469,320
Minnesota Tax-Free 387,656 415,918 423,704
Ohio High Yield 418,755 452,121 421,882
United Missouri has an additional sub-contract with FSC, pursuant to which
FSC performs the calculations necessary to determine each fund's net asset
value per share and dividends and maintains each fund's accounting records.
The annual fee rates for these pricing and bookkeeping services are
based on the funds ' average net assets , and are presented
in the table below.
Pricing and Bookkeeping Annual Fee Rates
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
$0-$500 Million Greater Than Minimum Maximum
$500 Million Per Year Per Year
money market funds .0175% .0075% $ 20,000 $ 750,000
bond funds .04% .02% $ 45,000 $ 750,000
</TABLE>
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid to FSC for the fiscal years ended December 31, 1994, 1993,
and 1992 are indicated in the table below.
Pricing and Bookkeeping Fees
1994 1993 1992
Michigan Money Market $ 40,958 $ 33,742 $ 40,408
Ohio Money Market 60,657 53,555 64,508
Michigan High Yield 216,724 230,745 206,410
Minnesota Tax-Free 135,450 126,835 126,291
Ohio High Yield 178,407 174,640 186,181
The transfer agent fees and charges and pricing and bookkeeping fees
described above are paid to FSC by United Missouri, which is entitled to
reimbursement from the fund s for these expenses.
For the money market funds, FSC has entered into an agreement with Fidelity
Brokerage Services, Inc. (FBSI), a subsidiary of FMR Corp., pursuant to
which FBSI performs certain recordkeeping, communication, and other
services for money market fund shareholders participating in the
Fidelity Ultra Service Account program. FBSI directly charges each Ultra
Service Account client that chooses the enhanced features, an
administrative fee at a rate of $5.00 per month for these services, which
is in addition to the transfer agency fee received by FSC. Administrative
fees paid to FBSI by money market fund shareholders participating in
the Fidelity Ultra Service Account program amounted to approximately
$8,465 and $7,730 for Michigan Money Market and Ohio Money Market,
respectively, for fiscal 1994.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. Each distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Michigan Tax-Free High Yield Portfolio,
Fidelity Minnesota Tax-Free Portfolio, and Fidelity Ohio Tax-Free High
Yield Portfolio are funds (series) of Fidelity Municipal Trust (the
Massachusetts trust) , is an open-end management investment company
originally organized as a Maryland corporation on November 22, 1976
and was reorganized as a Massachusetts business trust, at which time
its name changed from Fidelity Municipal Bond Fund, Inc. to Fidelity
Municipal Bond Fund. On March 1, 1986, the trust's name was changed to
Fidelity Municipal Trust to reflect the multiple funds within the trust.
Currently, there are seven f unds of the trust: Fidelity Municipal
Bond Fund, Fidelity Aggressive Tax-Free Fund, Fidelity Insured Tax-Free
Fund, Fidelity Ohio Tax-Free High Yield Fund, Fidelity Michigan Tax-Free
High Yield Fund, Fidelity Minnesota Tax-Free Fund, and Spartan Pennsylvania
Municipal High Yield Fund . The Declaration of Trust permits the
Trustees to create additional funds.
Fidelity Michigan Municipal Money Market Portfolio and Fidelity Ohio
Municipal Money Market Portfolio are funds (series) of Fidelity
Municipal Trust II (the Delaware trust) an open-end management
investment company organized as a Delaware business trust on June 20, 1991.
The funds acquired all of the assets of Fidelity Ohio Municipal Money
Market Fund and Fidelity Michigan Municipal Money Market Fund,
respectively, of Fidelity Municipal Trust on February 28, 1992. Currently
there are three funds of Fidelity Municipal Trust II: Fidelity Ohio
Municipal Money Market Fund, Fidelity Michigan Municipal Money Market Fund,
and Spartan Pennsylvania Municipal Money Market Fund. The Trust Instrument
permits the Trustees to create additional funds.
In the event that FMR ceases to be investment adviser to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote
possibility that one fund might become liable for an y misstatement
in its prospectus or statement of additional information about another
fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of their respective trusts. Expenses with respect to
the trusts are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Boards of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
trust is an entity of the type commonly known as "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the Massachusetts trust shall
not have any claim against shareholders except for the payment of the
purchase price of shares and requires that each agreement, obligation, or
instrument entered into or executed by the Massachusetts trust or its
Trustees shall include a provision limiting the obligations created thereby
to the Massachusetts trust and its assets. The Declaration of Trust
provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument also provides that each fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that Trustees are not protected against any liability
to which they would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved
in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the Massachusetts trust, you
receive one vote for each dollar value of net asset value you own. The
shares have no preemptive or conversion rights; voting and dividend rights,
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth
under the respective "Shareholder and Trustee Liability" headings above.
Shareholders representing 10% or more of a trust or one of its funds may,
as set forth in the Declaration of Trust or Trust Instrument, call meetings
of the trust or fund for any purpose related to the trust or fund, as the
case may be, including, in the case of a meeting of an entire trust, the
purpose o f voting on removal of one or more Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund (for the Delaware trust), or by a vote of
the holders of a majority of the trust or fund, as determined by the
current value of each shareholder's investment in the trust or fund (for
the Massachusetts trust); however, the Trustees of the Delaware trust may,
without prior shareholder approval, change the form of the organization of
the Delaware trust by merger, consolidation, or incorporation. If not so
terminated or reorganized, the trusts and their funds will continue
indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware trust to be
incorporated under Delaware law. Each fund of th e Delaware business
trust may also invest all of its assets in another investment
company.
CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
M issouri , is custodian of each funds' assets. The custodian is
responsible for the safekeeping of the fund s' assets and the
appointment of subcustodian banks and clearing agencies. The custodian
takes no part in determining investment policies of the funds or in
deciding which securities are purchased or sold by the funds. The funds
may, however, invest in obligations of the custodian and may purchase
securities from or sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, L.L.P. One Post Office Square, Boston,
Massachusetts ( bond funds) and 1999 Bryan Street, Dallas, Texas
(money market funds), serves as the trusts' independent accountant. The
auditor examines financial statements for the funds and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
Each fund's financial statements and financial highlights for the fiscal
year ended December 31, 1994 are included in each fund ' s
Annual Report, which is a separate report supplied with this Statement of
Additional Information. Each fund ' s financial statements and
financial highlights are incorporated herein by reference.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for, but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Funds at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Funds at a Glance; Investment Principles and
Risks
b .............................. Investment Principals and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page: The Funds at a Glance; Doing
Business with Fidelity; Charter
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
. *
ii............................
..
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. *
c .............................. Transaction Details; Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ Descrption of the Trusts
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR, Portfolio Transactions
ii ............................ Trustees and Officers
iii ............................ Management Contracts
b ............................ Management Contracts
c, d ............................ Interests of FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plans
g ............................ *
h ............................ Description of the Trusts
i ............................ Interests of FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trusts
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interests of FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how each
fund invests and the services available to shareholders.
To learn more about each fund and its investments, you can obtain a copy of
the funds' most recent financial reports and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated February 19,1995.
The SAI has been filed with the Securities and Exchange Commission (SEC)
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of either document, call Fidelity at
1-800-544-8888.
Investments in the money market fund are neither insured nor guaranteed by
the U.S. government, and there can be no assurance that the fund will
maintain a stable $1.00 share price.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
PFR-pro-295
Each fund seeks a high level of current income free from federal income tax
and Pennsylvania personal income tax.
SPARTAN(REGISTERED TRADEMARK)
PENNSYLVANIA
MUNICIPAL
FUNDS
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET invests in high-quality,
short-term municipal money market securities and is designed to maintain a
stable $1.00 share price.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD seeks to provide higher yields by
investing in a broader range of municipal securities.
PROSPECTUS
FEBRUARY 19, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
CONTENTS
KEY FACTS THE FUNDS AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES Each fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of each fund's financial data.
PERFORMANCE How each fund has
done over time.
THE FUNDS IN DETAIL CHARTER How each fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
Each fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUNDS AT A GLANCE
GOAL: High current tax-free income for Pennsylvania residents.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the management
arm of Fidelity Investments, which was established in 1946 and is now
America's largest mutual fund manager. FMR Texas Inc. (FTX), a subsidiary
of FMR, chooses investments for Spartan Pennsylvania Municipal Money
Market.
As with any mutual fund, there is no assurance that a fund will
achieve its goal.
SPARTAN PENN MONEY MARKET
STRATEGY: Invests in high-quality, short-term municipal money market
securities whose interest is free from federal income tax and Pennsylvania
personal income tax, while maintaining a stable $1.00 share price.
SIZE: As of December 31, 1994, the fund had over $257 million in
assets.
SPARTAN PENN HIGH YIELD
STRATEGY: Invests mainly in longer-term, investment-grade municipal
securities whose interest is free from federal income tax and Pennsylvania
personal income tax.
SIZE: As of December 31, 1994, the fund had over $ 241 million in
assets.
WHO MAY WANT TO INVEST
These non-diversified funds may be appropriate for investors in higher tax
brackets who seek high current income that is free from federal income tax
and Pennsylvania personal income tax. Each fund's level of risk and
potential reward depend on the quality and maturity of its investments.
Spartan Pennsylvania Municipal Money Market is managed to keep its
share price stable at $1.00. Spartan Pennsylvania Municipal High Yield,
with its broader range of investments, has the potential for higher yields,
but also carries a higher degree of risk. You should consider your
investment objective and tolerance for risk when making an investment
decision.
The value of the funds' investments and the income they generate will vary
from day to day and generally reflect interest rates, market conditions,
and other federal and state political and economic news. When you sell your
shares of Spartan Pennsylvania Municipal High Yield, they may be worth more
or less than what you paid for them. By themselves, these funds do not
constitute a balanced investment plan.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Spartan
Pennsylvania Municipal Money
Market is in the MONEY
MARKET category, and Spartan
Pennsylvania Municipal High
Yield is in the INCOME
category.
(right arrow) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly
in stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy ,
sell , or hold shares of a fund. See pages and for more
information.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Redemption fee (as a % of amount redeemed
on shares held less than 180 days)
for Spartan Pennsylvania Municipal Money Market None
for Spartan Pennsylvania Municipal High Yield .50%
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written (available
for Spartan Pennsylvania Municipal
Money Market) $2.00
Account closeout fee $5.00
Annual account maintenance fee
(for accounts under $2,500) $12.00
THESE FEES ARE WAIVED (except for the redemption fee) if your account
balance at the time of the transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of each fund's assets. Each
fund pays a management fee to FMR. Expenses are factored into each fund's
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
SPARTAN PENN MONEY MARKET
Management fee .50%
12b-1 fee None
Other expenses .0 0%
Total fund operating expenses .50%
SPARTAN PENN HIGH YIELD
Management fee .55%
12b-1 fee None
Other expenses .0 0%
Total fund operating expenses .55%
EXAMPLES: Let's say, hypothetically, that each fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
SPARTAN PENN MONEY MARKET
Account Account
open closed
After 1 year $ 5 $ 10
After 3 years $ 16 $ 21
After 5 years $ 28 $ 33
After 10 years $ 63 $ 68
SPARTAN PENN HIGH YIELD
Account Account
open closed
After 1 year $ 6 $ 11
After 3 years $ 18 $ 23
After 5 years $ 31 $ 36
After 10 years $ 69 $ 74
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
FINANCIAL HIGHLIGHTS
The tables that follow are included in the funds' Annual Report and have
been audited by Coopers & Lybrand L.L.P., independent accountants. Their
reports on the financial statements and financial highlights are included
in the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the funds' Statement
of Additional Information.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
73.Selected Per-Share
Data and Ratios
74.Years ended 1986B 1987 1988 1989 1990 1991 1992 1993 1994
December 31
75.Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
value,
beginning of
period
76.Income .015 .042 .049 .062 .059 .045 .029 .022 .026
from
Investment
Operations
Net interest
income
77. Dividends (.015) (.042) (.049) (.062) (.059) (.045) (.029) (.022) (.026)
from
net interest
income
78.Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
value,
end of period
79.Total 1.51 4.27 5.05 6.35 6.05 4.55 2.90 2.21 2.61
returnC % % % % % % % % %
80.Net assets, $ 19,00 $ 64,18 $ 117,0 $ 176,9 $ 319,9 $ 289,8 $ 243,3 $ 240,9 $ 257,6
end of 1 0 79 98 82 26 35 83 08
period (000
omitted)
81.Ratio of .30 .50 .30 .28 .13 .34 .47 .50 .50
expenses to %A % % % % % % % %
average net
assets
82.Ratio of 2.14 .85 .79 .73 .57 .50 .50 .50 .50
expenses to %A % % % % % % % %
average net
assets before
expense
reductions
83.Ratio of net 3.73 4.26 5.02 6.17 5.92 4.47 2.88 2.19 2.58
interest income %A % % % % % % % %
to average
net assets
</TABLE>
A ANNUALIZED.
B FROM AUGUST 6, 1986 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1986.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
84.Selected Per-Share
Data and Ratios
85.Years ended 1986B 1987 1988 1989 1990 1991 1992 1993 1994
December 31
86.Net asset $ 10.00 $ 10.35 $ 9.070 $ 9.660 $ 9.900 $ 9.880 $ 10.37 $ 10.59 $ 11.13
value, 0 0 0 0 0
beginning of
period
87.Income .270 .695 .661 .676 .701 .701 .693 .679 .652
from
Investment
Operations
Net interest
income
88. Net .350 (1.280) .590 .240 (.020) .489 .219 .679 (1.201)
realized and
unrealized
gain (loss)
on
investments
89. Total from .620 (.585) 1.251 .916 .681 1.190 .912 1.358 (.549)
investment
operations
90.Less (.270) (.695) (.661) (.676) (.701) (.701) (.693) (.679) (.652)
Distributions
From net
interest
income
91. From net -- -- -- -- -- -- -- (.140) (.310)
realized
gain on
investments
92. Total (.270) (.695) (.661) (.676) (.701) (.701) (.693) (.819) (.962)
distributions
93. Redempti -- -- -- -- -- .001 .001 .001 .001
on fees
added to paid
in capital
94.Net asset $ 10.35 $ 9.070 $ 9.660 $ 9.900 $ 9.880 $ 10.37 $ 10.59 $ 11.13 $ 9.620
value, 0 0 0 0
end of period
95.Total 6.23% (5.73) 14.21 9.80% 7.20% 12.49 9.11% 13.18 (5.04)
returnC % % % % %
96.Net assets, $ 7,904 $ 41,65 $ 62,50 $ 104,2 $ 142,9 $ 199,4 $ 242,3 $ 306,2 $ 241,7
end of period 6 9 02 06 99 75 46 29
(000 omitted)
97.Ratio of .30% .63% .84% .78% .60% .55% .55% .55% .55%
expenses to A
average net
assets
98.Ratio of 2.45% 1.08% .96% .82% .66% .55% .55% .55% .55%
expenses to A
average net
assets before
expense
reductions
99.Ratio of net 6.66% 7.28% 7.05% 6.90% 7.22% 6.96% 6.65% 6.13% 6.33%
interest income A
to average
net assets
100.Portfolio 38% 54% 31% 23% 8% 6% 8% 38% 26%
turnover rate A
</TABLE>
A ANNUALIZED.
B FROM AUGUST 6, 1986 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1986.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL
RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIODS SHOWN.
PERFORMANCE
Mutual fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of any transaction fees you may have paid. The
figures would be lower if fees were taken into account.
Each fund's fiscal year runs from January 1 through December 31. The tables
below show each fund's performance over past fiscal years compared to a
measure of inflation. The charts on page illustrate the yields of
these funds .
SPARTAN PENN MONEY MARKET
Fiscal periods Pas Past Life
ended t 1 5 of
December 31, yea year fund
1994 r s A
Average 2.61 3.66 4.21
annual % % %
total return
Cumulative 2.61 19.67 41.51
total return % % %
Consumer 2.67 3.49 3.78
Price % % %
Index (average
annual)
Consumer 2.67 18.72 36.71
Price % % %
Index
(cumulative)
SPARTAN PENN HIGH YIELD
Fiscal periods Pas Past Life
ended t 1 5 of
December 31, yea year fund
1994 r s A
Average -5.04 7.18 7.07
annual % % %
total return
Cumulative -5.04 41.42 77.61
total return % % %
Consumer 2.67 3.49 3.78
Price % % %
Index (average
annual)
Consumer 2.67 18.72 36.71
Price % % %
Index
(cumulative)
A FROM AUGUST 6, 1986
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a fund over a given
period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. Seven-day
yields are the most common
illustration of money market
performance. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions, and
any change in a fund's share
price.
(checkmark)
YIELD refers to the income generated by an investment in a fund over a
given period of time, expressed as an annual percentage rate. When a money
market fund yield assumes that income earned is reinvested, it is called an
EFFECTIVE YIELD. A TAX-EQUIVALENT YIELD shows what an investor would have
to earn before taxes to equal a tax-free yield. Yields for the bond fund
are calculated according to a standard that is required for all stock and
bond funds. Because this differs from other accounting methods, the quoted
yield may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
The funds' recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
101.SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
7-day yields
Percentage (%)
Row: 1, Col: 1, Value: 2.1
Row: 1, Col: 2, Value: 1.81
Row: 2, Col: 1, Value: 2.2
Row: 2, Col: 2, Value: 1.87
Row: 3, Col: 1, Value: 2.3
Row: 3, Col: 2, Value: 1.96
Row: 4, Col: 1, Value: 2.29
Row: 4, Col: 2, Value: 1.98
Row: 5, Col: 1, Value: 2.4
Row: 5, Col: 2, Value: 2.13
Row: 6, Col: 1, Value: 2.02
Row: 6, Col: 2, Value: 1.79
Row: 7, Col: 1, Value: 2.14
Row: 7, Col: 2, Value: 1.86
Row: 8, Col: 1, Value: 2.28
Row: 8, Col: 2, Value: 1.97
Row: 9, Col: 1, Value: 2.47
Row: 9, Col: 2, Value: 2.16
Row: 10, Col: 1, Value: 2.23
Row: 10, Col: 2, Value: 1.95
Row: 11, Col: 1, Value: 2.16
Row: 11, Col: 2, Value: 1.91
Row: 12, Col: 1, Value: 2.41
Row: 12, Col: 2, Value: 2.13
Row: 13, Col: 1, Value: 1.96
Row: 13, Col: 2, Value: 1.71
Row: 14, Col: 1, Value: 2.19
Row: 14, Col: 2, Value: 1.93
Row: 15, Col: 1, Value: 2.0
Row: 15, Col: 2, Value: 1.74
Row: 16, Col: 1, Value: 2.37
Row: 16, Col: 2, Value: 2.15
Row: 17, Col: 1, Value: 2.55
Row: 17, Col: 2, Value: 2.31
Row: 18, Col: 1, Value: 2.42
Row: 18, Col: 2, Value: 2.22
Row: 19, Col: 1, Value: 2.64
Row: 19, Col: 2, Value: 2.25
Row: 20, Col: 1, Value: 2.9
Row: 20, Col: 2, Value: 2.56
Row: 21, Col: 1, Value: 3.11
Row: 21, Col: 2, Value: 2.78
Row: 22, Col: 1, Value: 2.85
Row: 22, Col: 2, Value: 2.6
Row: 23, Col: 1, Value: 3.38
Row: 23, Col: 2, Value: 3.09
Row: 24, Col: 1, Value: 4.21
Row: 24, Col: 2, Value: 3.83
Spartan Penn
Money Market
1993
1994
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
30-day yields
Percentage (%)
Row: 1, Col: 1, Value: 6.119999999999999
Row: 1, Col: 2, Value: 5.23
Row: 2, Col: 1, Value: 5.59
Row: 2, Col: 2, Value: 4.89
Row: 3, Col: 1, Value: 5.84
Row: 3, Col: 2, Value: 4.75
Row: 4, Col: 1, Value: 5.8
Row: 4, Col: 2, Value: 4.92
Row: 5, Col: 1, Value: 5.72
Row: 5, Col: 2, Value: 4.88
Row: 6, Col: 1, Value: 5.59
Row: 6, Col: 2, Value: 4.75
Row: 7, Col: 1, Value: 5.68
Row: 7, Col: 2, Value: 4.76
Row: 8, Col: 1, Value: 5.49
Row: 8, Col: 2, Value: 4.68
Row: 9, Col: 1, Value: 5.46
Row: 9, Col: 2, Value: 4.54
Row: 10, Col: 1, Value: 5.37
Row: 10, Col: 2, Value: 4.42
Row: 11, Col: 1, Value: 5.58
Row: 11, Col: 2, Value: 4.44
Row: 12, Col: 1, Value: 5.46
Row: 12, Col: 2, Value: 4.48
Row: 13, Col: 1, Value: 5.38
Row: 13, Col: 2, Value: 4.430000000000001
Row: 14, Col: 1, Value: 5.6
Row: 14, Col: 2, Value: 4.6
Row: 15, Col: 1, Value: 6.14
Row: 15, Col: 2, Value: 4.970000000000001
Row: 16, Col: 1, Value: 6.3
Row: 16, Col: 2, Value: 5.09
Row: 17, Col: 1, Value: 6.29
Row: 17, Col: 2, Value: 5.109999999999999
Row: 18, Col: 1, Value: 6.25
Row: 18, Col: 2, Value: 5.109999999999999
Row: 19, Col: 1, Value: 6.29
Row: 19, Col: 2, Value: 5.02
Row: 20, Col: 1, Value: 6.35
Row: 20, Col: 2, Value: 5.06
Row: 21, Col: 1, Value: 6.45
Row: 21, Col: 2, Value: 5.2
Row: 22, Col: 1, Value: 6.67
Row: 22, Col: 2, Value: 5.38
Row: 23, Col: 1, Value: 7.01
Row: 23, Col: 2, Value: 5.72
Row: 24, Col: 1, Value: 6.91
Row: 24, Col: 2, Value: 5.619999999999999
Spartan Penn
High Yield
1993
1994
THE TOP CHART SHOWS THE 7-DAY EFFECTIVE YIELD FOR THE MONEY MARKET
FUND
AS OF THE LAST TUESDAY OF EACH MONTH FROM JANUARY 1993 THROUGH
DECEMBER 1994. THE BOTTOM CHART SHOWS THE 30-DAY ANNUALIZED NET
YIELDS FOR THE HIGH YIELD FUND AS OF THE LAST DAY OF EACH
MONTH DURING THE
SAME PERIOD.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money
and invests it toward a specified goal. In technical terms, Spartan
Pennsylvania Municipal Money Market is currently a non-diversified fund of
Fidelity Municipal Trust II, and Spartan Pennsylvania Municipal High Yield
is currently a non-diversified fund of Fidelity Municipal Trust. Both
trusts are open-end management investment companies. Fidelity Municipal
Trust II was organized as a Delaware business trust on June 20, 1991.
Fidelity Municipal Trust was organized as a Massachusetts business trust on
June 22, 1984. There is a remote possibility that one fund might become
liable for a misstatement in the prospectus about another fund.
EACH FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the funds' activities,
review contractual arrangements with companies that provide services to the
funds, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These
meetings may be called to elect or remove trustees, change fundamental
policies, approve a management contract, or for other purposes.
Shareholders not attending these meetings are encouraged to vote by proxy.
Fidelity will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. For the money market fund,
you are entitled to one vote for each share you own. For the bond fund, the
number of votes you are entitled to is based upon the dollar value of your
investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $ 250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The funds are managed by FMR, which chooses their investments and handles
their business affairs. FTX has primary responsibility for providing
investment management services for Spartan Pennsylvania Municipal Money
Market.
Steven Harvey is manager of Spartan Pennsylvania Municipal High Yield,
which he has managed since October 1993. Mr. Harvey also manages Minnesota
Tax-Free and Spartan Maryland Municipal Income. Previously, he was an
analyst following tax-free bonds. Mr. Harvey joined Fidelity in 1986.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets Fidelity's
funds and services. Fidelity Service Co. (FSC) performs transfer agent
servicing functions for the funds.
FMR Corp. is the parent company of FMR and FTX. Through ownership of voting
common stock, members of the Edward C. Johnson 3d family form a controlling
group with respect to FMR Corp. Changes may occur in the Johnson family
group, through death or disability, which would result in changes in each
individual family member's holding of stock. Such changes could result in
one or more family members becoming holders of over 25% of the stock. FMR
Corp. has received an opinion of counsel that changes in the composition of
the Johnson family group under these circumstances would not result in the
termination of the funds' management or distribution contracts and,
accordingly, would not require a shareholder vote to continue operation
under those contracts.
United Missouri Bank, N.A., is each fund's transfer agent, although it
employs FSC to perform these functions for the funds. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the funds' transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that a fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
SPARTAN PENNSYLVANIA MONEY MARKET seeks to earn high current income that is
free from federal income tax and Pennsylvania personal income tax while
maintaining a stable $1.00 share price by investing in high-quality,
short-term municipal money market securities of all types. FMR normally
invests at least 65% of the fund's total assets in state tax-free
securities, and normally invests so that at least 80% of its income
distributions are free from federal income tax.
When you sell your shares, they should be worth the same amount as when you
bought them. Of course, there is no guarantee that the fund will maintain a
stable $1.00 share price. The fund follows industry-standard guidelines on
the quality and maturity of its investments, which are designed to help
maintain a stable $1.00 share price. The fund will purchase only
high-quality securities that FMR believes present minimal credit risks and
will observe maturity restrictions on securities it buys. It is possible
that a major change in interest rates or a default on the fund's
investments could cause its share price (and the value of your investment)
to change.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD seeks high current income that is
free from federal income tax and Pennsylvania personal income tax by
investing primarily in municipal securities judged by FMR to be of
investment-grade quality, although it can also invest in some lower quality
securities. The fund has no restrictions on maturity but it generally
invests in medium and long-term bonds and maintains a dollar-weighted
average maturity of 15 years or longer. FMR normally invests so that at
least 80% of the fund's income is free from federal and Pennsylvania
personal income taxes.
EACH FUND'S performance is affected by the economic and political
conditions within the state of Pennsylvania. In particular, Pennsylvania
has been historically identified as a heavy industry state, although that
reputation has somewhat changed recently, as the industrial composition of
the Commonwealth diversified when the coal, steel, and railroad industries
began to decline. However, the state's continued dependence on industry has
made the state's economy vulnerable to cyclical fluctuations, foreign
imports, and environmental concerns.
The money market fund stresses income, preservation of capital, and
liquidity. The bond fund seeks to provide a higher level of income by
investing in a broader range of securities. Each fund's yield and the bond
fund's share price change daily and are based on interest rates, market
conditions, other economic and political news, and on the quality and
maturity of its investments. In general, bond prices rise when interest
rates fall, and vice versa. This effect is usually more pronounced for
longer-term securities. Lower-quality securities offer higher yields, but
also carry more risk. FMR may use various investment techniques to hedge
the bond fund's risks, but there is no guarantee that these strategies will
work as intended. When you sell your shares of the bond fund, they may be
worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that each fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests each fund's assets according to its investment
strategy. The funds do not expect to invest in federally taxable
obligations, and Spartan Pennsylvania Municipal High Yield does not expect
to invest in state taxable obligations. Each fund also reserves the right
to invest without limitation in short-term instruments, to hold a
substantial amount of uninvested cash, or to invest more than normally
permitted in taxable obligations for temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which a fund may invest, and strategies FMR may employ in
pursuit of a fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. A complete listing of each fund's policies
and limitations and more detailed information about the funds' investments
is contained in the funds' SAI. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
funds achieve their goals. Current holdings and recent investment
strategies are described in the funds' financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "municipal junk bonds")
often have speculative characteristics, and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness.
The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of
general or regional economic difficulty.
The table on page 14 provides a summary of ratings assigned to debt
holdings (not including money market instruments) in Spartan Pennsylvania
Municipal High Yield's portfolio. These figures are dollar-weighted
averages of month-end portfolio holdings during fiscal 1994, and are
presented as a percentage of total security investments. These percentages
are historical and do not necessarily indicate the fund's current or future
debt holdings.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
Fiscal 1994 Debt Holdings, by Rating MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 37.5 % AA 51.5 %
Upper-medium grade A A
Medium grade Baa 23.1 % BBB 14.6 %
LOWER QUALITY
Moderately speculative Ba 8.1 % BB 3.0 %
Speculative B 0.0 % B 0.1 %
Highly speculative Caa 0.0 % CCC 0.0 %
Poor quality Ca 0.0 % CC 0.0 %
Lowest quality, no interest C C
In default, in arrears -- D 0.0 %
68.7 % 69.2 %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO 20.7 %. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER-QUALITY ACCOUNT
FOR
19.2 % OF THE FUND'S TOTAL SECURITY INVESTMENTS. REFER TO THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF
THESE RATINGS.
RESTRICTIONS: Spartan Pennsylvania Municipal High Yield does not currently
intend to invest more than one-third of its assets in bonds judged by FMR
to be of equivalent quality to those rated Ba or lower by Moody's and BB or
lower by S&P, and does not currently intend to invest in bonds of
equivalent quality to bonds rated lower than B. The fund does not currently
intend to invest in bonds rated below Caa by Moody's or CCC by S&P.
MONEY MARKET SECURITIES are high-quality, short-term investments issued by
municipalities, local and state governments, and other entities. These
investments may carry fixed, variable, or floating interest rates.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
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. A security's credit may be enhanced by a bank,
insurance company, or other entity . A fund may own a municipal
security directly or through a participation interest.
STATE TAX-FREE SECURITIES include municipal obligations issued by the
Commonwealth of Pennsylvania or its counties, municipalities, authorities,
or other subdivisions. The ability of issuers to repay their debt can be
affected by many factors that impact the economic vitality of either the
state or a region within the state.
Other state tax-free securities include obligations of the U.S. territories
and possessions such as Guam, the Virgin Islands, and Puerto Rico, and
their political subdivisions and public corporations. The economy of Puerto
Rico is closely linked to the U.S. economy, and will be affected by the
strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation revised these incentives, but the government of Puerto Rico
anticipates only a slight reduction in the average real growth rates for
the economy.
STRUCTURED SECURITIES employ a trust or other similar structure to modify
the maturity, price characteristics or quality of financial assets. If the
structure does not perform as intended, adverse tax or investment
consequences may result.
RESTRICTIONS: Spartan Pennsylvania Municipal Money Market may not purchase
structured securities which are inconsistent with the fund's goal of
maintaining a stable share price.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
RESTRICTIONS: Spartan Pennsylvania Municipal Money Market may not purchase
certain types of variable and floating rate securities which are
inconsistent with the fund's goal of maintaining a stable share price.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include zero coupon bonds, and
commercial paper.
PUT FEATURES entitle the holder to put (sell back) a security to the issuer
or a financial intermediary. In exchange for this benefit, the funds may
pay periodic fees or accept a lower interest rate. The credit quality of
the investment may be affected by the creditworthiness of the put provider.
Demand features, standby commitments and tender options are types of put
features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include interests in pools of purchase
contracts, financing leases, or sales agreements entered into by
municipalities. These securities usually rely on continued payments by a
municipality, and may also be subject to prepayment risk.
ADJUSTING INVESTMENT EXPOSURE. A fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of a fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
RESTRICTIONS: Spartan Pennsylvania Municipal Money Market may not use
investment techniques which are inconsistent with the fund's goal of
maintaining a stable share price.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities, including illiquid securities, may be subject
to legal restrictions. Difficulty in selling securities may result in a
loss or may be costly to a fund.
RESTRICTIONS: A fund may not purchase a security if, as a result, more than
10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect a fund's yield or the market value of its assets.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type. A fund that is not diversified may be more sensitive to
these changes, and also to changes in the market value of a single issuer
or industry.
RESTRICTIONS: The funds are considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, a fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. These limitations do not apply to U.S. government
securities. A fund may invest more than 25% of its total assets in tax-free
securities that finance similar types of projects.
BORROWING. A fund may borrow from banks or from other funds advised by FMR,
or through reverse repurchase agreements. If a bond fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: A fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraphs restate all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraphs, can be changed without shareholder approval.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET seeks as high a level of
current income, exempt from federal income tax and Pennsylvania personal
income tax, as is consistent with preservation of capital. The fund will
normally invest so that at least 80% of its income distributions are exempt
from federal income tax.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD seeks as high a level of current
income, exempt from federal income tax and Pennsylvania personal income
tax, as is consistent with its investment characteristics. The fund will
normally invest so that at least 80% of its income is exempt from federal
and Pennsylvania income taxes. FMR anticipates that the fund ordinarily
will be fully invested in obligations whose interest is exempt from federal
income tax and Pennsylvania personal income tax. The fund invests primarily
in municipal bonds judged by FMR to be of investment-grade quality,
although it may invest up to one-third of its assets in lower quality
bonds. The fund may not purchase bonds that are judged by FMR to be of
equivalent quality to those rated lower than B.
EACH FUND may borrow only for temporary or emergency purposes, but not in
an amount exceeding 33% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the funds pay fees related to their daily
operations. Expenses paid out of a fund's assets are reflected in its share
price or dividends; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to an affiliate who provides
assistance with these services for Spartan Pennsylvania Municipal Money
Market.
FMR may, from time to time, agree to reimburse the funds for management
fees above a specified limit. FMR retains the ability to be repaid by a
fund if expenses fall below the specified limit prior to the end of the
fiscal year. Reimbursement arrangements, which may be terminated at any
time without notice, can decrease a fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. Each fund
pays a management fee at a fixed annual rate of its average net assets:
.50% for Spartan Pennsylvania Municipal Money Market and .55% for Spartan
Pennsylvania Municipal High Yield.
FMR HAS A SUB-ADVISORY AGREEMENT with FTX, which has primary responsibility
for providing investment management for Spartan Pennsylvania Municipal
Money Market, while FMR retains responsibility for providing other
management services. FMR pays FTX 50% of its management fee (before expense
reimbursements) for these services.
FSC performs many transaction and accounting functions for the funds. These
services include processing shareholder transactions and calculating each
fund's share price. FMR, and not the funds, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and, for Spartan Pennsylvania Municipal Money
Market, the $2.00 checkwriting charge. For fiscal 1994, these fees amounted
to $3,060, $1,357, $355, and $5,548, respectively, for Spartan
Pennsylvania Municipal Money Market and $3,969, $1,805, and $310 ,
respectively, for Spartan Pennsylvania Municipal High Yield.
Each fund has adopted a Distribution and Service Plan. These plans
recognize that FMR may use its resources, including management fees, to pay
expenses associated with the sale of fund shares. This may include payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of the fund's shares. It is
important to note, however, that the funds do not pay FMR any separate fees
for this service.
For fiscal 1994, the portfolio turnover rate for Spartan Pennsylvania
Municipal High Yield was 26 %. This rate varies from year to year .
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in a fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in a fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
EACH FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. Spartan Pennsylvania Municipal Money Market is managed to
keep its share price stable at $1.00. Each fund's shares are sold without a
sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(small solid bullet) Mail in an application with a check, or
(small solid bullet) Open your account by exchanging from another Fidelity
fund.
If you buy shares by check or Fidelity Money Line(registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Spartan Penn Money Market $25,000
TO ADD TO AN ACCOUNT $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Spartan Penn Money Market $10,000
UNDERSTANDING THE
SPARTAN APPROACH(registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to the complete
check payable to the name of the fund.
complete name of the Indicate your fund
fund of your choice. account number on
Mail to the address your check and mail to
indicated on the the address printed on
application. your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (small solid bullet) Bring your application (small solid bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify the complete
Bank Routing name of the fund and
#021001033, include your account
Account #00163053. number and your
Specify the complete name.
name of the fund and
include your new
account number and
your name.
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Automatically (automatic_graphic) (small solid bullet) Not available. (small solid bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account ($10,000 for Spartan Pennsylvania Municipal
Money Market) to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the table
at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account in Spartan Pennsylvania Municipal
Money Market, you may write an unlimited number of checks. Do not, however,
try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOU SELL SHARES OF SPARTAN PENN HIGH YIELD AFTER HOLDING THEM LESS THAN 180 DAYS,
THE FUND WILL DEDUCT A REDEMPTION FEE EQUAL TO .50% OF THE VALUE OF THOSE SHARES. IF
YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION
TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE,
AND ACCOUNT CLOSEOUT.
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<TABLE>
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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (small solid bullet) Minimum check: $1,000.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
<TABLE>
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<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the funds, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of a fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
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<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE BOND FUND SHARE PRICES FLUCTUATE, THAT FUND MAY NOT BE AN
APPROPRIATE CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each fund distributes substantially all of its net investment income and
capital gains, if any, to shareholders each year. Income dividends are
declared daily and paid monthly. Capital gains earned by the bond fund are
normally distributed in February and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. Each fund offers four
options (three for Spartan Pennsylvania Municipal Money Market):
5. REINVESTMENT OPTION. Your dividend and capital gain distributions, if
any, will be automatically reinvested in additional shares of the fund. If
you do not indicate a choice on your application, you will be assigned this
option.
6. INCOME-EARNED OPTION. Your capital gain distributions, if any, will be
automatically reinvested, but you will be sent a check for each dividend
distribution. This option is not available for Spartan Pennsylvania
Municipal Money Market.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions, if any.
8. DIRECTED DIVIDENDS(registered trademark) OPTION. Your dividend and
capital gain distributions, if any, will be automatically invested in
another identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions, if any, will be reinvested at the NAV as
of the date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days, or longer for a December
ex-dividend date.
TAXES
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS. Money
market funds usually don't
make capital gain
distributions.
(checkmark)
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the funds' tax implications.
TAXES ON DISTRIBUTIONS. Interest income that a fund earns is distributed to
shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. Each fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
To the extent that a fund's distributions are derived from interest on
state tax-free investments, they will be free from the Pennsylvania
personal income tax. Capital gain distributions from the funds will be
fully taxable for purposes of the Pennsylvania personal income tax.
Distributions from the fund will also be exempt from the Philadelphia
School District investment income tax for individuals who are residents of
the City of Philadelphia to the extent that such distributions are derived
from interest on state tax-free investments, or to the extent that such
distributions are designated as capital gain dividends for federal income
tax purposes. Investments in the funds may be free from the
Pennsylvania county and Pittsburgh city and School District personal
property taxes.
During fiscal 1994, 100 % of each fund's income dividends was free
from federal income tax and 99.9 % and 100 % were free from
Pennsylvania personal income taxes for Spartan Pennsylvania
Municipal Money Market and Spartan Pennsylvania Municipal High Yield,
respectively. 46.6 % of Spartan Pennsylvania Municipal Money Market's
and 8.8 % of Spartan Pennsylvania Municipal High Yield's income
dividends were subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your bond fund redemptions - including exchanges to
other Fidelity funds - are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a fund deducts a capital
gain distribution from its NAV, you will pay the full price for the shares
and then receive a portion of the price back in the form of a taxable
distribution.
TRANSACTION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates each fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The money market fund values the securities it owns on the basis of
amortized cost. This method minimizes the effect of changes in a security's
market value and helps the fund to maintain a stable $1.00 share price. For
the bond fund, assets are valued primarily on the basis of market
quotations, if available. Since market quotations are often unavailable,
assets are usually valued by a method that the Board of Trustees believes
accurately reflects fair value.
EACH FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require a fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you do not want the
ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. Each fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of a fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) Each fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
cancelled and you could be liable for any losses or fees a fund or its
transfer agent has incurred.
(small solid bullet) Spartan Pennsylvania Municipal Money Market reserves
the right to limit all accounts maintained or controlled by any one person
to a maximum total balance of $2 million.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
1.YOU MAY BUY OR SELL SHARES OF THE FUNDS THROUGH A BROKER, who may charge
you a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when a fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect a fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) Each fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
THE REDEMPTION FEE for Spartan Pennsylvania Municipal High Yield, if
applicable, will be deducted from the amount of your redemption. This fee
is paid to the fund rather than FMR, and it does not apply to shares that
were acquired through reinvestment of distributions. If shares you are
redeeming were not all held for the same length of time, those shares you
held longest will be redeemed first for purposes of determining whether the
fee applies.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(small solid bullet) The $2.00 checkwriting charge will be deducted from
your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of
your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
2.FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
or if total assets in Fidelity funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FSC or FBSI which are registered under the same social
security number or which list the same social security number for the
custodian of a Uniform Gifts/Transfers to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000 ($10,000 for Spartan
Pennsylvania Municipal Money Market), you will be given 30 days' notice to
reestablish the minimum balance. If you do not increase your balance,
Fidelity reserves the right to close your account and send the proceeds to
you. Your shares will be redeemed at the NAV on the day your account is
closed and the $5.00 account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a fund for
shares of other Fidelity funds. However, you should note the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and
any sales charge you have previously paid in connection with the shares you
are exchanging. For example, if you had already paid a sales charge of 2%
on your shares and you exchange them into a fund with a 3% sales charge,
you would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, each fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor who makes more
than four exchanges out of the fund per calendar year. Accounts under
common ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) Each fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if a fund
receives or anticipates simultaneous orders affecting significant portions
of the fund's assets. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to a fund.
Although the funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The funds reserve the right to terminate or modify the exchange privilege
in the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(Registered trademark) PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
A FUND OF FIDELITY MUNICIPAL TRUST
SPARTAN(Registered trademark) PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
A FUND OF FIDELITY MUNICIPAL TRUST II
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 19, 1995
This Statement is not a prospectus but should be read in conjunction with
the funds' current Prospectus (dated February 19, 1995). Please retain this
document for future reference. The funds' financial statements and
financial highlights, included in the Annual Report for the fiscal
year ended December 31, 1994 are incorporated herein by reference. To
obtain an additional copy of the Prospectus or the Annual Report, please
call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Special Factors Affecting Pennsylvania
Special Factors Affecting Puerto Rico
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contracts
Distribution and Service Plans
Interest of FMR Affiliates
Description of the Trusts
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISER (MONEY MARKET FUND ONLY)
FMR Texas Inc. ( FTX )
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
PFR-ptb-295
INVESTMENT POLICIES AND LIMITATIONS
T he 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.
Each fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval.
INVESTMENT LIMITATIONS OF SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET
PORTFOLIO
(MONEY MARKET FUND)
THE FOLLOWING ARE THE MONEY MARKET FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) sell securities short (except by selling futures contracts), unless it
owns, or by virtue of ownership of other securities has the right to
obtain, securities equivalent in kind and amount to the securities sold;
(3) purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, and provided that the fund
may make initial and variation margin payments in connection with the
purchase or sale of futures contracts or of options on futures contracts;
(4) 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;
(5) underwrite securities issued by others, except to the extent that the
purchase of municipal bonds in accordance with the fund's investment
objective, policies, and limitations, either directly from the issuer, or
from an underwriter for an issuer, may be deemed to be underwriting;
(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, 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;
(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) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments;
(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 limit
does not apply to purchases of debt securities or to repurchase
agreements); or
(10) invest in oil, gas or other mineral exploration or development
programs.
IN ADDITION, THE FUND MAY:
(11) 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
objectives, policies, and limitations as the fund.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(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 (4)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(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 invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(v) The fund does not currently intend to purchase or sell futures
contracts or call options. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying
securities, and does not apply to securities that incorporate features
similar to options or futures contracts.
(vi) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
(ix) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's policies on quality and maturity, see the section entitled
"Quality and Maturity" on page .
For purposes of limitations (6) 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.
INVESTMENT LIMITATIONS OF SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD
PORTFOLIO
(HIGH YIELD FUND)
THE FOLLOWING ARE THE HIGH YIELD FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this limit
does not apply to purchases of debt securities or to repurchase agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(x) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (4) and (i), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the high yield fund's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page .
Each fund's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the funds.
AFFILIATED BANK TRANSACTIONS. A fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
QUALITY AND MATURITY. (MONEY MARKET FUND ONLY) Pursuant to procedures
adopted by the Board of Trustees, the fund may purchase only high-quality
securities that FMR believes present minimal credit risks. To be considered
high-quality, a security must be rated in accordance with applicable rules
in one of the two highest categories for short-term securities by at least
two nationally recognized rating services (or by one, if only one rating
service has rated the security); or, if unrated, judged to be of equivalent
quality by FMR.
The fund currently intends to limit its investments to securities with
remaining maturities of 397 days or less, and to maintain a dollar-weighted
average maturity of 90 days or less. When determining the maturity of a
security, the fund may look to an interest rate reset or demand feature.
DELAYED-DELIVERY TRANSACTIONS. Each fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The high yield fund may receive fees for
entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, each fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If a fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a fund has sold a security on a delayed-delivery
basis, the fund does not participate in further gains or losses with
respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could miss
a favorable price or yield opportunity, or could suffer a loss.
Each fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. The high yield fund may purchase securities on a
when-issued basis in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts require the issuer to sell
and the fund to buy refunded municipal obligations at a stated price and
yield on a settlement date that may be several months or several years in
the future. The fund generally will not be obligated to pay the full
purchase price if it fails to perform under a refunding contract. Instead,
refunding contracts generally provide for payment of liquidated damages to
the issuer (currently 15-20% of the purchase price). The fund may secure
its obligations under a refunding contract by depositing collateral or a
letter of credit equal to the liquidated damages provisions of the
refunding contract. When required by SEC guidelines, the fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS. The high yield fund may invest in inverse floaters, which
are instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a
fixed-rate bond. For example, a municipal issuer may decide to issue two
variable-rate instruments instead of a single long-term, fixed-rate bond.
The interest rate on one instrument reflects short-term interest rates,
while the interest rate on the other instrument (the inverse floater)
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by two, minus the interest rate paid on the short-term
instrument. Depending on market availability, the two portions may be
recombined to form a fixed-rate municipal bond. The market for inverse
floaters is relatively new.
STRUCTURED SECURITIES employ a trust or other similar structure to modify
the maturity, price characteristics , or quality of financial assets.
For example, structural features can be used to modify the maturity of a
security , or interest rate adjustment features can be used to
enhance price stability. If the structure does not perform as intended,
adverse tax or investment consequences may result. Neither the Internal
Revenue Service (IRS) nor any other regulatory authority has ruled
definitively on certain legal issues presented by structured securities.
Future tax or other regulatory determinations could adversely affect the
value, liquidity or tax treatment of the income received from these
securities or the nature and timing of distributions made by the funds. The
payment of principal and interest on structured securities may be largely
dependent on the cash flows generated by the underlying financial assets.
VARIABLE AND FLOATING RATE SECURITIES provide for periodic adjustments of
the interest rate paid. Variable rate securities provide for a specified
periodic adjustment in the interest rate, while floating rate securities
have interest rates that change whenever there is a change in a designated
benchmark rate. Some variable or floating rate securities have put
features.
PUT FEATURES entitle the holder to sell a security back to the issuer or a
third party at any time or at specified intervals. They are subject to the
risk that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on
demand by obtaining letters of credit or other guarantees from domestic or
foreign banks. FMR may rely on its evaluation of a bank's credit in
determining whether to purchase a security supported by a letter of credit.
Demand features, standby commitments, and tender options are types of put
features .
TENDER OPTION BONDS are created by coupling an intermediate- or
long-term, fixed-rate, tax-exempt bond (generally held pursuant to a
custodial arrangement) with a tender agreement that gives the holder the
option to tender the bond at its face value. As consideration for providing
the tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, a fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Subject to applicable regulatory requirements, the money market fund
may buy tender option bonds if the agreement gives the fund the right to
tender the bond to its sponsor no less frequently than once every 397 days.
In selecting tender option bonds for the funds, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, a fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. Each fund may
acquire standby commitments to enhance the liquidity of portfolio
securities, but, in the case of the money market fund, only when the
issuers of the commitments present minimal risk of default.
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. Standby commitments will
not affect the dollar-weighted average maturity of the money market fund,
or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the funds; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. Each fund may invest a portion of its assets
in municipal leases and participation interests therein. These obligations,
which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the funds will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives
a fund a specified, undivided interest in the obligation in proportion to
its purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The funds do not intend to invest in
securities whose interest is federally taxable; however, from time to time,
each fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, each fund may invest in obligations whose interest is
federally taxable pending the investment or reinvestment in municipal
securities of proceeds from the sale of its shares or sales of portfolio
securities.
Should a fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The high yield fund's standards for high-quality, taxable
obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard & Poor's Corporation (S&P) in rating corporate obligations within
its two highest ratings of A-1 and A-2. The money market fund will purchase
taxable obligations only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before the Pennsylvania
legislature that would affect the state tax treatment of the funds'
distributions. If such proposals were enacted, the availability of
municipal obligations and the value of the funds' holdings would be
affected and the Trustees would reevaluate the funds' investment objectives
and policies.
Each fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, a fund may hold cash that is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a fund may be required to sell securities at a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell 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 . While it does
not presently appear possible to eliminate all risks from these
transactions (particularly the possibility that the value of the
underlying security will be less than the resale price , as well as
delays and costs to a fund in connection with bankruptcy proceedings), it
is each fund's current policy to engage in repurchase agreement
transactions with parties whose creditworthiness has been reviewed
and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of a fund's
assets and may be viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of a fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of a fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
For the money market fund, FMR may determine some restricted securities and
municipal lease obligations to be illiquid. Investments currently
considered by the high yield fund to be illiquid include over-the-counter
options. Also, FMR may determine some restricted securities and municipal
lease obligations to be illiquid. However, with respect to over-the-counter
options the high yield fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover
the option and the nature and terms of any agreement the fund may have to
close out the option before expiration.
In the absence of market quotations, illiquid investments for the money
market fund are valued for purposes of monitoring amortized cost valuation
and, for the high yield fund, priced at fair value as determined in good
faith by a committee appointed by the Board of Trustees. If through a
changes in values, net assets, or other circumstances, a fund were in a
position where more than 10% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, a fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security. However, in general, the money market fund anticipates
holding restricted securities to maturity or selling them in an exempt
transaction.
INDEXED SECURITIES. The high yield fund may purchase securities whose
prices are indexed to the prices of other securities, securities indicies,
or other financial indicators. Indexed securities typically, but not
always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic.
Indexed securities may have principal payments as well as coupon payments
that depend on the performance of one or more interest rates. Their coupon
rates or principal payments may change by several percentage points for
every 1% interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
LOWER-QUALITY MUNICIPAL SECURITIES. The high yield fund may invest a
portion of its assets in lower-quality municipal securities as described in
the prospectus.
While the market for Pennsylvania municipals is considered to be adequate,
adverse publicity and changing investor perceptions may affect the ability
of outside pricing services used by the fund to value its portfolio
securities, and the fund's ability to dispose of lower-quality bonds. The
outside pricing services are monitored by FMR and reported to the Board to
determine whether the services are furnishing prices that accurately
reflect fair value. The impact of changing investor perceptions may be
especially pronounced in markets where municipal securities are thinly
traded.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
INTERFUND BORROWING PROGRAM. The funds have received permission from
the SEC to lend money to and borrow money from other funds advised by FMR
or its affiliates , but will participate in the interfund borrowing
program only as a borrower . Interfund loans normally will extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice , and the fund may have to borrow from a bank
at a higher interest rate if an interfund loan is called or not
renewed . A fund will borrow through the program only when the
costs are equal to or lower than the cost of bank loans .
HEALTH CARE INDUSTRY. The health care industry is subject to
regulatory action by a number of private and governmental agencies,
including federal, state, and local governmental agencies. A major source
of revenues for the health care industry is payments from the Medicare and
Medicaid programs. As a result, the industry is sensitive to legislative
changes and reductions in governmental spending for such programs. Numerous
other factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
WATER AND SEWER. Water and sewer revenue bonds are often
considered to have relatively secure credit as a result of their issuer's
importance, monopoly status, and generally unimpeded ability to raise
rates. Despite this, lack of water supply due to insufficient rain,
run-off, or snow pack is a concern that has led to past defaults. Further,
costly environmental litigation and Federal environmental mandates are
challenges faced by issuers of water and sewer bonds.
HIGH YIELD FUND ONLY:
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SPECIAL FACTORS AFFECTING PENNSYLVANIA
The following highlights only some of the more significant financial trends
and problems affecting Pennsylvania, and is based on information drawn from
official statements and prospectuses relating to securities offerings of
the Commonwealth of Pennsylvania, its agencies and instrumentalities, 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.
OVERVIEW. Because the funds concentrate their investments in Pennsylvania,
there are risks associated with the funds that would not exist if the
funds' investments were more widely diversified. These risks include the
possible enactment of new legislation in Pennsylvania that could affect
obligations of the state or its political subdivisions, municipalities or
agencies, economic factors that could affect such obligations, and varying
levels of supply and demand for obligations of the Commonwealth and its
political subdivisions, municipalities, and agencies.
CONSTITUTIONAL AND STATUTORY REVENUE LIMITATIONS. The Constitution of
Pennsylvania requires that all taxes shall be uniform, upon the same class
of subjects, within the territorial limits of the authority levying the
tax, and shall be levied and collected under the general laws of the
Commonwealth of Pennsylvania.
The Constitution of Pennsylvania provides that the General Assembly may
exempt from taxation certain persons and property. For instance, the
General Assembly may establish exemption or special tax treatment for
classes based on age, disability, infirmity, or poverty.
Local taxes (other than Philadelphia) are generally authorized under the
Local Tax Enabling Act. This statute generally authorizes, and imposes
limits on, the ability of political subdivisions to impose taxes.
Pennsylvania's political subdivisions consist of counties, municipalities,
and school districts. The Local Tax Enabling Act does not apply to counties
whose taxing authority is limited for the most part to real estate and
personal property taxes. Most Philadelphia taxes (other than real estate
and personal property taxes) are imposed pursuant to the general authority
of the Sterling Act and the Little Sterling Act, applicable to the City and
School District, respectively. Each of these statutes grants broad taxing
powers, but generally prohibits taxing what the Commonwealth taxes. The
Philadelphia business privilege tax is imposed under the authority of the
First Class City Tax Reform Act.
The Pennsylvania Intergovernmental Cooperation Authority Act for cities
of the first class authorizes Philadelphia to enact a combination of a
sales tax, a realty transfer tax or a wage and net profits tax for the
benefit of the Pennsylvania Intergovernmental Cooperation Authority
("PICA"). The PICA tax on wages and net profits reduces the amount of wage
and net profits taxes imposed under the Sterling Act (prior to the
imposition of the PICA tax), so that the combined rate of tax remains the
same. Other local taxes are specially enacted or authorized for certain
classes of localities, including Philadelphia and Pittsburgh.
PENNSYLVANIA TAXES. Although Pennsylvania state taxes had, in general, been
lowered during the 1980s, the fiscal 1992 budget for the Commonwealth
included in excess of $2.7 billion of tax increases, consisting largely of
tax-rate increases and expansion of the existing tax base. Some of the more
significant tax changes include an increase in the personal income tax rate
from 2.1% to 2.8% (with an additional .3% surtax for the period July 1,
1991 through June 30, 1992); an increase in the Pennsylvania corporate net
income tax rate from 8.5% to 10.5% (plus an additional surtax of 1.75%);
repeal of the Pennsylvania corporate net income tax net operating loss
carryover; an increase in the Pennsylvania capital stock/foreign franchise
tax rate from 9.5 mills to 13 mills (dropping to 12.75 mills for taxable
years beginning on or after January 1, 1992); and an expansion of the sales
and use tax base.
The fiscal 1995 budget includes tax reductions totalling an estimated
$166.4 million. Some of the more significant changes include an increase in
the Pennsylvania personal income tax dependent exemption for low income
working families; a reduction in the Pennsylvania corporate net income tax
rate from 12.25% to 9.99% to be phased-in over a period of four years; and
reinstatement of a Pennsylvania corporate net income tax net operating loss
carryover to be phased-in over a period of three years with an annual cap
of $500,000. Several other changes to the Pennsylvania sales tax, the
Pennsylvania inheritance tax and the Pennsylvania capital stock/franchise
tax were also enacted.
GENERAL ECONOMIC CONDITIONS IN PENNSYLVANIA. Historically, the key
industries in Pennsylvania were in the areas of manufacturing and mining,
with steel and coal industries of national importance. These industries
have made Pennsylvania vulnerable not only to cyclical economic
fluctuations, but also to pronounced long-term changes in the nation's
economic structure. In recent years, the state has experienced growth in
the services sector, including trade, medical and health services,
education, and financial institutions. Manufacturing has fallen behind both
the services sector and the trade sector as the largest single source of
employment within the Commonwealth. This growth in the services and trade
sector has helped diversify Pennsylvania's economy and reduce the state's
unemployment rate.
From fiscal 1984, when the Commonwealth first prepared its financial
statements on a generally accepted accounting principles basis, through
fiscal 1989, the Commonwealth reported a positive unreserved fund balance
at the fiscal year-end. Slowing economic growth during fiscal 1990, leading
to a national economic recession beginning in fiscal 1991, reduced revenue
growth and increased expenditures and contributed to negative
unreserved-undesignated fund balances at the end of the 1990 and 1991
fiscal years. The five year period from fiscal 1989 through fiscal 1993 was
also marked by public health and welfare costs growing at a rate double the
growth rate for all state expenditures.
For the fiscal year ended June 30, 1992, the General Fund recorded a
$1.1 billion operating surplus, resulting in an increase of the fund
balance to $87.5 million. The 1993 fiscal year closed with revenues higher
than anticipated and expenditures about as projected, resulting in an
ending unappropriated surplus (on a budgetary basis) of $ 218
million. Cash revenues were $41.5 million above the budget estimate and
totalled $14.6 billion, representing less than a 1% increase over revenues
for the 1992 fiscal year. A reduction in the personal income tax rate in
July, 1992 and revenues from retroactive corporate tax increases received
in fiscal 1992 were responsible for the low rate of revenue growth. On a
generally accepted accounting principles basis, the General Fund increased
by $611.4 million, resulting in a fund balance of $698.9 million.
The 1994 fiscal year closed with revenues of $15.2 billion (on a
budgetary basis), $38.6 million above the fiscal year estimate. Additional
revenues were provided by higher than anticipated sales tax revenues and a
reduction in tax refund reserves resulting from a favorable decision in a
pending tax litigation. Personal income tax revenues, however, were below
estimate. Expenditures (net of certain pooled financing expenditures and
appropriation lapses) totaled $14.9 billion, representing a 7.2% increase
over fiscal 1993 expenditures.
The fiscal 1995 budget provides for $15.7 billion of appropriations, an
increase of 3.9% over appropriations for fiscal 1994. The budget also
includes the aforementioned tax reductions. The fiscal 1995 budget projects
a $4 million fiscal year-end unappropriated surplus. However, in a recent
mid-fiscal-year budget briefing, outgoing Governor Casey told legislative
leaders that projected revenues will grow by $522 million over expectations
for the current year, resulting in a projected surplus of $401 million at
June 30, 1995. According to the Governor, this amount, when added to other
cost savings and existing reserves, results in a total projected surplus of
over $1 billion.
Recent economic indicators suggest that the Pennsylvania economy is
growing at a moderate pace. The expansion is generally broad-based across
geographic regions and industrial sectors, and inflation is not
accelerating. Some evidence suggests, however, that the pace of growth may
slow somewhat in the coming months.
The following table shows the average annual unemployment rate for
Pennsylvania and the nation for the periods indicated. This information is
drawn from official statements and prospectuses relating to securities
offerings of the state of Pennsylvania, its agencies, and
instrumentalities. No independent verification of the information contained
in such official statements and other publicly available documents has been
made.
Period Pennsylvania United States
1986 6.8% 7.0%
1987 5.7% 6.2%
1988 5.1% 5.5%
1989 4.5% 5.3%
1990 5.4% 5.5%
1991 6.9% 6.7%
1992 7.5% 7.4%
1993 7.1% 6.8%
As of October, 1994, the seasonally adjusted unemployment rate for
the Commonwealth was 6.0 %.
There is various litigation pending against the Commonwealth, its officers,
and employees. An adverse decision in one or more of those cases could
materially affect the Commonwealth's governmental operations.
Certain Pennsylvania municipalities and political subdivisions have also
experienced economic downturns. For example, the financial condition of the
City of Philadelphia had impaired its ability to borrow and resulted in its
obligations being downgraded by the major rating services to below
investment grade. Legislation provided for the establishment of the
Pennsylvania Intergovernmental Cooperation Authority (PICA) to assist
Philadelphia in remedying fiscal emergencies was enacted by the General
Assembly and approved by the Governor in June 1991. PICA is designed to
provide assistance through the issuance of funding debt to liquidate budget
deficits and to make factual findings and recommendations to the City
concerning its budgetary and fiscal affairs. At this time Philadelphia is
operating under a five-year fiscal plan originally approved by PICA
on April 6, 1992 with the latest update approved May 2, 1994. The
audited general fund balance as of June 30, 1993 showed a surplus of
approximately $3 million. The unaudited preliminary General Fund balanced
as of June 30, 1994 estimates a surplus of approximately $15.4 million.
All of the foregoing factors could affect the outstanding obligations of
the Commonwealth and its municipalities and political subdivisions,
including obligations held by the funds. Further, there can be no assurance
that the same factors that adversely affect the economy of the Commonwealth
generally will not also adversely affect the market value or marketability
of obligations issued by local units of government or local authorities in
the Commonwealth, or the ability of the obligators to pay the principal of
or interest on such obligations. In November 1994 , Pennsylvania
General Obligation Bonds were rated A1 by Moody's and AA- by Fitch and S&P.
SPECIAL FACTORS AFFECTING PUERTO RICO
The following only highlights some of the more significant financial trends
and problems affecting the Commonwealth of Puerto Rico (the "Commonwealth"
or "Puerto Rico"), and is based on information drawn from official
statements and prospectuses relating to the securities offerings of Puerto
Rico and its agencies and instrumentalities, 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,
prospectuses, and other publicly available documents, but is not aware of
any fact which would render such information materially inaccurate.
The economy of Puerto Rico is closely linked with that of the United
States, and in fiscal 1993 trade with the United States accounted for
approximately 86% of Puerto Rico's exports and approximately 69% of its
imports. In this regard, in fiscal 1993 Puerto Rico experienced a $2.5
billion positive adjusted merchandise trade balance. Since fiscal 1987,
personal income, both aggregate and per capita, has increased consistently
each year. In fiscal 1993 aggregate personal income was $24.1 billion and
personal per capita income was $6,760. Gross domestic product in fiscal
1991, 1992, and 1993 was $22.8 billion, $23.5 billion, and $25 billion,
respectively. For fiscal 1994, an increase in gross domestic product of
2.9% over fiscal 1993 is forecasted. However, actual growth in the Puerto
Rico economy will depend on several factors, including the condition of the
U.S. economy, the exchange rate for the U.S. dollar and the price stability
of oil imports and interest rates. Due to these factors there is no
assurance that the economy of Puerto Rico will continue to grow.
Puerto Rico's economy continued to expand throughout the five-year period
from fiscal 1989 through fiscal 1993. While trends in the Puerto Rico
economy generally follow those of the United States, Puerto Rico did not
experience a recession primarily because of its strong manufacturing base,
which has a large component of non-cyclical industries. Other factors
behind the continued expansion included Commonwealth-sponsored economic
development programs, stable prices of oil imports, low exchange rates for
the U.S. dollar, and the relatively low cost of borrowing funds during the
period.
Puerto Rico has made marked improvements in fighting unemployment.
Unemployment is at a low level compared to that of the late 1970s, but it
still remains significantly above the U.S. average and has been increasing
in recent years. Despite long-term improvements the unemployment rate rose
from 16.5% to 17.5% from fiscal 1992 to fiscal 1993. However, by the end of
January 1994, the unemployment rate had dropped to 16.3%.
The economy of Puerto Rico has undergone a transformation in the later half
of this century from one centered around agriculture to one dominated by
the manufacturing and service industries. Manufacturing is the cornerstone
of Puerto Rico's economy, accounting for $14.1 billion or 39.4% of gross
domestic product in fiscal 1993. However, manufacturing has experienced a
basic change over the years as a result of the influx of higher wages, high
technology industries such as the pharmaceutical industry, electronics,
computers, micro-processors, scientific instruments and high technology
machinery. The service sector, which employs the largest number of people,
includes wholesale and retail trade, finance and real estate, and ranks
second in its contribution to gross domestic product. In fiscal 1993, the
service sector generated $14.0 billion in gross domestic product or 39.1%
of the total and employed over 467,000 workers providing 46.7% of total
employment. The government sector of the Commonwealth plays an important
role in Puerto Rico's economy. In fiscal year 1993, the government
accounted for $3.9 billion of Puerto Rico's gross domestic product and
provided 21.7% of the total employment. Tourism also contributes
significantly to the island economy, accounting for $1.6 billion of gross
domestic product in fiscal 1993.
The present administration, which took office in January 1993, envisions
major economic reforms and has developed a new economic development program
to be implemented in the next few years. This program is based on the
premise that the private sector will be the primary vehicle for economic
development and growth. The program promotes changing the role of the
government from one of being a provider of most basic services to one of
being a facilitator for private sector initiatives and will encourage
private sector investment by reducing regulatory restraints. The program
contemplates the development of initiatives that will foster private
investment, both eternal and internal, in areas that are served more
efficiently and effectively by the private sector. The program also
contemplates a general revision of the tax system to expand the tax base,
reduce top personal and corporate tax rates, and simplify a highly complex
system. Other important goals for the new program are to reduce the size of
the government's direct contribution to gross domestic product and, to
facilitate private development and growth which would be realized through a
reduction in government consumption and an increase in government
investment in order to improve and expand Puerto Rico's infrastructure.
Much of the development of the manufacturing sector of the economy of
Puerto Rico is attributable to federal and Commonwealth tax incentives,
most notably section 936 of the Internal Revenue Code of 1986, as amended
("Section 936") and the Commonwealth's Industrial Incentives Program.
Section 936 currently grants U.S. corporations that meet certain criteria
and elect its application, a credit against their U.S. corporate income tax
on the portion of the tax attributable to (i) income derived from the
active conduct of a trade or business in Puerto Rico ("active income"), or
from the sale or exchange of substantially all the assets used in the
active conduct of such trade or business, and (ii) qualified possession
sources investment income ("passive income"). The Industrial Incentives
Program, through the 1987 Industrial Incentives Act, grants corporations
engaged in certain qualified activities a fixed 90% exemption from
Commonwealth income and property taxes and a 60% exemption from municipal
license taxes.
Pursuant to recently enacted amendments to the Internal Revenue Code (the
"Code"), and for taxable years commencing after 1993, two alternative
limitations will apply to the Section 936 credit against active business
income and sale of assets as previously described. The first option will
limit the credit against such income to 40% of the credit allowed under
current law, with a five-year phase-in period starting at 60% of the
current credit. The second option will limit the allowable credit to the
sum of (i) 60% of qualified compensation paid to employees (as defined in
the Code); (ii) a specified percentage of depreciation deductions; and
(iii) a portion of the Puerto Rico income taxes paid by the Section 936
corporation, up to a 9% effective tax rate.
At present, it is difficult to forecast what the short- and long-term
effects of the new limitations to the Section 936 credit will be on the
economy of Puerto Rico. However, preliminary econometric studies by the
government of Puerto Rico and private sector economists (assuming no
enhancements to the existing Industrial Incentives Program) project only a
slight reduction in average real growth rates for the economy of Puerto
Rico. These studies also show that particular industry groups will be
affected differently. For example, manufacturers of pharmaceuticals and
beverages may suffer a larger reduction in tax benefits due to their
relatively higher profit margins. In addition, the above limitations are
not expected to reduce the tax credit currently enjoyed by labor-intensive,
lower profit margin industries, which represent approximately 40% of the
total employment by Section 936 corporations in Puerto Rico.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each fund by FMR pursuant to authority contained in the funds'
management contracts. If FMR grants investment management authority to a
sub-adviser (see section entitled "Management Contracts"), the sub-adviser
is authorized to place orders for the purchase and sale of portfolio
securities and will do so in accordance with the policies described below.
FMR is also responsible for the placement of transaction orders for other
investment companies and accounts for which it or its affiliates act as
investment adviser. Securities purchased and sold by the money market fund
generally will be traded on a net basis (i.e., without commission). In
selecting broker-dealers, subject to applicable limitations of the federal
securities laws, FMR considers various relevant factors, including, but not
limited to, the size and type of the transaction; the nature and character
of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any commissions.
The funds may execute portfolio transactions with broker-dealers who
provide research and execution services to the funds or other accounts over
which FMR or its affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). FMR maintains a listing of broker-dealers who
provide such services on a regular basis. However, as many transactions on
behalf of the money market fund are placed with broker-dealers (including
broker-dealers on the list) without regard to the furnishing of such
services, it is not possible to estimate the proportion of such
transactions directed to such broker-dealers solely because such services
were provided. The selection of such broker-dealers generally is made by
FMR (to the extent possible consistent with execution considerations),
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the funds may be useful to FMR in rendering investment management
services to the funds or its other clients and, conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the funds. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
each fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the funds and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the funds, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
Each fund's Trustees periodically review FMR's performance of its
responsibilities in connection with the placement of portfolio transactions
on behalf of the funds and review the commissions paid by each fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
For the fiscal periods ended December 31, 1994 and 1993 the high yield
fund's portfolio turnover rates were 26% and 38% , respectively.
For fiscal 1994, 1993, and 1992, the funds paid no brokerage
commissions .
From time to time the Trustees will review whether the recapture for the
benefit of the funds of some portion of the brokerage commissions or
similar fees paid by the funds on portfolio transactions is legally
permissible and advisable. Each fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine in the exercise of their business
judgment whether it would be advisable for each fund to seek such
recapture.
Although the Trustees and officers of each fund are substantially the same
as those of other funds managed by FMR, investment decisions for each fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as each fund is concerned. In other cases,
however, the ability of the funds to participate in volume transactions
will produce better executions and prices for the funds. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to each fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
MONEY MARKET FUND. The fund values its investments on the basis of
amortized cost. This technique involves valuing an instrument at its cost
as adjusted for amortization of premium or accretion of discount rather
than its value based on current market quotations or appropriate
substitutes which reflect current market conditions. The amortized cost
value of an instrument may be higher or lower than the price the fund would
receive if it sold the instrument.
Valuing the fund's instruments on the basis of amortized cost and use of
the term "money market fund" are permitted by Rule 2a-7 under the
Investment Company Act of 1940. The fund must adhere to certain conditions
under Rule 2a-7.
The Board of Trustees of the trust oversees FMR's adherence to SEC rules
concerning money market funds, and has established procedures designed to
stabilize the fund's NAV at $1.00. At such intervals as they deem
appropriate, the Trustees consider the extent to which NAV calculated by
using market valuations would deviate from $1.00 per share. If the Trustees
believe that a deviation from 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.
During periods of declining interest rates, the fund's yield based on
amortized cost may be higher than the yield based on market valuations.
Under these circumstances, a shareholder in the fund would be able to
obtain a somewhat higher yield than would result if the fund utilized
market valuations to determine its NAV. The converse would apply in a
period of rising interest rates.
HIGH YIELD FUND. Valuations of portfolio securities furnished by the
pricing service employed by the fund are based upon a computerized matrix
system or appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
fund and FSC under the general supervision of the Board of Trustees. There
are a number of pricing services available, and the Trustees, or officers
acting on behalf of the Trustees, on the basis of on-going evaluation of
these services, may use other pricing services or discontinue the use of
any pricing service in whole or in part. Futures contracts and options are
valued on the basis of market quotations if available.
PERFORMANCE
The funds may quote performance in various ways. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns. The high yield fund's share price, and
each fund's yield and total return fluctuate in response to market
conditions and other factors, and the value of the high yield fund's shares
when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. To compute the money market fund's yield for a period,
the net change in value of a hypothetical account containing one share
reflects the value of additional shares purchased with dividends from the
one original share and dividends declared on both the original share and
any additional shares. The net change is then divided by the value of the
account at the beginning of the period to obtain a base period return. This
base period return is annualized to obtain a current annualized yield. The
money market fund also may calculate a compound effective yield by
compounding the base period return over a one-year period. In addition to
the current yield, the money market fund may quote yields in advertising
based on any historical seven-day period. Yields for the money market fund
are calculated on the same basis as other money market funds, as required
by regulation.
For the high yield fund, yields are computed by dividing the fund's
interest income for a given 30-day or one-month period, net of expenses, by
the average number of shares entitled to receive dividends during the
period, dividing this figure by the fund's net asset value per share at the
end of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Yields do not
reflect the fund's .50% redemption fee, which applies to shares held less
than 180 days. Income is calculated for purposes of the high yield fund's
yield quotations in accordance with standardized methods applicable to all
stock and bond funds. In general, interest income is reduced with
respect to bonds trading at a premium over their par value by subtracting a
portion of the premium from income on a daily basis, and is increased with
respect to bonds trading at a discount by adding a portion of the discount
to daily income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of determining the high yield 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 high yield fund's
yield may not equal its distribution rate, the income paid to your account,
or the income reported in the fund's financial statements.
Yield information may be useful in reviewing the funds' performance and in
providing a basis for comparison with other investment alternatives.
However, each fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
funds' yield s will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates the funds' yield s
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 their shares
will likely be invested in instruments producing lower yields than the
balance of the fund's holdings, thereby reducing the fund's current yield.
In periods of rising interest rates, the opposite can be expected to occur.
A fund's tax-equivalent yield is the rate an investor would have to earn
from a fully taxable investment after taxes to equal the fund's tax-free
yield. Tax-equivalent yields are calculated by dividing a fund's yield by
the result of one minus a stated federal or combined federa l, state, and
city tax rate. If only a portion of a fund's yield is tax-exempt, only
that portion is adjusted in the calculation.
The following tables show the effect of a shareholder's tax status on
effective yield under federal and state income tax laws for 1995. The
second table shows the approximate yield a taxable security must provide at
various income brackets to produce after-tax yields equivalent to those of
hypothetical tax-exempt obligations yielding from 3.0% to 8.0% . Of
course, no assurance can be given that a fund will achieve any specific
tax-exempt yield. While the funds invest principally in obligations whose
interest is exempt from federal and state income tax, other income received
by the funds may be taxable. The tables do not take into account local
taxes, if any, payable on fund distributions.
Use the first table to find your approximate effective tax bracket taking
into account federal and state taxes for 1995.
1995 TAX RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Combined Combined
Pennsylvania Pennsylvania,
Marginal and Federal,
Federal Federal and City of
Taxable Income Income Marginal Effective Philadelphia
Single Return* Joint Return* Tax Bracket Tax Rate Tax Bracket** Tax Bracket**
</TABLE>
State of City of
Pennsylvania Philadelphia
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 23, 351 - $ 56,550 $ 39,001 - $ 94,250 28% 2.8% 4.96% 30.02% 33.59%
56,551 - 117,950 94,251 - 143,600 31% 2.8% 4.96% 32.93% 36.35%
117,951 - 256,500 143,601 - 256,500 36% 2.8% 4.96% 37.79% 40.97%
256,501 & above 256,501 & above 39.6% 2.8% 4.96% 41.29% 44.29%
</TABLE>
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
Having determined your effective tax bracket, use the following table to
determine the tax-equivalent yield for a given tax-free yield.
CITY OF PHILADELPHIA RESIDENTS - TRIPLE TAXES - 1995
If your effective combined federal state and Philadelphia personal
income tax rate in 1995 is:
33.59% 36.35% 40.97% 44.29%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To match these
tax-free yields: Your taxable investment would have to earn the following yield:
3% 4.52% 4.71% 5.08% 5.38%
4% 6.02% 6.28% 6.78% 7.18%
5% 7.53% 7.86% 8.47% 8.97%
6% 9.03% 9.43% 10.16% 10.77%
7% 10.54% 11.00% 11.86% 12.56%
8% 12.05% 12.57% 13.55% 14.36%
</TABLE>
PENNSYLVANIA (OUTSIDE PHILADELPHIA) - DOUBLE TAXES - 1995
If your effective combined federal and state personal income tax rate in
1995 is:
30.02% 32.93% 37.79% 41.29%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To match these
tax-free yields: Your taxable investment would have to earn the
following yield:
3% 4.29% 4.47% 4.82% 5.11%
4% 5.72% 5.96% 6.43% 6.81%
5% 7.14% 7.46% 8.04% 8.52%
6% 8.57% 8.95% 9.65% 10.22%
7% 10.00% 10.44% 11.25% 11.92%
8% 11.43% 11.93% 12.86% 13.63%
</TABLE>
Each fund may invest a portion of its assets in obligations that are
subject to state or federal income taxes. When a fund invests in these
obligations, its tax-equivalent yield will be lower. In the table above,
tax-equivalent yields are calculated assuming investments are 100%
federally and state tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's net asset
value (NAV) over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a fund over a stated period, and then calculating
the annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual 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 the fund.
In addition to average annual total returns, a fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis and, for the high yield fund, may or may not
include the effect of the .50% redemption fee on shares held less than 180
days. Excluding the high yield fund's redemption fee from a total return
calculation produces a higher total return figure. Total returns, yields,
and other performance information may be quoted numerically or in a table,
graph, or similar illustration, and may omit or include the effects of each
fund's $5.00 account closeout fee.
NET ASSET VALUE. Charts and graphs using a fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following tables show the money market fund's
7-day yields, the high yield fund's 30-day yields, each fund's
tax-equivalent yields, and total returns for periods ended December 31,
1994. Total return figures include the effect of the $5.00 account closeout
fee based on average account size, but not the high yield fund's .50%
redemption fee, applicable to shares held less than 180 days.
The tax-equivalent yield is based on a combined effective federal and state
income tax rate of 37.79 % and reflects that, as of December 31,
1994, an estimated 0 % of each fund's income was subject to
state taxes. Note that each fund may invest in securities whose income is
subject to the federal alternative minimum tax.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Equivalent One Five Life of One Five Life of
Yield Yield Year Years Fund* Year Years Fund*
Money Market 4.34% 6.98% 2.61% 3.66% 4.21% 2.61% 19.66% 41.50%
Fund
High Yield 6.91% 11.11% -5.04% 7.18% 7.07% -5.04% 41.41% 77.61%
Fund
</TABLE>
* From August 6, 1986 (commencement of operations).
Note: If FMR had not reimbursed certain fund expenses during these
periods, the fund s' total returns would have been lower.
The following table s show the income and capital elements of each
fund's cumulative total return. The table s compare each fund's
return to the record of the Standard & Poor's Composite Index of 500 Stocks
(S&P 500), the Dow Jones Industrial Average (DJIA), and the cost of living
(measured by the Consumer Price Index, or CPI) over the same period. The
CPI information is as of the month end closest to the initial investment
date for each fund. The S&P 500 and DJIA comparisons are provided to show
how each fund's total return compared to the record of a broad average of
common stocks and a narrower set of stocks of major industrial companies,
respectively, over the same period. Of course, since the high yield fund
invests in fixed income securities, and the money market 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 a fixed-income investment such
as the funds. Figures for the S&P 500 and DJIA are based on the prices of
unmanaged groups of stocks and, unlike the funds' returns, do not include
the effect of paying brokerage commissions or other costs of investing.
MONEY MARKET FUND. During the period from August 6, 1986 (commencement of
operations) to December 31, 1994, a hypothetical $10,000 investment in
Spartan Pennsylvania Municipal Money Market Portfolio would have grown to
$ 14,151 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates and the figures below should not be
considered representative of the dividend income or capital gain or loss
that could be realized from an investment in the fund today.
<TABLE>
<CAPTION>
<S> <C> <C>
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $10,000 $ 4,151 $ 0 $ 14,151 $ 25,411 $ 28,416 $ 13,671
1993 10,000 3,790 0 13,790 25,081 27,070 13,315
1992 10,000 3,491 0 13,491 22,784 23,138 12,959
1991 10,000 3,111 0 13,111 21,167 21,565 12,594
1990 10,000 2,540 0 12,540 16,222 17,343 12,219
1989 10,000 1,825 0 11,825 16,743 17,437 11,516
1988 10,000 1,118 0 11,118 12,715 13,234 11,005
1987 10,000 584 0 10,584 10,904 11,416 10,539
1986* 10,000 151 0 10,151 10,359 10,828 10,091
</TABLE>
* From August 6, 1986 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August 6,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends for the period covered (their cash value at the time
they were reinvested), amounted to $ 14,151 . If distributions had not
been reinvested, the amount of distributions earned from the fund over time
would have been smaller, and cash payments (dividends) for the period would
have amounted to $ 3,478 . The fund did not distribute any capital
gains during the period. If FMR had not reimbursed certain fund expenses
during some of the periods shown , the fund's return would have been lower.
Tax consequences of different investments have not been factored into the
above figures. The figures in the table do not reflect the effect of the
fund's $5.00 account closeout fee.
HIGH YIELD FUND. During the period from August 6, 1986 (commencement of
operations) to December 31, 1994, a hypothetical $10,000 investment in
Spartan Pennsylvania Municipal High Yield Portfolio would have grown to
$ 17,762 assuming all distributions were reinvested. This was a
period of widely fluctuating interest rates and bond prices, and the
figures below should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the fund today.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Year Ended $10,000 Dividend Capital Gain Total of
December 31 Investment Distributions Distributions Value S&P 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 9,620 $ 7,418 $ 725 $ 17,763 $ 25,411 $ 28,416 $ 13,671
1993 11,130 7,342 232 18,704 25,081 27,070 13,315
1992 10,590 5,936 0 16,526 22,784 23,138 12,959
1991 10,370 4,776 0 15,146 21,167 21,565 12,594
1990 9,880 3,584 0 13,464 16,222 17,343 12,219
1989 9,900 2,660 0 12,560 16,743 17,437 11,516
1988 9,660 1,778 0 11,438 12,715 13,234 11,005
1987 9,070 945 0 10,015 10,904 11,416 10,539
1986* 10,350 273 0 10,623 10,359 10,828 10,091
</TABLE>
* From August 6, 1986 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on August 6,
1986, the net amount invested in fund shares was $10,000. The cost of the
initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gains distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 18,544 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 5,729 for
dividends and $ 450 for capital gains distributions. Tax consequences
of different investments have not been factored into the above figures. The
figures in the table do not reflect the effect of the fund's $5.00 account
closeout fee, or the .50% redemption fee applicable to shares held less
than 180 days.
A fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, a fund's performance may be compared to stock, bond,
and money market mutual fund performance indices prepared by Lipper or
other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
From time to time, a fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc., in its advertising
materials. Morningstar, Inc., is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
A fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, a fund
may offer greater liquidity or higher potential returns than CDs, a fund
does not guarantee your principal or your return, and fund shares are not
FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 153 tax-free money market funds. The BOND fund Report
AverageS(trademark)/Municipal, which is reported in the BOND FUND
REPORT(registered trademark), covers over 57 tax-free bond funds.
When evaluating comparisons to money market funds, investors should
consider the relevant differences in investment objectives and policies.
Specifically, money market funds invest in short-term, high-quality
instruments and seek to maintain a stable $1.00 share price. The high yield
fund, however, invests in longer-term instruments and its share price
changes daily in response to a variety of factors.
The high yield fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal
bond. Unlike tax-free mutual funds, individual municipal bonds offer a
stated rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales charges
of many tax-free mutual funds are lower than the purchase cost of
individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college and other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
Fidelity may also reprint, and use as advertising and sales literature,
articles from Fidelity Focus, a quarterly magazine provided free of charge
to Fidelity fund shareholders.
A fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The high yield fund may quote various measures of volatility
and benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare the fund's historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how valid
a comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the high
yield fund may also discuss or illustrate examples of interest rate
sensitivity.
MOMENTUM INDICATORS indicate the high yield fund's price movements over
specific periods of time. Each point on the momentum indicator represents
the fund's percentage change in price movements over that period.
The high yield fund may advertise examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In such
a program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of December 31, 1994, FMR advised over $ 25 billion in tax-free
fund assets, $ 65 billion in money market fund assets, $ 165
billion in equity fund assets, $ 35 billion in international fund
assets, and $ 20 billion in Spartan fund assets. The funds may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management figure represents the largest amount of equity fund assets
under management by a mutual fund investment adviser in the United States,
making FMR America's leading equity (stock) fund manager. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1995: New Year's
Day (observed), Washington's Birthday (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Although FMR expects the same holiday schedule to be observed in the
future, the NYSE may modify its holiday schedule at any time.
FSC normally determines each fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a fund's NAV may be affected on days when investors do
not have access to the fund to purchase or redeem shares. In addition,
trading in some of a fund's portfolio securities may not occur on days when
the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing a fund's NAV. Shareholders receiving securities or other property
on redemption may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, each fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying the
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the prospectus, each fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that each fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deductions. These
gains will be taxed as ordinary income. Each fund will send each
shareholder a notice in January describing the tax status of dividend and
capital gain distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
Each fund purchases municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based on covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenant at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other purposes. Interest from private activity securities will be
considered tax-exempt for purposes of each fund's policies of investing so
that up to 8 0% of its income is free from federal income tax .
Interest from private activity securities is a tax-preference item for the
purposes of determining whether a taxpayer is subject to the AMT and the
amount of AMT to be paid, if any. Private activity securities issued after
August 7, 1986 to benefit a private or industrial user or to finance a
private facility are affected by this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by each fund are taxable
to shareholders as dividends, not as capital gains. Dividend distributions
resulting from a recharacterization of gain from the sale of bonds
purchased with market discount after April 30, 1993 are not considered
income for purposes of the high yield fund's policy of investing so that at
least 80% of its income is free from federal income tax and the money
market fund's policy of investing so that at least 80% of its income
distributions are free from federal income tax. The money market fund may
distribute any net-realized short-term capital gains and taxable market
discount once a year or more often, as necessary, to maintain its net asset
value at $1.00 per share.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of amount of exempt-interest dividend.
PENNSYLVANIA TAXES. To the extent that each fund's distributions are
derived from interest on state tax-free obligations, its income dividends
will be exempt from the Pennsylvania personal income tax. However,
distributions attributable to capital gains from state tax-free obligation
are not exempt from the Pennsylvania personal income tax. Distributions of
interest earned from non-exempt obligations are not exempt from the
Pennsylvania personal income tax. The funds' dividends may or may not be
exempt from current or future taxes of certain Pennsylvania municipalities.
To the extent a fund's investments consist of (i) municipal obligations of
the Commonwealth of Pennsylvania and its political subdivisions or
municipal authorities, and (ii) obligations of the United States, including
certain obligations of Puerto Rico, the Virgin Islands and Guam, and any
U.S. territories or possessions whose obligations are immune from state and
local taxation under federal law, collectively referred to as exempt
obligations, shares purchased as an investment in either of the funds will
not be taxable for purposes of the Pennsylvania county personal property
tax, the City of Pittsburgh personal property tax, or the School District
of Pittsburgh personal property tax. Any holdings other than exempt
obligations may result in shares of the funds being wholly or partially
subject to the taxes described above.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by each fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of a fund, and such shares are held six
months or less and are sold at a loss, the portion of the loss equal to the
amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
each fund are taxable to shareholders as dividends, not as capital gains.
The high yield fund hereby designates approximately $ 838,211 as a
capital gain dividend for the purpose of the dividend-paid deduction.
TAX STATUS OF THE FUNDS. Each fund has qualified and intends to continue to
qualify each year as a "regulated investment company" for tax purposes so
that it will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to qualify as a regulated investment
company and avoid being subject to federal income or excise taxes at the
fund level, each fund intends to distribute substantially all of its net
investment income and net realized capital gains within each calendar year
as well as on a fiscal year basis. Each fund intends to comply with
other tax rules applicable to regulated investment companies, including a
requirement that capital gains from the sale of securities held less than
three months constitute less than 30% of the fund's gross income for each
fiscal year. Gains from some futures contracts and options are included in
this 30% calculation, which may limit the high yield fund's
investments in such instruments.
Each fund is treated as a separate entity from the other funds of Fidelity
Municipal Trust (Spartan Pennsylvania Municipal High Yield Portfolio) and
Fidelity Municipal Trust II (Spartan Pennsylvania Municipal Money Market
Portfolio) for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each fund and its shareholders,
and no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether a fund is suitable to their particular tax situations.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures
for personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and
participation in initial public offerings is prohibited. In
addition, restrictions on the timing of personal investing relative to
trades by Fidelity funds and on short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trusts are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. Trustees and officers elected or
appointed to Fidelity Municipal Trust prior to the money market fund's
conversion from a series of Fidelity Municipal Trust to a series of
Fidelity Municipal Trust II served Fidelity Municipal Trust in identical
capacities. All persons named as Trustees also serve in similar capacities
for other funds advised by FMR. Unless otherwise noted, the business
address of each Trustee and officer is 82 Devonshire Street, Boston,
Massachusetts 02109, which is also the address of FMR. Those Trustees who
are "interested persons" (as defined in the Investment Company Act of 1940)
by virtue of their affiliation with either trust or with FMR, are indicated
by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR
Texas Inc. Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. , Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Sanifill Corporation (non-hazardous waste,
1993) and CH2M Hill Companies (engineering). In addition, he served on the
Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992). Prior
to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she is a member of the President's
Advisory Council of The University of Vermont School of Business
Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. , and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside 680 Steamboat Road, Greenwich,
CT, Trustee, is Executive-in-Residence (1995) at Columbia University
Graduate School of Business and a financial consultant from 1987 to
January 1995, Mr. Kirk was a Professor at Columbia University Graduate
School of Business. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund , Vice Chairman of
the Board of the Trustees of the Greenwich Hospital Associatio n, and as
a Member of the Public Oversight Board of the American Institute of
Certified Public Accountants' SEC Practice Section (1995).
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals ) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
and Society for the Preservation of New England Antiquities, and as an
Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee, is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and
refrigeration ), Commercial Intertech Corp. (water treatment
equipment, 1992), and Associated Estates Realty Corporation (a real estate
investment trust, 1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is a member of the Advisory
Boards of Butler Capital Corporation Funds and Warburg, Pincus Partnership
Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company of
Vermont, American Software, Inc. , and AppleSouth, Inc. (restaurants,
1992).
FRED L. HENNING, JR., Vice President (1994) (money market fund only), is
Vice President of Fidelity's money market funds and Senior Vice President
of FMR Texas Inc.
DEBORAH F. WATSON is manager and Vice President (1992) of Spartan
Pennsylvania Municipal Money Market, which she has managed since September
1989. She also manages Fidelity California Tax-Free Money Market, Spartan
California Municipal Money Market, and Spartan Florida Municipal Money
Market.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President - Legal of FMR Corp., and Vice President and
Clerk of FDC.
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and Senior
Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
THOMAS D. MAHER, Assistant Vice President (1990) (money market fund only),
is Assistant Vice President of Fidelity's money market funds and Vice
President and Associate General Counsel of FMR Texas Inc. (1990).
Prior to 1990, Mr. Maher was an employee of FMR .
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was
Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer
of Fidelity Brokerage Services, Inc. (1990-1993); and Vice President,
Assistant Controller, and Director of the Accounting Department - First
Boston Corp. (1986-1990).
The following table sets forth information describing the compensation
of each current non-interested trustee of each fund for his or her services
as trustee for the fiscal year ended December 31, 1994.
Aggregate Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ralph F. Phyllis Richard E. Donald Gerald C. Edward Marvin Thomas
Cox Burke J. Flynn Bradley J. Kirk McDonough H. L. Mann R.
Davis Jones Malone Williams
Money Market $ 113 $ 110 $ 139 $ 111 $ 111 $ 113 $ 115 $ 113 $ 114
Fund
High Yield Fund 138 135 170 136 136 138 141 138 139
</TABLE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pension or
Estimated Annual Total
Retirement Benefits Upon Compensation
Benefits Accrued Retirement from from the Fund
from the Fund the Fund Complex*
Complex* Complex*
Ralph F. Cox $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 5,200 52,000 122,000
Richard J. Flynn 0 52,000 154,500
E. Bradley Jones 5,200 49,400 123,500
Donald J. Kirk 5,200 52,000 125,000
Gerald C. McDonough 5,200 52,000 125,000
Edward H. Malone 5,200 44,200 128,000
Marvin L. Mann 5,200 52,000 125,000
Thomas R. Williams 5,200 52,000 126,500
</TABLE>
* Information as of December 31, 1994 for the 206 funds in the
complex.
Under a retirement program adopted in July, 1988, non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded. A
trustee becomes eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
As of December 31, 1994, the Trustees and officers of the funds owned, in
the aggregate, less than 1 % of each fund's total outstanding shares.
MANAGEMENT CONTRACTS
Each fund employs FMR to furnish investment advisory and other services.
Under its management contract with each fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of each fund in accordance with its investment objective,
policies, and limitations. FMR also provides the funds with all necessary
office facilities and personnel for servicing the funds' investments, and
compensates all officers of the trusts, all Trustees who are "interested
persons" of the trusts or of FMR, and all personnel of the trusts 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 funds. 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 the funds; preparing all general shareholder
communications and conducting shareholder relations; maintaining each
fund's records and the registration of each fund's shares under federal and
state law; developing management and shareholder services for the funds;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the trusts' Board of Trustees.
FMR is responsible for the payment of all expenses of the funds with
certain exceptions. Specific expenses payable by FMR include, without
limitation, the fees and expenses of registering and qualifying the trusts,
the funds, and their shares for distribution under federal and state
securities laws; expenses of typesetting for printing the Prospectus and
Statement of Additional Information; custodian charges; audit and legal
expenses; insurance expense; association membership dues; and the expenses
of mailing reports to shareholders, shareholder meetings, and proxy
solicitations. FMR also provides for transfer agent and dividend disbursing
services and portfolio and general accounting record maintenance through
FSC.
FMR pays all other expenses of the funds with the following exceptions:
fees and expenses of all Trustees of the trusts who are not "interested
persons" of the trusts or of FMR (the non-interested Trustees); interest on
borrowings; taxes; brokerage commissions (if any); and such nonrecurring
expenses as may arise, including costs of any litigation to which the funds
may be a party, and any obligation the trusts or funds may have to
indemnify the officers and Trustees with respect to litigation.
FMR is manager of the high yield fund pursuant to a management contract
dated August 1, 1990, which was approved by shareholders on July 18, 1990.
FMR is manager of the money market fund pursuant to a management contract
dated February 28, 1992, which was approved by Fidelity Municipal Trust as
sole shareholder of the money market fund on February 28, 1992, in
conjunction with an Agreement and Plan to convert the fund from a series of
a Massachusetts business trust to a series of a Delaware business trust.
The Agreement and Plan was approved by public shareholders of the money
market fund on December 11, 1991. The money market fund's contract is
identical to the fund's prior contract with FMR .
For the services of FMR under the contracts, the money market fund and the
high yield fund pay FMR monthly management fees at the annual rates of .50%
and .55%, respectively, of their average net assets throughout the month.
FMR reduces its fee by an amount equal to the fees and expenses of the
non-interested Trustees.
FMR may, from time to time, voluntarily reimburse all or a portion of a
fund's operating expenses (excluding interest, taxes, brokerage commissions
(if any), and extraordinary expenses). The tables below outline such
expense limitations (as a percentage of average net assets) and state both
the amount of the management fees and the amount reimbursed, from fiscal
1992 to the date of this Statement of Additional Information:
MONEY MARKET FUND:
Voluntary
From: To: Expense Limitation
March 1, 1992 May 1, 1992 .45%
January 1, 1992 February 29, 1992 .40%
Fiscal Year Ended Management Fees Amount of Total Expense
December 31 Before Reimbursement Reimbursements
1994 $ 1,140,476 $ 0
1993 1,092,498 0
1992 1,245,915 67,166
HIGH YIELD FUND:
Fiscal Year Ended Management Fees Amount of Total Expense
December 31 Before Reimbursement Reimbursements
1994 $ 1,507,849 $ 0
1993 1,555,647 0
1992 1,205,412 0
To defray shareholder service costs, FMR or its affiliates also collect the
funds' $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and the money market fund's $2.00
checkwriting charge. Shareholder transaction fees and charges collected for
fiscal 1994, 1993, and 1992 are indicated in the tables below.
MONEY MARKET FUND:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal Year Ended Exchange Account Wire Checkwriting
December 31 Fees Closeout Fees Fees Charges
1994 $ 3,060 $ 1,357 $ 355 $ 5,548
1993 5,950 1,586 345 6,653
1992 11,475 2,009 1,605 13,461
</TABLE>
HIGH YIELD FUND:
Fiscal Year Ended Exchange Account Wire
December 31 Fees Closeout Fees Fees
1994 $ 3,969 $ 1,805 $ 310
1993 3,615 1,055 380
1992 5,010 1,093 750
SUB-ADVISER. With respect to the money market fund, FMR has entered into a
sub-advisory agreement with FTX pursuant to which FTX has primary
responsibility for providing portfolio investment management services to
the fund. Under the sub-advisory agreement, FMR pays FTX a fee equal to 50%
of the management fee payable to FMR under its management contract with the
fund. The fees paid to FTX are not reduced by any voluntary or mandatory
expense reimbursements that may be in effect from time to time. For fiscal
1994 and 1993, FMR paid FTX fees of $570,238 and $546,249.
DISTRIBUTION AND SERVICE PLANS
Each fund has adopted a distribution and service plan (the plan) under Rule
12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides
in substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of the fund except pursuant to a plan adopted by the fund under the
Rule. Each fund's Board of Trustees has adopted the plan to allow 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 a 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 also specifically recognizes that FMR, either directly or through
FDC, may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the fund. In addition, each
plan provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that provide assistance in
selling shares of the fund, or to third parties, including banks, that
render shareholder support services. No third party payments were made in
fiscal 1994.
Each fund's plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
implementation of each plan prior to its approval, and have determined that
there is a reasonable likelihood that the plan will benefit the fund and
its shareholders. In particular, the Trustees noted that 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 shares
of the fund, additional sales of the fund's shares may result.
Additionally, certain shareholder support services may be provided more
effectively under each plan by local entities with whom shareholders have
other relationships.
The money market fund's plan was approved by Fidelity Municipal Trust on
February 28, 1992 as the then sole shareholder of the fund, pursuant to an
Agreement and Plan of Conversion approved by public shareholders of the
fund on December 11, 1991. The high yield fund's plan was approved by
shareholders on December 31, 1986.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the 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.
Each 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. In addition, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is each fund's custodian and transfer agent. United
Missouri has entered into sub-contracts with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with providing transfer agent and shareholder servicing functions for each
fund. United Missouri has additional sub-contracts with FSC, pursuant to
which FSC performs the calculations necessary to determine each fund's net
asset value per share and dividends and maintains the funds' accounting
records. United Missouri is entitled to reimbursement for fees paid to FSC
from FMR, which must bear these costs pursuant to its management contract
with each fund.
Each fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of each fund, which are continuously
offered at net asset value. Promotional and administrative expenses in
connection with the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUSTS
TRUSTS' ORGANIZATION. Fidelity Municipal Trust (the Massachusetts trust) is
an open-end management investment company originally organized as a
Maryland corporation on November 22, 1976 and reorganized as a
Massachusetts business trust on June 22, 1984, at which time its name
changed from Fidelity Municipal Bond Fund, Inc. to Fidelity Municipal Bond
Fund. On March 1, 1986, the trust's name was changed to Fidelity Municipal
Trust. Currently, there are seven funds of the Massachusetts trust:
Fidelity Municipal Bond Portfolio; Fidelity Aggressive Tax-Free Portfolio;
Fidelity Insured Tax-Free Portfolio; Fidelity Ohio Tax-Free High Yield
Fund; Fidelity Michigan Tax-Free High Yield Fund; Fidelity Minnesota
Tax-Free Portfolio; and Spartan Pennsylvania Municipal High Yield
Portfolio. The Massachusetts trust's Declaration of Trust permits the
Trustees to create additional funds.
Fidelity Municipal Trust II (the Delaware trust) is an open-end management
investment company organized as a Delaware business trust on June 20, 1991.
Currently, there are three funds of the Delaware trust: Fidelity Ohio
Municipal Money Market Portfolio; Fidelity Michigan Municipal Money Market
Portfolio; and Spartan Pennsylvania Municipal Money Market Portfolio.
The Delaware trust's Trust Instrument permits the Trustees to create
additional funds.
In the event that FMR ceases to be investment adviser to a trust or any of
its funds, the right of the trust or the fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn. There is a remote possibility
that one fund might become liable for any misstatement in its prospectus or
statement of additional information about another fund.
The assets of each trust received for the issue or sale of shares of each
of its funds and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of their respective trusts. Expenses with respect to
the trusts are to be allocated in proportion to the asset value of their
respective funds, except where allocations of direct expense can otherwise
be fairly made. The officers of the trusts, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds of a certain trust. In the event of the dissolution or
liquidation of a trust, shareholders of each fund of that trust are
entitled to receive as a class the underlying assets of such fund available
for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY - MASSACHUSETTS TRUST. The Massachusetts
trust is an entity of the type commonly known as "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable for the obligations of the
trust. The Declaration of Trust provides that the Massachusetts
t rust shall not have any claim against shareholders except for the
payment of the purchase price of shares and requires that each agreement,
obligation, or instrument entered into or executed by the Massachusetts
trust or its Trustees shall include a provision limiting the obligations
created thereby to the Massachusetts trust and its assets. The Declaration
of Trust provides for indemnification out of each fund's property of any
shareholders held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the fund itself would be unable to
meet its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
SHAREHOLDER AND TRUSTEE LIABILITY - DELAWARE TRUST. The Delaware trust is a
business trust organized under Delaware law. Delaware law provides that
shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this
point. The Trust Instrument contains an express disclaimer of shareholder
liability for the debts, liabilities, obligations, and expenses of the
Delaware trust and requires that a disclaimer be given in each contract
entered into or executed by the Delaware trust or its Trustees. The Trust
Instrument provides for indemnification out of each fund's property of any
shareholder or former shareholder held personally liable for the
obligations of the fund. The Trust Instrument also provides that each fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the fund and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which
Delaware law does not apply, no contractual limitation of liability was in
effect, and the fund is unable to meet its obligations. FMR believes that,
in view of the above, the risk of personal liability to shareholders is
extremely remote.
The Trust Instrument further provides that the Trustees shall not be
personally liable to any person other than the Delaware trust or its
shareholders; moreover, the Trustees shall not be liable for any conduct
whatsoever, provided that the Trustees are not protected against any
liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
VOTING RIGHTS - BOTH TRUSTS. Each fund's capital consists of shares of
beneficial interest. As a shareholder of the Massachusets trust, you
receive one vote for each dollar value of net asset value you own. As a
shareholder of the Delaware trust, you receive one vote for each share you
own. The shares have no preemptive or conversion rights; voting and
dividend rights, the right of redemption, and the privilege of exchange are
described in the prospectus. Shares are fully paid and nonassessable,
except as set forth under the respective "Shareholder and Trustee
Liability" headings above. Shareholders representing 10% or more of a trust
or one of its funds may, as set forth in the Declaration of Trust or Trust
Instrument, call meetings of the trust or fund for any purpose related to
the trust or fund, as the case may be, including, in the case of a meeting
of an entire trust, the purpose of voting on removal of one or more
Trustees.
A trust or any fund may be terminated upon the sale of its assets to (or,
in the case of the Delaware trust and its funds, merger with) another
open-end management investment company or series thereof, or upon
liquidation and distribution of its assets. Generally such terminations
must be approved by vote of the holders of a majority of the outstanding
shares of the trust or the fund (for the Delaware trust), or by a vote of
the holders of a majority of the trust or fund, as determined by the
current value of each shareholder's investment in the trust or fund (for
the Massachusets trust); however, the Trustees of the Delaware trust may,
without prior shareholder approval, change the form of the organization of
the Delaware trust by merger, consolidation, or incorporation. If not so
terminated or reorganized, the trusts and their funds will continue
indefinitely.
Under the Trust Instrument, the Trustees may, without shareholder vote,
cause the Delaware trust to merge or consolidate into one or more trusts,
partnerships, or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the
Delaware trust registration statement, or cause the Delaware trust to be
incorporated under Delaware law . Each fund of the Delaware trust may
invest all of its assets in another investment company.
CUSTODIAN. United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City,
Missouri, is custodian of the assets of the funds. The custodian is
responsible for the safekeeping of the funds' assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the trusts'
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts (high yield fund) and 1999 Bryan Street, Dallas, Texas (money
market fund) serves as the trusts' independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The funds' financial statements and financial highlights for the fiscal
year ended December 31, 1994 are included in the funds' Annual Report,
which is a separate report supplied with this Statement of Additional
Information. The funds' financial statements and financial highlights are
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
The descriptions that follow are examples of eligible ratings for the
funds. A fund may, however, consider the ratings for other types of
investments and the ratings assigned by other rating organizations when
determining the eligibility of a particular investment.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF STATE AND
MUNICIPAL NOTES:
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade (MIG, or VMIG for variable rate
obligations). This distinction is in recognition of the difference between
short-term credit risk and long-term credit risk. Factors affecting the
liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important in the short
run. Symbols used will be as follows:
MIG-1/VMIG-1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG-3/VMIG-3 - This designation denotes favorable quality, with all
security elements accounted for, but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG-4/VMIG-4 - This designation denotes adequate quality protection
commonly regarded as required of an investment security is present and,
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS OF STATE AND
MUNICIPAL NOTES:
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
SP-3 - Speculative capacity to pay principal and interest.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of other
terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA- Debt rated AAA has the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (1) Financial Statements and Financial Highlights included in the
Annual Report, for Fidelity Michigan Municipal Money Market Portfolio for
the fiscal year ended December 31, 1994 are incorporated by reference into
the fund's Statement of Additional Information and were filed on February
7, 1995 for Fidelity Municipal Trust II (File No. 811-6454) pursuant to
Rule 30d-1 under the Investment Company Act of 1940 and are incorporated
herein by reference.
(2) Financial Statements and Financial Highlights included in the Annual
Report, for Fidelity Ohio Municipal Money Market Portfolio for the fiscal
year ended December 31, 1994 are incorporated by reference into the fund's
Statement of Additional Information and were filed on February 7, 1995 for
Fidelity Municipal Trust II (File No. 811-6454) pursuant to Rule 30d-1
under the Investment Company Act of 1940 and are incorporated herein by
reference.
(3) Financial Statements and Financial Highlights included in the Annual
Report, for Spartan Pennsylvania Municipal Money Market Portfolio for the
fiscal year ended December 31, 1994 are incorporated by reference into the
fund's Statement of Additional Information and were filed on February 7,
1995 for Fidelity Municipal Trust II (File No. 811-6454) pursuant to Rule
30d-1 under the Investment Company Act of 1940 and are incorporated herein
by reference.
(4) Financial Statements and Financial Highlights included in the Annual
Report, for Fidelity Michigan Tax-Free High Yield Portfolio for the fiscal
year ended December 31, 1994 are incorporated by reference into the fund's
Statement of Additional Information and were filed on February 13, 1995 for
Fidelity Municipal Trust (File No. 811-2720) pursuant to Rule 30d-1 under
the Investment Company Act of 1940 and are incorporated herein by
reference.
(5) Financial Statements and Financial Highlights included in the Annual
Report, for Fidelity Ohio Tax-Free High Yield Portfolio for the fiscal year
ended December 31, 1994 are incorporated by reference into the fund's
Statement of Additional Information and were filed on February 13, 1995 for
Fidelity Municipal Trust (File No. 811-2720) pursuant to Rule 30d-1 under
the Investment Company Act of 1940 and are incorporated herein by
reference.
(6) Financial Statements and Financial Highlights included in the Annual
Report, for Fidelity Minnesota Tax-Free Portfolio for the fiscal year ended
December 31, 1994 are incorporated by reference into the fund's Statement
of Additional Information and were filed on February 13, 1995 for Fidelity
Municipal Trust (File No. 811-2720) pursuant to Rule 30d-1 under the
Investment Company Act of 1940 and are incorporated herein by reference.
(7) Financial Statements and Financial Highlights included in the Annual
Report, for Spartan Pennsylvania Municipal High Yield Portfolio for the
fiscal year ended December 31, 1994 are incorporated herein by reference
into the fund's Statement of Additional Information and were filed on
February 13, 1995 for Fidelity Municipal Trust (File No. 811-2720) pursuant
to Rule 30d-1 under the Investment Company Act of 1940 and are incorporated
herein by reference.
(b) Exhibits
(1) Trust Instrument dated June 20, 1991 is filed herein as Exhibit 1.
(2) Bylaws of the Trust, as amended, are incorporated herein by reference
to Exhibit 2(a) to Fidelity Union Street Trust II's (File No. 33-43757)
Post-Effective Amendment No. 10.
(3) Not applicable.
(4) Not applicable.
(5) (a) Management Contract between Ohio Municipal Money Market Portfolio
and Fidelity Management & Research Company dated February 28, 1992 is
incorporated herein by reference to Exhibit 5(a) to Post-Effective
Amendment No. 8.
(b) Management Contract between Michigan Municipal Money Market Portfolio
and Fidelity Management & Research Company dated February 28, 1992 is
incorporated herein by reference to Exhibit 5(b) to Post-Effective
Amendment No. 8.
(c) Management Contract between Spartan Pennsylvania Municipal Money
Market Portfolio and Fidelity Management & Research Company dated February
28, 1992 is filed herein as Exhibit 5(c).
(d) Sub-Advisory Agreement between FMR Texas Inc. and Fidelity Management
& Research Company with respect to Fidelity Ohio Municipal Money Market
Portfolio dated February 28, 1992 is filed herein as Exhibit 5(d).
(e) Sub-Advisory Agreement between FMR Texas Inc. and Fidelity Management
& Research Company with respect to Fidelity Michigan Municipal Money Market
Portfolio dated February 28, 1992 is filed herein as Exhibit 5(e).
(f) Sub-Advisory Agreement between FMR Texas Inc. and Fidelity Management
& Research Company with respect to Spartan Pennsylvania Municipal Money
Market Portfolio dated February 28, 1992 is filed herein as Exhibit 5(f).
(6) (a) General Distribution Agreement between Fidelity Ohio Municipal
Money Market Portfolio and Fidelity Distributors Corporation dated February
28, 1992 is filed herein as Exhibit 6(a).
(b) General Distribution Agreement between Fidelity Michigan Municipal
Money Market Portfolio and Fidelity Distributors Corporation dated February
28, 1992 is filed herein as Exhibit 6(b).
(c) General Distribution Agreement between Spartan Pennsylvania Municipal
Money Market Portfolio and Fidelity Distributors Corporation dated February
29, 1992 is filed herein as Exhibit 6(c).
(7) Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, is incorporated herein by reference to Exhibit 7 to
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective Amendment
No. 87.
(8) (a) Custodian Agreement between Registrant and United Missouri Bank,
N.A. dated October 17, 1991 is filed herein as Exhibit 8(a).
(b) Appendix A and Appendix B, dated January 16, 1992, to the Custodian
Agreement between Registrant and United Missouri Bank, N.A. dated October
17, 1991 are filed herein as Exhibit 8(b).
(9) Not applicable.
(10) Not applicable.
(11) Consent of Coopers & Lybrand, L. L. P., is electronically filed
herein as Exhibit 11.
(12) Not applicable.
(13) Not applicable.
(14) (a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(a) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(d) to Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(c) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) to Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(d) National Financial Services Corporation Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(h) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(e) Fidelity Portfolio Advisory Services Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(i) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(f) Fidelity Investments Section 403(b)(7) Individual Custodial Account
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(j) to Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(g) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(h) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(l)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(i) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(m)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Ohio Municipal Money Market Portfolio is filed herein as Exhibit 15(a).
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Michigan Municipal Money Market Portfolio is filed herein as Exhibit 15(b).
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Spartan
Pennsylvania Municipal Money Market Portfolio is filed herein as Exhibit
15(c).
(16) Schedule for computation of performance calculations for Fidelity
Ohio Municipal Money Market Portfolio is filed herein as Exhibit 16.
(17) Financial Data Schedules for the funds are filed herein as Exhibit
27.
Item 25. Persons Controlled by or under Common Control with Registrant
The Registrant's Board of Trustees is the same as the boards of other
funds managed by Fidelity Management & Research Company. In addition, the
officers of these funds are substantially identical. Nonetheless,
Registrant takes the position that it is not under common control with
these other funds since the power residing in the respective boards and
officers arises as the result of an official position with the respective
funds.
Item 26. Number of Holders of Securities
December 31, 1994
Title of Class: Shares of Beneficial Interest
Title of Series Number of Record Holders
Fidelity Ohio Municipal Money Market Portfolio 10,908
Fidelity Michigan Municipal Money Market Portfolio 9,046
Spartan Pennsylvania Municipal Money Market Portfolio 4,725
Item 27. Indemnification
Pursuant to Del. Code Ann. title 12 (sub-section) 3817, a Delaware
business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article X, Section 10.02 of the Declaration
of Trust states that the Registrant shall indemnify any present trustee or
officer to the fullest extent permitted by law against liability, and all
expenses reasonably incurred by him or her in connection with any claim,
action, suit or proceeding in which he or she is involved by virtue of his
or her service as a trustee, officer, or both, and against any amount
incurred in settlement thereof. Indemnification will not be provided to a
person adjudged by a court or other adjudicatory body to be liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties (collectively,
"disabling conduct"), or not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Registrant.
In the event of a settlement, no indemnification may be provided unless
there has been a determination, as specified in the Declaration of Trust,
that the officer or trustee did not engage in disabling conduct.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of their own
disabling conduct.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its 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, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephen Jonas Treasurer and Vice President of FMR (1993); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Division Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Malcolm W. McNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FMR TEXAS INC. (FMR Texas)
FMR Texas 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.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Texas; Chairman of the
Executive Committee of FMR; President and Chief
Exective Officer of FMR Corp.; Chairman of the Board
and a Director of FMR, FMR Corp., Fidelity
Management & Research (Far East) Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Texas; President of FMR;
Managing Director of FMR Corp.; President and a
Director of Fidelity Management & Research (Far East)
Inc. and Fidelity Management & Research (U.K.) Inc.;
Senior Vice President and Trustee of funds advised by
FMR.
Fred L. Henning, Jr. Senior Vice President of FMR Texas; Money Market
Division Leader.
Robert Auld Vice President of FMR Texas (1993).
Leland Barron Vice President of FMR Texas and of funds advised by
FMR.
Robert Litterst Vice President of FMR Texas and of funds advised by
FMR (1993).
Thomas D. Maher Vice President of FMR Texas and Assistant Vice
President of funds advised by FMR.
Burnell R. Stehman Vice President of FMR Texas and of funds advised by
FMR.
John J. Todd Vice President of FMR Texas and of funds advised by
FMR.
Sarah H. Zenoble Vice President of FMR Texas and of funds advised by
FMR.
Steven Jonas Treasurer of FMR Texas Inc. (1993), Fidelity
Management & Research (U.K.) Inc. (1993), and Fidelity
Mangement & Research (Far East) Inc. (1993); Treasurer
and Vice President of FMR (1993).
David C. Weinstein Secretary of FMR Texas; Clerk of Fidelity Management
& Research (U.K.) Inc.; Clerk of Fidelity Management &
Research (Far East) Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' custodian United
Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 11 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 15th day
of February 1995.
FIDELITY MUNICIPAL TRUST II
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee February 15, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer February 15, 1995
Gary L. French
/s/J. Gary Burkhead Trustee February 15, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee February 15, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee February 15, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee February 15, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee February 15, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee February 15, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee February 15, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee February 15, 1995
Edward H. Malone
/s/Marvin L. Mann_____* Trustee February 15, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee February 15, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee February 15, 1995
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Director, Trustee or General Partner (collectively,
the "Funds"), hereby severally constitute and appoint Arthur J. Brown,
Arthur C. Delibert, Robert C. Hacker, Richard M. Phillips, Dana L. Platt
and Stephanie A. Djinis, each of them singly, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
each of them, to sign for me and my name in the appropriate capacities any
Registration Statements of the Funds on Form N-1A or any successor thereto,
any and all subsequent Pre-Effective Amendments or Post-Effective
Amendments to said Registration Statements on Form N-1A or any successor
thereto, any Registration Statements on Form N-14, and any supplements or
other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorneys-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact
or their substitutes may do or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Daily Money Fund Fidelity Institutional Tax-Exempt Cash Portfolios
Daily Tax-Exempt Money Fund Fidelity Institutional Investors Trust
Fidelity Beacon Street Trust Fidelity Money Market Trust II
Fidelity California Municipal Trust II Fidelity Municipal Trust II
Fidelity Court Street Trust II Fidelity New York Municipal Trust II
Fidelity Hereford Street Trust Fidelity Phillips Street Trust
Fidelity Institutional Cash Portfolios Fidelity Union Street Trust II
</TABLE>
in addition to any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity any
Registration Statements of the Funds on Form N-1A, Form N-8A or any
successor thereto, any and all subsequent Pre-Effective Amendments or
Post-Effective Amendments to said Registration Statements on Form N-1A or
any successor thereto, any Registration Statements on Form N-14, and any
supplements or other instruments in connection therewith, and generally to
do all such things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and 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.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994
Edward C. Johnson 3d
Exhibit 1
FIDELITY MUNICIPAL TRUST II
TRUST INSTRUMENT
Dated June 20, 1991
FIDELITY MUNICIPAL TRUST II
TRUST INSTRUMENT
TABLE OF CONTENTS
Page
ARTICLE I -- NAME AND DEFINITIONS 1
Section 1.01 Name 1
Section 1.02 Definitions 1
ARTICLE II -- BENEFICIAL INTEREST 2
Section 2.01 Shares of Beneficial Interest 2
Section 2.02 Issuance of Shares 2
Section 2.03 Register of Shares and Share Certificates 2
Section 2.04 Transfer of Shares 2
Section 2.05 Treasury Shares 2
Section 2.06 Establishment of Series 3
Section 2.07 Investment in the Trust 3
Section 2.08 Assets and Liabilities of Series 3
Section 2.09 No Preemptive Rights 4
Section 2.10 Personal Liability of Shareholders 4
Section 2.11 Assent to Trust Instrument 4
ARTICLE III -- THE TRUSTEES 4
Section 3.01 Management of the Trust 4
Section 3.02 Initial Trustees 5
Section 3.03 Term of Office of Trustees 5
Section 3.04 Vacancies and Appointment of Trustees 5
Section 3.05 Temporary Absence of Trustee
Section 3.06 Number of Trustee 5
Section 3.07 Effect of Death, Resignation, Etc. of a Trustee 5
Section 3.08 Ownership of Assets of the Trust 5
ARTICLE IV -- POWERS OF THE TRUSTEES 6
Section 4.01 Powers 6
Section 4.02 Issuance and Repurchase of Shares 8
Section 4.03 Trustees and Officers as Shareholders 8
Section 4.04 Action By the Trustees 8
Section 4.05 Chairman of the Trustees 8
Section 4.06 Principal Transactions 8
ARTICLE V -- EXPENSES OF THE TRUST 8
Section 5.01 Trustee Reimbursement 8
ARTICLE VI -- INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
9
Section 6.01 Investment Adviser 9
Section 6.02 Principal Underwriter 9
Section 6.03 Transfer Agent 9
Section 6.04 Parties to Contract 9
Section 6.05 Provisions and Amendments 10
- -i-
ARTICLE VII -- SHAREHOLDERS' VOTING POWERS AND MEETINGS 10
Section 7.01 Voting Powers 10
Section 7.02 Meetings 10
Section 7.03 Quorum and Required Vote 11
ARTICLE VIII -- CUSTODIAN 11
Section 8.01 Appointment and Duties 11
Section 8.02 Central Certificate System 12
ARTICLE IX -- DISTRIBUTIONS AND REDEMPTIONS 12
Section 9.01 Distributions 12
Section 9.02 Redemptions 12
Section 9.03 Determination of Net Asset Value and Valuation of Portfolio
Assets 12
Section 9.04 Suspension of the Right of Redemption 13
Section 9.05 Redemption of Shares in Order to Qualify as 13
Regulated Investment Company
ARTICLE X -- LIMITATION OF LIABILITY AND INDEMNIFICATION 13
Section 10.01 Limitation of Liability 13
Section 10.02 Indemnification 14
Section 10.03 Shareholders 15
ARTICLE XI - MISCELLANEOUS 15
Section 11.01 Trust Not a Partnership 15
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety 15
Section 11.03 Establishment of Record Dates 15
Section 11.04 Termination of Trust 15
Section 11.05 Reorganization 16
Section 11.06 Filing of Copies, References, Headings 16
Section 11.07 Applicable Law 16
Section 11.08 Amendments 17
Section 11.09 Fiscal Year 17
Section 11.10 Use of the Word "Fidelity" 17
Section 11.11 Provisions in Conflict with Law 17
- -ii-
FIDELITY MUNICIPAL TRUST II
Municipal INSTRUMENT, made June 20, 1991 by Edward C. Johnson 3d, J. Gary
Burkhead and John E. Ferris (the "Trusteees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under
this Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1.01. The name of the trust created hereby is the "Fidelity
Municipal Trust II."
DEFINITIONS.
Section 1.02. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) "Bylaws" means the Bylaws referred to in Article IV, Section 4.01(e)
hereof, as from time to time amended;
(b) The term "Commission" has the meaning given it in the 1940 Act. The
terms "Affiliated Person", "Assignment", "Interested Person" and "Principal
Underwriter" shall have the meanings given them in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretive releases of
the Commission thereunder. "Majority Shareholder Vote" shall have the same
meaning as the term "vote of a majority of the outstanding voting
securities" is given in the 1940 Act, as modified by or interpreted by any
applicable order or orders of the Commission or any rules or regulations
adopted or interpretive releases of the Commission thereunder.
(c) The "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as it may be amended
from time to time.
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time in the
books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust;
(f) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(g) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(h) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of
the Trust or class thereof shall be divided and may include fractions of
Shares as well as whole Shares;
(i) The "Trust" refers to Fidelity Municipal Trust II and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series;
(j) The "Trustees" means the person or persons who has or have signed this
Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time
to time be duly qualified and serving as Trustees in accordance with the
provisions of Article III hereof and reference herein to a Trustee or to
the Trustees shall refer to the individual Trustees in their capacity as
Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one
or more of the Trust or any Series, or the Trustees on behalf of the Trust
or any Series.
(l) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 2.01. The beneficial interest in the Trust shall be divided into
such transferable Shares of one or more separate and distinct Series or
classes of a Series as the Trustees shall from time to time create and
establish. The number of Shares of each Series, and class thereof,
authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
ISSUANCE OF SHARES
Section 2.02. The Trustees in their discretion may, from time to time,
without vote of the Shareholders, issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on
such terms as the Trustees may deem appropriate, and may in such manner
acquire other assets (including the acquisition of assets subject to, and
in connection with, the assumption of liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional
Shares and Shares held in the treasury. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or 1/1,000th of a Share or integral multiples
thereof.
REGISTER OF SHARES AND SHARE CERTIFICATES
Section 2.03. A register shall be kept at the principal office of the
Trust or an office of the Trust's transfer agent which shall contain the
names and addresses of the Shareholders of each Series, the number of
Shares of that Series (or any class or classes thereof) held by them
respectively and a record of all transfers thereof. As to Shares for which
no certificate has been issued, such register shall be conclusive as to who
are the holders of the Shares and who shall be entitled to receive
dividends or other distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or other distribution, nor to have notice given to
him as herein or in the Bylaws provided, until he has given his address to
the transfer agent or such other officer or agent of the Trustees as shall
keep the said register for entry thereon. The Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use. Such certificates may
be issuable for any purpose limited in the Trustees discretion. In the
event that one or more certificates are issued, whether in the name of a
shareholder or a nominee, such certificate or certificates shall constitute
evidence of ownership of Shares for all purposes, including transfer,
assignment or sale of such Shares, subject to such limitations as the
Trustees may, in their discretion, prescribe.
TRANSFER OF SHARES
Section 2.04. Except as otherwise provided by the Trustees, Shares shall
be transferable on the records of the Trust only by the record holder
thereof or by his agent thereunto duly authorized in writing, upon delivery
to the Trustees or the Trust's transfer agent of a duly executed instrument
of transfer, together with a Share certificate, if one is outstanding, and
such evidence of the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon such
delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be
the holder of such Shares for all purposes hereunder and neither the
Trustees nor the Trust, nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
TREASURY SHARES
Section 2.05. Shares held in the treasury shall, until reissued pursuant
to Section 2.02 hereof, not confer any voting rights on the Trustees, nor
shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
ESTABLISHMENT OF SERIES
Section 2.06. The Trust created hereby shall consist of one or more
Series and separate and distinct records shall be maintained by the Trust
for each Series and the assets associated with any such Series shall be
held and accounted for separately from the assets of the Trust or any other
Series. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time
to time determine, to divide or combine the Shares or any Series or classes
thereof into a greater or lesser number, to classify or reclassify any
issued Shares or any Series or classes thereof into one or more Series or
classes of Shares, and to take such other action with respect to the Shares
as the Trustees may deem desirable. The establishment and designation of
any Series shall be effective upon the adoption of a resolution by a
majority of the Trustees setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series. A
Series may issue any number of Shares and need not issue shares. At any
time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by a majority vote
abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally
to each Series of the Trust, and each class thereof, except as the context
otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions of
income and capital gains, if any, made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.
INVESTMENT IN THE TRUST
Section 2.07. The Trustees shall accept investments in any Series of the
Trust from such persons and on such terms as they may from time to time
authorize. At the Trustees' discretion, such investments, subject to
applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX,
Section 9.03 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however,
that the Trustees may, in their sole discretion, (a) fix the Net Asset
Value per Share of the initial capital contribution, (b) impose a sales
charge upon investments in the Trust in such manner and at such time
determined by the Trustees or (c) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES
Section 2.08. All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as
"assets belonging to" that Series. The assets belonging to a particular
Series shall belong to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. In
addition, any assets, income, earnings, profits or funds, or payments and
proceeds with respect thereto, which are not readily identifiable as
belonging to any particular Series shall be allocated by the Trustees
between and among one or more of the Series in such manner as the Trustees,
in their sole discretion, deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all Series for all
purposes, and such assets, income, earnings, profits or funds, or payments
and proceeds with respect thereto shall be assets belonging to that Series.
The assets belonging to a particular Series shall be so recorded upon the
books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to
each particular Series shall be charged with the liabilities of that Series
and all expenses, costs, charges and reserves attributable to that Series.
Any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees between or among any one or
more of the Series in such manner as the Trustees in their sole discretion
deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes. Without
limitation of the foregoing provisions of this Section 2.08, but subject to
the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Series shall be enforceable
against the assets of such Series only, and not against the assets of the
Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State
of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section
3804 of the Delaware Act relating to limitations on inter-Series
liabilities (and the statutory effect under Section 3804 of setting forth
such notice in the certificate of trust) shall become applicable to the
Trust and each Series. Any person extending credit to, contracting with or
having any claim against any Series may look only to the assets of that
Series to satisfy or enforce any debt, liability, obligation or expense
incurred, contracted for or otherwise existing with respect to that Series.
No Shareholder or former Shareholder of any Series shall have a claim on or
any right to any assets allocated or belonging to any other Series.
NO PREEMPTIVE RIGHTS
Section 2.09. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees, whether of the same or other Series.
PERSONAL LIABILITY OF SHAREHOLDERS
Section 2.10. Each Shareholder of the Trust and of each Series shall not
be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the
Trust or by or on behalf of any Series. The Trustees shall have no power
to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription
for any Shares or otherwise. Every note, bond, contract or other
undertaking issued by or on behalf of the Trust or the Trustees relating to
the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
ASSENT TO TRUST INSTRUMENT
Section 2.11. Every Shareholder, by virtue of having purchased a Share
shall become a Shareholder and shall be held to have expressly assented and
agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 3.01. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and business in
their own right, but with such powers of delegation as may be permitted by
this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of
Delaware, in any and all states of the United States of America, in the
District of Columbia, in any and all commonwealths, territories,
dependencies, colonies, or possessions of the United States of America, and
in any foreign jurisdiction and to do all such other things and execute all
such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Trust Instrument, the presumption shall
be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not
be construed as limiting the aforesaid power. The powers of the Trustees
may be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected
by the Shareholders owning of record a plurality of the Shares voting at a
meeting of Shareholders. Such a meeting shall be held on a date fixed by
the Trustees. In the event that less than a majority of the Trustees
holding office have been elected by Shareholders, the Trustees then in
office will call a Shareholders' meeting for the election of Trustees.
INITIAL TRUSTEES
Section 3.02. The initial Trustees shall be the persons named herein. On
a date fixed by the Trustees, the Shareholders shall elect at least three
but not more than twelve Trustees, as specified by the Trustees pursuant to
Section 3.06 of this Article III.
TERM OF OFFICE OF TRUSTEES
Section 3.03. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as herein provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may
be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests in
writing to be retired or who has died, become physically or mentally
incapacitated by reason of disease or otherwise, or is otherwise unable to
serve, may be retired by written instrument signed by a majority of the
other Trustees, specifying the date of his retirement; and (d) that a
Trustee may be removed at any meeting of the Shareholders of the Trust by a
vote of Shareholders owning at least two-thirds of the outstanding Shares.
VACANCIES AND APPOINTMENT OF TRUSTEES
Section 3.04. In case of the declination to serve, death, resignation,
retirement, removal, physical or mental incapacity by reason of disease or
otherwise, or a Trustee is otherwise unable to serve, or an increase in the
number of Trustees, a vacancy shall occur. Whenever a vacancy in the Board
of Trustees shall occur, until such vacancy is filled, the other Trustees
shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the 1940 Act. Such appointment shall be evidenced by a
written instrument signed by a majority of the Trustees in office or by
resolution of the Trustees, duly adopted, which shall be recorded in the
minutes of a meeting of the Trustees, whereupon the appointment shall take
effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that
said appointment shall become effective only at or after the effective date
of said retirement, resignation or increase in number of Trustees. As soon
as any Trustee appointed pursuant to this Section 3.04 shall have accepted
this trust, the trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder. The power to
appoint a Trustee pursuant to this Section 3.04 is subject to the
provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 3.05. Any Trustee may, by power of attorney, delegate his power
for a period not exceeding six months at any one time to any other Trustee
or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
NUMBER OF TRUSTEES
Section 3.06. The number of Trustees shall be at least three, and
thereafter shall be such number as shall be fixed from time to time by a
majority of the Trustees, provided, however, that the number of Trustees
shall in no event be more than twelve (12).
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 3.07. The declination to serve, death, resignation, retirement,
removal, incapacity, or inability of the Trustees, or any one of them,
shall not operate to terminate the Trust or to revoke any existing agency
created pursuant to the terms of this Trust Instrument.
OWNERSHIP OF ASSETS OF THE TRUST
Section 3.08. The assets of the Trust and of each Series shall be held
separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees.
Legal title in all of the assets of the Trust and the right to conduct any
business shall at all times be considered as vested in the Trustees on
behalf of the Trust, except that the Trustees may cause legal title to any
Trust Property to be held by, or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series
or any right of partition or possession thereof, but each Shareholder shall
have, except as otherwise provided for herein, a proportionate undivided
beneficial interest in the Trust or Series. The Shares shall be personal
property giving only the rights specifically set forth in this Trust
Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
POWERS
Section 4.01. The Trustees in all instances shall act as principals, and
are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
sole discretion, shall deem proper to accomplish the purpose of this Trust
without recourse to any court or other authority. Subject to any
applicable limitation in this Trust Instrument or the Bylaws of the Trust,
the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other
Person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both, or otherwise pursuant to a plan of
distribution of any kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them
to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to
any conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, manager, custodian, underwriter
or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, Section 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee
or nominees, subject in either case to proper safeguards according to the
usual practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish
classes of such Series having relative rights, powers and duties as they
may provide consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular
Series or to apportion the same between or among two or more Series,
provided that any liabilities or expenses incurred by a particular Series
shall be payable solely out of the assets belonging to that Series as
provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided;
(t) To establish, from time to time, a minimum investment for Shareholders
in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers of
the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of said
committees as the Trustees may deem proper. Notwithstanding the provisions
of this Article IV, and in addition to such provisions or any other
provision of this Trust Instrument or of the Bylaws, the Trustees may by
resolution appoint a committee consisting of less than the whole number of
Trustees then in office, which committee may be empowered to act for and
bind the Trustees and the Trust, as if the acts of such committee were the
acts of all the Trustees then in office, with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any action,
suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body;
(v) To interpret the investment policies, practices or limitations of any
Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment
of any object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every other act or
thing incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by
one or more of the Trustees in their capacity as such hereunder shall be
deemed an action on behalf of the Trust or the applicable Series, and not
an action in an individual capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
ISSUANCE AND REPURCHASE OF SHARES
Section 4.02. The Trustees shall have the power to issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose
of, and otherwise deal in Shares and, subject to the provisions set forth
in Article II and Article IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of
the Trust, or the particular Series of the Trust, with respect to which
such Shares are issued.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 4.03. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of Shares to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may issue and sell or cause to
be issued and sold Shares to and buy such Shares from any such person or
any firm or company in which he is interested, subject only to the general
limitations herein contained as to the sale and purchase of such Shares;
and all subject to any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 4.04. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone
meeting provided a quorum of Trustees participate in any such telephone
meeting, unless the 1940 Act requires that a particular action be taken
only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a
quorum. Meetings of the Trustees may be called orally or in writing by the
Chairman of the Board of Trustees or by any two other Trustees. Notice of
the time, date and place of all meetings of the Trustees shall be given by
the party calling the meeting to each Trustee by telephone, telefax, or
telegram sent to his home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to his home or business
address at least seventy-two hours in advance of the meeting. Notice need
not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect
to the meeting. Any meeting conducted by telephone shall be deemed to take
place at the principal office of the Trust, as determined by the Bylaws or
by the Trustees. Subject to the requirements of the 1940 Act, the Trustees
by majority vote may delegate to any one or more of their number their
authority to approve particular matters or take particular actions on
behalf of the Trust. Written consents or waivers of the Trustees may be
executed in one or more counterparts. Execution of a written consent or
waiver and delivery thereof to the Trust may be accomplished by telefax.
CHAIRMAN OF THE TRUSTEES
Section 4.05. The Trustees shall appoint one of their number to be
Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees, shall be responsible for the execution of
policies established by the Trustees and the administration of the Trust,
and may be (but is not required to be) the chief executive, financial
and/or accounting officer of the Trust.
PRINCIPAL TRANSACTIONS
Section 4.06. Except to the extent prohibited by applicable law, the
Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer
of the Trust or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any investment adviser,
distributor or transfer agent for the Trust or with any Interested Person
of such person; and the Trust may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 5.01. Subject to the provisions of Article II, Section 2.08
hereof, the Trustees shall be reimbursed from the Trust estate or the
assets belonging to the appropriate Series for their expenses and
disbursements, including, without limitation, fees and expenses of Trustees
who are not Interested Persons of the Trust, interest expense, taxes, fees
and commissions of every kind, expenses of pricing Trust portfolio
securities, expenses of issue, repurchase and redemption of shares,
including expenses attributable to a program of periodic repurchases or
redemptions, expenses of registering and qualifying the Trust and its
Shares under Federal and State laws and regulations or under the laws of
any foreign jurisdiction, charges of third parties, including investment
advisers, managers, custodians, transfer agents, portfolio accounting
and/or pricing agents, and registrars, expenses of preparing and setting up
in type prospectuses and statements of additional information and other
related Trust documents, expenses of printing and distributing prospectuses
sent to existing Shareholders, auditing and legal expenses, reports to
Shareholders, expenses of meetings of Shareholders and proxy solicitations
therefor, insurance expenses, association membership dues and for such
non-recurring items as may arise, including litigation to which the Trust
(or a Trustee acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust, and for the
payment of such expenses, disbursements, losses and liabilities the
Trustees shall have a lien on the assets belonging to the appropriate
Series, or in the case of an expense allocable to more than one Series, on
the assets of each such Series, prior to any rights or interests of the
Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 6.01. The Trustees may in their discretion, from time to time,
enter into an investment advisory or management contract or contracts with
respect to the Trust or any Series whereby the other party or parties to
such contract or contracts shall undertake to furnish the Trustees with
such management, investment advisory, statistical and research facilities
and services and such other facilities and services, if any, and all upon
such terms and conditions, as the Trustees may in their discretion
determine; provided, however, that the initial approval and entering into
of such contract or contracts shall be subject to a Majority Shareholder
Vote. Notwithstanding any other provision of this Trust Instrument, the
Trustees may authorize any investment adviser (subject to such general or
specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of
the Trustees, or may authorize any officer, agent, or Trustee to effect
such purchases, sales or exchanges pursuant to recommendations of the
investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized
by all of the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, including those relating to Shareholder approval, the investment
adviser to employ, from time to time, one or more sub-advisers to perform
such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser
and sub-adviser. Any reference in this Trust Instrument to the investment
adviser shall be deemed to include such sub-advisers, unless the context
otherwise requires.
PRINCIPAL UNDERWRITER
Section 6.02. The Trustees may in their discretion from time to time
enter into an exclusive or non-exclusive underwriting contract or contracts
providing for the sale of Shares, whereby the Trust may either agree to
sell Shares to the other party to the contract or appoint such other party
its sales agent for such Shares. In either case, the contract shall be on
such terms and conditions, if any, as may be prescribed in the Bylaws, and
such further terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Article VI, or of
the Bylaws; and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
TRANSFER AGENT
Section 6.03. The Trustees may in their discretion from time to time
enter into one or more transfer agency and Shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees
with transfer agency and Shareholder services. The contract or contracts
shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Trust
Instrument or of the Bylaws.
PARTIES TO CONTRACT
Section 6.04. Any contract of the character described in Sections 6.01,
6.02 and 6.03 of this Article VI or any contract of the character described
in Article VIII hereof may be entered into with any corporation, firm,
partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as
Shareholder and/or Trustee, nor shall any person holding such relationship
be liable merely by reason of such relationship for any loss or expense to
the Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article VI or
Article VIII hereof or of the Bylaws. The same person (including a firm,
corporation, partnership, trust, or association) may be the other party to
contracts entered into pursuant to Sections 6.01, 6.02 and 6.03 of this
Article VI or pursuant to Article VIII hereof, and any individual may be
financially interested or otherwise affiliated with persons who are parties
to any or all of the contracts mentioned in this Section 6.04.
PROVISIONS AND AMENDMENTS
Section 6.05. Any contract entered into pursuant to Sections 6.01 or 6.02
of this Article VI shall be consistent with and subject to the requirements
of Section 15 of the 1940 Act or other applicable Act of Congress hereafter
enacted with respect to its continuance in effect, its termination, and the
method of authorization and approval of such contract or renewal thereof,
and no amendment to any contract, entered into pursuant to Section 6.01 of
this Article VI shall be effective unless assented to in a manner
consistent with the requirements of said Section 15, as modified by any
applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 7.01. The Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article III, Sections 3.01 and 3.02
hereof, (ii) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (iii) with respect to any investment advisory or
management contract as provided in Article VI, Sections 6.01 and 6.05
hereof, and (iv) with respect to such additional matters relating to the
Trust as may be required by law, by this Trust Instrument, or the Bylaws or
any registration of the Trust with the Commission or any State, or as the
Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series;
and (ii) when the Trustees have determined that the matter affects the
interests of more than one Series, then the Shareholders of all such Series
shall be entitled to vote thereon. The Trustees may also determine that a
matter affects only the interests of one or more classes of a Series, in
which case any such matter shall be voted on by such class or classes. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws. A proxy may be given in writing. The
Bylaws may provide that proxies may also, or may instead, be given by any
electronic or telecommunications device or in any other manner.
Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is
submitted to a vote of the Shareholders of one or more Series or of the
Trust, or in the event of any proxy contest or proxy solicitation or
proposal in opposition to any proposal by the officers or Trustees of the
Trust, Shares may be voted only in person or by written proxy. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and
may take any action required or permitted by law, this Trust Instrument or
any of the Bylaws of the Trust to be taken by Shareholders.
MEETINGS
Section 7.02. The first Shareholders' meeting shall be held in order to
elect Trustees as specified in Section 3.02 of Article III hereof at the
principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware.
Special meetings of the Shareholders of any Series may be called by the
Trustees and shall be called by the Trustees upon the written request of
Shareholders owning at least one-tenth of the Outstanding Shares entitled
to vote. Whenever ten or more Shareholders meeting the qualifications set
forth in Section 16(c) of the 1940 Act, as the same may be amended from
time to time, seek the opportunity of furnishing materials to the other
Shareholders with a view to obtaining signatures on such a request for a
meeting, the Trustees shall comply with the provisions of said Section
16(c) with respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials to
such Shareholders of record, subject to any rights provided to the Trust or
any Trustees provided by said Section 16(c). Notice shall be sent, by
First Class Mail or such other means determined by the Trustees, at least
15 days prior to any such meeting.
QUORUM AND REQUIRED VOTE
Section 7.03. One-third of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Trust Instrument
permits or requires that holders of any Series shall vote as a Series (or
that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote
shall be necessary to constitute a quorum for the transaction of business
by that Series (or that class). Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. Except when a larger vote is required by law
or by any provision of this Trust Instrument or the Bylaws, a majority of
the Shares voted in person or by proxy shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law
or of this Trust Instrument permits or requires that the holders of any
Series shall vote as a Series (or that the holders of any class shall vote
as a class), then a majority of the Shares present in person or by proxy of
that Series or, if required by law, a Majority Shareholder Vote of that
Series (or class), voted on the matter in person or by proxy shall decide
that matter insofar as that Series (or class) is concerned. Shareholders
may act by unanimous written consent. Actions taken by Series (or class)
may be consented to unanimously in writing by Shareholders of that Series.
ARTICLE VIII
CUSTODIAN
APPOINTMENT AND DUTIES
Section 8.01. The Trustees shall at all times employ a bank, a company
that is a member of a national securities exchange, or a trust company,
each having capital, surplus and undivided profits of at least two million
dollars ($2,000,000) as custodian with authority as its agent, but subject
to such restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order confirmed in writing;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
and
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(4) to keep the books and accounts of the Trust or of any Series or class
and furnish clerical and accounting services; and
(5) to compute, if authorized to do so by the Trustees, the Net Asset Value
of any Series, or class thereof, in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank, a company
that is a member of a national securities exchange, or a trust company
organized under the laws of the United States or one of the states thereof
and having capital, surplus and undivided profits of at least two million
dollars ($2,000,000) or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act.
CENTRAL CERTIFICATE SYSTEM
Section 8.02. Subject to such rules, regulations and orders as the
Commission may adopt, the Trustees may direct the custodian to deposit all
or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities
exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such
other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which system all securities of
any particular class or series of any issuer deposited within the system
are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Trust or
its custodians, subcustodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 9.01.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any
other Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other
distribution or among the Shareholders of record at such other date or time
or dates or times as the Trustees shall determine, which dividends or
distributions, at the election of the Trustees, may be paid pursuant to a
standing resolution or resolutions adopted only once or with such frequency
as the Trustees may determine. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans
or related plans as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Section (b) hereof.
REDEMPTIONS
Section 9.02. In case any holder of record of Shares of a particular
Series desires to dispose of his Shares or any portion thereof, he may
deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees
may from time to time authorize, requesting that the Series purchase the
Shares in accordance with this Section 9.02; and the Shareholder so
requesting shall be entitled to require the Series to purchase, and the
Series or the principal underwriter of the Series shall purchase his said
Shares, but only at the Net Asset Value thereof (as described in Section
9.03 of this Article IX). The Series shall make payment for any such
Shares to be redeemed, as aforesaid, in cash or property from the assets of
that Series and payment for such Shares shall be made by the Series or the
principal underwriter of the Series to the Shareholder of record within
seven (7) days after the date upon which the request is effective. Upon
redemption, shares shall become Treasury shares and may be re-issued from
time to time.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
Section 9.03. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days
and at such times as the Trustees may determine. Such determination shall
be made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to
other securities and assets, at the fair value as determined in good faith
by the Trustees; provided, however, that the Trustees, without Shareholder
approval, may alter the method of valuing portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the Commission or insofar as permitted by
any Order of the Commission applicable to the Series. The Trustees may
delegate any of their powers and duties under this Section 9.03 with
respect to valuation of assets and liabilities. The resulting amount,
which shall represent the total Net Asset Value of the particular Series,
shall be divided by the total number of shares of that Series outstanding
at the time and the quotient so obtained shall be the Net Asset Value per
Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner
and may fix the time when such redetermined value shall become effective.
If, for any reason, the net income of any Series, determined at any time,
is a negative amount, the Trustees shall have the power with respect to
that Series (i) to offset each Shareholder's pro rata share of such
negative amount from the accrued dividend account of such Shareholder, or
(ii) to reduce the number of Outstanding Shares of such Series by reducing
the number of Shares in the account of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents the
amount of such excess negative net income, or (iii) to cause to be recorded
on the books of such Series an asset account in the amount of such negative
net income (provided that the same shall thereupon become the property of
such Series with respect to such Series and shall not be paid to any
Shareholder), which account may be reduced by the amount, of dividends
declared thereafter upon the Outstanding Shares of such Series on the day
such negative net income is experienced, until such asset account is
reduced to zero; (iv) to combine the methods described in clauses (i) and
(ii) and (iii) of this sentence; or (v) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net
Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and
declaration. The Trustees shall also have the power not to declare a
dividend out of net income for the purpose of causing the Net Asset Value
per Share to be increased. The Trustees shall not be required to adopt,
but may at any time adopt, discontinue or amend the practice of maintaining
the Net Asset Value per Share of the Series at a constant amount.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 9.04. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940 Act.
Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no
right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined
after the termination of the suspension. In the event that any Series is
divided into classes, the provisions of this Section 9.03, to the extent
applicable as determined in the discretion of the Trustees and consistent
with applicable law, may be equally applied to each such class.
REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED INVESTMENT COMPANY
Section 9.05. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has
or may become concentrated in any Person to an extent which would
disqualify any Series as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power (but not the
obligation) by lot or other means deemed equitable by them (i) to call for
redemption by any such person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares
into conformity with the requirements for such qualification and (ii) to
refuse to transfer or issue Shares to any person whose acquisition of the
Shares in question would result in such disqualification. The redemption
shall be effected at the redemption price and in the manner provided in
this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares as
the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code, or to comply with the requirements of any other taxing
authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 10.01. A Trustee, when acting in such capacity, shall not be
personally liable to any person other than the Trust or a beneficial owner
for any act, omission or obligation of the Trust or any Trustee. A Trustee
shall not be liable for any act or omission or any conduct whatsoever in
his capacity as Trustee, provided that nothing contained herein or in the
Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee hereunder.
INDEMNIFICATION
Section 10.02.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(i) every Person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party
or otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither Interested
Persons of the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review
of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be a Covered Person and shall inure to the benefit of the heirs, executors
and administrators of such a person. Nothing contained herein shall affect
any rights to indemnification to which Trust personnel, other than Covered
Persons, and other persons may be entitled by contract or otherwise under
law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the Trust or Series if it is ultimately determined that
he is not entitled to indemnification under this Section 10.02; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of
the Trustees who are neither Interested Persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 10.02.
SHAREHOLDERS
Section 10.03. In case any Shareholder or former Shareholder of any
Series shall be held to be personally liable solely by reason of his being
or having been a Shareholder of such Series and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder
(or his heirs, executors, administrators or other legal representatives,
or, in the case of a corporation or other entity, its corporate or other
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust, on behalf of the
affected Series, shall, upon request by the Shareholder, assume the defense
of any claim made against the Shareholder for any act or obligation of the
Series and satisfy any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 11.01. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power
to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of
the Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Trust Instrument shall protect a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 11.02. The exercise by the Trustees of their powers and
discretions hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested.
Subject to the provisions of Article X hereof and to Section 11.01 of this
Article XI, the Trustees shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Trust Instrument,
and subject to the provisions of Article X hereof and Section 11.01 of this
Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety if
a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 11.03. The Trustees may close the Share transfer books of the
Trust for a period not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends or
other distributions, or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into effect;
or in lieu of closing the stock transfer books as aforesaid, the Trustees
may fix in advance a date, not exceeding sixty (60) days preceding the date
of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date
when any change or conversion or exchange of Shares shall go into effect,
as a record date for the determination of the Shareholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment
of any such dividend or other distribution, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion
or exchange of Shares, and in such case such Shareholders and only such
Shareholders as shall be Shareholders of record on the date so fixed shall
be entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend or other distribution, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed as aforesaid.
TERMINATION OF TRUST
Section 11.04.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 11.04.
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder
Vote of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of the Trust or
any affected Series to another trust, partnership, association or
corporation, or to a separate series of shares thereof, organized under the
laws of any state which trust, partnership, association or corporation is
an open-end management investment company as defined in the 1940 Act, or is
a series thereof, for adequate consideration which may include the
assumption of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust or any affected Series, and which may
include shares of beneficial interest, stock or other ownership interests
of such trust, partnership, association or corporation or of a series
thereof; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for
the payment of all such liabilities in either (i) or (ii), by such
assumption or otherwise, the Trustees shall distribute the remaining
proceeds or assets (as the case may be) of each Series (or class) ratably
among the holders of Shares of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged
of any and all further liabilities and duties hereunder and the right,
title and interest of all parties with respect to the Trust or Series shall
be cancelled and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware
Act, which certificate of cancellation may be signed by any one Trustee.
REORGANIZATION
Section 11.05. Notwithstanding anything else herein, the Trustees, in
order to change the form of organization of the Trust, may, without prior
Shareholder approval, (i) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long
as the surviving or resulting entity is an open-end management investment
company under the 1940 Act, or is a series thereof, that will succeed to or
assume the Trust's registration under that Act and which is formed,
organized or existing under the laws of a state, commonwealth possession or
colony of the United States or (ii) cause the Trust to incorporate under
the laws of Delaware. Any agreement of merger or consolidation or
certificate of merger may be signed by a majority of Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be
valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in
this Trust Instrument, an agreement of merger or consolidation approved by
the Trustees in accordance with this Section 11.05 may effect any amendment
to the Trust Instrument or effect the adoption of a new trust instrument of
the Trust if it is the surviving or resulting trust in the merger or
consolidation.
FILING OF COPIES, REFERENCES, HEADINGS
Section 11.06. The original or a copy of this Trust Instrument and of
each amendment hereof or Trust Instrument supplemental hereto shall be kept
at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer or
Trustee of the Trust as to whether or not any such amendments or
supplements have been made and as to any matters in connection with the
Trust hereunder, and with the same effect as if it were the original, may
rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or
supplemental Trust Instrument, references to this Trust Instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to
refer to this Trust Instrument as amended or affected by any such
supplemental Trust Instrument. All expressions like "his", "he" and "him",
shall be deemed to include the feminine and neuter, as well as masculine,
genders. Headings are placed herein for convenience of reference only and
in case of any conflict, the text of this Trust Instrument, rather than the
headings, shall control. This Trust Instrument may be executed in any
number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 11.07. The trust set forth in this instrument is made in the
State of Delaware, and the Trust and this Trust Instrument, and the rights
and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act
and the laws of said State; provided, however, that there shall not be
applicable to the Trust, the Trustees or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware
(other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining court or other governmental
approval concerning the acquisition, holding or disposition of real or
personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and
expenditures to income or principal, (vi) restrictions or limitations on
the permissible nature, amount or concentration of trust investments or
requirements relating to the titling, storage or other manner of holding of
trust assets, or (vii) the establishment of fiduciary or other standards or
responsibilities or limitations on the acts or powers of trustees, which
are inconsistent with the limitations or liabilities or authorities and
powers of the Trustees set forth or referenced in this Trust Instrument.
The Trust shall be of the type commonly called a "business trust", and
without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts
under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
AMENDMENTS
Section 11.08. Except as specifically provided herein, the Trustees may,
without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto
or an amended and restated trust instrument. Shareholders shall have the
right to vote (i) on any amendment which would affect their right to vote
granted in Section 7.01 of Article VII hereof, (ii) on any amendment to
this Section 11.08, (iii) on any amendment as may be required by law or by
the Trust's registration statement filed with the Commission and (iv) on
any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to Shareholders which, as the Trustees determine,
shall affect the Shareholders of one or more Series shall be authorized by
vote of the Shareholders of each Series affected and no vote of
shareholders of a Series not affected shall be required. Notwithstanding
anything else herein, any amendment to Article 10 hereof shall not limit
the rights to indemnification or insurance provided therein with respect to
action or omission of Covered Persons prior to such amendment.
FISCAL YEAR
Section 11.09. The fiscal year of the Trust shall end on a specified date
as set forth in the Bylaws, provided, however, that the Trustees may,
without Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 11.10. Fidelity Management & Research Company ("FMR") has
consented to, and granted a non-exclusive license for, the use by any
Series or by the Trust of the identifying word "Fidelity" or "Spartan" in
the name of any Series or of the Trust. Such consent is subject to
revocation by FMR in its discretion, if FMR or subsidiary or affiliate
thereof is not employed as the investment adviser of each Series of the
Trust. As between the Trust and FMR, FMR controls the use of the name of
the Trust insofar as such name contains the identifying word "Fidelity" or
"Spartan." FMR may, from time to time, use the identifying word "Fidelity"
or "Spartan" in other connections and for other purposes, including,
without limitation, in the names of other investment companies,
corporations or businesses which it may manage, advise, sponsor or own or
in which it may have a financial interest. FMR may require the Trust or
any Series thereof to cease using the identifying word "Fidelity" or
"Spartan" in the name of the Trust or any Series thereof if the Trust or
any Series thereof ceases to employ FMR or a subsidiary or affiliate
thereof as investment adviser.
PROVISIONS IN CONFLICT WITH LAW
Section 11.11. The provisions of this Trust Instrument are severable, and
if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other applicable
laws and regulations, the conflicting provision shall be deemed never to
have constituted a part of this Trust Instrument; provided, however, that
such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted
prior to such determination. If any provision of this Trust Instrument
shall be held invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any
other jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the initial Trustees of
the Trust, have executed this instrument this 20th day of June, 1991.
_/s/ Edward C. Johnson 3d_________________________
Edward C. Johnson 3d, as Trustee
and not individually.
/s/J. Gary Burkhead________________________________________
J. Gary Burkhead, as Trustee
and not individually.
/s/John E. Ferris______________________________________
John E. Ferris, as Trustee
and not individually.
CERTIFICATE OF TRUST
OF
FIDELITY MUNICIPAL TRUST II
1. The name of the trust is:
Fidelity Municipal Trust II
2. The Fidelity Municipal Trust II business address of the
registered office of the Trust and of the registered agent
of the Trust for service of process is:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
3. This certificate shall be effective upon filing.
4. Notice is hereby given that the Trust is a series Trust. The debts,
liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect
to a particular series of the Trust shall be enforceable against the
assets of such series
only and not against the assets of the Trust generally.
This Certificate is executed this 20th day of June, 1991, in Irving, Texas,
upon the penalties of perjury and constitutes the oath or affirmation that
the facts stated above are true to the undersigned's belief or knowledge.
<TABLE>
<CAPTION>
<S> <C>
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk /s/J. Tylee Wilson
Donald J. Kirk J. Tylee Wilson
/s/Peter S. Lynch /s/Bertram H. Witham
Peter S. Lynch Bertram H. Witham
/s/Edward H. Malone /s/J. Gary Burkhead
Edward H. Malone J. Gary Burkhead
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
</TABLE>
Exhibit 5(c)
MANAGEMENT CONTRACT
between
FIDELITY MUNICIPAL TRUST II:
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 28th day of February, 1992, by and between Fidelity
Municipal Trust II, a Delaware business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Spartan Pennsylvania Municipal Money Market Portfolio
(hereinafter called the "Portfolio"), and Fidelity Management & Research
Company, a Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser undertakes to pay all expenses involved in the operation
of the Portfolio, except the following, which shall be paid by the
Portfolio: (i) taxes; (ii) the fees and expenses of all Trustees of the
Fund who are not "interested persons" of the Fund or of the Adviser; (iii)
brokerage fees and commissions; (iv) interest expenses with respect to
borrowings by the Portfolio; and (v) such non-recurring and extraordinary
expenses as may arise, including actions, suits or proceedings to which the
Portfolio is or is threatened to be a party and the legal obligation that
the Portfolio may have to indemnify the Fund's Trustees and officers with
respect thereto. It is understood that service charges billed directly to
shareholders of the Portfolio, including charges for exchanges,
redemptions, or other services, shall not be payable by the Adviser, but
may be received and retained by the Adviser or its affiliates.
(d) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable
in relation to the benefits received. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Adviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. For the services and facilities to be furnished hereunder, the Adviser
shall receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, at the annual rate of .50% of
the average net assets of the Portfolio (computed in the manner set forth
in the Fund's Trust Instrument) determined as of the close of business on
each day throughout the month; provided that the fee, so computed, shall
be reduced by the compensation, including reimbursement of expenses, paid
by the Portfolio to those Trustees who are not "interested persons" of the
Fund or the Adviser. In the case of initiation or termination of this
Contract during any month, the fee shall be reduced proportionately based
on the number of business days during which it is in effect, and the fee
computed upon the average net assets for the business days it is so in
effect for that month.
4. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
5. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 5, this Contract shall continue in force until June 30, 1992
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 5, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
6. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Trust Instrument and
agrees that the obligations assumed by the Fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolios of
the Fund. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Trust Instrument are separate and distinct from those of any and all other
Portfolios.
7. This contract shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY MUNICIPAL TRUST II
on behalf of Spartan Pennsylvania Municipal
Money Market Portfolio
By /s/J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/ J. Gary Burkhead
President
Exhibit 5(d)
SUB-ADVISORY AGREEMENT
between
FMR TEXAS INC.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 28th day of February, 1992, by and between FMR Texas
Inc., a Texas corporation with principal offices at 400 East Las Colinas
Boulevard, Irving, Texas (hereinafter called the "Sub-Adviser") and
Fidelity Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
Municipal Trust II, a Delaware business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Fidelity Ohio Municipal Money Market Portfolio (hereinafter
called the "Portfolio"), pursuant to which the Adviser is to act as
investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing investment
management of money market mutual funds, both taxable and tax-exempt,
advising generally with respect to money market instruments, and managing
or providing advice with respect to cash management.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the Adviser,
direct the investments of the Portfolio in accordance with the investment
objective, policies and limitations as provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of l940 and rules thereunder, as amended from
time to time (the "l940 Act"), and such other limitations as the Portfolio
may impose by notice in writing to the Adviser or Sub-Adviser. The
Sub-Adviser shall also furnish for the use of the Portfolio office space
and all necessary office facilities, equipment and personnel for servicing
the investments of the Portfolio; and shall pay the salaries and fees of
all personnel of the Sub-Adviser performing services for the Portfolio
relating to research, statistical and investment activities. The
Sub-Adviser is authorized, in its discretion and without prior consultation
with the Portfolio or the Adviser, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other actions of
the Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's Board of
Trustees or the Adviser may request from time to time or as the Sub-Adviser
may deem to be desirable. The Sub-Adviser shall make recommendations to
the Fund's Board of Trustees with respect to Portfolio policies, and shall
carry out such policies as are adopted by the Trustees. The Sub-Adviser
shall, subject to review by the Board of Trustees, furnish such other
services as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement and
which are not otherwise furnished by the Adviser.
(c) The Sub-Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions at
prices which are advantageous to the Portfolio and at commission rates
which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of l934) to the Portfolio and/or the other accounts over which the
Sub-Adviser, Adviser or their affiliates exercise investment discretion.
The Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Trustees
of the Fund shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 50% of the management fee which
the Portfolio is obligated to pay the Adviser under the Portfolio's
Management Contract with the Adviser. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any, in
effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the Fund
are or may be or become interested in the Adviser or the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser or the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Sub-Adviser hereunder or
by the Adviser under the Management Contract with the Portfolio, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund, the Sub-Adviser or the
Adviser; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Fund and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Adviser, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Fund's Trustees and officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. The
Sub-Adviser shall for all purposes be an independent contractor and not an
agent or employee of the Adviser or the Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser, the
Sub-Adviser shall not be subject to liability to the Adviser, the Fund or
to any shareholder of the Portfolio for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until June 30,
1992 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust Instrument and agrees that
any obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio. Nor
shall the Sub-Adviser seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized all as of the date written above.
FMR TEXAS INC.
By /s/Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/J. Gary Burkhead
President
Exhibit 5(e)
SUB-ADVISORY AGREEMENT
between
FMR TEXAS INC.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 28th day of February, 1992, by and between FMR Texas
Inc., a Texas corporation with principal offices at 400 East Las Colinas
Boulevard, Irving, Texas (hereinafter called the "Sub-Adviser") and
Fidelity Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
Municipal Trust II, a Delaware business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Fidelity Michigan Municipal Money Market Portfolio (hereinafter
called the "Portfolio"), pursuant to which the Adviser is to act as
investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing investment
management of money market mutual funds, both taxable and tax-exempt,
advising generally with respect to money market instruments, and managing
or providing advice with respect to cash management.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the Adviser,
direct the investments of the Portfolio in accordance with the investment
objective, policies and limitations as provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of l940 and rules thereunder, as amended from
time to time (the "l940 Act"), and such other limitations as the Portfolio
may impose by notice in writing to the Adviser or Sub-Adviser. The
Sub-Adviser shall also furnish for the use of the Portfolio office space
and all necessary office facilities, equipment and personnel for servicing
the investments of the Portfolio; and shall pay the salaries and fees of
all personnel of the Sub-Adviser performing services for the Portfolio
relating to research, statistical and investment activities. The
Sub-Adviser is authorized, in its discretion and without prior consultation
with the Portfolio or the Adviser, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other actions of
the Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's Board of
Trustees or the Adviser may request from time to time or as the Sub-Adviser
may deem to be desirable. The Sub-Adviser shall make recommendations to
the Fund's Board of Trustees with respect to Portfolio policies, and shall
carry out such policies as are adopted by the Trustees. The Sub-Adviser
shall, subject to review by the Board of Trustees, furnish such other
services as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement and
which are not otherwise furnished by the Adviser.
(c) The Sub-Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions at
prices which are advantageous to the Portfolio and at commission rates
which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of l934) to the Portfolio and/or the other accounts over which the
Sub-Adviser, Adviser or their affiliates exercise investment discretion.
The Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Trustees
of the Fund shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 50% of the management fee which
the Portfolio is obligated to pay the Adviser under the Portfolio's
Management Contract with the Adviser. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any, in
effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the Fund
are or may be or become interested in the Adviser or the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser or the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Sub-Adviser hereunder or
by the Adviser under the Management Contract with the Portfolio, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund, the Sub-Adviser or the
Adviser; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Fund and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefor;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Adviser, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Fund's Trustees and officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. The
Sub-Adviser shall for all purposes be an independent contractor and not an
agent or employee of the Adviser or the Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser, the
Sub-Adviser shall not be subject to liability to the Adviser, the Fund or
to any shareholder of the Portfolio for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until June 30,
1992 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust Instrument and agrees that
any obligations of the Fund or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio. Nor
shall the Sub-Adviser seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized all as of the date written above.
FMR TEXAS INC.
By /s/Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/J. Gary Burkhead
President
Exhibit 5(f)
SUB-ADVISORY AGREEMENT
between
FMR TEXAS INC.
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 28th day of February, 1992, by and between FMR Texas
Inc., a Texas corporation with principal offices at 400 East Las Colinas
Boulevard, Irving, Texas (hereinafter called the "Sub-Adviser") and
Fidelity Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Adviser").
WHEREAS the Adviser has entered into a Management Contract with Fidelity
Municipal Trust II, a Delaware business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Fund"), on
behalf of Spartan Pennsylvania Municipal Money Market Portfolio
(hereinafter called the "Portfolio"), pursuant to which the Adviser is to
act as investment manager and adviser to the Portfolio, and
WHEREAS the Sub-Adviser was formed for the purpose of providing investment
management of money market mutual funds, both taxable and tax-exempt,
advising generally with respect to money market instruments, and managing
or providing advice with respect to cash management.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Adviser and the Sub-Adviser agree as follows:
1. (a) The Sub-Adviser shall, subject to the supervision of the Adviser,
direct the investments of the Portfolio in accordance with the investment
objective, policies and limitations as provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of l940 and rules thereunder, as amended from
time to time (the "l940 Act"), and such other limitations as the Portfolio
may impose by notice in writing to the Adviser or Sub-Adviser. The
Sub-Adviser shall also furnish for the use of the Portfolio office space
and all necessary office facilities, equipment and personnel for servicing
the investments of the Portfolio; and shall pay the salaries and fees of
all personnel of the Sub-Adviser performing services for the Portfolio
relating to research, statistical and investment activities. The
Sub-Adviser is authorized, in its discretion and without prior consultation
with the Portfolio or the Adviser, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Portfolio. The investment policies and all other actions of
the Portfolio are and shall at all times be subject to the control and
direction of the Fund's Board of Trustees.
(b) The Sub-Adviser shall also furnish such reports, evaluations,
information or analyses to the Fund and the Adviser as the Fund's Board of
Trustees or the Adviser may request from time to time or as the Sub-Adviser
may deem to be desirable. The Sub-Adviser shall make recommendations to
the Fund's Board of Trustees with respect to Portfolio policies, and shall
carry out such policies as are adopted by the Trustees. The Sub-Adviser
shall, subject to review by the Board of Trustees, furnish such other
services as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement and
which are not otherwise furnished by the Adviser.
(c) The Sub-Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Sub-Adviser, which may include brokers
or dealers affiliated with the Adviser or Sub-Adviser. The Sub-Adviser
shall use its best efforts to seek to execute portfolio transactions at
prices which are advantageous to the Portfolio and at commission rates
which are reasonable in relation to the benefits received. In selecting
brokers or dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of l934) to the Portfolio and/or the other accounts over which the
Sub-Adviser, Adviser or their affiliates exercise investment discretion.
The Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination
may be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Trustees
of the Fund shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
2. The Sub-Adviser will be compensated by the Adviser on the following
basis for the services to be furnished hereunder: the Adviser agrees to
pay the Sub-Adviser a monthly fee equal to 50% of the management fee which
the Portfolio is obligated to pay the Adviser under the Portfolio's
Management Contract with the Adviser. Such fee shall not be reduced to
reflect expense reimbursements or fee waivers by the Adviser, if any, in
effect from time to time.
3. It is understood that Trustees, officers, and shareholders of the Fund
are or may be or become interested in the Adviser or the Sub-Adviser as
directors, officers or otherwise and that directors, officers and
stockholders of the Adviser or the Sub-Adviser are or may be or become
similarly interested in the Fund, and that the Adviser or the Sub-Adviser
may be or become interested in the Fund as a shareholder or otherwise.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Sub-Adviser hereunder or
by the Adviser under the Management Contract with the Portfolio, which
expenses payable by the Portfolio shall include, (i) taxes; (ii) the fees
and expenses of all Trustees of the Fund who are not "interested persons"
of the Fund, Sub-Adviser or of the Adviser; (iii) brokerage fees and
commissions; (iv) interest expenses with respect to borrowings by the
Portfolio; (v) such non-recurring or extraordinary expenses as may arise,
including actions, suits or proceedings to which the Portfolio is or is
threatened to be a party and the legal obligation that the Portfolio may
have to indemnify the Fund's Trustees and officers with respect thereto.
5. The Services of the Sub-Adviser to the Adviser are not to be deemed to
be exclusive, the Sub-Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Adviser's ability to meet all of its
obligations with respect to rendering investment advice hereunder. The
Sub-Adviser shall for all purposes be an independent contractor and not an
agent or employee of the Adviser or the Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser, the
Sub-Adviser shall not be subject to liability to the Adviser, the Fund or
to any shareholder of the Portfolio for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Agreement shall continue in force until June 30,
1992 and indefinitely thereafter, but only so long as the continuance after
such period shall be specifically approved at least annually by vote of the
Fund's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Adviser, the
Sub-Adviser and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of the Agreement
must have been approved by the vote of a majority of those Trustees of the
Fund who are not parties to such Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or by vote of a majority of its outstanding voting
securities. This Agreement shall terminate automatically in the event of
its assignment.
7. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust Instrument of the Fund and
agrees that any obligations of the Fund or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Adviser shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Adviser seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
8. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FMR TEXAS INC.
By /s/Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/J. Gary Burkhead
President
Exhibit 6(a)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY MUNICIPAL TRUST II
Fidelity Ohio Municipal Money Market Portfolio
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 28th day of February, 1992, between Fidelity Municipal
Trust II, a Delaware business trust having its principal place of business
in Wilmington, Delaware and which may issue one or more series of
beneficial interest ("Issuer"), with respect to shares of Fidelity Ohio
Municipal Money Market Portfolio, a series of the Issuer, and Fidelity
Distributors Corporation, a Massachusetts corporation having its principal
place of business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to Distributors the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: Distributors (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to Distributors shall
be nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further,
the Issuer reserves the right to issue shares in connection with the merger
or consolidation, or acquisition by the Issuer through purchase or
otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by Distributors or the Issuer will be sold at the public
offering price. The public offering price for all accepted subscriptions
will be the net asset value per share, as determined in the manner
described in the Issuer's current Prospectus and/or Statement of Additional
Information, plus a sales charge (if any) described in the Issuer's current
Prospectus and/or Statement of Additional Information. The Issuer shall in
all cases receive the net asset value per share on all sales. If a sales
charge is in effect, the Distributor shall have the right subject to such
rules or regulations of the Securities and Exchange Commission as may then
be in effect pursuant to Section 22 of the Investment Company Act of 1940
to pay a portion of the sales charge to dealers who have sold shares of the
Issuer. If a fee in connection with shareholder redemptions is in effect,
the Issuer shall collect the fee on behalf of Distributors and, unless
otherwise agreed upon by the Issuer and Distributors, Distributors shall be
entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by Distributors except such
unconditional orders as may have been placed with Distributors before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and Distributors' authority to process orders for
shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to
Distributors, the Distributors agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent Distributors from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate Distributors to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for Distributors' use. This
shall not be construed to prevent Distributors from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares Distributors may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to
Distributors copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1992 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to Distributors, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust of the Issuer and agrees that the obligations assumed by the Issuer
under this contract shall be limited in all cases to the Issuer and its
assets. The Distributor shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Issuer. Nor shall the
Distributor seek satisfaction of any such obligation from the Trustees or
any individual Trustee of the Issuer. The Distributor understands that the
rights and obligations of each series of shares of the Issuer under the
Issuer's Declaration of Trust and distinct from those of any and all other
series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf by
one of its officers duly authorized, as of the day and year first above
written.
Fidelity Municipal Trust II
Fidelity Ohio Municipal Money Market Portfolio
Attest: /s/ Arthur S. Loring By /s/ J. Gary Burkhead
Secretary
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/ Arthur S. Loring By /s/ Nita B. Kincaid
Clerk
Exhibit 6(b)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY MUNICIPAL TRUST II
Fidelity Michigan Municipal Money Market Portfolio
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 28th day of February, 1992, between Fidelity Municipal
Trust II, a Delaware business trust having its principal place of business
in Wilmington, Delaware and which may issue one or more series of
beneficial interest ("Issuer"), with respect to shares of Fidelity Michigan
Municipal Money Market Portfolio, a series of the Issuer, and Fidelity
Distributors Corporation, a Massachusetts corporation having its principal
place of business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to Distributors the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: Distributors (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to Distributors shall
be nonexclusive in that the Issuer reserves the right to sell its shares to
investors on applications received and accepted by the Issuer. Further,
the Issuer reserves the right to issue shares in connection with the merger
or consolidation, or acquisition by the Issuer through purchase or
otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by Distributors or the Issuer will be sold at the public
offering price. The public offering price for all accepted subscriptions
will be the net asset value per share, as determined in the manner
described in the Issuer's current Prospectus and/or Statement of Additional
Information, plus a sales charge (if any) described in the Issuer's current
Prospectus and/or Statement of Additional Information. The Issuer shall in
all cases receive the net asset value per share on all sales. If a sales
charge is in effect, the Distributor shall have the right subject to such
rules or regulations of the Securities and Exchange Commission as may then
be in effect pursuant to Section 22 of the Investment Company Act of 1940
to pay a portion of the sales charge to dealers who have sold shares of the
Issuer. If a fee in connection with shareholder redemptions is in effect,
the Issuer shall collect the fee on behalf of Distributors and, unless
otherwise agreed upon by the Issuer and Distributors, Distributors shall be
entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by Distributors except such
unconditional orders as may have been placed with Distributors before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and Distributors' authority to process orders for
shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to
Distributors, the Distributors agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent Distributors from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate Distributors to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for Distributors' use. This
shall not be construed to prevent Distributors from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares Distributors may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to
Distributors copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1992 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to Distributors, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust of the Issuer and agrees that the obligations assumed by the Issuer
under this contract shall be limited in all cases to the Issuer and its
assets. The Distributor shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Issuer. Nor shall the
Distributor seek satisfaction of any such obligation from the Trustees or
any individual Trustee of the Issuer. The Distributor understands that the
rights and obligations of each series of shares of the Issuer under the
Issuer's Declaration of Trust and distinct from those of any and all other
series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf by
one of its officers duly authorized, as of the day and year first above
written.
Fidelity Municipal II
Fidelity Michigan Municipal Money Market Portfolio
Attest: /s/ Arthur S. Loring By /s/ J. Gary Burkhead
Secretary
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/ Arthur S. Loring By /s/ Nita B. Kincaid
Clerk
Exhibit 6(c)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY MUNICIPAL TRUST II:
Spartan Pennsylvania Municipal Money Market Portfolio
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 29th day of February, 1992, between Fidelity Municipal
Trust II, a Delaware business trust having its principal place of business
in Wilmington, Delaware and which may issue one or more series of
beneficial interest ("Issuer"), with respect to shares of Spartan
Pennsylvania Municipal Money Market Portfolio, a series of the Issuer, and
Fidelity Distributors Corporation, a Massachusetts corporation having its
principal place of business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of Distributors and, unless otherwise agreed upon by the Issuer and
Distributors, Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and the Distributor's authority to process orders
for shares on behalf of the Issuer if, in the judgment of the Issuer, it is
in the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1992 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to Distributors, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Trust
Instrument of the Issuer and agrees that the obligations assumed by the
Issuer under this contract shall be limited in all cases to the Issuer and
its assets. The Distributor shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Issuer. Nor
shall the Distributor seek satisfaction of any such obligation from the
Trustees or any individual Trustee of the Issuer. The Distributor
understands that the rights and obligations of each series of shares of the
Issuer under the Issuer's Trust Instrument are separate and distinct from
those of any and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, by one of its officers duly authorized, and the Distributor has
executed this instrument in its name and behalf, by one of its officers
duly authorized, as of the day and year first above written.
FIDELITY MUNICIPAL TRUST II:
Spartan Pennsylvania Municipal Money Market Portfolio
Attest: /s/Arthur S. Loring By /s/J. Gary Burkhead
Secretary Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
Attest:/s/Arthur S. Loring By /s/Nita B. Kincaid
Clerk President
Exhibit 8(a)
CUSTODIAN AGREEMENT
Dated as of: October 17, 1991
Between
FIDELITY MUNICIPAL TRUST II
and
UNITED MISSOURI BANK, N.A.
TABLE OF CONTENTS
ARTICLE
Page
I. APPOINTMENT OF CUSTODIAN 1
II. POWERS AND DUTIES OF CUSTODIAN 1
2.01 Safekeeping 1
2.02 Manner of Holding Securities 2
2.03 Security Purchases 2
2.04 Exchanges of Securities 3
2.05 Sales of Securities 3
2.06 Depositary Receipts 3
2.07 Exercise of Rights; Tender Offers 4
2.08 Stock Dividends, Rights, Etc. 4
2.09 Options 4
2.10 Futures Contracts 4
2.11 Borrowing 5
2.12 Interest Bearing Deposits 5
2.13 Foreign Exchange Transactions 6
2.14 Securities Loans 6
2.15 Collections 7
2.16 Dividends, Distributions and Redemptions 7
2.17 Proceeds from Shares Sold 7
2.18 Proxies, Notices, Etc. 7
2.19 Bills and Other Disbursements 8
2.20 Nondiscretionary Functions 8
2.21 Bank Accounts 8
2.22 Deposit of Fund Assets in Securities Systems 9
2.23 Other Transfers 10
2.24 Establishment of Segregated Account 10
2.25 Custodian's Books and Records . 10
2.26 Opinion of Fund's Independent Certified Public
Accountants 11
2.27 Reports of Independent Certified Public Accountants 11
2.28 Overdraft Facility 11
III. PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS 12
3.01 Proper Instructions and Special Instructions 12
3.02 Authorized Persons 13
3.03 Persons Having Access to Assets of the Portfolios 13
3.04 Actions of the Custodian Based on Proper Instructions and
Special Instructions 13
IV. SUBCUSTODIANS 13
4.01 Domestic Subcustodians 14
4.02 Foreign Subcustodians and Interim Subcustodians 14
4.03 Special Subcustodians 15
4.04 Termination of a Subcustodian 15
4.05 Certification Regarding Foreign Subcustodians 16
V. STANDARD OF CARE; INDEMNIFICATION 16
5.01 Standard of Care 16
5.02 Liability of Custodian for Actions of Other Persons 17
5.03 Indemnification 18
5.04 Investment Limitations 19
5.05 Fund's Right to Proceed 19
VI. COMPENSATION 20
VII. TERMINATION 20
7.01 Termination of Agreement in Full 20
7.02 Termination as to One or More Portfolios 21
VIII. DEFINED TERMS 21
IX. MISCELLANEOUS 22
9.01 Execution of Documents, Etc 22
9.02 Representative Capacity; Nonrecourse Obligations 22
9.03 Several Obligations of the Portfolios 23
9.04 Representations and Warranties 23
9.05 Entire Agreement 23
9.06 Waivers and Amendments 24
9.07 Interpretation 24
9.08 Captions 24
9.09 Governing Law 24
9.10 Notices 24
9.11 Assignment 25
9.12 Counterparts 25
9.13 Confidentiality; Survival of Obligations 25
APPENDICES
Appendix "A" - List of Portfolios
Appendix "B" - List of Foreign Subcustodians
and Special Subcustodians
Appendix "C" - Procedures Relating to
Custodian's Security Interest
CUSTODIAN AGREEMENT
AGREEMENT made as of the 17th day of October between Fidelity Municipal
Trust II (the "Fund") and United Missouri Bank, N.A. (the "Custodian").
W I T N E S S E T H
WHEREAS, the Fund may, from time to time organize one or more series of
shares, in addition to the series set forth in Appendix "A" attached
hereto, each of which shall represent an interest in a separate portfolio
of cash, securities and other assets (all such existing and additional
series now or hereafter listed on Appendix "A" being hereinafter referred
to individually, as a "Portfolio," and collectively, as the "Portfolios");
and
WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf
of the Portfolios in accordance with the provisions of the Investment
Company Act of 1940 (the "1940 Act") and the rules and regulations
thereunder, under the terms and conditions set forth in this Agreement, and
the Custodian has agreed so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
On behalf of the Portfolios, the Fund hereby employs and appoints the
Custodian as a custodian, subject to the terms and provisions of this
Agreement. The Fund shall deliver to the Custodian, or shall cause to be
delivered to the Custodian, cash, securities and other assets owned by the
Portfolios from time to time during the term of this Agreement and shall
specify the Portfolio to which such cash, securities and other assets are
to be specifically allocated.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article
IV hereof, the Custodian may appoint one or more Subcustodians (as
hereinafter defined) to exercise the powers and perform the duties of the
Custodian set forth in this Article II and references to the Custodian in
this Article II shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall keep safely all cash,
securities and other assets of the Portfolios delivered to the Custodian
and, on behalf of the Portfolios, the Custodian shall, from time to time,
accept delivery of cash, securities and other assets for safekeeping.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Portfolios
either: (i) by physical possession of the share certificates or other
instruments representing such securities in registered or bearer form; or
(ii) in book-entry form by a Securities System (as hereinafter defined) in
accordance with the provisions of Section 2.22 below.
(b) The Custodian shall at all times hold registered securities of each
Portfolio in the name of the Custodian, the Portfolio or a nominee of
either of them, unless specifically directed by Proper Instructions to hold
such registered securities in so-called street name; provided that, in any
event, all such securities and other assets shall be held in an account of
the Custodian containing only assets of a Portfolio, or only assets held by
Custodian as a fiduciary or custodian for customers, and provided further,
that the records of the Custodian shall indicate at all times the Portfolio
or other customer for which such securities and other assets are held in
such account and the respective interests therein.
Section 2.03. Security Purchases. Upon receipt of Proper Instructions
(as hereinafter defined), the Custodian shall pay for and receive
securities purchased for the account of a Portfolio, provided that payment
shall be made by Custodian only upon receipt of the securities: (a) by the
Custodian; (b) by a clearing corporation of a national securities exchange
of which the Custodian is a member; or (c) by a Securities System.
Notwithstanding the foregoing, upon receipt of Proper Instructions: (i) in
the case of a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System
that the securities underlying such repurchase agreement have been
transferred by book-entry into the Account (as hereinafter defined)
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities system require that the
Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the securities
underlying the repurchase agreement into the Account; (ii) in the case of
time deposits, call account deposits, currency deposits, and other
deposits, foreign exchange transactions, futures contracts or options,
pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; (iii) in the case
of the purchase of securities, the settlement of which occurs outside of
the United States of America, the Custodian may make payment therefor and
receive delivery of such securities in accordance with local custom and
practice generally accepted by Institutional Clients (as hereinafter
defined) in the country in which the settlement occurs, but in all events
subject to the standard of care set forth in Article V hereof. For purposes
of this Agreement, an "Institutional Client" shall mean a major commercial
bank, corporation, insurance company, or substantially similar institution,
which, as a substantial part of its business operations, purchases or sells
securities and makes use of custodial services.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the
account of a Portfolio for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities, and shall deposit any such securities in accordance with the
terms of any reorganization or protective plan. The Custodian shall,
without receiving Proper Instructions: surrender securities in temporary
form for definitive securities; surrender securities for transfer into the
name of the Custodian, a Portfolio or a nominee of either of them, as
permitted by Section 2.02(b); and surrender securities for a different
number of certificates or instruments representing the same number of
shares or same principal amount of indebtedness, provided that the
securities to be issued will be delivered to the Custodian or a nominee of
the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for
the account of a Portfolio, but only against payment therefor in the form
of: (a) cash, certified check, bank cashier's check, bank credit, or bank
wire transfer; (b) credit to the account of the custodian with a clearing
corporation of a national securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities
System, in accordance with the provisions of Section 2.22 hereof.
Notwithstanding the foregoing: (i) in the case of the sale of securities,
the settlement of which occurs outside of the United States of America,
such securities shall be delivered and paid for in accordance with local
custom and practice generally accepted by Institutional Clients in the
country in which the settlement occurs, but in all events subject to the
standard of care set forth in Article V hereof; (ii) in the case of
securities held in physical form, such securities shall be delivered and
paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
securities, provided that the Custodian shall have taken reasonable steps
to ensure prompt collection of the payment for, or the return of, such
securities by the broker or its clearing agent, and provided further that
the Custodian shall not be responsible for the selection of or the failure
or inability to perform of such broker or its clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter referred to, collectively, as "ADRs"),
against a written receipt therefor adequately describing such securities
and written evidence satisfactory to the Custodian that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
securities in the name of the Custodian or a nominee of the Custodian, for
delivery to the Custodian at such place as the Custodian may from time to
time designate. Upon receipt of Proper Instructions, the Custodian shall
surrender ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof, or to the
agent of such issuer or trustee, for the purpose of exercise or sale,
provided that the new securities, cash or other assets, if any, acquired as
a result of such actions are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the
Custodian, or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Proper Instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar rights of
security ownership, and shall promptly notify the Fund of such action in
writing by facsimile transmission or in such other manner as the Fund and
Custodian may agree in writing.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and,
upon receipt of Proper Instructions, take action with respect to the same
as directed in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, the Fund relating to compliance
with the rules of the Options Clearing Corporation or of any registered
national securities exchange or similar organization(s), the Custodian
shall: (a) receive and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a security or securities
index by a Portfolio; (b) deposit and maintain in a segregated account,
securities (either physically or by book-entry in a Securities System),
cash or other assets; and (c) pay, release and/or transfer such securities,
cash or other assets in accordance with notices or other communications
evidencing the expiration, termination or exercise of such options
furnished by the Options Clearing Corporation, the securities or options
exchange on which such options are traded, or such other organization as
may be responsible for handling such option transactions. The Fund and the
broker-dealer shall be responsible for the sufficiency of assets held in
any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions, or
pursuant to the provisions of any futures margin procedural agreement among
the Fund, on behalf of any Portfolio, the Custodian and any futures
commission merchant (a "Procedural Agreement"), the Custodian shall: (a)
receive and retain confirmations, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract by a Portfolio;
(b) deposit and maintain in a segregated account, cash, securities and
other assets designated as initial, maintenance or variation "margin"
deposits intended to secure the Portfolio's performance of its obligations
under any futures contracts purchased or sold or any options on futures
contracts written by the Portfolio, in accordance with the provisions of
any Procedural Agreement designed to comply with the rules of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release assets from and/or transfer
assets into such margin accounts only in accordance with any such
Procedural Agreements. The Fund and such futures commission merchant shall
be responsible for the sufficiency of assets held in the segregated account
in compliance with applicable margin maintenance requirements and the
performance of any futures contract or option on a futures contract in
accordance with its terms.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of a Portfolio to lenders or their
agents, or otherwise establish a segregated account as agreed to by the
Fund and the Custodian, as collateral for borrowings effected by the Fund
on behalf of a Portfolio, provided that such borrowed money is payable by
the lender (a) to or upon the Custodian's order, as Custodian for such
Portfolio, and (b) concurrently with delivery of such securities.
Section 2.12. Interest Bearing Deposits.
Upon receipt of Proper Instructions directing the Custodian to purchase
interest bearing fixed term and call deposits (hereinafter referred to
collectively, as "Interest Bearing Deposits") for the account of a
Portfolio, the Custodian shall purchase such Interest Bearing Deposits in
the name of a Portfolio with such banks or trust companies (including the
Custodian, any Subcustodian or any subsidiary or affiliate of the
Custodian) (hereinafter referred to as "Banking Institutions") and in such
amounts as the Fund may direct pursuant to Proper Instructions. Such
Interest Bearing Deposits may be denominated in U.S. Dollars or other
currencies, as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall include in its records with respect to
the assets of each Portfolio appropriate notation as to the amount and
currency of each such Interest Bearing Bank Deposit, the accepting Banking
Institution and all other appropriate details, and shall retain such forms
of advice or receipt evidencing such account, if any, as may be forwarded
to the Custodian by the Banking Institution. The responsibilities of the
Custodian to the Fund for Interest Bearing Deposits accepted on the
Custodian's books in the United States shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than
those accepted on the Custodian's books, (a) the Custodian shall be
responsible for the collection of income as set forth in Section 2.15 and
the transmission of cash and instructions to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or, so long as the Custodian acts in accordance with
Proper Instructions, for the failure of such Banking Institution to pay
upon demand. Upon receipt of Proper Instructions, the Custodian shall take
such reasonable actions as the Fund deems necessary or appropriate to cause
each such Interest Bearing Deposit Account to be insured to the maximum
extent possible by all applicable deposit insurers including, without
limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions
(a) Foreign Exchange Transactions Other than as Principal. Upon receipt
of Proper Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for spot and
future delivery on behalf of and for the account of a Portfolio with such
currency brokers or Banking Institutions as the Fund may determine and
direct pursuant to Proper Instructions. The Custodian shall be responsible
for the transmission of cash and instructions to and from the currency
broker or Banking Institution with which the contract or option is made,
the safekeeping of all certificates and other documents and agreements
evidencing or relating to such foreign exchange transactions and the
maintenance of proper records as set forth in Section 2.25. The Custodian
shall have no duty with respect to the selection of the currency brokers or
Banking Institutions with which the Fund deals or, so long as the Custodian
acts in accordance with Proper Instructions, for the failure of such
brokers or Banking Institutions to comply with the terms of any contract or
option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal.
However, if the Custodian has made available to the Fund its services as a
principal in foreign exchange transactions, upon receipt of Proper
Instructions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of a Portfolio with the Custodian
as principal. The Custodian shall be responsible for the selection of the
currency brokers or Banking Institutions and the failure of such currency
brokers or Banking Institutions to comply with the terms of any contract or
option.
(c) Payments. Notwithstanding anything to the contrary contained herein,
upon receipt of Proper Instructions the Custodian may, in connection with a
foreign exchange contract, make free outgoing payments of cash in the form
of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue
currency completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions, the
Custodian shall, in connection with loans of securities by a Portfolio,
deliver securities of such Portfolio to the borrower thereof prior to
receipt of the collateral, if any, for such borrowing; provided that, in
cases of loans of securities secured by cash collateral, the Custodian's
instructions to the Securities System shall require that the Securities
System deliver the securities of the Portfolio to the borrower thereof only
upon receipt of the collateral for such borrowing.
Section 2.15. Collections. The Custodian shall, and shall cause any
Subcustodian to: (a) collect amounts due and payable to the Fund with
respect to portfolio securities and other assets of each Portfolio; (b)
promptly credit to the account of each Portfolio all income and other
payments relating to portfolio securities and other assets held by the
Custodian hereunder upon Custodian's receipt of such income or payments or
as otherwise agreed in writing by the Custodian and the Fund; (c) promptly
endorse and deliver any instruments required to effect such collections;
and (d) promptly execute ownership and other certificates and affidavits
for all federal, state and foreign tax purposes in connection with receipt
of income or other payments with respect to portfolio securities and other
assets of each Portfolio, or in connection with the transfer of such
securities or other assets; provided, however, that with respect to
portfolio securities registered in so-called street name, the Custodian
shall use its best efforts to collect amounts due and payable to the Fund.
The Custodian shall promptly notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing if any amount payable with respect to portfolio securities or other
assets of the Portfolios is not received by the Custodian when due. The
Custodian shall not be responsible for the collection of amounts due and
payable with respect to portfolio securities or other assets that are in
default.
Section 2.16. Dividends, Distributions and Redemptions. The Custodian
shall promptly release funds or securities: (a) upon receipt of Proper
Instructions, to one or more Distribution Accounts designated by the Fund
in such Proper Instructions; or (b) upon receipt of Special Instructions,
as otherwise directed by the Fund, for the purpose of the payment of
dividends or other distributions to shareholders of the Portfolios, and
payment to shareholders who have requested repurchase or redemption of
their shares of the Portfolio(s) (collectively, the "Shares"). For
purposes of this Agreement, a "Distribution Account" shall mean an account
established at a Banking Institution designated by the Fund in Special
Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from
time to time by the Fund, and shall promptly credit such funds to the
account(s) of the applicable Portfolio(s). The Custodian shall promptly
notify the Fund of Custodian's receipt of cash in payment for Shares issued
by the Fund by facsimile transmission or in such other manner as the Fund
and Custodian may agree in writing. Upon receipt of Proper Instructions,
the Custodian shall: (a) deliver all federal funds received by the
Custodian in payment for Shares in payment for such investments as may be
set forth in such Proper Instructions and at a time agreed upon between the
Custodian and the Fund; and (b) make federal funds available to the Fund as
of specified times agreed upon from time to time by the Fund and the
Custodian, in the amount of checks received in payment for Shares which are
deposited to the accounts of the Portfolios.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver to the
Fund, in the most expeditious manner practicable, all forms of proxies, all
notices of meetings, and any other notices or announcements affecting or
relating to securities owned by the Portfolios that are received by the
Custodian, any Subcustodian, or any nominee of either of them, and, upon
receipt of Proper Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or nominee to execute and deliver, such proxies or
other authorizations as may be required. Except as directed pursuant to
Proper Instructions, neither the Custodian nor any Subcustodian or nominee
shall vote upon any such securities, or execute any proxy to vote thereon,
or give any consent or take any other action with respect thereto.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Portfolios.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend to
all nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
assets of the Portfolios held by the Custodian, except as otherwise
directed from time to time pursuant to Proper Instructions.
Section 2.21. Bank Accounts
(a) Accounts with the Custodian and any Subcustodians. The Custodian shall
open and operate a bank account or accounts (hereinafter referred to
collectively, as "Bank Accounts") on the books of the Custodian or any
Subcustodian provided that such account(s) shall be in the name of the
Custodian or a nominee of the Custodian, for the account of a Portfolio,
and shall be subject only to the draft or order of the Custodian; provided
however, that such Bank Accounts in countries other than the United States
may be held in an account of the Custodian containing only assets held by
the Custodian as a fiduciary or custodian for customers, and provided
further, that the records of the Custodian shall indicate at all times the
Portfolio or other customer for which such securities and other assets are
held in such account and the respective interests therein. Such Bank
Accounts may be denominated in either U.S. Dollars or other currencies.
The responsibilities of the Custodian to the Fund for deposits accepted on
the Custodian's books in the United States shall be that of a U.S. bank for
a similar deposit. The responsibilities of the Custodian to the Fund for
deposits accepted on any Subcustodian's books shall be governed by the
provisions of Section 5.02.
(b) Accounts With Other Banking Institutions. The Custodian may open and
operate Bank Accounts on behalf of a Portfolio, in the name of the
Custodian or a nominee of the Custodian, at a Banking Institution other
than the Custodian or any Subcustodian, provided that such account(s) shall
be in the name of the Custodian or a nominee of the Custodian, for the
account of a Portfolio, and shall be subject only to the draft or order of
the Custodian; provided however, that such Bank Accounts may be held in an
account of the Custodian containing only assets held by the Custodian as a
fiduciary or custodian for customers, and provided further, that the
records of the Custodian shall indicate at all times the Portfolio or other
customer for which such securities and other assets are held in such
account and the respective interests therein. Such Bank Accounts may be
denominated in either U.S. Dollars or other currencies. Subject to the
provisions of Section 5.01(a), the Custodian shall be responsible for the
selection of the Banking Institution and for the failure of such Banking
Institution to pay according to the terms of the deposit.
(c) Deposit Insurance. Upon receipt of Proper Instructions, the Custodian
shall take such reasonable actions as the Fund deems necessary or
appropriate to cause each deposit account established by the Custodian
pursuant to this Section 2.21 to be insured to the maximum extent possible
by all applicable deposit insurers including, without limitation, the
Federal Deposit Insurance Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by the
Portfolios in: (a) The Depository Trust Company; (b) the Participants
Trust Company; (c) any book-entry system as provided in (i) Subpart O of
Treasury Circular No. 300, 31 CFR 306.115, (ii) Subpart B of Treasury
Circular Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the
book-entry regulations of federal agencies substantially in the form of 31
CFR 306.115; or (d) any other domestic clearing agency registered with the
Securities and Exchange Commission ("SEC") under Section 17A of the
Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository
or clearing agent for the securities or other assets of investment
companies) which acts as a securities depository and the use of which the
Fund has previously approved by Special Instructions (as hereinafter
defined) (each of the foregoing being referred to in this Agreement as a
"Securities System"). Use of a Securities System shall be in accordance
with applicable Federal Reserve Board and SEC rules and regulations, if
any, and subject to the following provisions:
(A) The Custodian may deposit and/or maintain securities held hereunder
in a Securities System, provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which Account
shall not contain any assets of the Custodian other than assets held as a
fiduciary, custodian, or otherwise for customers.
(B) The books and records of the Custodian shall at all times identify
those securities belonging to each Portfolio which are maintained in a
Securities System.
(C) The Custodian shall pay for securities purchased for the account of a
Portfolio only upon (w) receipt of advice from the Securities System that
such securities have been transferred to the Account of the Custodian, and
(x) the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of such Portfolio. The Custodian
shall transfer securities sold for the account of a Portfolio only upon (y)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account of the Custodian, and (z)
the making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Portfolio. Copies of all
advices from the Securities System relating to transfers of securities for
the account of a Portfolio shall identify such Portfolio, shall be
maintained for the Portfolio by the Custodian. The Custodian shall deliver
to the Fund on the next succeeding business day daily transaction reports
which shall include each day's transactions in the Securities System for
the account of each Portfolio. Such transaction reports shall be delivered
to the Fund or any agent designated by the Fund pursuant to Proper
Instructions, by computer or in such other manner as the Fund and Custodian
may agree in writing.
(D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System.
(E) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System (except the federal book-entry system) on
behalf of any Portfolio as promptly as practicable and shall take all
actions reasonably practicable to safeguard the securities of the
Portfolios maintained with such Securities System.
Section 2.23. Other Transfers. Upon receipt of Special Instructions, the
Custodian shall make such other dispositions of securities, funds or other
property of the Portfolios in a manner or for purposes other than as
expressly set forth in this Agreement, provided that the Special
Instructions relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of funds and/or
securities to be delivered, and the name of the person or persons to whom
delivery is to be made, and shall otherwise comply with the provisions of
Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its
books a segregated account or accounts for and on behalf of a Portfolio,
into which account or accounts may be transferred cash and/or securities or
other assets of such Portfolio, including securities maintained by the
Custodian in a Securities System pursuant to Section 2.22 hereof, said
account or accounts to be maintained: (a) for the purposes set forth in
Sections 2.09, 2.10 and 2.11 hereof; (b) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the SEC relating to the
maintenance of segregated accounts by registered investment companies; or
(c) for such other purposes as set forth, from time to time, in Special
Instructions.
Section 2.25. Custodian's Books and Records. The Custodian shall provide
any assistance reasonably requested by the Fund in the preparation of
reports to Fund shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete
and accurate records with respect to securities and other assets held for
the accounts of the Portfolios as required by the rules and regulations of
the SEC applicable to investment companies registered under the 1940 Act,
including: (a) journals or other records of original entry containing a
detailed and itemized daily record of all receipts and deliveries of
securities (including certificate and transaction identification numbers,
if any), and all receipts and disbursements of cash; (b) ledgers or other
records reflecting (i) securities in transfer, (ii) securities in physical
possession, (iii) securities borrowed, loaned or collateralizing
obligations of the Portfolios, (iv) monies borrowed and monies loaned
(together with a record of the collateral therefor and substitutions of
such collateral), and (v) dividends and interest received; and (c)
cancelled checks and bank records related thereto. The Custodian shall
keep such other books and records of the Fund as the Fund shall reasonably
request. All such books and records maintained by the Custodian shall be
maintained in a form acceptable to the Fund and in compliance with the
rules and regulations of the SEC, including, but not limited to, books and
records required to be maintained by Section 31(a) of the 1940 Act and the
rules and regulations from time to time adopted thereunder. All books and
records maintained by the Custodian pursuant to this Agreement shall at all
times be the property of the Fund and shall be available during normal
business hours for inspection and use by the Fund and its agents,
including, without limitation, its independent certified public
accountants. Notwithstanding the preceding sentence, the Funds shall not
take any actions or cause the Custodian to take any actions which would
cause, either directly or indirectly, the Custodian to violate any
applicable laws, regulations or orders.
Section 2.26. Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as the Fund may request to
obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder in connection with the preparation of the Fund's Form N-1A and
the Fund's Form N-SAR or other periodic reports to the SEC and with respect
to any other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of the Fund, the Custodian shall deliver to the Fund a written
report prepared by the Custodian's independent certified public accountants
with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding cash,
securities and other assets, including cash, securities and other assets
deposited and/or maintained in a Securities System or with a Subcustodian.
Such report shall be of sufficient scope and in sufficient detail as may
reasonably be required by the Fund and as may reasonably be obtained by the
Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of a Portfolio for which there would be, at the close of business on
the date of such payment or transfer, insufficient funds held by the
Custodian on behalf of such Portfolio, the Custodian may, in its
discretion, provide an overdraft (an "Overdraft") to the Fund on behalf of
such Portfolio, in an amount sufficient to allow the completion of such
payment. Any Overdraft provided hereunder: (a) shall be payable on the
next Business Day, unless otherwise agreed by the Fund and the Custodian;
and (b) shall accrue interest from the date of the Overdraft to the date of
payment in full by the Fund on behalf of the applicable Portfolio at a rate
agreed upon in writing, from time to time, by the Custodian and the Fund.
The Custodian and the Fund acknowledge that the purpose of such Overdrafts
is to temporarily finance the purchase or sale of securities for prompt
delivery in accordance with the terms hereof, or to meet emergency expenses
not reasonably foreseeable by the Fund. The Custodian shall promptly
notify the Fund in writing (an "Overdraft Notice") of any Overdraft by
facsimile transmission or in such other manner as the Fund and the
Custodian may agree in writing. At the request of the Custodian, the Fund,
on behalf of a Portfolio, shall pledge, assign and grant to the Custodian a
security interest in certain specified securities of the Portfolio, as
security for Overdrafts provided to such Portfolio, under the terms and
conditions set forth in Appendix "C" attached hereto.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification
signed or initialed by or on behalf of the Fund by one or more Authorized
Persons (as hereinafter defined); (ii) a telephonic or other oral
communication by one or more Authorized Persons; or (iii) a communication
effected directly between an electro-mechanical or electronic device or
system (including, without limitation, computers) by or on behalf of the
Fund by one or more Authorized Persons; provided, however, that
communications of the types described in clauses (ii) and (iii) above
purporting to be given by an Authorized Person shall be considered Proper
Instructions only if the Custodian reasonably believes such communications
to have been given by an Authorized Person with respect to the transaction
involved. Proper Instructions in the form of oral communications shall be
confirmed by the Fund by tested telex or in writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral
instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all
telephonic or other oral instructions communicated to the Custodian.
Proper Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Fund or any other person
designated by the Treasurer of the Fund in writing, which countersignature
or confirmation shall be (i)included on the same instrument containing the
Proper Instructions or on a separate instrument relating thereto, and (ii)
delivered by hand, by facsimile transmission, or in such other manner as
the Fund and the Custodian agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian
at the address and/or telephone, telecopy or telex number agreed upon from
time to time by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund
shall deliver to the Custodian, duly certified as appropriate by a
Treasurer or Assistant Treasurer of the Fund, a certificate setting forth:
(a) the names, titles, signatures and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request,
direction, instruction, certificate or instrument on behalf of the Fund
(collectively, the "Authorized Persons" and individually, an "Authorized
Person"); and (b) the names, titles and signatures of those persons
authorized to issue Special Instructions. Such certificate may be accepted
and relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary. Upon
delivery of a certificate which deletes the name(s) of a person previously
authorized to give Proper Instructions or to issue Special Instructions,
such persons shall no longer be considered an Authorized Person or
authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Trustee, officer, employee or agent of the Fund shall
have physical access to the assets of any Portfolio held by the Custodian
nor shall the Custodian deliver any assets of a Portfolio for delivery to
an account of such person; provided, however, that nothing in this Section
3.03 shall prohibit (a) any Authorized Person from giving Proper
Instructions, or any person authorized to issue Special Instructions from
issuing Special Instructions, so long as such action does not result in
delivery of or access to assets of any Portfolio prohibited by this Section
3.03; or (b) the Fund's independent certified public accountants from
examining or reviewing the assets of the Portfolios held by the Custodian.
The Fund shall deliver to the Custodian a written certificate identifying
such Authorized Persons, Trustees, officers, employees and agents of the
Fund.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts
in accordance with (a) Proper Instructions or Special Instructions, as the
case may be, and (b) the terms of this Agreement, the Custodian shall not
be responsible for the title, validity or genuineness of any property, or
evidence of title thereof, received by it or delivered by it pursuant to
this Agreement.
ARTICLE IV
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant
provisions of this Article IV, appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Interim Subcustodians and Special Subcustodians to
act on behalf of a Portfolio. (For purposes of this Agreement, all duly
appointed Domestic Subcustodians, Foreign Subcustodians, Interim
Subcustodians, and Special Subcustodians are hereinafter referred to
collectively, as "Subcustodians.")
Section 4.01. Domestic Subcustodians. The Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the
1940 Act meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of one
or more Portfolios as a subcustodian for purposes of holding cash,
securities and other assets of such Portfolios and performing other
functions of the Custodian within the United States (a "Domestic
Subcustodian"); provided, that, the Custodian shall notify the Fund in
writing of the identity and qualifications of any proposed Domestic
Subcustodian at least thirty (30) days prior to appointment of such
Domestic Subcustodian, and the Fund may, in its sole discretion, by written
notice to the Custodian executed by an Authorized Person disapprove of the
appointment of such Domestic Subcustodian. If following notice by the
Custodian to the Fund regarding appointment of a Domestic Subcustodian and
the expiration of thirty (30) days after the date of such notice, the Fund
shall have failed to notify the Custodian of its disapproval thereof, the
Custodian may, in its discretion, appoint such proposed Domestic
Subcustodian as its subcustodian.
Section 4.02. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and from time
to time, appoint: (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the
1940 Act and the rules and regulations thereunder or by order of the
Securities and Exchange Commission exempted therefrom, or (ii) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act on behalf of one or more Portfolios as a subcustodian for
purposes of holding cash, securities and other assets of such Portfolios
and performing other functions of the Custodian in countries other than the
United States of America (a "Foreign Subcustodian"); provided, that, prior
to the appointment of any Foreign Subcustodian, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees or
other governing body or entity of the Fund on behalf of the applicable
Portfolio(s) (which approval may be withheld in the sole discretion of such
Board of Trustees or other governing body or entity) with respect to (i)
the identity and qualifications of any proposed Foreign Subcustodian, (ii)
the country or countries in which, and the securities depositories or
clearing agencies, if any, through which, any proposed Foreign Subcustodian
is authorized to hold securities and other assets of the Portfolio(s), and
(iii) the form and terms of the subcustodian agreement to be entered into
between such proposed Foreign Subcustodian and the Custodian. Each such
duly approved Foreign Subcustodian and the countries where and the
securities depositories and clearing agencies through which they may hold
securities and other assets of the Funds shall be listed on Appendix "B"
attached hereto, as it may be amended, from time to time, in accordance
with the provisions of Section 9.05(c) hereof. The Fund shall be
responsible for informing the Custodian sufficiently in advance of a
proposed investment which is to be held in a country in which no Foreign
Subcustodian is authorized to act, in order that there shall be sufficient
time for the Custodian to effect the appropriate arrangements with a
proposed foreign subcustodian, including obtaining approval as provided in
this Section 4.02(a). The Custodian shall not amend any subcustodian
agreement entered into with a Foreign Subcustodian, or agree to change or
permit any changes thereunder, or waive any rights under such agreement,
which materially affect the Fund's rights or the Foreign Subcustodian's
obligations or duties to the Fund under such agreement, except upon prior
approval pursuant to Special Instructions.
(b) Interim Subcustodians. Notwithstanding the foregoing, in the event
that a Portfolio shall invest in a security or other asset to be held in a
country in which no Foreign Subcustodian is authorized to act, the
Custodian shall promptly notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in
such country; and the Custodian shall, upon receipt of Special
Instructions, appoint any Person designated by the Fund in such Special
Instructions to hold such security or other asset. (Any Person appointed
as a subcustodian pursuant to this Section 4.02(b) is hereinafter referred
to as an "Interim Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of the Fund for one or more
Portfolios, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act as a subcustodian for
purposes of: (i) effecting third-party repurchase transactions with banks,
brokers, dealers or other entities through the use of a common custodian or
subcustodian; (ii) establishing a joint trading account for the Portfolios
and other registered open-end management investment companies for which
Fidelity Management & Research Company serves as investment adviser,
through which the Portfolios and such other investment companies shall
collectively participate in certain repurchase transactions; (iii)
providing depository and clearing agency services with respect to certain
variable rate demand note securities; and (iv) effecting any other
transactions designated by the Fund in Special Instructions. (Each such
designated subcustodian is hereinafter referred to as a "Special
Subcustodian.") Each such duly appointed Special Subcustodian shall be
listed on Appendix "B" attached hereto, as it may be amended from time to
time in accordance with the provisions of Section 9.05(c) hereof. In
connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in
form and substance approved by the Fund, provided that such agreement shall
in all events comply with the provisions of the 1940 Act and the rules and
regulations thereunder and the terms and provisions of this Agreement. The
Custodian shall not amend any subcustodian agreement entered into with a
Special Subcustodian, or agree to change or permit any changes thereunder,
or waive any rights under such agreement, except upon prior approval
pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian and Foreign Subcustodian to, and (ii) use
its best efforts to cause each Interim Subcustodian and Special
Subcustodian to, perform all of its obligations in accordance with the
terms and conditions of the subcustodian agreement between the Custodian
and such Subcustodian. In the event that the Custodian is unable to cause
such Subcustodian to fully perform its obligations thereunder, the
Custodian shall forthwith, upon the receipt of Special Instructions,
terminate such Subcustodian with respect to the Fund and, if necessary or
desirable, appoint a replacement Subcustodian in accordance with the
provisions of Section 4.01 or Section 4.02, as the case may be. In
addition to the foregoing, the Custodian (A) may, at any time in its
discretion, upon written notification to the Fund, terminate any Domestic
Subcustodian, Foreign Subcustodian or Interim Subcustodian, and (B) shall,
upon receipt of Special Instructions, terminate any Subcustodian with
respect to the Fund, in accordance with the termination provisions under
the applicable subcustodian agreement.
Section 4.05. Certification Regarding Foreign Subcustodians. Upon
request of the Fund, the Custodian shall deliver to the Fund a certificate
stating: (i) the identity of each Foreign Subcustodian then acting on
behalf of the Custodian; (ii) the countries in which and the securities
depositories and clearing agents through which each such Foreign
Subcustodian is then holding cash, securities and other assets of any
Portfolio; and (iii) such other information as may be requested by the Fund
to ensure compliance with Rule 17(f)-5 under the 1940 Act.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under
this Agreement, and shall be liable to the Fund for all loss, damage and
expense suffered or incurred by the Fund or the Portfolios resulting from
the failure of the Custodian to exercise such reasonable care and
diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, securities depository or securities
system utilized by any such Subcustodian, or any nominee of the Custodian
or any Subcustodian (individually, a "Person") is prevented, forbidden or
delayed from performing, or omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason
of: (i) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any foreign
country, or political subdivision thereof or of any court of competent
jurisdiction; or (ii) any act of God or war or other similar circumstance
beyond the control of the Custodian, unless, in each case, such delay or
nonperformance is caused by (A) the negligence, misfeasance or misconduct
of the applicable Person, or (B) a malfunction or failure of equipment
operated or utilized by the applicable Person other than a malfunction or
failure beyond such Person's control and which could not reasonably be
anticipated and/or prevented by such Person.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Fund or any
Portfolio, (i) the Custodian shall, (ii) the Custodian shall cause any
applicable Domestic Subcustodian or Foreign Subcustodian to, and (iii) the
Custodian shall use its best efforts to cause any applicable Interim
Subcustodian or Special Subcustodian to, use all commercially reasonable
efforts and take all reasonable steps under the circumstances to mitigate
the effects of such event and to avoid continuing harm to the Fund and the
Portfolios.
(d) Advice of Counsel. The Custodian shall be entitled to receive and act
upon advice of counsel on all matters. The Custodian shall be without
liability for any action reasonably taken or omitted in good faith pursuant
to the advice of (i) counsel for the Fund, or (ii) at the expense of the
Custodian, such other counsel as the Fund and the Custodian may agree upon;
provided, however, with respect to the performance of any action or
omission of any action upon such advice, the Custodian shall be required to
conform to the standard of care set forth in Section 5.01(a).
(e) Expenses of the Fund. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to the Fund for all
reasonable costs and expenses incurred by the Fund in connection with any
claim by the Fund against the Custodian arising from the obligations of the
Custodian hereunder including, without limitation, all reasonable
attorneys' fees and expenses incurred by the Fund in asserting any such
claim, and all expenses incurred by the Fund in connection with any
investigations, lawsuits or proceedings relating to such claim; provided,
that the Fund has recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as
such loss, damage or expense arises from the performance of the Custodian's
duties hereunder by reason of the Custodian's reliance upon records that
were maintained for the Fund by entities other than the Custodian prior to
the Custodian's employment hereunder.
Section 5.02. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians and Foreign Subcustodians. The Custodian shall
be liable for the actions or omissions of any Domestic Subcustodian or any
Foreign Subcustodian to the same extent as if such action or omission were
performed by the Custodian itself. In the event of any loss, damage or
expense suffered or incurred by the Fund caused by or resulting from the
actions or omissions of any Domestic Subcustodian or Foreign Subcustodian
for which the Custodian would otherwise be liable, the Custodian shall
promptly reimburse the Fund in the amount of any such loss, damage or
expense.
(b) Interim Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary, the Custodian shall not be liable to the Fund for any
loss, damage or expense suffered or incurred by the Fund or any Portfolio
resulting from the actions or omissions of an Interim Subcustodian unless
such loss, damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, in the event
of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against such Interim
Subcustodian to protect the interests of the Fund and the Portfolios.
(c) Special Subcustodians. Notwithstanding the provisions of Section 5.01
to the contrary and except as otherwise provided in any subcustodian
agreement to which the Custodian, the Fund and any Special Subcustodian are
parties, the Custodian shall not be liable to the Fund for any loss, damage
or expense suffered or incurred by the Fund or any Portfolio resulting from
the actions or omissions of a Special Subcustodian, unless such loss,
damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, that in the
event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against any Special
Subcustodian to protect the interests of the Fund and the Portfolios.
(d) Securities Systems. Notwithstanding the provisions of Section 5.01 to
the contrary, the Custodian shall not be liable to the Fund for any loss,
damage or expense suffered or incurred by the Fund or any Portfolio
resulting from the use by the Custodian of a Securities System, unless such
loss, damage or expense is caused by, or results from, the negligence,
misfeasance or misconduct of the Custodian; provided, however, that in the
event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against the
Securities System to protect the interests of the Fund and the Portfolios.
(e) Reimbursement of Expenses. The Fund agrees to reimburse the Custodian
for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under this Section 5.02;
provided, however, that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or misconduct
of the Custodian.
Section 5.03. Indemnification.
(a) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, the Fund agrees to indemnify and hold harmless the
Custodian and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Custodian or its
nominee caused by or arising from actions taken by the Custodian in the
performance of its duties and obligations under this Agreement to the
extent that the Custodian proves that such a loss, damage and expense was
not occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian or its nominee. In addition, the Fund agrees to
indemnify any Person against any liability incurred by reason of taxes
assessed to such Person, or other loss, damage or expenses incurred by such
Person, resulting from the fact that securities and other property of the
Portfolios are registered in the name of such Person; provided, however,
that in no event shall such indemnification be applicable to income,
franchise or similar taxes which may be imposed or assessed against any
Person.
(b) Notice of Litigation, Right to Prosecute, Etc. The Fund shall not be
liable for indemnification under this Section 5.03 unless a Person shall
have promptly notified the Fund in writing of the commencement of any
litigation or proceeding brought against such Person in respect of which
indemnity may be sought under this Section 5.03. With respect to claims in
such litigation or proceedings for which indemnity by the Fund may be
sought and subject to applicable law and the ruling of any court of
competent jurisdiction, the Fund shall be entitled to participate in any
such litigation or proceeding and, after written notice from the Fund to
any Person, the Fund may assume the defense of such litigation or
proceeding with counsel of its choice at its own expense in respect of that
portion of the litigation for which the Fund may be subject to an
indemnification obligation; provided, however, a Person shall be entitled
to participate in (but not control) at its own cost and expense, the
defense of any such litigation or proceeding if the Fund has not
acknowledged in writing its obligation to indemnify the Person with respect
to such litigation or proceeding. If the Fund is not permitted to
participate or control such litigation or proceeding under applicable law
or by a ruling of a court of competent jurisdiction, such Person shall
reasonably prosecute such litigation or proceeding. A Person shall not
consent to the entry of any judgment or enter into any settlement in any
such litigation or proceeding without providing the Fund with adequate
notice of any such settlement or judgment, and without the Fund's prior
written consent. All Persons shall submit written evidence to the Fund
with respect to any cost or expense for which they are seeking
indemnification in such form and detail as the Fund may reasonably request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duties generally, and more particularly in connection with the purchase,
sale or exchange of securities made by or for a Portfolio, the Custodian
shall not be liable to the Fund and the Fund agrees to indemnify the
Custodian and its nominees, for any loss, damage or expense suffered or
incurred by the Custodian and its nominees arising out of any violation of
any investment or other limitation to which the Fund is subject.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon
reasonable notice to the Custodian, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Custodian's
rights against any Subcustodian, Securities System, or other Person for
loss, damage or expense caused the Fund by such Subcustodian, Securities
System, or other Person, and shall be entitled to enforce the rights of the
Custodian with respect to any claim against such Subcustodian, Securities
System or other Person, which the Custodian may have as a consequence of
any such loss, damage or expense, if and to the extent that the Fund has
not been made whole for any such loss or damage. If the Custodian makes
the Fund whole for any such loss or damage, the Custodian shall retain the
ability to enforce its rights directly against such Subcustodian,
Securities System or other Person. Upon the Fund's election to enforce any
rights of the Custodian under this Section 5.05, the Fund shall reasonably
prosecute all actions and proceedings directly relating to the rights of
the Custodian in respect of the loss, damage or expense incurred by the
Fund; provided that, so long as the Fund has acknowledged in writing its
obligation to indemnify the Custodian under Section 5.03 hereof with
respect to such claim, the Fund shall retain the right to settle,
compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by the Fund without the Custodian's
consent and provided further, that if the Fund has not made an
acknowledgement of its obligation to indemnify, the Fund shall not settle,
compromise or terminate any such action or proceeding without the written
consent of the Custodian, which consent shall not be unreasonably withheld
or delayed. The Custodian agrees to cooperate with the Fund and take all
actions reasonably requested by the Fund in connection with the Fund's
enforcement of any rights of the Custodian. The Fund agrees to reimburse
the Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian in connection with the fulfillment of its obligations under this
Section 5.05; provided, however, that such reimbursement shall not apply to
expenses occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian.
ARTICLE VI
COMPENSATION
On behalf of each Portfolio, the Fund shall compensate the Custodian in an
amount, and at such times, as may be agreed upon in writing, from time to
time, by the Custodian and the Fund.
ARTICLE VII
TERMINATION
Section 7.01. Termination of Agreement in Full. This Agreement shall
continue in full force and effect until the first to occur of: (a)
termination by the Custodian by an instrument in writing delivered or
mailed to the Fund, such termination to take effect not sooner than ninety
(90) days after the date of such delivery; (b) termination by the Fund by
an instrument in writing delivered or mailed to the Custodian, such
termination to take effect not sooner than thirty (30) days after the date
of such delivery; or (c) termination by the Fund by written notice
delivered to the Custodian, based upon the Fund's determination that there
is a reasonable basis to conclude that the Custodian is insolvent or that
the financial condition of the Custodian is deteriorating in any material
respect, in which case termination shall take effect upon the Custodian's
receipt of such notice or at such later time as the Fund shall designate.
In the event of termination pursuant to this Section 7.01, the Fund shall
make payment of all accrued fees and unreimbursed expenses within a
reasonable time following termination and delivery of a statement to the
Fund setting forth such fees and expenses. The Fund shall identify in any
notice of termination a successor custodian to which the cash, securities
and other assets of the Portfolios shall, upon termination of this
Agreement, be delivered. In the event that no written notice designating a
successor custodian shall have been delivered to the Custodian on or before
the date when termination of this Agreement shall become effective, the
Custodian may deliver to a bank or trust company doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less
than $25,000,000, all securities and other assets held by the Custodian and
all instruments held by the Custodian relative thereto and all other
property held by it under this Agreement. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Agreement. In
the event that securities and other assets remain in the possession of the
Custodian after the date of termination hereof owing to failure of the Fund
to appoint a successor custodian, the Custodian shall be entitled to
compensation for its services in accordance with the fee schedule most
recently in effect, for such period as the Custodian retains possession of
such securities and other assets, and the provisions of this Agreement
relating to the duties and obligations of the Custodian and the Fund shall
remain in full force and effect. In the event of the appointment of a
successor custodian, it is agreed that the cash, securities and other
property owned by the Fund and held by the Custodian, any Subcustodian or
nominee shall be delivered to the successor custodian; and the Custodian
agrees to cooperate with the Fund in the execution of documents and
performance of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
Section 7.02. Termination as to One or More Portfolios. This Agreement
may be terminated as to one or more Portfolios (but less than all of the
Portfolios) by delivery of an amended Appendix "A" deleting such Portfolios
pursuant to Section 9.05(b) hereof, in which case termination as to such
deleted Portfolios shall take effect thirty (30) days after the date of
such delivery. The execution and delivery of an amended Appendix "A" which
deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed
by the preceding provisions of Section 7.01 as to the identification of a
successor custodian and the delivery of cash, securities and other assets
of the Portfolio(s) so deleted, and shall not affect the obligations of the
Custodian and the Fund hereunder with respect to the other Portfolios set
forth in Appendix "A," as amended from time to time.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22
ADRs 2.06
Authorized Person(s) 3.02
Banking Institution 2.12(a)
Business Day Appendix "C"
Bank Accounts 2.21
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Subcustodian 4.02(a)
Institutional Client 2.03
Interim Subcustodian 4.02(b)
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Portfolio Preamble
Procedural Agreement 2.10
Proper Instructions 3.01(a)
SEC 2.22
Securities System 2.22
Shares 2.16
Special Instructions 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by the Fund. Upon request, the Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement, provided that the exercise by the Custodian or any Subcustodian
of any such rights shall in all events be in compliance with the terms of
this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to the Fund or to such other parties as
the Fund may designate in such Proper Instructions, all such documents,
instruments or agreements as may be reasonable and necessary or desirable
in order to effectuate any of the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations. A COPY
OF THE DECLARATION OF TRUST OF THE FUND IS ON FILE WITH THE SECRETARY OF
THE STATE OF THE FUND'S FORMATION, AND NOTICE IS HEREBY GIVEN THAT THIS
AGREEMENT IS NOT EXECUTED ON BEHALF OF THE TRUSTEES OF THE FUND AS
INDIVIDUALS, AND THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON ANY
OF THE TRUSTEES, OFFICERS, SHAREHOLDERS OR PARTNERS OF THE FUND
INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF THE
PORTFOLIOS. THE CUSTODIAN AGREES THAT NO SHAREHOLDER, TRUSTEE, OFFICER OR
PARTNER OF THE FUND MAY BE HELD PERSONALLY LIABLE OR RESPONSIBLE FOR ANY
OBLIGATIONS OF THE FUND ARISING OUT OF THIS AGREEMENT.
Section 9.03. Several Obligations of the Portfolios. WITH RESPECT TO ANY
OBLIGATIONS OF THE FUND ON BEHALF OF THE PORTFOLIOS ARISING OUT OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS ARISING UNDER
SECTIONS 2.28, 5.03, 5.05 and ARTICLE VI HEREOF, THE CUSTODIAN SHALL LOOK
FOR PAYMENT OR SATISFACTION OF ANY OBLIGATION SOLELY TO THE ASSETS AND
PROPERTY OF THE PORTFOLIO TO WHICH SUCH OBLIGATION RELATES AS THOUGH THE
FUND HAD SEPARATELY CONTRACTED WITH THE CUSTODIAN BY SEPARATE WRITTEN
INSTRUMENT WITH RESPECT TO EACH PORTFOLIO.
Section 9.04. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby
represents and warrants that each of the following shall be true, correct
and complete at all times during the term of this Agreement: (i) the Fund
is duly organized under the laws of its jurisdiction of organization and is
registered as an open-end management investment company under the 1940 Act;
and (ii) the execution, delivery and performance by the Fund of this
Agreement are (w) within its power, (x) have been duly authorized by all
necessary action, and (y) will not (A) contribute to or result in a breach
of or default under or conflict with any existing law, order, regulation or
ruling of any governmental or regulatory agency or authority, or (B)
violate any provision of the Fund's corporate charter, Declaration of Trust
or other organizational document, or bylaws, or any amendment thereof or
any provision of its most recent Prospectus or Statement of Additional
Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants that each of the following shall be true,
correct and complete at all times during the term of this Agreement: (i)
the Custodian is duly organized under the laws of its jurisdiction of
organization and qualifies to act as a custodian to open-end management
investment companies under the provisions of the 1940 Act; and (ii) the
execution, delivery and performance by the Custodian of this Agreement are
(w) within its power, (x) have been duly authorized by all necessary
action, and (y) will not (A) contribute to or result in a breach of or
default under or conflict with any existing law, order, regulation or
ruling of any governmental or regulatory agency or authority, or (B)
violate any provision of the Custodian's corporate charter, or other
organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the
subject matter hereof and accordingly, supersedes as of the effective date
of this Agreement any custodian agreement heretofore in effect between the
Fund and the Custodian.
Section 9.06. Waivers and Amendments. No provision of this Agreement may
be waived, amended or terminated except by a statement in writing signed by
the party against which enforcement of such waiver, amendment or
termination is sought; provided, however: (a) Appendix "A" listing the
Portfolios for which the Custodian serves as custodian may be amended from
time to time to add one or more Portfolios, by the Fund's execution and
delivery to the Custodian of an amended Appendix "A", and the execution of
such amended Appendix by the Custodian, in which case such amendment shall
take effect immediately upon execution by the Custodian; (b) Appendix "A"
may be amended from time to time to delete one or more Portfolios (but less
than all of the Portfolios), by the Fund's execution and delivery to the
Custodian of an amended Appendix A", in which case such amendment shall
take effect thirty (30) days after such delivery, unless otherwise agreed
by the Custodian and the Fund in writing; (c) Appendix "B" listing Foreign
Subcustodians and Special Subcustodians approved by the Fund may be amended
from time to time to add or delete one or more Foreign Subcustodians or
Special Subcustodians by the Fund's execution and delivery to the Custodian
of an amended Appendix "B", in which case such amendment shall take effect
immediately upon execution by the Custodian; and (d) Appendix "C" setting
forth the procedures relating to the Custodian's security interest may be
amended only by an instrument in writing executed by the Fund and the
Custodian.
Section 9.07. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to
time on such provisions interpretative of or in addition to the provisions
of this Agreement as may in their joint opinion be consistent with the
general tenor of this Agreement. No interpretative or additional
provisions made as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.
Section 9.08. Captions. Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the
parties hereto.
Section 9.09. Governing Law. Insofar as any question or dispute may
arise in connection with the custodianship of foreign securities pursuant
to an agreement with a Foreign Subcustodian that is governed by the laws of
the State of New York, the provisions of this Agreement shall be construed
in accordance with and governed by the laws of the State of New York,
provided that in all other instances this Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of
Massachusetts, in each case without giving effect to principles of
conflicts of law.
Section 9.10. Notices. Except in the case of Proper Instructions or
Special Instructions, notices and other writings contemplated by this
Agreement shall be delivered by hand or by facsimile transmission (provided
that in the case of delivery by facsimile transmission, notice shall also
be mailed postage prepaid to the parties at the following addresses:
(a) If to the Fund:
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Gary L. French, Treasurer
Telephone: (617) 570-6556
Telefax: (617) 742-1231
(b) If to the Custodian:
United Missouri Bank, N.A.
928 Grand Avenue, 10th Floor
Kansas City, Missouri 64106
Attn: Securities Administration
Telephone: (816) 860-7756
Telefax: (816) 860-4869
or to such other address as either party may have designated in writing to
the other party hereto.
Section 9.11. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that, subject to the provisions of Section
7.01 hereof, neither party hereto may assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the
other party.
Section 9.12. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original. This Agreement
shall become effective when one or more counterparts have been signed and
delivered by each of the parties.
Section 9.13. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions
of this Agreement and all information provided by each party to the other
regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely
for the purpose of rendering services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required to be
disclosed by any bank examiner of the Custodian or any Subcustodian, any
auditor of the parties hereto, by judicial or administrative process or
otherwise by applicable law or regulation. The provisions of this Section
9.13 and Sections 9.01, 9.02, 9.03, 9.09, Section 2.28, Section 3.04,
Section 7.01, Article V and Article VI hereof and any other rights or
obligations incurred or accrued by any party hereto prior to termination of
this Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIDELTIY MUNICIPAL TRUST II UNITED MISSOURI BANK, N.A.
By: /s/Gary L. French By: /s/David F. Larrabee
Name: Gary L. French Name: David F. Larrabee
Title: Treasurer Title: Vice President
APPENDIX "C" TO THE
CUSTODIAN AGREEMENT BETWEEN
FIDELITY MUNICIPAL TRUST II
and
UNITED MISSOURI BANK, N.A.
Dated as of October 17, 1991
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
As security for any Overdrafts (as defined in the Custodian Agreement) of
any Portfolio, the Fund, on behalf of such Portfolio, shall pledge, assign
and grant to the Custodian a security interest in Collateral (as
hereinafter defined), under the terms, circumstances and conditions set
forth in this Appendix "C".
Section 1. Defined Terms. As used in this Appendix "C" the following
terms shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which the Custodian is closed for business.
(b) "Collateral" shall mean, with respect to any Portfolio, the securities
having a fair market value (as determined in accordance with the procedures
set forth in the prospectus for the Portfolio) equal to the aggregate of
all Overdraft Obligations of such Portfolio: (i) identified in any Pledge
Certificate executed on behalf of such Portfolio; or (ii) designated by the
Custodian for such Portfolio pursuant to Section 3 of this Appendix C.
Such securities shall consist of marketable securities held by the
Custodian on behalf of such Portfolio or, if no such marketable securities
are held by the Custodian on behalf of such Portfolio, such other
securities designated by the Fund in the applicable Pledge Certificate or
by the Custodian pursuant to Section 3 of this Appendix C.
(c) "Overdraft Obligations" shall mean, with respect to any Portfolio, the
amount of any outstanding Overdraft(s) provided by the Custodian to such
Portfolio together with all accrued interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached to this Appendix "C" as Schedule 1 executed by a duly authorized
officer of the Fund and delivered by the Fund to the Custodian by facsimile
transmission or in such other manner as the Fund and the Custodian may
agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form
attached to this Appendix "C" as Schedule 2 executed by a duly authorized
officer of the Custodian and delivered by the Custodian to the Fund by
facsimile transmission or in such other manner as the Fund and the
Custodian may agree in writing.
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by
facsimile transmission or in such other manner as the Fund and the
Custodian shall agree in writing.
Section 2. Pledge of Collateral. To the extent that any Overdraft
Obligations of any Portfolio are not satisfied within one (1) Business Day
after receipt by the Fund of a Written Notice requesting security for such
Overdraft Obligation and stating the amount of such Overdraft Obligation,
the Fund, on behalf of such Portfolio, shall pledge, assign and grant to
the Custodian a first priority security interest, by delivering to the
Custodian, a Pledge Certificate executed by the Fund on behalf of such
Portfolio describing the applicable Collateral. Such Written Notice may,
in the discretion of the Custodian, be included within or accompany the
Overdraft Notice relating to the applicable Overdraft Obligations.
Section 3. Failure to Pledge Collateral. In the event that the Fund
shall fail: (a) to pay, on behalf of the applicable Portfolio, the
Overdraft Obligation described in such Written Notice; (b) to deliver to
the Custodian a Pledge Certificate pursuant to Section 2; or (c) to
identify substitute securities pursuant to Section 6 upon the sale or
maturity of any securities identified as Collateral, the Custodian may, by
Written Notice to the Fund specify Collateral which shall secure the
applicable Overdraft Obligation. The Fund, on behalf of any applicable
Portfolio, hereby pledges, assigns and grants to the Custodian a first
priority security interest in any and all Collateral specified in such
Written Notice; provided that such pledge, assignment and grant of security
shall be deemed to be effective only upon receipt by the Fund of such
Written Notice.
Section 4. Delivery of Additional Collateral. If at any time the
Custodian shall notify the Fund by Written Notice that the fair market
value of the Collateral securing any Overdraft Obligation is less than the
amount of such Overdraft Obligation, the Fund, on behalf of the applicable
Portfolio, shall deliver to the Custodian, within one (1) Business Day
following the Fund's receipt of such Written Notice, an additional Pledge
Certificate describing additional Collateral. If the Fund shall fail to
deliver such additional Pledge Certificate, the Custodian may specify
Collateral which shall secure the unsecured amount of the applicable
Overdraft Obligation in accordance with Section 3 of this Appendix C.
Section 5. Release of Collateral. Upon payment by the Fund of any
Overdraft Obligation secured by the pledge of Collateral, the Custodian
shall promptly deliver to the Fund a Release Certificate pursuant to which
the Custodian shall release Collateral from the lien under the applicable
Pledge Certificate or Written Notice pursuant to Section 3 having a fair
market value equal to the amount paid by the Fund on account of such
Overdraft Obligation. In addition, if at any time the Fund shall notify
the Custodian by Written Notice that the Fund desires that specified
Collateral be released and: (a) that the fair market value of the
Collateral securing any Overdraft Obligation shall exceed the amount of
such Overdraft Obligation; or (b) that the Fund has delivered a Pledge
Certificate substituting Collateral for such Overdraft Obligation, the
Custodian shall deliver to the Fund, within one (1) Business Day following
the Custodian's receipt of such Written Notice, a Release Certificate
relating to the Collateral specified in such Written Notice.
Section 6. Substitution of Collateral. The Fund may substitute
securities for any securities identified as Collateral by delivery to the
Custodian of a Pledge Certificate executed by the Fund on behalf of the
applicable Portfolio, indicating the securities pledged as Collateral.
Section 7. Security for Individual Portfolios' Overdraft Obligations.
The pledge of Collateral by the Fund on behalf of any individual Portfolio
shall secure only the Overdraft Obligations of such Portfolio. In no event
shall the pledge of Collateral by one Portfolio be deemed or considered to
be security for the Overdraft Obligations of any other Portfolio.
Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any
Overdraft Obligation of a Portfolio within thirty (30) days after receipt
by the Fund of a Written Notice demanding security therefore, and (b) one
(1) Business Day's prior Written Notice to the Fund, the Custodian may
elect to enforce its security interest in the Collateral securing such
Overdraft Obligation, by taking title to (at the then prevailing fair
market value), or selling in a commercially reasonable manner, so much of
the Collateral as shall be required to pay such Overdraft Obligation in
full. Notwithstanding the provisions of any applicable law, including,
without limitation, the Uniform Commercial Code, the remedy set forth in
the preceding sentence shall be the only right or remedy to which the
Custodian is entitled with respect to the pledge and security interest
granted pursuant to any Pledge Certificate or Section 3, without limiting
the foregoing, the Custodian hereby waives and relinquishes all contractual
and common law rights of set off to which it may now or hereafter be or
become entitled with respect to any obligations of the Fund to the
Custodian arising under this Appendix C to the Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Appendix to be
executed in its name and behalf on the day and year first above written.
FIDELITY MUNICIPAL TRUST II UNITED MISSOURI BANK, N.A.
By: /s/Gary L. French By: /s/David F. Larrabee
Name: Gary L. French Name: David F. Larrabee
Title: Treasurer Title: Vice President
SCHEDULE 1
TO
APPENDIX "C"
PLEDGE CERTIFICATE
This Pledge Certificate is delivered pursuant to the Custodian Agreement
dated as of [ ] (the "Agreement"), between [ ] (the "Fund") and [
] (the "Custodian"). Capitalized terms used herein without definition
shall have the respective meanings ascribed to them in the Agreement.
Pursuant to [Section 2 or Section 4] of Appendix "C" attached to the
Agreement, the Fund, on behalf of [ ] (the "Portfolio"), hereby pledges,
assigns and grants to the Custodian a first priority security interest in
the securities listed on Exhibit "A" attached to this Pledge Certificate
(collectively, the "Pledged Securities"). Upon delivery of this Pledge
Certificate, the Pledged Securities shall constitute Collateral, and shall
secure all Overdraft Obligations of the Portfolio described in that certain
Written Notice dated , 19 , delivered by the Custodian to the
Fund. The pledge, assignment and grant of security in the Pledged
Securities hereunder shall be subject in all respect to the terms and
conditions of the Agreement, including, without limitation, Sections 7 and
8 of Appendix "C" attached thereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge Certificate to be
executed in its name, on behalf of the Portfolio this day of 19 .
FIDELITY MUNICIPAL TRUST II
By: /s/ Gary L. French
Name: Gary L. French
Title: Treasurer
EXHIBIT "A"
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
SCHEDULE 2
TO
APPENDIX "C"
RELEASE CERTIFICATE
This Release Certificate is delivered pursuant to the Custodian Agreement
dated as of October 17, 1991 (the "Agreement"), between Fidelity Municipal
Trust II (the "Fund") and United Missouri Bank, N.A. (the "Custodian").
Capitalized terms used herein without definition shall have the respective
meanings ascribed to them in the Agreement. Pursuant to Section 5 of
Appendix "C" attached to the Agreement, the Custodian hereby releases the
securities listed on Exhibit "A" attached to this Release Certificate from
the lien under the [Pledge Certificate dated __________, 19__ or the
Written Notice delivered pursuant to Section 3 of Appendix "C" dated
__________, 19__ ].
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate to
be executed in its name and on its behalf this day of 19 .
UNITED MISSOURI BANK, N.A.
By: /s/David F. Larrabee
Name: David F. Larrabee
Title: Vice President
EXHIBIT "A"
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
Exhibit 8(b)
APPENDIX "A"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity Municipal Trust and United Missouri Bank, N.A.
Dated as of January 16, 1992
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of October 17, 1991
Portfolio Name: Effective as of:
Fidelity Michigan Municipal Money Market Portfolio March 2, 1992
Fidelity Ohio Municipal Money Market Portfolio March 2, 1992
Spartan Pennsylvania Municipal Money Market Portfolio March 2, 1992
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to
be executed in its name and behalf as of the day and year first set forth
opposite each such Portfolio.
FIDELITY MUNICIPAL TRUST II UNITED MISSOURI BANK, N.A.
By: /s/Gary L. French By: /s/David Larrabee
Name: Gary L. French Name: David F. Larrabee
Title: Treasurer Title: Vice President
APPENDIX "B"
TO
CUSTODIAN AGREEMENT
BETWEEN
Fidelity Municipal Trust II and United Missouri Bank, N.A.
Dated as of January 16, 1992
The following is a list of Foreign Subcustodians and Special Subcustodians
under the Custodian Agreement dated as of October 17, 1991:
A. Special Subcustodians:
Subcustodian Purpose
Morgan Guaranty Trust Company FICASH
of New York
Bankers Trust Company Variable Rate Demand Notes
Bank of New York Variable Rate Demand Notes
Chemical Bank, N.A. Variable Rate Demand Notes
Morgan Guaranty Trust Company Variable Rate Demand Notes
of New York
NCNB National Bank of North Carolina Variable Rate Demand Notes
Manufacturers Hanover Trust Company Third Party Repurchases
B. Foreign Subcustodians:
None
FIDELITY MUNICIPAL TRUST II
By: /s/Gary L. French
Name: Gary L. French
Title: Treasurer
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Prospectuses
and Statements of Additional Information in Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A of Fidelity Municipal Trust II,
of our reports dated January 27, 1995 on the financial statements and
financial highlights included in the December 31, 1994 Annual Report to
Shareholders of Fidelity Michigan Municipal Money Market Portfolio,
Fidelity Ohio Municipal Money Market Portfolio, and Spartan Pennsylvania
Municipal Money Market Portfolio.
We also consent to the incorporation by reference in this Post-Effective
Amendment, of our reports dated January 27, 1995 on the financial
statements and financial highlights included in the Annual Reports to
Shareholders of Fidelity Municipal Trust: Fidelity Michigan Tax-Free High
Yield Portfolio, Fidelity Ohio Tax-Free High Yield Portfolio, Fidelity
Minnesota Tax-Free High Yield Portfolio, and Spartan Pennsylvania Municipal
High Yield Portfolio.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the Statements
of Additional Information.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 15, 1995
Exhibit 15(a)
DISTRIBUTION AND SERVICE PLAN
of FIDELITY MUNICIPAL TRUST II:
Fidelity Ohio Municipal Money Market Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Fidelity Ohio
Municipal Money Market Portfolio (the "Portfolio"), a series of shares of
Fidelity Municipal Trust II (the "Trust").
2. The Fund has entered into a General Distribution Agreement with
Fidelity Distributors Corporation (the "Distributor"), a wholly-owned
subsidiary of Fidelity Management & Research Company (the "Adviser"), under
which the Distributor uses all reasonable efforts, consistent with its
other business, to secure purchasers for the Portfolio's shares of
beneficial interest ("shares"). Under the agreement, the Distributor pays
the expenses of printing and distributing any prospectuses, reports and
other literature used by the Distributor, advertising, and other
promotional activities in connection with the offering of shares for sale
to the public. It is understood that the Adviser may reimburse the
Distributor for these expenses from any source available to it, including
management fees paid to it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
this Plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1992, and from year to year thereafter, provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to to authorize direct payments
by the Portfolio to finance any activity primarily intended to result in
the sale of shares issued by the Portfolio or any amendment of the
Management Contract to increase the amount to be paid by the Portfolio
thereunder shall be effective only upon approval by a vote of a majority of
the outstanding voting securities of the Portfolio, and (b) any material
amendments of this Plan shall be effective only upon approval in the manner
provided in the first sentence in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Trust Instrument, any obligations assumed by the Portfolio
pursuant to this Plan and any agreements related to this Plan shall be
limited in all cases to the Portfolio and its assets.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(b)
DISTRIBUTION AND SERVICE PLAN
of FIDELITY MUNICIPAL TRUST II:
Fidelity Michigan Municipal Money Market Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Fidelity
Michigan Municipal Money Market Portfolio (the "Portfolio"), a series of
shares of Fidelity Municipal Trust II (the "Trust").
2. The Fund has entered into a General Distribution Agreement with
Fidelity Distributors Corporation (the "Distributor"), a wholly-owned
subsidiary of Fidelity Management & Research Company (the "Adviser"), under
which the Distributor uses all reasonable efforts, consistent with its
other business, to secure purchasers for the Portfolio's shares of
beneficial interest ("shares"). Under the agreement, the Distributor pays
the expenses of printing and distributing any prospectuses, reports and
other literature used by the Distributor, advertising, and other
promotional activities in connection with the offering of shares for sale
to the public. It is understood that the Adviser may reimburse the
Distributor for these expenses from any source available to it, including
management fees paid to it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
this Plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1992, and from year to year thereafter, provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to to authorize direct payments
by the Portfolio to finance any activity primarily intended to result in
the sale of shares issued by the Portfolio or any amendment of the
Management Contract to increase the amount to be paid by the Portfolio
thereunder shall be effective only upon approval by a vote of a majority of
the outstanding voting securities of the Portfolio, and (b) any material
amendments of this Plan shall be effective only upon approval in the manner
provided in the first sentence in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Trust Instrument, any obligations assumed by the Portfolio
pursuant to this Plan and any agreements related to this Plan shall be
limited in all cases to the Portfolio and its assets.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(c)
DISTRIBUTION AND SERVICE PLAN
Spartan Pennsylvania Municipal Money Market Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") for Spartan
Pennsylvania Municipal Money Market Portfolio (the "Portfolio"), a series
of shares of Fidelity Municipal Trust II (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of Fund shares for sale to the public. It is understood that the
Adviser may reimburse the Distributor for these expenses from any source
available to it, including management fees paid to it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
this Plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect until May 31, 1992, and from year to year thereafter; provided,
however, that such continuance is subject to approval annually by a vote of
a majority of the Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on this Plan. This Plan may be amended at any time by the Board of
Trustees, provided that (a) any amendment to to authorize direct payments
by the Portfolio to finance any activity primarily intended to result in
the sale of shares of the Portfolio, to increase materially the amount
spent by the Portfolio for distribution, or any amendment of the Management
Contract to increase the amount to be paid by the Portfolio thereunder
shall be effective only upon approval by a vote of a majority of the
outstanding voting securities of the Portfolio, and (b) any material
amendments of this Plan shall be effective only upon approval in the manner
provided in the first sentence in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Trust Instrument, any obligations assumed by the Portfolio
pursuant to this Plan and any agreements related to this Plan shall be
limited in all cases to the Portfolio and its assets, and shall not
constitute obligations of any other series issued by the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE CALCULATIONS
CUMULATIVE TOTAL RETURNS and their income and capital components are
described in the fund's Statement of Additional Information, and are based
on the net asset values, dividends, capital gain distributions, and
reinvestment prices of the historical period covered.
AVERAGE ANNUAL RETURNS are calculated according to the following formula:
Average Annual Return = [(1 + Cumulative Return)1/n] - 1
[where n = the number of years in the base period]
Fidelity Ohio Municipal Money Market Portfolio
DATE DAILY MILRATE YTD MILRATE
01-Jan-94 0.000069 0.000069
02-Jan-94 0.000068 0.000137
03-Jan-94 0.000069 0.000206
04-Jan-94 0.000069 0.000275
05-Jan-94 0.000057 0.000332
06-Jan-94 0.000051 0.000383
07-Jan-94 0.000049 0.000432
08-Jan-94 0.000048 0.000480
09-Jan-94 0.000049 0.000529
10-Jan-94 0.000048 0.000577
11-Jan-94 0.000049 0.000626
12-Jan-94 0.000048 0.000674
13-Jan-94 0.000050 0.000724
14-Jan-94 0.000050 0.000774
15-Jan-94 0.000049 0.000823
16-Jan-94 0.000050 0.000873
17-Jan-94 0.000049 0.000922
18-Jan-94 0.000050 0.000972
19-Jan-94 0.000052 0.001024
20-Jan-94 0.000053 0.001077
21-Jan-94 0.000052 0.001129
22-Jan-94 0.000053 0.001182
23-Jan-94 0.000052 0.001234
24-Jan-94 0.000053 0.001287
25-Jan-94 0.000053 0.001340
26-Jan-94 0.000054 0.001394
27-Jan-94 0.000056 0.001450
28-Jan-94 0.000055 0.001505
29-Jan-94 0.000055 0.001560
30-Jan-94 0.000055 0.001615
31-Jan-94 0.000055 0.001670
01-Feb-94 0.000054 0.001724
02-Feb-94 0.000053 0.001777
03-Feb-94 0.000052 0.001829
04-Feb-94 0.000052 0.001881
05-Feb-94 0.000052 0.001933
06-Feb-94 0.000052 0.001985
07-Feb-94 0.000051 0.002036
08-Feb-94 0.000052 0.002088
09-Feb-94 0.000054 0.002142
10-Feb-94 0.000055 0.002197
11-Feb-94 0.000054 0.002251
12-Feb-94 0.000054 0.002305
13-Feb-94 0.000054 0.002359
14-Feb-94 0.000055 0.002414
15-Feb-94 0.000055 0.002469
16-Feb-94 0.000051 0.002520
17-Feb-94 0.000056 0.002576
18-Feb-94 0.000056 0.002632
19-Feb-94 0.000056 0.002688
20-Feb-94 0.000056 0.002744
21-Feb-94 0.000055 0.002799
22-Feb-94 0.000056 0.002855
23-Feb-94 0.000056 0.002911
24-Feb-94 0.000054 0.002965
25-Feb-94 0.000056 0.003021
26-Feb-94 0.000055 0.003076
27-Feb-94 0.000055 0.003131
28-Feb-94 0.000055 0.003186
01-Mar-94 0.000058 0.003244
02-Mar-94 0.000056 0.003300
03-Mar-94 0.000056 0.003356
04-Mar-94 0.000056 0.003412
05-Mar-94 0.000056 0.003468
06-Mar-94 0.000056 0.003524
07-Mar-94 0.000056 0.003580
08-Mar-94 0.000056 0.003636
09-Mar-94 0.000055 0.003691
10-Mar-94 0.000055 0.003746
11-Mar-94 0.000055 0.003801
12-Mar-94 0.000054 0.003855
13-Mar-94 0.000055 0.003910
14-Mar-94 0.000055 0.003965
15-Mar-94 0.000054 0.004019
16-Mar-94 0.000053 0.004072
17-Mar-94 0.000052 0.004124
18-Mar-94 0.000052 0.004176
19-Mar-94 0.000053 0.004229
20-Mar-94 0.000052 0.004281
21-Mar-94 0.000053 0.004334
22-Mar-94 0.000052 0.004386
23-Mar-94 0.000051 0.004437
24-Mar-94 0.000052 0.004489
25-Mar-94 0.000051 0.004540
26-Mar-94 0.000052 0.004592
27-Mar-94 0.000052 0.004644
28-Mar-94 0.000052 0.004696
29-Mar-94 0.000052 0.004748
30-Mar-94 0.000055 0.004803
31-Mar-94 0.000057 0.004860
01-Apr-94 0.000057 0.004917
02-Apr-94 0.000056 0.004973
03-Apr-94 0.000057 0.005030
04-Apr-94 0.000057 0.005087
05-Apr-94 0.000056 0.005143
06-Apr-94 0.000053 0.005196
07-Apr-94 0.000054 0.005250
08-Apr-94 0.000053 0.005303
09-Apr-94 0.000053 0.005356
10-Apr-94 0.000053 0.005409
11-Apr-94 0.000053 0.005462
12-Apr-94 0.000053 0.005515
13-Apr-94 0.000052 0.005567
14-Apr-94 0.000053 0.005620
15-Apr-94 0.000053 0.005673
16-Apr-94 0.000053 0.005726
17-Apr-94 0.000054 0.005780
18-Apr-94 0.000053 0.005833
19-Apr-94 0.000054 0.005887
20-Apr-94 0.000060 0.005947
21-Apr-94 0.000066 0.006013
22-Apr-94 0.000066 0.006079
23-Apr-94 0.000065 0.006144
24-Apr-94 0.000066 0.006210
25-Apr-94 0.000066 0.006276
26-Apr-94 0.000065 0.006341
27-Apr-94 0.000065 0.006406
28-Apr-94 0.000067 0.006473
29-Apr-94 0.000074 0.006547
30-Apr-94 0.000073 0.006620
01-May-94 0.000071 0.006691
02-May-94 0.000071 0.006762
03-May-94 0.000071 0.006833
04-May-94 0.000067 0.006900
05-May-94 0.000065 0.006965
06-May-94 0.000065 0.007030
07-May-94 0.000065 0.007095
08-May-94 0.000064 0.007159
09-May-94 0.000065 0.007224
10-May-94 0.000065 0.007289
11-May-94 0.000066 0.007355
12-May-94 0.000069 0.007424
13-May-94 0.000068 0.007492
14-May-94 0.000068 0.007560
15-May-94 0.000069 0.007629
16-May-94 0.000067 0.007696
17-May-94 0.000068 0.007764
18-May-94 0.000068 0.007832
19-May-94 0.000069 0.007901
20-May-94 0.000068 0.007969
21-May-94 0.000068 0.008037
22-May-94 0.000068 0.008105
23-May-94 0.000069 0.008174
24-May-94 0.000068 0.008242
25-May-94 0.000067 0.008309
26-May-94 0.000067 0.008376
27-May-94 0.000067 0.008443
28-May-94 0.000067 0.008510
29-May-94 0.000067 0.008577
30-May-94 0.000066 0.008643
31-May-94 0.000067 0.008710
01-Jun-94 0.000065 0.008775
02-Jun-94 0.000063 0.008838
03-Jun-94 0.000062 0.008900
04-Jun-94 0.000062 0.008962
05-Jun-94 0.000062 0.009024
06-Jun-94 0.000063 0.009087
07-Jun-94 0.000062 0.009149
08-Jun-94 0.000058 0.009207
09-Jun-94 0.000057 0.009264
10-Jun-94 0.000057 0.009321
11-Jun-94 0.000057 0.009378
12-Jun-94 0.000057 0.009435
13-Jun-94 0.000057 0.009492
14-Jun-94 0.000058 0.009550
15-Jun-94 0.000057 0.009607
16-Jun-94 0.000059 0.009666
17-Jun-94 0.000059 0.009725
18-Jun-94 0.000059 0.009784
19-Jun-94 0.000059 0.009843
20-Jun-94 0.000058 0.009901
21-Jun-94 0.000060 0.009961
22-Jun-94 0.000062 0.010023
23-Jun-94 0.000064 0.010087
24-Jun-94 0.000064 0.010151
25-Jun-94 0.000063 0.010214
26-Jun-94 0.000064 0.010278
27-Jun-94 0.000064 0.010342
28-Jun-94 0.000064 0.010406
29-Jun-94 0.000062 0.010468
30-Jun-94 0.000061 0.010529
01-Jul-94 0.000061 0.010590
02-Jul-94 0.000061 0.010651
03-Jul-94 0.000061 0.010712
04-Jul-94 0.000061 0.010773
05-Jul-94 0.000060 0.010833
06-Jul-94 0.000055 0.010888
07-Jul-94 0.000054 0.010942
08-Jul-94 0.000054 0.010996
09-Jul-94 0.000054 0.011050
10-Jul-94 0.000055 0.011105
11-Jul-94 0.000054 0.011159
12-Jul-94 0.000055 0.011214
13-Jul-94 0.000055 0.011269
14-Jul-94 0.000057 0.011326
15-Jul-94 0.000058 0.011384
16-Jul-94 0.000057 0.011441
17-Jul-94 0.000058 0.011499
18-Jul-94 0.000057 0.011556
19-Jul-94 0.000057 0.011613
20-Jul-94 0.000063 0.011676
21-Jul-94 0.000068 0.011744
22-Jul-94 0.000067 0.011811
23-Jul-94 0.000067 0.011878
24-Jul-94 0.000067 0.011945
25-Jul-94 0.000067 0.012012
26-Jul-94 0.000068 0.012080
27-Jul-94 0.000069 0.012149
28-Jul-94 0.000069 0.012218
29-Jul-94 0.000069 0.012287
30-Jul-94 0.000069 0.012356
31-Jul-94 0.000069 0.012425
01-Aug-94 0.000068 0.012493
02-Aug-94 0.000069 0.012562
03-Aug-94 0.000067 0.012629
04-Aug-94 0.000066 0.012695
05-Aug-94 0.000066 0.012761
06-Aug-94 0.000067 0.012828
07-Aug-94 0.000066 0.012894
08-Aug-94 0.000066 0.012960
09-Aug-94 0.000066 0.013026
10-Aug-94 0.000067 0.013093
11-Aug-94 0.000066 0.013159
12-Aug-94 0.000066 0.013225
13-Aug-94 0.000067 0.013292
14-Aug-94 0.000066 0.013358
15-Aug-94 0.000067 0.013425
16-Aug-94 0.000067 0.013492
17-Aug-94 0.000068 0.013560
18-Aug-94 0.000069 0.013629
19-Aug-94 0.000069 0.013698
20-Aug-94 0.000069 0.013767
21-Aug-94 0.000070 0.013837
22-Aug-94 0.000068 0.013905
23-Aug-94 0.000070 0.013975
24-Aug-94 0.000070 0.014045
25-Aug-94 0.000073 0.014118
26-Aug-94 0.000071 0.014189
27-Aug-94 0.000072 0.014261
28-Aug-94 0.000071 0.014332
29-Aug-94 0.000072 0.014404
30-Aug-94 0.000071 0.014475
31-Aug-94 0.000071 0.014546
01-Sep-94 0.000068 0.014614
02-Sep-94 0.000072 0.014686
03-Sep-94 0.000071 0.014757
04-Sep-94 0.000072 0.014829
05-Sep-94 0.000071 0.014900
06-Sep-94 0.000072 0.014972
07-Sep-94 0.000072 0.015044
08-Sep-94 0.000070 0.015114
09-Sep-94 0.000071 0.015185
10-Sep-94 0.000070 0.015255
11-Sep-94 0.000071 0.015326
12-Sep-94 0.000072 0.015398
13-Sep-94 0.000071 0.015469
14-Sep-94 0.000073 0.015542
15-Sep-94 0.000073 0.015615
16-Sep-94 0.000074 0.015689
17-Sep-94 0.000074 0.015763
18-Sep-94 0.000074 0.015837
19-Sep-94 0.000075 0.015912
20-Sep-94 0.000074 0.015986
21-Sep-94 0.000075 0.016061
22-Sep-94 0.000078 0.016139
23-Sep-94 0.000078 0.016217
24-Sep-94 0.000078 0.016295
25-Sep-94 0.000079 0.016374
26-Sep-94 0.000079 0.016453
27-Sep-94 0.000079 0.016532
28-Sep-94 0.000082 0.016614
29-Sep-94 0.000083 0.016697
30-Sep-94 0.000083 0.016780
01-Oct-94 0.000083 0.016863
02-Oct-94 0.000082 0.016945
03-Oct-94 0.000088 0.017033
04-Oct-94 0.000083 0.017116
05-Oct-94 0.000079 0.017195
06-Oct-94 0.000076 0.017271
07-Oct-94 0.000076 0.017347
08-Oct-94 0.000076 0.017423
09-Oct-94 0.000076 0.017499
10-Oct-94 0.000076 0.017575
11-Oct-94 0.000075 0.017650
12-Oct-94 0.000076 0.017726
13-Oct-94 0.000072 0.017798
14-Oct-94 0.000073 0.017871
15-Oct-94 0.000072 0.017943
16-Oct-94 0.000073 0.018016
17-Oct-94 0.000073 0.018089
18-Oct-94 0.000073 0.018162
19-Oct-94 0.000076 0.018238
20-Oct-94 0.000077 0.018315
21-Oct-94 0.000080 0.018395
22-Oct-94 0.000081 0.018476
23-Oct-94 0.000080 0.018556
24-Oct-94 0.000077 0.018633
25-Oct-94 0.000078 0.018711
26-Oct-94 0.000081 0.018792
27-Oct-94 0.000082 0.018874
28-Oct-94 0.000083 0.018957
29-Oct-94 0.000083 0.019040
30-Oct-94 0.000083 0.019123
31-Oct-94 0.000083 0.019206
01-Nov-94 0.000083 0.019289
02-Nov-94 0.000081 0.019370
03-Nov-94 0.000080 0.019450
04-Nov-94 0.000080 0.019530
05-Nov-94 0.000080 0.019610
06-Nov-94 0.000080 0.019690
07-Nov-94 0.000080 0.019770
08-Nov-94 0.000080 0.019850
09-Nov-94 0.000082 0.019932
10-Nov-94 0.000082 0.020014
11-Nov-94 0.000082 0.020096
12-Nov-94 0.000082 0.020178
13-Nov-94 0.000081 0.020259
14-Nov-94 0.000082 0.020341
15-Nov-94 0.000082 0.020423
16-Nov-94 0.000084 0.020507
17-Nov-94 0.000087 0.020594
18-Nov-94 0.000088 0.020682
19-Nov-94 0.000089 0.020771
20-Nov-94 0.000089 0.020860
21-Nov-94 0.000087 0.020947
22-Nov-94 0.000087 0.021034
23-Nov-94 0.000087 0.021121
24-Nov-94 0.000087 0.021208
25-Nov-94 0.000088 0.021296
26-Nov-94 0.000088 0.021384
27-Nov-94 0.000087 0.021471
28-Nov-94 0.000088 0.021559
29-Nov-94 0.000087 0.021646
30-Nov-94 0.000088 0.021734
01-Dec-94 0.000083 0.021817
02-Dec-94 0.000086 0.021903
03-Dec-94 0.000085 0.021988
04-Dec-94 0.000086 0.022074
05-Dec-94 0.000084 0.022158
06-Dec-94 0.000085 0.022243
07-Dec-94 0.000079 0.022322
08-Dec-94 0.000079 0.022401
09-Dec-94 0.000080 0.022481
10-Dec-94 0.000080 0.022561
11-Dec-94 0.000080 0.022641
12-Dec-94 0.000080 0.022721
13-Dec-94 0.000082 0.022803
14-Dec-94 0.000090 0.022893
15-Dec-94 0.000098 0.022991
16-Dec-94 0.000096 0.023087
17-Dec-94 0.000096 0.023183
18-Dec-94 0.000096 0.023279
19-Dec-94 0.000097 0.023376
20-Dec-94 0.000098 0.023474
21-Dec-94 0.000105 0.023579
22-Dec-94 0.000112 0.023691
23-Dec-94 0.000111 0.023802
24-Dec-94 0.000112 0.023914
25-Dec-94 0.000111 0.024025
26-Dec-94 0.000111 0.024136
27-Dec-94 0.000111 0.024247
28-Dec-94 0.000112 0.024359
29-Dec-94 0.000114 0.024473
30-Dec-94 0.000118 0.024591
31-Dec-94 0.000119 0.024710
Name: Ohio Municipal Money Market Portfolio (419)
Notes:
Load:
Redemption:
FiscYear: 31-Dec
Reinvest Cum Total
Pay-date X-Date NAV MonthEnd Shares Value
1.00 29-Aug-89 10000.000 10000
1.00 Aug-89 10000.000 10000
1.00 Sep-89 10000.000 10000
1.00 Oct-89 10000.000 10000
1.00 Nov-89 10000.000 10000
1.00 Dec-89 10000.000 10000
1.00 Jan-90 10000.000 10000
1.00 Feb-90 10000.000 10000
1.00 Mar-90 10000.000 10000
1.00 Apr-90 10000.000 10000
1.00 May-90 10000.000 10000
1.00 Jun-90 10000.000 10000
1.00 Jul-90 10000.000 10000
1.00 Aug-90 10000.000 10000
1.00 Sep-90 10000.000 10000
1.00 Oct-90 10000.000 10000
1.00 Nov-90 10000.000 10000
1.00 Dec-90 10000.000 10000
1.00 Jan-91 10000.000 10000
1.00 Feb-91 10000.000 10000
1.00 Mar-91 10000.000 10000
1.00 Apr-91 10000.000 10000
1.00 May-91 10000.000 10000
1.00 Jun-91 10000.000 10000
1.00 Jul-91 10000.000 10000
1.00 Aug-91 10000.000 10000
1.00 Sep-91 10000.000 10000
1.00 Oct-91 10000.000 10000
1.00 Nov-91 10000.000 10000
1.00 Dec-91 10000.000 10000
1.00 Jan-92 10000.000 10000
1.00 Feb-92 10000.000 10000
1.00 Mar-92 10000.000 10000
1.00 Apr-92 10000.000 10000
1.00 May-92 10000.000 10000
1.00 Jun-92 10000.000 10000
1.00 Jul-92 10000.000 10000
1.00 Aug-92 10000.000 10000
1.00 Sep-92 10000.000 10000
1.00 Oct-92 10000.000 10000
1.00 Nov-92 10000.000 10000
1.00 Dec-92 10000.000 10000
1.00 Jan-93 10000.000 10000
1.00 Feb-93 10000.000 10000
1.00 Mar-93 10000.000 10000
1.00 Apr-93 10000.000 10000
1.00 May-93 10000.000 10000
1.00 Jun-93 10000.000 10000
1.00 Jul-93 10000.000 10000
1.00 Aug-93 10000.000 10000
1.00 Sep-93 10000.000 10000
1.00 Oct-93 10000.000 10000
1.00 Nov-93 10000.000 10000
1.00 Dec-93 10000.000 10000
1.00 Jan-94 10000.000 10000
1.00 Feb-94 10000.000 10000
1.00 Mar-94 10000.000 10000
1.00 Apr-94 10000.000 10000
1.00 May-94 10000.000 10000
1.00 Jun-94 10000.000 10000
1.00 Jul-94 10000.000 10000
1.00 Aug-94 10000.000 10000
1.00 Sep-94 10000.000 10000
1.00 Oct-94 10000.000 10000
1.00 Nov-94 10000.000 10000
1.00 Dec-94 10000.000 10000
Value of Value of
Rep Reinvst Reinvst Total
DIV CGLONG CGSHORT NAV Div Cap GainsValue
1.00
0.000451 1.00 5 0 10005
0.005180 1.00 56 0 10056
0.005102 1.00 108 0 10108
0.005048 1.00 159 0 10159
0.005561 1.00 215 0 10215
0.004909 1.00 265 0 10265
0.004506 1.00 312 0 10312
0.004984 1.00 363 0 10363
0.004759 1.00 412 0 10412
0.004928 1.00 464 0 10464
0.004637 1.00 512 0 10512
0.004590 1.00 560 0 10560
0.004659 1.00 610 0 10610
0.004908 1.00 662 0 10662
0.004860 1.00 713 0 10713
0.004524 1.00 762 0 10762
0.005156 1.00 817 0 10817
0.004227 1.00 863 0 10863
0.003522 1.00 901 0 10901
0.003959 1.00 945 0 10945
0.003849 1.00 987 0 10987
0.003842 1.00 1029 0 11029
0.003458 1.00 1067 0 11067
0.003423 1.00 1105 0 11105
0.003696 1.00 1146 0 11146
0.003731 1.00 1188 0 11188
0.003540 1.00 1227 0 11227
0.003371 1.00 1265 0 11265
0.003503 1.00 1304 0 11304
0.002786 1.00 1336 0 11336
0.002467 1.00 1364 0 11364
0.002512 1.00 1392 0 11392
0.002643 1.00 1423 0 11423
0.002740 1.00 1454 0 11454
0.002271 1.00 1480 0 11480
0.002043 1.00 1503 0 11503
0.001972 1.00 1526 0 11526
0.002133 1.00 1551 0 11551
0.002045 1.00 1574 0 11574
0.001946 1.00 1597 0 11597
0.002150 1.00 1622 0 11622
0.001879 1.00 1643 0 11643
0.001598 1.00 1662 0 11662
0.001754 1.00 1683 0 11683
0.001735 1.00 1703 0 11703
0.001841 1.00 1724 0 11724
0.001561 1.00 1743 0 11743
0.001619 1.00 1762 0 11762
0.001799 1.00 1783 0 11783
0.001706 1.00 1803 0 11803
0.001823 1.00 1824 0 11824
0.001673 1.00 1844 0 11844
0.001740 1.00 1865 0 11865
0.001670 1.00 1885 0 11885
0.001516 1.00 1903 0 11903
0.001674 1.00 1923 0 11923
0.001760 1.00 1944 0 11944
0.002090 1.00 1969 0 11969
0.001819 1.00 1990 0 11990
0.001896 1.00 2013 0 12013
0.002121 1.00 2039 0 12039
0.002234 1.00 2065 0 12065
0.002426 1.00 2095 0 12095
0.002528 1.00 2125 0 12125
0.002976 1.00 2161 0 12161
DividendsCap GainsCost of
Received Received Reinvst
in Cash in Cash Distrib
5 0 5
56 0 56
107 0 108
158 0 159
213 0 215
263 0 265
308 0 312
357 0 363
405 0 412
454 0 464
501 0 512
547 0 560
593 0 610
642 0 662
691 0 713
736 0 762
788 0 817
830 0 863
865 0 901
905 0 945
943 0 987
982 0 1029
1016 0 1067
1050 0 1105
1087 0 1146
1125 0 1188
1160 0 1227
1194 0 1265
1229 0 1304
1257 0 1336
1281 0 1364
1306 0 1392
1333 0 1423
1360 0 1454
1383 0 1480
1403 0 1503
1423 0 1526
1445 0 1551
1465 0 1574
1484 0 1597
1506 0 1622
1525 0 1643
1541 0 1662
1558 0 1683
1576 0 1703
1594 0 1724
1610 0 1743
1626 0 1762
1644 0 1783
1661 0 1803
1679 0 1824
1696 0 1844
1713 0 1865
1730 0 1885
1745 0 1903
1762 0 1923
1779 0 1944
1800 0 1969
1818 0 1990
1837 0 2013
1859 0 2039
1881 0 2065
1905 0 2095
1931 0 2125
1960 0 2161
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<NAME> Spartan Pennsylvania Municipal Money Market Portfolio
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<NUMBER-OF-SHARES-SOLD> 547,410
<NUMBER-OF-SHARES-REDEEMED> 514,839
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<NET-CHANGE-IN-ASSETS> 39,320
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .025
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<TABLE> <S> <C>
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<NAME> Fidelity Municipal Trust II
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<NAME> Fidelity Michigan Municipal Money Market Portfolio
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<NUMBER-OF-SHARES-SOLD> 440,391
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