UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02460
Fidelity Union Street Trust
(Exact name of registrant as specified in charter)
245 Summer St., Boston, MA 02210
(Address of principal executive offices) (Zip code)
Margaret Carey, Secretary
245 Summer St.
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code:
617-563-7000
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Date of fiscal year end: | August 31 |
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Date of reporting period: | February 28, 2023 |
Item 1.
Reports to Stockholders
Fidelity® Maryland Municipal Income Fund
Semi-Annual Report
February 28, 2023
Contents
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You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
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Other third-party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. © 2023 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
| Revenue Sources (% of Fund's net assets) |
| Health Care | 25.8 | |
| General Obligations | 20.1 | |
| Special Tax | 13.5 | |
| Transportation | 12.7 | |
| Water & Sewer | 11.1 | |
| Education | 9.0 | |
| Others* (Individually Less Than 5%) | 7.8 | |
| | 100.0 | |
| |
| *Includes net other assets | | |
Quality Diversification (% of Fund's net assets) |
|
| |
| We have used ratings from Moody's Investors Service, Inc. Where Moody's® ratings are not available, we have used S&P® ratings. All ratings are as of the date indicated and do not reflect subsequent changes. |
Showing Percentage of Net Assets
| Municipal Bonds - 96.1% |
| | | Principal Amount (a) | Value ($) |
| District Of Columbia - 1.3% | | | |
| Washington D.C. Metropolitan Transit Auth. Rev. Series 2017 B, 5% 7/1/33 | | 2,000,000 | 2,160,149 |
| Guam - 0.2% | | | |
| Guam Int'l. Arpt. Auth. Rev. Series 2013 C: | | | |
| 6.25% 10/1/34 (b) | | 180,000 | 182,736 |
| 6.25% 10/1/34 (Pre-Refunded to 10/1/23 @ 100) (b) | | 120,000 | 121,824 |
TOTAL GUAM | | | 304,560 |
| Maryland - 93.6% | | | |
| Anne Arundel County Gen. Oblig.: | | | |
| Series 2018, 5% 10/1/35 | | 6,400,000 | 6,941,924 |
| Series 2019, 5% 10/1/48 | | 550,000 | 592,832 |
| Baltimore Convention Ctr. Hotel Rev. Series 2017, 5% 9/1/32 | | 1,500,000 | 1,513,564 |
| Baltimore County Gen. Oblig.: | | | |
| Series 2019, 4% 11/1/33 | | 1,805,000 | 1,924,125 |
| Series 2020: | | | |
4% 1/1/32 | | 700,000 | 694,156 |
4% 1/1/33 | | 1,200,000 | 1,183,680 |
4% 1/1/35 | | 1,230,000 | 1,191,562 |
4% 1/1/37 | | 1,500,000 | 1,408,170 |
4% 1/1/45 | | 1,750,000 | 1,519,456 |
4% 1/1/50 | | 2,400,000 | 2,023,514 |
| Series 2021, 5% 3/1/34 | | 2,515,000 | 2,919,972 |
| Baltimore Gen. Oblig.: | | | |
| (East Baltimore Research Park Proj.) Series 2017 A, 5% 9/1/38 | | 1,650,000 | 1,653,211 |
| Series 2015: | | | |
5% 6/15/23 | | 350,000 | 351,619 |
5% 6/15/24 | | 500,000 | 508,805 |
| Series 2017 A: | | | |
5% 10/15/34 | | 2,000,000 | 2,171,660 |
5% 10/15/36 | | 1,000,000 | 1,074,397 |
5% 10/15/37 | | 1,005,000 | 1,076,372 |
| Series 2022 A, 5% 10/15/36 | | 1,565,000 | 1,796,382 |
| Baltimore Proj. Rev.: | | | |
| (Wastewtr. Projs.) Series 2014 C: | | | |
5% 7/1/27 | | 2,325,000 | 2,410,144 |
5% 7/1/34 | | 1,285,000 | 1,326,625 |
| (Wtr. Projs.): | | | |
Series 2014 A: �� | | | |
5% 7/1/28 | | 2,825,000 | 2,927,630 |
5% 7/1/33 | | 3,000,000 | 3,101,483 |
Series 2020 A, 5% 7/1/50 | | 2,490,000 | 2,650,542 |
| Series 2017 D, 5% 7/1/31 | | 5,260,000 | 5,670,651 |
| City of Westminster Series 2016, 5% 11/1/31 | | 1,000,000 | 1,046,557 |
| Maryland Cmnty. Dev. Admin Dept. Hsg. & Cmnty. Dev.: | | | |
| Series 2019 B, 4% 9/1/49 | | 465,000 | 462,072 |
| Series 2019 C: | | | |
5% 9/1/29 | | 550,000 | 603,902 |
5% 3/1/30 | | 700,000 | 766,920 |
5% 3/1/31 | | 1,150,000 | 1,253,783 |
| Series 2021 B, 3% 9/1/51 | | 960,000 | 923,376 |
| Maryland Dept. of Trans.: | | | |
| Series 2020, 5% 10/1/33 | | 1,520,000 | 1,752,771 |
| Series 2021 A, 2% 10/1/34 | | 2,000,000 | 1,621,412 |
| Series 2021 B: | | | |
4% 8/1/51 (b) | | 2,005,000 | 1,800,342 |
5% 8/1/46 (b) | | 2,000,000 | 2,056,087 |
| Maryland Econ. Dev. Auth. Rev.: | | | |
| (Ports America Chesapeake LLC. Proj.) Series 2017 A, 5% 6/1/29 | | 1,850,000 | 1,955,010 |
| (Term. Proj.) Series 2019 A: | | | |
5% 6/1/44 (b) | | 500,000 | 509,340 |
5% 6/1/49 (b) | | 1,000,000 | 1,013,218 |
| Maryland Econ. Dev. Corp. (Purple Line Lt. Rail Proj.) Series 2022 B: | | | |
| 5% 6/30/37 (b) | | 2,465,000 | 2,518,319 |
| 5.25% 6/30/55 (b) | | 1,000,000 | 1,000,010 |
| Maryland Econ. Dev. Corp. Air Cargo Series 2019: | | | |
| 5% 7/1/27 (b) | | 200,000 | 204,685 |
| 5% 7/1/28 (b) | | 630,000 | 650,332 |
| 5% 7/1/29 (b) | | 585,000 | 608,629 |
| Maryland Econ. Dev. Corp. Student Hsg. Rev.: | | | |
| (Morgan State Univ. Proj.) Series 2022 A, 5.75% 7/1/53 | | 1,000,000 | 1,059,128 |
| (Towson Univ. Proj.) Series 2017: | | | |
5% 7/1/26 | | 350,000 | 356,745 |
5% 7/1/28 | | 305,000 | 311,041 |
5% 7/1/29 | | 185,000 | 188,519 |
5% 7/1/30 | | 250,000 | 254,263 |
5% 7/1/31 | | 300,000 | 304,409 |
5% 7/1/32 | | 325,000 | 328,886 |
5% 7/1/36 | | 500,000 | 500,351 |
| (Univ. of Maryland, Baltimore County Proj.) Series 2016: | | | |
5% 7/1/28 (Assured Guaranty Muni. Corp. Insured) | | 350,000 | 367,539 |
5% 7/1/29 (Assured Guaranty Muni. Corp. Insured) | | 700,000 | 735,086 |
| (Univ. of Maryland, College Park Projs.) Series 2016, 5% 6/1/43 (Assured Guaranty Muni. Corp. Insured) | | 575,000 | 587,325 |
| Maryland Gen. Oblig. Series 2021 2A, 4% 8/1/36 | | 1,000,000 | 1,026,543 |
| Maryland Health & Higher Edl.: | | | |
| Series 2020: | | | |
4% 7/1/40 | | 300,000 | 276,439 |
4% 7/1/45 | | 750,000 | 673,263 |
4% 7/1/50 | | 1,000,000 | 873,836 |
| Series 2021 A: | | | |
2.5% 7/1/51 | | 5,000,000 | 3,076,662 |
3% 7/1/51 | | 1,000,000 | 699,933 |
4% 6/1/39 | | 475,000 | 445,005 |
4% 6/1/40 | | 500,000 | 463,093 |
4% 6/1/55 | | 500,000 | 418,994 |
| Maryland Health & Higher Edl. Facilities Auth. Rev.: | | | |
| (Anne Arundel Med. Ctr., MD Proj.) Series 2017 A: | | | |
5% 7/1/28 | | 520,000 | 551,613 |
5% 7/1/30 | | 850,000 | 896,881 |
5% 7/1/31 | | 1,400,000 | 1,477,084 |
5% 7/1/32 | | 290,000 | 305,757 |
| Series 2013 B, 5% 8/15/38 | | 2,000,000 | 2,002,618 |
| Series 2014, 5% 7/1/27 (Pre-Refunded to 7/1/24 @ 100) | | 3,495,000 | 3,574,860 |
| Series 2015 A, 5% 5/15/30 | | 1,000,000 | 1,040,711 |
| Series 2015: | | | |
5% 7/1/26 (Pre-Refunded to 7/1/24 @ 100) | | 1,000,000 | 1,022,850 |
5% 7/1/27 (Pre-Refunded to 7/1/24 @ 100) | | 1,000,000 | 1,022,850 |
5% 8/15/29 | | 2,000,000 | 2,057,939 |
5% 7/1/31 | | 2,200,000 | 2,293,000 |
5% 7/1/33 | | 1,325,000 | 1,357,611 |
5% 7/1/34 | | 1,200,000 | 1,227,397 |
| Series 2016 A: | | | |
4% 7/1/42 | | 2,175,000 | 1,902,092 |
5% 7/1/35 | | 1,500,000 | 1,540,635 |
5% 7/1/38 | | 3,215,000 | 3,258,986 |
5.5% 1/1/31 | | 1,500,000 | 1,596,163 |
| Series 2016: | | | |
5% 6/1/26 | | 300,000 | 311,504 |
5% 6/1/27 | | 255,000 | 265,072 |
5% 6/1/28 | | 310,000 | 322,880 |
5% 6/1/29 | | 350,000 | 364,702 |
5% 7/1/31 | | 500,000 | 527,974 |
5% 6/1/33 | | 305,000 | 316,842 |
5% 6/1/36 | | 250,000 | 257,267 |
| Series 2017: | | | |
4% 7/1/42 | | 2,845,000 | 2,668,471 |
5% 6/1/27 | | 290,000 | 301,454 |
5% 6/1/31 | | 425,000 | 442,102 |
5% 6/1/33 | | 970,000 | 1,007,662 |
5% 6/1/35 | | 600,000 | 619,969 |
5% 6/1/42 | | 1,000,000 | 1,019,453 |
| Series 2019 A, 5% 10/1/49 | | 2,000,000 | 2,114,458 |
| Series 2020 A: | | | |
5% 7/1/23 | | 310,000 | 311,385 |
5% 7/1/24 | | 355,000 | 360,928 |
5% 7/1/34 | | 1,000,000 | 1,071,981 |
5% 7/1/35 | | 1,000,000 | 1,063,635 |
| Series 2020 B: | | | |
5% 4/15/34 | | 1,010,000 | 1,105,487 |
5% 4/15/35 | | 1,000,000 | 1,086,658 |
| Maryland Stadium Auth. Built to Learn Rev.: | | | |
| Series 2021, 4% 6/1/46 | | 1,000,000 | 920,814 |
| Series 2022 A, 4% 6/1/36 | | 1,875,000 | 1,901,892 |
| Maryland Stadium Auth. Rev. (Pub. Schools Construction and Revitalization Prog.): | | | |
| Series 2016: | | | |
5% 5/1/30 | | 1,715,000 | 1,821,324 |
5% 5/1/36 | | 2,000,000 | 2,097,861 |
| Series 2018 A, 5% 5/1/36 | | 1,580,000 | 1,702,186 |
| Maryland Trans. Auth. Trans. Facility Projs. Rev.: | | | |
| Series 2017, 5% 7/1/30 | | 3,000,000 | 3,263,270 |
| Series 2020: | | | |
4% 7/1/50 | | 2,500,000 | 2,339,317 |
5% 7/1/33 | | 1,000,000 | 1,148,219 |
5% 7/1/36 | | 490,000 | 546,449 |
| Series 2021 A, 2.5% 7/1/47 | | 2,000,000 | 1,335,400 |
| Montgomery County Gen. Oblig. Series A, 4% 11/1/33 | | 3,000,000 | 3,197,992 |
| Prince Georges County Ctfs. of Prtn.: | | | |
| Series 2018, 5% 10/1/48 | | 2,100,000 | 2,195,786 |
| Series 2021: | | | |
4% 10/1/39 | | 1,205,000 | 1,200,087 |
4% 10/1/40 | | 1,255,000 | 1,244,735 |
4% 10/1/41 | | 400,000 | 394,965 |
| Prince Georges County Gen. Oblig. Series 2020 A, 5% 7/15/34 | | 1,010,000 | 1,118,596 |
| Washington Metropolitan Area Transit Auth. Series 2021 A: | | | |
| 3% 7/15/36 | | 400,000 | 360,360 |
| 5% 7/15/46 | | 3,350,000 | 3,592,584 |
TOTAL MARYLAND | | | 155,377,069 |
| Puerto Rico - 1.0% | | | |
| Puerto Rico Commonwealth Aqueduct & Swr. Auth. Series 2021 B, 5% 7/1/37 (c) | | 445,000 | 436,054 |
| Puerto Rico Commonwealth Pub. Impt. Gen. Oblig. Series 2021 A1: | | | |
| 0% 7/1/33 | | 505,310 | 287,044 |
| 5.625% 7/1/27 | | 55,000 | 56,751 |
| 5.625% 7/1/29 | | 185,000 | 192,722 |
| 5.75% 7/1/31 | | 445,000 | 467,478 |
| Puerto Rico Sales Tax Fing. Corp. Sales Tax Rev. Series 2018 A1, 4.55% 7/1/40 | | 335,000 | 312,010 |
TOTAL PUERTO RICO | | | 1,752,059 |
| TOTAL MUNICIPAL BONDS (Cost $168,430,091) | | | 159,593,837 |
| | | | |
| Municipal Notes - 2.2% |
| | | Principal Amount (a) | Value ($) |
| Maryland - 2.2% | | | |
Montgomery County Gen. Oblig. Series 2017 E, 2.4% 3/1/23 (Liquidity Facility U.S. Bank NA, Cincinnati), VRDN (d) (Cost $3,600,000) | | 3,600,000 | 3,600,000 |
| | | | |
| TOTAL INVESTMENT IN SECURITIES - 98.3% (Cost $172,030,091) | 163,193,837 |
NET OTHER ASSETS (LIABILITIES) - 1.7% | 2,850,313 |
| NET ASSETS - 100.0% | 166,044,150 |
| | |
Security Type Abbreviations
| VRDN | - | VARIABLE RATE DEMAND NOTE (A debt instrument that is payable upon demand, either daily, weekly or monthly) |
Legend
| (a) | Amount is stated in United States dollars unless otherwise noted. |
| (b) | Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
| (c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $436,054 or 0.3% of net assets. |
| (d) | Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
Investment Valuation
The following is a summary of the inputs used, as of February 28, 2023, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| Valuation Inputs at Reporting Date: |
| Description | Total ($) | Level 1 ($) | Level 2 ($) | Level 3 ($) |
Investments in Securities: | | | | |
|
| Municipal Securities | 163,193,837 | - | 163,193,837 | - |
| | | | | |
| Total Investments in Securities: | 163,193,837 | - | 163,193,837 | - |
| Statement of Assets and Liabilities |
| | | | February 28, 2023 (Unaudited) |
| | | | | |
| Assets | | | | |
Investment in securities, at value - See accompanying schedule Unaffiliated issuers (cost $172,030,091): | | | $ | 163,193,837 |
| Cash | | | | 1,403,001 |
| Receivable for fund shares sold | | | | 72,705 |
| Interest receivable | | | | 1,737,696 |
| Other receivables | | | | 617 |
Total assets | | | | 166,407,856 |
| Liabilities | | | | |
| Payable for fund shares redeemed | $ | 196,511 | | |
| Distributions payable | | 89,750 | | |
| Accrued management fee | | 77,445 | | |
| Total Liabilities | | | | 363,706 |
| Net Assets | | | $ | 166,044,150 |
| Net Assets consist of: | | | | |
| Paid in capital | | | $ | 177,648,258 |
| Total accumulated earnings (loss) | | | | (11,604,108) |
| Net Assets | | | $ | 166,044,150 |
Net Asset Value , offering price and redemption price per share ($166,044,150 ÷ 15,848,043 shares) | | | $ | 10.48 |
| Statement of Operations |
| | | | Six months ended February 28, 2023 (Unaudited) |
| Investment Income | | | | |
| Interest | | | $ | 2,356,439 |
| Expenses | | | | |
| Management fee | $ | 446,681 | | |
| Independent trustees' fees and expenses | | 320 | | |
| Total expenses before reductions | | 447,001 | | |
| Expense reductions | | (742) | | |
| Total expenses after reductions | | | | 446,259 |
| Net Investment income (loss) | | | | 1,910,180 |
| Realized and Unrealized Gain (Loss) | | | | |
| Net realized gain (loss) on: | | | | |
| Investment Securities: | | | | |
| Unaffiliated issuers | | (1,116,838) | | |
| Total net realized gain (loss) | | | | (1,116,838) |
| Change in net unrealized appreciation (depreciation) on investment securities | | | | (149,883) |
| Net gain (loss) | | | | (1,266,721) |
| Net increase (decrease) in net assets resulting from operations | | | $ | 643,459 |
| Statement of Changes in Net Assets |
| |
| | Six months ended February 28, 2023 (Unaudited) | | Year ended August 31, 2022 |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net investment income (loss) | $ | 1,910,180 | $ | 4,302,587 |
| Net realized gain (loss) | | (1,116,838) | | (1,476,036) |
| Change in net unrealized appreciation (depreciation) | | (149,883) | | (22,687,715) |
| Net increase (decrease) in net assets resulting from operations | | 643,459 | | (19,861,164) |
| Distributions to shareholders | | (1,893,240) | | (5,160,829) |
| Share transactions | | | | |
| Proceeds from sales of shares | | 48,470,152 | | 87,084,017 |
| Reinvestment of distributions | | 1,328,493 | | 3,357,436 |
| Cost of shares redeemed | | (58,852,829) | | (121,586,103) |
Net increase (decrease) in net assets resulting from share transactions | | (9,054,184) | | (31,144,650) |
| Total increase (decrease) in net assets | | (10,303,965) | | (56,166,643) |
| | | | | |
| Net Assets | | | | |
| Beginning of period | | 176,348,115 | | 232,514,758 |
| End of period | $ | 166,044,150 | $ | 176,348,115 |
| | | | | |
| Other Information | | | | |
| Shares | | | | |
| Sold | | 4,694,137 | | 7,993,800 |
| Issued in reinvestment of distributions | | 127,852 | | 298,422 |
| Redeemed | | (5,722,267) | | (11,122,606) |
| Net increase (decrease) | | (900,278) | | (2,830,384) |
| | | | | |
Financial Highlights
| Fidelity® Maryland Municipal Income Fund |
| |
| | Six months ended (Unaudited) February 28, 2023 | | Years ended August 31, 2022 | | 2021 | | 2020 | | 2019 | | 2018 |
Selected Per-Share Data | | | | | | | | | | | | |
| Net asset value, beginning of period | $ | 10.53 | $ | 11.88 | $ | 11.69 | $ | 11.78 | $ | 11.11 | $ | 11.47 |
| Income from Investment Operations | | | | | | | | | | | | |
Net investment income (loss) A,B | | .123 | | .233 | | .239 | | .257 | | .259 | | .258 |
| Net realized and unrealized gain (loss) | | (.052) | | (1.305) | | .232 | | (.090) | | .670 | | (.278) |
| Total from investment operations | | .071 | | (1.072) | | .471 | | .167 | | .929 | | (.020) |
| Distributions from net investment income | | (.121) | | (.234) | | (.239) | | (.257) | | (.259) | | (.258) |
| Distributions from net realized gain | | - | | (.044) | | (.042) | | - | | - | | (.082) |
| Total distributions | | (.121) | | (.278) | | (.281) | | (.257) | | (.259) | | (.340) |
| Net asset value, end of period | $ | 10.48 | $ | 10.53 | $ | 11.88 | $ | 11.69 | $ | 11.78 | $ | 11.11 |
Total Return C,D | | .69% | | (9.15)% | | 4.08% | | 1.45% | | 8.48% | | (.16)% |
Ratios to Average Net Assets B,E,F | | | | | | | | | | | | |
| Expenses before reductions | | .55% G | | .55% | | .55% | | .55% | | .55% | | .55% |
| Expenses net of fee waivers, if any | | .55% G | | .55% | | .55% | | .55% | | .55% | | .55% |
| Expenses net of all reductions | | .55% G | | .55% | | .55% | | .55% | | .55% | | .55% |
| Net investment income (loss) | | 2.37% G | | 2.08% | | 2.03% | | 2.21% | | 2.29% | | 2.30% |
| Supplemental Data | | | | | | | | | | | | |
| Net assets, end of period (000 omitted) | $ | 166,044 | $ | 176,348 | $ | 232,515 | $ | 222,833 | $ | 224,276 | $ | 216,922 |
Portfolio turnover rate H | | 12% G | | 10% | | 10% | | 19% | | 10% | | 25% |
A Calculated based on average shares outstanding during the period.
B Net investment income (loss) is affected by the timing of the declaration of dividends by any underlying mutual funds or exchange-traded funds (ETFs). Net investment income (loss) of any mutual funds or ETFs is not included in the Fund's net investment income (loss) ratio.
C Total returns for periods of less than one year are not annualized.
D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
E Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
G Annualized.
H Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
For the period ended February 28, 2023
1. Organization.
Fidelity Maryland Municipal Income Fund (the Fund) is a non-diversified fund of Fidelity Union Street Trust (the Trust) and is authorized to issue an unlimited number of shares. Share transactions on the Statement of Changes in Net Assets may contain exchanges between affiliated funds. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund may be affected by economic and political developments in the state of Maryland.
2. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies . The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has designated the Fund's investment adviser as the valuation designee responsible for the fair valuation function and performing fair value determinations as needed. The investment adviser has established a Fair Value Committee (the Committee) to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Committee. In accordance with these fair valuation policies and procedures, which have been approved by the Board, the Fund attempts to obtain prices from one or more third party pricing services or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with the policies and procedures. Factors used in determining fair value vary by investment type and may include market or investment specific events, transaction data, estimated cash flows, and market observations of comparable investments. The frequency that the fair valuation procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee manages the Fund's fair valuation practices and maintains the fair valuation policies and procedures. The Fund's investment adviser reports to the Board information regarding the fair valuation process and related material matters.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - unadjusted quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 - unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing services or from brokers who make markets in such securities. Municipal securities are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of February 28, 2023 is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Expenses. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Distributions are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to market discount and losses deferred due to excise tax regulations.
The Fund purchases municipal securities whose interest, in the opinion of the issuer, is free from federal income tax. There is no assurance that the IRS will agree with this opinion. In the event the IRS determines that the issuer does not comply with relevant tax requirements, interest payments from a security could become federally taxable, possibly retroactively to the date the security was issued.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $457,935 |
| Gross unrealized depreciation | (9,276,797) |
| Net unrealized appreciation (depreciation) | $(8,818,862) |
| Tax cost | $172,012,699 |
The Fund elected to defer to its next fiscal year approximately $1,654,937 of capital losses recognized during the period November 1, 2021 to August 31, 2022.
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| Fidelity Maryland Municipal Income Fund | 9,644,186 | 24,801,500 |
4. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee that is based on an annual rate of .55% of the Fund's average net assets. Under the management contract, the investment adviser pays all other expenses, except the compensation of the independent Trustees and certain other expenses such as interest expense. The management fee is reduced by an amount equal to the fees and expenses paid by the Fund to the independent Trustees.
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note. During the period, there were no interfund trades.
5. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The commitment fees on the pro-rata portion of the line of credit are borne by the investment adviser. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
Through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses by $742.
7. Other.
A fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, a fund may also enter into contracts that provide general indemnifications. A fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against a fund. The risk of material loss from such claims is considered remote.
8. Risk and Uncertainties.
Many factors affect a fund's performance. Developments that disrupt global economies and financial markets, such as pandemics, epidemics, outbreaks of infectious diseases, war, terrorism, and environmental disasters, may significantly affect a fund's investment performance. The effects of these developments to a fund will be impacted by the types of securities in which a fund invests, the financial condition, industry, economic sector, and geographic location of an issuer, and a fund's level of investment in the securities of that issuer. Significant concentrations in security types, issuers, industries, sectors, and geographic locations may magnify the factors that affect a fund's performance.
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
| The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (September 1, 2022 to February 28, 2023). |
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | Annualized Expense Ratio- A | | Beginning Account Value September 1, 2022 | | Ending Account Value February 28, 2023 | | Expenses Paid During Period- C September 1, 2022 to February 28, 2023 |
| | | | | | | | | | |
| Fidelity® Maryland Municipal Income Fund | | | | .55% | | | | | | |
| Actual | | | | | | $ 1,000 | | $ 1,006.90 | | $ 2.74 |
Hypothetical- B | | | | | | $ 1,000 | | $ 1,022.07 | | $ 2.76 |
| |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B 5% return per year before expenses
C Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Maryland Municipal Income Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established four standing committees (Committees) - Operations, Audit, Fair Valuation, and Governance and Nominating - each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all the Independent Trustees are members, meets regularly throughout the year and requests, receives and considers, among other matters, information related to the annual consideration of the renewal of the fund's Advisory Contracts before making its recommendation to the Board. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet from time to time with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
At its September 2022 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness relative to peer funds of the fund's management fee and the total expense ratio; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided . The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage. The Board also considered the steps Fidelity had taken to ensure the continued provision of high quality services to the Fidelity funds throughout the COVID-19 pandemic, including the expansion of staff in client facing positions to maintain service levels in periods of high volumes and volatility.
Resources Dedicated to Investment Management and Support Services . The Board reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted the resources devoted to Fidelity's global investment organization, and that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, cybersecurity, and technology and operations capabilities and resources, which are integral parts of the investment management process.
Shareholder and Administrative Services . The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency and pricing and bookkeeping services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools. The Board also considered that it reviews customer service metrics such as telephone response times, continuity of services on the website and metrics addressing services at Fidelity Investor Centers.
Investment in a Large Fund Family . The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations to the Board that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds, ETFs, and share classes with innovative structures, strategies and pricing and making other enhancements to meet investor needs; (iv) broadening eligibility requirements for certain funds and share classes; (v) reducing management fees and total expenses for certain funds and classes; (vi) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (vii) rationalizing product lines and gaining increased efficiencies from fund mergers and liquidations; (viii) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (ix) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including their retirement income goals.
Investment Performance . The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index) and an appropriate peer group of funds with similar objectives (peer group). The Board also receives and considers information about performance attribution. In its evaluation of fund investment performance at meetings throughout the year, the Board gave particular attention to information indicating underperformance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for such underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on gross performance (before fees and expenses but after transaction costs) compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, and on net performance (after fees and expenses) compared to appropriate peer groups, as applicable, over the same periods, taking into account relevant factors including the following: general market conditions; expectations for interest rate levels and credit conditions; issuer-specific information including credit quality; the potential for incremental return versus the fund's benchmark index weighed against the risks involved in obtaining that incremental return, including the risk of diminished or negative total returns; and fund cash flows and other factors. The Independent Trustees generally give greater weight to fund performance over longer time periods than over shorter time periods. Depending on the circumstances, the Independent Trustees may be satisfied with a fund's performance notwithstanding that it lags its benchmark index or peer group for certain periods.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative calendar year total return information for the fund and an appropriate benchmark index and peer group for the most recent one-, three-, and five-year periods.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio . The Board considered the fund's management fee and total expense ratio compared to selected groups of competitive funds and classes (referred to as "mapped groups" below) for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar investment objective categories (as classified by Lipper) that have comparable investment mandates. Combining funds with similar investment objective categories aids the Board's comparison of management fees and total expense ratios by broadening the competitive group used for such comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
The Board noted that the fund's management fee rate ranked above the median of its Total Mapped Group and above the median of its ASPG for 2021. The Board considered that the fund has an all-inclusive fee that covers expenses beyond portfolio management, unlike the majority of funds within this group. The Board further considered that, as discussed below, when compared to the total expenses of its competitors, the fund ranked equal to its load-type group median.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio . In its review of the fund's total expense ratio, the Board considered the fund's all-inclusive (subject to certain limited exceptions) fee rate. The Board also considered other expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees, paid by FMR under the all-inclusive arrangement. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. The fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure. The Board also considered a total expense ASPG comparison, which focuses on the total expenses of the fund relative to a subset of non-Fidelity funds within the similar sales load structure group that are similar in size and management fee structure. The total expense ASPG is limited to 15 larger and 15 smaller classes of different funds, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in expenses relating to these items.
The Board noted that the fund's total net expense ratio ranked equal to the similar sales load structure group competitive median for 2021 and below the ASPG competitive median for 2021.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the fund's total expense ratio was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability . The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board's consideration of these matters was informed by the findings of a joint ad hoc committee created by it and the boards of other Fidelity funds to evaluate potential fall-out benefits.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive.
Economies of Scale . The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board recognized that, due to the fund's current contractual arrangements, its expense ratio will not decline if the fund's operating costs decrease as assets grow, or rise as assets decrease. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board . In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, the allocation of various costs to different funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) the extent to which current market conditions have affected retention and recruitment of personnel; (iv) the arrangements with and compensation paid to certain fund sub-advisers on behalf of the Fidelity funds and the treatment of such compensation within Fidelity's fund profitability methodology; (v) the terms of the funds' various management fee structures, including the basic group fee and the terms of Fidelity's voluntary expense limitation arrangements; (vi) Fidelity's transfer agent, pricing and bookkeeping fees, expense and service structures for different funds and classes relative to competitive trends; (vii) the impact on fund profitability of recent industry trends, such as the growth in passively managed funds and the changes in flows for different types of funds; (viii) the types of management fee and total expense comparisons provided, and the challenges and limitations associated with such information; and (ix) explanations regarding the relative total expense ratios and management fees of certain funds and classes, total expense and management fee competitive trends, and methodologies for total expense and management fee competitive comparisons. In addition, the Board considered its discussions with Fidelity regarding Fidelity's efforts to maintain the continuous investment and shareholder services necessary for the funds during the current pandemic and economic circumstances.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable and that the fund's Advisory Contracts should be renewed.
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program (the Program) reasonably designed to assess and manage the Fund's liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund's Board of Trustees (the Board) has designated the Fund's investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund's liquidity risk based on a variety of factors including (1) the Fund's investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) certain factors specific to ETFs including the effect of the Fund's prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund's portfolio, as applicable.
In accordance with the Program, each of the Fund's portfolio investments is classified into one of four defined liquidity categories based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments - cash or convertible to cash within three business days or less
- Moderately liquid investments - convertible to cash in three to seven calendar days
- Less liquid investments - can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments - cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund's illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund's Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of the Program for the period December 1, 2021 through November 30, 2022. The report concluded that the Program is operating effectively and is reasonably designed to assess and manage the Fund's liquidity risk.
1.701070.125
SMD-SANN-0423
Fidelity® Arizona Municipal Income Fund
Semi-Annual Report
February 28, 2023
Contents
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You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third-party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. © 2023 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
| Revenue Sources (% of Fund's net assets) |
| Health Care | 24.4 | |
| Education | 19.3 | |
| General Obligations | 11.1 | |
| Special Tax | 11.0 | |
| Water & Sewer | 8.5 | |
| Synthetics | 6.5 | |
| Transportation | 6.0 | |
| Others* (Individually Less Than 5%) | 13.2 | |
| | 100.0 | |
| |
| *Includes net other assets | | |
Quality Diversification (% of Fund's net assets) |
|
| |
| We have used ratings from Moody's Investors Service, Inc. Where Moody's® ratings are not available, we have used S&P® ratings. All ratings are as of the date indicated and do not reflect subsequent changes. |
Showing Percentage of Net Assets
| Municipal Bonds - 92.6% |
| | | Principal Amount (a) | Value ($) |
| Arizona - 91.2% | | | |
| Apache County Ariz Unified School Distn Series 2022: | | | |
| 5% 7/1/35 | | 500,000 | 547,176 |
| 5% 7/1/36 | | 500,000 | 541,739 |
| Arizona Board of Regents Arizona State Univ. Rev.: | | | |
| Series 2015 B, 5% 7/1/31 | | 1,525,000 | 1,585,413 |
| Series 2015 D: | | | |
5% 7/1/34 | | 500,000 | 518,553 |
5% 7/1/35 | | 900,000 | 930,328 |
| Arizona Ctfs. of Prtn. Series 2015: | | | |
| 5% 9/1/27 | | 290,000 | 302,686 |
| 5% 9/1/27 (Pre-Refunded to 9/1/25 @ 100) | | 1,210,000 | 1,265,301 |
| Arizona Game and Fish Dept. and Commission (AGF Administration Bldg. Proj.) Series 2006, 5% 7/1/32 | | 470,000 | 470,642 |
| Arizona Health Facilities Auth. Rev. (Banner Health Sys. Proj.) Series 2007 B, 3 month U.S. LIBOR + 0.810% 3.995%, tender 1/1/37 (b)(c) | | 1,000,000 | 931,529 |
| Arizona Indl. Dev. Auth. Hosp. Rev.: | | | |
| Series 2020 A: | | | |
3% 2/1/45 | | 1,000,000 | 771,600 |
4% 2/1/50 | | 2,005,000 | 1,797,387 |
5% 2/1/40 | | 700,000 | 741,229 |
| Series 2021 A: | | | |
4% 2/1/39 | | 500,000 | 482,058 |
4% 2/1/40 | | 1,000,000 | 945,277 |
| Arizona Indl. Dev. Auth. Lease Rev. Series 2020 A: | | | |
| 4% 9/1/35 | | 200,000 | 201,363 |
| 4% 9/1/36 | | 355,000 | 354,298 |
| 4% 9/1/46 | | 1,000,000 | 942,652 |
| Arizona State Trans. Board: | | | |
| Series 2017 A, 5% 7/1/32 | | 1,500,000 | 1,620,387 |
| Series 2017A, 5% 7/1/31 | | 385,000 | 417,202 |
| Arizona State Univ. Revs.: | | | |
| Series 2019 A, 5% 7/1/40 | | 510,000 | 551,713 |
| Series 2020 A: | | | |
4% 7/1/40 | | 1,300,000 | 1,304,616 |
5% 7/1/39 | | 390,000 | 426,101 |
5% 7/1/43 | | 2,925,000 | 3,158,528 |
| Buckeye Excise Tax Rev. Series 2015: | | | |
| 5% 7/1/27 | | 350,000 | 364,345 |
| 5% 7/1/28 | | 500,000 | 519,123 |
| 5% 7/1/29 | | 455,000 | 471,884 |
| Bullhead City Excise Taxes Series 2021, 2.55% 7/1/46 | | 3,000,000 | 2,055,219 |
| Central Wtr. Conservation District (Central Arizona Proj.) Series 2016 A, 5% 1/1/36 | | 500,000 | 519,568 |
| Chandler Indl. Dev. Auth. Indl. Dev. Rev.: | | | |
| (Intel Corp. Proj.) Series 2022 2, 5%, tender 9/1/27 (b)(d) | | 3,000,000 | 3,102,457 |
| Bonds (Intel Corp. Proj.) Series 2019, 5%, tender 6/3/24 (b)(d) | | 3,700,000 | 3,719,537 |
| Glendale Union School District 205 Series A: | | | |
| 4% 7/1/38 (Assured Guaranty Muni. Corp. Insured) | | 1,000,000 | 999,331 |
| 4% 7/1/39 (Assured Guaranty Muni. Corp. Insured) | | 1,000,000 | 990,096 |
| Glendale Gen. Oblig. Series 2017: | | | |
| 5% 7/1/30 | | 2,310,000 | 2,503,210 |
| 5% 7/1/32 | | 1,000,000 | 1,073,948 |
| Glendale Indl. dev auth Sr Living Facilities Rev. (Royal Oaks Inspirata Pointe Proj.) Series 2020 A, 5% 5/15/56 | | 1,000,000 | 841,632 |
| Glendale Indl. Dev. Auth. (Terraces of Phoenix Proj.) Series 2018 A: | | | |
| 4% 7/1/28 | | 265,000 | 242,579 |
| 5% 7/1/33 | | 435,000 | 398,063 |
| Glendale Sr. Excise Tax Rev. Series 2015 A, 5% 7/1/28 | | 1,000,000 | 1,043,049 |
| Goodyear Pub. Impt. Corp. Facilities Rev. Series 2016 A, 5% 7/1/29 | | 1,000,000 | 1,063,720 |
| Maricopa County Indl. Dev. Auth.: | | | |
| (Creighton Univ. Proj.) Series 2020, 5% 7/1/47 | | 2,000,000 | 2,091,938 |
| Series 2019 A: | | | |
5% 9/1/29 | | 310,000 | 338,226 |
5% 9/1/33 | | 275,000 | 296,994 |
5% 9/1/34 | | 680,000 | 730,201 |
| Series 2021 A: | | | |
3% 9/1/51 | | 3,000,000 | 2,144,314 |
4% 9/1/51 | | 1,500,000 | 1,335,692 |
| Maricopa County Indl. Dev. Auth. Sr. Living Facilities Series 2016: | | | |
| 5.75% 1/1/36 (e) | | 500,000 | 385,955 |
| 6% 1/1/48 (e) | | 500,000 | 349,022 |
| Maricopa County Phoenix Union High School District #210 Series 2017 B: | | | |
| 5% 7/1/32 | | 1,180,000 | 1,304,506 |
| 5% 7/1/34 | | 585,000 | 643,358 |
| Maricopa County Rev.: | | | |
| Bonds: | | | |
Series 2019 D, 5%, tender 5/15/26 (b) | | 200,000 | 210,384 |
Series C, 5%, tender 10/18/24 (b) | | 125,000 | 128,099 |
| Series 2016 A: | | | |
5% 1/1/25 | | 105,000 | 108,050 |
5% 1/1/34 | | 2,935,000 | 3,131,201 |
5% 1/1/38 | | 2,320,000 | 2,435,936 |
| Series 2019 E, 3% 1/1/49 | | 3,000,000 | 2,194,805 |
| Series 2019 F, 4% 1/1/45 | | 1,000,000 | 929,874 |
| Maricopa County School District #214 Tolleson Series 2018 A, 5% 7/1/31 | | 350,000 | 378,386 |
| Maricopa County School District #28 Kyrene Elementary: | | | |
| Series 2015 C, 4% 7/1/29 | | 650,000 | 667,102 |
| Series 2019 A, 5% 7/1/37 | | 1,000,000 | 1,085,490 |
| Maricopa County Spl. Health Care District Gen. Oblig. Series 2018 C, 5% 7/1/36 | | 1,000,000 | 1,073,714 |
| Maricopa County Unified School District #48 Scottsdale: | | | |
| Series 2017 B, 5% 7/1/33 | | 3,015,000 | 3,262,072 |
| Series D, 4% 7/1/34 | | 350,000 | 369,038 |
| Maricopa County Unified School District #69 Paradise Valley Series 2022, 5% 7/1/31 | | 105,000 | 122,617 |
| McAllister Academic Village LLC Rev. (Arizona State Univ. Hassayampa Academic Village Proj.) Series 2016: | | | |
| 5% 7/1/37 | | 2,000,000 | 2,099,234 |
| 5% 7/1/38 | | 3,850,000 | 4,035,989 |
| Mesa Util. Sys. Rev.: | | | |
| Series 2019 A, 5% 7/1/43 | | 2,015,000 | 2,151,723 |
| Series 2021: | | | |
4% 7/1/35 | | 1,000,000 | 1,028,501 |
5% 7/1/45 | | 1,000,000 | 1,076,974 |
| Northern Arizona Univ. Revs.: | | | |
| Series 2015, 5% 6/1/30 | | 1,000,000 | 1,032,251 |
| Series 2020 B, 5% 6/1/37 (Build America Mutual Assurance Insured) | | 1,000,000 | 1,092,906 |
| Phoenix Civic Impt. Board Arpt. Rev.: | | | |
| Series 2017 A: | | | |
5% 7/1/33 (d) | | 25,000 | 26,296 |
5% 7/1/35 (d) | | 2,425,000 | 2,530,280 |
| Series 2017 D, 5% 7/1/31 | | 2,000,000 | 2,155,007 |
| Series 2019 B, 5% 7/1/33 (d) | | 280,000 | 299,990 |
| Phoenix Civic Impt. Corp. Series 2019 A: | | | |
| 5% 7/1/29 | | 185,000 | 204,115 |
| 5% 7/1/35 | | 1,000,000 | 1,076,267 |
| Phoenix Civic Impt. Corp. District Rev. (Plaza Expansion Proj.) Series 2005 B, 5.5% 7/1/38 (Nat'l. Pub. Fin. Guarantee Corp. Insured) | | 2,000,000 | 2,415,453 |
| Phoenix Civic Impt. Corp. Excise Tax Rev. Series 2022, 5% 7/1/37 | | 1,000,000 | 1,134,675 |
| Phoenix Civic Impt. Corp. Wastewtr. Sys. Rev. Series 2016, 5% 7/1/33 | | 1,000,000 | 1,060,457 |
| Phoenix Civic Impt. Corp. Wtr. Sys. Rev. Series 2021 A: | | | |
| 5% 7/1/35 | | 1,190,000 | 1,360,523 |
| 5% 7/1/45 | | 2,865,000 | 3,117,400 |
| Phoenix IDA Student Hsg. Rev.: | | | |
| (Downtown Phoenix Student Hsg. II LLC Arizona State Univ. Proj.) Series 2019 A, 5% 7/1/36 | | 1,175,000 | 1,192,748 |
| Series 2018 A, (Downtown Phoenix Student Hsg., LLC AZ State Univ. Proj.) 5% 7/1/42 | | 1,500,000 | 1,463,587 |
| Phoenix-Mesa Gateway Arpt. Auth. (Mesa Proj.) Series 2012: | | | |
| 5% 7/1/24 (d) | | 380,000 | 380,392 |
| 5% 7/1/27 (d) | | 400,000 | 400,285 |
| Pima County Indl. Dev. Auth. Rev. Series 2021 A: | | | |
| 4% 4/1/37 | | 415,000 | 400,474 |
| 4% 4/1/46 | | 3,000,000 | 2,638,978 |
| Salt River Proj. Agricultural Impt. & Pwr. District Elec. Sys. Rev.: | | | |
| Series 2015 A, 5% 12/1/34 | | 1,600,000 | 1,661,794 |
| Series 2019 A, 5% 1/1/35 | | 395,000 | 444,227 |
| Series A, 5% 1/1/37 | | 880,000 | 975,162 |
| Salt Verde Finl. Corp. Sr. Gas Rev. Series 2007: | | | |
| 5% 12/1/37 | | 2,910,000 | 2,969,047 |
| 5.5% 12/1/29 | | 3,000,000 | 3,194,684 |
| Scottsdale Gen. Oblig. Series 2017, 4% 7/1/32 | | 400,000 | 419,411 |
| Tempe Excise Tax Rev. Series 2016: | | | |
| 5% 7/1/28 | | 315,000 | 334,866 |
| 5% 7/1/29 | | 500,000 | 530,391 |
| 5% 7/1/30 | | 325,000 | 344,225 |
| 5% 7/1/31 | | 375,000 | 396,696 |
| Tempe Indl. Dev. Auth. Rev. (Friendship Village of Tempe Proj.) Series 2021 A, 4% 12/1/46 | | 1,000,000 | 722,426 |
| Tucson Wtr. Rev. Series 2017, 5% 7/1/34 | | 1,000,000 | 1,069,349 |
| Univ. of Arizona Univ. Revs.: | | | |
| Series 2015 A, 5% 6/1/30 | | 2,500,000 | 2,596,553 |
| Series 2019 A, 5% 6/1/41 | | 1,965,000 | 2,112,200 |
| Series 2020 C, 5% 8/1/28 | | 900,000 | 999,814 |
| Western Maricopa Ed. Ctr. District Series 2019 B, 5% 7/1/28 | | 1,315,000 | 1,457,658 |
| Yavapai County Indl. Dev. Auth.: | | | |
| Series 2016, 5% 8/1/36 | | 1,305,000 | 1,347,867 |
| Series 2019: | | | |
4% 8/1/43 | | 350,000 | 315,855 |
5% 8/1/24 | | 325,000 | 330,803 |
5% 8/1/25 | | 400,000 | 413,319 |
5% 8/1/26 | | 600,000 | 628,376 |
5% 8/1/27 | | 625,000 | 662,471 |
5% 8/1/39 | | 1,060,000 | 1,096,739 |
| Yuma Indl. Dev. Auth. Hosp. Rev. Series 2014 A, 5% 8/1/27 | | 2,000,000 | 2,042,340 |
TOTAL ARIZONA | | | 127,873,291 |
| Guam - 0.1% | | | |
| Guam Int'l. Arpt. Auth. Rev. Series 2013 C, 6.375% 10/1/43 (d) | | 95,000 | 96,512 |
| Puerto Rico - 1.3% | | | |
| Puerto Rico Commonwealth Aqueduct & Swr. Auth. Series 2021 B, 5% 7/1/37 (e) | | 395,000 | 387,059 |
| Puerto Rico Commonwealth Pub. Impt. Gen. Oblig. Series 2021 A1: | | | |
| 0% 7/1/33 | | 435,874 | 247,601 |
| 5.625% 7/1/27 | | 50,000 | 51,592 |
| 5.625% 7/1/29 | | 150,000 | 156,261 |
| 5.75% 7/1/31 | | 365,000 | 383,437 |
| Puerto Rico Indl., Tourist, Edl., Med. And Envir. Cont. Facilities Fing. Auth. Series 2021: | | | |
| 4% 7/1/41 | | 50,000 | 43,396 |
| 5% 7/1/27 | | 125,000 | 131,859 |
| 5% 7/1/32 | | 95,000 | 103,912 |
| Puerto Rico Sales Tax Fing. Corp. Sales Tax Rev. Series 2018 A1, 4.55% 7/1/40 | | 310,000 | 288,725 |
TOTAL PUERTO RICO | | | 1,793,842 |
| TOTAL MUNICIPAL BONDS (Cost $136,282,318) | | | 129,763,645 |
| | | | |
| Municipal Notes - 6.6% |
| | | Principal Amount (a) | Value ($) |
| Arizona - 6.6% | | | |
| Arizona Health Facilities Auth. Rev. Series 2015 C, 2.45% 3/1/23, LOC Bank of America NA, VRDN (b) | | 200,000 | 200,000 |
| Arizona St Indl. Dev. Auth. Multi Participating VRDN Series MIZ 91 18, 2.57% 3/1/23 (Liquidity Facility Mizuho Cap. Markets LLC) (b)(f)(g) | | 9,100,000 | 9,100,000 |
| | | | |
| TOTAL MUNICIPAL NOTES (Cost $9,300,000) | | | 9,300,000 |
| | | | |
| TOTAL INVESTMENT IN SECURITIES - 99.2% (Cost $145,582,318) | 139,063,645 |
NET OTHER ASSETS (LIABILITIES) - 0.8% | 1,142,684 |
| NET ASSETS - 100.0% | 140,206,329 |
| | |
Security Type Abbreviations
| VRDN | - | VARIABLE RATE DEMAND NOTE (A debt instrument that is payable upon demand, either daily, weekly or monthly) |
Legend
| (a) | Amount is stated in United States dollars unless otherwise noted. |
| (b) | Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end. |
| (c) | Coupon is indexed to a floating interest rate which may be multiplied by a specified factor and/or subject to caps or floors. |
| (d) | Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
| (e) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $1,122,036 or 0.8% of net assets. |
| (f) | Provides evidence of ownership in one or more underlying municipal bonds. |
| (g) | Coupon rates are determined by re-marketing agents based on current market conditions. |
Investment Valuation
The following is a summary of the inputs used, as of February 28, 2023, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| Valuation Inputs at Reporting Date: |
| Description | Total ($) | Level 1 ($) | Level 2 ($) | Level 3 ($) |
Investments in Securities: | | | | |
|
| Municipal Securities | 139,063,645 | - | 139,063,645 | - |
| | | | | |
| Total Investments in Securities: | 139,063,645 | - | 139,063,645 | - |
| Statement of Assets and Liabilities |
| | | | February 28, 2023 (Unaudited) |
| | | | | |
| Assets | | | | |
Investment in securities, at value - See accompanying schedule Unaffiliated issuers (cost $145,582,318): | | | $ | 139,063,645 |
| Cash | | | | 166,950 |
| Receivable for fund shares sold | | | | 1,705 |
| Interest receivable | | | | 1,217,365 |
| Other receivables | | | | 572 |
Total assets | | | | 140,450,237 |
| Liabilities | | | | |
| Payable for fund shares redeemed | $ | 72,110 | | |
| Distributions payable | | 106,141 | | |
| Accrued management fee | | 65,657 | | |
| Total Liabilities | | | | 243,908 |
| Net Assets | | | $ | 140,206,329 |
| Net Assets consist of: | | | | |
| Paid in capital | | | $ | 147,920,177 |
| Total accumulated earnings (loss) | | | | (7,713,848) |
| Net Assets | | | $ | 140,206,329 |
Net Asset Value , offering price and redemption price per share ($140,206,329 ÷ 12,574,458 shares) | | | $ | 11.15 |
| Statement of Operations |
| | | | Six months ended February 28, 2023 (Unaudited) |
| Investment Income | | | | |
| Interest | | | $ | 2,069,291 |
| Expenses | | | | |
| Management fee | $ | 394,523 | | |
| Independent trustees' fees and expenses | | 281 | | |
| Total expenses before reductions | | 394,804 | | |
| Expense reductions | | (691) | | |
| Total expenses after reductions | | | | 394,113 |
| Net Investment income (loss) | | | | 1,675,178 |
| Realized and Unrealized Gain (Loss) | | | | |
| Net realized gain (loss) on: | | | | |
| Investment Securities: | | | | |
| Unaffiliated issuers | | (1,044,781) | | |
| Total net realized gain (loss) | | | | (1,044,781) |
| Change in net unrealized appreciation (depreciation) on investment securities | | | | 223,170 |
| Net gain (loss) | | | | (821,611) |
| Net increase (decrease) in net assets resulting from operations | | | $ | 853,567 |
| Statement of Changes in Net Assets |
| |
| | Six months ended February 28, 2023 (Unaudited) | | Year ended August 31, 2022 |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net investment income (loss) | $ | 1,675,178 | $ | 3,570,936 |
| Net realized gain (loss) | | (1,044,781) | | (199,478) |
| Change in net unrealized appreciation (depreciation) | | 223,170 | | (19,755,644) |
| Net increase (decrease) in net assets resulting from operations | | 853,567 | | (16,384,186) |
| Distributions to shareholders | | (1,649,186) | | (4,211,626) |
| Share transactions | | | | |
| Proceeds from sales of shares | | 10,879,967 | | 33,089,748 |
| Reinvestment of distributions | | 1,006,826 | | 2,691,125 |
| Cost of shares redeemed | | (20,746,798) | | (55,337,086) |
Net increase (decrease) in net assets resulting from share transactions | | (8,860,005) | | (19,556,213) |
| Total increase (decrease) in net assets | | (9,655,624) | | (40,152,025) |
| | | | | |
| Net Assets | | | | |
| Beginning of period | | 149,861,953 | | 190,013,978 |
| End of period | $ | 140,206,329 | $ | 149,861,953 |
| | | | | |
| Other Information | | | | |
| Shares | | | | |
| Sold | | 984,360 | | 2,769,731 |
| Issued in reinvestment of distributions | | 91,041 | | 225,086 |
| Redeemed | | (1,875,070) | | (4,664,588) |
| Net increase (decrease) | | (799,669) | | (1,669,771) |
| | | | | |
Financial Highlights
| Fidelity® Arizona Municipal Income Fund |
| |
| | Six months ended (Unaudited) February 28, 2023 | | Years ended August 31, 2022 | | 2021 | | 2020 | | 2019 | | 2018 |
Selected Per-Share Data | | | | | | | | | | | | |
| Net asset value, beginning of period | $ | 11.21 | $ | 12.63 | $ | 12.53 | $ | 12.52 | $ | 11.82 | $ | 12.21 |
| Income from Investment Operations | | | | | | | | | | | | |
Net investment income (loss) A,B | | .130 | | .248 | | .257 | | .277 | | .298 | | .300 |
| Net realized and unrealized gain (loss) | | (.062) | | (1.379) | | .148 | | .009 | | .698 | | (.309) |
| Total from investment operations | | .068 | | (1.131) | | .405 | | .286 | | .996 | | (.009) |
| Distributions from net investment income | | (.128) | | (.247) | | (.257) | | (.276) | | (.296) | | (.300) |
| Distributions from net realized gain | | - | | (.042) | | (.048) | | - | | - | | (.081) |
| Total distributions | | (.128) | | (.289) | | (.305) | | (.276) | | (.296) | | (.381) |
| Net asset value, end of period | $ | 11.15 | $ | 11.21 | $ | 12.63 | $ | 12.53 | $ | 12.52 | $ | 11.82 |
Total Return C,D | | .62% | | (9.07)% | | 3.27% | | 2.33% | | 8.56% | | (.05)% |
Ratios to Average Net Assets B,E,F | | | | | | | | | | | | |
| Expenses before reductions | | .55% G | | .55% | | .55% | | .55% | | .55% | | .55% |
| Expenses net of fee waivers, if any | | .55% G | | .55% | | .55% | | .55% | | .55% | | .55% |
| Expenses net of all reductions | | .55% G | | .55% | | .55% | | .55% | | .55% | | .55% |
| Net investment income (loss) | | 2.35% G | | 2.07% | | 2.04% | | 2.23% | | 2.49% | | 2.52% |
| Supplemental Data | | | | | | | | | | | | |
| Net assets, end of period (000 omitted) | $ | 140,206 | $ | 149,862 | $ | 190,014 | $ | 178,875 | $ | 180,860 | $ | 170,557 |
Portfolio turnover rate H | | 20% G | | 10% | | 8% | | 17% | | 13% | | 12% |
A Calculated based on average shares outstanding during the period.
B Net investment income (loss) is affected by the timing of the declaration of dividends by any underlying mutual funds or exchange-traded funds (ETFs). Net investment income (loss) of any mutual funds or ETFs is not included in the Fund's net investment income (loss) ratio.
C Total returns for periods of less than one year are not annualized.
D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
E Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
G Annualized.
H Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
For the period ended February 28, 2023
1. Organization.
Fidelity Arizona Municipal Income Fund (the Fund) is a non-diversified fund of Fidelity Union Street Trust (the Trust) and is authorized to issue an unlimited number of shares. Share transactions on the Statement of Changes in Net Assets may contain exchanges between affiliated funds. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The Fund may be affected by economic and political developments in the state of Arizona.
2. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies . The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has designated the Fund's investment adviser as the valuation designee responsible for the fair valuation function and performing fair value determinations as needed. The investment adviser has established a Fair Value Committee (the Committee) to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Committee. In accordance with these fair valuation policies and procedures, which have been approved by the Board, the Fund attempts to obtain prices from one or more third party pricing services or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with the policies and procedures. Factors used in determining fair value vary by investment type and may include market or investment specific events, transaction data, estimated cash flows, and market observations of comparable investments. The frequency that the fair valuation procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee manages the Fund's fair valuation practices and maintains the fair valuation policies and procedures. The Fund's investment adviser reports to the Board information regarding the fair valuation process and related material matters.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
Level 1 - unadjusted quoted prices in active markets for identical investments
Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 - unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing services or from brokers who make markets in such securities. Municipal securities are valued by pricing services who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing services. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of February 28, 2023 is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable.
Expenses. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Distributions are declared and recorded daily and paid monthly from net investment income. Distributions from realized gains, if any, are declared and recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to market discount and losses deferred due to excise tax regulations.
The Fund purchases municipal securities whose interest, in the opinion of the issuer, is free from federal income tax. There is no assurance that the IRS will agree with this opinion. In the event the IRS determines that the issuer does not comply with relevant tax requirements, interest payments from a security could become federally taxable, possibly retroactively to the date the security was issued.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $1,328,944 |
| Gross unrealized depreciation | (7,763,355) |
| Net unrealized appreciation (depreciation) | $(6,434,411) |
| Tax cost | $145,498,056 |
| | |
The Fund elected to defer to its next fiscal year approximately $243,885 of capital losses recognized during the period November 1,2021 to August 31, 2022.
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| Fidelity Arizona Municipal Income Fund | 13,382,751 | 30,497,362 |
4. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee that is based on an annual rate of .55% of the Fund's average net assets. Under the management contract, the investment adviser pays all other expenses, except the compensation of the independent Trustees and certain other expenses such as interest expense. The management fee is reduced by an amount equal to the fees and expenses paid by the Fund to the independent Trustees.
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note. Interfund trades during the period are noted in the table below.
| | Purchases ($) | Sales ($) | Realized Gain (Loss) ($) |
| Fidelity Arizona Municipal Income Fund | 100,000 | 1,300,000 | - |
5. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The commitment fees on the pro-rata portion of the line of credit are borne by the investment adviser. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
Through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses by $691.
7. Other.
A fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, a fund may also enter into contracts that provide general indemnifications. A fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against a fund. The risk of material loss from such claims is considered remote.
8. Risk and Uncertainties.
Many factors affect a fund's performance. Developments that disrupt global economies and financial markets, such as pandemics, epidemics, outbreaks of infectious diseases, war, terrorism, and environmental disasters, may significantly affect a fund's investment performance. The effects of these developments to a fund will be impacted by the types of securities in which a fund invests, the financial condition, industry, economic sector, and geographic location of an issuer, and a fund's level of investment in the securities of that issuer. Significant concentrations in security types, issuers, industries, sectors, and geographic locations may magnify the factors that affect a fund's performance.
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
| The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (September 1, 2022 to February 28, 2023). |
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | Annualized Expense Ratio- A | | Beginning Account Value September 1, 2022 | | Ending Account Value February 28, 2023 | | Expenses Paid During Period- C September 1, 2022 to February 28, 2023 |
| | | | | | | | | | |
| Fidelity® Arizona Municipal Income Fund | | | | .55% | | | | | | |
| Actual | | | | | | $ 1,000 | | $ 1,006.20 | | $ 2.74 |
Hypothetical- B | | | | | | $ 1,000 | | $ 1,022.07 | | $ 2.76 |
| |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B 5% return per year before expenses
C Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Arizona Municipal Income Fund / Fidelity Arizona Municipal Money Market Fund
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for each fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of each fund's Advisory Contracts, including the services and support provided to each fund and its shareholders. The Board has established four standing committees (Committees) - Operations, Audit, Fair Valuation, and Governance and Nominating - each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Operations Committee, of which all the Independent Trustees are members, meets regularly throughout the year and requests, receives and considers, among other matters, information related to the annual consideration of the renewal of each fund's Advisory Contracts before making its recommendation to the Board. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet from time to time with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
At its September 2022 meeting, the Board unanimously determined to renew each fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to each fund and its shareholders (including the investment performance of each fund); (ii) the competitiveness relative to peer funds of each fund's management fee and total expense ratio; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with each fund; and (iv) the extent to which, if any, economies of scale exist and are realized as each fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for each fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of each fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of each fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that each fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in that fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the funds, including the backgrounds of investment personnel of Fidelity, and also considered the funds' investment objectives, strategies, and related investment philosophies. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of each fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage. The Board also considered the steps Fidelity had taken to ensure the continued provision of high quality services to the Fidelity funds throughout the COVID-19 pandemic, including the expansion of staff in client facing positions to maintain service levels in periods of high volumes and volatility.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted the resources devoted to Fidelity's global investment organization, and that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, cybersecurity, and technology and operations capabilities and resources, which are integral parts of the investment management process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency and pricing and bookkeeping services for each fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, each fund's compliance policies and procedures.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools. The Board also considered that it reviews customer service metrics such as telephone response times, continuity of services on the website and metrics addressing services at Fidelity Investor Centers.
Investment in a Large Fund Family . The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations to the Board that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds, ETFs, and share classes with innovative structures, strategies and pricing and making other enhancements to meet investor needs; (iv) broadening eligibility requirements for certain funds and share classes; (v) reducing management fees and total expenses for certain funds and classes; (vi) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (vii) rationalizing product lines and gaining increased efficiencies from fund mergers and liquidations; (viii) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (ix) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including their retirement income goals.
Investment Performance (for Fidelity Arizona Municipal Income Fund). The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index) and an appropriate peer group of funds with similar objectives (peer group). The Board also receives and considers information about performance attribution. In its evaluation of fund investment performance at meetings throughout the year, the Board gave particular attention to information indicating underperformance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for such underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on gross performance (before fees and expenses but after transaction costs) compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, and on net performance (after fees and expenses) compared to appropriate peer groups, as applicable, over the same periods, taking into account relevant factors including the following: general market conditions; expectations for interest rate levels and credit conditions; issuer-specific information including credit quality; the potential for incremental return versus the fund's benchmark index weighed against the risks involved in obtaining that incremental return, including the risk of diminished or negative total returns; and fund cash flows and other factors. The Independent Trustees generally give greater weight to fund performance over longer time periods than over shorter time periods. Depending on the circumstances, the Independent Trustees may be satisfied with a fund's performance notwithstanding that it lags its benchmark index or peer group for certain periods.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative calendar year total return information for the fund and an appropriate benchmark index and peer group for the most recent one-, three-, and five-year periods.
Investment Performance (for Fidelity Arizona Municipal Money Market Fund) . The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate peer group of funds with similar objectives (peer group). The Board also receives and considers information about performance attribution.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on gross performance (before fees and expenses but after transaction costs) compared to the gross performance of appropriate peer groups, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; expectations for interest rate levels and credit conditions; issuer-specific information including credit quality; the fund's market value NAV over time and its resilience under various stressed conditions; and fund cash flows and other factors. The Independent Trustees generally give greater weight to fund performance over longer time periods than over shorter time periods.
The Board recognizes that in interest rate environments where many competitors waive fees to maintain a minimum yield, relative money market fund performance on a net basis (after fees and expenses) may not be particularly meaningful due to miniscule performance differences among competitor funds. Depending on the circumstances, the Independent Trustees may be satisfied with a fund's performance notwithstanding that it lags its peer group for certain periods.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative calendar year total return information for the fund and an appropriate peer group for the most recent one-, three-, and five-year periods.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to each fund under the Advisory Contracts should continue to benefit the shareholders of each fund.
Competitiveness of Management Fee and Total Expense Ratio . The Board considered each fund's management fee and total expense ratio compared to selected groups of competitive funds and classes (referred to as "mapped groups" below) for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar investment objective categories (as classified by Lipper) that have comparable investment mandates. Combining funds with similar investment objective categories aids the Board's comparisons of management fees and total expense ratios by broadening the competitive group used for such comparisons.
Management Fee . The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the charts below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and is broader than the Lipper peer group used by the Board for performance comparisons. For each fund, the Total Mapped Group is broader than the Lipper peer group used by the Board for performance comparisons because the Total Mapped Group combines several Lipper investment objective categories while the Lipper peer group does not. The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than a fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than a fund. The funds' actual TMG %s and the number of funds in the Total Mapped Group are in the charts below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which a fund's management fee rate ranked, is also included in the charts and was considered by the Board.
Fidelity Arizona Municipal Income Fund
The Board noted that the fund's management fee rate ranked above the median of its Total Mapped Group and above the median of its ASPG for 2021. The Board noted that the management fee rate was 7 BP above the Total Mapped Group and 7.5 BP above the ASPG median. Arizona Municipal Income Fund has an all-inclusive management fee that covers expenses beyond portfolio management, whereas the majority of its competitors do not have all-inclusive fees. As discussed below, when compared to the total expenses of its load-type competitors, the fund ranks below its load-type group median.
Fidelity Arizona Municipal Money Market Fund
The Board noted that the fund's management fee rate ranked above the median of its Total Mapped Group and above the median of its ASPG for 2021. The Board noted that the management fee rate was 22 BP above the Total Mapped Group and 24 BP above the ASPG median. The Board noted that because there is a relatively small number of state-specific funds in the Lipper objective, Fidelity combines Lipper's separate categories for state-specific funds with all state and national municipal money market funds to create a single mapped group. The Board considered that Fidelity believes the fee charged for the fund is reasonable for overall value of the services provided and also considered that in July 2022 the Board approved and recommended to shareholders for their approval the reorganization of the fund into Fidelity Municipal Money Market Fund. The Board further noted that the proposed reorganization was expected to result in a reduction in the fund's total expense ratio.
Based on its review, the Board concluded that each fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio . In its review of each fund's total expense ratio, the Board considered the fund's all-inclusive (subject to certain limited exceptions) fee rate. The Board also considered other expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees, paid by FMR under the all-inclusive arrangement. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for each fund. Each fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure. The Board also considered a total expense ASPG comparison for each fund, which focuses on the total expenses of the fund relative to a subset of non-Fidelity funds within the similar sales load structure group that are similar in size and management fee structure. The total expense ASPG is limited to 15 larger and 15 smaller of different funds, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in expenses relating to these items.
The Board noted that Fidelity Arizona Municipal Income Fund's total net expense ratio ranked equal to the similar sales load structure group competitive median for 2021 and below the ASPG competitive median for 2021.
The Board noted that Fidelity Arizona Municipal Money Market Fund's total net expense ratio ranked below the similar sales load structure group competitive median for 2021 and below the ASPG competitive median for 2021.
Fees Charged to Other Fidelity Clients . The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that each fund's total expense ratio was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability . The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing each fund and servicing each fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with each fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board's consideration of these matters was informed by the findings of a joint ad hoc committee created by it and the boards of other Fidelity funds to evaluate potential fall-out benefits.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of each fund and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including each fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which each fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board recognized that, due to each fund's current contractual arrangements, its expense ratio will not decline if the fund's operating costs decrease as assets grow, or rise as assets decrease. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board . In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) Fidelity's fund profitability methodology, profitability trends for certain funds, the allocation of various costs to different funds, and the impact of certain factors on fund profitability results; (ii) portfolio manager changes that have occurred during the past year and the amount of the investment that each portfolio manager has made in the Fidelity fund(s) that he or she manages; (iii) the extent to which current market conditions have affected retention and recruitment of personnel; (iv) the arrangements with and compensation paid to certain fund sub-advisers on behalf of the Fidelity funds and the treatment of such compensation within Fidelity's fund profitability methodology; (v) the terms of the funds' various management fee structures, including the basic group fee and the terms of Fidelity's voluntary expense limitation arrangements; (vi) Fidelity's transfer agent, pricing and bookkeeping fees, expense and service structures for different funds and classes relative to competitive trends; (vii) the impact on fund profitability of recent industry trends, such as the growth in passively managed funds and the changes in flows for different types of funds; (viii) the types of management fee and total expense comparisons provided, and the challenges and limitations associated with such information; and (ix) explanations regarding the relative total expense ratios and management fees of certain funds and classes, total expense and management fee competitive trends, and methodologies for total expense and management fee competitive comparisons. In addition, the Board considered its discussions with Fidelity regarding Fidelity's efforts to maintain the continuous investment and shareholder services necessary for the funds during the current pandemic and economic circumstances.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable and that each fund's Advisory Contracts should be renewed.
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program (the Program) reasonably designed to assess and manage the Fund's liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund's Board of Trustees (the Board) has designated the Fund's investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund's liquidity risk based on a variety of factors including (1) the Fund's investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) certain factors specific to ETFs including the effect of the Fund's prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund's portfolio, as applicable.
In accordance with the Program, each of the Fund's portfolio investments is classified into one of four defined liquidity categories based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments - cash or convertible to cash within three business days or less
- Moderately liquid investments - convertible to cash in three to seven calendar days
- Less liquid investments - can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments - cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund's illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund's Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of the Program for the period December 1, 2021 through November 30, 2022. The report concluded that the Program is operating effectively and is reasonably designed to assess and manage the Fund's liquidity risk.
1.700927.125
AZI-SPZ-SANN-0423
Item 2.
Code of Ethics
Not applicable.
Item 3.
Audit Committee Financial Expert
Not applicable.
Item 4.
Principal Accountant Fees and Services
Not applicable.
Item 5.
Audit Committee of Listed Registrants
Not applicable.
Item 6.
Investments
(a)
Not applicable.
(b)
Not applicable
Item 7.
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8.
Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9.
Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10.
Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Fidelity Union Street Trust’s Board of Trustees.
Item 11.
Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Fidelity Union Street Trust’s (the “Trust”) disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the Trust’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
Item 12.
Disclosure of Securities Lending Activities for Closed-End Management
Investment Companies
Not applicable.
Item 13.
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Union Street Trust
| |
By: | /s/Laura M. Del Prato |
| Laura M. Del Prato |
| President and Treasurer |
|
|
Date: | April 20, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| |
By: | /s/Laura M. Del Prato |
| Laura M. Del Prato |
| President and Treasurer |
|
|
Date: | April 20, 2023 |
| |
By: | /s/John J. Burke III |
| John J. Burke III |
| Chief Financial Officer |
|
|
Date: | April 20, 2023 |
