SPARTAN(Registered trademark)
(registered trademark)
NEW JERSEY
MUNICIPAL
HIGH YIELD
PORTFOLIO
SEMIANNUAL REPORT
MAY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 22 Notes to the financial statements.
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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates in February and March. These rate hikes caused bond yields
to rise and bond prices to fall. While nobody knows whether rates will
continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important to remember,
however, that this loss in principal is only "on paper" until you choose to
sell your shares. That's why your investing time horizon is key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund investment into a money market fund.
If you can't keep your investment in the bond fund until yields start
falling again and bond prices rise, you increase your risk of not recouping
the full value of the shares. A money market fund provides a stable $1
share price and a yield that becomes more attractive as rates go up.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's ten years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value), and the effect of the $5 account closeout fee.
You can also look at the fund's income. If Fidelity had not reimbursed
certain fund expenses during the periods shown, the total returns,
dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Spartan New Jersey Municipal
High Yield Portfolio -2.66% 1.61% 47.11% 72.30%
Lehman Brothers Municipal Bond Index -1.83% 2.47% 48.85% 72.49%
Average New Jersey Tax-exempt
Municipal Bond Fund -2.98% 1.48% 46.71% n/a
Consumer Price Index 1.17% 2.29% 19.14% 27.82%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, six months, one year, five years, or since the fund started on
January 1, 1988. For example, if you invested $1,000 in a fund that had a
5% return over the past year, you would end up with $1,050. You can compare
these figures to the performance of the Lehman Brothers Municipal Bond
index - a broad gauge of the municipal bond market. To measure how the fund
stacked up against its peers, you can look at the average New Jersey
tax-exempt municipal fund, which reflects the performance of 34 New Jersey
municipal bond funds tracked by Lipper Analytical Services. Both benchmarks
include reinvested dividends and capital gains, if any. Comparing the
fund's performance to the consumer price index helps show how your fund did
compared to inflation.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan New Jersey Municipal
High Yield Portfolio 1.61% 8.03% 8.85%
Lehman Brothers Municipal Bond Index 2.47% 8.28% 8.86%
Average New Jersey Tax-exempt
Municipal Bond Fund 1.48% 7.97% n/a
Consumer Price Index 2.29% 3.57% 3.90%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spartan NJ Muni Hi Yld (416)Muni Bond Index
01/01/88 10000.00 10000.00
01/31/88 10382.99 10356.20
02/29/88 10489.58 10465.67
03/31/88 10108.41 10343.74
04/30/88 10162.42 10422.35
05/31/88 10195.16 10392.23
06/30/88 10424.31 10544.27
07/31/88 10490.37 10613.02
08/31/88 10515.89 10622.36
09/30/88 10760.93 10814.62
10/31/88 11060.18 11005.50
11/30/88 10893.59 10904.69
12/31/88 11089.94 11016.25
01/31/89 11261.41 11244.06
02/28/89 11131.82 11115.77
03/31/89 11142.30 11089.20
04/30/89 11470.47 11352.46
05/31/89 11712.36 11588.25
06/30/89 11899.59 11745.62
07/31/89 12030.89 11905.47
08/31/89 11882.88 11788.92
09/30/89 11837.44 11753.55
10/31/89 12002.50 11896.95
11/30/89 12181.54 12105.14
12/31/89 12237.61 12204.41
01/31/90 12116.04 12147.04
02/28/90 12239.41 12255.15
03/31/90 12260.71 12258.83
04/30/90 12101.33 12170.57
05/31/90 12416.90 12435.88
06/30/90 12542.36 12545.32
07/31/90 12738.81 12729.74
08/31/90 12493.09 12545.16
09/30/90 12573.56 12552.68
10/31/90 12751.56 12779.89
11/30/90 13053.06 13036.76
12/31/90 13111.66 13094.12
01/31/91 13270.57 13269.58
02/28/91 13355.11 13385.03
03/31/91 13389.35 13390.38
04/30/91 13575.50 13568.48
05/31/91 13686.76 13689.24
06/30/91 13684.33 13675.55
07/31/91 13910.27 13842.39
08/31/91 14075.10 14025.11
09/30/91 14253.49 14207.43
10/31/91 14405.60 14335.30
11/30/91 14441.04 14375.44
12/31/91 14728.41 14684.51
01/31/92 14753.13 14718.29
02/29/92 14761.20 14722.70
03/31/92 14733.41 14728.59
04/30/92 14852.05 14859.68
05/31/92 15067.78 15035.02
06/30/92 15308.14 15287.61
07/31/92 15854.11 15746.24
08/31/92 15632.74 15591.92
09/30/92 15697.06 15693.27
10/31/92 15375.33 15539.48
11/30/92 15787.98 15817.63
12/31/92 16010.91 15978.97
01/31/93 16206.24 16164.33
02/28/93 16838.39 16749.48
03/31/93 16627.16 16571.93
04/30/93 16820.45 16739.31
05/31/93 16957.57 16833.05
06/30/93 17267.40 17114.16
07/31/93 17270.95 17136.41
08/31/93 17674.72 17492.85
09/30/93 17885.81 17692.27
10/31/93 17892.26 17725.88
11/30/93 17701.63 17569.89
12/31/93 18101.77 17940.62
01/31/94 18291.90 18145.14
02/28/94 17751.96 17675.18
03/31/94 16940.48 16955.80
04/30/94 17037.91 17099.93
05/31/94 17247.35 17248.70
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan New
Jersey Municipal High Yield Portfolio on January 1, 1988, when the fund
started. As the chart shows, by May 31, 1994, the value of your investment
would have grown to $17,232 - a 72.32% increase on your initial investment.
This assumes you still own the fund on May 31, 1994, and therefore does not
include the effect of the $5 account closeout fee. For comparison, look at
how the Lehman Brothers Municipal Bond index did over the same period. With
dividends reinvested, the same $10,000 would have grown to $17,249 - a
72.49% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONT
HS
ENDED YEARS ENDED NOVEMBER 30,
MAY 31,
1994 1993 1992 1991 1990
Dividend return 2.70% 5.99% 6.59% 6.87% 6.68%
Capital appreciation returns -5.36% 6.12% 2.73% 3.75% 0.46%
Total return -2.66% 12.11% 9.32% 10.62% 7.14%
DIVIDEND returns, and capital appreciation returns are both part of a bond
fund's total return. An income return reflects the dividends paid by the
fund. A capital gain return reflects the amount paid by the fund to
shareholders based on the profits it has from selling bonds that have grown
in value. Both returns assume the dividends or gains are reinvested.
Changes in the fund's share price include changes in the prices of the
bonds owned by the fund. Change in share price and total return figures
include the effect of the $5 account closeout fee on an average size
account.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED MAY 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.42(cents) 31.90(cents) 63.51(cents)
Annualized dividend rate 5.85% 5.61% 5.47%
30-day annualized yield 5.67% - -
30-day annualized tax-equivalent yield 9.49% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.90 over
the past month , $11.40 over the past six months and $11.62 over the past
year, you can compare the fund's income over these two periods. The 30-day
annualized YIELD is a standard formula for all funds based on the yields of
the bonds in the fund, averaged over the past 30 days. This figure shows
you the yield characteristics of the fund's investments at the end of the
period. It also helps you compare funds from different companies on an
equal basis. The tax-equivalent yield shows what you would have to earn on
a taxable investment to equal the fund's tax-free yield, if you're in the
40.26% combined federal and state tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
Interview with David Murphy,
Portfolio Manager of Spartan
New Jersey Municipal High Yield
Portfolio
Q. DAVID, HOW HAS THE FUND PERFORMED?
A. It has been a difficult period for both the fund and municipal bonds in
general. The fund's total return for the six months ended May 31, 1994, was
- -2.66%. That was slightly better than the average New Jersey municipal bond
fund, which returned -2.98% for the same period, according to Lipper
Analytical Services. For the 12 months ended May 31, the fund had a total
return of 1.61%, compared to the average New Jersey fund's return of 1.48%,
again according to Lipper.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. Toward the end of 1993, I had structured the fund to take advantage of
what I believed would be a relatively stable interest rate environment. But
when the Federal Reserve moved on February 4 to raise interest rates,
volatility, not stability, was what ruled the municipal market. The Fed,
acting on evidence that the economy was growing at a fairly strong pace,
raised short-term interest rates one-quarter of a percent in early
February, even though there wasn't any solid indication that inflation was
on the rise. Since the bond market fears inflation, a preemptive Fed move
against the threat of inflation is sometimes greeted enthusiastically by
long-term bond investors. But this time, the market reacted negatively
because investors expected further Fed hikes. As a result, many investors
started to sell municipal bonds, and the market dropped. Most of the fund's
and the market's losses came in February and March, when the selling was at
its peak. By the end of May, the Fed had raised short-term interest rates
by 1.25% to 4.25%. Meanwhile, 30-year AAA bond yields rose from 5.20% at
the end of November 1993 to 6.10% at the end of May.
Q. YET THE FUND STILL BEAT THE AVERAGE. WHAT WERE SOME POSITIVES FOR THE
FUND?
A. Fortunately, I had started to shorten the fund's duration - a measure of
the its sensitivity to interest rate moves - in the early fall of 1993. The
shorter the fund's duration, the less sensitive it is to rising interest
rates. I shortened duration by selling some bonds with maturities of 20
years or more and buying bonds with maturities in the 10- to 20-year
maturity range. The yield curve had flattened, which meant the difference
in yield between long- and intermediate bonds had narrowed. At the end of
November, a 30-year AAA-rated municipal bond was yielding only 0.25% more
than a 15-year issue. I didn't think that was a big enough reward for the
added risk of a longer maturity. On May 31, 1994, bonds with maturities
between ten years and 20 years made up 45% of the fund's investments.
Q. WERE THERE ANY PARTICULAR TYPES OF BONDS THAT HELD UP BETTER THAN OTHERS
DURING THE DOWNTURN?
A. Despite the threat of health care reform, some hospital issues performed
surprisingly well during the past six months. That was partly due to a
change in the way hospitals and other facilities are reimbursed for
uncompensated care, which in turn, helped improve the profitability of some
hospitals. Also, our careful research paid off. We targeted those issues
that combine high yields and the potential for credit upgrades. Health care
bonds are the fund's second largest sector concentration at 16% of
investments.
Q. DID YOU CHANGE THE WAY YOU ALLOCATE INVESTMENTS ACROSS OTHER SECTORS?
A. I kept the fund's sector concentrations fairly stable over the past six
months. Transportation bonds still make up the largest sector at 17% of
investments at the end of the period. Most of these were bonds issued by
the New Jersey Highway Authority and the New Jersey Turnpike Authority.
These were bought when there was a heavy supply and so had yields that were
attractive.
Q. YOU'VE CONTINUED TO GENERALLY AVOID STATE GENERAL OBLIGATION BONDS
(GOS), WHICH ARE BACKED BY THE TAXING POWER OF THE ISSUER. WHAT'S YOUR
THINKING?
A. After lagging the national average for four years, New Jersey's economy
is still trying to catch up with other states. Employment growth caught up
with the nation as a whole, but more recently has again fallen behind the
nation. Even though the unemployment rate is dropping, it's still higher
than the national average. What's troubling me most is the state's fiscal
condition. Governor Whitman has recently proposed a reduction in the
state's income tax, which is to be phased in over the next few years. But
it's not clear where the state will cut its budget to help cover these tax
reductions. Until there's a more concrete solution, I'll probably continue
to avoid state GOs.
Q. THERE'S BEEN A LOT OF TALK LATELY ABOUT DERIVATIVES. DO YOU USE THEM?
A. Yes, I use a type of derivative contract known as an inverse floater.
The coupon, or interest payment, of inverse floaters rises when short-term
rates fall, and vice versa. These securities typically are created by
splitting a municipal bond into two parts: a tax-free money market
instrument yielding the prevailing short-term rate and a longer-term
security whose yield moves in the opposite direction when money market
rates change. The latter piece is called an inverse floater. By using
derivatives, I can achieve higher levels of tax-exempt income and increased
flexibility in managing overall sensitivity to changes in interest rates.
Inverse floaters made up less than 3% of the fund's total investments
throughout the period.
Q. DO YOU THINK THE WORST IS OVER FOR MUNICIPAL BONDS?
A. I believe so, but I also expect a fair amount of volatility over the
short term. Yet there are some positives working in municipal bonds' favor.
The municipal market is very dependent on supply and demand. With interest
rates higher, the supply of New Jersey bonds is expected to be less this
year than it was in 1993. And I continue to believe that demand for
municipal bonds will increase over the next year or so, once the market
settles down and individual investors feel more confident about municipals.
If demand increases and supply is lower, bond prices could rise.
FUND FACTS
GOAL: to provide high current
income exempt from New
Jersey state and federal
income taxes
START DATE: January 1, 1988
SIZE: as of May 31, 1994,
over $370 million
MANAGER: David Murphy,
since April 1991; manager,
Fidelity Limited Term
Municipals, since December,
1989; Spartan California
Intermediate Municipal
Portfolio, since December
1993; Spartan Intermediate
Municipal Fund, since May
1993; Spartan New York
Intermediate Municipal
Portfolio, since December
1993; Spartan
Short-Intermediate Municipal
Fund, since December 1989;
joined Fidelity in 1989
(checkmark)
DAVID MURPHY ON
INTERMEDIATE BONDS:
"Intermediate bonds in the
15-year range are very
attractive right now. The yield
curve - or
the difference in yield
between bonds with various
maturities -
is very steep - up to 15
years. A 15-year AAA New
Jersey bond pays about
5.75% yield, compared to a
five year bond which pays
only 4.75%. But in the 15- to
30-year range, the curve
starts to flatten. In that longer
range, you only get rewarded
with about one-quarter of a
percent in incremental yield."
(bullet) On May 31, 1993,
transportation bonds were
17.3% of the fund, down
slightly from 19.4% six
months ago, but still the
fund's largest sector
concentration.
(bullet) Because of new federal
taxes, New Jersey joint filers
in the 36% federal tax bracket
have an effective rate - state
and federal
taxes combined - of 40.26%.
Those in the 39.6% federal
tax bracket now pay a total of
43.62% of their income in
taxes.
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF MAY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Transportation 17.3 19.4
Health Care 15.6 14.8
General Obligation 15.4 14.9
Industrial Development 11.1 9.9
Escrowed/Prerefunded 9.4 8.7
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1994
6 MONTHS AGO
Years 17.6 19.4
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE
BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF MAY 31, 1994
6 MONTHS AGO
Years 8.3 8.4
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A
FIVE-YEAR DURATION WILL FALL 5%.
QUALITY DIVERSIFICATION AS OF MAY 31, 1994
(MOODY'S RATINGS)
Aaa 25.2%
Aa, A 51.4%
Baa 12.9%
Ba, B 0.2%
Non-rated 7.4%
Row: 1, Col: 1, Value: 25.2
Row: 1, Col: 2, Value: 51.4
Row: 1, Col: 3, Value: 12.9
Row: 1, Col: 4, Value: 2.0
Row: 1, Col: 5, Value: 7.4
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS MAY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 97.1%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (NOTE 1)
NEW JERSEY - 84.5%
Atlantic County Ctfs. of Prtn. (Pub. Facs. Lease
Agreement) (FGIC Insured):
7.40% 3/1/07 Aaa $ 3,035,000 $ 3,478,869
7.40% 3/1/08 Aaa 3,260,000 3,728,625
Atlantic County Impt. Auth. Luxury Tax Rev.
(Convention Ctr.) (MBIA Insured):
7.375% 7/1/10 Aaa 1,000,000 1,153,750
7.40% 7/1/16 Aaa 3,510,000 4,054,050
Bergen County Util. Auth. Wtr. Poll. Cont. Rev.
Series B, 5.75% 12/15/05,
(FGIC Insured) Aaa 1,870,000 1,919,088
Burlington County Bridge Commission Bridge
System Rev., 5.30% 10/1/13 Aa 1,500,000 1,376,250
Camden County Muni. Util. Auth. Swr. Rev.
(FGIC Insured):
(Cap. Appreciation) Series A:
0% 9/1/11 Aaa 3,500,000 1,238,125
0% 9/1/17 Aaa 9,930,000 2,395,613
0% 9/1/18 Aaa 1,375,000 311,094
Series A, 0% 9/1/16 Aaa 5,000,000 1,281,250
Series B, 0% 9/1/16 Aaa 16,300,000 4,176,875
Camden Gen. Oblig. Fiscal Adjustment
0% 2/15/07, (FSA Insured) Aaa 4,000,000 1,875,000
Cape May County Ind. Poll. Cont. Fing. Auth.
Rev. Rfdg. (Atlantic City Elec. Co.)
Series A, 6.80% 3/1/21, (MBIA Insured) Aaa 2,550,000 2,779,500
Edison Township School Unltd. Tax
6.50% 6/1/11 A1 1,000,000 1,067,500
Essex County Impt. Auth. Rev.
(East Orange School Dist.) Series A:
5.60% 11/1/05 A 1,250,000 1,232,813
5.70% 11/1/06 A 1,600,000 1,576,000
5.80% 11/1/07 A 1,000,000 985,000
Gloucester County Impt. Auth. Solid Waste
Resources Recovery Rev. (SES Gloucester Co.
LP Proj.) Series A, 8.125% 7/1/10,
LOC Fuji Bank Aa3 1,175,000 1,264,594
Hudson County Gen. Oblig. 5.125% 8/1/08 A+ 3,000,000 2,763,750
Hudson County Impt. Auth.
(Essential Purp. Pooled Gov't. Loan Prog.):
6.625% 8/1/25 A+ 4,000,000 4,180,000
7.60% 8/1/25 A 5,275,000 5,795,906
Jersey City Series B, (FSA Insured):
0% 5/15/07 Aaa 4,740,000 2,192,250
0% 5/15/11 Aaa 3,500,000 1,203,125
Jersey City Swr. Auth. Rev., Rfdg. 6% 1/1/09
(AMBAC Insured) Aaa 1,000,000 1,008,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
Keansburg Board of Ed. Ctfs. of Prtn.
8% 11/1/14 (Pre-Refunded to
11/1/99 @ 102)(g) BBB- $ 1,500,000 $ 1,708,125
Lacey Muni. Util. Auth. Wtr. Rev. Rfdg.
(Cap. Appreciation) Series A (MBIA Insured):
0% 12/1/08 Aaa 1,400,000 595,000
0% 12/1/09 Aaa 1,400,000 554,750
0% 12/1/10 Aaa 1,400,000 518,000
Lenape Regional High School Dist. Unltd. Tax
(MBIA Insured):
7.625% 1/1/13 Aaa 675,000 799,031
7.625% 1/1/14 Aaa 1,000,000 1,182,500
Mercer County Impt. Auth. Rev. Rfdg.
(Cap. Appreciation Solid Waste County
Guaranteed):
0% 4/1/08 Aa1 6,000,000 2,602,500
0% 4/1/09 Aa1 11,655,000 4,809,369
0% 4/1/10 Aa1 3,000,000 1,162,500
0% 4/1/11 Aa1 3,500,000 1,277,500
0% 4/1/12 Aa1 7,000,000 2,380,000
0% 4/1/13 Aa1 7,000,000 2,240,000
Mercer County Impt. Rev. Regional Sludge
Proj. 5.20% 12/15/09
(FGIC Insured) Aaa 1,540,000 1,430,275
Middlesex County Poll. Cont. Auth. Rev. Rfdg.
(Fing. Poll.) (Amerada Hess Corp.):
7.875% 6/1/22 (c) Aaa 7,750,000 7,905,000
6.875% 12/1/22 - 5,000,000 5,162,500
Middlesex County Util. Auth. Solid Waste Sys.
Rev. 5% 12/1/94, (FGIC Insured) Aaa 3,000,000 3,026,250
Monmouth County Impt. Auth. Wastewtr.
Treatment Facs. Rev. (Asbury Park Proj.)
7.375% 12/1/09 Baa 1,000,000 1,063,750
New Jersey Bldg. Auth. Bldg. Rev.
7.50% 6/15/09 Aa 1,700,000 1,906,125
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.:
Rfdg. (Holt Hauling & Warehouse)
8.60% 12/15/17 (b) - 9,000,000 9,090,000
Rfdg. (Stolt Term. Proj.) 10.50% 1/15/18 - 2,500,000 2,868,750
(777 Pattison Ave., Inc.) 8.95% 12/15/18 - 6,140,000 6,163,025
(Weyerhauser Co. Proj.) 9% 11/1/04 A2 2,000,000 2,472,500
New Jersey Econ. Dev. Auth. 1st Mtg. Gross
Rev. (Franciscan Oaks Proj.)
Series A, 8.50% 10/1/23 - 4,250,000 4,414,688
New Jersey Econ. Dev. Auth. Poll. Cont. Rev.
(Central Pwr. & Lt.) 7.10% 7/1/15 A2 1,415,000 1,496,363
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Edl. Facs. Fing. Auth. Rev.:
Rfdg. (Trenton State College)
Series E, 6% 7/1/09, (AMBAC Insured) Aaa $ 2,000,000 $ 2,025,000
(Ramapo College) Series B, 7.70% 7/1/13
(Pre-Refunded to 7/1/98 @ 102)(g) A 1,000,000 1,118,750
(Union Commty. College)
Series B, 7.25% 7/1/09 A 1,000,000 1,077,500
New Jersey Gen. Oblig. Rfdg. Series D:
(Cap. Appreciation) 0% 2/15/04 Aa1 5,335,000 3,120,975
Unltd. Tax 0% 2/15/06 Aa1 6,445,000 3,319,175
Series D, 6% 2/15/11 Aa1 3,500,000 3,561,250
New Jersey Health Care Facs. Fing. Auth. Rev.:
Rfdg. (Atlantic City Med. Ctr.)
Series C, 6.80% 7/1/11 A 4,200,000 4,341,750
(Barnert Mem. Hosp.) 10.625% 8/1/14,
(FHA Guaranteed) Aa 5,090,000 5,242,700
(Bridgeton Hosp. & Millville Hosp.)
Series 1988 A, 7.875% 7/1/10,
(MBIA Insured) Aaa 1,250,000 1,387,500
(Burdette Tomlin Mem. Hosp.) Series D
(FGIC Insured):
6% 7/1/02 Aaa 1,715,000 1,787,888
6.25% 7/1/06 Aaa 1,710,000 1,776,263
(Cathedral Health) Series A, 7.25%
2/15/21, (FHA Guaranteed) Aa 3,130,000 3,313,888
(East Orange Gen. Hosp.) Series B,
7.75% 7/1/20 BBB+ 2,450,000 2,621,500
(Elizabeth Gen. Med. Ctr.) Series C:
7.10% 7/1/99 Baa1 1,125,000 1,168,594
7.25% 7/1/06 Baa1 1,975,000 2,049,063
(Helene Fuld Med. Ctr.) Series C,
8.125% 7/1/13 A 1,000,000 1,092,500
(Holy Name Hosp.) Series A, 6.875%
7/1/2004 Aaa 1,960,000 2,067,800
(Jersey Shore Med. Ctr.) Series B, 8%
7/1/18, (AMBAC Insured) Aaa 1,905,000 2,131,219
(Kennedy Mem. Hosp.-Univ. Med. Ctr.)
Series D, 7.875% 7/1/09 A 3,000,000 3,213,750
(Kimball Med. Ctr.) Issue C, 8% 7/1/13 Baa 2,900,000 3,066,750
(Lady of Lourdes Med. Ctr.) Series B,
9.75% 2/1/15, (FHA Guaranteed) Aa 170,000 179,988
(Millville Hosp.) Series A, 10.625%
8/1/14, (FHA Guaranteed)
(Pre-Refunded to 8/1/94 @ 102)(g) A- 145,000 149,350
(Mountainside Hosp.) Series A, 9% 8/1/25,
(FHA Guaranteed)
(Pre-Refunded to 8/1/95 @ 102)(g) Aa 3,165,000 3,398,419
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Health Care Facs. Fing. Auth. Rev. - continued
(Muhlenberg Regional Med. Ctr.) Series B,
8% 7/1/18, (AMBAC Insured) Aaa $ 2,000,000 $ 2,237,500
(Newcombe Med. Ctr.) Series A,
7.875% 7/1/03 Baa 3,950,000 4,285,750
(Pascack Valley Hosp.) Series 1991,
6.70% 7/1/11 A- 5,500,000 5,527,500
(St. Elizabeth Hosp.) Series B, 8.25%
7/1/20 Baa 8,500,000 9,063,125
(St. Francis Hosp.-Franciscan Sisters)
9.25% 7/1/12 Baa 500,000 530,000
(St. Peters Med. Ctr.) Series F, 4.70%
7/1/06 (MBIA Insured) Aaa 2,000,000 1,790,000
(Wayne Gen. Hosp.) Series A, 10.75%
8/1/24, (FHA Guaranteed) Aa 250,000 258,128
New Jersey Hwy. Auth. Garden Pkwy. Gen. Rev.
(Sr. Pkwy):
6.10% 1/1/06 A1 2,750,000 2,829,063
6.20% 1/1/10 A1 20,000,000 20,550,000
5.75% 1/1/19 A1 3,000,000 2,861,250
6% 1/1/19, (Escrowed to Maturity) (g) Aaa 4,485,000 4,563,488
New Jersey Hsg. Fin. Agcy.
(Gen. Resolution Section 8) Series A:
6.90% 11/1/07 AA+ 2,670,000 2,790,150
6.95% 11/1/08 AA+ 2,265,000 2,366,925
7% 11/1/09 AA+ 2,855,000 2,983,475
7.05% 11/1/10 AA+ 3,500,000 3,661,875
7.10% 11/1/11 AA+ 3,000,000 3,150,000
New Jersey Hsg. & Mtg. Fin. Agcy.
(Home Buyer) Series B, 7.90% 10/1/22,
(MBIA Insured)(b) Aaa 1,875,000 1,975,781
New Jersey Hsg. & Mtg. Fin. Custodial
Receipts Secondary Series 1, 9.088%
11/1/07 INFL (e) A+ 5,000,000 5,181,250
New Jersey Tpk. Auth. Tpk. Rev. Rfdg.:
10.375% 1/1/03
(Escrowed to Maturity) (b)(g) AAA 10,475,000 12,714,031
Series C, 6.50% 1/1/09 A 6,700,000 7,127,125
Series C, 6.50% 1/1/16 A 6,000,000 6,285,000
New Jersey Univ. (Medicine & Dentistry)
Series C, 7.20% 12/1/19 A 3,500,000 3,823,750
New Jersey Wastewtr. Treatment Trust Loan Rev.:
6.875% 6/15/06 Aa 1,320,000 1,419,000
6.875% 6/15/09 Aa 2,500,000 2,653,125
7% 6/15/10 Aa 1,750,000 1,868,125
Ocean County Utils. Auth. Wastewtr. Rev.
Rfdg. Series B, 5.75% 1/1/18 Aa 2,605,000 2,491,031
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (NOTE 1)
NEW JERSEY - CONTINUED
Pennsauken Township Board of Ed. Ctfs. of
Prtn. 7.75% 7/15/09, (MBIA Insured) Aaa $ 500,000 $ 561,250
Sayreville Hsg. Dev. Corp. Mtg. Rev. Rfdg.
(Lakeview) Section 8, 7.75% 8/1/24,
(FHA Guaranteed) AAA 2,500,000 2,593,750
Stony Brook Regional Swr. Auth. Rev.
Series A, 7.40% 12/1/09 Aa 1,000,000 1,123,750
Union County Util. Auth. Solid Waste Rev.:
Series A:
6.95% 6/15/03 (b)(f) A- 9,000,000 9,360,000
7% 6/15/04 (b) A- 7,200,000 7,515,000
7.15% 6/15/09 A- 2,040,000 2,098,650
Wanaque Valley Reg'l. Swr. Auth. Rfdg.
Series B, 5.75% 9/1/18,
(AMBAC Insured) Aaa 2,000,000 1,937,500
West New York Muni. Util. Auth. Swr. Rev.
Rfdg. (Cap. Appreciation) 0% 12/15/19,
(FGIC Insured) Aaa 6,395,000 1,342,950
Woodbridge Twp. Swr. Util. Rfdg. Series B,
4.45% 9/15/03 A1 1,000,000 928,750
315,525,897
NEW YORK & NEW JERSEY - 4.5%
New York & New Jersey Port Auth.:
Consolidated 59th Series,
7.75% 1/15/23 (b) A1 1,000,000 1,036,250
Consolidated 85th Series,
5.375% 3/1/28 A1 9,000,000 8,032,500
Consolidated 87th Series,
5.25% 7/15/17 A1 2,000,000 1,772,500
Series 77th, 6.25% 1/15/27 A1 5,000,000 4,968,750
New York & New Jersey Port Auth. Spl. Oblig.
Rev. (Continental Airlines Corp./Eastern
Airlines, Inc. Proj.) 9.125%
12/1/15 (b) B2 700,000 794,500
16,604,500
PUERTO RICO - 8.1%
Puerto Rico Commonwealth Hwy. Auth. Hwy.
Rev. Series Q, 6% 7/1/20 Baa1 4,000,000 3,840,000
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Rfdg.
7.875% 10/1/04 Baa1 5,235,000 5,843,569
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series M, 8% 7/1/08 Baa1 1,300,000 1,473,875
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (NOTE 1)
PUERTO RICO - CONTINUED
Puerto Rico Hsg. Fin. Corp. Rev.
(Multi-Family Mtg. Portfolio A)
Series I, 7.50% 4/1/22, LOC Puerto Rico
Gov't. Dev. Bank AA $ 3,230,000 $ 3,403,613
Puerto Rico Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 Baa1 2,255,000 2,457,950
Puerto Rico Pub. Bldgs. Auth. Rev. Rfdg.
Series L, 5.50% 7/1/21 (f) Baa1 10,000,000 8,975,000
Puerto Rico Tel. Auth. Rev. 7.16% 1/1/03,
(AMBAC Insured) INFL (e) Aaa 5,000,000 4,387,492
30,381,499
TOTAL MUNICIPAL BONDS
(Cost $351,311,521) 362,511,896
MUNICIPAL NOTES (A) - 2.9%
NEW JERSEY - 2.9%
New Jersey Econ. Dev. Auth. Ind. & Econ. Dev.
(Casa DiBertacchi Corp. Facs.)
Series 1988, 2.65%, LOC Marine Midland
Bank, VRDN (b) A-2 3,000,000 3,000,000
New Jersey Econ. Dev. Auth. Rev.
(Danic Urban Renewal Co. Proj.)
Series 1985, 3.20%, LOC Marine Midland
Bank, VRDN P-2 4,000,000 4,000,000
New Jersey Tpk. Auth. Tpk. Rev.
Series 1991 D, 2.20%, (FGIC Insured)
(BPA Societe Generale), VRDN VMIG 1 3,800,000 3,800,000
TOTAL MUNICIPAL NOTES
(Cost $10,800,000) 10,800,000
TOTAL INVESTMENTS - 100%
(Cost $362,111,521) $ 373,311,896
FUTURES CONTRACTS
AMOUNT IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
40 Municipal Bond Index Contracts June 1994 $ 3,657,500 $ 886
THE VALUE OF FUTURES CONTRACTS PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 1.0%
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c) Security purchased on a delayed delivery basis. (see Note 2 of Notes
to Financial Statements).
(d) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(e) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
(f) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $10,870,000.
(g) Security collateralized by an amount sufficient to pay interest and
principal.
INCOME TAX INFORMATION
At May 31, 1994 the aggregate cost of investment securities for income tax
purposes was $362,111,521. Net unrealized appreciation aggregated
$11,200,375, of which $15,837,764 related to appreciated investment
securities and $4,637,389 related to depreciated investment securities.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 59.3% AAA, AA, A 73.7%
Baa 11.7% BBB 9.0%
Ba 0.2% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 7.4%. FMR
has determined that unrated debt securities that are lower quality account
for 6.0% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Transportation 17.3%
Health Care 15.6
General Obligation 15.4
Industrial Development 11.1
Others
(individually less than 10%) 40.6
TOTAL 100.0%
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1994 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $362,111,521) 5. $ 373,311,896
(Notes 1 and 2) - See accompanying schedule
6.Cash 7. 14,261
8.Interest receivable 9. 7,920,904
10.Redemption fees receivable (Note 1) 11. 25
12. 13.TOTAL ASSETS 14. 381,247,086
15.LIABILITIES 16. 17.
18.Payable for investments purchased $ 2,902,465 19.
Regular delivery
20. Delayed delivery (Note 2) 7,684,358 21.
22.Payable for fund shares redeemed 99,547 23.
24.Dividends payable 342,153 25.
26.Accrued management fee 171,719 27.
28.Payable for daily variation on futures contracts 15,000 29.
30. 31.TOTAL LIABILITIES 32. 11,215,242
33.34.NET ASSETS 35. $ 370,031,844
36.Net Assets consist of (Note 1): 37. 38.
39.Paid in capital 40. $ 360,799,605
41.Accumulated undistributed net realized gain (loss) on 42. (1,969,022)
investments
43.Net unrealized appreciation (depreciation) on: 44. 45.
46. Investment securities 47. 11,200,375
48. Futures contracts 49. 886
50.51.NET ASSETS, for 33,680,982 shares outstanding 52. $ 370,031,844
53.54.NET ASSET VALUE, offering price and redemption 55. $10.99
price per share ($370,031,844 (divided by) 33,680,982 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1994 (UNAUDITED)
56.INVESTMENT INCOME 58. $ 12,287,189
57.Interest
59.EXPENSES 60. 61.
62.Management fee (Note 4) $ 1,104,485 63.
64.Non-interested trustees' compensation 1,341 65.
66. 67.TOTAL EXPENSES 68. 1,105,826
69.70.NET INVESTMENT INCOME 71. 11,181,363
72.REALIZED AND UNREALIZED GAIN (LOSS) ON 74. 75.
INVESTMENTS
(NOTES 1)
73.Net realized gain (loss) on:
76. Investment securities (1,476,166) 77.
78. Futures contracts 251,436 (1,224,730)
79.Change in net unrealized appreciation (depreciation) 80. 81.
on:
82. Investment securities (21,249,523) 83.
84. Futures contracts 886 (21,248,637)
85.86.NET GAIN (LOSS) 87. (22,473,367)
88.89.NET INCREASE (DECREASE) IN NET ASSETS 90. $ (11,292,004)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
MAY 31, 1994 NOVEMBER 30,
(UNAUDITED) 1993
91.INCREASE (DECREASE) IN NET ASSETS
92.Operations $ 11,181,363 $ 22,029,087
Net investment income
93. Net realized gain (loss) on investments (1,224,730) 5,409,129
94. Change in net unrealized appreciation (depreciation) (21,248,637) 16,830,884
on investments
95. 96.NET INCREASE (DECREASE) IN NET ASSETS (11,292,004) 44,269,100
RESULTING FROM OPERATIONS
97.Distributions to shareholders (11,181,363) (22,029,087)
From net investment income
98. From net realized gain (5,384,226) (4,879,335)
99. 100.TOTAL DISTRIBUTIONS (16,565,589) (26,908,422)
101.Share transactions 34,300,669 117,264,900
Net proceeds from sales of shares
102. Reinvestment of distributions 13,695,850 22,285,985
103. Cost of shares redeemed (72,656,367) (77,178,149)
104. Redemption fees (Notes 1) 30,200 52,148
105. (24,629,648) 62,424,884
Net increase (decrease) in net assets resulting from
share transactions
106. (52,487,241) 79,785,562
107.TOTAL INCREASE (DECREASE) IN NET ASSETS
108.NET ASSETS 109. 110.
111. Beginning of period 422,519,085 342,733,523
112. End of period $ 370,031,844 $ 422,519,085
113.OTHER INFORMATION 115. 116.
114.Shares
117. Sold 2,993,018 10,139,177
118. Issued in reinvestment of distributions 1,194,395 1,932,128
119. Redeemed (6,434,335) (6,628,468)
120. Net increase (decrease) (2,246,922) 5,442,837
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
121. SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1994
122. (UNAUDITED) 1993 1992 1991 1990 1989
123.SELECTED PER-SHARE DATA
124.Net asset value, beginning of period $ 11.760 $ 11.240 $ 11.020 $ 10.620 $ 10.650 $ 10.190
125.Income from Investment Operations .319 .640 .694 .694 .674 .710
Net investment income
126. Net realized and unrealized gain
(loss) on investments (.621) .678 .298 .398 .050 .460
127. Total from investment operations (.302) 1.318 .992 1.092 .724 1.170
128.Less Distributions (.319) (.640) (.694) (.694) (.674) (.710)
From net investment income
129. From net realized gain on investments (.150) (.160) (.080) - (.080) -
130. Total distributions (.469) (.800) (.774) (.694) (.754) (.710)
131.Redemption fees added to paid in capital .001 .002 .002 .002 - -
132.Net asset value, end of period $ 10.990 $ 11.760 $ 11.240 $ 11.020 $ 10.620 $ 10.650
133.TOTAL RETURN (dagger) -2.65% 12.12% 9.33% 10.63% 7.15% 11.82%
134.RATIOS AND SUPPLEMENTAL DATA
135.Net assets, end of period (000 omitted) $ 370,032 $ 422,519 $ 342,734 $ 289,792 $ 209,658 $ 158,655
136.Ratio of expenses to average net assets .55%* .55% .51% .52% .65% .56%
137.Ratio of expenses to average net
assets before expense .55%* .55% .56% .64% .68% .82%
reductions
138.Ratio of net investment income to
average net assets 5.56%* 5.52% 6.22% 6.44% 6.47% 6.76%
139.Portfolio turnover rate 6%* 25% 33% 42% 82% 90%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS
SHOWN.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan New Jersey High Yield Portfolio (the fund) is a fund of Fidelity
Court Street Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which quotations are not readily available through the
pricing service are valued at their fair value as determined in good faith
under consistently applied procedures under the general supervision of the
Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
losses deferred due to wash sales and futures and options transactions.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to .50% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
accordance with income tax regulations. Accordingly, amounts as of November
30, 1993 have been restated to reflect an increase in paid in capital and
a decrease in accumulated net realized gain on investments of $510,154.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
may receive compensation for interest forgone in a delayed delivery
transaction. The fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the purchase
commitment.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures contracts and
write options. These investments involve to varying degrees, elements of
market risk and risks in excess of the amount recognized in the Statement
of Assets and Liabilities. The face or contract amounts reflect the extent
of the involvement the fund has in the particular classes of instruments.
Risks may be caused by an imperfect correlation between movements in the
price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary
market for the instruments, or due to the inability of counterparties to
perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $12,739,090 and $44,706,208 respectively.
The gross market value of futures contracts opened and closed amounted to
$42,512,707 and $38,986,377, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .55% of the fund's average net
assets.
FMR also bears the cost of providing shareholder services to the fund. For
the period, FMR or its affiliates collected certain transaction fees from
shareholders which aggregated $5,685.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
David Murphy, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(registered trademark) Aggressive Tax-Free
Spartan California Municipal High Yield
Spartan Connecticut Municipal High Yield
Spartan Florida Municipal Income
Spartan Intermediate Municipal
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal High Yield
Spartan New York Municipal High Yield
Spartan Pennsylvania Municipal High Yield
Spartan Short-Intermediate Municipal
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
