(2_FIDELITY_LOGOS)SPARTAN(Registered trademark)
GINNIE MAE
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
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 last six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 14 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 18 Footnotes 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:
No one wants to pay more taxes than they have to. But a recent survey of
500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed
that few people took steps to reduce their taxes under the new tax laws
that went into effect last year. In fact, many people were not completely
aware of the changes until they filed their 1993 tax returns.
Whether or not you're someone whose tax bill increased as a result of these
changes, it may make sense to consider ways to keep more of what you earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider tax-free investments like municipal bonds and municipal
bond funds. Often these can provide higher after-tax yields than comparable
taxable investments. For example, if you're in the new 36% federal income
tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll
pay $252 in federal taxes and receive $448 in income. That same $10,000
invested in a tax-free bond fund yielding 5.5% would allow you to keep $550
in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center. We look forward to
talking with you.
Best regards,
Edward C. Johnson 3d, Chairman
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, the fund's one year and life of fund figures would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1994 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Ginnie Mae 0.86% 4.26% 29.39%
Salomon Brothers GNMA
Pass-through Index 1.29% 4.72% n/a
Average GNMA Fund 0.32% 3.78% n/a
Consumer Price Index 1.31% 2.52% 9.64%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year or since the fund
started on December 27, 1990. 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 Salomon Brothers GNMA
Pass-through Index - a broad measure of the GNMA market. To measure how the
fund stacked up against its peers, you can look at the average GNMA fund,
which reflects the performance of 49 GNMA 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 FEBRUARY 28, 1994 PAST 1 LIFE OF
YEAR FUND
Spartan Ginnie Mae 4.26% 8.45%
Salomon Brothers GNMA Pass-through Index 4.72% n/a
Average GNMA Fund 3.78% n/a
Consumer Price Index 2.52% 2.95%
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 Ginnie Mae Fund (461) SB PASSTHROUGH GNMA (SB19)
12/31/90 10000.00 10000.00
01/31/91 10104.29 10141.00
02/28/91 10164.55 10200.83
03/31/91 10239.68 10279.38
04/30/91 10302.27 10387.31
05/31/91 10368.06 10469.37
06/30/91 10380.53 10491.36
07/31/91 10535.23 10669.71
08/31/91 10732.58 10862.83
09/30/91 10902.34 11065.97
10/31/91 11063.73 11231.96
11/30/91 11129.01 11304.96
12/31/91 11378.64 11587.59
01/31/92 11291.23 11457.81
02/29/92 11443.23 11563.22
03/31/92 11373.38 11522.75
04/30/92 11467.56 11621.84
05/31/92 11671.06 11826.39
06/30/92 11808.40 11988.41
07/31/92 11791.77 12079.52
08/31/92 11898.54 12246.22
09/30/92 11982.19 12344.19
10/31/92 11900.61 12259.01
11/30/92 11955.80 12325.21
12/31/92 12118.74 12466.95
01/31/93 12269.42 12641.49
02/28/93 12386.01 12752.73
03/31/93 12468.41 12835.63
04/30/93 12522.25 12901.09
05/31/93 12592.40 12973.34
06/30/93 12720.23 13104.37
07/31/93 12787.95 13156.78
08/31/93 12803.67 13183.10
09/30/93 12802.51 13192.33
10/31/93 12850.68 13222.67
11/30/93 12777.53 13204.16
12/31/93 12881.97 13304.51
01/31/94 13025.35 13418.93
02/28/94 12915.75 13354.52
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Ginnie Mae Fund on December 31, 1990, shortly after the fund started. As
the chart shows, by February 28, 1994, the value of your investment would
have grown to $12,916 - a 29.16% increase on your initial investment. This
assumes you still own the fund on February 28, 1994 and therefore does not
include the effect of the $5 account closeout fee. For comparison, look at
how the Salomon Brothers GNMA Pass-through Index did over the same period.
With dividends reinvested, the same $10,000 would have grown to $13,355 - a
33.55% 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)
INCOME
SIX MONTHS
ENDED
FEBRUARY 28, YEARS ENDED AUGUST 31,
1994 1993 1992
Income return 2.43% 6.51% 8.30%
Capital gain return 0.68% 2.35% 0.20%
Change in share price -2.25% -1.27% 2.35%
Total return 0.86% 7.59% 10.85%
INCOME returns, capital gain returns, and changes in share price are all
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.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1994 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 24.86(cents) 53.93(cents)
Annualized dividend rate n/a 4.94% 5.29%
Annualized yield 5.21% n/a n/a
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 $10.15 over
the past six months and $10.20 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.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Robert Ives,
Portfolio Manager of Spartan
Ginnie Mae Fund
Q. BOB, HOW DID THE FUND PERFORM?
A. The fund had a total return of .86% for the six months ended February
28, 1994. That topped the total return for the average GNMA fund tracked by
Lipper Analytical Services during the same period, which was .32%. However,
the fund trailed the Salomon Brothers Pass-through GNMA index, which
returned 1.29%. For the 12 months ended February 28, the fund returned
4.26%. That again beat the average fund's 3.78% return. The Salomon index
returned 4.72% for the year.
Q. ALTHOUGH THE FUND BEAT THE AVERAGE, ITS RETURNS WERE LOW COMPARED TO
THOSE IN RECENT YEARS. WHAT HAPPENED?
A. It's been a rough few months for bond investors. A long decline in
interest rates had pushed bond prices higher through September. But the
market changed in late fall. Fueled by inflation fears, interest rates
moved higher in late October and into November, causing bond prices to
fall. Rates moved within a narrow range in December and January. Then, on
February 4, the Federal Reserve inched up the federal funds rate - the rate
banks charge each other for overnight loans - from 3.00% to 3.25%, which
had the effect of pushing all interest rates higher.
Q. HOW DID THE FED'S MOVE AFFECT THE FUND?
A. The Fed rate-hike was a sort of preemptive strike against the threat of
higher inflation. The economy was heating up, and the Fed appeared
determined to keep inflation in check. However, the move still worried bond
investors, who hate any mention of inflation because inflation erodes the
value of their bonds' interest income, which is at fixed rates. Bond prices
reeled in February, which hurt the performance of all bond funds. There is
a silver lining, though, for mortgage investors. Slowly rising interest
rates have finally meant a slow down in mortgage prepayments, which have
had a negative effect on the fund's total return.
Q. WHAT IS THE LATEST ON MORTGAGE
REFINANCINGS?
A. When homeowners refinance their existing mortgages, as millions did when
interest rates fell in 1993, they pay off their old mortgages before the
due dates. These prepayments mean investors lose the higher paying interest
rates on the mortgages that are paid off early. In their place, investors
have to buy newer mortgage bonds with lower rates. That's what happened
last year, as refinancings took place at a rapid pace until January. When
investors buy GNMAs, the prepayment risk - or risk that a mortgage security
will be paid off early - is usually factored into the price of the bond. So
prepayments are, in effect, only damaging when they happen more quickly, or
in some cases more slowly, than the investor expected.
Q. WERE YOU ABLE TO LIMIT THE HARMFUL EFFECTS OF THE PREPAYMENTS?
A. Yes. First, I looked to avoid bonds with the highest prepayment risk -
such as GNMAs that are a few years old, with 8.5% coupons (the interest
rate received by the investor). When rates on 30-year mortgages fell to 7%
and below in the fall, homeowners rushed to refinance. That caused a high
percentage of these bonds to prepay quickly.
Q. WHAT ELSE DID YOU DO?
A. I moved a larger percentage of the fund's investments into brand new
mortgage bonds, those with coupons lower than 8%. On February 28, 34.4% of
the fund's investments were in these bonds, up from 20.2% six months ago.
Generally, these bonds were much less susceptible to prepayments because
the mortgages were so new. Homeowners had just obtained them, either by
buying new homes or refinancing. They offered the fund a steady stream of
dependable income.
Q. DID YOU MAKE ANY OTHER STRUCTURAL CHANGES TO THE FUND?
A. Over the past six months, I reduced the fund's stake in mortgage bonds
with coupons of 9 to 9.99% from 36.1% to 21.3%. For those I did buy, I used
our computer model here at Fidelity to search out the bonds that had the
best chance of prepaying more slowly than the market expected. In other
words, more slowly than the expectations already factored into the bond's
price.
Q. WHAT ABOUT BONDS WITH COUPONS OF 10% OR ABOVE, 19.8% OF THE FUND ON
FEBRUARY 28?
A. Many of these are older bonds, and the thinking is, if the homeowner
hasn't refinanced by now, he or she probably won't. In some cases, it's
because there's only a small balance left on the loan, and refinancing
wouldn't make sense. In others, the homeowner may be facing some type of
financial dilemma - possibly the loss of a job or a decline in the home's
value - that makes it more difficult to refinance anytime soon. Many of the
higher yielding issues available were Fannie Maes - 10.1% of the fund on
February 28 - and Freddie Macs - 8.5% of the fund.
Q. HOW ARE THE NEXT SIX MONTHS
SHAPING UP?
A. I think GNMAs face better times ahead. Late last year, after interest
rates had moved back up a little, we saw what I'm hoping was the last major
round of prepayments for a while. In fact, in January, prepayments slowed
for the first time in many months. As for interest rates, I think the Fed
wants to take proactive steps to keep inflation under control, and may move
short-term rates up further in the coming months. That should ultimately be
reassuring because a dramatic rise in rates triggered by unchecked
inflation would hurt the fund. So I believe the signs are good for Ginnie
Mae investors, and I'm optimistic about the next six months.
FUND FACTS
GOAL: to provide high current
income by investing mainly
in GNMA securities
START DATE: December 27, 1990
SIZE: as of February 28,
1994, over $509 million
MANAGER: Robert Ives, since
January 1993; manager,
Fidelity Ginnie Mae Portfolio,
since January 1993; Fidelity
Mortgage Securities Portfolio,
January 1993 - August 1993;
institutional mortgage-backed
funds, since May 1991
(checkmark)
BOB IVES ON INVESTING IN
GNMAS VS. TREASURIES:
"Over the past year and a
half, or so, long-term Treasury
bonds have generally
outperformed their GNMA
counterparts. Interest rates
mostly fell during that time,
which boosted the prices of
Treasuries. For mortgage
bonds, falling interest rates
meant a period of high
prepayments. Sure, the price
of a GNMA goes up if rates
fall, just like a Treasury.
However, if the homeowner
refinances and the mortgage
bond is prepaid, the investor
is forced to take the principal
and reinvest it, most often in a
lower-yielding bond than the
previous one. That's why
Ginnie Maes don't benefit as
much from falling rates as
their Treasury cousins.
However, I think the interest
rate landscape is changing.
As rates have increased, the
performance of GNMAs has
improved relative to
Treasuries, since Ginnie
Maes normally carry higher
yields than Treasuries of
comparable maturities. I
expect this trend to continue
in the coming year."
(bullet) The fund had a 8.5% stake
in 30-year Treasury bonds on
February 28, up from 5.7% at
the end of December. They
were added to the fund in
anticipation that long-term
interest rates have room to
fall a bit further -despite the
recent rise in short-term rates
- - - which would boost the
prices of these bonds.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF FEBRUARY 28, 1994
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
6 - 6.99% 6.5 -
7 - 7.99% 27.9 20.2
8 - 8.99% 23.2 23.6
9 - 9.99% 21.3 36.1
10 - 10.99% 8.3 9.8
11 - 11.99% 8.4 7.0
12 - 12.99% 2.6 2.2
13% and over 0.5 0.5
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1994
6 MONTHS AGO
Years 7.4 5.15
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF FEBRUARY 28, 1994
6 MONTHS AGO
Years 3.9 2.3
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF FEBRUARY 28, 1994* AS OF AUGUST 31, 1993**
Row: 1, Col: 1, Value: 1.3
Row: 1, Col: 2, Value: 2.7
Row: 1, Col: 3, Value: 8.5
Row: 1, Col: 4, Value: 37.5
Row: 1, Col: 5, Value: 50.0
Mortgage-backed
securities 92.8%
U.S. government
and government
agency obligations 1.2%
Collateralized
mortgage obligations
(CMOs) 4.1%
Other 1.9%
Mortgage-backed
securities 87.5%
U.S. government
and government
agency obligations 8.5%
Collateralized
mortgage obligations
(CMOs) 2.7%
Other 1.3%
Row: 1, Col: 1, Value: 1.9
Row: 1, Col: 2, Value: 4.1
Row: 1, Col: 3, Value: 1.2
Row: 1, Col: 4, Value: 42.8
Row: 1, Col: 5, Value: 50.0
* GNMA SECURITIES 71.6%
** GNMA SECURITIES 82.8%
INVESTMENTS FEBRUARY 28, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investments
U.S. TREASURY OBLIGATIONS - 8.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
8 1/8%, 8/15/19 (Cost $47,381,316) $ 40,000,000 $ 46,100,000
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 87.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 6.2%
8 1/2%, 10/1/18/to 2/1/19 45,871 48,079
9%, 7/1/08 to 7/1/21 8,769,826 9,343,876
9 3/4%, 12/1/08 to 4/1/03 947,331 1,012,158
10%, 1/1/09 to 2/1/23 15,059,735 16,408,817
10 1/4%, 8/1/10 to 11/1/16 2,004,601 2,172,487
11 1/4%, 9/1/13 294,574 325,136
11 1/2%, 6/1/19 792,833 881,036
12%, 5/1/10 to 2/1/17 1,207,811 1,368,597
12 1/4%, 11/1/12 to 1/1/14 903,935 1,048,566
13%, 11/1/12 to 11/1/14 497,055 581,557
13 1/2%, 1/1/13 to 12/1/14 255,755 299,394
33,489,703
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.7%
7%, 4/1/09 (a) 25,000,000 25,429,687
9%, 9/1/22 422,983 452,063
10%, 7/1/04 866,658 925,158
10 1/2%, 11/1/05 3,177,830 3,398,277
11%, 8/1/10 to 8/1/20 15,137,917 16,992,317
12%, 3/1/17 1,659,999 1,878,904
12 1/4%, 12/1/14 to 6/1/15 95,399 107,743
12 1/2%, 11/1/13 to 5/1/21 2,227,350 2,539,182
13 1/4%, 9/1/11 823,023 943,391
52,666,722
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 71.6%
6 1/2%, 10/15/23 to 3/15/24 36,546,440 35,552,323
7%, 9/15/22 to 1/15/24 91,602,081 91,729,337
7 1/2%, 7/15/23 to 11/15/23 33,712,922 34,617,864
8%, 7/15/23 to 12/15/23 29,902,599 31,389,954
8%, 3/15/22 to 4/15/23 (b) 30,200,000 31,638,187
8 1/2%, 2/15/16 to 1/15/23 15,770,314 16,780,542
9%, 9/15/01 to 6/15/17 63,697,787 68,621,461
9 1/2%, 3/15/01 to 10/15/20 20,018,311 21,743,079
10%, 11/15/09 to 9/15/19 19,596,835 21,593,231
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - CONTINUED
10 1/2%, 9/15/00 to 8/15/13 $ 354,739 $ 387,533
11%, 12/15/09 to 1/15/16 19,553,415 22,290,976
11 1/2%, 3/15/10 to 12/15/15 4,307,107 4,963,961
12%, 12/15/12 to 5/15/14 1,053,210 1,221,730
12 1/2%, 4/15/10 to 10/15/15 5,070,104 5,932,334
13%, 9/15/13 to 1/15/15 862,728 1,026,654
389,489,166
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE-
BACKED SECURITIES (Cost $478,412,590) 475,645,591
U.S GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 2.7%
FEDERAL HOME MORTGAGE CORPORATION - 2.3%
9 1/2%, 3/15/20 7,000,000 7,665,000
9 1/4%, 7/15/21 4,346,053 4,625,809
12,290,809
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.4%
9 1/2%, 12/15/20 2,024,077 2,246,726
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $14,999,066) 14,537,535
REPURCHASE AGREEMENTS - 1.3%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 3.47% dated
2/28/94 due 3/1/94 $ 7,270,701 7,270,000
TOTAL INVESTMENTS - 100%
(Cost $548,062,972) $ 543,553,126
LEGEND
1. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
2. Security sold on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION
At February 28, 1994, the aggregate cost of investment securities for
income tax purposes was $548,062,972. Net unrealized depreciation
aggregated $4,509,846, of which $1,086,033 related to appreciated
investment securities and $5,595,879 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 543,553,126
agreements of $7,270,000) (cost $548,062,972)
(Notes 1 and 2) - See accompanying schedule
Commitment to sell securities on a delayed delivery $ (31,638,187)
basis
Receivable for securities sold on a delayed delivery 31,630,672 (7,515)
basis (Note 2)
Receivable for investments sold, regular delivery 8,364,678
Cash 43,736
Interest receivable 3,443,136
TOTAL ASSETS 555,397,161
LIABILITIES
Payable for investments purchased 17,851,792
Regular delivery
Delayed delivery (Note 2) 25,526,910
Payable for fund shares redeemed 1,985,550
Dividends payable 525,465
Accrued management fee 260,581
TOTAL LIABILITIES 46,150,298
NET ASSETS $ 509,246,863
Net Assets consist of (Note 1):
Paid in capital $ 515,139,834
Undistributed net investment income 8,262,575
Accumulated undistributed net realized gain (loss) on (9,638,185)
investments
Net unrealized appreciation (depreciation) on:
Investment securities (4,509,846)
Delayed delivery (7,515)
NET ASSETS, for 50,736,843 shares outstanding $ 509,246,863
NET ASSET VALUE, offering price and redemption price per $10.04
share ($509,246,863 (divided by) 50,736,843 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1994 (UNAUDITED)
INVESTMENT INCOME $ 23,753,931
Interest (Note 1)
EXPENSES
Management fee (Note 4) $ 1,916,031
Non-interested trustees' compensation 2,016
TOTAL EXPENSES 1,918,047
NET INVESTMENT INCOME 21,835,884
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (7,699,966)
(NOTES 1, 2 AND 3)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on:
Investment securities (9,262,059)
Delayed delivery commitments (7,515) (9,269,574)
NET GAIN (LOSS) (16,969,540)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 4,866,344
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED FEBRUARY AUGUST 31,
28, 1993
1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,835,884 $ 58,520,758
Net investment income
Net realized gain (loss) on investments (7,699,966) (5,319,289)
Change in net unrealized appreciation (depreciation) (9,269,574) 2,840,732
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,866,344 56,042,201
FROM OPERATIONS
Distributions to shareholders (14,468,222) (48,304,215)
From net investment income
From net realized gain (4,299,781) (19,460,315)
TOTAL DISTRIBUTIONS (18,768,003) (67,764,530)
Share transactions 57,851,112 245,596,540
Net proceeds from sales of shares
Reinvestment of distributions from: 10,804,464 36,041,733
Net investment income
Net realized gain 3,511,363 15,987,874
Cost of shares redeemed (232,922,884) (439,587,780)
Net increase (decrease) in net assets resulting from (160,755,945) (141,961,633)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (174,657,604) (153,683,962)
NET ASSETS
Beginning of period 683,904,467 837,588,429
End of period (including undistributed net investment $ 509,246,863 $ 683,904,467
income of $8,262,575 and $12,642,531,
respectively)
OTHER INFORMATION
Shares
Sold 5,707,130 24,083,307
Issued in reinvestment of distributions from: 1,065,801 3,531,829
Net investment income
Net realized gain 345,850 1,575,160
Redeemed (22,958,803) (43,169,890)
Net increase (decrease) (15,840,022) (13,979,594)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX MONTHS DECEMBER 27,
ENDED 1990
FEBRUARY 28, (COMMENCEMENT
OF
OPERATIONS) TO
1994 YEARS ENDED AUGUST 31, AUGUST 31,
(UNAUDITED) 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.270 $ 10.400 $ 10.160 $ 10.000
of period
Income from Investment .398 .800 .832 .578
Operations
Net investment income
Net realized and (.309) (.050) .236 .154
unrealized gain (loss)
on investments
Total from investment .089 .750 1.068 .732
operations
Less Distributions (.249) (.640) (.808) (.572)
From net investment
income
From net realized gain on (.070) (.240) (.020) -
investments
Total distributions (.319) (.880) (.828) (.572)
Net asset value, end of $ 10.040 $ 10.270 $ 10.400 $ 10.160
period
TOTAL RETURN (dagger) (double dagger) 0.88% 7.61% 10.86% 7.53%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 509,247 $ 683,904 $ 837,588 $ 422,498
(000 omitted)
Ratio of expenses to .65%* .41% .17% .25%*
average net assets
Ratio of expenses to .65%* .65% .65% .65%*
average net assets
before expense
reductions
Ratio of net interest income 7.40%* 7.63% 8.09% 8.69%*
to average net assets
Portfolio turnover rate 294%* 241% 168% 41%*
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(double dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Ginnie Fund (the fund) is a fund of Fidelity Union 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 market
quotations are not readily available 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."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned. Interest income includes $518,047
received for entering into delayed delivery transactions.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Mortgage security paydown gains
(losses) are taxable as ordinary income and, therefore, increase (decrease)
taxable ordinary income available for distribution.
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
mortgage-backed securities. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications 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 September
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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
to shareholders to better disclose the differences between financial
statement amounts and distributions determined in accordance with income
tax regulations. Accordingly, amounts as of August 31, 1993 have been
reclassified to reflect a decrease in paid in capital of $1,263,010, a
decrease in undistributed net investment income of $11,747,618 and a
decrease in accumulated net realized (loss) on investments of $13,010,628.
2. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
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.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $752,393,142 and $892,007,317, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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 .65% 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 $31,048.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
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 AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income Fund
Ginnie Mae Portfolio
Global Bond Fund
Government Securities Fund
Intermediate Bond Fund
Investment Grade Bond Fund
Mortgage Securities Portfolio
New Markets Income Fund
Short-Intermediate Government Fund
Short-Term Bond Portfolio
Short-Term World Income Fund
Spartan Ginnie Mae Fund
Spartan Government Income Fund
Spartan High Income Fund
Spartan Investment Grade Bond Fund
Spartan Limited Maturity Government
Fund
Spartan Long-Term Government Bond
Fund
Spartan Short-Intermediate Government Fund
Spartan Short-Term Bond Fund
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)
AUTOMATED LINES FOR QUICKEST SERVICE
