SPARTAN
(Registered trademark)
(Registered trademark)
MARYLAND
MUNICIPAL INCOME
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1994
CONTENTS
CHECK PAGE NUMBERS !!!
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 past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 16 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 20 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
performance 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 reduced certain fund expenses during the period shown, the total
return, dividends and yield would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1994 PAST 6 LIFE OF
MONTHS FUND
Spartan Maryland Municipal Income .60% 6.12%
Lehman Brothers Municipal Bond Index 1.05% n/a
Average Maryland Tax-Exempt
Municipal Bond .58% n/a
Consumer Price Index 1.31% 1.88%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, six months, or since the fund began on April 22,
1993. 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. Comparing the fund's
performance to the consumer price index helps show how your investment did
compared to inflation. (The consumer price index begins on the month end
closest to the start of the fund.)
AVERAGE ANNUAL TOTAL RETURNS
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. In the fund's next report we'll report these
numbers for the fund and the benchmarks.
$10,000 OVER LIFE OF FUND
Spartan MD Muni Inc Municipal Bond
04/30/93 10000.00 10000.00
05/31/93 10085.91 10056.00
06/30/93 10290.79 10223.94
07/31/93 10265.31 10237.23
08/31/93 10557.39 10450.16
09/30/93 10704.98 10569.29
10/31/93 10689.74 10589.37
11/30/93 10529.06 10496.19
12/31/93 10803.25 10717.66
01/31/94 10954.64 10839.84
02/28/94 10622.39 10559.09
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Maryland Municipal Income Portfolio on April 30, 1993, shortly after the
fund started. As the chart shows, by February 28, 1994, the value of your
investment would have grown to $10,622 -
a 6.22% 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 Lehman Brothers
Municipal Bond Index did over the same period. With dividends reinvested,
the same $10,000 would have grown to $10,559 - a 5.59% 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
APRIL 22, 1993
SIX MONTHS (COMMENCEME
ENDED NT
FEBRUARY 28, OF OPERATIONS) T
1994 O
AUGUST 31,
1993
Income return 2.55% 1.99%
Capital gain return 0.19% 0.00%
Change in share price -2.14% 3.48%
Total return 0.60% 5.47%
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 also include the effect of the $5 account closeout fee.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1994 PAST 30 PAST 6 LIFE OF
DAYS MONTHS FUND
Dividends per share n/a 26.63(cents) 46.01(cents)
Annualized dividend rate n/a 5.18% 5.23%
Annualized yield 5.37% n/a n/a
Tax-equivalent yield 9.22% 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 $10.37 over
the past six months and $10.26 over the life of the fund, 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 41.76%
combined effective 1994 federal and state income tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
Interview with Steven Harvey,
Portfolio Manager of Spartan
Maryland Municipal Income Fund
Q. STEVE, HOW DID THE FUND DO?
A. For the six months ended February 28, 1994, the fund had a total return
of 0.60%. That matched the average Maryland municipal bond fund's return of
0.58% for the same period, according to Lipper Analytical Services.
Q. WHAT MADE THE DIFFERENCE?
A. Having a longer-than-average duration - about nine years at the end of
February - helped. Duration is a measure of interest rate sensitivity and
the longer the duration, the more sensitive the fund is to changes in
interest rates. When interest rates fell - as they generally did during
most of the period - the fund benefited. In hindsight, having a shorter
duration when the Federal Reserve raised interest rates in February would
have helped the fund even more. Even though I don't anticipate a dramatic
rise in interest rates over the next six months,
I've started to shorten the fund's duration to offset some of the bond
market's recent volatility.
Q. HOW DID YOU DO THAT?
A. I sold some of the fund's longest term bonds, or those with maturities
of 25 and 30 years, and used the proceeds to buy bonds in the ten- to
15-year range. Bonds in this intermediate range aren't as sensitive to
interest rate moves as longer-term bonds. I also started to increase the
fund's stake in housing bonds. A bond's total return is based on its price
appreciation - or depreciation - and the income it generates. Bonds that
pay higher income, like housing bonds, would probably suffer some decline
in price if interest rates rose. But their relatively high income would
help boost total return. Housing bonds accounted for about 12% of the
fund's investments on February 28.
Q. IN TERMS OF CREDIT QUALITY, NEARLY HALF OF THE FUND'S INVESTMENTS ARE IN
THE HIGHEST QUALITY AAA BONDS. WHAT'S THE ATTRACTION?
A. Some of the Aaa bonds are multi-family housing units, which are insured
by the Federal Housing Authority (FHA) or Government National Mortgage
Association (Ginnie Mae). That insurance means they carry the highest
rating. There's generally an abundant supply of Aaa-rated bonds in
Maryland. The state is one of five that carries the highest ratings from
Moody's Investors Service and Standard & Poor's.
Q. WHY DID YOU REDUCE THE FUND'S STAKE IN HEALTH-CARE BONDS OVER THE PAST
SIX MONTHS?
A. That was mainly because I wanted to reduce the fund's investments in
longer-term bonds. So I sold some hospital bonds with 30-year maturities.
Still, health care remains the fund's largest industry concentration at
22.9% of investments. I've targeted health-care organizations that I think
are well managed, and could not only survive, but possibly benefit from
health-care reform. Many of the fund's health-care bonds have already
benefited as issuers have aggressively worked to control costs.
Q. WHAT ABOUT THE TRANSPORTATION
SECTOR - AT 21.4% OF INVESTMENTS?
A. Transportation bonds were attractive because a heavy supply made their
prices cheap relative to other sectors. Going forward, I believe that
transportation bonds may become more scarce, which could help drive up
prices. The fund's single largest holding, the Washington, D.C.
Metropolitan Area Transit Authority, falls into this category. That's one
reason why I like them. But there are others.
Q. WHAT ARE THEY?
A. First, the bonds are non-callable, which means they can't be prematurely
redeemed by their issuers. They also have a longer duration because they
trade to their maturity date, rather than a shorter call date. Second, the
bonds are exempt not only from Maryland state taxes, but also from taxes in
Virginia and the District of Columbia. So there's demand for these bonds
outside of Maryland. Finally, the bonds are insured. Metropolitan Area
Transit Authority bonds were 9.7% of the fund's investments on February 28.
Q. NOW THAT THE ECONOMY HAS SHOWN SIGNS OF STRENGTH AND THE FEDERAL RESERVE
HAS RAISED INTEREST RATES, WILL YOUR STRATEGY CHANGE?
A. Not really, because I haven't changed my long-term outlook enough to
radically restructure the fund. Despite the recent decline in bond prices -
caused by stronger-than-expected economic news - I believe that interest
rates won't rise or fall much more over the next 12 months. Even though
economic growth has been strong, it hasn't yet translated into higher
inflation. Many commodity prices are flat, and there seems to be strong
evidence that wages are under control. To me, that signals that rates could
remain at or near their current levels for some time. Over the near term,
however, there could be a period of volatility. One way I'm trying to
offset a potential short-term downturn in municipal bond prices is to sell
interest rate futures contracts. These can help offset the price volatility
of long-term bond prices. That means if long-term bonds decline in price,
the futures contracts appreciate. On the other hand, if bonds rally,
hedging offsets the gains as well.
Q. WHAT'S YOUR OUTLOOK FOR MARYLAND'S ECONOMY?
A. Maryland has recovered a lot more sluggishly than it had coming out of
past recessions. Part of that has to do with the state's dependence on the
defense industry. But there are some positive signs that have come up in
the last two or three years. Retail sales have bounced back and the
employment picture continues to improve.
Q. SO WHAT CAN INVESTORS REALISTICALLY EXPECT?
A. The bond markets could continue to be bumpy over the next several months
because of fears of inflation and concern about the direction of interest
rates. But I believe that by summer, things will start to calm down. It
seems unlikely that the huge drop in interest rates that occurred in 1993
will repeat itself in 1994. What's probably more likely is that the range
of interest rates will be relatively tight. In that kind of market, good
investment returns usually come from selecting the right sector and doing
careful research to identify bonds that have the strongest potential for
improved credit ratings.
FUND FACTS
GOAL: to provide high current
income exempt from federal,
Maryland state and county
income taxes by investing
primarily in long-term,
investment grade Maryland
municipal bonds
START DATE: April 22, 1993
SIZE: as of February 28, 1994,
over $42 million
MANAGER: Steven Harvey,
since April 1993; manager,
Fidelity Minnesota Tax-Free
Portfolio and Spartan
Pennsylvania Municipal
Portfolio, since October, 1993
(checkmark)
STEVEN HARVEY'S OUTLOOK FOR
THE MARYLAND ECONOMY:
"Maryland's fiscal picture has
started to improve. Currently
the governor and the
legislature are debating
whether they should
discontinue the additional one
percent income tax enacted in
1992. This tax is scheduled to
expire in 1995, and that
appears to be what's going to
occur. That's good news
because it means that the state
budget is under control.
Maryland counties' tax rates,
which have been rising, will
probably remain at that higher
level. The added revenue
generated from these taxes
has helped out the local fiscal
situation. On the economic
front, Maryland's recovery has
been more sluggish than it was
coming out of past recessions.
But there are some positive
signs that have come up in the
last two or three months. Retail
sales have bounced back and
the employment picture
continues to improve."
(bullet) Although the fund invests
primarily in long-term,
investment-grade (Baa or
above) Maryland municipal
bonds, up to one-third of its
assets may be in
non-investment-grade bonds.
At the end of February, less
than .5% of the fund's
investments were rated Ba or
below, or are non-rated.
(bullet) Because of recent tax hikes
on the federal, state and
county level, some Maryland
residents could be subject to a
tax-rate as high as 45.04%.
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF FEBRUARY 28, 1994
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
Health Care 22.9 29.0
Transportation 21.4 11.9
General Obligation 20.9 19.3
Housing 12.1 7.3
Water & Sewer 4.2 4.6
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1994
6 MONTHS AGO
Years 17.6 20.2
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 FEBRUARY 28, 1994
6 MONTHS AGO
Years 8.1 8.6
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 FEBRUARY 28, 1994
(MOODY'S RATINGS)
Aaa 39.3%
Aa, A 31.6%
Baa 28.6%
Ba, B 0%
Non-rated 0.5%
Row: 1, Col: 1, Value: 39.3
Row: 1, Col: 2, Value: 31.6
Row: 1, Col: 3, Value: 28.6
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.0
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS FEBRUARY 28, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 94.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - 74.4%
Anne Arundel County Cons. Gen. Impt.
Ltd. Tax 5.25% 7/15/11 Aa $ 500,000 $ 490,625 035881QS
Anne Arundel County Cons. Wtr. & Swr.
Rfdg. 5% 4/15/07 Aa 500,000 481,250 035881RC
Anne Arundel County Mtg. Rev. Rfdg.
(Mill Pond Apts.) Series A, 6% 1/1/26,
(FHA & MBIA Insured) Aaa 500,000 501,250 035885FM
Baltimore Cons. Pub. Impt.:
Series C, 5.20% 10/15/02,
(FGIC Insured) (b) Aaa 600,000 615,000 059185L8
Rfdg. Series D:
6% 10/15/04 (AMBAC Insured) Aaa 1,000,000 1,087,500 059185P7
5% 10/15/08 (AMBAC Insured) Aaa 750,000 724,687 059185Q3
5.40% 10/15/12, (AMBAC Insured) Aaa 700,000 693,875 059185Q7
Baltimore County Metro. Dist. Unltd. Tax:
62nd Issue 6% 7/1/99 Aaa 125,000 133,594 059145GD
63rd Issue 6.125% 7/1/12 Aaa 200,000 212,500 059146FJ
Baltimore County Mtg. Rev. Rfdg.:
(Kingswood IV), Series A, 5.75% 9/1/20
(FHA Guaranteed) AAA 1,000,000 973,750 059148ZV
(Liberty Crossing) Series A, 6% 8/20/20,
(GNMA Guaranteed) AAA 1,000,000 997,500 059148YL
Baltimore Rev. Rfdg. (Wtr. Projs.)
Series A, 6.25% 7/1/22 (FGIC Insured) Aaa 350,000 390,250 059231GM
Baltimore Wastewtr. 8.525% 7/1/20,
(MBIA Insured) (d) Aaa 1,000,000 1,033,750 059231JC
Calvert County Rfdg. (Consolidated
Pub. Impt. Proj.):
Unltd. Tax 4.50% 7/15/03 Aa 500,000 483,125 131537NM
4.875% 7/15/10 Aa 500,000 473,125 131537PB
Harford County:
5.80% 9/1/09 Aa 190,000 196,650 412486YJ
5.80% 9/1/09 (e) AA- 310,000 336,737 412486YD
Howard County Mtg. Rev. Rfdg.
(Autumn Woods Proj.) Series A, 6.125%
8/1/26, (FHA Insured) AAA 300,000 303,375 442586KB
Maryland Commty. Dev. Administration Dept.
Hsg. & Commty. Dev. (Single Family Prog.)
3rd Series, 6.55% 4/1/17 Aa 45,000 47,194 57419HT5
Maryland Dept. of Trans. Consolidated Trans.:
Rfdg. Series 1993, 6.775% 12/15/05 (d) Aa 1,000,000 951,250 574204LL
Series 1991, 6.25% 9/1/03 Aa 100,000 107,625 574204HS
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - CONTINUED
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg.:
(Doctors Commty. Hosp.):
5.75% 7/1/13 Baa $ 500,000 $ 479,375 574216FQ
5.50% 7/1/24 Baa 1,945,000 1,774,812 574216FR
(Howard County Gen. Hosp.)
5.50% 7/1/13 Baa1 2,000,000 1,882,500 574216JM
(John Hopkins Health Sys.) Series 1988,
7.50% 7/1/20 Aa1 300,000 338,250 574215VT
(Suburban Hosp.) 6% 7/1/21,
(Pre-Refunded to 7/1/02 @ 102) (e) A1 200,000 216,250 5742155T
(Frederick Mem. Hosp.) 5.20% 7/1/08,
(FGIC Insured) Aaa 1,500,000 1,492,500 574216KG
(Good Samaritan Hosp.), 5.75% 7/1/13 A 385,000 389,812 574216DP
Maryland Trans. Auth. Trans. Facs. Proj. Rev.:
0% 7/1/11, (FGIC Insured) Aaa 500,000 189,375 574300CX
5.75% 7/1/15 A1 100,000 100,875 574300DD
Montgomery County Rev. Auth. Lease Rev.
Rfdg. (Olney Indoor Swim Center)
Project C, 5.25% 10/1/12 AA- 1,000,000 954,360 613366EB
Northeast Waste Disp. Auth. Solid Waste Rev.
(Montgomery County Resource Recovery Proj.):
Series A, 5.90% 7/1/05 (b) A 600,000 613,500 664257AK
Series A, 6% 7/1/07 (b) A 500,000 508,125 664257AM
Prince George's County Hosp. Rev.:
(Dimensions Health Corp.) 7% 7/1/22 (e) A 1,000,000 1,162,500 741710AK
(Greater Southeast Health Care Sys.):
6.375% 1/1/13 Baa 470,000 478,813 741710AW
6.375% 1/1/23 Baa 2,660,000 2,689,925 741710AX
Prince George's County Hsg. Auth. Mtg.
Rev. Rfdg. (Templton Manor) 6.0%
4/20/20 (GNMA Coll.) AAA 1,400,000 1,372,000 7417138J
Prince George's County Poll. Cont. Rev.
Rfdg. (Potomac Elec. Pwr. Proj.) 6% 9/1/22 A1 200,000 205,500 741723AC
Prince George's County Rfdg. Consolidated
Pub. Impt. Ltd. Tax 5.25% 10/1/11 A 1,000,000 975,000 741701BQ
Prince George's County Solid Waste Mgmt.
Sys. Rev. 5.25% 6/15/13 A 500,000 475,625 74172MBK
Rockville Mtg. Rev. Rfdg.
(Summit Apts. Project A) 5.625% 7/1/19
(FHA & MBIA Insured) Aaa 750,000 728,438 774227BF
St. Mary's College Rev. Series A, 5.50%
9/1/13, (MBIA Insured) Aaa 100,000 100,250 792547CF
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - CONTINUED
Univ. of Maryland Sys. Auxiliary Facs. &
Tuition Rev. 5% 10/1/09 Aa $ 1,000,000 $ 971,250 914402GN
Washington Suburban San. Dist. Rfdg.
Swr. Disp. 4.90% 12/1/05 Aa1 355,000 347,456 940156CC
Washington Suburban San. Dist. Wtr.
Supply Unltd. Tax:
Rfdg. 5.10% 12/1/07 Aa1 250,000 244,063 940156CM
5.90% 6/1/04 Aa1 1,000,000 1,062,500 9401555W
Worcester County Sanitation Dist. Rfdg.
Series J, 6% 8/15/02 Aa 400,000 430,000 981219HT
31,417,666
PUERTO RICO - 7.7%
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Rev. Rfdg. Series W, 5.50% 7/1/13 Baa1 2,000,000 1,962,500 745181BZ
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series N, 6% 7/1/10 Baa1 450,000 460,688 745268JP
Puerto Rico Port Auth. Rev. Spl. Facs.
(American Airlines) Series A,
6.30% 6/1/23 (b) Baa3 805,000 814,056 745290EA
3,237,244
U.S. VIRGIN ISLANDS - 0.5%
Virgin Islands Pub. Fin. Auth. Rev.
Series A, 7.25% 10/1/18 - 200,000 220,000 927676CF
GUAM - 2.0%
Guam Arpt. Auth. Gen. Rev.:
Series B, 6.40% 10/1/05 (b) BBB 500,000 522,500 400648BB
Series B, 6.70% 10/1/23 (b) BBB 300,000 314,625 400648BM
837,125
MULTIPLE STATE- 9.7%
Washington Metropolitan Area Trans. Auth.
Gross Rev. Rfdg.:
3.90% 7/1/97 (FGIC Insured) Aaa 1,380,000 1,378,275 938782AG
6% 7/1/10 (FGIC Insured) (g) Aaa 2,570,000 2,708,138 938782BK
4,086,413
TOTAL MUNICIPAL BONDS
(Cost $40,104,380) 39,798,448
MUNICIPAL NOTES (A) - 5.7%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - 5.7%
Baltimore County Econ. Dev. Rev. Rfdg.
(Blue Circle, Inc. Proj.) Series 1992, 2.50%,
LOC Den Danske Bank Group, VRDN VMIG 1 $ 1,200,000 $ 1,200,000 059136AJ
Maryland Gen. Oblig. Partnership Ctfs.
2.55% (Liquidity Enhancement Merrill
Capital Services) (f) Aaa 500,000 500,000 574192CP
Maryland Health & Higher Edl. Facs. Rev.
(Pooled Loan Prog.) Series A, 2.50%
LOC Dai-Ichi Kangyo Bank Ltd., VRDN VMIG 1 500,000 500,000 574215RC
Montgomery County Multi-Family Hsg. Rev.
(Falkland Apts.) Series 1985 B,
2.60%, VRDN A-1+ 200,000 200,000 613344BQ
TOTAL MUNICIPAL NOTES
(Cost $2,400,000) 2,400,000
TOTAL INVESTMENTS - 100%
(Cost $42,504,380) $ 42,198,448
FUTURES CONTRACTS
AMOUNT IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SELL
(30) Contracts June 1994 $ 3,340,313 $ (16,211)
THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 7.9%
SECURITY TYPE ABBREVIATIONS
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) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
Inverse floating rate security is a security where the coupon is inversely
indexed to a floating interest rate. The price will be more volatile than
the price of a comparable fixed rate security.
(e) Security collateralized by an amount sufficient to pay interest and
principal.
(f) Provides evidence of ownership in one or more underlying municipal
bonds.
(g) 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 $2,708,138.
INCOME TAX INFORMATION
At February 28, 1994, the aggregate cost of investment securities for
income tax purposes was $42,504,380. Net unrealized depreciation aggregated
$305,932 of which $246,211 related to appreciated investment securities and
$552,143 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 55.9% AAA, AA, A 66.0%
Baa 25.0% BBB 11.8%
Ba 0.0% BB 1.9%
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 0.5%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Health Care 22.9%
Transportation 21.4
General Obligation 20.9
Housing 12.1
Others
(individually less than 10%) 22.7
TOTAL 100.0%
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1994 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $42,504,380) 5. $ 42,198,448
(Notes 1 and 2) - See accompanying schedule
6.Cash 7. 132,746
8.Receivable for investments sold 9. 947,280
10.Interest receivable 11. 513,089
12.Receivable from investment adviser for expense 13. 18,135
reductions (Note 4)
14. 15.TOTAL ASSETS 16. 43,809,698
17.LIABILITIES 18. 19.
20.Payable for investments purchased $ 960,777 21.
22.Dividends payable 37,795 23.
24.Accrued management fee 18,135 25.
26.Payable for daily variation on futures contracts 22,500 27.
28. 29.TOTAL LIABILITIES 30. 1,039,207
31.32.NET ASSETS 33. $ 42,770,491
34.Net Assets consist of (Note 1): 35. 36.
37.Paid in capital 38. $ 43,194,456
39.Accumulated undistributed net realized gain (loss) on 40. (101,822)
investments
41.Net unrealized appreciation (depreciation) on: 42. 43.
44. Investment securities 45. (305,932)
46. Futures contracts 47. (16,211)
48.49.NET ASSETS, for 4,222,876 shares outstanding 50. $ 42,770,491
51.52.NET ASSET VALUE, offering price and redemption 53. $10.13
price per share ($42,770,491 (divided by) 4,222,876 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1994 (UNAUDITED)
54.55.INTEREST INCOME 56. $ 964,449
57.EXPENSES 58. 59.
60.Management fee (Note 3) $ 101,953 61.
62.Non-interested trustees' compensation 101 63.
64. Total expenses before reductions 102,054 65.
66. Expense reductions (Note 4) (102,054) 0
67.68.NET INTEREST INCOME 69. 964,449
70.REALIZED AND UNREALIZED GAIN (LOSS) ON 72. (27,152)
INVESTMENTS
(NOTES 1 AND 2)
71.Net realized gain (loss) on investment securities
73.Change in net unrealized appreciation (depreciation) 74. 75.
on:
76. Investment securities (902,187) 77.
78. Futures contracts (16,211) (918,398)
79.80.NET GAIN (LOSS) 81. (945,550)
82.83.NET INCREASE (DECREASE) IN NET ASSETS 84. $ 18,899
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS APRIL 22, 1993
ENDED (COMMENCEMENT
FEBRUARY 28, 1994 OF OPERATIONS) TO
(UNAUDITED) AUGUST 31, 1993
85.INCREASE (DECREASE) IN NET ASSETS
86.Operations $ 964,449 $ 264,915
Net interest income
87. Net realized gain (loss) on investments (27,152) (437)
88. Change in net unrealized appreciation (depreciation) (918,398) 596,255
on investments
89. 90.NET INCREASE (DECREASE) IN NET ASSETS 18,899 860,733
RESULTING FROM
OPERATIONS
91.Distributions to shareholders (964,449) (264,915)
From net interest income
92. From net realized gain (74,233) -
93. 94.TOTAL DISTRIBUTIONS (1,038,682) (264,915)
95.Share transactions 19,879,174 30,709,782
Net proceeds from sales of shares
96. Reinvestment of distributions from: 756,125 229,468
Net interest income
97. Net realized gain 61,012 -
98. Cost of shares redeemed (5,865,718) (2,596,708)
99. Redemption fees (Notes 1 and 2) 18,601 2,720
100. 14,849,194 28,345,262
Net increase (decrease) in net assets resulting from
share transactions
101. 13,829,411 28,941,080
102.TOTAL INCREASE (DECREASE) IN NET ASSETS
103.NET ASSETS 104. 105.
106. Beginning of period 28,941,080 -
107. End of period $ 42,770,491 $ 28,941,080
108.OTHER INFORMATION 110. 111.
109.Shares
112. Sold 1,914,041 3,033,327
113. Issued in reinvestment of distributions from: 73,154 22,484
Net interest income
114. 5,878 -
Net realized gain
115. Redeemed (567,777) (258,231)
116. Net increase (decrease) 1,425,296 2,797,580
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
117. SIX MONTHS APRIL 22, 1993
ENDED (COMMENCEME
FEBRUARY 28, 199 NT
4 OF OPERATIONS) T
O
AUGUST 31,
118. (UNAUDITED) 1993
119.SELECTED PER-SHARE DATA
120.Net asset value, beginning of period $ 10.350 $ 10.000
121.Income from Investment Operations .266 .194
Net interest income
122. Net realized and unrealized gain (loss) on investments (.205) .348
123. Total from investment operations .061 .542
124.Less Distributions (.266) (.194)
From net interest income
125. From net realized gain on investments (.020) -
126. Total distributions (.286) (.194)
127.Redemption fees added to paid in capital .005 .002
128.Net asset value, end of period $ 10.130 $ 10.350
129.TOTAL RETURN dagger .62% 5.49%
130.RATIOS AND SUPPLEMENTAL DATA
131.Net assets, end of period (000 omitted) $ 42,770 $ 28,941
132.Ratio of expenses to average net assets dagger dagger - -
133.Ratio of expenses to average net assets before .55%* .55%*
expense reductions dagger dagger
134.Ratio of net interest income to average net assets 5.20%* 5.46%*
135.Portfolio turnover rate 77%* 29%*
</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.
dagger dagger SEE NOTE 4 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Maryland Municipal Income 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 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.
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
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.
2. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $27,401,495 and $13,421,489, respectively.
3. 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 $420.
4. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses). For the period, the reimbursement reduced the expenses by
$102,054.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
32 West Central Boulevard
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
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
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
United Missouri Bank, N.A.
Kansas City, MO
Fidelity Logo
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 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
