(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
SHORT-INTERMEDIATE MUNICIPAL
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
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.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 23 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888 FOR
A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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. A fund's total
return 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 to measure
performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Spartan Short-Intermediate 1.91% 2.58% 33.50% 49.45%
Municipal
Lehman Brothers Municipal Bond 2.80% 1.88% 46.94% n/a
Index
Average Short Municipal Bond Fund 1.52% 2.10% 30.85% n/a
Consumer Price Index 1.28% 2.86% 17.89% 36.56%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or since
the fund started on December 24, 1986. For example, if you invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond Index - a broad measure
of the municipal bond market. To measure how the fund's performance stacked
up against its peers, you can compare it to the average short municipal
bond fund, which reflects the performance of 45 similar municipal bond
funds tracked by Lipper Analytical Services during the period covered by
this report. Both benchmarks include reinvested dividends and capital
gains, if any. Comparing the fund's performance to the consumer price index
(CPI) helps show how your fund did compared to inflation. (The CPI returns
begin on the month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Short-Intermediate Municipal 2.58% 5.95% 5.03%
Lehman Brothers Municipal Bond Index 1.88% 8.00% n/a
Average Short Municipal Bond Fund 2.10% 5.52% n/a
Consumer Price Index 2.86% 3.35% 3.89%
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 Short-IntermMunicipal Bond Index
12/31/86 10000.00 10000.00
01/31/87 10054.19 10301.10
02/28/87 10117.69 10351.78
03/31/87 10080.93 10242.05
04/30/87 9812.59 9728.11
05/31/87 9797.34 9679.85
06/30/87 9956.04 9964.06
07/31/87 10032.45 10065.69
08/31/87 10016.91 10088.34
09/30/87 9828.72 9716.38
10/31/87 9745.55 9750.78
11/30/87 9964.64 10005.37
12/31/87 10026.49 10150.55
01/31/88 10214.94 10512.11
02/29/88 10245.99 10623.22
03/31/88 10180.98 10499.46
04/30/88 10232.40 10579.26
05/31/88 10264.93 10548.68
06/30/88 10288.76 10703.01
07/31/88 10334.17 10772.79
08/31/88 10328.99 10782.27
09/30/88 10402.52 10977.43
10/31/88 10466.30 11171.18
11/30/88 10452.79 11068.86
12/31/88 10517.08 11182.09
01/31/89 10579.27 11413.34
02/28/89 10541.79 11283.11
03/31/89 10524.02 11256.14
04/30/89 10585.63 11523.36
05/31/89 10703.42 11762.71
06/30/89 10787.88 11922.44
07/31/89 10895.39 12084.71
08/31/89 10922.28 11966.40
09/30/89 10939.95 11930.50
10/31/89 11024.77 12076.05
11/30/89 11100.67 12287.38
12/31/89 11179.78 12388.14
01/31/90 11185.47 12329.91
02/28/90 11275.66 12439.65
03/31/90 11319.98 12443.38
04/30/90 11301.90 12353.79
05/31/90 11405.67 12623.10
06/30/90 11462.06 12734.19
07/31/90 11553.83 12921.38
08/31/90 11573.00 12734.02
09/30/90 11641.87 12741.66
10/31/90 11728.47 12972.28
11/30/90 11837.33 13233.03
12/31/90 11897.08 13291.25
01/31/91 12006.73 13469.35
02/28/91 12080.45 13586.54
03/31/91 12129.01 13591.97
04/30/91 12243.41 13772.74
05/31/91 12317.14 13895.32
06/30/91 12351.13 13881.43
07/31/91 12435.87 14050.78
08/31/91 12534.74 14236.25
09/30/91 12634.01 14421.32
10/31/91 12717.80 14551.11
11/30/91 12774.13 14591.86
12/31/91 12950.17 14905.58
01/31/92 13005.05 14939.86
02/29/92 13057.09 14944.35
03/31/92 13063.49 14950.32
04/30/92 13148.56 15083.38
05/31/92 13221.15 15261.37
06/30/92 13330.37 15517.76
07/31/92 13535.01 15983.29
08/31/92 13480.29 15826.65
09/30/92 13547.53 15929.53
10/31/92 13546.29 15773.42
11/30/92 13668.06 16055.76
12/31/92 13750.97 16219.53
01/31/93 13889.29 16407.68
02/28/93 14133.74 17001.63
03/31/93 14090.31 16821.42
04/30/93 14157.50 16991.31
05/31/93 14212.39 17086.47
06/30/93 14307.64 17371.81
07/31/93 14319.09 17394.39
08/31/93 14473.17 17756.20
09/30/93 14569.02 17958.62
10/31/93 14595.30 17992.74
11/30/93 14575.48 17834.40
12/31/93 14730.29 18210.71
01/31/94 14828.46 18418.31
02/28/94 14674.59 17941.28
03/31/94 14422.25 17211.07
04/30/94 14476.71 17357.36
05/31/94 14562.86 17508.37
06/30/94 14586.36 17406.82
07/31/94 14715.89 17725.36
08/31/94 14770.43 17787.40
09/30/94 14732.88 17525.93
10/31/94 14681.29 17213.97
11/30/94 14599.74 16902.39
12/31/94 14717.76 17274.25
01/31/95 14881.05 17768.29
02/28/95 15053.91 18285.35
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Short-Intermediate Municipal Fund on December 31, 1986, shortly after the
fund started. As the chart shows, by February 28, 1995, the value of your
investment would have grown to $15,054 - a 50.54% increase on your initial
investment. This assumes you still owned the fund on February 28, 1995, and
therefore does not include the effect of the $5 account closeout fee. For
comparison, look at how the Lehman Brothers Municipal Bond Index - which
includes longer term bonds - did over the same period. With dividends
reinvested, the same $10,000 would have grown to $18,285 - an 82.85%
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 MONTHS YEARS ENDED AUGUST 31,
ENDED
FEBRUARY
28,
1995 1994 1993 1992 1991 1990
Dividend return 2.22% 4.43% 4.82% 5.47% 6.30% 5.96%
Capital appreciation -0.31 -2.38% 2.53% 2.06% 2.00% -0.01%
return %
Total return 1.91% 2.05% 7.35% 7.53% 8.30% 5.95%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 3.30(cents) 21.48(cents) 43.73(cents)
Annualized dividend rate 4.40% 4.46% 4.48%
30-day annualized yield 4.54% - -
30-day annualized tax-equivalent 7.09% - -
yield
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 $9.77 over
the past month, $9.72 over the past six months and $9.77 over the past
year, you can compare the fund's income over these three 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 36% federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with David Murphy, Portfolio Manager of Spartan
Short-Intermediate Municipal Fund
Q. DAVID, HOW HAS THE FUND
PERFORMED?
A. Better than average. For the six months ended February 28, 1995, the
fund had a total return of 1.91%. That outpaced the average short municipal
bond fund's return of 1.52% for the same period, according to Lipper
Analytical Services. For the year ended February 28, 1995, the fund
returned 2.58%, compared to the average short fund's return of 2.10%, again
according to Lipper.
Q. IN YOUR VIEW, WHAT DROVE THE MUNICIPAL BOND MARKET'S PERFORMANCE DURING
THE PAST SIX MONTHS?
A. We need to look back to early 1994 to set the stage for what happened
during the past six months. From February through August last year, the
Federal Reserve Board raised short-term interest rates by 1.75% to 4.75% in
an effort to stave off inflation. Rising interest rates, coupled with fears
of inflation and technical market factors, made for an extended period of
volatility in which intermediate and long-term bonds - taxable and tax-free
alike - fell. Bond prices briefly stabilized in the summer. But from
September until about mid-November, the market began to fall again. That
occurred in part because many investors sold municipal bonds for tax
purposes, locking in their 1994 municipal bond losses to offset investment
gains from other areas. That tax-loss selling - and another short-term
interest rate hike of 0.75% in November- put additional pressure on
municipal bond prices. From mid-December through the end of February,
however, the market rebounded as tax-loss selling abated, the supply of
municipal bonds fell, and investors began to believe that the economy's
strong fourth-quarter 1994 performance could slow a bit in 1995.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. The fund's duration - which measures how sensitive its share price is to
changes in interest rates - was slightly long compared to other funds of
its type. A longer duration means that the fund is more sensitive to
changes in interest rates. Having a relatively long duration hurt the
fund's performance when rates were rising in October and November, but
helped it when the market rallied from December through February. Also,
because the yield curve - or the difference in yields that bonds of various
maturities pay - was steep, the extra yield from longer-term bonds helped
offset much of the earlier price decline. Another factor which helped the
fund's performance was its relatively high level of income.
Q. WHAT TYPE OF BONDS HELP THE FUND GENERATE HIGH INCOME?
A. Mostly student loan bonds, which come under the classification of
education bonds, and made up about 28.8% of the fund's investments on
February 28, 1995. These bonds are generally rated A or higher by Moody's
Investors Service, which is an investment-grade rating. However, they can
pay as much as 0.50% more in yield than similarly rated bonds. That's
because they carry the risk of being prepaid. However, now that interest
rates have risen, there isn't much of an incentive for borrowers to pay
these loans off early.
Q. WERE THERE ANY CHANGES IN THE WAY YOU ALLOCATED THE FUND'S INVESTMENTS
AMONG STATES?
A. One noticeable change was that I reduced the fund's holdings in
Louisiana to 5.4% from 8.9% six months ago. Many of these bonds did quite
well during the period, so I reduced the fund's exposure to them in favor
of other opportunities. Massachusetts remained the fund's largest state
concentration, and stood at 16.5% of investments at the end of the period.
Continuing economic and fiscal improvements in the state made Massachusetts
bonds more attractive. California was the fund's second largest state
concentration at 10.9% at the end of the period, up from 7.7% six months
earlier. Most of the bonds I purchased within the last six months were
pre-refunded, meaning their principal and interest payments are backed by
U.S. Treasury securities. As a result, these bonds carry the highest credit
rating. Because pre-refunded bonds have generally done well recently, I am
starting to reduce the fund's stake in them in favor of other types of
bonds.
Q. SUCH AS . . .
A. High-quality premium bonds, which sell above face value. Recently, the
law changed regarding the tax treatment of investment gains on bonds. Under
the new tax law, if a bond is bought at a discount - below face value - and
is sold at a gain, that gain is taxed as ordinary income, not at the lower
capital gains rate. Many investors now tend to avoid discount bonds and the
demand for them is more restricted. As a result, premium bonds are now more
attractive. At the end of the period, premium bonds made up over half of
the fund's total investments.
Q. DO YOU THINK1995 LOOKS MORE POSITIVE FOR THE MUNICIPAL BOND MARKET?
A. I think the Federal Reserve Board will raise interest rates one or two
more times, which would have more of an impact on short-term bond prices
than long-term bond prices. But it appears that the municipal bond market
is starting to anticipate that we're nearing the end of the Fed's actions
to raise interest rates. What's more, fixed-income investments, with their
relatively high current yields, are attractive compared to other
investments. I believe that these yields could help attract investors,
which ultimately could benefit the municipal market.
FUND FACTS
GOAL: to provide a current
income exempt from federal
income taxes by investing in
higher-grade and upper
medium-grade securities
START DATE: December 24,
1986
SIZE: As of February 28, 1995,
more than $920 million
MANAGER: David Murphy, since
December 1989;
manager, Spartan California
Intermediate Municipal
Portfolio, since 1993;
Spartan New York
Intermediate Portfolio, since
1993; Spartan Intermediate
Municipal Fund, since April
1993; Spartan New Jersey
Municipal High Yield Portfolio,
since 1991; Fidelity Limited
Term Municipals, since 1989;
joined Fidelity in 1989
(checkmark)
DAVID MURPHY ON HIS
INVESTMENT STRATEGY:
"During the fall of 1994, I used
a strategy known as a barbell.
If you picture a barbell, the
ends are heavy and the
middle is light. On one end of
the barbell, I bought bonds
with maturities of between
five and seven years.
Because the yield curve -
meaning the difference in
yield that bonds of various
maturities pay - was steep at
that time, intermediate bonds
in the five- to seven-year
range added additional yield
to the fund. I balanced the
additional interest rate risk of
those bonds with securities
that matured in
one-and-a-half years.
However, by the end of the
period the yield curve was
relatively flat, so that there
now isn't much incentive to
take on the added risk of
intermediate bonds in the
five-to-seven-year range. So I
have begun to "bullet" the
fund, concentrating its
holdings in bonds in the two-
to four-year range."
INVESTMENT CHANGES
TOP FIVE STATES AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Massachusetts 16.5 11.2
California 10.9 7.7
Texas 8.1 9.8
Louisiana 5.4 8.9
Montana 4.8 4.2
TOP FIVE SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Education 31.7 28.9
General Obligation 19.0 22.7
Escrowed/Pre-Refunded 14.7 11.3
Electric Revenue 10.1 10.4
Transportation 6.9 5.5
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 3.3 3.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 2.8 3.1
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 1.8
Row: 1, Col: 3, Value: 2.7
Row: 1, Col: 4, Value: 43.1
Row: 1, Col: 5, Value: 49.0
Row: 1, Col: 1, Value: 6.8
Row: 1, Col: 2, Value: 1.2
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 44.0
Row: 1, Col: 5, Value: 45.0
Aaa, Aa, A 93.1%
Baa 2.3%
Non-rated 1.2%
Short-term
investments 3.4%
Aaa, Aa, A 90.5%
Baa 2.5%
Non-rated 0.2%
Short-term
investments 6.8%
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.6%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ALASKA - 3.7%
Alaska Student Loan Corp. Student Loan Rev.
6.90% 7/1/96, (AMBAC Insured) (d) $ 3,800 $ 3,900
North Slope Borough:
Rfdg.:
Series G, 8.35% 6/30/98, (MBIA Insured) 8,000 8,740
Series 1988 G, 7.50% 6/30/97, (AMBAC Insured) 9,015 9,466
Series B, 0% 1/1/99, (MBIA Insured) 7,450 5,979
Gen. Oblig. Series B, 6.10% 6/30/99,
(Capital Guaranty Insured) 6,500 6,671
34,756
ARIZONA - 4.5%
Arizona Trans. Board Excise Tax Rev. (Maricopa County
Reg. Area) 7.40% 7/1/98 3,750 4,017
Maricopa County School Dist. #4 Mesa Unified:
Rfdg. 6% 7/1/97, (AMBAC Insured) 5,000 5,137
(Cap. Appreciation) 0% 7/1/98, (FGIC Insured) 2,600 2,194
(Mesa Elementary) Series D, 6% 7/1/01,
(Pre-Refunded to 7/1/98 @ 101) (FGIC Insured) (e) 9,300 9,672
Phoenix Arpt. Rev. Rfdg. Series A:
4.80% 7/1/96, (MBIA Insured) (a) 2,880 2,887
5.05% 7/1/97, (MBIA Insured) (a) 2,885 2,903
5.40% 7/1/99, (MBIA Insured) (a) 6,070 6,138
Phoenix Civic Impt. Corp. (Arpt. Impts.) Series A, Excise Tax
Rev. Rfdg. (a)(d):
5.25% 7/1/97 2,845 2,845
5.60% 7/1/99 3,240 3,260
5.75% 7/1/00 2,000 2,020
5.85% 7/1/01 1,000 1,011
42,084
CALIFORNIA - 9.8%
Brea California Redev. Agcy. 8.40% 9/15/05, (Pre-Refunded
to 9/15/96 @ 102.50) (e) 5,675 6,136
California Pub. Works Board Lease Rev.:
(Dept. of Corrections) Rfdg. Series A, 4.50% 12/1/98,
(AMBAC Insured) 4,600 4,410
(Dept. of Corrections State Prisons) Series E:
4.50% 6/1/00 4,035 3,752
4.625% 6/1/01 4,795 4,429
Clovis Unified School Dist. Spl. Tax Series B, (Cap. Appreciation)
0% 8/1/00, (MBIA Insured) 7,000 5,276
Los Angeles Dept. of Wtr. and Pwr. Rev.:
Second Issue (Electric Plant) 9% 10/15/00 1,300 1,537
9% 10/15/01 2,000 2,407
Los Angeles Ctfs. of Prtn. 8.125% 6/1/08,
(Pre-Refunded to 6/1/97 @ 102) (e) 6,000 6,532
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Los Angeles Wastewtr. Sys. Rev. Series B,
9% 6/1/96, (AMBAC Insured) $ 2,305 $ 2,414
Mountain View Ctfs. of Prtn. 7.90% 12/1/08,
(Pre-Refunded to 12/1/97 @ 102) (e) 6,835 7,484
Northern California Pwr. Agcy. Pub. Pwr. Rev.:
Rfdg. (Geothermal Proj. #3) Series A, 8.80% 7/1/95 2,750 2,788
7.75% 7/1/99, (Pre-Refunded to 7/1/96 @ 102) (e) 1,585 1,682
7.80% 7/1/00, (Pre-Refunded to 7/1/96 @ 102) (e) 1,990 2,112
7.80% 7/1/01, (Pre-Refunded to 7/1/96 @ 102) (e) 1,455 1,544
7.875% 7/1/06, (Pre-Refunded to 7/1/96 @ 102) (e) 3,495 3,713
Pasadena Ctfs. of Prtn. (Cap. Impt. Proj.) 6.75% 8/1/15,
(Pre-Refunded to 8/1/00 @ 102) (e) 7,500 8,231
Rancho Wtr. Dist. Ctfs. of Prtn. (Pre-Refunded to 9/1/97 @ 102)
(FGIC insured) (e):
8% 9/1/00 1,085 1,187
8.40% 9/1/07 5,500 6,064
Rosemead Redev. Agcy. (Sub. Lien Tax Allocation Proj. Area 1)
(Escrowed to Maturity) (e):
0% 10/1/96 2,235 2,078
0% 10/1/97 1,875 1,655
0% 10/1/98 1,000 835
0% 10/1/99 2,205 1,742
Sacramento Ctfs. of Prtn. 8% 8/1/05, (Pre-Refunded to
8/1/97 @ 102.5) (e) 5,830 6,391
San Bernardino County Ctfs. of Prtn. (Medical Center Fing.
Proj.) 4.75% 8/1/00 4,000 3,825
Univ. of California Rev. Rfdg. (Multi-Purp. Projs.) Series C,
10% 9/1/99, (AMBAC Insured) 2,605 3,100
91,324
COLORADO - 3.3%
Aurora Ctfs. of Prtn. Rfdg. 4.75% 12/1/96 500 498
Boulder County Sales & Use Spl. Tax Rev. 5.40% 12/15/01,
(FGIC Insured) 500 506
Colorado Ctfs. of Prtn. (Rfdg. & Acquisition Projs.):
4.75% 5/1/97, (AMBAC Insured) 4,000 4,000
4.75% 11/1/97, (AMBAC Insured) 2,750 2,750
Denver City & County Arpt. Rev.:
(Stapleton Int'l. Arpt.) 10% 12/1/95,
(Escrowed to Maturity) (e) 200 208
Series B, 4.25% 12/1/25, (LOC Sumitomo Bank) 15,000 14,944
Jefferson County School Dist. #R-1 Rfdg. Series A,
5.50% 12/15/01 5,000 4,956
Pueblo Wtr. Rfdg. Series 1984 B, 9.50% 11/1/98,
(MBIA Insured) 2,250 2,624
30,486
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CONNECTICUT - 0.3%
Connecticut Resources Recovery Auth. Rev. (Bridgeport Resco
Co. LP Proj.) Series B:
8.10% 1/1/96 $ 1,460 $ 1,491
8.20% 1/1/97 1,490 1,548
3,039
DELAWARE - 0.6%
Delaware Trans. Auth. Trans. Sys. Rev.:
7.50% 7/1/02, (MBIA Insured) 3,500 3,776
Jr. 7.75% 7/1/06, (Pre-Refunded to
7/1/98 @ 101.50) (MBIA Insured) (e) 1,500 1,648
5,424
DISTRICT OF COLUMBIA - 0.8%
District of Columbia:
Gen. Oblig. Series E, 5% 6/1/02, (FGIC Insured) 3,850 3,653
Series E, 4.75% 6/1/00, (FGIC Insured) 1,825 1,731
Unltd. Tax Series B, 5.50% 6/1/98, (MBIA Insured) 2,165 2,173
7,557
FLORIDA - 0.9%
Florida Lease Ctfs. of Prtn. (Consolidated Equip. Prog.) :
5.75% 11/15/95 2,310 2,336
5.90% 5/15/96 5,865 5,909
8,245
GEORGIA - 0.4%
Gwinnett County Wtr. & Swr. Ctfs. of Prtn. 7.75% 8/1/96 3,850 4,023
HAWAII - 0.3%
Hawaii Arpts. Sys. Rev.:
Rfdg. Series 1993, 5.10% 7/1/97, (MBIA Insured) 1,860 1,867
2nd Series, 7.40% 7/1/02, (FGIC Insured) (d) 1,000 1,108
2,975
ILLINOIS - 2.7%
Illinois Edl. Facs. Auth. Rev. (DePaul Univ.) Series A, 9.10%
10/1/97, (Pre-Refunded to 10/1/95 @ 103) (e) 500 528
Illinois Scholarship Commission Student Loan Rev.:
Series G, 8.10% 3/1/98 (Pre-Refunded to
3/1/95 @ 102) (d)(e) 3,500 3,570
Series I, 0.02% 3/1/96 (d) 8,725 8,321
McHenry County Conservation Dist. (Cap. Appreciation)
0% 2/1/96, (AMBAC Insured) 1,630 1,565
Metropolitan Pier & Export Auth. Dedicated Tax Rev.
(McCormick Place Expansion Proj.):
0% 6/15/95, (AMBAC Insured) 2,500 2,472
Series A, 0% 6/15/96, (AMBAC Insured) 4,055 3,832
Metropolitan Wtr. Reclamation Dist. of Greater Chicago
(Cap. Impt.) 5.55% 12/1/98 3,500 3,513
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - CONTINUED
Rock Island County Ctfs. of Prtn.:
10% 12/1/95, (FGIC Insured) $ 790 $ 824
10% 12/1/96, (FGIC Insured) 840 919
25,544
KANSAS - 0.4%
Johnson Cnty. Unified School Dist. #233 Rfdg. & Impt.
8% 9/1/99, (AMBAC Insured) 3,050 3,393
KENTUCKY - 2.3%
Louisville & Jefferson County (Reg. Arpt. Auth. Arpt. Sys.) Rev.
Series C, 4.75% 7/1/00, (MBIA Insured) (d) 6,480 6,334
Owensboro Elec. Lt. and Pwr. Rev. Rfdg. Series B:
0% 1/1/96, (AMBAC Insured) 1,425 1,375
0% 7/1/96, (AMBAC Insured) 1,400 1,321
0% 1/1/97, (AMBAC Insured) 3,025 2,783
0% 7/1/97, (AMBAC Insured) 1,000 899
0% 1/1/98, (AMBAC Insured) 2,000 1,745
0% 1/1/99, (AMBAC Insured) 3,300 2,727
0% 1/1/01, (AMBAC Insured) 5,450 3,999
21,183
LOUISIANA - 5.1%
East Baton Rouge Parish Sales and Use Tax (Pub. Impt.)
12% 2/1/97, (MBIA Insured) 1,000 1,134
Jefferson Sales Tax Dist. Spl. Sales Tax Rev. Series A,
6.25% 12/1/98, (FGIC Insured) 3,000 3,146
Louisiana Pub. Facs. Auth. Rev.:
(Browning-Ferris Ind., Inc.) 3.85% 11/1/96 (d) 5,000 4,900
(Loyola Univ.) 9% 10/1/95 9,710 9,953
(Student Loan):
Sr. Series A-2, 5.90% 3/1/98 (d) 3,000 3,056
Sr. Series A-1, 5.90% 3/1/99 2,140 2,169
(Supplemental Student Loan):
Series B, 8.125% 12/1/99, (AMBAC Insured) 8,545 9,592
Series C, 8.125% 12/1/99, (AMBAC Insured) 4,065 4,563
Louisiana Gen. Oblig.:
Rfdg. Series A, 6.40% 8/1/96 3,000 3,053
Series A:
6.50% 9/1/95 1,000 1,008
8% 5/1/98, (MBIA Insured) 1,000 1,081
8% 9/1/95 3,365 3,415
Ouachita Parish Hosp. Svc. Dist. #1 Rev. (Glenwood Regional
Med. Ctr.):
6.50% 7/1/95 395 396
6.70% 7/1/96 475 483
47,949
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MAINE - 1.4%
Maine Edl. Loan Auth. Edl. Loan Rev.(Supplemental Ed.
Loan Prog.) Series A-1, 5.60% 12/1/96 (d) $ 2,720 $ 2,744
Maine Edl. Loan. Marketing Corp. Student Loan Rev. Rfdg. (d):
Series A-1, 4.95% 5/1/96 1,200 1,199
Series A-1, 5.20% 5/1/97 1,750 1,748
6.20% 11/1/95 7,250 7,304
12,995
MARYLAND - 0.7%
Northeast Waste Disp. Auth. Resources Recovery Rev. Rfdg.
(Southwest Resource Recovery Fac.) 6.85%
1/1/99, (MBIA Insured) 4,000 4,240
Prince Georges County 6.2% 3/15/99, (MBIA Insured) 1,985 2,057
6,297
MASSACHUSETTS - 16.5%
Massachusetts Bay Trans. Auth. 1985 Series A, 8.60% 3/1/04
(Pre-Refunded to 3/1/95 @ 103) (e) 300 309
Massachusetts Gen. Oblig.:
Series A:
Consolidated Loan (Cap. Appreciation) 0% 6/1/97 1,930 1,718
(Dedicated Income Tax) 7.875% 6/1/97 28,200 29,821
(Dedicated Income Tax) 7.875% 6/1/97, (FGIC Insured) 9,930 10,526
9.25% 7/1/00 4,500 5,304
Massachusetts Health & Edl. Facs. Auth. Rev. (Salem Hosp.)
Series A, 6.75% 7/1/00 (Pre-Refunded to 7/1/97 @ 100) (e) 4,720 4,932
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Morton Hosp. & Med. Ctr.) Series A, 8.75% 7/1/11
(Pre-Refunded to 7/1/99 @ 102) (e) 4,075 4,645
(Massachusetts Biomedical Research) Series A-1:
7.10% 8/1/99 4,500 4,770
(Cap. Appreciation) 0% 8/1/00 4,510 3,332
New England Ed. Loan Marketing Corp. Rfdg.
(Massachusetts Student Loan) Series E,
5% 7/1/99 (b) 25,400 24,765
New England Ed. Loan Marketing Corp. Rev. Rfdg. (Mass.
Student Loan):
Sr. Issue D, 6% 9/1/99 7,000 7,245
Series A, 6.00% 9/1/98 11,500 11,845
Series B, 5.40% 6/1/00 10,500 10,356
Series G:
4.70% 8/1/98 6,600 6,435
5% 8/1/00 8,350 8,079
Series H, 4.75% 12/1/99 20,000 19,250
153,332
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MICHIGAN - 1.8%
Detroit, Michigan Gen. Oblig. Rfdg. (Distributable Aid)
3.40% 5/1/95, Non-Callable, (AMBAC Insured) $ 4,240 $ 4,229
Detroit, Michigan Convention Fac. Rev. (Cobo Hall Expansion
Project) Rfdg.:
3.75% 9/30/96 2,090 2,051
4% 9/30/97 2,000 1,943
4.75% 9/30/00 5,220 5,011
4.80% 9/30/01 3,855 3,672
16,906
MINNESOTA - 0.8%
Southern Minnesota Muni. Pwr. Agcy. Pwr.:
4.40% 1/1/00 2,500 2,387
5.10% 1/1/00, (Escrowed to Maturity) (e) 1,430 1,435
5.10% 1/1/99 2,945 2,941
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Sys. Rev. Series A 8.45% 1/1/96 500 517
7,280
MISSISSIPPI - 1.6%
Mississippi Higher Ed. Assist Corp. Student
Loan Rev. Series B, 4.80% 9/1/98 (d) 15,500 15,248
MONTANA - 4.8%
Montana Dept. Hwy. Trans. Rev. Rfdg. 4.50% 7/1/98 2,000 1,990
Montana Higher Ed. Student Assistance Corp.
Student Loan Rev. (d):
Sr. Series A, 4.75% 12/1/98 1,600 1,590
Sr. Series B:
4.50% 12/1/97 3,770 3,742
4.70% 12/1/98 9,225 9,144
4.90% 12/1/99 12,420 12,311
Series B:
4.30% 12/1/96 3,500 3,474 6.20% 12/1/97 4,190 4,284
6.40% 6/1/98 3,765 3,864
6.40% 12/1/98 4,330 4,454
44,853
MULTIPLE STATES - 1.1%
California Higher Ed. Loan Student Loan Auth.
Rev. Rfdg. Series E-2, 5.70% 12/1/98 (d) 4,000 4,055
New England Ed. Loan Marketing Corp. Student Loan Rev.
Rfdg. Sr. Issue D, 6.20% 9/1/00 1,100 1,149
Washington DC Metro Area Transit Auth. Gross Rev. Rfdg.
4.60% 1/1/02, (FGIC Insured) 4,930 4,597
9,801
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW HAMPSHIRE - 1.6%
New Hampshire Higher Edl. & Health Facs. Auth. Rev.
(Frisbie Mem. Hosp.) 9.50% 10/1/08 (Pre-Refunded
to 10/1/97 @ 103) (e) $ 13,500 $ 15,356
NEW JERSEY - 2.6%
Jersey City School Unltd. Tax 6.40% 2/15/96 1,675 1,698
New Jersey Health Care Facs. Fing. Auth. Rev.
(Atlantic City Med. Ctr.):
Series B, 8.375% 8/1/20, (Pre-Refunded to 2/1/98 @102)
(FHA Guaranteed) (e) 6,820 7,579
Series C:
5.30% 7/1/95 3,615 3,624
5.60% 7/1/96 3,300 3,337
5.80% 7/1/97 4,005 4,070
6.45% 7/1/02 3,500 3,596
23,904
NEW MEXICO - 2.2%
New Mexico Edl. Assistance Foundation Student Loan Rev. (d):
Sr. Series:
1-A, 4.80% 12/1/95 1,750 1,754 IV-A1:
6.40% 3/1/03 (a) 5,375 5,496 6.50% 3/1/04 (a) 3,370 3,475
Series A:
6.05% 4/1/97, (AMBAC Insured ) 2,025 2,055
6.255% 4/1/98, (AMBAC Insured) 4,775 4,882
6.55% 4/1/00, (AMBAC Insured) 2,700 2,805
20,467
NEW YORK - 2.3%
New York City Ind. Dev. Agcy. (Term. One Group
Assoc. Proj.) Spl. Fac. Rev. 5.40% 1/1/01 (d) 1,000 979
New York State Gen. Oblig. Crossover Rfdg.:
7.80% 11/15/98 12,820 13,862 7.80% 11/15/99 3,780 4,158
New York City Muni. Wtr. Fing. Auth. Rev. (Wtr. &
Swr. Sys.) Series B, 4.75% 6/15/01 3,000 2,888
21,887
NEW YORK & NEW JERSEY - 1.1%
New York & New Jersey Port Auth. Series SS,
4.90% 9/1/97 (d) 10,000 9,974
NORTH CAROLINA - 1.7%
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.
Rfdg. Series A, 7.875% 1/1/02 8,000 8,870
North Carolina Muni. Pwr. Agcy. Rev. #1 (Catawba Elec.)
4.20% 1/1/98 7,000 6,816
15,686
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NORTH DAKOTA - 0.3%
North Dakota Student Loan Rev. Rfdg. Series A,
5.70% 7/1/97 $ 2,315 $ 2,350
OHIO - 1.4%
Cincinnati City School Dist.:
Ltd. Tax 5.40% 6/1/96 4,000 4,010
5.35% 6/15/96 1,700 1,700
Franklin County Rev. (OCLC-Online Computer Library Ctr.):
Series 1991, 6% 7/15/95 745 747
Series 1993, 4.70% 4/15/96 270 268
Montgomery County Hosp. Facs. Rev. (Miami Valley Hosp.)
Series A, 9% 12/1/96 1,500 1,575
Ohio Dev. Commty. (Globe Ind. Proj.) Series 1,
7.75% 6/1/96, (d) 695 698
Student Loan Funding Corp. Ohio Student
Loan Series A, 5.50% 12/1/01 (d) 4,000 3,950
12,948
OKLAHOMA - 0.3%
Oklahoma Student Loan Auth. Rev. Rfdg. (Student Loan)
Series A, 5.35% 9/1/96 (d) 1,930 1,928
Tulsa Ind. Auth. Hosp. Rev. (Tulsa Reg'l. Med. Ctr.):
Series A, 7% 6/1/96 500 509
6.75% 6/1/95 500 502
2,939
OREGON - 0.2%
Tri City Svc. Dist. Oregon Advanced Swr. Rfdg. 5% 9/1/00 2,100 2,069
PENNSYLVANIA - 2.4%
Erie County School Dist. (Cap. Appreciation)
(Escrowed to Maturity) (e):
0% 6/1/96 785 743
0% 12/1/96 1,125 1,036
0% 6/1/97 1,435 1,290
0% 12/1/97 1,405 1,233
0% 6/1/98 905 776
0% 12/1/98 1,770 1,476
Northampton County Ind. Dev. Auth. Rev. (Poll. Cont.)
(Metro Edison Co.) 10.50% 9/1/95 4,000 4,115
Philadelphia Gas Wks. Rev. Fifteenth Series Rfdg.:
4.10% 8/1/99, (AMBAC Insured) 2,000 1,875
4.10% 8/1/99, (MBIA Insured) 3,845 3,600
4.25% 8/1/00, (AMBAC Insured) 2,325 2,162
Philadelphia School Dist. Rfdg. Series A, 6.25% 7/1/97,
(AMBAC Insured) 3,500 3,596
21,902
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
RHODE ISLAND - 2.1%
Rhode Island Consolidated Cap. Loan Unltd. Tax Rev.
8% 8/1/98 $ 4,470 $ 4,861
Rhode Island Student Loan Auth. Student Loan Rev.
Rfdg. Series A, 6% 12/1/97 (b) 14,000 14,280
19,141
SOUTH DAKOTA - 0.4%
South Dakota Student Loan Fin. Corp. Student Loan Rev.
Series A, 5.70% 8/1/99 (d) 3,575 3,602
TEXAS - 8.1%
Alamo Community Dist. Rfdg. (Cap. Appreciation):
0% 2/15/99, (AMBAC Insured) 3,530 2,873
0% 2/15/00, (AMBAC Insured) 3,350 2,563
Arlington Independent School Dist. Rfdg. (Cap. Appreciation)
0% 8/15/97, (MBIA Insured) 1,250 1,111
Austin Util. Sys. Rev. Rfdg.:
Series A, 0% 11/15/98, (MBIA Insured) 3,000 2,479
Series B, 7% 11/15/98, (FGIC Insured) 5,000 5,312
Austin Wtr. Swr. & Elec. Rev. Rfdg. 11% 11/15/96 12,505 13,584
Brazos Higher Ed. Auth. Student Loan Rev.
Rfdg. Series C:
4.95% 6/1/98 (b)(d) 11,700 11,612
5.15% 6/1/99 (d) 9,875 9,789
Colorado River Water Resources Auth. 8.50% 1/1/01 2,200 2,547
Dallas Independent School Dist. Ref. (Cap. Appreciation)
0% 8/15/96 5,000 4,681
Harris County Rfdg. Toll Road Sub. Lien. Rev. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 8/1/01 3,490 2,487
North Texas Higher Ed. Auth. Student Loan Rev. Series B,
4.85% 4/1/98 (d) 4,815 4,761
Panhandle-Plains Higher Ed. Auth. Student Loan Rev.
Series C, 4.15% 9/1/97 2,800 2,758
San Antonio Elec. & Gas Rev. 6.40% 2/1/98 3,000 3,064
San Antonio Wtr. 0% 5/1/09, (Pre-Refunded to
5/1/00 @ 102) (AMBAC Insured) (e) 6,415 2,630
Texas Gen. Oblig. Superconducting Series C,
(Cap. Appreciation) 0% 4/1/02, (FGIC Insured) 3,000 2,033
Texas Higher Ed. Coordinating Board College Student Loan
Rev. (Sr. Lien) 6.60% 4/1/96 (d) 885 899
75,183
UTAH - 1.0%
Intermountain Pwr. Agcy. Pwr. Supply Rev.:
Rfdg. Series B 0% 7/1/01, (AMBAC Insured) 5,000 3,569
0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101) (b)(e) 7,500 5,738
9,307
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
VERMONT - 0.6%
Vermont Student Assistance Corp. Edl. Loan
Rev. Rfdg. Fing. Prog. Series A:
6.25% 6/15/98, (AMBAC Insured) $ 3,250 $ 3,356
6.35% 6/15/99, (AMBAC Insured) 2,500 2,597
5,953
WASHINGTON - 4.4%
Washington Health Care Facs. Auth. Rev.:
(Franciscan Health Sys. St. Francis) 9.25% 7/1/15,
(BIG Insured) (Pre-Refunded to 7/1/95 @ 102) (e) 17,175 17,776
(Group Health Coop. Puget Sound Seattle) Series 1988 A,
7.40% 12/1/98, (MBIA Insured) 2,750 2,998
(Pooled Cap. Facs. & Equip.) 7.30% 4/1/96, (MBIA Insured) 580 581
Washington Pub. Pwr. Supply Sys. Rev. Rfdg. (Nuclear Proj. #1) :
Series A:
4.625% 7/1/98 2,400 2,310
7.25% 7/1/99 2,760 2,939
6.50% 7/1/02 1,000 1,044
6.50% 7/1/02 2,220 2,317
Series B, 5% 7/1/01 2,500 2,366
Series C:
7.10% 7/1/96 2,235 2,291
7.10% 7/1/98 1,000 1,050
7.70% 7/1/02 2,500 2,788
7.20% 7/1/99 1,000 1,064
(Nuclear Proj. #2) Rev. Rfdg. Series A, 5.10% 7/1/98 1,000 983
40,507
WISCONSIN - 0.1%
Milwaukee Wisconsin Rfdg. 4.50% 12/1/98 1,000 968
TOTAL MUNICIPAL BONDS
(Cost $905,603) 898,837
MUNICIPAL NOTES (C) - 3.4%
CALIFORNIA - 1.1%
Ventura County TRAN 4.50% 8/1/95 10,000 9,994
ILLINOIS - 0.9%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg. (Garden
Glen Apts.) Series 93, 4.10%, VRDN 1,000 1,000
Illinois Health Facs. Auth. Rev.:
(Central Dupage Hosp. Assoc. Proj.) Series 1990, 3.80%,
LOC Industrial Bank of Japan, VRDN 2,200 2,200
(LaGrange Mem. Health Sys.) Series 1990, 3.80%,
LOC First Nat'l. Bank of Chicago, VRDN 5,000 5,000
8,200
MUNICIPAL NOTES (C) - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
LOUISIANA - 0.3%
Louisiana Pub. Facs. Auth. Dev. Rev. Ind. Dev.
(Kenner Hotel Ltd.) 4%, LOC Long-Term Cr.
Bank of Japan, VRDN $ 2,600 $ 2,600
VIRGINIA - 0.8%
Campbell County Ind. Dev. Auth. Facs. Rev. (Hadson Pwr.
#12-Altavista Proj.) Series 1990-A, 4.25%, LOC
Barclays Bank PLC, VRDN (d) 3,000 3,000
Hopewell Ind. Dev. Auth. Rev.
(Hadson Pwr. 13-Hopewell Proj.)
Series 1990 A, 4.25% LOC Cr. Suisse Bank, VRDN (d) 1,300 1,300
Richmond Ind. Dev. Auth. (Cogentrix of Richmond, Inc.) (d):
Series 1991 A, 4.30%, LOC Banque Paribas, VRDN 1,600 1,600
Series 1991 B, 4.30%, LOC Banque Paribas, VRDN 1,700 1,700
7,600
WYOMING - 0.3%
Lincoln County Poll. Cont. Rev. (Exxon Co. Proj.)
Series 1984 D, 3.90%, VRDN 3,500 3,500
TOTAL MUNICIPAL NOTES
(Cost $31,894) 31,894
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $937,497) $ 930,731
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(b) A portion of the security was pledged to cover for delayed delivery
purchases. At the period end, the value of securities pledged amounted to
$38,572,000.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(e) Security collateralized by an amount sufficient to pay interest and
principal.
OTHER INFORMATION
The composition of long-term debt holdings
as a percentage of total value of investment in securities, is as follows
(ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 86.0% AAA, AA, A 72.8%
Baa 2.2% BBB 0.1%
Ba 0.0% 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 1.2%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Education 31.7%
General Obligation 19.0
Escrowed/Pre-Refunded 14.7
Electric Revenue 10.1
Others (individually less than 10%) 24.5
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $937,497,000. Net unrealized depreciation
aggregated $6,766,000, of which $8,319,000 related to appreciated
investment securities and $15,085,000 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) FEBRUARY 28, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $937,497) - $ 930,731
See accompanying schedule
Cash 1,048
Receivable for investments sold 9,590
Regular delivery
Delayed delivery 4,819
Interest receivable 13,042
TOTAL ASSETS 959,230
LIABILITIES
Payable for investments purchased $ 8,065
Regular delivery
Delayed delivery 29,665
Dividends payable 560
Accrued management fee 387
TOTAL LIABILITIES 38,677
NET ASSETS $ 920,553
Net Assets consist of:
Paid in capital $ 936,803
Accumulated undistributed net realized gain (loss) on (9,484)
investments
Net unrealized appreciation (depreciation) on (6,766)
investments
NET ASSETS, for 93,870 shares outstanding $ 920,553
NET ASSET VALUE, offering price and redemption price per $9.81
share ($920,553 (divided by) 93,870 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
INTEREST INCOME $ 24,928
EXPENSES
Management fee $ 2,724
Non-interested trustees' compensation 3
TOTAL EXPENSES 2,727
NET INTEREST INCOME 22,201
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (3,484)
Futures contracts (790) (4,274)
Change in net unrealized appreciation (depreciation) on (2,731)
investment securities
NET GAIN (LOSS) (7,005)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 15,196
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED FEBRUARY AUGUST 31,
28, 1994
1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 22,201 $ 49,446
Net interest income
Net realized gain (loss) (4,274) (3,465)
Change in net unrealized appreciation (depreciation) (2,731) (27,205)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 15,196 18,776
FROM OPERATIONS
Distributions to shareholders (22,201) (49,456)
From net interest income
In excess of net realized gain - (1,110)
TOTAL DISTRIBUTIONS (22,201) (50,566)
Share transactions 197,410 1,202,475
Net proceeds from sales of shares
Reinvestment of distributions 19,128 43,957
Cost of shares redeemed (371,716) (1,098,806)
Net increase (decrease) in net assets resulting from (155,178) 147,626
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (162,183) 115,836
NET ASSETS
Beginning of period 1,082,736 966,900
End of period $ 920,553 $ 1,082,736
OTHER INFORMATION
Shares
Sold 20,276 120,280
Issued in reinvestment of distributions 1,968 4,418
Redeemed (38,359) (110,516)
Net increase (decrease) (16,115) 14,182
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS SIX MONTHS YEAR ENDED EIGHT YEARS ENDED DECEMBER 31,
ENDED FEBRUARY AUGUST 31, MONTHS
28, 1995 ENDED
AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.840 $ 10.090 $ 9.880 $ 9.780 $ 9.520 $ 9.490 $ 9.450
Income from Investment Operations .215 .443 .303 .490 .559 .562 .536
Net interest income
Net realized and unrealized gain (loss) (.030) (.240) .210 .100 .260 .030 .040
Total from investment operations .185 .203 .513 .590 .819 .592 .576
Less Distributions (.215) (.443) (.303) (.490) (.559) (.562) (.536)
From net interest income
In excess of net realized gain on investments - (.010) - - - - -
Total distributions (.215) (.453) (.303) (.490) (.559) (.562) (.536)
Net asset value, end of period $ 9.810 $ 9.840 $ 10.090 $ 9.880 $ 9.780 $ 9.520 $ 9.490
TOTAL RETURN B, C 1.92% 2.05% 5.25% 6.18% 8.85% 6.42% 6.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 921 $ 1,083 $ 967 $ 659 $ 244 $ 59 $ 58
Ratio of expenses to average net assets .55% A .47% .55% .55% .55% .60% .58%
A
Ratio of expenses to average net assets before expense .55% A .55% .55% .55% .75% .89% .87%
reductions A
Ratio of net interest income to average net assets 4.48% A 4.45% 4.55% 4.95% 5.68% 5.90% 5.69%
A
Portfolio turnover rate 45% A 44% 56% 28% 59% 75% 82%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
SEMIANNUAL REPORT
26
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Short-Intermediate Municipal 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 of their purchase date 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. Distributions are declared daily and paid
monthly from net interest income. Distributions from realized gains, 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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and market discount. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net interest income per share. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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. 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. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. Losses may arise due to changes in the market
value of the underlying securities or if the counterparty does not perform
under the contract.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond market and to fluctuations in interest rates. Buying futures,
writing puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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 $216,884,000 and $339,636,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $86,939,000 and $86,008,000, 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.
4. FEES AND OTHER
TRANSACTIONS - CONTINUED
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$11,000 for the period.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that no
payments were made to third parties under the Plan.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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. Swayze, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S 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 Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
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 Intermediate Municipal
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
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
AGGRESSIVE MUNICIPAL
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
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.
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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888 FOR
A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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. A fund's total
return 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 to measure
performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Aggressive Municipal 2.20% 0.68% 8.63%
Lehman Brothers Municipal Bond Index 2.80% 1.88% n/a
Average High Yield Municipal Bond Fund 2.43% 1.06% n/a
Consumer Price Index 1.28% 2.86% 4.79%
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 April 29, 1993. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Lehman Brothers Municipal Bond index - a broad gauge of the municipal bond
market. To measure how the fund's performance stacked up against its peers,
you can compare it to the average high yield municipal bond fund, which
reflects the performance of 38 funds with similar objectives tracked by
Lipper Analytical Services during the period covered by this report. Both
benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Aggressive Municipal 0.68% 4.60%
Lehman Brothers Municipal Bond Index 1.88% n/a
Average High Yield Municipal Bond Fund 1.06% n/a
Consumer Price Index 2.86% 2.58%
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 Aggressive MMunicipal Bond Index
04/30/93 10000.00 10000.00
05/31/93 10111.64 10056.00
06/30/93 10292.53 10223.94
07/31/93 10315.65 10237.23
08/31/93 10551.38 10450.16
09/30/93 10724.42 10569.29
10/31/93 10748.10 10589.37
11/30/93 10656.40 10496.19
12/31/93 10896.03 10717.66
01/31/94 11021.66 10839.84
02/28/94 10776.71 10559.09
03/31/94 10253.21 10129.33
04/30/94 10327.49 10215.43
05/31/94 10413.95 10304.31
06/30/94 10368.72 10244.54
07/31/94 10562.24 10432.02
08/31/94 10616.12 10468.53
09/30/94 10464.17 10314.64
10/31/94 10258.74 10131.04
11/30/94 9996.55 9947.67
12/31/94 10230.34 10166.52
01/31/95 10543.13 10457.28
02/28/95 10850.76 10761.59
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Aggressive Municipal Fund on April 30, 1993, shortly after the fund
started. As the chart shows, by February 28, 1995, the value of your
investment with dividends reinvested would have grown to $10,851 - an 8.51%
increase on your initial investment. This assumes you still owned the fund
on February 28, 1995 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 $10,762 - a 7.62% 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
APRIL 29, 1993
SIX MONTHS (COMMENCEM
ENDED YEAR ENDED ENT OF
FEBRUARY 28, AUGUST 31, OPERATIONS) TO
1995 1994 AUGUST 31,
1993
Dividend return 3.23% 5.84% 2.14%
Capital appreciation return -1.03% -5.24% 3.49%
Total return 2.20% 0.60% 5.63%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST
MONTH MONTHS 1 YEAR
Dividends per share 4.60(cents) 30.25(cents) 60.42(cents)
Annualized dividend rate 6.25% 6.50% 6.30%
30-day annualized yield 6.46% - -
30-day annualized tax-equivalent 10.09% - -
yield
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 $9.60 over
the past month, $9.39 over the past six months and $9.59 over the past
year, you can compare the fund's income over these three 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 36% tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Maureen Newman, Portfolio Manager of Spartan Aggressive
Municipal Fund
Q. MAUREEN, HOW DID THE FUND PERFORM?
A. About average during the most recent period. For the six months ended
February 28, 1995, the fund had a total return of 2.20%. That compared to
the average high yield municipal bond fund's return of 2.43% for the same
period, according to Lipper Analytical Services. For the 12 months ended
February 28, 1995, the fund returned 0.68%, lagging the average fund's
return of 1.06%, again according to Lipper.
Q. CAN YOU UPDATE US ON WHAT'S BEEN HAPPENING WITH THE MUNICIPAL BOND
MARKET?
A. From September to November, bond prices continued to decline because of
signs of economic strength and the fear of inflation. Starting in November
and throughout February, however, bond prices rebounded as investors began
to believe that the Federal Reserve Board's interest rate hikes were having
their intended effect of slowing down the economy, thereby reducing the
risk of inflation.
Q. WHAT ACCOUNTS FOR THE FUND'S PERFORMANCE DURING THE PAST SIX MONTHS?
A. On the negative side, health care bonds - which made up 29.3% of the
fund's investments at the end of the period - performed poorly during the
past six months due to continued concerns about consolidation of the health
care industry.
Q. WHAT WERE SOME OF THE POSITIVES?
A. In terms of credit quality, insured and other high-quality bonds
performed well during the last six months. In terms of sectors, some
industrial revenue bonds were strong performers. Industrial revenue bonds
are issued for corporations for various public purposes and therefore are
tax-exempt. In particular, airline bonds such as Delta Airlines and
supermarket bonds like Kroger were among the fund's top performers.
Airlines in general did well on the heels of an improving economy and
internal cost-cutting programs. Many investors now believe that there is
the potential for these bonds to be upgraded in the future, which also has
helped boost their prices. Kroger, too, benefited from an improving economy
and expectations that its bonds could be upgraded. While neither of these
has yet been upgraded, I believe that each could be, which might help their
prices even more. As a result, I'll most likely continue to hold on to
these bonds for the foreseeable future.
Q. THERE'S BEEN AN INCREASE IN THE FUND'S STAKE IN RESOURCE RECOVERY BONDS
OVER THE PAST SIX MONTHS. WHAT'S BEHIND THAT MOVE?
A. Resource recovery bonds are issued to fund waste recycling projects. One
type of resource recycling project I've purchased recently is bonds issued
for paper recycling plants. There are a number of reasons these issues are
attractive. First, President Clinton recently mandated that all federal
agencies must use a certain amount of recycled paper, which in turn,
created an increased demand for recycled products. At the same time, the
collection of paper and other waste has become more cost effective.
Finally, these bonds offer relatively high yields. At the end of the
period, resource recovery bonds made up 6.5% of the fund's investments.
Q. HAVE YOU MADE ANY CHANGES IN HOW YOU'RE ALLOCATING THE FUND'S
INVESTMENTS IN BONDS WITH VARIOUS MATURITIES?
A. Yes. I've recently started selling some longer-term bonds - with
maturities of 20 years or more - and in their place bought
intermediate-term bonds - with maturities in the 10- to 15-year range. That
change and others resulted in a shorter duration for the fund. Duration
measures how sensitive the fund's share price is to changing interest
rates. The shorter the duration, the less sensitive the fund's share price
is when interest rates are rising or falling. Since I believe the market
will be less volatile in 1995 than it was in 1994, I most likely will
maintain this shorter duration and focus on generating income for the fund.
Q. IN TERMS OF STATE CONCENTRATIONS, HOW HAVE YOU ALLOCATED THE FUND'S
INVESTMENTS?
A. Bonds from Michigan issuers made up the fund's largest state
concentration, at 17.2% of investments at the end of the period, and
accounted for a portion of the fund's health care bonds. Unlike some states
which tend to have more private hospitals, Michigan has many that are
tax-exempt. That means that the supply of tax-exempt hospital bonds is
fairly abundant, and they also provide attractive yields. California was
the fund's second largest state concentration at 10.8%. Almost two-thirds
of the fund's California bonds are insured. In general, I think that the
California economy is doing a bit better - evidenced by rising housing and
retail sales and declining unemployment. So I'll probably maintain the
fund's stake in California going forward. Investors probably have heard
that Orange County, California, declared bankruptcy because of losses in
its investment pool. The fund holds two bonds - which made up less than 3%
of the fund's investments at the end of the period - affected by this
situation. However, both bonds are insured, so their principal and interest
payments are guaranteed by an AAA-rated municipal bond insurance company.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET IN 1995?
A. Overall, I think the municipal bond market will be less volatile in 1995
than it was in 1994. Turning to the high-yield sector of the municipal bond
market, there are a couple of positives. In my view, the supply of
high-yielding, lower-quality bonds could remain low this year. Demand for
municipal bonds, on the other hand, has started to rise again, a trend that
could continue. The combination of low supply and stable demand could work
in the favor of lower-quality, high-yielding bonds. In my view, investors
who focus on high-yielding investments could do well this year.
FUND FACTS
GOAL: to provide high current
income exempt from federal
taxes by investing primarily
in medium- and lower-quality
securities
START DATE: April 29, 1993
SIZE: as of February 28,
1995, more than $64 million
MANAGER: Maureen
Newman, since October 1994;
manager, Fidelity Michigan
Tax-Free High Yield Portfolio,
since July 1994; Spartan
Arizona Municipal Income
Portfolio, since October
1994; Spartan Connecticut
Municipal High Yield
Portfolio, since July 1994;
bond analyst, 1985 to 1994;
joined Fidelity in 1985
(checkmark)
MAUREEN NEWMAN'S
INVESTMENT STRATEGY:
"I start with fundamental
research - checking
investment options issuer
by issuer - to come up with
investment ideas relating to
changes in credit quality. I try
to stay ahead of the market
and rating agencies, looking
for quality trends before they
happen, in order to buy into
good situations on their way
up and get out of securities
before the market realizes
potential problems.
Diversification is also a key,
as I try to keep a good mix of
coupons and maturities in the
fund which can reduce its
overall volatility. I also
balance the fund's
higher-yielding bonds with
higher-rated bonds such as
insured bonds."
(solid bullet) Inverse floaters, one of the
financial arrangements
known as derivatives, made
up less than 2.4% of the
fund's investments at the end
of the period. The yield on
inverse floaters rises as
short-term rates fall and vice
versa. By using various
derivatives, the manager
hopes to achieve higher
levels of tax-exempt income
and increased flexibility in
managing the fund's overall
sensitivity to changes in
interest rates. However, these
strategies can involve
additional risk to the fund and
don't always work as
intended.
(solid bullet) As of October 1, 1994,
Maureen Newman became
the fund manager.
INVESTMENT CHANGES
TOP FIVE STATES AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Michigan 17.2 8.1
California 10.8 13.1
Pennsylvania 8.7 9.1
Kentucky 8.2 9.7
Maryland 6.1 0.0
TOP FIVE SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Health Care 29.3 24.6
Industrial Development 21.3 24.6
Special Tax 10.2 7.6
Electric Revenue 8.1 10.4
Resource Recovery 6.5 1.8
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 17.8 20.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 7.7 9.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO
CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A
BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994
11
Aaa 20.8%
Aa, A 11.7%
Baa 18.1%
Ba or B 18.2%
Non-rated 24.9%
Short-term
investments 6.3%
Aaa 14.0%
Aa, A 20.4%
Baa 18.7%
Ba or B 24.3%
Non-rated 20.3%
Short-term
investments 2.3%
Row: 1, Col: 1, Value: 6.3
Row: 1, Col: 2, Value: 24.9
Row: 1, Col: 3, Value: 18.2
Row: 1, Col: 4, Value: 18.1
Row: 1, Col: 5, Value: 11.7
Row: 1, Col: 6, Value: 20.8
Row: 1, Col: 1, Value: 2.3
Row: 1, Col: 2, Value: 22.1
Row: 1, Col: 3, Value: 23.7
Row: 1, Col: 4, Value: 18.4
Row: 1, Col: 5, Value: 19.8
Row: 1, Col: 6, Value: 13.7
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT FEBRUARY 28, 1995
AND AUGUST 31, 1994 ACCOUNT FOR 22.5% AND 17.7%, RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 93.7%
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
ALABAMA - 1.1%
Cullman Med. Park South Med. Clinic
Board Rev. (Cullman Reg. Med. Ctr.)
Series A, 6.50% 2/15/13 Baa $ 750,000 $ 681,563
ARKANSAS - 0.9%
Fayetteville Pub. Facs. Board. Rev. Rfdg.
(Butterfield Trail Village Proj.)
Series A, 8.25% 9/1/00 - 550,000 551,375
CALIFORNIA - 10.8%
Alameda County Ctfs. of Prtn. Rfdg.
(Santa Rita Jail Proj.) 5.375% 6/1/09,
(MBIA Insured) Aaa 770,000 730,538
California Statewide Commty. Dev. Corp.
Rev. Ctfs. of Prtn. (Sisters of Charity
Leavenworth) 5% 12/1/23 Aa 500,000 396,250
La Quinta Redev. Agcy. Tax Allocation Rfdg.
(Redev. Proj. Area #1) 7.30% 9/1/12,
(MBIA Insured) Aaa 470,000 536,975
Los Angeles Bldg. Auth. Lease Rev. Rfdg.
(California St. Dept. Gen. Svcs.)
Series A, 5.625% 5/1/11 A 1,000,000 910,000
San Bernardino County Ctfs. of Prtn.
(Med Ctr. Fing. Proj.) 5.50% 8/1/17 Baa1 1,000,000 833,750
Santa Clara County Fin. Auth. Lease Rev.
(VMC Replacement Proj.) Series A, 7.75%
11/15/08, (AMBAC Insured) Aaa 1,000,000 1,190,000
Santa Margarita/Dana Point Auth. Rev.
(Impt. Dists. 1-2-2A & 8) Series A, 7.25%
8/1/10, (MBIA Insured) Aaa 1,045,000 1,189,994
So. Orange County Pub. Fin. Auth. Spl.
Tax Rev. (Foothill Area) Series C,
8% 8/15/08, (FGIC Insured) Aaa 500,000 605,000
Upland Ctfs. of Prtn. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A 500,000 444,375
6,836,882
COLORADO - 5.3%
Colorado Health Facs. Auth. Rev.:
(Hosp.-Swedish Med. Ctr. Proj.)
Series A, 6.80% 1/1/23 Baa1 500,000 489,375
(PSL Health Sys. Proj.) Series A,
6.875% 2/15/23 Baa1 1,850,000 1,782,938
(Rocky Mountain Adventist) 6.625% 2/1/13 Baa 1,000,000 937,500
Colorado Springs Arpt. Rev. (Cap.
Appreciation) Series C, 0% 1/1/06 BBB 250,000 125,938
3,335,751
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
CONNECTICUT - 2.3%
Connecticut Health & Ed. Facs. Auth. Rev.
(Quinnipiac Coll.) Series D, 6% 7/1/13 BBB- $ 1,000,000 $ 902,500
Connecticut Hsg. Fin. Auth. (Hsg. Mortgage
Fin. Prog.) Subseries B-1, 6.50% 5/15/18 Aa 200,000 201,250
Eastern Connecticut Res. Recovery Auth. Solid
Waste Rev. (Wheelabrator Lisbon Proj.)
Series A, 5.50% 1/1/20 (c) A 400,000 334,500
1,438,250
FLORIDA - 1.7%
Martin County Ind. Dev. Auth. Rev. Rfdg.
(Indiantown Cogeneration L.P. Proj.)
8.05% 12/15/25 (c) Baa3 1,000,000 1,072,500
ILLINOIS - 2.5%
Illinois Dev. Fin. Auth. Solid Wst. Disp.
Rev. (Ford Heights Wst. Tire Proj.)
7.875% 4/1/11 (c) - 1,100,000 1,046,375
Metropolitan Pier & Expo Auth. Rfdg. (Cap.
Appreciation) (McCormick Place Expansion
Proj.) 0% 6/15/08, (MBIA Insured) Aaa 1,155,000 516,863
1,563,238
INDIANA - 4.9%
Fishers Econ. Dev. Rev. (1st Mtg. United
Student Funds, Inc.) 8.375% 9/1/14 - 1,500,000 1,561,875
Greensburg Ind. Economic Dev.
(Kroger Co. Proj.) Rev. Rfdg. 7.25% 6/1/11 Ba2 1,000,000 1,017,500
Indiana Bond Bank Rev. (State Revolving
Fund Program) Series A, 7% 2/1/05 A 500,000 535,000
3,114,375
KENTUCKY - 8.2%
Kenton County Arpt. Board Arpt. Rev.
(Spl. Facs. Delta Airlines Proj.) Series A (c):
6.125% 2/1/22 Ba1 1,420,000 1,235,400
7.125% 2/1/21 Ba1 2,000,000 1,965,000
Owensboro Hosp. Rev. (Children's Psychiatric
Hosp. Western Proj.) 13% 11/1/10 - 915,000 947,025
Winchester Ind. Bldg. Rev. Rfdg.
(Kroger Co.) 7.75% 7/1/12 (b) Ba2 1,000,000 1,061,250
5,208,675
LOUISIANA - 1.6%
Port New Orleans Ind. Dev. Rev. Rfdg.
(Continental Grain Co. Proj.) 7.50% 7/1/13 (b) BB- 1,000,000 997,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
MARYLAND - 4.7%
Baltimore County Poll. Cont. Rev. Rfdg.
(Bethlehem Steel Proj.) Series B, 7.50% 6/1/15 - $ 1,000,000 $ 1,005,000
Maryland Energy Fing. Administration Ltd.
Oblig. Solid Waste Disp. Facs. Recycling
Rev. Bonds (Hagerstown Fiber Ltd. Partners 94)
9% 10/15/16 (c) - 1,000,000 1,031,250
Northeast Maryland Waste Disp. Auth. Solid
Waste Rev. (Montgomery County Resources
Recovery Proj.) Series A, 6.30% 7/1/16 (c) A 1,000,000 961,250
2,997,500
MASSACHUSETTS - 4.6%
Massachusetts Health & Edl. Facs. Auth. Rev.
(Beth Israel Hosp.) Series G, 5.75%
7/1/12, (AMBAC Insured) Aaa 2,500,000 2,418,743
Massachusetts Ind. Fin. Agcy. (Reeds Landing
Lifecare Center Proj.) 8.625% 10/1/23 - 300,000 292,875
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. (Reg. Inflos) Series A,
5.47% 7/1/18 (d) Aaa 250,000 203,438
2,915,056
MICHIGAN - 13.9%
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.)
5.25% 9/30/12 A 1,500,000 1,316,250
Greater Detroit Resources Recovery Auth.
Rev. Series G, 9.25% 12/13/08 BBB- 1,000,000 1,045,000
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit-Macomb Hosp. Corp.) Series A:
7.30% 6/1/01 B 750,000 735,938
7.40% 6/1/13 B 500,000 458,750
(Pontiac Osteopathic Hosp.) 6% 2/1/24 (b) Baa1 1,000,000 806,250
(Port Huron Hosp.) Series A, 7.625% 7/1/15 Baa 1,000,000 1,000,000
(Saratoga Commty. Hosp.) 8.75% 6/1/10 - 485,000 509,856
Michigan Strategic Fund Ltd. Gen. Oblig. Rev.
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 (c) - 1,000,000 1,048,750
Three Rivers Area Hosp. Auth. Rev. Series A:
10.80% 11/1/04 - 180,000 185,850
10.90% 11/1/05 - 215,000 222,256
11% 11/1/06 - 235,000 242,931
11% 11/1/07 - 265,000 273,944
Warren Consolidated School Dist. Rfdg.
(Macomb & Oakland Counties)
5.50% 5/1/14, (MBIA Insured) Aaa 1,000,000 933,750
8,779,525
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
MISSOURI - 0.8%
Kansas City Ind. Dev. Auth. (Kingswood
United Methodist Manor Proj.) Series 1993,
9% 11/15/13 - $ 500,000 $ 520,000
NEVADA - 0.7%
Las Vegas Redev. Agcy. Tax Increment Rev.
(Sub. Lien Fremont St. Proj. A)
6.10% 6/15/14 BBB+ 500,000 466,250
NEW JERSEY - 0.8%
Camden County Impt. Auth. Lease Rev.
(Holt Hauling) 8.40% 4/1/24 (c) - 500,000 506,250
NEW MEXICO - 4.0%
Albuquerque Retirement Facs. Rev. Rfdg.
(La Vida Liena Proj.) Series A, 8.85% 2/1/23 - 200,000 204,250
Farmington Poll. Cont. Rev.:
(Pub. Svc. Co. of New Mexico San Juan Proj.)
Series A, 6% 3/1/08 Ba2 2,040,000 1,858,950
6.40% 8/15/23 Ba2 500,000 442,500
2,505,700
NEW YORK - 5.8%
New York City Gen. Oblig.
Series B, 5.60% 8/15/06 Baa1 350,000 317,188
New York City Ind. Dev. Agcy. Spl. Facs. Rev.
(Terminal One Group Assoc. Proj.)
6% 1/1/19 (c) A 1,000,000 931,250
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.) Series A:
5.25% 5/15/15 Baa1 650,000 560,625
5.50% 5/15/13 Baa1 250,000 224,688
New York State Local Govt. Asst. Corp.
Rfdg. Series C, 5.50% 4/1/17 A 850,000 784,125
New York State Tollway Auth. Gen. Rev. Series B,
5% 1/1/14, (MBIA Insured) Aaa 1,000,000 881,250
3,699,126
OHIO - 1.6%
Ohio Solid Waste Rev. (Republic Engineered
Steels Proj.) 8.25% 10/1/14 (c) - 1,000,000 996,250
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
PENNSYLVANIA - 8.7%
Delaware County Auth. Rev. (1st. Mtg.)
(Riddle Village Proj.):
7% 6/1/00 - $ 600,000 $ 592,500
8% 6/1/99 - 350,000 357,438
Montgomery County Higher Ed. & Health
Auth. Hosp. Rev. (United Hosp., Inc.):
Series A, 8.375% 11/1/03 Ba1 135,000 140,400
Series B, 7.50% 11/1/15 Ba1 165,000 157,163
Pennsylvania Convention Ctr. Auth. Rev.
Rfdg. Series A, 6.70% 9/1/14 Ba 1,500,000 1,430,625
Philadelphia Hosp. & Higher Ed. Facs.
Auth. Rev. (Graduate Health System)
Series A, 6.25% 7/1/13 Baa1 250,000 221,563
Philadelphia Ind. Dev. Auth. Dev. Rev.
(Long Term Care, Maplewood)
8% 1/1/24 - 500,000 467,500
Somerset County Hosp. Auth. Rev. (Health
Care 1st Mortgage-GF) 8.40% 6/1/09 - 415,000 404,106
Southern Pennsylvania Trans. Auth. Spl.
6.50% 3/1/05, (FGIC Insured) Aaa 1,000,000 1,068,750
Warren County Ind. Dev. Auth. Specialized
Dev. Rev. Rfdg. (Beverly Enterprises, Inc.):
8.75% 11/1/06 - 125,000 134,531
9% 11/1/12 - 500,000 544,375
5,518,951
TEXAS - 3.3%
East Texas Health Facs. Dev. Corp. Hosp.
Rev. (Palestine) 7.80% 8/15/18 - 850,000 823,438
El Paso Prop. Fin. Auth. Single Family
Mtg. Rev. Series A, 8.70% 12/1/18,
(GNMA Coll.) (c) Aaa 795,000 856,613
Harris County Cultural & Ed. Facs.
Fin. Corp. (Space Ctr. Houston Proj.)
9.25% 8/15/15 - 300,000 264,000
Texas Nat'l. Research Lab Commission
Fing. Corp. Lease Rev. (Superconducting
Supercollider Proj.) 6.95% 12/1/12 A 150,000 153,375
2,097,426
VIRGINIA - 1.6%
Loudoun County Ind. Dev. Auth. Residential
Care Facs. Rev. (Falcons Landing Proj.)
Series A, 8.75% 11/1/24 - 1,055,000 1,044,450
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (A) AMOUNT (NOTE 1)
WASHINGTON - 3.9%
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #2 Rev.:
Rfdg. Series A, 0% 7/1/11,
(MBIA Insured) (b) Aaa $ 1,350,000 $ 491,063
5.12% 7/1/12 (d) Aa 500,000 387,500
5.41% 7/1/10, (FGIC Insured) Aaa 700,000 665,875
5.47% 7/1/10, (FGIC Insured) (d) Aaa 1,000,000 896,250
2,440,688
TOTAL MUNICIPAL BONDS
(Cost $60,259,810) 59,287,281
MUNICIPAL NOTES (E) - 6.3%
ARIZONA - 0.7%
Apache County Ind. Dev. Auth. (Tucson Elec.
Pwr. Co.) Series 1981B, 4.15% 10/1/21,
LOC Mitsubishi Bank Ltd., VRDN VMIG 1 200,000 200,000
Maricopa County Hosp. Rev. (Samaritan
Health Sys.) 3.80% 12/1/08, (MBIA Insured)
LOC Bank of America, VRDN VMIG 1 200,000 200,000
400,000
KANSAS - 0.9%
Olathe Edl. Facs. Rev. (College Assoc. Pooled
Ed. Loan Prog.) Series 1989 A, 4.20%,
LOC Marine Midland Bank, VRDN VMIG 1 560,000 560,000
MARYLAND - 1.4%
Montgomery County Hsg. Opportunity
Commission Hsg. Rev. (Draper Lane Apts.)
4.15%, (FGIC Insured) BPA Sumitomo
Bank Ltd., VRDN VMIG 1 900,000 900,000
MICHIGAN - 3.3%
Michigan Higher Ed. Student Loan
Auth. Rev., Series XII-D, 4.05%,
(AMBAC Insured) LOC Fuji Bank, VRDN VMIG 1 2,100,000 2,100,000
TOTAL MUNICIPAL NOTES
(Cost $3,960,000) 3,960,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $64,219,810) $ 63,247,281
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
10 Municipal Bond Index Futures Contracts March 1995 $ 906,875 $ (66,028)
20 U.S. Treasury Bond Futures Contracts March 1995 2,079,375 (125,182)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.7%
$ (191,210)
SECURITY TYPE ABBREVIATIONS
VRDN -Variable Rate Demand Notes
LEGEND
(a) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(b) 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 $865,181.
(c) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(d) 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.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 28.3% AAA, AA, A 30.8%
Baa 14.1% BBB 15.2%
Ba 14.7% BB 12.5%
B 0.0% B 1.9%
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 24.9%. FMR
has determined that unrated debt securities that are lower quality account
for 22.5% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 29.3%
Industrial Development 21.3
Special Tax 10.2
Others (individually less than 10%) 39.2
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $64,219,810. Net unrealized depreciation aggregated
$972,529, of which $1,003,260 related to appreciated investment securities
and $1,975,789 related to depreciated investment securities.
The fund has elected to defer to its fiscal year ending August 31, 1995,
$726,000 of losses recognized during the period November 1, 1993 to August
31, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $64,219,810) - $ 63,247,281
See accompanying schedule
Cash 1,211,114
Interest receivable 1,027,865
Redemption fees receivable 42
TOTAL ASSETS 65,486,302
LIABILITIES
Payable for investments purchased $ 1,077,065
Payable for fund shares redeemed 2,291
Dividends payable 83,685
Accrued management fee 28,388
Payable for daily variation on futures contracts 11,563
TOTAL LIABILITIES 1,202,992
NET ASSETS $ 64,283,310
Net Assets consist of:
Paid in capital $ 67,382,493
Accumulated undistributed net realized gain (loss) on (1,935,444)
investments
Net unrealized appreciation (depreciation) on (1,163,739)
investments
NET ASSETS, for 6,635,814 shares outstanding $ 64,283,310
NET ASSET VALUE, offering price and redemption price per $9.69
share ($64,283,310 (divided by) 6,635,814 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
INTEREST INCOME $ 2,070,064
EXPENSES
Management fee $ 175,186
Non-interested trustees' compensation 147
TOTAL EXPENSES 175,333
NET INTEREST INCOME 1,894,731
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (1,206,312)
Futures contracts 4,092 (1,202,220)
Change in net unrealized appreciation (depreciation) on:
Investment securities 671,906
Futures contracts (191,210) 480,696
NET GAIN (LOSS) (721,524)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,173,207
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED FEBRUARY AUGUST 31,
28, 1994
1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 1,894,731 $ 2,447,990
Net interest income
Net realized gain (loss) (1,202,220) (715,018)
Change in net unrealized appreciation (depreciation) 480,696 (1,891,220)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,173,207 (158,248)
FROM OPERATIONS
Distributions to shareholders: (1,894,731) (2,448,988)
From net interest income
From net realized gain - (26,999)
In excess of net realized gain - (29,073)
TOTAL DISTRIBUTIONS (1,894,731) (2,505,060)
Share transactions 24,912,611 65,586,929
Net proceeds from sales of shares
Reinvestment of distributions 1,330,283 1,818,173
Cost of shares redeemed (22,988,199) (20,434,677)
Redemption fees 77,199 98,511
Net increase (decrease) in net assets resulting from 3,331,894 47,068,936
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,610,370 44,405,628
NET ASSETS
Beginning of period 61,672,940 17,267,312
End of period $ 64,283,310 $ 61,672,940
OTHER INFORMATION
Shares
Sold 2,662,208 6,489,653
Issued in reinvestment of distributions 141,614 181,929
Redeemed (2,467,844) (2,039,295)
Net increase (decrease) 335,978 4,632,287
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS YEAR ENDED APRIL 29, 1993
ENDED AUGUST 31, (COMMENCEME
FEBRUARY 28, NT OF
1995 OPERATIONS) TO
AUGUST 31,
(UNAUDITED) 1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.790 $ 10.350 $ 10.000
Income from Investment Operations .303 .603 .209
Net interest income
Net realized and unrealized gain (loss) (.112) (.564) .346
Total from investment operations .191 .039 .555
Less Distributions (.303) (.603) (.209)
From net interest income
From net realized gain on investments - (.010) -
In excess of net realized gain on - (.010) -
investments
Total distributions (.303) (.623) (.209)
Redemption fees added to paid in capital .012 .024 .004
Net asset value, end of period $ 9.690 $ 9.790 $ 10.350
TOTAL RETURN B 2.21% .61% 5.64%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 64,283 $ 61,673 $ 17,267
Ratio of expenses to average net assets .60% .60% .60%
A A
Ratio of net interest income to average net 6.48% 6.03% 6.24%
assets A A
Portfolio turnover rate 74% 64% 53%
A A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Aggressive Municipal 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 of their purchase date 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. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, 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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures,
market discount and losses deferred due to excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net interest income per share. Any taxable gain remaining at fiscal
year end is distributed in the following year.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to 1% 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
and written options involve, to varying degrees, risk of loss in excess of
the futures variation margin or the option value reflected in the Statement
of Assets and Liabilities. The underlying face amount at value is shown in
the schedule of investments under the caption "Futures Contracts." This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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 $21,465,990 and $20,592,972, respectively.
The market value of futures contracts opened and closed during the period
amounted to $7,613,336 and $4,814,204, 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 .60% of the fund's average net
assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$775 for the period.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. Swayze, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
United Missouri Bank, N.A.
Kansas City, MO
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S 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 Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
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 Intermediate Municipal
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
SPARTAN(registered trademark)
(registered trademark)
ARIZONA
MUNICIPAL
PORTFOLIOS
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT SUMMARY 9 A summary of the fund's
investments.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 13 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 17 How the fund has done over time.
FUND TALK 19 The manager's review of fund
performance, strategy and outlook.
INVESTMENT SUMMARY 21 A summary of the fund's
investments.
INVESTMENTS 22 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 29 Notes to the financial statements.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO
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
PERIOD ENDED FEBRUARY 28, 1995 LIFE OF
FUND
Spartan Arizona Municipal Income 5.85%
Lehman Brothers Municipal Bond Index n/a
Average Arizona Municipal Bond Fund n/a
Consumer Price Index 1.28%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, since the fund started on October 11,
1994. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. Once the
fund is six months old, you can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond Index - a broad gauge of
the municipal bond market. To measure how the fund's performance stacked up
against its peers (again, once it's six months old), you can compare it to
the average Arizona municipal bond fund, which reflects the performance of
30 Arizona municipal bond funds with similar objectives tracked by Lipper
Analytical Services during the period covered by this report. Both
benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date.)
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. Average annual returns for the fund and its
benchmarks will appear in the fund's next annual report, once the fund is
older; this next report will also show the effect of investing $10,000 OVER
THE LIFE OF THE FUND for both the fund and the Lehman Brothers Municipal
Bond Index.
TOTAL RETURN COMPONENTS
OCTOBER 11, 1994
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 28,
1995
Dividend return 2.26%
Capital appreciation
return 3.59%
Total return 5.85%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST LIFE OF
MONTH FUND
Dividends per share 4.66(cents) 21.44(cents)
Annualized dividend rate 5.93% 5.70%
30-day annualized yield 5.85% -
30-day annualized tax-equivalent yield 9.68% -
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 $10.25 over
the past month and $9.73 over the life of 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 39.58%
combined effective 1995 federal and state income tax bracket. If the
advisor had not reimbursed certain portfolio expenses during the period
shown, the yield and tax-equivalent yield would have been 5.30% and 8.77%,
respectively. A portion of the fund's income may be subject to the
alternative minimum tax.
SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Maureen Newman,
Portfolio Manager of Spartan Arizona
Municipal Income Portfolio
Q. MAUREEN, HOW HAS THE FUND PERFORMED?
A. Fairly well, but since the fund has been operating for such a short
time, any comparison of its performance with other funds of its type would
be misleading. That said, from the start of its operations on October 11,
1994, through February 28, 1995, the fund returned 5.85%.
Q. WHAT HAS THE MUNICIPAL BOND MARKET BEEN LIKE SINCE OCTOBER?
A. In October, bond prices continued to decline due to signs of economic
strength and the fear of higher inflation. From November through February,
however, bond prices rebounded as investors began to believe that the
Federal Reserve Board's interest rate hikes were having their intended
effect of slowing down the economy, thereby reducing the risk of inflation.
Q. HOW HAVE YOU INVESTED THE FUND SO FAR?
A. I have purchased bonds with a variety of credit qualities, but
emphasized high-quality bonds. At the end of February, 53.3% of the fund's
investments were in high-quality bonds, or those rated Aa or Aaa by Moody's
Investors' Services. I did invest some of the fund in high-yielding,
lower-quality investment-grade and non-investment grade bonds because they
can provide additional income to the fund. Lower-quality investment-grade
bonds rated A and Baa were 37.1% of investments at the end of February.
Finally, bonds rated below Baa made up just 3.3% of the fund's investments.
Q. HOW DO BONDS ISSUED BY GUAM, PUERTO RICO AND THE U.S. VIRGIN ISLANDS
QUALIFY FOR INCLUSION IN THE FUND?
A. As territories of the United States, Guam, Puerto Rico and the U.S.
Virgin Islands may issue municipal bonds free from local, state and federal
income taxes in all 50 states. Demand for these bonds is very strong
because of that broad tax-exempt status. I think that demand will continue
to be strong because supply in the overall municipal market has dropped off
substantially since 1993. For state municipal bond mutual funds that must
invest in bonds exempt from state taxes, these territorial bonds serve as a
good tax-free proxy for bonds issued in the home state. At the end of
February, the fund's stake in territorial bonds was about 27%, of which
about one third are pre-refunded. That means that their principal and
interest payments are backed by treasury securities. Going forward, I'll
most likely reduce the fund's stake in U.S. territorial bonds as
opportunities to purchase Arizona securities arise.
Q. WHAT SECTORS ARE YOU EMPHASIZING CURRENTLY?
A. Electric revenue bonds, for one. They made up 25.1% of the fund's
investments at the end of February. Some of the fund's largest holdings in
this sector include Salt River Project, which is an electric utility in the
Phoenix area and Public Service of New Mexico (PSNM). The Salt River bond
is rated Aa, and the utility has a strong management team and low consumer
rates. PSNM has been aggressively reducing its debt and its bonds have the
potential for a credit rating upgrade. While PSNM is headquartered in New
Mexico, it owns a portion of a plant in Arizona, so some of its bonds have
tax-exempt status in Arizona. There has been concern about increased
competition in the electric utility sector, so I've concentrated the fund's
electric holdings in utilities that I think are less susceptible to
competitive pressures. Since the U.S. territories are islands, there is
virtually no competition from electric producers elsewhere, so I've also
invested in Puerto Rico Electric and Guam Power. Local and state general
obligation bonds were the fund's largest sector concentration at the end of
the period. In this sector, I've emphasized local school districts and some
local insured bonds.
Q. DURING 1994, MARICOPA COUNTY'S CREDIT RATING WAS DOWNGRADED BECAUSE OF
SOME FISCAL PROBLEMS THE COUNTY EXPERIENCED. IS THE FUND INVESTED IN ANY
MARICOPA COUNTY BONDS?
A. Yes, the fund had roughly 6.5% of investments in securities issued by
Maricopa County at the end of the period. Since the fund commenced
operations after the downgrade, I bought these at their new credit rating
of A, which is an investment-grade rating. In my view, the downgrade
reflects some short-term problems which won't affect the county's viability
over the long-term. The problems Maricopa County experienced stemmed mostly
from inadequate administrative and financial controls, which recently it
has taken steps to remedy. What's more, the county's economy is quite
strong. Together, improving fiscal controls and a strong economy are
positives for Maricopa bonds. Once the county has worked through its
problems, which may take a couple of years, it's credit rating could be
upgraded. Improvements in credit quality could, in turn, help the prices of
securities issued by the county.
Q. WHAT'S YOUR OUTLOOK FOR ARIZONA MUNICIPAL BONDS?
A. The state's economy is well diversified and has been very strong
recently, which has translated into a very favorable fiscal picture. After
the period ended, the legislature passed a reduction in the top state
income tax bracket from 6.9% to 5.6%. Despite this modification, Arizona
tax-free bonds currently remain attractive investments.
Q. WHAT CAN INVESTORS EXPECT IN 1995?
A. I believe that interest rates probably will be more stable in 1995 than
they were in 1994. If I am correct, it's likely that bond prices will be
more stable as well. In that type of environment, the fund's total return
will be less dependent on bond prices rising and more dependent on the
level of income the bonds pay. So I'll continue to concentrate on pursuing
a high level of income for the fund. I'll do that primarily by investing a
limited portion of the fund in higher-yielding, lower-rated
investment-grade bonds, with improving credit fundamentals.
FUND FACTS
GOAL: to provide a high level
of current income exempt from
Arizona state and federal
income taxes by investing
primarily in long-term,
investment-grade
Arizona municipal securities
START DATE: October 11, 1994
SIZE: as of February 28,
1995, more than $6 million
MANAGER: Maureen Newman,
since October 1994; manager,
Fidelity Michigan Tax-Free
High Yield Portfolio, since July
1994; Spartan Aggressive
Municipal Fund, since October
1994; Spartan Connecticut
Municipal High Yield Portfolio,
since July 1994; bond analyst,
1985 to 1994; joined Fidelity in
1985
(checkmark)
MAUREEN NEWMAN'S
INVESTMENT STRATEGY:
"I start with fundamental
research - checking
investment options issuer by
issuer - to come up with
investment ideas relating to
changes in credit quality.
Improvements in a bond's
credit quality can translate
into a higher price for that
bond. I try to stay ahead of the
market and the rating
agencies, looking for quality
trends before they happen, in
order to buy into good
situations on their way up and
to get out of securities before
the market realizes potential
problems. Diversification is
also a key, as I try to keep a
good mix of coupons -
stated interest rates - and
maturities in the fund, which
can reduce its overall
volatility."
SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO
INVESTMENT SUMMARY
TOP FIVE SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S
INVESTMENTS
General Obligation 29.7
Electric Revenue 25.1
Water & Sewer 11.7
Transportation 9.9
Escrowed/Pre-refunded 7.8
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995
Years 14.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
Years 7.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995
Aaa 39.2%
Aa, A 27.3%
Baa 23.9%
Ba, B 3.3%
Non-rated 1.6%
Short-term
investments 4.7%
Row: 1, Col: 1, Value: 39.2
Row: 1, Col: 2, Value: 27.3
Row: 1, Col: 3, Value: 23.9
Row: 1, Col: 4, Value: 3.5
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 6, Value: 4.7
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 95.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
ARIZONA - 68.8%
Arizona Pwr. Auth. Pwr. Resources Rev. Rfdg.
(Hoover Uprating Proj.) 5.25% 10/1/17
(MBIA Insured) Aaa $ 100,000 $ 89,250
Arizona Trans. Board Hwy. Rev. Rfdg.
5.25% 7/1/09 Aa 300,000 279,375
Arizona Univ. Rev. Rfdg. Series A,
5.75% 7/1/12 A1 100,000 97,875
Central Arizona Wtr. Conservation Dist.
Contract Rev. Rfdg. (Central Arizona Proj.)
Series A, 5.50% 11/1/10 A1 100,000 97,000
Cochise County Unified School Dist. #68
(Sierra Vista) 9% 7/1/02 (FGIC Insured) Aaa 200,000 242,750
Glendale Ind. Dev. Auth. Edl. Facs. Rev. Rfdg.
(American Graduate School Int'l.)
6.55% 7/1/06 (Connie Lee Insured) AAA 150,000 161,438
Maricopa County Cfts. of Prtn.
5.625% 6/1/00 Baa 450,000 438,188
Maricopa County Poll. Cont. Corp. Poll. Cont.
Rev. (Pub. Svc. Co. New Mexico - Palo Verde)
7.75% 11/1/09 Ba2 200,000 207,750
Maricopa County School Dist. #6
(Washington Elementary) Series A,
5.50% 7/1/11 (AMBAC Insured) Aaa 200,000 191,250
Maricopa County Unified School Dist. #69
(Paradise Valley) 5% 7/1/08
(AMBAC Insured) (f) Aaa 300,000 275,250
Phoenix Civic Impt. Corp. Wtr. Sys. Rev.
(Jr. Lien) 5.45% 7/1/19 A1 500,000 458,125
Phoenix Gen. Oblig. Rfdg. Series B,
5.50% 7/1/16 Aa 100,000 92,125
Phoenix Street & Hwy. User Rev. Rfdg. (Jr. Lien):
Series A, 0% 7/1/13 (FGIC Insured) Aaa 350,000 112,875
6.25% 7/1/11 (MBIA Insured) Aaa 250,000 257,813
Salt River Proj. Agricultural Impt. & Pwr. Dist.
Elec. Sys. Rev. Rfdg. Series B, 6.50%
1/1/04 Aa 400,000 436,000
Scottsdale Gen. Oblig. Rfdg. 5.50% 7/1/09 Aa1 100,000 96,000
Tempe Union High School Dist. #213
Rfdg. & Impt. 7% 7/1/08
(FGIC Insured) Aaa 310,000 349,912
Tucson Gen. Oblig.:
Series 1984 G, 6.25% 7/1/18
(FGIC Insured) Aaa 100,000 101,750
6.75% 7/1/03 (FGIC Insured) (e) Aaa 200,000 217,747
Tucson Wtr. Rev. Rfdg. Series A, 5.75%
7/1/18 A1 200,000 191,500
4,393,973
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
PUERTO RICO - 21.1%
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Hwy. Rev. 5.50% 7/1/17 Baa1 $ 100,000 $ 91,625
Puerto Rico Commonwealth Pub. Impt.
Gen. Oblig. 6.80% 7/1/21
(Pre-refunded to 7/1/02 @ 101.5) (d) AAA 250,000 280,000
Puerto Rico Elec. Pwr. Auth. Pwr. Rev.:
Rfdg. Series N, 5% 7/1/12 Baa1 150,000 131,625
Series O, 5% 7/1/12 Baa1 450,000 394,875
7.125% 7/1/14
(Pre-refunded to 7/1/99 @ 101.5) (d) AAA 200,000 220,000
Puerto Rico Pub. Bldgs. Auth. Guaranteed
Pub. Ed. & Health Facs. Rfdg. Series M,
5.50% 7/1/21 Baa1 250,000 225,938
1,344,063
U.S. VIRGIN ISLANDS - 1.6%
Virgin Islands Pub. Fin. Auth. Rev. Rfdg.
Series A, 7.25% 10/1/18 - 100,000 103,125
GUAM - 3.8%
Guam Pwr. Auth. Rev. Series A, 6.30% 10/1/22 BBB 250,000 241,875
TOTAL MUNICIPAL BONDS
(Cost $5,823,337) 6,083,036
MUNICIPAL NOTES (A) - 4.7%
ARIZONA - 4.7%
Maricopa County Poll. Cont. Rev.
(Arizona Pub. Svc.) Series 1994 B, 3.90%,
LOC Morgan Guaranty Trust, VRDN P-1 100,000 100,000
Pinal County Ind. Dev. Poll. Cont. Rev. (Newmont
Mining Corp.) (Magna Copper Co. Proj.)
3.75%, LOC Nat'l. Westminster Bank, VRDN P-1 100,000 100,000
Yuma Ind. Dev. Auth. Ind. Rev. (Ardco Inc. Proj.)
4.15%, LOC Bank of Montreal & Harris Trust,
VRDN (c) A-1+ 100,000 100,000
TOTAL MUNICIPAL NOTES
(Cost $300,000) 300,000
TOTAL INVESTMENTS - 100%
(Cost $6,123,337) $ 6,383,036
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) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(c) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(f) Security was pledged to cover margin requirements for delayed delivery
purchases. At the period end, the value of securities pledged amounted to
$275,250.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 64.0% AAA, AA, A 79.8%
Baa 20.1% BBB 10.6%
Ba 3.3% BB 3.3%
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 1.6%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
General Obligation 29.7%
Electric Revenue 25.1
Water & Sewer 11.7
Others
(individually less than 10%) 33.5
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $6,123,337. Net unrealized appreciation aggregated
$259,699, of which $260,076 related to appreciated investment securities
and $377 related to depreciated investment securities
SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $6,123,337) - 5. $ 6,383,036
See accompanying schedule
6.Cash 7. 694,457
8.Receivable for investments sold 9. 201,348
10.Interest receivable 11. 72,537
12.Receivable from investment adviser for expense 13. 2,525
reductions
14. 15.TOTAL ASSETS 16. 7,353,903
17.LIABILITIES 18. 19.
20.Payable for investments purchased $ 278,134 21.
Regular delivery
22. Delayed delivery 218,985 23.
24.Dividends payable 4,912 25.
26.Accrued management fee 2,525 27.
28. 29.TOTAL LIABILITIES 30. 504,556
31.32.NET ASSETS 33. $ 6,849,347
34.Net Assets consist of: 35. 36.
37.Paid in capital 38. $ 6,560,550
39.Accumulated undistributed net realized gain (loss) on 40. 29,098
investments
41.Net unrealized appreciation (depreciation) on 42. 259,699
investments
43.44.NET ASSETS, for 661,433 shares outstanding 45. $ 6,849,347
46.47.NET ASSET VALUE, offering price and redemption 48. $10.36
price per share ($6,849,347 (divided by) 661,433 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED)
49.50.INTEREST INCOME 51. $ 93,237
52.EXPENSES 53. 54.
55.Management fee $ 8,844 56.
57.Non-interested trustees' compensation - 58.
59. Total expenses before reductions 8,844 60.
61. Expense reductions (8,844) -
62.63.NET INTEREST INCOME 64. 93,237
65.REALIZED AND UNREALIZED GAIN (LOSS) 67. 29,098
66.Net realized gain (loss) on investment securities
68.Change in net unrealized appreciation (depreciation) 69. 259,699
on investment securities
70.71.NET GAIN (LOSS) 72. 288,797
73.74.NET INCREASE (DECREASE) IN NET ASSETS 75. $ 382,034
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
OCTOBER 11, 1994
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 28, 1995
(UNAUDITED)
76.INCREASE (DECREASE) IN NET ASSETS
77.Operations $ 93,237
Net interest income
78. Net realized gain (loss) 29,098
79. Change in net unrealized appreciation (depreciation) 259,699
80. 81.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM 382,034
OPERATIONS
82.Dividends to shareholders from net interest income (93,237)
83.Share transactions 8,566,199
Net proceeds from sales of shares
84. Reinvestment of dividends from net interest income 80,094
85. Cost of shares redeemed (2,086,071)
86. Redemption fees 328
87. Net increase (decrease) in net assets resulting from share 6,560,550
transactions
88. 89.TOTAL INCREASE (DECREASE) IN NET ASSETS 6,849,347
90.NET ASSETS 91.
92. Beginning of period -
93. End of period $ 6,849,347
94.OTHER INFORMATION 96.
95.Shares
97. Sold 864,055
98. Issued in reinvestment of distributions 8,033
99. Redeemed (210,655)
100. Net increase (decrease) 661,433
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
101. OCTOBER 11, 1994
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 28, 1995
102. (UNAUDITED)
103.SELECTED PER-SHARE DATA
104.Net asset value, beginning of period $ 10.000
105.Income from Investment Operations .214
Net interest income
106. Net realized and unrealized gain (loss) .359
107. Total from investment operations .573
108.Less Distributions (.214)
From net interest income
109.Redemption fees added to paid in capital .001
110.Net asset value, end of period $ 10.360
111.TOTAL RETURN B 5.86%
112.RATIOS AND SUPPLEMENTAL DATA
113.Net assets, end of period (000 omitted) $ 6,849
114.Ratio of expenses to average net assets -
115.Ratio of expenses to average net assets before expense reductions .55%A
116.Ratio of net interest income to average net assets 5.80%A
117.Portfolio turnover rate 60%A
</TABLE>
A ANNUALIZED
B 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. SEE
NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period, reinvestment of its dividends (or income), and the
effect of the fund's $5 account closeout fee. Yield measures the income
paid by a fund. Since a money market fund tries to maintain a $1 share
price, yield is an important measure of performance.
If Fidelity had not reimbursed certain fund expenses during the periods
shown, the total returns and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED FEBRUARY 28, 1995 LIFE OF
FUND
Spartan Arizona Municipal Money Market 1.40%
Average All Tax-Free Money Market Fun 1.05%
d
Consumer Price Index 1.28%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a specific period - in this case, since the fund started on October
12, 1994. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050. To
measure how the fund's performance stacked up against its peers, you can
compare it to the average all tax-free money market fund's total return
which reflects the performance of 381 all tax-free money market funds
tracked by IBC/Donoghue during the period covered by this report. Comparing
the fund's performance to the consumer price index (CPI) helps show how
your fund did compared to inflation. (The CPI and IBC/Donoghue returns are
the closest available match to those covered by 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. Average annual returns for the fund and its
benchmarks will appear in the fund's next annual report, once the fund is
older.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
11/28/94 2/27/95
Spartan Arizona Municipal Money Market 3.76% 4.15%
If Fidelity had not reimbursed certain fund expenses 3.26% 3.65%
Average All Tax-Free Money Market Fund 3.10% 3.48%
Spartan Arizona Municipal Money Market - Tax-equivalent 6.22% 6.87%
If Fidelity had not reimbursed certain fund expenses 5.40% 6.04%
</TABLE>
Spartan Arizona
Municipal Money
Market
Average
All Tax-Free
Money Market
Fund
Row: 1, Col: 1, Value: 3.76
Row: 1, Col: 2, Value: 3.1
Row: 2, Col: 1, Value: 4.149999999999999
Row: 2, Col: 2, Value: 3.48
5% -
4% -
3% -
2% -
1% -
0%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals. You can compare these
yields to the average all tax-free money market fund. Or you can look at
the fund's tax-equivalent yield, which is based on a combined effective
1995 federal and state income tax rate of 39.58%. A portion of the fund's
income may be subject to the alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more meaningful.
Keep in mind that the U.S.
government neither insures nor
guarantees a money market
fund. In fact, there is no
assurance that a money fund
will maintain a $1 share price.
(checkmark)
SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Scott Orr, Portfolio
Manager of Spartan Arizona
Municipal Money Market Portfolio
Q. SCOTT, HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT SINCE THE FUND
BEGAN OPERATING LAST OCTOBER?
A. Because the fund is new, it avoided much of the turmoil that accompanied
the rapid series of rate increases by the Federal Reserve Board earlier in
the year. As recently as February 1994, the federal funds rate - the rate
banks charge each other for overnight loans - was only 3%. By the time the
fund opened to shareholders in October, there had already been five rate
increases in 1994 totalling one and three-quarters percentage points, and
the federal funds rate was 4.75%. Since then, while the rate increases have
continued, they've been both more predictable and more widely spaced than
before: three-quarters of a percentage point in November 1994, followed by
half a point in February 1995. By the end of the period, the federal funds
rate was 6%, higher than it had been in several years. Changes in the
federal funds rate are significant because they influence tax-free rates.
Q. WHAT CAN YOU TELL US ABOUT YOUR INVESTMENT STRATEGY?
A. As long as rates are rising, I'll usually try to shorten the fund's
average maturity in order to keep pace with market yields. That's been my
strategy so far. Throughout the fall and winter, therefore, I've been
defensive with the fund's average maturity, staying between 30 and 40 days.
In terms of security selection, Arizona is unlike most other states in that
the supply of general obligation bonds - securities issued by
municipalities for their short-term needs - is extremely limited. That's
partly a reflection of the strength of the Arizona economy. The upshot is
that while other state tax-free money market funds may be as much as 50%
invested in general obligation bonds, with this fund, the figure is closer
to 12%. That's not a problem. It just means that the fund focuses more on
tax-free securities issued by schools, hospitals and utilities.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven day yield on February 28, 1995, was 4.15%, which is the
equivalent of a 6.87% taxable yield for Arizona investors in the 39.58%
combined state and federal tax bracket. There's no point in making a
comparison now with the fund's yield in October because yields fluctuate
sharply when a fund is just starting out. That said, the fund's total
return from October 12, 1994, when the fund started through February 28,
1995 was 1.40%.
Q. WHAT CAN WE EXPECT IN THE MONTHS AHEAD?
A. While it's not clear yet where the economy is heading, signs have been
accumulating lately that point toward a possible slow-down in the growth
rate. My own feeling is that while rates are unlikely to climb much higher
in the months ahead, it's too early to say whether they've peaked or not.
That's why I'll probably want to extend the fund's average maturity only
slightly in the months ahead - possibly beyond 40 days, but not much
farther than that, at least not until I see more firm signs of weakness in
key economic indicators such as job creation and consumer spending.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality, short-term,
Arizona municipal securities
START DATE: October 12, 1994
SIZE: as of February 28,
1995, more than $23 million
MANAGER: Scott Orr, since
October 1994; manager,
Fidelity
Connecticut Municipal Money
Market Portfolio and Fidelity
Michigan Municipal Money
Market Portfolio, since
October 1993; Fidelity New
Jersey Tax-Free Money
Market Portfolio and Spartan
New Jersey Municipal Money
Market Portfolio, since
January 1992; joined
Fidelity in 1989
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face
value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT SUMMARY
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS
2/28/95
0 - 30 68
31 - 90 23
91 - 180 5
181 - 397 4
WEIGHTED AVERAGE MATURITY
2/28/95
Spartan Arizona
Municipal Money Market 35 days
Average All Tax-Free
Money Market Fund* 39 days
ASSET ALLOCATION
AS OF FEBRUARY 28, 1995
Row: 1, Col: 1, Value: 64.0
Row: 1, Col: 2, Value: 26.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 10.0
Variable rate
demand notes
(VRDNs) 64%
Commercial
paper 26%
Tender bonds 0%
Municipal
notes 0%
Other 10%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ARIZONA - 95.0%
Apache County Ind. Dev. Auth. Rev.
(Tucson Elec. Pwr. Co. Springerville Proj.), VRDN:
Series 1983 B, 4.20%, LOC Bank of New York $ 200,000 $ 200,000
Series 1983 C, 4.10%, LOC Bankers Trust 300,000 300,000
Arizona Ed. Loan Mktg. Corp., VRDN (b):
Series 1990 A, 4.20%, LOC Fuji Bank (MBIA Insured) 200,000 200,000
Series 1991 A, 4.25%, LOC Dresdner Bank 900,000 900,000
Arizona Health Facs. Auth. Hosp. Sys. Rev. Bonds
(Samaritan Health Svcs.) 5.30% 12/1/95 (MBIA Insured) 1,000,000
1,003,961
Arizona Health Facs. Auth. Rev., VRDN:
(Samcor 1986 Loan Pool-Samaritan Health Care)
4.40% (FGIC Insured) 900,000 900,000
(Voluntary Hosp. Federation Pooled Loan Prog.):
Series 1985 A, 4.10% (FGIC Insured) 225,000 225,000
Series 1985 B, 4.10% (FGIC Insured) 200,000 200,000
Chandler Ind. Dev. Auth. Multi-Family Hsg. Rev. Rfdg.
(Southpark Apts.) 4.05%, LOC Citibank, VRDN 900,000 900,000
Coconino County Poll. Cont. Corp. Poll. Cont. Rev.
(Arizona Pub. Svc. Co.-Navajo Proj.) Series 1994 A,
4.30%, LOC Bank of America, VRDN (b) 900,000 900,000
Glendale Gen. Oblig. Bonds 7% 7/1/95 (FGIC Insured) 250,000 252,287
Maricopa County Ind. Dev. Auth. Rev. (Privado Park Apt.
Proj.) Series 1994 A, 4.25%, LOC Bank One,
VRDN (b) 1,300,000 1,300,000
Maricopa County Poll. Cont. Rev. Bonds:
Series 1985 D:
4.10%, tender 4/7/95 400,000 400,000
4.25%, tender 5/16/95 500,000 500,000
Series 1985 E:
4.25%, tender 5/12/95 250,000 250,000
4.20%, tender 5/18/95 100,000 100,000
Series 1985 F, 4.10%, tender 4/10/95 600,000 600,000
Maricopa County Poll. Cont. Rev. (Pub. Svc. Co. of
New Mexico Palo Verde Proj.) Series 1992 A, 4%,
LOC Canadian Imperial Bank of Commerce, VRDN (b) 700,000 700,000
Maricopa County Unified School Dist. #69 Participating VRDN,
Series PA-25, 4.20% (Liquidity Facility Merrill Lynch) (c) 800,000
800,000
Mohave County Ind. Dev. Auth. Ind. Dev. Rev. Bonds
Series 1993 E (b):
4%, tender 3/7/95 300,000 300,000
4.35%, tender 5/1/95 500,000 500,000
Phoenix Gen. Oblig. Bonds Series 1992 B, 5.80% 7/1/95 400,000 401,825
Phoenix Gen. Oblig. Rev. Series 1994-2, 3.75%
(BPA Morgan Guaranty Trust Co.), VRDN 200,000 200,000
Phoenix Ind. Dev. Board Multi-Family Hsg. Rev. (Lynwood
Apt. Proj.) Series 1994, 4.15%, LOC FHLB, VRDN 900,000 900,000
Pima County Ind. Dev. Auth. Ind. Rev. Rfdg. (Tucson Retirement
Ctr. Proj.) 4%, LOC Swiss Bank Corp., VRDN 1,000,000 1,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ARIZONA - CONTINUED
Pima County Ind. Dev. Auth. Multi-Family Rev.
(Quail Ridge Apt.-B) 4.25%, LOC Bank One, VRDN $ 500,000 $ 500,000
Pinal County Ind. Dev. Auth. Ind. Dev. Rev.
(Sunbelt Refining Co. LP Proj.) Series 1988,
4.45%, LOC Bankers Trust, VRDN (b) 600,000 600,000
Pinal County Ind. Dev. Poll. Cont. Rev.
(Magna Copper Co. Proj.) VRDN:
Series 1984, 3.75%, LOC Nat'l. Westminster Bank PLC 900,000 900,000
Series 1984A, 3.75%, LOC Nat'l. Westminster Bank PLC 1,000,000
1,000,000
Salt River Proj. Agricultural Impt. and Pwr. Dist., CP:
4.10% 4/6/95 200,000 200,000
4.05% 4/10/95 300,000 300,000
4.05% 4/12/95 700,000 700,000
4.10% 4/12/95 300,000 300,000
4.20% 5/18/95 251,000 251,000
Scottsdale Gen. Oblig. Bonds Series 1994, 8.25% 7/1/95 225,000 228,056
Tempe Ind. Dev. Auth. Multi-Family Hsg. Rev. (Elliot's
Crossing Apts.) Series 1985, 3.85%, LOC Citibank, VRDN 800,000 800,000
Tucson Ind. Dev. Auth. Multi-Family Hsg. Rev., VRDN:
Rfdg. (Freedom Park Apts. Proj.) Series 1989 A, 4.20%,
LOC Sumitomo Bank Ltd. 600,000 600,000
(Lincoln Garden Proj.) 4.10%, LOC Sumitomo Bank Ltd. 300,000 300,000
Yavapai County Ind. Dev. Auth. Ind. Dev. Rev. Bonds
Series 1993, 4.30%, tender 5/11/95 (b) 600,000 600,000
Yuma Ind. Dev. Auth. Ind. Rev. (Ardco Inc. Proj.) 4.15%,
LOC Bank of Montreal & Harris Trust, VRDN (b) 400,000 400,000
21,612,129
PUERTO RICO - 5.0%
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Series J,
9.125% 7/1/15 320,000 334,773
Puerto Rico Gov't. Dev. Bank, CP:
3.25% 3/1/95 300,000 300,000
3.40% 3/6/95 300,000 300,000
4.10% 5/8/95 300,000 300,000
Puerto Rico Ind. Higher Ed. Rev. Bonds
(Inter-American Univ.) Series 1994 A,
4.10%, tender 5/8/95, LOC Banque Paribas 200,000 200,000
1,434,773
TOTAL INVESTMENTS - 100% $ 23,046,902
Total Cost for Income Tax Purposes $ 23,046,902
SECURITY TYPE ABBREVIATIONS
CP - Commercial Paper
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) Provides evidence of ownership in one or more underlying municipal
bonds.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED)
118.ASSETS 119. 120.
121.Investment in securities, at value - See 122. $ 23,046,902
accompanying schedule
123.Cash 124. 364,646
125.Interest receivable 126. 113,202
127. 128.TOTAL ASSETS 129. 23,524,750
130.LIABILITIES 131. 132.
133.Dividends payable 842
134.135.NET ASSETS 136. $ 23,523,908
137.Net Assets consist of: 138. 139.
140.Paid in capital 141. $ 23,523,918
142.Accumulated net realized gain (loss) on 143. (10)
investments
144.145.NET ASSETS, for 23,523,918 shares 146. $ 23,523,908
outstanding
147.148.NET ASSET VALUE, offering price and 149. $1.00
redemption price per share ($23,523,908 (divided by)
23,523,918 shares)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 12, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED)
150.151.INTEREST INCOME 152. $ 178,888
153.EXPENSES 154. 155.
156.Management fee $ 23,107 157.
158.Non-interested trustees' compensation - 159.
160. Total expenses before reductions 23,107 161.
162. Expense reductions (23,107) -
163.164.NET INTEREST INCOME 165. 178,888
166.167.NET REALIZED GAIN (LOSS) ON INVESTMENTS 168. (10)
169.170.NET INCREASE IN NET ASSETS RESULTING FROM 171. $ 178,878
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
OCTOBER 12, 1994
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 28, 1995
(UNAUDITED)
172.INCREASE (DECREASE) IN NET ASSETS
173.Operations $ 178,888
Net interest income
174. Net realized gain (loss) (10)
175. 178,878
176.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS
177.Dividends to shareholders from net interest income (178,888)
178.Share transactions at net asset value of $1.00 per share 30,848,033
Proceeds from sales of shares
179. Reinvestment of dividends from net interest income 174,761
180. Cost of shares redeemed (7,498,876)
181. 23,523,918
Net increase (decrease) in net assets and shares
resulting from share transactions
182. 23,523,908
183.TOTAL INCREASE (DECREASE) IN NET ASSETS
184.NET ASSETS 185.
186. Beginning of period -
187. End of period $ 23,523,908
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C>
188. OCTOBER 12, 1994
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 28, 1995
189. (UNAUDITED)
190.SELECTED PER-SHARE DATA
191.Net asset value, beginning of period $ 1.000
192.Income from Investment Operations .014
Net interest income
193.Less Distributions (.014)
From net interest income
194.Net asset value, end of period $ 1.000
195.TOTAL RETURN B 1.40%
196.RATIOS AND SUPPLEMENTAL DATA
197.Net assets, end of period (000 omitted) $ 23,524
198.Ratio of expenses to average net assets -
199.Ratio of expenses to average net assets before expense reductions .50%
A
200.Ratio of net interest income to average net assets 3.87%
A
</TABLE>
A ANNUALIZED
B 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. SEE
NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Arizona Municipal Income Portfolio (the income fund) is a fund of
Fidelity Union Street Trust. Spartan Arizona Municipal Money Market
Portfolio (the money market fund) is a fund of Fidelity Union Street Trust
II. Each trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company.
Fidelity Union Street Trust and Fidelity Union Street Trust II (the trusts)
are organized as a Massachusetts business trust and a Delaware business
trust, respectively. Each fund is authorized to issue an unlimited number
of shares. The following summarizes the significant accounting policies of
the funds:
SECURITY VALUATION.
INCOME FUND. 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 of their purchase date 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.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. Each fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. By so qualifying,
each fund will not be subject to income taxes to the extent that it
distributes all of its taxable income for its fiscal year. The income
fund's 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. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each 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.
REDEMPTION FEES. Shares held in the income 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. Each 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
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. Each fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the commitment. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
3. PURCHASES AND SALES OF
INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $6,811,675 and $1,019,190, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each 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% and .50% of average net assets
for the income and money market funds, respectively.
FMR also bears the cost of providing shareholder services to each fund. To
offset the cost of providing these services, FMR or its affiliates
collected certain transaction fees from shareholders which amounted to $0
and $57 for the income and money market funds, respectively.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse each fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses). For the period, the reimbursements reduced the expenses by
$8,844 and $23,107 for the income and money market funds, respectively.
6. BENEFICIAL INTEREST.
At the end of the period, an affiliate of FMR was record owner of
approximately 23% of the total outstanding shares of the income fund.
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr. , Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Michael D. Conway, Assistant Treasurer-
MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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*
Marvin L. Mann*
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
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
SPARTAN
(registered trademark)
(registered trademark)
MARYLAND
MUNICIPAL INCOME
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
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 15 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 19 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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 and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Maryland Municipal Income 2.08% -0.02% 6.11%
Lehman Brothers Municipal Bond Index 2.80% 1.88% n/a
Average Maryland Municipal Bond 2.51% 0.29% n/a
Consumer Price Index (CPI) 1.28% 2.86% 4.79%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, six months, one year or since the fund started on April 22,
1993. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare the fund's returns to the performance of the Lehman
Brothers Municipal Bond Index. You can also compare them to the average
Maryland municipal bond fund, which reflects the performance of 24 Maryland
municipal bond funds with similar objectives tracked by Lipper Analytical
Services during the period covered by this report. Both benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the CPI helps show how your fund did compared to inflation.
(The periods covered by CPI numbers are the closest available match to
those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Maryland Municipal Income -0.02% 3.24%
Lehman Brothers Municipal Bond Index 1.88% n/a
Average Maryland Municipal Bond 0.29% n/a
Consumer Price Index 2.86% 2.58%
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 Maryland MunMunicipal Bond Index
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
03/31/94 10073.67 10129.33
04/30/94 10162.94 10215.43
05/31/94 10243.70 10304.31
06/30/94 10206.48 10244.54
07/31/94 10384.84 10432.02
08/31/94 10403.21 10468.53
09/30/94 10214.50 10314.64
10/31/94 9973.88 10131.04
11/30/94 9719.70 9947.67
12/31/94 9992.19 10166.52
01/31/95 10309.68 10457.28
02/28/95 10621.51 10761.59
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Maryland Municipal Income Fund on April 30, 1993, shortly after the fund
started. As the chart shows, by February 28, 1995, 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, 1995 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 $10,762 - a 7.62% 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
APRIL 22, 1993
SIX MONTHS YEAR (COMMENCEMENT
ENDED ENDED OF OPERATIONS) TO
FEBRUARY 28, AUGUST 31, AUGUST 31,
1995 1994 1993
Dividend returns 3.03% 5.22% 1.99%
Capital appreciation
returns -0.95% -6.70% 3.48%
Total returns 2.08% -1.48% 5.47%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.16(cents) 27.85(cents) 55.52(cents)
Annualized dividend rate 5.73% 6.09% 5.88%
30-day annualized yield 5.91% - -
30-day annualized tax-equivalent yield 10.15% - -
</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 $9.46 over
the past month, $9.22 over the past six months and $9.44 over the past
year, you can compare the fund's income over these three 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 1995 federal and state income tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Steven Harvey, Portfolio Manager of Spartan Maryland
Municipal Income Fund
Q. STEVE, HOW HAS THE FUND PERFORMED?
A. For the six months ended February 28, 1995, the fund had a total return
of 2.08%. That lagged the average Maryland municipal fund's return of 2.51%
for the same period, according to Lipper Analytical Services. For the year
ended February 28, 1995, the fund returned -0.02%, compared to the average
fund's return of 0.29%, again according to Lipper.
Q. WHAT FACTORS DETERMINED THE MUNICIPAL BOND MARKET'S PERFORMANCE OVER THE
PAST SIX MONTHS?
A. The major factor continued to be the Federal Reserve Board raising
short-term interest rates. In early September, the bond market began to
anticipate that the Fed was near the end of its actions, and the market was
somewhat more positive. But later in the month, economic indicators
continued to point to strength in the manufacturing, retail, and auto
sectors, and employment growth remained healthy, which caused some
additional inflationary fears. From that point through November, the bond
market fell. Accelerating the decline was the fact that many municipal bond
mutual funds were forced to sell to meet shareholder redemptions. However,
the market stabilized in December as the mutual fund selling abated and the
rate of issuance of municipal bonds - which is typically quite high during
this period - slowed. From year-end through the end of February, the
municipal bond market rallied.
Q. WHY DID THE FUND LAG THE AVERAGE?
A. Mostly because of its relatively large stake in discount bonds, which
are bonds that sell below face value. Generally, the prices of discount
bonds are more sensitive to changes in interest rates, and as a result,
they performed poorly when interest rates were rising. Also, discounts fell
out of favor among investors because of a recent change in the tax law.
Prior to the change, gains on discount bonds were not taxed or were taxed
as capital gains. Under the new law, some gains are taxed at the much
higher ordinary income rate. During the recent municipal bond market rally,
however, discount bonds did quite well and as their prices rose, many of
them no longer sold at a deep discount. As a result, the fund's stake in
them has naturally declined.
Q. WHAT WERE SOME OF THE BRIGHT SPOTS IN THE FUND?
A. A pollution control bond backed by Bethlehem Steel was one. Steel is a
cyclical industry that was very much in an upward trend over the past six
months. That reflected the overall strength of the auto sector and the
economy. But because I expect a more mixed economic picture going forward,
and softness in the domestic auto industry, I sold the bond in late
February. That reduced the fund's stake in pollution control bonds to 0.5%
of investments at the end of the period, down from 4.9% six months earlier.
Q. THE FUND'S STAKE IN RESOURCE RECOVERY BONDS HAS RISEN SHARPLY OVER THE
PAST SIX MONTHS. WHERE ARE YOU FINDING OPPORTUNITIES IN THIS SECTOR?
A. Mainly in Northeast Maryland Solid Waste Disposal Authority bonds, which
were issued to fund construction of a comprehensive waste collection and
resource recovery program for Montgomery County. About a year ago, resource
recovery bonds were hurt when the U.S. Supreme Court ruled that
municipalities could not dictate where waste haulers ultimately sent waste.
A lot of resource recovery plants were built on the notion that all waste
haulers in a given county had to take waste to that municipality's plant.
However, after the Supreme Court ruling, these plants found themselves
competing with each other on the basis of fees, and could no longer count
on revenues that were mandated. The Northeast Maryland Solid Waste Disposal
project is financed partly by service fees imposed on county residents, so
its revenues are less dependent on competitive rates. We also like the bond
because the project is administered by Montgomery County, which is an
excellent manager. At the end of the period, resource recovery bonds were
7.5% of the fund's investments, up from 2.6% six months ago.
Q. WHY DID YOU ALSO REDUCE THE FUND'S STAKE IN LOWER-QUALITY BONDS?
A. As I mentioned, I see more signs of economic weakness on the horizon. As
news of weakness appears, investors may be more wary of lower-quality bonds
and as a result, their performance could lag higher-quality bonds over the
next three to six months. I thought it was better to sell some of them,
locking in their recent strength. Likewise, my focus on higher credit
quality is one reason I've selectively reduced the fund's stake in
lower-quality health care bonds. Another reason was that I felt the
advantages of cost cutting were now behind some of the health care
institutions that back these bonds. Finally, I weeded out hospitals that I
thought might have a difficult time increasing revenues. If the economy
does slow, I'll re-evaluate lower-quality bonds, looking for those that may
have inexpensive prices relative to their credit.
Q. HOW DO YOU THINK 1995 SHAPES UP FOR THE MUNICIPAL BOND MARKET?
A. During the next year, I think there will be some additional interest
rate volatility as the battle between forces of economic acceleration and
deceleration goes on. While the economy's growth may slow a bit from the
torrid pace of the fourth quarter, there are still signs that manufacturing
is strong, and lower interest rates could provide additional strength for
housing and auto sales. I believe we could see at least one more, and maybe
as many as three more, interest rate hikes by the Federal Reserve Board in
the next six to nine months.
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,
1995, more than $40 million
MANAGER: Steven Harvey,
since April 1993; manager,
Fidelity Ohio Tax-Free
Portfolio, since 1994; Fidelity
Minnesota
Tax-Free Portfolio and Spartan
Pennsylvania Municipal
Portfolio, since 1993; joined
Fidelity
in 1986
(checkmark)
STEVEN HARVEY ON HIS
INVESTMENT STRATEGY:
"The yield curve - or the
difference in yields that bonds
of varying maturities pay - is
relatively flat right now. That
means there currently isn't
much difference in yields
between intermediate-term
and long-term bonds, and I
can buy intermediate
securities without sacrificing
much income. Recently, I've
been buying more bonds in
the eight- to 15-year range,
which offer an attractive
risk/reward tradeoff. In
essence, I've reduced the
fund's interest rate risk but
given up very little in added
income. As always, I'll
attempt to identify sectors and
individual bonds that I think
can outperform over the next
six to 12 months. While I
often buy bonds just for their
relative stability, I'm also on
the lookout for bonds with
the potential of price
appreciation as a result of an
improving credit quality.
Generally, I try to buy bonds
when they're out of favor,
before improving credit
fundamentals are apparent,
and sell them before any
deteriorating credit news has
pushed prices down."
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 24.5 22.3
Health Care 20.7 24.7
Transportation 15.9 20.4
Housing 15.2 11.3
Resource Recovery 7.5 2.6
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 16.0 18.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 8.3 9.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
CAN ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994
Aaa 32.5%
Aa, A 34.5%
Baa 21.0%
Ba, B 0.0%
Non-rated 0.3%
Short-term
investments 11.7%
Aaa 32.8%
Aa, A 30.4%
Baa 26.7%
Ba, B 0.0%
Non-rated 5.5%
Short-term
investments 4.6%
Row: 1, Col: 1, Value: 32.5
Row: 1, Col: 2, Value: 34.5
Row: 1, Col: 3, Value: 21.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 1.3
Row: 1, Col: 6, Value: 11.7
Row: 1, Col: 1, Value: 32.8
Row: 1, Col: 2, Value: 30.4
Row: 1, Col: 3, Value: 26.7
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 5.5
Row: 1, Col: 6, Value: 4.6
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNTED FOR 0.3% AND 5.5% OF THE FUND'S
INVESTMENTS ON FEBRUARY 28, 1995, AND AUGUST 31, 1994, RESPECTIVELY.
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 88.3%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MARYLAND - 69.7%
Anne Arundel County Consolidated Gen. Impt.
Ltd. Tax 5.25% 7/15/11 Aa $ 500,000 $ 462,500
Anne Arundel County Gen. Oblig.
7% 8/1/04 Aa 550,000 613,938
Baltimore County Mtg. Rev. Rfdg.
(Kingswood IV) Series A, 5.75% 9/1/20
(FHA Guaranteed) AAA 1,000,000 925,000
Baltimore Consolidated Pub. Impt.:
Rfdg. Series D:
6% 10/15/04 (AMBAC Insured) Aaa 500,000 521,875
5% 10/15/08 (AMBAC Insured) Aaa 750,000 692,813
5.40% 10/15/12 (AMBAC Insured) Aaa 700,000 658,875
Series B, 7.05% 10/15/07
(MBIA Insured) Aaa 1,000,000 1,123,750
7% 10/15/09 Aaa 500,000 563,810
Baltimore Rev. Rfdg. (Kidder Wastewtr. Proj.)
Series A, 5.65% 7/1/20
(MBIA insured) Aaa 2,000,000 1,877,500
Calvert County Rfdg.
(Consolidated Pub. Impt. Proj.):
Unltd. Tax 4.50% 7/15/03 Aa 500,000 460,000
4.875% 7/15/10 Aa 500,000 445,000
Maryland Commty. Dev. Administration Dept.
Hsg. & Commty. Dev. (Single Family Prog.):
4th Series, 6.45% 4/1/14 Aa 500,000 506,250
7th Series, 7.25% 4/1/19 (b) Aa 500,000 525,625
Maryland Health & Higher Ed. Facs. Auth. Rev.:
Rfdg.:
(Doctors Commty. Hosp.)
5.75% 7/1/13 Baa 500,000 417,500
(Howard County Gen. Hosp.)
5.50% 7/1/13 Baa1 2,000,000 1,672,500
(John Hopkins Health Sys.)
Series 1988, 7.50% 7/1/20 Aa1 1,000,000 1,058,750
(Frederick Mem. Hosp.) 5.20% 7/1/08
(FGIC Insured) Aaa 1,500,000 1,387,500
(Good Samaritan Hosp.) 5.75% 7/1/13 A 385,000 359,975
Maryland Wtr. Quality Fing. Revolving Loan
Fund Rev. 7.25% 9/1/12 Aa 1,000,000 1,083,750
Montgomery County Rev. Auth. Lease Rev.
Rfdg. (Olney Indoor Swim Center) Project C,
5.25% 10/1/12 AA- 1,000,000 920,000
Montgomery County Rev. Hsg. Opportunity
Commission (Single Family Mtg.)
Series A, 6.60% 7/1/14 Aa 1,000,000 1,007,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MARYLAND - CONTINUED
Northeast Waste Disp. Auth. Solid Waste Rev.
(Montgomery County Resource Recovery Proj.)
Series A:
5.90% 7/1/05 (b) A $ 600,000 $ 590,250
6% 7/1/07 (b) A 500,000 486,875
6.30% 7/1/16 A 2,000,000 1,922,500
Prince George's County Hosp. Rev.
(Greater Southeast Health Care Sys.):
6.375% 1/1/13 Baa 470,000 421,825
6.375% 1/1/23 Baa 2,660,000 2,307,550
Prince George's County Hsg. Auth.:
(Single Family Rev.)
Series A, 6.50% 12/1/15 (b) AAA 500,000 505,625
6.70% 6/20/20 AAA 1,000,000 1,027,500
Prince George's County Rfdg. Consolidated
Pub. Impt. Ltd. Tax 5.25% 10/1/11 A 1,000,000 925,000
Rockville Gen. Oblig. Rfdg. 5.00% 4/15/08 Aa1 500,000 456,875
Univ. of Maryland Sys. Auxiliary Facs. &
Tuition Rev. 5% 10/1/09 Aa 1,000,000 901,250
Washington Suburban San. Dist. Rev.
6.75% 6/1/01 Aa1 590,000 632,038
Washington Suburban San. Dist. Rfdg. Swr.
Disp. 4.90% 12/1/05 Aa1 355,000 332,811
Worcester County San. Dist. Rfdg.
Series J, 6% 8/15/02 Aa 100,000 103,375
27,897,885
PUERTO RICO - 7.0%
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Rev. Series W, 5.50% 7/1/13 Baa1 2,000,000 1,847,500
Puerto Rico Pub. Ed. & Health Facs. Rfdg.
Series M, 5.75% 7/1/15 Baa1 1,000,000 948,750
2,796,250
U.S. VIRGIN ISLANDS - 0.3%
Virgin Islands Pub. Fin. Auth. Rev. Rfdg.
Series A, 7.25% 10/1/18
(Escrowed to Maturity)(d) - 100,000 103,125
GUAM - 2.0%
Guam Arpt. Auth. Gen. Rev. Series B:
6.40% 10/1/05 (b) BBB 500,000 502,500
6.70% 10/1/23 (b) BBB 300,000 298,875
801,375
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MULTIPLE STATE - 9.3%
Washington Metropolitan Area Trans. Auth.
Gross Rev. Rfdg.:
4.50% 7/1/01 (FGIC Insured) Aaa $ 525,000 $ 491,531
6% 7/1/09 (FGIC Insured) Aaa 600,000 617,340
6% 7/1/10 (FGIC Insured)(e) Aaa 2,570,000 2,608,550
3,717,421
TOTAL MUNICIPAL BONDS
(Cost $37,047,423) 35,316,056
MUNICIPAL NOTES (A) - 11.7%
MARYLAND - 11.7%
Baltimore County Econ. Dev. Rev. Rfdg.
(Blue Circle, Inc. Proj.) Series 1992, 4.15%,
LOC Den Danske Bank Group, VRDN VMIG 1 1,400,000 1,400,000
Maryland Health & Higher Edl. Facs. Rev.
(Pooled Loan Prog.) Series A, 4.35%
LOC Dai-Ichi Kangyo Bank Ltd., VRDN VMIG 1 1,700,000 1,700,000
Montgomery County Hsg. Opportunity
Commission Hsg. Rev. (Draper Lane Apts.)
4.15%, BPA Sumitomo Bank Ltd.
(FGIC Insured), VRDN (b) VMIG 1 1,600,000 1,600,000
TOTAL MUNICIPAL NOTES
(Cost $4,700,000) 4,700,000
TOTAL INVESTMENTS - 100%
(Cost $41,747,423) $ 40,016,056
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
10 Municipal Bond Contacts March, 95 $ 906,875 $ (57,591)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.1%
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.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) 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 $2,608,550.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 58.5% AAA, AA, A 61.1%
Baa 19.0% BBB 7.2%
Ba 0.0% 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 0.3%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 24.5%
Health Care 20.7
Transportation 15.9
Housing 15.2
Others
(individually less than 10%) 23.7
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $47,747,423. Net unrealized depreciation aggregated
$1,731,367, of which $276,489 related to appreciated investment securities
and $2,007,856 related to depreciated investment securities.
The fund intends to elect to defer to its fiscal year ending August 31,
1995, $86,337 of losses recognized during the period November 1, 1993 to
August 31, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $41,747,423) - 5. $ 40,016,056
See accompanying schedule
6.Cash 7. 999,480
8.Interest receivable 9. 519,934
10.Receivable from investment adviser for expense 11. 13,329
reductions
12. 13.TOTAL ASSETS 14. 41,548,799
15.LIABILITIES 16. 17.
18.Payable for investments purchased $ 1,201,610 19.
20.Dividends payable 37,072 21.
22.Accrued management fee 16,290 23.
24.Payable for daily variation on futures contracts 4,063 25.
26. 27.TOTAL LIABILITIES 28. 1,259,035
29.30.NET ASSETS 31. $ 40,289,764
32.Net Assets consist of: 33. 34.
35.Paid in capital 36. $ 43,311,236
37.Accumulated undistributed net realized gain (loss) on 38. (1,232,514)
investments
39.Net unrealized appreciation (depreciation) on 40. (1,788,958)
investments
41.42.NET ASSETS, for 4,217,964 shares outstanding 43. $ 40,289,764
44.45.NET ASSET VALUE, offering price and redemption 46. $9.55
price per share ($40,289,764 (divided by) 4,217,964 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
47.48.INTEREST INCOME 49. $ 1,167,744
50.EXPENSES 51. 52.
53.Management fee $ 103,754 54.
55.Non-interested trustees' compensation 101 56.
57. Total expenses before reductions 103,855 58.
59. Expense reductions (84,972) 18,883
60.61.NET INTEREST INCOME 62. 1,148,861
63.REALIZED AND UNREALIZED GAIN (LOSS) 65. 66.
64.Net realized gain (loss) on:
67. Investment securities (1,229,442) 68.
69. Futures contracts 60,190 (1,169,252)
70.Change in net unrealized appreciation (depreciation) 71. 72.
on:
73. Investment securities 688,271 74.
75. Futures contracts (36,784) 651,487
76.77.NET GAIN (LOSS) 78. (517,765)
79.80.NET INCREASE (DECREASE) IN NET ASSETS 81. $ 631,096
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 1995 AUGUST 31,
(UNAUDITED) 1994
82.INCREASE (DECREASE) IN NET ASSETS
83.Operations $ 1,148,861 $ 2,136,472
Net interest income
84. Net realized gain (loss) (1,169,252) 11,813
85. Change in net unrealized appreciation (depreciation) 651,487 (3,036,700)
86. 87.NET INCREASE (DECREASE) IN NET ASSETS 631,096 (888,415)
RESULTING FROM OPERATIONS
88.Distributions to shareholders: (1,148,861) (2,136,472)
From net interest income
89. From net realized gain - (11,813)
90. In excess of net realized gain - (62,420)
91. 92.TOTAL DISTRIBUTIONS (1,148,861) (2,210,705)
93.Share transactions 6,381,901 27,396,237
Net proceeds from sales of shares
94. Reinvestment of distributions 872,030 1,711,392
95. Cost of shares redeemed (7,913,981) (13,513,074)
96. Redemption fees 3,600 27,464
97. Net increase (decrease) in net assets resulting (656,450) 15,622,019
from
share transactions
98. 99.TOTAL INCREASE (DECREASE) IN NET ASSETS (1,174,215) 12,522,899
100.NET ASSETS 101. 102.
103. Beginning of period 41,463,979 28,941,080
104. End of period $ 40,289,764 $ 41,463,979
105.OTHER INFORMATION 107. 108.
106.Shares
109. Sold 690,835 2,692,013
110. Issued in reinvestment of distributions 94,619 172,096
111. Redeemed (869,163) (1,360,016)
112. Net increase (decrease) (83,709) 1,504,093
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX MONTHS YEAR APRIL 22, 1993
ENDED ENDED (COMMENCEME
FEBRUARY 28, 1995 AUGUST 31, NT
OF OPERATIONS)
AUGUST 31,
(UNAUDITED) 1994 1993
113.SELECTED PER-SHARE DATA
114.Net asset value, beginning of period $ 9.640 $ 10.350 $ 10.000
115.Income from Investment Operations .278 .543 .194
Net interest income
116. Net realized and unrealized gain (loss) (.091) (.697) .348
117. Total from investment operations .187 (.154) .542
118.Less Distributions (.278) (.543) (.194)
From net interest income
119. In excess of net realized gain on - (.020) -
investments
120. Total distributions (.278) (.563) (.194)
121.Redemption fees added to paid in capital .001 .007 .002
122.Net asset value, end of period $ 9.550 $ 9.640 $ 10.350
123.TOTAL RETURN B 2.10% -1.46% 5.49%
124.RATIOS AND SUPPLEMENTAL DATA
125.Net assets, end of period (000 omitted) $ 40,290 $ 41,464 $ 28,941
126.Ratio of expenses to average net assets .10% .03% -
A
127.Ratio of expenses to average net assets .55% .55% .55%A
A
before expense reductions
128.Ratio of net interest income to average 6.08% 5.45% 5.46%A
net assets A
129.Portfolio turnover rate 69% 64% 29%A
A
</TABLE>
A ANNUALIZED
B 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. SEE
NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (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 of their purchase date 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. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, 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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, market discount, net operating losses, capital
loss carryforwards, expiring capital loss carryforwards and losses deferred
due to wash sales, futures and options and excise tax regulations. The fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
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. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
and written options involve, to varying degrees, risk of loss in excess of
the futures variation margin or the option value reflected in the Statement
of Assets and Liabilities. The underlying face amount at value is shown in
the schedule of investments under the caption "Futures Contracts". This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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 $12,218,840 and $15,600,366,
respectively.
The market value of futures contracts opened and closed during the period
amounted to $9,586,592 and $10,730,686, 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. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$880 for the period.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .10% of average net assets. For the
period, the reimbursement reduced the expenses by $84,972.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
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416 Belmont Street
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280 North Woodward Ave.
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8885 Ladue Road
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60B South Street
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501 Route 17, South
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505 Millburn Avenue
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NEW YORK
1050 Franklin Avenue
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999 Walt Whitman Road
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1271 Avenue of the
Americas
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71 Broadway
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350 Park Avenue
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10 Bank Street
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NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
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OHIO
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28699 Chagrin Boulevard
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1903 East Ninth Street
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439 Fifth Avenue
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1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
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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
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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*
Marvin L. Mann*
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
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
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THE FIDELITY TELEPHONE CONNECTION
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for the deaf and hearing impaired
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* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
EXPORT
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 5 The manager's review of fund
performance, strategy and outlook.
INVESTMENT SUMMARY 8 A summary of the fund's
investments.
INVESTMENTS 9 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 23 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR
FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY
FIDELITY FUND,
INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS.
READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells stocks that have grown in value). Export Fund
has a 3% sales charge which has been waived since the fund's start on
October 4, 1994 through December 31, 1995.
CUMULATIVE TOTAL RETURN
PERIOD ENDED FEBRUARY 28, 1995 LIFE OF
FUND
Export Fund 5.01%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, since the fund began on October 4, 1994. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. Once the fund has
a longer record, you may want to compare it to the Standard & Poor's
Composite Index of 500 Stocks - a common proxy for the U.S. stock market.
You may also want to look at the performance of the average growth fund, as
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital gains, if any. They will appear in the fund's next
report six months from now.
AVERAGE ANNUAL RETURNS will appear once the fund is a year old, and the
growth of a hypothetical $10,000 INVESTMENT in the fund will appear in the
fund's next report six months from now.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Arieh Coll,
Portfolio Manager of Fidelity
Export Fund
Q. ARIEH, HOW HAS THE FUND PERFORMED SO FAR?
A. The fund had a total return of 5.01% from its inception date - October
4, 1994 - through February 28, 1995. For the closest available comparison
to its peers, we can look at the period from October 6, 1994, through
February 28, 1995. During that time, the fund had a total return of 9.50%,
compared to 14.56% for the average growth fund tracked by Lipper Analytical
Services.
Q. GRANTED, EXPORT FUND'S TRACK RECORD IS SHORT, BUT WHY DID IT
UNDERPERFORM THE AVERAGE FUND?
A. The fund did quite well in October, but its performance slowed somewhat
from November through January. The main reason is that the fund tends to
invest in smaller companies than many of its peers, and these companies
have underperformed broad stock market averages recently. But I continue to
believe that many of the fund's small and mid-sized stocks are extremely
attractive. In many cases, I've increased the fund's investments in these
companies. In addition, it's important to maintain a proper mind-set about
performance. Shareholders in the fund should have a long-term investing
horizon, and five-month figures provide little in the way of historical
perspective.
Q. BEFORE WE TALK ABOUT SPECIFIC STOCKS, CAN YOU FILL US IN ON THE
PHILOSOPHY BEHIND THE FUND?
A. Sure, it's really quite simple. The fund invests in North American
companies that derive, or I expect will derive, 10% or more of their annual
revenues from the sales of exported goods or services. While 10% may not
sound like a lot, the truth is that most U.S. companies fall far below this
threshold. The theory behind the fund is that if a company can export
successfully, it probably has superior products and business expertise.
That's because there are many obstacles to exporting - tariffs, increased
transportation costs, and long distances between the companies and their
customers, among them. If a company can succeed in foreign markets despite
those hurdles, it is most likely an aggressive and well-managed company.
Q. WHAT ARE SOME OF THE RISKS
INHERENT IN THE FUND?
A. I mentioned earlier the fund's bias toward small and medium-sized
companies, often in young, fast-growing industries. While these stocks have
the potential for strong long-term gains, they're often more volatile than
the broad stock market. So, again, shareholders should have a long-term
view. In addition, I plan to weight the fund's assets in its top 20 or so
investments - the investments in which I'm most confident. While I believe
that strategy will help the fund achieve long-term success, it also may
contribute to volatility in the short run. Finally, companies that export
tend to be clustered in a few key industries. Bad news surrounding any one
of these industries could negatively impact the fund more than some of its
peers.
Q. WHICH SECTORS LEND THEMSELVES TO EXPORTING?
A. Technology - 23.7% of the fund's investments on February 28 - is one.
The U.S. has become the world leader in technology, and many U.S. companies
are expanding market share by selling their products overseas. The stock of
semiconductor manufacturer Altera has risen 64% over the past four months
on the heels of strong earnings. New management and successful new products
have helped boost the stock of network software manufacturer Novell. In
addition, the health care sector is home to many exporters. Medical supply
companies Becton Dickinson and St. Jude Medical are examples of companies
that seem to have excellent earnings prospects. Even though both stocks
have performed well, they appear to remain relatively cheap.
Q. MANY OF THE FUND'S STOCKS MUST FALL OUTSIDE OF THOSE SECTORS . . .
A. They do. Although most share the common thread of exporting, the fund's
investments fall into several different industry classifications. Its
second largest investment at the end of February was Scientific Games
Holdings, a company that manufactures instant lottery tickets. This company
is a great example of what the fund is all about. It has more than a 50%
market share in the U.S., and derives about 10% of its sales from exports.
Now, consider that half of all lottery tickets sold worldwide are sold
overseas, and you can see the long-term earnings potential. The fund's
largest holding is the brokerage firm Lehman Brothers. As the stock market
suffered in 1994, so did brokerage companies. But I felt that Lehman's
stock was oversold, and was too cheap to ignore. When other investors also
began to believe that Lehman's business would eventually recover, they
helped drive up the company's stock price by roughly 30%.
Q. WHICH STOCKS HAVEN'T FARED WELL
SO FAR?
A. Brock Control Systems was a disappointment. The company sells sales
force automation software, but didn't enhance its product quickly enough to
keep up with competitors. That caused the company's sales, profits and
stock price to fall. American Safety Razor is another stock that has
languished recently. The company makes razors that are sold under private
labels. Because its earnings growth and business prospects appear solid,
I'm hopeful its stock price should eventually rise accordingly.
Q. LET'S TALK ABOUT YOUR OUTLOOK. WHAT'S ON THE HORIZON?
A. My outlook for 1995 is optimistic. Although the U.S. may see slower
economic growth as a result of higher interest rates, other world economies
- - particularly in Europe and Japan - appear to be on the upswing. This
could bode well for many companies that the fund holds because Europe and
Japan are two of the primary recipients of U.S. exports. Foreign export
markets could provide a hedge of sorts for these companies, should economic
growth slow in the U.S. In addition, the declining dollar has helped make
U.S. exports cheaper, though it's difficult to say how long that will last.
Despite those positives, I expect a fair amount of volatility going
forward. The full effect of higher interest rates on corporate earnings in
the U.S. and overseas is yet to be seen. If earnings growth slows, stocks
could run into trouble.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing mainly in the stocks
of North American
companies that are expected
to benefit from exporting
goods or services
START DATE: October 4, 1994
SIZE: As of February 28,
1995, more than $117 million
MANAGER: Arieh Coll, since
October 1994; manager,
Fidelity Select Brokerage and
Investment Management
Portfolio, 1993-1995; Fidelity
Select Software and
Computer Services Portfolio,
1991-1994; Fidelity Select
Technology Portfolio
1992-1993; joined Fidelity in
1989
(checkmark)
ARIEH COLL ON HIS
INVESTING STYLE:
"I would consider myself a
growth investor, with an eye
toward value. WMS Industries
is a good example of a value
stock with growth potential.
The company sells pinball
and other gaming machines.
Last fall, its sales and
earnings were declining, and
its stock seemed to be
extremely cheap. But WMS
was planning to launch new
video game and slot machine
products in 1995 that I felt
would reinvigorate its growth
prospects. When other
investors began to see the
same potential, the stock rose
nicely.
"Semiconductor manufacturer
Altera is an example of a
growth stock with value
characteristics. Last fall, its
earnings were growing
rapidly, but its stock valuation
- - its price relative to earnings
- - was attractively low.
Although the stock has since
risen to more fairly reflect the
company's earnings potential,
I think it still has further to go."
(solid bullet) At least 65% of the fund's
assets must be invested in
North American companies that
are expected to benefit from
exporting goods or services.
One exception among the
fund's top 10 investments is
Nokia, a Finnish cellular
phone manufacturer. The
company is expanding its
worldwide market share in the
rapidly growing cellular
industry. For example, as
Asian countries install new
telephone networks, they are
largely using cellular systems,
which are much less
expensive than their
land-based counterparts.
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF FEBRUARY 28, 1995
% OF FUND'S INVESTMENTS
Lehman Brothers Holdings, Inc. 4.2
Scientific Games Holdings Corp. 4.1
Becton, Dickinson & Co. 3.1
Novell, Inc. 2.8
TSX Corp. 2.7
RJR Nabisco Holdings Corp. 2.5
Altera Corp. 2.4
Cominco Fertilizer Ltd. 2.3
St. Jude Medical, Inc. 2.2
Nokia Corp. AB sponsored ADR 1.9
TOP FIVE MARKET SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S INVESTMENTS
Technology 23.7
Health 11.7
Media & Leisure 10.7
Basic Industries 8.0
Construction & Real Estate 7.5
ASSET ALLOCATION
AS OF FEBRUARY 28, 1995 *
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 46.0
Row: 1, Col: 4, Value: 47.0
Stocks 94.5%
Bonds 0.1%
Short-term investments 5.4%
Foreign investments 17.1%
*
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
COMMON STOCKS - 94.5%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.7%
AEROSPACE & DEFENSE - 0.3%
Lockheed Corp. 50 $ 3,881
Northrop Corp. 7,600 337,250
341,131
DEFENSE ELECTRONICS - 0.4%
Tracor, Inc. 50,000 531,250
TOTAL AEROSPACE & DEFENSE 872,381
BASIC INDUSTRIES - 8.0%
CHEMICALS & PLASTICS - 7.2%
Cominco Fertilizer Ltd. (a) 100,600 2,669,650
Cytec Industries, Inc. (a) 10,200 395,250
Ferro Corp. 1,000 25,625
First Mississippi Corp. 22,000 533,500
Great Lakes Chemical Corp. 50 3,006
Hanna (M.A.) Co. 100 2,438
Intertape Polymer Group, Inc. 59,100 1,020,762
Kemira OY (a) 40,000 328,265
Mississippi Chemical Corp. 19,200 350,400
OM Group, Inc. 85,800 2,059,200
Union Carbide Corp. 33,100 947,488
8,335,584
METALS & MINING - 0.8%
Alcan Aluminium Ltd. 14,500 353,487
Aluminum Co. of America 9,400 366,600
Castech Aluminum Group (a) 14,100 202,688
922,775
TOTAL BASIC INDUSTRIES 9,258,359
CONSTRUCTION & REAL ESTATE - 7.5%
BUILDING MATERIALS - 0.9%
RB&W Corp. (a) 117,700 1,029,875
CONSTRUCTION - 6.1%
American Homestar Corp. (a) 34,000 323,000
Beazer Homes USA, Inc. (a) 131,000 1,915,875
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - CONTINUED
Engle Homes, Inc. 10,000 $ 82,500
Kaufman & Broad Home Corp. 73,600 1,076,400
Pulte Corp. 7,200 165,600
Redman Industries (a) 48,000 948,000
Southern Energy Homes, Inc. (a) 10,000 112,500
Standard Pacific Corp. 139,400 958,375
U.S. Home Corp. (a) 82,900 1,512,925
7,095,175
REAL ESTATE - 0.5%
Hovnanian Enterprises, Inc. Class A (a) 10,000 60,000
Sun Hung Kai Properties Ltd. 85,000 571,687
631,687
TOTAL CONSTRUCTION & REAL ESTATE 8,756,737
DURABLES - 1.9%
AUTOS, TIRES, & ACCESSORIES - 0.6%
Allen Group, Inc. (The) 9,000 211,500
Magna International, Inc. Class A 11,500 442,769
654,269
CONSUMER DURABLES - 1.1%
Sola Group Ltd. 75,000 1,275,000
CONSUMER ELECTRONICS - 0.0%
Duracraft Corp. (a) 100 3,575
TEXTILES & APPAREL - 0.2%
Farah, Inc. (a) 100 738
Stride Rite Corp. 20,000 257,500
Westpoint Stevens, Inc. Class A (a) 500 6,938
265,176
TOTAL DURABLES 2,198,020
ENERGY - 1.4%
COAL - 0.1%
Zeigler Coal Holding Co. 10,000 107,500
ENERGY SERVICES - 0.3%
Halliburton Co. 9,000 335,250
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - 1.0%
Anderson Exploration Ltd. (a) 497 $ 4,694
Beau Canada Exploration 2,700 3,187
Canadian Natural Resources Ltd. (a) 1,400 14,231
Northstar Energy Corp. (a) 50,200 361,268
Ranchmen's Resources Ltd. (a) 900 3,400
Renaissance Energy Ltd. (a) 19,000 379,439
Richland Petroleum Corp. Class A (a) 60,300 368,861
1,135,080
TOTAL ENERGY 1,577,830
FINANCE - 6.6%
BANKS - 0.8%
Bankers Trust New York Corp. 15,000 946,875
INSURANCE - 0.1%
GMIS, Inc. (a) 200 4,300
NAC Re Corp. 1,900 63,175
67,475
SECURITIES INDUSTRY - 5.7%
Duff & Phelps Credit Rating Co. 10,000 108,750
First Marathon Inc. Class A (non-vtg.) 25,000 215,897
Lehman Brothers Holdings, Inc. 268,900 4,873,813
Merrill Lynch & Co., Inc. 1,000 41,000
Midland Walwyn Inc. 50,000 256,378
Peregrine Investments Holdings 951,000 1,162,379
6,658,217
TOTAL FINANCE 7,672,567
HEALTH - 11.7%
DRUGS & PHARMACEUTICALS - 1.8%
Biogen, Inc. 10,100 416,625
Bristol-Myers Squibb Co. 18,500 1,147,000
North American Biologicals, Inc. (a) 18,800 159,800
Phoenix International Life Sciences, Inc. (a) 41,600 209,564
Phoenix International Life Sciences, Inc. (a)(c) 27,000 136,015
2,069,004
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 9.9%
Advanced Technology Laboratories, Inc. (a) 100 $ 1,550
American Medical Electronics, Inc. (a) 7,200 46,800
Ballard Medical Products 43,600 501,400
Beckman Instruments, Inc. 49,200 1,500,600
Becton, Dickinson & Co. 69,400 3,643,500
Elscint Ltd. 3,600 7,200
Minntech Corp. 10,000 157,500
St. Jude Medical, Inc. 69,600 2,523,000
Sofamor/Danek Group, Inc. (a) 70,400 1,469,600
U.S. Surgical Corp. 77,700 1,631,700
11,482,850
TOTAL HEALTH 13,551,854
HOLDING COMPANIES - 0.7%
Catena AB Class A Free shares 27,300 239,602
Jardine Matheson Holdings Ltd. 64,800 596,160
835,762
INDUSTRIAL MACHINERY & EQUIPMENT - 5.9%
ELECTRICAL EQUIPMENT - 5.7%
C COR Electronics, Inc. (a) 22,200 593,850
California Amplifier, Inc. (a) 124,000 806,000
California Microwave Corp. (a) 100 2,925
Hutchison Whampoa Ltd. Ord. 136,000 576,965
Oak Industries, Inc. (a) 100 2,675
Scientific-Atlanta, Inc. 63,700 1,488,988
TSX Corp. (a) 191,600 3,161,400
6,632,803
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
Cascade Corp. 10,000 252,500
Harnischfeger Industries, Inc. 100 2,788
255,288
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 6,888,091
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 10.7%
BROADCASTING - 0.3%
Capital Cities/ABC, Inc. 100 $ 8,850
Grupo Televisa GDS (c) 200 3,300
Valuevision International, Inc. (a) 54,500 313,375
325,525
ENTERTAINMENT - 5.9%
American Classic Voyages Co. 29,500 287,625
Cinergi Pictures Entertainment, Inc. (a) 9,400 64,038
Disney (Walt) Co. 16,500 880,688
Players International, Inc. (a) 37,600 902,400
Scientific Games Holdings Corp. (a) 104,450 4,700,250
6,835,001
LEISURE DURABLES & TOYS - 3.1%
ARCTCO, Inc. 20,500 338,250
Cobra Golf, Inc. (a) 64,100 2,087,256
First Team Sports, Inc. (a) 16,500 307,313
Rawlings Sporting Goods, Inc. (a) 72,000 864,000
3,596,819
LODGING & GAMING - 1.4%
President Casinos, Inc. (a) 33,600 218,400
Video Lottery Technologies, Inc. 40,000 315,000
WMS Industries, Inc. (a) 51,100 1,111,425
1,644,825
TOTAL MEDIA & LEISURE 12,402,170
NONDURABLES - 6.6%
FOODS - 0.1%
Archer-Daniels-Midland Co. 500 9,500
Chiquita Brands International, Inc. 10,000 133,750
Dole Food, Inc. 100 2,600
145,850
HOUSEHOLD PRODUCTS - 1.6%
American Safety Razor Co. (a) 48,800 597,800
Colgate-Palmolive Co. 19,100 1,231,950
Safety First, Inc. (a) 100 2,300
Tambrands, Inc. 100 4,325
1,836,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
TOBACCO - 4.9%
Philip Morris Companies, Inc. 26,000 $ 1,579,500
RJR Nabisco Holdings Corp. (a) 518,900 2,918,813
Sampoerna, Hanjaya Mandala (For. Reg.) 205,000 1,146,854
5,645,167
TOTAL NONDURABLES 7,627,392
PRECIOUS METALS - 0.7%
Euro-Nevada Mining Corp. 40,000 780,828
RETAIL & WHOLESALE - 0.2%
APPAREL STORES - 0.1%
Sportmart, Inc. Class A (non-vtg) (a) 15,900 107,325
APPLIANCE STORES - 0.0%
Cellstar Corp. (a) 2,300 51,175
RETAIL & WHOLESALE, MISC - 0.1%
Sodak Gaming, Inc. (a) 7,300 116,800
U.S. Office Products Co. 500 5,625
122,425
TOTAL RETAIL & WHOLESALE 280,925
SERVICES - 2.2%
LEASING & RENTAL - 0.2%
Hollywood Entertainment Corp. (a) 10,000 280,000
SERVICES - 2.0%
Career Horizons, Inc. 8,500 163,625
Craig (Jenny), Inc. 41,000 297,250
HCIA, Inc. 500 9,375
Lazare Kaplan International, Inc. (a) 206,300 1,805,125
2,275,375
TOTAL SERVICES 2,555,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 23.7%
COMMUNICATIONS EQUIPMENT - 3.1%
DSC Communications Corp. (a) 100 $ 3,600
Digital Systems International, Inc. (a) 200 1,375
Ericsson (L.M.) Telephone Co. Class B ADR 200 11,375
Inter-Tel, Inc. (a) 35,900 408,363
Nokia Corp. AB 6,000 898,293
Nokia Corp. AB sponsored ADR (a) 30,000 2,257,500
3,580,506
COMPUTER SERVICES & SOFTWARE - 11.1%
Alias Research, Inc. (a) 2,700 78,300
Bachman Information Systems, Inc. (a) 30,000 135,000
Brock Control Systems, Inc.(a) 30,800 192,500
Business Objects SA sponsored ADR (a) 100 3,013
Clinicom, Inc. (a) 10,000 172,500
Cognos, Inc. (a) 300 6,369
CompUSA, Inc. (a) 1,400 26,425
Comshare, Inc. (a) 100 1,656
Corel Systems Corp. 30,000 410,205
ECI Telecom Ltd. 20,000 305,000
EIS International, Inc. (a) 100 1,550
Electronics for Imaging, Inc. (a) 56,700 2,225,475
Investment Technology Group, Inc. (a) 154,500 1,023,563
MDL Information Systems, Inc. (a) 114,200 1,213,375
Manugistics Group, Inc. (a) 500 5,313
Modatech Systems, Inc. (a) 309,800 154,900
Novell, Inc. (a) 160,100 3,254,534
Platinum Technology, Inc. 900 21,375
Ross Systems, Inc. (a) 195,500 977,500
Ross Systems, Inc. (a)(b) 70,000 297,500
SHL Systemhouse, Inc. (a) 185,100 1,110,600
Shared Medical Systems Corp. 100 3,444
Structural Dynamics Research Corp. (a) 300 2,213
Systems & Computer Technology Corp. (a) 70,000 1,233,750
TGV Software, Inc. (a) 100 1,600
Transaction Systems Architects 500 8,938
Wavefront Technologies, Inc. (a) 5,900 90,713
12,957,311
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 4.0%
Amdahl Corp. (a) 60,000 $ 667,500
Compaq Computer Corp. 20,000 690,000
Diebold, Inc. 30,100 1,064,788
Digital Equipment Corp. (a) 50 1,675
Pinnacle Micro, Inc. (a) 105,000 1,391,250
RETIX 100,000 487,500
Silicon Graphics, Inc. (a) 400 13,850
Telxon Corp. 22,700 314,963
4,631,526
ELECTRONIC INSTRUMENTS - 0.4%
Electro Scientific Industries, Inc. (a) 50 944
Megatest Corp. 42,300 470,588
Silicon Valley Group, Inc. 100 2,344
473,876
ELECTRONICS - 5.1%
Advanced Micro Devices, Inc. (a) 100 3,038
Altera Corp. (a) 49,300 2,803,938
Integrated Device Technology, Inc. (a) 100 3,813
Integrated Silicon Solution (a) 500 14,250
LSI Logic Corp. (a) 33,300 1,814,850
Micron Technology, Inc. 13,000 806,000
S-3, Inc. (a) 23,600 430,700
Tencor Instruments (a) 100 4,750
5,881,339
TOTAL TECHNOLOGY 27,524,558
TRANSPORTATION - 3.8%
AIR TRANSPORTATION - 1.4%
AMR Corp. (a) 5,000 305,625
Northwest Airlines Corp. Class A (a) 7,500 184,688
Pittston Company Services Group 43,000 1,075,000
1,565,313
RAILROADS - 1.0%
Bombardier, Inc. Class B 61,800 1,184,142
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 1.4%
Airborne Freight Corp. 31,400 $ 749,675
Hunt (J.B.) Transport Services Inc. 46,700 910,650
1,660,325
TOTAL TRANSPORTATION 4,409,780
UTILITIES - 2.2%
CELLULAR - 1.2%
BCE Mobile Communications, Inc. (a) 15,700 526,798
Vodafone Group PLC sponsored ADR 29,100 887,550
1,414,348
TELEPHONE SERVICES - 1.0%
BellSouth Corp. 18,500 1,091,500
TOTAL UTILITIES 2,505,848
TOTAL COMMON STOCKS
(Cost $104,657,310) 109,698,477
NONCONVERTIBLE BONDS - 0.1%
MOODY'S RATINGS PRINCIPAL
AMOUNT
NONDURABLES - 0.1%
HOUSEHOLD PRODUCTS - 0.1%
Revlon Worldwide Corp. secured 0%, 3/15/98
(Cost $117,749) B3 $ 200,000 121,000
REPURCHASE AGREEMENTS - 5.4%
MATURITY VALUE (NOTE 1)
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account, at 6.08%
dated 2/28/95 due 3/1/95 $ 6,226,051 $ 6,225,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $111,000,059) $ 116,044,477
LEGEND
(a) Non-income producing
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Ross Systems, Inc. 1/4/95 $262,500
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $139,315 or 0.1% of net
assets.
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 82.9%
Canada 9.3
Finland 3.0
Hong Kong 2.5
Indonesia 1.0
Others (individually less than 1%) 1.3
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $111,000,059. Net unrealized appreciation
aggregated $5,044,418, of which $7,944,771 related to appreciated
investment securities and $2,900,353 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 116,044,477
agreements of $6,225,000) (cost $111,000,059) -
See accompanying schedule
Cash 221
Receivable for investments sold 8,460,523
Receivable for fund shares sold 3,438,140
Dividends receivable 61,729
TOTAL ASSETS 128,005,090
LIABILITIES
Payable for investments purchased $ 9,726,983
Payable for fund shares redeemed 980,271
Accrued management fee 51,308
Other payables and accrued expenses 124,629
TOTAL LIABILITIES 10,883,191
NET ASSETS $ 117,121,899
Net Assets consist of:
Paid in capital $ 116,468,256
Distributions in excess of net investment income (132,824)
Accumulated undistributed net realized gain (loss) on (4,257,967)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 5,044,434
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 11,168,146 shares outstanding $ 117,121,899
NET ASSET VALUE, offering price and redemption price per $10.49
share ($117,121,899 (divided by) 11,168,146 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 4, 1994 (COMMENCEMENT OF OPERATIONS)
TO FEBRUARY 28, 1995 (UNAUDITED)
INVESTMENT INCOME $ 137,434
Dividends
Interest 207,599
TOTAL INCOME 345,033
EXPENSES
Management fee $ 156,739
Transfer agent fees 139,052
Accounting fees and expenses 19,488
Custodian fees and expenses 45,000
Registration fees 41,091
Audit 13,262
Interest 1,773
TOTAL EXPENSES 416,405
NET INVESTMENT INCOME (LOSS) (71,372)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (4,256,459)
Foreign currency transactions (1,508) (4,257,967)
Change in net unrealized appreciation (depreciation) on:
Investment securities 5,044,418
Assets and liabilities in foreign currencies 16 5,044,434
NET GAIN (LOSS) 786,467
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 715,095
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
OCTOBER 4, 1994
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 28, 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ (71,372)
Net investment income (loss)
Net realized gain (loss) (4,257,967)
Change in net unrealized appreciation (depreciation) 5,044,434
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 715,095
Distributions to shareholders from net investment income (61,452)
Share transactions 189,049,431
Net proceeds from sales of shares
Reinvestment of distributions 60,633
Cost of shares redeemed (72,641,808)
Net increase (decrease) in net assets resulting from share transactions 116,468,256
TOTAL INCREASE (DECREASE) IN NET ASSETS 117,121,899
NET ASSETS
Beginning of period -
End of period (including distributions in excess of net investment $ 117,121,899
income of $132,824)
OTHER INFORMATION
Shares
Sold 18,267,046
Issued in reinvestment of distributions 6,125
Redeemed (7,105,025)
Net increase (decrease) 11,168,146
</TABLE>
FINANCIAL HIGHLIGHTS
OCTOBER 4, 1994
(COMMENCEMENT OF
OPERATIONS) TO
FEBRUARY 28, 1995
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income (.01) C
Net realized and unrealized gain (loss) .51
Total from investment operations .50
Less Distributions (.01)
From net investment income
Net asset value, end of period $ 10.49
TOTAL RETURN B 5.01%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 117,122
Ratio of expenses to average net assets 1.65% A
Ratio of net investment income to average net assets (.28)% A
Portfolio turnover rate 467% A
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE-TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Export 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 for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and
losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. The effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. The fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By so qualifying, the fund
will not be 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. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Investment income
is recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of 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. Distributions 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, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Distributions in excess of net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
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. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
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. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $297,500 or .3% of net assets.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $232,213,908 and $123,185,389, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2700% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annualized rate of .62%
of average net assets.
SALES LOAD. For the period October 4, 1994 through December 31, 1995,
Fidelity Distributors Corporation, an affiliate of FMR and the general
distributor of the fund, will voluntarily waive the sales charge (3.00% of
the offering price) on the sales of shares.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period October 4, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which FSC receives
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $97,065 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $7,255,000 and $5,206,000,
respectively. The weighted average interest rate was 6.1%.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East 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
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
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
8885 Ladue Road
Ladue, 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
1271 Avenue of
the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
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OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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
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Gerald C. McDonough*
Thomas R. Williams*
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Boston, MA
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Fidelity Service Co.
Boston, MA
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Brown Brothers Harriman & Co.
Boston, MA
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MUNICIPAL INCOME
PORTFOLIO
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
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.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 23 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888 FOR
A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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. A fund's total
return 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 to measure
performance. If Fidelity had not reimbursed certain fund expenses, the
life of fund figures would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Municipal Income 2.29% -0.28% 44.18%
Lehman Brothers Municipal Bond 2.80% 1.88% n/a
Index
Average General Municipal Bond Fund 2.53% 0.64% n/a
Consumer Price Index 1.28% 2.86% 16.80%
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 June 4, 1990. For example, if you invested $1,000 in a fund that
had a 5% return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the Lehman
Brothers Municipal Bond index - a broad measure of the municipal bond
market. To measure how the fund's performance stacked up against its peers,
you can compare it to the average general municipal bond fund, which
reflects the performance of 210 funds with similar objectives tracked by
Lipper Analytical Services during the period covered by this report. Both
benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Municipal Income -0.28% 8.02%
Lehman Brothers Municipal Bond Index 1.88% n/a
Average General Municipal Bond Fund 0.64% n/a
Consumer Price Index 2.86% 3.32%
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 Municipal InMunicipal Bond Index
06/30/90 10000.00 10000.00
07/31/90 10181.47 10147.00
08/31/90 9974.13 9999.87
09/30/90 10017.45 10005.87
10/31/90 10121.87 10186.97
11/30/90 10359.04 10391.73
12/31/90 10425.75 10437.46
01/31/91 10552.62 10577.32
02/28/91 10615.56 10669.34
03/31/91 10668.63 10673.61
04/30/91 10826.12 10815.57
05/31/91 10964.36 10911.83
06/30/91 10953.34 10900.91
07/31/91 11104.20 11033.91
08/31/91 11235.66 11179.55
09/30/91 11366.05 11324.89
10/31/91 11464.39 11426.81
11/30/91 11473.45 11458.81
12/31/91 11749.14 11705.17
01/31/92 11748.27 11732.09
02/29/92 11767.02 11735.61
03/31/92 11790.52 11740.31
04/30/92 11901.96 11844.80
05/31/92 12060.83 11984.56
06/30/92 12251.68 12185.90
07/31/92 12617.13 12551.48
08/31/92 12463.74 12428.48
09/30/92 12528.61 12509.26
10/31/92 12314.71 12386.67
11/30/92 12593.68 12608.39
12/31/92 12733.78 12737.00
01/31/93 12911.16 12884.75
02/28/93 13428.90 13351.18
03/31/93 13302.89 13209.65
04/30/93 13405.33 13343.07
05/31/93 13522.61 13417.79
06/30/93 13771.91 13641.87
07/31/93 13813.56 13659.60
08/31/93 14152.92 13943.72
09/30/93 14341.56 14102.68
10/31/93 14355.77 14129.48
11/30/93 14225.06 14005.14
12/31/93 14556.51 14300.65
01/31/94 14731.99 14463.67
02/28/94 14312.83 14089.06
03/31/94 13549.62 13515.64
04/30/94 13630.75 13630.52
05/31/94 13756.39 13749.11
06/30/94 13646.92 13669.36
07/31/94 13923.31 13919.51
08/31/94 13952.60 13968.23
09/30/94 13717.16 13762.90
10/31/94 13384.66 13517.92
11/30/94 13046.97 13273.24
12/31/94 13377.35 13565.25
01/31/95 13835.68 13953.22
02/28/95 14273.16 14359.26
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Municipal Income Portfolio on June 30, 1990, shortly after the fund
started. As the chart shows, by February 28, 1995, the value of your
investment would have grown to $14,273 - a 42.73% increase on your initial
investment. This assumes you still owned the fund on February 28, 1995, 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 $14,359 - a 43.59% 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)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
JUNE 4, 1990
SIX MONTHS (COMMENCEM
ENDED ENT OF
FEBRUARY 28, YEARS ENDED AUGUST 31, OPERATIONS) TO
AUGUST 31,
1995 1994 1993 1992 1991 1990
</TABLE>
Dividend return 3.17% 5.54% 6.69% 7.15% 7.90% 1.86%
Capital appreciation -0.88 -6.96% 6.86% 3.77% 4.74% -1.11%
%
return
Total return 2.29% -1.42% 13.55% 10.92% 12.64% 0.75%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.48(cents) 30.18(cents) 60.90(cents)
Annualized dividend rate 5.95% 6.37% 6.19%
30-day annualized yield 6.03% - -
30-day annualized tax-equivalent yield 9.42% - -
</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 $9.81 over
the past month, $9.56 over the past six months and $9.84 over the past
year, you can compare the fund's income over these three 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 36% federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Norman Lind, Portfolio Manager of Spartan
Municipal Income Portfolio
Q. NORM, HOW DID THE FUND DO?
A. For the six months ended February 28, 1995, the fund had a total return
of 2.29%. That lagged the average municipal bond fund's return of 2.53% for
the same period, according to Lipper Analytical Services. For the year
ended February 28, 1995, the fund returned -0.28%, compared to the average
fund's return of 0.64%, again according to Lipper.
Q. IN YOUR VIEW, WHAT FACTORS DROVE THE MUNICIPAL MARKET'S PERFORMANCE
DURING THE PAST SIX MONTHS?
A. There were several, but the most important was higher interest rates.
The Federal Reserve Board continued raising rates - a process they started
in February 1994 - in an effort to stave off inflation. Between August 31,
1994, and February 28, 1995, the Fed raised short-term interest rates twice
to 6.00%. Higher interest rates generally pushed bond prices - taxable and
tax-free alike - down from mid-September through mid-November. Exacerbating
the decline was selling by investors who wanted to take their 1994
municipal bond losses and offset them against gains from other investments
for tax purposes. By January, inflation seemed relatively stable and
tax-loss selling abated. That set the stage for a market rally that pushed
municipal bond prices higher and lasted until the end of the period.
Q. WHAT ACCOUNTS FOR THE FUND'S
PERFORMANCE?
A. There were two factors, but the primary factor was that the fund owned
certain types of bonds which underperformed the market throughout much of
the period. The bonds I'm referring to included non-callable and discount
bonds. Non-callable bonds, which can't be redeemed by their issuer before a
scheduled maturity date, and discount bonds, which sell below face value,
are more sensitive to rising interest rates than other types of bonds. As a
result, these bonds commanded a high price and did very well when interest
rates fell in 1993, but fell out of favor and underperformed when rates
rose in 1994. Discount bonds also were penalized because of a law that
changed the way capital gains for discounts are taxed. From November
through February, however, the bond market rallied, bringing both
non-callable and discount bonds back into favor and helping the fund's
performance. Going forward, there may be a limited supply of these bonds
available, which could help their prices if they continue to be favored
among investors.
Q. AND THE SECOND FACTOR?
A. The fund's stake in lower-quality investment-grade and below-investment
grade bonds also hurt its performance. I had purchased many of these bonds
because of their relatively high yields. However, in October and November,
credit spreads widened. By that I mean that lower quality bonds had to
offer higher yields than normal, relative to higher-quality bonds, in order
to attract investors. As the yields on lower-quality bonds rose, their
prices fell. But during the market's rally in 1995, spreads again narrowed
and these bonds have done quite well. Going forward, I'll most likely take
advantage of the market's recent strength and reduce the fund's stake in
these lower-quality bonds.
Q. NEW YORK WAS THE FUND'S SECOND LARGEST STATE CONCENTRATION AT THE END OF
THE PERIOD. HOW DID THOSE BONDS FARE OVER THE PAST SIX MONTHS?
A. Fairly well. Much of the fund's 12.3% New York stake was in
state-appropriated bonds, which rely on annual appropriations by the state
legislature to meet all or part of their principal and interest payments,
and were among the fund's top performers. As the New York economy showed
signs of improvement, and the state made progress on debt reform, investors
seemed to expect these bonds to get upgraded, and their values generally
increased. Recently, I've taken advantage of their strong prices and
reduced the fund's holdings in them. On the other hand, I increased the
fund's stake in New York City bonds toward the end of the period, partly
because their prices have been relatively attractive relative to their
credit fundamentals.
Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF
LOSSES IN ITS INVESTMENT POOL. IS THE FUND INVESTED IN ANY ORANGE COUNTY
BONDS?
A. The fund has a very small stake - about 0.5% of investments - in an
insured Orange County bond. Because the bond is insured, its principal and
interest payments are guaranteed. While the news of the Orange County
bankruptcy did put pressure on California bonds in general, I continue to
hold onto some of them. That's because I think the state's economy has
stopped deteriorating and California bond prices have started to reflect
that recently. I've used that recent strength to pare back the fund's stake
in California to 12.3% of investments at the end of the period, from 14.3%
six months ago.
Q. WHAT'S AHEAD FOR THE FUND?
A. There's some uncertainty about which direction the economy and inflation
will move in 1995. As for interest rates, I believe that the worst is over.
While the Fed may be close to the end of the cycle of raising interest
rates, I think there will probably be some continued volatility in the bond
market. To help guard against that volatility, I'll most likely keep the
fund's duration - which is a measure of its sensitivity to changes in
interest rates - neutral, or more in line with the municipal bond market as
a whole. Also, I'll concentrate on finding individual bonds that I think
can outperform the overall market. In particular, I'll look for the types
of bonds I think investors will want to own in the future, in order to
invest in these bonds early.
FUND FACTS
GOAL: to provide high current
income exempt from federal
taxes
START DATE: June 4, 1990
SIZE: as of February 28,
1995, more than $575 million
MANAGER: Norman Lind,
since June 1990; manager,
Fidelity New York Tax-Free
Insured Portfolio, since
March 1994; Fidelity New
York Tax-Free High Yield and
Spartan New York Municipal
High Yield Portfolios, since
1993; joined Fidelity in 1986
(checkmark)
NORM LIND ON HIS INVESTMENT
STRATEGY:
"The municipal bond market
was quite strong during
December, January and
February. Going forward, I
plan to take advantage of the
market's recent strength,
selectively selling bonds with
prices that have risen to what
I believe are at or near their
peak. At the same time, I plan
to look for opportunities in
individual bonds or sectors
that are attractively priced,
and have the potential to rise
in value. I'll focus on bonds
that I think will rise as the
result of improving credit
fundamentals, or sectors that
may become more favored
among investors in the
future."
(solid bullet) Inverse floaters, one of the
financial arrangements known
as derivatives, made up less
than 3% of the fund's
investments as of February
28, 1995. The yield on inverse
floaters rises as short-term
interest rates fall, and vice
versa. By using various
derivatives, the manager
hopes to achieve higher
levels of tax-exempt income
and increased flexibility in
managing the fund's overall
sensitivity to changes in
interest rates.
INVESTMENT CHANGES
TOP FIVE STATES AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 12.3 14.3
New York 12.3 13.1
Washington 9.1 6.8
Illinois 8.9 5.8
Pennsylvania 6.5 6.5
TOP FIVE SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Electric Revenue 20.1 21.3
Health Care 17.3 13.2
Lease Revenue 12.2 11.6
Industrial Development 11.0 8.6
General Obligation 10.5 9.0
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 17.3 19.9
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 8.4 10.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO
CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A
BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994
Row: 1, Col: 1, Value: 9.300000000000001
Row: 1, Col: 2, Value: 12.5
Row: 1, Col: 3, Value: 2.7
Row: 1, Col: 4, Value: 17.2
Row: 1, Col: 5, Value: 58.3
Row: 1, Col: 1, Value: 2.1
Row: 1, Col: 2, Value: 11.4
Row: 1, Col: 3, Value: 2.7
Row: 1, Col: 4, Value: 18.8
Row: 1, Col: 5, Value: 65.0
Aaa, Aa, A 58.3%
Baa 17.2%
Ba, B 2.7%
Non-rated 12.5%
Short-term
investments 9.3%
Aaa, Aa, A 65.0%
Baa 18.8%
Ba, B 2.7%
Non-rated 11.4%
Short-term
investments 2.1%
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT FEBRUARY 28, 1995
AND AUGUST 31, 1994 ACCOUNT FOR 11.1% AND 10.2%, RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 90.7%
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALASKA - 0.2%
North Slope Borough Gen. Oblig. (Cap.
Appreciation) Series B, 0% 6/30/05,
(Cap. Guaranty Insured) Aaa $ 2,500,000 $ 1,359,375
ARIZONA - 0.7%
Chandler:
7.375% 7/1/09, (FGIC Insured) Aaa 1,000,000 1,152,500
4.375% 7/1/12, (FGIC Insured) Aaa 1,000,000 811,250
Tucson Wtr. Rev. Series D:
9.75% 7/1/07 A1 500,000 676,250
9.75% 7/1/08 A1 500,000 673,750
9.75% 7/1/09 A1 750,000 1,021,875
4,335,625
CALIFORNIA - 11.7%
California Gen. Oblig. 4.75% 9/1/23 A1 8,150,000 6,438,500
California Hsg. Fin. Agcy. Rev. (Home Mtg.)
Series 1983 A, 0% 2/1/15 Aa 187,000 25,946
California Pub. Wks. Board Lease Rev.:
Rfdg. (Dept. Corrections St. Prisons) Series A,
5% 12/1/19, (AMBAC Insured)(b) Aaa 5,000,000 4,256,250
(California Univ. Proj.) Series A:
5.50% 6/1/14 A 3,000,000 2,640,000
5.50% 12/1/18 A 2,500,000 2,168,750
California Univ. Rev. Rfdg. (Multiple Purp.
Projs.) Series C, 5.125% 9/1/13,
(AMBAC Insured) Aaa 1,800,000 1,602,000
Culver City Redev. Fing. Auth. Rev. Rfdg. Tax
Allocation 5.50% 11/1/14, (AMBAC Insured) Aaa 2,000,000 1,860,000
Metropolitan Wtr. Dist. Southern California
Wtrwks. Rev. Rfdg. Series A, 5.75% 7/1/21 Aa 9,000,000 8,516,250
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Rfdg. (Geothermal Proj. #3) Series A,
5.85% 7/1/10 A 1,750,000 1,658,125
Sacramento City Fing. Auth. Lease Rev. Rfdg.:
Series A, 5.40% 11/1/20, (AMBAC Insured) Aaa 10,000,000 9,025,000
Series B, 5.40% 11/1/20 Aa 3,000,000 2,658,750
5% 11/1/14 Aa 4,020,000 3,432,075
San Bernardino County Ctfs. of Prtn.
(Med Ctr. Fing. Proj.) 5.50% 8/1/17 Baa1 4,000,000 3,335,000
San Joaquin County Ctfs. of Prtn. Rfdg.
(Cap. Facs. Proj.) 4.90% 11/15/08,
(MBIA Insured)(b) Aaa 4,000,000 3,610,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
San Jose Redev. Agcy. Tax Allocation
(Merged Area Redev. Proj.)
5% 8/1/20, (MBIA Insured) Aaa $ 3,550,000 $ 3,017,500
South Orange County California Spl. Tax Rev.
(Foothill Area) Series C, 7.50% 8/15/07,
(FGIC Insured) Aaa 2,500,000 2,912,500
Southern California Pub. Pwr. Auth.
(Transmission Proj. Rev.) Rfdg. Sub-Series A,
4.75% 7/1/23, (MBIA Insured) Aaa 3,110,000 2,491,888
Three Valleys Muni. Wtr. Dist. Rev. Rfdg. Ctfs.
of Prtn. 5% 11/1/14, (FGIC Insured) Aaa 2,790,000 2,427,300
West & Central Basin Wtr. Rfdg. (West Basin
Proj.)(e):
5.67% 8/1/07, (AMBAC Insured) INFL Aaa 2,900,000 2,544,750
5.72% 8/1/08, (AMBAC Insured) INFL Aaa 3,050,000 2,649,688
67,270,272
COLORADO - 4.0%
Adams County Single Family Mtg. Rev. Rfdg.
Series A-2, 8.70% 6/1/12, (FSA Insured) Aaa 5,000,000 5,462,500
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist)
6.625% 2/1/13 Baa 7,500,000 7,031,250
(PSL Health Sys. Proj.):
Series A, 6.875% 2/15/23 Baa1 4,000,000 3,855,000
Series B, 8.50% 2/15/21 Baa1 2,250,000 2,449,688
Denver City & County Arpt. Rev.
(Cap. Appreciation)(d):
Series A, 0% 11/15/05 Baa 4,615,000 2,180,588
Series D, 0% 11/15/05 Baa 5,000,000 2,362,500
23,341,526
CONNECTICUT - 0.5%
Connecticut Health & Ed. Facs. Auth. Rev.
(St. Raphael Hosp.) 5.30% 7/1/10,
(AMBAC Insured) Aaa 2,990,000 2,825,550
DISTRICT OF COLUMBIA - 1.6%
District of Columbia Hosp. Rev. (Hosp. for Sick
Children) Series A, 8.875% 1/1/21 - 3,430,000 3,661,525
District of Columbia Rev. (Georgetown Univ.)
Series A, 7.40% 4/1/18 A1 2,380,000 2,519,825
Metropolitan Washington Arpt. Auth. Gen.
Arpt. Rev. Series A, 7.25% 10/1/10,
(FGIC Insured)(d) Aaa 3,000,000 3,232,500
9,413,850
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
GEORGIA - 3.2%
Cobb-Marrieta Coliseum & Exhibit Hall Auth.
Rev. Rfdg. 5.50% 10/1/12, (MBIA Insured) Aaa $ 3,975,000 $ 3,776,250
Georgia Gen. Oblig.:
6.50% 12/1/01 Aaa 5,000,000 5,350,000
6.75% 12/1/01 Aaa 3,585,000 3,907,650
6.50% 8/1/02 Aaa 2,000,000 2,145,000
Georgia Residential Fin. Auth. Home Ownership
Mtg. Series 1984 B, 0% 12/1/15 (b) Aa 29,785,000 3,164,656
18,343,556
HAWAII - 1.0%
Hawaii Arpts. Sys. Rev. 2nd Series,
7.50% 7/1/20, (FGIC Insured)(d) Aaa 1,500,000 1,603,125
Honolulu City & County Rfdg. & Impt.
Series B, 5% 10/1/13 Aa 5,000,000 4,475,000
6,078,125
IDAHO - 0.8%
Idaho Falls Elec. Rfdg. 0% 4/1/07,
(FGIC Insured) Aaa 4,000,000 1,995,000
Idaho Hsg. Agcy. Single Family Mtg.
Series 1991 B, 7.50% 7/1/24 (d) AA 2,360,000 2,454,400
4,449,400
ILLINOIS - 5.6%
Chicago Gen. Oblig. Rfdg. Series B,
5.125% 1/1/15, (AMBAC Insured) Aaa 2,250,000 2,005,313
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. Sr. Lien
Series A, 5% 1/1/12 A1 7,500,000 6,506,250
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.
(United Airlines, Inc.) 8.25% 5/1/99 (d) Baa3 4,395,000 4,675,181
Chicago Residential Mtg. Rev. Rfdg.
(Cap. Appreciation) Series B, 0% 10/1/09,
(MBIA Insured) Aaa 9,000,000 3,172,500
Chicago Single Family Mtg. Rev.
(Cap. Appreciation) Series A, 0% 12/1/16,
(FGIC Insured) Aaa 34,590,000 4,323,750
DeKalb Single Family Mtg. Rev. 7.45% 12/1/09,
(GNMA Coll.)(d) Aaa 1,950,000 2,047,500
Illinois Dev. Fin. Auth. Solid Waste Disp. Rev.
(Ford Heights Waste Tire Proj.)
7.875% 4/1/11 (d) - 10,000,000 9,512,500
32,242,994
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
KANSAS - 0.2%
Reno County Mtg. Rev. Rfdg. (Single Family)
Series B, 8.70% 9/1/11 A1 $ 925,000 $ 996,688
KENTUCKY - 0.9%
Kenton County Arpt. Board Arpt. Rev.
(Spl. Facs. Delta) Series A,
7.50% 2/1/20 (d) Ba1 3,600,000 3,618,000
Owensboro Elec. Lt. & Pwr. Rev. Series B,
0% 1/1/10, (AMBAC Insured) Aaa 4,000,000 1,640,000
5,258,000
LOUISIANA - 1.5%
Louisiana Gen. Oblig. 6.75% 5/15/04,
(MBIA Insured) Aaa 7,865,000 8,572,850
MARYLAND - 1.3%
Maryland Health & Higher Ed. Facs. Auth. Rev.:
Rfdg. (Doctors Commty. Hosp.):
5.75% 7/1/13 Baa 2,000,000 1,670,000
5.50% 7/1/24 Baa 4,000,000 3,055,000
Rfdg. (Howard County Gen. Hosp.)
5.50% 7/1/13 Baa1 3,000,000 2,508,750
7,233,750
MASSACHUSETTS - 1.3%
Massachusetts Bay Trans. Auth. Rfdg.
(Gen. Trans. Sys.) Series A, 5.50% 3/1/12 A1 5,000,000 4,706,250
Massachusetts Health & Edl. Facs. Auth. Rev.
(St. Anne's Hosp.) Series A, 9.375% 7/1/14 Ba 1,000,000 1,007,500
Massachusetts Ind. Fin. Agcy. Rev.
(Reeds Landing Proj.) 8.625% 10/1/23 - 1,945,000 1,898,806
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. 13.625% 7/1/17,
(Pre-Refunded to 7/1/95 @ 100)(f) Baa1 5,000 5,154
7,617,710
MICHIGAN - 4.3%
Detroit Swr. Disp. Rev. 6.867% 7/1/23,
(FGIC Insured) INFL (e) Aaa 3,000,000 2,610,000
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Pontiac Osteopathic Hosp.):
Series A, 6% 2/1/14 Baa1 1,500,000 1,263,750
6% 2/1/24 Baa1 3,500,000 2,821,875
(Sisters of Mercy Health Corp.)
5.375% 8/15/14, (MBIA Insured) Aaa 2,840,000 2,619,900
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev.:
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 - $ 10,000,000 $ 10,487,500
(Mercy Svcs. for Aging Proj.)
9.40% 5/15/20 - 3,900,000 4,104,750
Waterford Township Econ. Dev. Corp. Rev.
Ltd. Tax Oblig. (Canterbury Health Care)
8.375% 7/1/23 - 800,000 820,000
24,727,775
MINNESOTA - 3.5%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Healthcare Sys. Rev. (Healthspan Health
Sys. Corp.) (Health One Sys.) Series A,
4.75% 11/15/18, (AMBAC Insured) Aaa 5,000,000 4,081,250
Southern Minnesota Muni. Pwr. Agcy. Pwr.
Supply Sys. Rev. Series A, 4.75% 1/1/16 (b) A 19,500,000 16,209,375
20,290,625
MISSISSIPPI - 0.3%
Mississippi Hosp. Equip. & Facs. Auth. Rev.
(Rush Med. Foundation Proj.) Series A,
8.75% 1/1/16 Baa 1,500,000 1,633,125
MISSOURI - 1.7%
Kansas City Ind. Dev. Auth. Econ. Dev. Rev.
Rfdg. (Encore Nursing Ctr.) (Beverly
Enterprises, Inc.) 8% 12/1/02 - 3,175,000 3,234,531
Missouri Health & Edl. Facs. Auth. Health
Facs. Rev. (Still Reg'l. Med. Ctr. Proj.)
7.70% 2/1/13 Baa 2,000,000 2,015,000
St. Louis Reg'l. Convention & Sports Complex
Auth. Series C:
7.75% 8/15/01 - 895,000 919,613
7.90% 8/15/21 - 3,500,000 3,696,875
9,866,019
MONTANA - 1.7%
Montana Board of Investment Payroll Tax
(Workers Compensation) 6.875% 6/1/20,
(MBIA Insured) Aaa 7,130,000 7,575,625
Montana Coal Severance Tax Rfdg.
(Broadwater Pwr. Proj.) Series A,
6.875% 12/1/11 (d) A1 2,000,000 2,080,000
9,655,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEBRASKA - 1.6%
Nebraska Pub. Pwr. Dist. Rev. Rfdg.
(Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 $ 4,500,000 $ 3,864,375
Omaha Pub. Pwr. Dist. Elec. Rev. Series C,
5.50% 2/1/14 Aa 5,650,000 5,275,688
9,140,063
NEW JERSEY - 1.7%
Camden County Impt. Auth. Lease Rev.
(Dockside Refridgerated Holt)
8.40% 4/1/24 (d) - 3,000,000 3,037,500
Jersey City Swr. Auth. Swr. Rev. Rfdg.
4.50% 1/1/19, (FGIC Insured) Aaa 1,850,000 1,468,433
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.
Rfdg. (Holt Hauling & Warehouse)
Series G, 8.40% 12/15/15 - 5,000,000 5,137,500
9,643,433
NEW MEXICO - 0.8%
Farmington Poll. Cont. Rev. Rfdg.
(Pub. Svc. Co. San Juan Proj.)
Series A, 6.40% 8/15/23 Ba2 3,250,000 2,876,250
Hobbs Single Family Mtg. Rev. Rfdg.
8.75% 7/1/11 A 1,840,000 1,984,900
4,861,150
NEW YORK - 12.3%
Metropolitan Trans. Auth. Svc. Contract:
Rfdg. (Trans. Facs.) Series 7, 0% 7/1/09 Baa1 7,500,000 3,000,000
(Commuter Facs.) Series O, 5.75% 7/1/13 Baa1 1,000,000 927,500
Series O, 5.75% 7/1/13 Baa1 2,000,000 1,855,000
New York City Gen. Oblig. Series A,
7.75% 8/15/07 Baa1 4,000,000 4,280,000
New York City Ind. Dev. Agcy. Spl. Facs. Rev.
(Terminal One Group Assoc. Proj.)
6% 1/1/19 (d) A 5,000,000 4,656,250
New York State Dorm. Auth. Rev.:
Rfdg. (State Univ. Edl. Facs.) Series A:
5.50% 5/15/09 Baa1 4,000,000 3,700,000
5.50% 5/15/13 Baa1 13,100,000 11,773,625
5.25% 5/15/15 (b) Baa1 5,000,000 4,312,500
(Suffolk County Judicial Facs.) Series A,
9.50% 4/15/14 Baa1 7,000,000 8,163,750
New York State Energy Research & Dev. Auth.
Elec. Facs. Rev. (Long Island Ltg.) Series A,
6.90% 8/1/22 (d) Ba1 5,000,000 4,562,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Local Gov't. Assistance Corp.
Rfdg.:
Series C, 5.50% 4/1/17 A $ 15,000,000 $ 13,837,500
Series E, 5.25% 4/1/16 A 4,075,000 3,657,313
Triborough Bridge & Tunnel Auth. Rev. Rfdg.
(Gen. Purp.) Series Y, 5.50% 1/1/17 Aa 6,500,000 6,020,625
70,746,563
NORTH CAROLINA - 1.0%
North Carolina Muni. Pwr. Agcy. #1
Catawba Elec. Rev. 5.25% 1/1/09 A 6,155,000 5,531,806
NORTH DAKOTA - 1.0%
Mercer County Poll. Cont. Rev. Rfdg.
(Basin Electric Pwr.) (Antelope Valley Station)
7.20% 6/30/13, (AMBAC Insured) Aaa 5,000,000 5,643,750
OHIO - 1.7%
Bedford Hosp. Impt. Rev. Rfdg.
(Bedford Commty. Hosp.) Series 1990,
8.50% 5/15/09, (Escrowed to Maturity)(f) - 1,020,000 1,188,300
Ohio Bldg. Auth. (Workers Compensation Bldg. A)
4.75% 4/1/14 A 8,000,000 6,690,000
Ohio Hsg. Fin. Agcy. Mtg. Rev.
(Oakleaf-Toledo Apts. Proj.)
10.25% 12/20/25, (GNMA Coll.) AAA 1,590,000 1,836,450
9,714,750
OKLAHOMA - 1.6%
Grand River Dam Auth. Rev. Rfdg.
5.50% 6/1/10 A 9,450,000 9,036,563
OREGON - 0.6%
Port Morrow Poll. Ctr. Rev. (Pacific Northwest)
Series A, 8% 7/15/11 AA- 3,420,000 3,851,775
PENNSYLVANIA - 5.8%
Clarion County Hosp. Auth. Hosp. Rev.
(Clarion Hosp. Proj.) 8.50% 7/1/21 BBB- 2,500,000 2,671,875
Delaware County Auth. Rev. (First Mtg. Riddle
Village Proj.):
8% 6/1/99 - 3,875,000 3,957,344
7% 6/1/00 - 700,000 691,250
8.25% 6/1/22 - 1,660,000 1,614,350
9.25% 6/1/22 - 4,915,000 5,216,044
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.70% 9/1/14 Ba $ 1,500,000 $ 1,430,625
6.75% 9/1/19 Ba 2,250,000 2,134,688
Pennsylvania Intergovernmental Coop. Auth.
Spl. Tax Rev. Rfdg. Series A, 5% 6/15/15 Baa1 3,000,000 2,587,500
Pennsylvania Rfdg. & Proj. First Series,
5.375% 4/15/12 A1 2,000,000 1,857,500
Philadelphia Hosp. & Higher Ed. Facs.
Auth. Hosp. Rev. (Temple Univ. Hosp.)
Series A, 6.50% 11/15/08 Baa1 2,000,000 1,977,500
Philadelphia Wtr. & Wastewtr. Rev.
6.06% 6/15/12, (FGIC Insured) INFL (e) Aaa 6,000,000 5,362,500
Somerset County Pennsylvania Hosp. Auth. Rev.
(Health Care 1st Mtg.) 8.50% 6/1/24 - 2,000,000 1,962,500
Wilkins Area Ind. Dev. Auth. Rev. (1st Mtg.)
(Fairview Extended Care) Series A,
10.25% 1/1/21 (b) - 2,000,000 2,172,500
33,636,176
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Hwy. Rev. Series W, 5.50% 7/1/15 Baa1 1,500,000 1,380,000
SOUTH DAKOTA - 0.3%
South Dakota Health & Edl. Facs. Auth. Rev.
Rfdg. (Prairie Lakes Healthcare)
7.25% 4/1/22 Baa 2,000,000 1,925,000
TENNESSEE - 0.3%
Metropolitan Gov't. Nashville & Davidson
County Wtr. & Swr. Rev. Rfdg.
5.20% 1/1/13, (FGIC Insured) Aaa 2,000,000 1,822,500
TEXAS - 4.7%
Alliance Arpt. Auth. Spl. Facs. Rev.
(American Airlines, Inc.)
7% 12/1/11 (b)(d) Baa1 10,000,000 9,887,500
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
Series A, 0% 11/15/08, (MBIA Insured) Aaa 3,895,000 1,743,013
Dallas Wtrwks. & Swr. Sys. Rev. 4.50% 4/1/00 Aa 5,000,000 4,768,750
East Texas Health Facs. Dev. Corp. Hosp. Rev.
(Mem. Hosp. Foundation Palestine)
7.80% 8/15/18 - 3,000,000 2,906,250
El Paso Prop. Fin. Auth. Single Family Mtg. Rev.
Series A, 8.70% 12/1/18, (GNMA Coll.)(d) Aaa 1,370,000 1,476,175
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
TEXAS - CONTINUED
Harris County Cultural & Ed. Facs. Fin. Corp.
(Space Ctr. Houston Proj.) 9.25% 8/15/15 - $ 3,315,000 $ 2,917,200
San Antonio Elec. & Gas Rev. Rfdg.
(Cap. Appreciation) Series B:
0% 2/1/08, (FGIC Insured) Aaa 2,000,000 932,500
0% 2/1/09, (FGIC Insured) Aaa 2,000,000 875,000
Victoria Hsg. Fin. Corp. Single Family Mtg. Rev.
Rfdg. Series A, 8.50% 1/1/11 A 980,000 1,049,825
Winters Wtrwks. & Swr. Sys. Rev. Rfdg.
8.50% 8/1/17, (Pre-Refunded to
8/1/03 @ 100)(f) - 500,000 604,375
27,160,588
UTAH - 0.5%
Intermountain Pwr. Agcy. Pwr. Supply Series A
6.607% 7/1/21 INFL (e) Aa 1,000,000 817,500
Utah Hsg. Fin. Agcy.:
(Residential Mtg.) Series 1983 A, 0% 7/1/16 A+ 7,635,042 868,486
(Single Family Mtg.) Series G, 9.25% 7/1/19,
(FHA Guaranteed)(d) AA 1,010,000 1,078,175
2,764,161
VERMONT - 0.7%
Vermont Hsg. Fin. Agcy. Single Family Series 2,
7.30% 5/1/25 (d) A 1 1,500,000 1,546,875
Vermont Ind. Dev. Auth. Ind. Dev. Rev.
(Radisson Hotel) Series B-1,
7.75% 11/15/15 - 2,350,000 2,379,375
3,926,250
VIRGINIA - 0.8%
Virginia Gen. Oblig. 6% 6/1/03 Aaa 4,000,000 4,195,000
Virginia Hsg. Dev. Auth. Residential Mtg.
(Single Family Mtg.) Series 1983 B,
0% 9/1/14 Aa 2,430,000 328,050
4,523,050
WASHINGTON - 9.1%
Douglas County Pub. Util. Dist. #1 Wells
Hydroelec. Rev. Rfdg. (Pacific Pwr. & Lt. Co.)
8.75% 9/1/18 A 1,395,000 1,729,800
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #1 Rev. Rfdg. Series C,
5.30% 7/1/10 Aa 2,500,000 2,253,125
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #2 Rev.:
Rfdg. Series C, 0% 7/1/05, (MBIA Insured) Aaa $ 11,000,000 $ 6,008,750
5.26% 7/1/12 Aa 28,000,000 24,990,000
Washington Pub. Pwr. Supply Sys.
Nuclear Proj. #3 Rev. 5.26% 7/1/12 Aa 20,000,000 17,825,000
52,806,675
TOTAL MUNICIPAL BONDS
(Cost $542,993,363) 523,626,693
MUNICIPAL NOTES (C) - 9.3%
CALIFORNIA - 0.6%
Ventura County TRAN 4.50% 8/1/95 MIG 1 3,800,000 3,797,758
ILLINOIS - 3.3%
Illinois Dev. Fin. Auth. Multi-Family Hsg.
Rev. Rfdg. (Garden Glen Apts.) Series 93,
4.10%, VRDN A-1+ 3,000,000 3,000,000
Illinois Health Facs. Auth. Rev.:
(Central Dupage Hosp. Assoc. Proj.)
Series 1990, 3.80%, LOC Industrial
Bank of Japan, VRDN VMIG 1 11,700,000 11,700,000
(LaGrange Mem. Health Sys.) Series 1990,
3.80%, LOC First Nat'l. Bank of Chicago,
VRDN VMIG 1 4,500,000 4,500,000
19,200,000
INDIANA - 0.6%
Indiana Hosp. Equip. Fing. Auth. Rev.
Series 1985 A, 4.10%, (MBIA Insured)
BPA Bank of New York, VRDN VMIG 1 3,500,000 3,500,000
MICHIGAN - 0.3%
Farmington Hills Hosp. Fin. Auth. Hosp. Rev.
(Botsford Hosp.) 3.80%, (MBIA Insured)
BPA Comerica Bank, Detroit, VRDN VMIG 1 1,500,000 1,500,000
MISSISSIPPI - 2.4%
Jackson County Poll. Cont. Rev. Rfdg.
(Chevron USA, Inc.) Series 1993,
3.90%, VRDN P-1 13,800,000 13,800,000
MUNICIPAL NOTES (C) - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
AMOUNT (NOTE 1)
MISSOURI - 0.4%
Kansas City Ind. Dev. Auth. Hosp. Rev.
Rfdg. & Impt. (Research Health Sys. Svc.)
Series 1985, 3.80%, (MBIA Insured)
BPA Mitsui Bank, VRDN A-1 $ 2,200,000 $ 2,200,000
NORTH CAROLINA - 0.7%
Halifax County Ind. Facs. Poll. Cont. Facs. Auth.
(Westmoreland Hadson Proj.) (Roanoke
Valley Proj.) Series 1991, 4.20%,
LOC Cr. Suisse, VRDN (d) - 4,115,000 4,115,000
PENNSYLVANIA - 0.7%
Pennsylvania Higher Ed. Assistance Agcy.
(Student Loan) Series 1988 A, 4.10%,
LOC Fuji Bank, VRDN (d) VMIG 1 2,000,000 2,000,000
Schuylkill County Ind. Dev. Auth. Resources
Recovery Rev. (Westwood Energy Prop.)
Series 1985, 4.05%, LOC Fuji Bank, VRDN P-1 1,800,000 1,800,000
3,800,000
TEXAS - 0.3%
North Central Health Fac. Dev. Corp. Hosp.
Rev. (Presbyterian Med. Ctr. Proj.) Series D,
3.80%, (MBIA Insured) LOC Nationsbank
of Texas, VRDN VMIG 1 1,800,000 1,800,000
TOTAL MUNICIPAL NOTES
(Cost $53,726,685) 53,712,758
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $596,720,048) $577,339,451
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
295 Municipal Bond Futures Contracts March 1995 $ 26,752,813 $ (996,332)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.6%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(b) 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 $26,293,238.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(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) Security collateralized by an amount sufficient to pay interest and
principal.
OTHER INFORMATION
The composition of long-term debt holdings
as a percentage of total value of investment in securities, is as follows
(ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 56.6% AAA, AA, A 59.0%
Baa 16.7% BBB 10.2%
Ba 2.7% BB 5.8%
B 0.0% B 0.2%
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 12.5%. FMR
has determined that unrated debt securities that
are lower quality account for 11.1% of the
total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Electric Revenue 20.1%
Health Care 17.3
Lease Revenue 12.2
Industrial Development 11.0
General Obligation 10.5
Others (individually less than 10%) 28.9
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes
was $596,720,048. Net unrealized depreciation aggregated $19,380,597, of
which $7,737,949 related to appreciated investment securities and
$27,118,546 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $596,720,048) - $ 577,339,451
See accompanying schedule
Receivable for investments sold 3,767,790
Interest receivable 7,463,665
TOTAL ASSETS 588,570,906
LIABILITIES
Payable to custodian bank $ 237,437
Payable for investments purchased 12,040,123
Dividends payable 615,879
Accrued management fee 238,315
Payable for daily variation on futures contracts 116,657
TOTAL LIABILITIES 13,248,411
NET ASSETS $ 575,322,495
Net Assets consist of:
Paid in capital $ 612,768,730
Accumulated undistributed net realized gain (loss) (17,069,306)
on investments
Net unrealized appreciation (depreciation) on (20,376,929)
investments
NET ASSETS, for 58,138,264 shares outstanding $ 575,322,495
NET ASSET VALUE, offering price and redemption price per $9.90
share ($575,322,495 (divided by) 58,138,264 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
INTEREST INCOME $ 20,306,697
EXPENSES
Management fee $ 1,624,557
Non-interested Trustees' compensation 1,621
TOTAL EXPENSES 1,626,178
NET INTEREST INCOME 18,680,519
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (16,393,709)
Futures contracts 308,729 (16,084,980)
Change in net unrealized appreciation (depreciation) on:
Investment securities 4,931,068
Futures contracts (933,463) 3,997,605
NET GAIN (LOSS) (12,087,375)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,593,144
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED FEBRUARY AUGUST 31,
28, 1994
1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 18,680,519 $ 45,667,244
Net interest income
Net realized gain (loss) (16,084,980) 19,535,273
Change in net unrealized appreciation (depreciation) 3,997,605 (77,059,116)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,593,144 (11,856,599)
FROM OPERATIONS
Distributions to shareholders: (18,680,519) (45,674,031)
From net interest income
From net realized gain (5,309,623) (43,781,431)
TOTAL DISTRIBUTIONS (23,990,142) (89,455,462)
Share transactions 50,902,501 144,360,608
Net proceeds from sales of shares
Reinvestment of distributions 17,994,488 70,984,626
Cost of shares redeemed (156,393,079) (346,734,933)
Redemption fees 39,787 167,057
Net increase (decrease) in net assets resulting from (87,456,303) (131,222,642)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (104,853,301) (232,534,703)
NET ASSETS
Beginning of period 680,175,796 912,710,499
End of period $ 575,322,495 $ 680,175,796
OTHER INFORMATION
Shares
Sold 5,328,453 13,609,404
Issued in reinvestment of distributions 1,878,421 6,585,102
Redeemed (16,609,556) (32,895,616)
Net increase (decrease) (9,402,682) (12,701,110)
</TABLE>
FINANCIAL HIGHLIGHTS
JUNE 4, 1990
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) TO
FEBRUARY 28, 1995 YEARS ENDED AUGUST 31, AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.070 $ 11.370 $ 10.710 $ 10.360 $ 9.890 $ 10.000
of period
Income from Investment .302 .611 .663 .704 .739 .187
Operations
Net interest income
Net realized and (.091) (.752) .727 .387 .463 (.120)
unrealized gain (loss)
Total from investment .211 (.141) 1.390 1.091 1.202 .067
operations
Less Distributions (.302) (.611) (.663) (.704) (.739) (.187)
From net interest
income
From net realized gain (.080) (.550) (.070) (.040) - -
on investments
Total distributions (.382) (1.161) (.733) (.744) (.739) (.187)
Redemption fees added to .001 .002 .003 .003 .007 .010
paid in capital
Net asset value, end $ 9.900 $ 10.070 $ 11.370 $ 10.710 $ 10.360 $ 9.890
of period
TOTAL RETURN B, C 2.30% (1.42) 13.55 10.93 12.65 .76%
% % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 575 $ 680 $ 913 $ 871 $ 551 $ 93
(in millions)
Ratio of expenses to .55% .55% .47 .36 .23 -
average net assets A % % %
Ratio of expenses to .55% .55% .55 .55 .55 .55%
average net assets A % % % A
before expense
reductions
Ratio of net interest 6.34% 5.76% 6.09 6.68 7.24 7.91%
income to average net A % % % A
assets
Portfolio turnover rate 45% 48% 50 62 78 116%
A % % % A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSE FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Municipal Income Portfolio (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 of their purchase date 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. Distributions are declared daily and paid
monthly from net interest income. Distributions from realized gains, 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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, market discount and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect
net interest income per share. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
and written options involve, to varying degrees, risk of loss in excess of
the futures variation margin or the option value reflected in the Statement
of Assets and Liabilities. The underlying face amount at value is shown in
the schedule of investments under the caption "Futures Contracts." This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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 $128,027,218 and $256,280,799, respectively.
The market value of futures contracts opened and closed during the period
amounted to $516,120,463 and $497,771,292, 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. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$8,180 for the period.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East 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
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
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
8885 Ladue Road
Ladue, 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
1271 Avenue of
the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, 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
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State 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
Norman Lind, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
FIDELITY'S 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 Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
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 Intermediate Municipal
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
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
GINNIE MAE
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
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.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 13 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 17 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888 FOR
A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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. A fund's total
return 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 to measure
performance. If Fidelity had not reimbursed certain fund expenses, the life
of fund figures would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Ginnie Mae 4.08% 2.92% 33.19%
Salomon Brothers GNMA Pass-Through 4.22% 3.08% n/a
Index
Average GNMA Fund 3.31% 1.78% n/a
Consumer Price Index 1.28% 2.86% 12.78%
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, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Salomon Brothers GNMA Pass-Through Index - a broad measure of the GNMA
market. To measure how the fund's performance stacked up against its peers,
you can compare it to the average GNMA fund, which reflects the performance
of 54 GNMA funds tracked by Lipper Analytical Services during the period
covered by this report. Both benchmarks include reinvested dividends and
capital gains, if any. Comparing the fund's performance to the consumer
price index (CPI) helps show how your fund did compared to inflation. (The
CPI returns begin on the month end closest to the fund's start date).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Ginnie Mae 2.92% 7.10%
Salomon Brothers GNMA Pass-Through Index 3.08% n/a
Average GNMA Fund 1.78% n/a
Consumer Price Index 2.86% 2.93%
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 FSB GNMA Index (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
03/31/94 12612.75 13016.65
04/30/94 12498.61 12938.55
05/31/94 12515.69 12981.24
06/30/94 12488.19 12955.28
07/31/94 12740.57 13194.95
08/31/94 12772.26 13208.15
09/30/94 12606.77 13050.97
10/31/94 12600.51 13036.62
11/30/94 12555.19 12990.99
12/31/94 12687.33 13128.69
01/31/95 12956.49 13408.33
02/28/95 13294.85 13766.34
$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, 1995, the value of your investment would
have grown to $13,295 - a 32.95% increase on your initial investment. This
assumes you still owned the fund on February 28, 1995 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
$13,766 - a 37.66% 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
YEARS ENDED AUGUST 31, DECEMBER 27,
1990
SIX MONTHS (COMMENCEME
ENDED NT
FEBRUARY 28, OF OPERATIONS)
TO AUGUST 31,
1995 1994 1993 1992 1991
Dividend return 3.99% 5.24% 6.51% 8.30% 5.93%
Capital appreciation 0.09% -5.50% 1.08% 2.55% 1.60%
return
Total return 4.08% -0.26% 7.59% 10.85% 7.53%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.71(cents) 36.93(cents) 65.42(cents)
Annualized dividend rate 7.83% 7.92% 6.86%
30-day annualized yield 7.22% - -
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 $9.51 over
the past month, $9.40 over the past six months and $9.53 over the past
year, you can compare the fund's income over these three 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
NOTE TO SHAREHOLDERS:
On February 13, 1995, Kevin Grant (right photo) became portfolio manager of
Spartan Ginnie Mae Portfolio. The following is an interview with Bob Ives -
who managed the fund during the period covered by this report - with some
comments from Kevin Grant on his outlook and strategy:
Q. BOB, HOW HAS THE FUND PERFORMED?
B.I. For the six and 12 months ended February 28, 1995, the fund had total
returns of 4.08% and 2.92%, respectively. During the same period, the
average GNMA fund returned 3.31% and 1.78%, respectively, according to
Lipper Analytical Services. The Salomon Brothers GNMA Pass-through index
returned 4.22% and 3.08%, respectively, during the same periods.
Q. WHAT HELPED THE FUND BEAT THE AVERAGE GNMA FUND?
A. First, Ginnie Maes generally outperformed other sectors of the
mortgage-backed securities market and Treasury bonds over the past six
months. Other GNMA fund managers may have kept core positions in Treasury
bonds, while I had most of the fund invested in Ginnie Maes. Second, I
focused the fund's investments on seasoned - or older - mortgages, and they
did well during the period. Finally, the fund's duration - its sensitivity
to changes in interest rates - was probably a bit longer than the duration
of other funds over the last two months of the period, meaning the fund was
more sensitive to interest rate changes. That longer duration probably made
a difference in January and February of this year, when longer-term
interest rates for mortgage-backed securities actually dropped. As these
rates dropped, the prices of the fund's bonds rose - more so, it appears,
than the prices of bonds in other funds, because the fund had a longer
duration.
Q. DESCRIBE THE MORTGAGE-BACKED SECURITIES ENVIRONMENT OVER THE PAST SIX
MONTHS.
A. In general, these securities have performed better than Treasuries and
other sectors of the bond market, in part because they generally offer
higher yields and shorter durations - a good combination in the generally
rising interest rate environment of the past six months. Mortgage-backed
securities typically pay higher yields than Treasuries to help compensate
investors for prepayment risk - the risk that mortgage holders will pay off
their loans before they are due. During the period, these securities
offered attractive yields and were less susceptible to prepayment risk.
That's because the rise in interest rates helped create an environment in
which mortgage holders were less likely to prepay.
Q. WHAT'S YOUR READ ON WHY THE PERFORMANCE OF GINNIE MAES IMPROVED DURING
THE PAST SIX MONTHS?
A. They were priced fairly cheaply at the beginning of the period, because
many investors were concerned about rising interest rates. The duration of
Ginnie Maes tends to be longer than other mortgage-backed securities.
That's because Ginnie Mae borrowers tend to prepay - or pay off their
loan's principal - more slowly than borrowers in other mortgage programs.
Rising interest rates made it even less likely that Ginnie Mae borrowers
would prepay. So as interest rates were rising, investors didn't want to
lose value by holding longer-duration Ginnie Maes. However, investors
gradually came to appreciate the inherent value offered by Ginnie Maes.
This increased investor interest helped drive prices up.
Q. WHAT HAS BEEN THE EFFECT OF TALK IN THE NEWS LATELY ABOUT POSSIBLE
REDUCTIONS IN THE SUPPLY OF GINNIE MAES?
A. It's another reason Ginnie Maes have outperformed other segments of the
market. The possible changes are a result of Washington's move toward
reducing the role of government. If the changes come about, there probably
would be a reduction in the supply of Ginnie Maes going forward. The
possibility that this might occur has helped increase investor interest in
the sector, especially among those who are required to invest in, or are
attracted to, bonds that are backed by the full faith and credit of the
U.S. government, such as Ginnie Maes. If the most drastic scenario comes
about, and the program is cut back significantly, it is likely to help
Ginnie Mae securities in the short term because there will be less supply
going forward, causing Ginnie Mae prices to rise.
Q. YOU HAD MENTIONED SEASONED MORTGAGES EARLIER . . .
A. This is a sector I've been active in throughout my tenure on the fund. A
mortgage security's age can help indicate how prepayment risk is likely to
change under different conditions. On average, that risk has not always
been priced all that efficiently relative to the more actively traded
sectors of the market, which are the newer issues. My strategy has been to
try to purchase very seasoned bonds at cheaper prices, then sell them when
the market realizes their value.
Q. TURNING TO YOU, KEVIN: AS YOU PREPARED TO TAKE OVER THE FUND ON FEBRUARY
13, WHAT WAS YOUR OUTLOOK FOR THE YEAR AHEAD?
K.G. The mortgage market today generally has less risk than it's had in
about five years. The main reason is that most home buyers have refinanced
into mortgages with interest rates that are low relative to the current
market. At the end of the period, the average rate on the outstanding
universe of mortgages was about 7.5%, and the average rate on a new
mortgage was about 8.75%. Therefore, at these rates there's no economic
incentive for most people to refinance. Historically, the mortgage market
has provided returns above Treasuries of about 1%. This year, I don't think
we'll get much more or less than that, and the primary reason is that the
world knows there's little prepayment risk, so there are fewer
opportunities within the mortgage market than there were last year.
Nevertheless, that 1% return advantage would be reasonable.
FUND FACTS
GOAL: to provide high current
income by investing primarily
in GNMA securities
START DATE: December 27,
1990
SIZE: as of February 28, 1995,
more than $360 million
MANAGER: Robert Ives, 1993
- - February 1995. Kevin
Grant, starting February 13,
1995; also manager, Fidelity
Mortgage Securities Portfolio
since 1993, Fidelity Ginnie
Mae Portfolio since February
1995; joined Fidelity in 1993
(checkmark)
KEVIN GRANT'S INVESTMENT
APPROACH:
"First, I try to avoid predicting
interest rate movements.
Second, I'm a value-oriented
investor. I use extensive
quantitative analysis to help
me find securities that appear
undervalued in the
marketplace - those whose
prices are very low relative to
their potential for gains. Third,
my mandate is to do this
within the Ginnie Mae market.
I will always look for the
cheapest alternatives within
that market.
"At times, Treasury bonds
might be a good alternative, if
investors aren't going to be
well-paid for the added
prepayment risk one can find
in Ginnie Maes. But, most of
the time that will not be the
case. Normally, I'll stay with
Ginnie Maes.
"My approach is simple,
because this is a simple fund.
I can invest up to 35% of the
fund in other
mortgage-backed securities,
such as Freddie Macs or
Fannie Maes. If I do so, it
probably will be when Ginnie
Maes are relatively
overpriced. But, for the most
part, I expect to be fully
oriented toward the Ginnie
Mae market."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
6 - 6.99% 3.9 6.6
7 - 7.99% 42.2 37.5
8 - 8.99% 27.5 19.7
9 - 9.99% 14.0 23.7
10 - 10.99% 4.6 6.2
11 - 11.99% 1.3 1.9
12 - 12.99% 2.8 3.1
13% and over 0.6 0.6
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, 1995
6 MONTHS AGO
Years 9.1 9.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 4.8 4.9
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994
Row: 1, Col: 1, Value: 3.1
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 46.4
Row: 1, Col: 4, Value: 49.5
Mortgage-backed
securities** 99.3%
Collateralized
mortgage obligations
(CMOs) -
Other 0.7%
Mortgage-backed
securities* 96.4%
Collateralized
mortgage obligations
(CMOs) 0.5%
Other 3.1%
Row: 1, Col: 1, Value: 2.6
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 48.0
Row: 1, Col: 4, Value: 48.0
* GNMA SECURITIES - 87.5%
** GNMA SECURITIES - 91.2%
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 96.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.8%
8 1/2%, 10/1/18 to 2/1/19 $ 33,624 $ 33,834
9%, 11/1/08 to 8/1/20 6,528,740 6,718,880
9 3/4%, 12/1/08 to 4/1/13 680,204 709,492
10%, 1/1/09 to 11/1/20 8,953,392 9,485,123
10 1/4%, 8/1/10 to 11/1/16 1,405,702 1,489,537
10 1/2%, 1/1/16 to 12/1/20 5,314,053 5,659,742
11 1/4%, 9/1/13 276,659 295,104
11 1/2%, 6/1/19 578,150 622,957
12%, 2/1/13 to 2/1/17 865,172 940,262
12 1/2%, 11/1/12 to 5/1/15 1,523,267 1,719,386
13%, 11/1/12 to 11/1/14 371,211 422,716
13 1/2%, 1/1/13 to 12/1/14 170,852 195,945
28,292,978
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.1%
11%, 8/1/10 843,561 915,786
12 1/4%, 12/1/14 to 6/1/15 56,901 62,373
12 1/2%, 11/1/13 to 5/1/21 1,943,263 2,137,590
13 1/4%, 9/1/11 637,806 720,721
3,836,470
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 87.5%
6 1/2%, 9/15/23 to 5/15/24 15,496,125 14,024,644
7%, 1/15/08 to 6/15/24 90,634,385 85,611,764
7 1/2%, 10/15/22 to 12/15/23 69,881,878 67,588,350
8%, 12/15/16 to 11/15/23 48,933,748 48,784,957
8 1/2%, 3/15/25 (a) 4,400,000 4,474,272
8 1/2%, 2/15/16 to 1/15/22 45,142,767 46,311,740
9%, 1/15/05 to 2/15/25 14,075,458 14,597,238
9 1/2%, 3/15/01 to 1/15/23 26,898,886 28,594,138
10 1/2%, 9/15/00 245,987 259,900
11%, 7/15/10 to 1/15/16 478,246 526,516
11 1/2%, 10/15/10 to 12/15/15 336,852 372,223
12%, 12/15/12 to 1/15/15 1,129,253 1,249,817
12 1/2%, 4/15/10 to 10/15/15 3,538,149 3,980,518
13%, 9/15/13 to 1/15/15 785,605 890,187
317,266,264
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE-
BACKED SECURITIES (Cost $342,459,623) 349,395,712
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - 0.5%
Federal National Mortgage Association Z Bond
Series 1987-2, 11%, 11/25/17 (Cost $1,914,820) $ 1,769,547 $ 1,937,654
REPURCHASE AGREEMENTS - 3.1%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account, at 6.08%
dated 2/28/95 due 3/1/95 $ 11,290,907 11,289,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $355,663,443) $ 362,622,366
LEGEND
(a) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $359,822,185. Net unrealized appreciation
aggregated $2,800,181, of which $8,266,583 related to appreciated
investment securities and $5,466,402 related to depreciated investment
securities.
The fund has elected to defer to its fiscal year ending August 31, 1995
$14,733,812 of losses recognized during the period November 1, 1993 to
August 31, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 362,622,366
agreements of $11,289,000) (cost $355,663,443) -
See accompanying schedule
Cash 69,828
Receivable for investments sold 571,364
Interest receivable 2,508,649
TOTAL ASSETS 365,772,207
LIABILITIES
Payable for investments purchased $ 43,945
Regular delivery
Delayed delivery 4,404,583
Payable for fund shares redeemed 184,616
Dividends payable 530,452
Accrued management fee 175,742
TOTAL LIABILITIES 5,339,338
NET ASSETS $ 360,432,869
Net Assets consist of:
Paid in capital $ 389,949,316
Distributions in excess of net investment income (816,554)
Accumulated undistributed net realized gain (loss) (35,658,816)
on investments
Net unrealized appreciation (depreciation) on 6,958,923
investments
NET ASSETS, for 37,361,729 shares outstanding $ 360,432,869
NET ASSET VALUE, offering price and redemption price per $9.65
share ($360,432,869 (divided by) 37,361,729 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
INVESTMENT INCOME $ 15,169,223
Interest
EXPENSES
Management fee $ 1,180,031
Non-interested trustees' compensation 993
TOTAL EXPENSES 1,181,024
NET INVESTMENT INCOME 13,988,199
REALIZED AND UNREALIZED GAIN (LOSS) (9,756,989)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on:
Investment securities 9,146,059
Delayed delivery commitments (9,799) 9,136,260
NET GAIN (LOSS) (620,729)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 13,367,470
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED FEBRUARY AUGUST 31,
28, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 13,988,199 $ 37,828,118
Net investment income
Net realized gain (loss) (9,756,989) (33,092,333)
Change in net unrealized appreciation (depreciation) 9,136,260 (6,929,550)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,367,470 (2,193,765)
FROM OPERATIONS
Distributions to shareholders: (14,313,071) (27,176,375)
From net investment income
From net realized gain - -
In excess of net realized gain - (4,300,957)
TOTAL DISTRIBUTIONS (14,313,071) (31,477,332)
Share transactions 20,773,426 78,976,702
Net proceeds from sales of shares
Reinvestment of distributions 10,419,351 23,657,169
Cost of shares redeemed (70,831,855) (351,849,693)
Net increase (decrease) in net assets resulting from (39,639,078) (249,215,822)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (40,584,679) (282,886,919)
NET ASSETS
Beginning of period 401,017,548 683,904,467
End of period (including distributions in excess of net $ 360,432,869 $ 401,017,548
investment income of $816,554 and $491,682,
respectively)
OTHER INFORMATION
Shares
Sold 2,203,188 7,887,946
Issued in reinvestment of distributions 1,105,841 2,380,934
Redeemed (7,553,864) (35,239,181)
Net increase (decrease) (4,244,835) (24,970,301)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED AUGUST 31, DECEMBER 27,
ENDED FEBRUARY 1990
28, 1995 (COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 9.640 $ 10.270 $ 10.400 $ 10.160 $ 10.000
beginning of period
Income from Investment .359 .332 D .800 .832 .578
Operations
Net investment
income
Net realized and .020 E (.359) (.050) .236 .154
unrealized gain
(loss)
Total from investment .379 (.027) .750 1.068 .732
operations
Less Distributions (.369) (.533) (.640) (.808) (.572)
From net investment
income
From net realized gain - - (.240) (.020) -
on investments
In excess of net - (.070) - - -
realized
gain on investments
Total distributions (.369) (.603) (.880) (.828) (.572)
Net asset value, end of $ 9.650 $ 9.640 $ 10.270 $ 10.400 $ 10.160
period
TOTAL RETURN B, C 4.09% (.25) 7.61 10.86 7.53%
% % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 360,433 $ 401,018 $ 683,904 $ 837,588 $ 422,498
period (000 omitted)
Ratio of expenses to .65% .65% .41 .17 .25%A
average net assets A % %
Ratio of expenses to .65% .65% .65 .65 .65%A
average net assets A % %
before expense
reductions
Ratio of net investment 7.70% 7.36% 7.63 8.09 8.69%A
income to average net A % %
assets
Portfolio turnover rate 200% 285% 241 168 41%A
A % %
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D EFFECTIVE SEPTEMBER 1, 1993, THE FUND BEGAN REFLECTING IN NET INVESTMENT
INCOME PER SHARE CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES IN ACCORDANCE WITH NEW GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET GAIN (LOSS) ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE
TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Ginnie Mae 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 of their purchase date 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."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on mortgage-backed securities and losses deferred due to wash
sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Distributions in excess of net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
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. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management and Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
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. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
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
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the commitment. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $364,651,659 and $416,200,061, 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. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$7,739 for the period.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
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Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
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representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
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Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
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3.
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representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
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ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
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Los Angeles, CA
251 University Avenue
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Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
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COLORADO
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CONNECTICUT
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DELAWARE
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FLORIDA
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Boca Raton, FL
90 Alhambra Plaza
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4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
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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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
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MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
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200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
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NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of
the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
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NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
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OHIO
600 Vine Street
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28699 Chagrin Boulevard
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1903 East Ninth Street
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OREGON
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Portland, OR
PENNSYLVANIA
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Philadelphia, PA
439 Fifth Avenue
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TENNESSEE
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Memphis, TN
TEXAS
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Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State 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
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If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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*
Marvin L. Mann*
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
Ginnie Mae
Global Bond
Government Securities
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Investment Grade Bond
Mortgage Securities
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Short-Intermediate Government
Short-Term Bond
Short-Term World Income
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
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(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
INTERMEDIATE MUNICIPAL
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
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.
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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888 FOR
A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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. A fund's total
return 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 to measure
performance. 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 FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Intermediate Municipal 1.91% 0.94% 7.78%
Lehman Brothers Municipal Bond 2.80% 1.88% n/a
Index
Average Intermediate Municipal Bond 1.85% 1.65% n/a
Fund
Consumer Price Index 1.28% 2.86% 4.79%
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 April 26, 1993. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Lehman Brothers Municipal Bond Index - a broad measure of the municipal
bond market. To measure how the fund's performance stacked up against its
peers, you can compare it to the average intermediate municipal bond fund,
which reflects the performance of 98 funds with similar objectives tracked
by Lipper Analytical Services during the period covered by this report.
Both benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Intermediate Municipal 0.94% 4.14%
Lehman Brothers Municipal Bond Index 1.88% n/a
Average Intermediate Municipal Bond Fund 1.65% n/a
Consumer Price Index 2.86% 2.58%
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 IntermediateMunicipal Bond Index
04/30/93 10000.00 10000.00
05/31/93 10042.52 10056.00
06/30/93 10223.32 10223.94
07/31/93 10237.67 10237.23
08/31/93 10494.62 10450.16
09/30/93 10638.84 10569.29
10/31/93 10653.55 10589.37
11/30/93 10584.30 10496.19
12/31/93 10814.45 10717.66
01/31/94 10921.60 10839.84
02/28/94 10650.21 10559.09
03/31/94 10215.13 10129.33
04/30/94 10249.15 10215.43
05/31/94 10369.19 10304.31
06/30/94 10349.97 10244.54
07/31/94 10513.55 10432.02
08/31/94 10549.03 10468.53
09/30/94 10432.96 10314.64
10/31/94 10296.33 10131.04
11/30/94 10081.49 9947.67
12/31/94 10270.04 10166.52
01/31/95 10513.10 10457.28
02/28/95 10751.29 10761.59
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Intermediate Municipal Fund on April 30, 1993, shortly after the fund
started. As the chart shows, by February 28, 1995, the value of your
investment with dividends reinvested would have grown to $10,751 - a 7.51%
increase on your initial investment. This assumes you still owned the fund
on February 28, 1995, 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 $10,762 - a 7.62% 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
APRIL 26, 1993
SIX MONTHS (COMMENCEM
ENDED YEAR ENDED ENT OF
FEBRUARY 28, AUGUST 31, OPERATIONS) TO
1995 1994 AUGUST 31,
1993
Dividend return 2.63% 4.99% 1.82%
Capital appreciation return -0.72% -4.48% 3.39%
Total return 1.91% 0.51% 5.21%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.73(cents) 24.97(cents) 50.85(cents)
Annualized dividend rate 5.02% 5.28% 5.25%
30-day annualized yield 5.23% - -
30-day annualized tax-equivalent yield 8.17% - -
</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 $9.69 over
the past month, $9.53 over the past six months and $9.68 over the past
year, you can compare the fund's income over these three 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 36% federal tax bracket. If the advisor had not reimbursed certain
portfolio expenses during the period shown, the yield and tax-equivalent
yield would have been 5.13% and 8.02%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with David Murphy, Portfolio Manager of Spartan
Intermediate Municipal Fund
Q. DAVID, HOW DID THE FUND DO?
A. A little bit better than average during the past six months. For the six
months ended February 28, 1995, the fund had a total return of 1.91%. That
compared to the average intermediate municipal bond fund's return of 1.85%
for the same period, according to Lipper Analytical Services. For the year
ended February 28, 1995, the fund returned 0.94%, compared to the average
fund's return of 1.65%, again according to Lipper.
Q. IN YOUR OPINION, WHAT DROVE THE MUNICIPAL BOND MARKET'S PERFORMANCE
DURING THE PAST SIX MONTHS?
A. We need to look back to early 1994 to set the stage for what happened
during the past six months. From February through August last year, the
Federal Reserve Board raised short-term interest rates by 1.75 percentage
points to 4.75%, in an effort to stave off inflation. Rising interest
rates, coupled with fears of inflation and technical market factors, made
for an extended period of volatility in which intermediate- and long-term
bond prices - taxable and tax-free alike - fell. Bond prices stabilized in
the summer. But from September until about mid-November, the market began
to fall again. That occurred in part because many investors sold municipal
bonds for tax purposes, locking in their 1994 municipal bond losses to
offset investment gains from other areas. That tax-loss selling - and
another short-term interest rate hike of 0.75% in November- put additional
pressure on municipal bond prices. From December through the end of
February, however, the market rebounded and prices rose as tax-loss selling
abated, the supply of municipal bonds fell, and some investors began to
believe that the economy's strong fourth-quarter 1994 performance could
slow a bit in 1995.
Q. WHAT FACTOR INFLUENCED THE FUND'S PERFORMANCE?
A. The primary factor was the fund's duration. Duration measures how
sensitive the fund's share price is to changes in interest rates. Because
the fund had a long duration in the first quarter of 1994, it was more
sensitive to rising interest rates than other funds of its type. During the
summer, however, I reduced the fund's duration, bringing it more in line
with other funds. That helped the fund's performance relative to its
competitors.
Q. WHY ARE EDUCATION BONDS THE FUND'S LARGEST SECTOR CONCENTRATION?
A. Mainly because they offer relatively high yields. Of the fund's 27.4%
stake in education bonds, 25.4% of the fund's total investments are student
loan bonds. Because these bonds can be difficult to understand and carry
some risk of being pre-paid before their maturity, they offer yields as
much as 0.7% higher than similarly-rated general obligation bonds.
Likewise, health care bonds, which were the fund's fourth largest sector
concentration at 11.1% at the end of the period, are also attractive
because of their high yields. I also invested in them because an expanding
economy will help their underlying credit fundamentals.
Q. ONE OF THE FUND'S LARGEST HOLDINGS IS DENVER AIRPORT BONDS. HOW DID THEY
FARE OVER THE PAST SIX MONTHS?
A. At 4.3% of the fund's investments at the end of the period, Denver
Airport bonds were one of the fund's - and the municipal market's - best
performers over the past six months. Delays in opening the airport caused a
major rating agency to downgrade the bonds to below-investment-grade last
year and, as a result, their prices took quite a beating. But by late 1994,
these bonds bounced back nicely as investors became convinced that problems
eventually would be ironed out. The airport finally opened on February 28,
1995, without any major glitches. From here, there's a possibility that the
bonds may get a credit upgrade, which could boost their prices further.
Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF
LOSSES IN ITS INVESTMENT POOL. DOES THE FUND HAVE INVESTMENTS IN SECURITIES
DIRECTLY AFFECTED BY THE BANKRUPTCY?
A. Yes, at the end of the period the fund had about 1% of investments in a
bond issued by the Orange County Development Agency. The bond currently is
rated Caa by Moody's Investors Service and BBB by Standard & Poor's. The
difference in ratings stems from the nature of the relationship between
Orange County and the Development Agency. It is Fidelity's view that the
Development Agency is an entity separate from the county, and has a
distinct revenue flow to cover debt service - meaning the payment of
interest and current maturities of principal on outstanding debt. On March
1, immediately after the fund's fiscal year ended, the scheduled debt
service payment was made on time and in full. That is a positive
development for our outlook on the bond. I'll continue to monitor the
situation as it develops.
Q. DO YOU THINK 1995 LOOKS MORE POSITIVE FOR THE MUNICIPAL BOND MARKET?
A. I think that the Federal Reserve Board could raise interest rates one or
two more times, which in my opinion would have more of an impact on
short-term bond prices than long-term bond prices. It appears that the
municipal market is starting to anticipate that we're nearing the end of
the Fed's cycle of raising interest rates. That has given a
positive tone to the municipal bond market in the past three months. What's
more, fixed-income investments, with their relatively high current yields,
are attractive compared to other investments. I believe that these yields
could attract investors, potentially benefiting the municipal market.
FUND FACTS
GOAL: to provide high current
income by investing primarily
in GNMA securities
START DATE: December 27,
1990
SIZE: as of February 28, 1995,
more than $360 million
MANAGER: Robert Ives, 1993
- - February 1995. Kevin
Grant, starting February 13,
1995; also manager, Fidelity
Mortgage Securities Portfolio
since 1993, Fidelity Ginnie
Mae Portfolio since February
1995; joined Fidelity in 1993
(checkmark)
KEVIN GRANT'S INVESTMENT
APPROACH:
"First, I try to avoid predicting
interest rate movements.
Second, I'm a value-oriented
investor. I use extensive
quantitative analysis to help
me find securities that appear
undervalued in the
marketplace - those whose
prices are very low relative to
their potential for gains. Third,
my mandate is to do this
within the Ginnie Mae market.
I will always look for the
cheapest alternatives within
that market.
"At times, Treasury bonds
might be a good alternative, if
investors aren't going to be
well-paid for the added
prepayment risk one can find
in Ginnie Maes. But, most of
the time that will not be the
case. Normally, I'll stay with
Ginnie Maes.
"My approach is simple,
because this is a simple fund.
I can invest up to 35% of the
fund in other
mortgage-backed securities,
such as Freddie Macs or
Fannie Maes. If I do so, it
probably will be when Ginnie
Maes are relatively
overpriced. But, for the most
part, I expect to be fully
oriented toward the Ginnie
Mae market."
INVESTMENT CHANGES
TOP FIVE STATES AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 13.4 15.4
Texas 12.2 12.4
New York 10.3 9.1
Virginia 6.5 0.7
Michigan 5.7 5.2
TOP FIVE SECTORS AS OF FEBRUARY 28, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Education 27.4 27.3
General Obligation 17.5 17.2
Industrial Development 11.4 6.6
Health Care 11.1 11.7
Special Tax 9.9 9.1
AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 8.1 9.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF FEBRUARY 28, 1995
6 MONTHS AGO
Years 6.1 7.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO
CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A
BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994
Row: 1, Col: 1, Value: 11.5
Row: 1, Col: 2, Value: 1.2
Row: 1, Col: 3, Value: 1.8
Row: 1, Col: 4, Value: 2.1
Row: 1, Col: 5, Value: 26.8
Row: 1, Col: 6, Value: 57.6
Row: 1, Col: 1, Value: 9.199999999999999
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 1.5
Row: 1, Col: 5, Value: 26.9
Row: 1, Col: 6, Value: 62.9
Aaa, Aa, A 58.6%
Baa 26.8%
Ba 1.6%
Caa 0.9%
Non-rated 0.6%
Short-term
investments 11.5%
Aaa, Aa, A 61.9%
Baa 26.9%
Ba 1.5%
Caa 0.0%
Non-rated 0.5%
Short-term
investments 9.2%
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 88.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALASKA - 5.0%
North Slope Borough (Cap. Appreciation)
Series A:
0% 6/30/01, (MBIA Insured) (c) Aaa $ 12,000,000 $ 8,385,000
0% 6/30/02, (MBIA Insured) Aaa 3,950,000 2,597,125
0% 6/30/03, (MBIA Insured) Aaa 1,500,000 943,125
11,925,250
ARIZONA - 2.3%
Maricopa County School Dist. #28 Rfdg.
(Kyrene Elementary) Series C, 0% 1/1/07,
(FGIC Insured) Aaa 5,900,000 2,964,750
Phoenix Civic Impt. Corp. Excise Tax Rev. Rfdg.
Arpt. Impts. Series A, 5.85% 7/1/01 (b) (e) Aa 2,420,000 2,447,225
5,411,975
CALIFORNIA - 10.8%
California Pub. Wks. Board Lease Rev. Rfdg.
(Dept. of Correction State Prisons) Series A,
5.25% 12/1/04 A 4,075,000 3,820,313
California Statewide Commty. Dev. Auth. Rev.
Ctfs. of Prtn. Rfdg. (Hosp. Triad Healthcare)
5.90% 8/1/01 A 1,115,000 1,094,094
Carson Redev. Agcy. Rfdg. (Redev. Proj. Area 2)
(Tax Allocation):
5.40% 10/1/01 Baa 1,350,000 1,301,063
5.50% 10/1/02 Baa 1,320,000 1,267,200
5.60% 10/1/03 Baa 1,500,000 1,434,375
5.625% 10/1/04 Baa 1,085,000 1,028,038
Central Valley Fin. Auth. Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.):
5.50% 7/1/01 BBB- 2,300,000 2,245,375
5.60% 7/1/02 BBB- 1,800,000 1,750,500
5.80% 7/1/04 BBB- 1,300,000 1,262,625
Clovis Unified School Dist. (Cap. Appreciation)
Series B, 0% 8/1/02, (MBIA Insured) Aaa 5,700,000 3,819,000
Los Angeles Hosp. Rev. Ctfs. of Prtn. (Insured
Health Facs. Construction Loan Prog.)
(Hollywood Presbyterian Hosp.) 9% 7/1/13 A 100,000 102,750
Orange County Dev. Agcy. Tax Allocation (Santa
Ana Heights Proj.):
5.70% 9/1/02 Caa 1,170,000 1,050,075
6% 9/1/05 Caa 1,335,000 1,169,794
San Bernardino County Ctfs. of Prtn. (Med. Ctr.
Fing. Proj.) 5% 8/1/03 Baa1 2,000,000 1,845,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Sequoia Hosp. Dist. Rev. Rfdg.:
5.10% 8/15/04 A $ 1,345,000 $ 1,235,719
5.25% 8/15/05 A 1,415,000 1,298,263
25,724,184
COLORADO - 5.1%
Colorado Health Facs. Auth. Rev.
(Rocky Mountain Adventist) 6.25% 2/1/04 Baa 2,000,000 1,972,500
Denver City & County Arpt. Rev. (e):
Series A:
(Cap. Appreciation) 0% 11/15/04 Baa 2,070,000 1,055,700
8.25% 11/15/02 Baa 730,000 777,450
Series C:
5.35% 11/15/96 Baa 1,035,000 1,018,181
6.55% 11/15/03 Baa 2,660,000 2,566,900
(Cap. Appreciation) Series D:
0% 11/15/03 Baa 5,320,000 2,919,350
0% 11/15/06 Baa 4,500,000 1,963,125
12,273,206
CONNECTICUT - 1.4%
Connecticut Health & Ed. Facs. Auth. Rev.
(Quinnipiac College) Series D:
4.90% 7/1/98 BBB- 2,300,000 2,222,375
5.625% 7/1/03 BBB- 1,100,000 1,036,750
3,259,125
DISTRICT OF COLUMBIA - 2.8%
District of Columbia Gen. Oblig. 5.625% 6/1/02,
(MBIA Insured) Aaa 1,000,000 982,500
District of Columbia Hosp. Rev. Rfdg. (Medlantic
Healthcare Group, Washington Hosp. Ctr.):
Series A, 5.50% 8/15/06, (MBIA Insured) Aaa 1,100,000 1,075,250
Series B, 6.125% 8/15/99 Baa1 4,520,000 4,525,650
6,583,400
ILLINOIS - 1.0%
Illinois Dev. Fin. Auth. Poll. Cont. Rev. Rfdg.
(Commonwealth Edison) 5.30% 1/15/04 Baa2 2,500,000 2,337,500
IOWA - 1.8%
Iowa Student Loan Liquidity Corp. Student Loan
Rev. Rfdg. Sr. Series B, 5.75% 12/1/07 (e) Aaa 4,500,000 4,387,500
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MARYLAND - 2.9%
Maryland Health & Higher Ed. Facs. Auth.
Rev. Rfdg. (Howard County Gen. Hosp.)
5.125% 7/1/03 Baa1 $ 2,220,000 $ 2,084,025
Northeast Maryland Waste Disp. Auth. Solid
Waste Rev. (Montgomery County Resource
Recovery Proj.) Series A, 5.80% 7/1/04 (e) A 3,375,000 3,324,375
Prince George's County Rev. Rfdg. (Dimensions
Health Corp. Proj.) 4.75% 7/1/03 A 1,750,000 1,605,625
7,014,025
MASSACHUSETTS - 4.6%
New England Ed. Loan Marketing Corp. Rfdg.
(Student Loan):
Series A, 5.70% 7/1/05 (e) A1 7,230,000 7,022,138
Series E, 5% 7/1/99 A1 4,000,000 3,900,000
10,922,138
MICHIGAN - 5.7%
Detroit Convention Facs. Rev. Rfdg. (Cobo Hall
Expansion Proj.) 5.125% 9/30/05 (c) A 10,830,000 10,071,900
Michigan Hosp. Fin. Auth. Rev. (Daughters of
Charity) 10% 11/1/15 Aa 3,385,000 3,575,406
13,647,306
MISSISSIPPI - 2.9%
Mississippi Higher Ed. Assistance Corp. Student
Loan Rev. Sr. Series B, 5.10% 9/1/00 (e) Aaa 4,000,000 3,880,000
Rankin County School Dist.:
7.75% 2/1/02, (MBIA Insured) Aaa 1,280,000 1,460,800
7.75% 2/1/03, (MBIA Insured) Aaa 1,370,000 1,582,350
6,923,150
MONTANA - 5.1%
Montana Higher Ed. Student Loan Assistance
Corp. Student Loan Rev. Sr. Series B,
5% 12/1/00 (c) (e) Aaa 12,580,000 12,186,875
NEW HAMPSHIRE - 1.6%
New Hampshire Higher Ed. & Health Facs. Auth.
Rev. (Frisbie Mem. Hosp.) 5.70% 10/1/04 Baa 4,145,000 3,839,306
NEW MEXICO - 2.3%
New Mexico Edl. Assistance Foundation
Student Loan Rev. Sr. Series IV A-1,
7.05% 3/1/10 (b) (e) Aaa 5,375,000 5,542,969
NEW YORK - 9.0%
Hempstead Town Ind. Dev. Agcy. Resource
Recovery Rev. (American RefFuel Co.)
7.40% 12/1/10 Baa1 7,345,000 7,647,981
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York City Gen. Oblig. Short Rites
Series C, 7.91589% 8/1/03 INFL (f) Baa1 $ 4,000,000 $ 4,085,000
New York State Ctfs. of Prtn. 6.70% 9/1/97 Baa1 1,800,000 1,856,250
New York State Dorm. Auth. Rev. (City Univ. Sys.)
Series B, 5.75% 7/1/06 Baa1 1,080,000 1,048,950
New York State Energy Research & Dev. Auth.
Poll. Cont. Rev. 5.90% 12/1/06, (MBIA Insured) Aaa 4,000,000 4,050,000
New York State Urban Dev. Corp. Rev.
5.30% 1/1/05 Baa1 2,900,000 2,682,500
21,370,681
OHIO - 1.5%
Franklin County Rev. (Online Computer
Library Ctr. Proj.):
4.80% 4/15/97 - 500,000 493,750
5% 4/15/98 - 560,000 551,600
5.65% 4/15/01 - 340,000 337,450
Ohio Bldg. Auth. 6.30% 10/1/11 A1 2,000,000 2,042,500
Ohio Econ. Dev. Rev. (Ohio State Commission
Globe Ind. Proj.) Series 1, 7.75% 6/1/96 (e) A- 155,000 155,581
3,580,881
PENNSYLVANIA - 4.2%
Allegheny County Ind. Dev. Agcy. Rev. Rfdg.
Environmental Impt. Series B, 5.30% 12/1/96 Baa3 4,010,000 3,994,963
Pennsylvania Convention Ctr. Auth. Rev Rfdg.
Series A, 6.60% 9/1/09 Ba 4,000,000 3,840,000
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev. (Temple Univ. Hosp.) Series A,
5.60% 11/15/97 Baa1 2,100,000 2,092,125
9,927,088
SOUTH DAKOTA - 2.1%
South Dakota Student Loan Fing. Corp. Student
Loan Rev. Series A, 6.15% 8/1/03 (e) A+ 5,000,000 5,087,500
TEXAS - 12.2%
Alief Independent School Dist.:
7% 2/15/03, (PSF Guaranteed) Aaa 1,125,000 1,241,719
7% 2/15/04, (PSF Guaranteed) Aaa 1,125,000 1,248,750
7% 2/15/05, (PSF Guaranteed) Aaa 1,125,000 1,254,375
Arlington Independent School Dist.:
6.50% 2/15/02, (PSF Guaranteed) Aaa 1,000,000 1,067,500
6.50% 2/15/03, (PSF Guaranteed) Aaa 1,500,000 1,606,875
6.50% 2/15/05, (PSF Guaranteed) Aaa 1,500,000 1,616,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TEXAS - CONTINUED
Brazos Higher Ed. Auth. Student Loan Rev. Rfdg.
Series C-1 (e):
5.50% 6/1/02 Aaa $ 4,680,000 $ 4,639,050
5.60% 6/1/03 Aaa 6,750,000 6,682,500
5.70% 6/1/04 Aaa 2,500,000 2,475,000
Central Texas Higher Ed. Auth. Student Loan
Rev. Rfdg. Sr. Series A, 5.10% 12/1/03 (e) Aaa 5,000,000 4,756,250
Katy Independent School Dist. Rfdg. Ltd. Tax
(Cap. Appreciation) Series A, 0% 2/15/07,
(PSF Guaranteed) Aaa 400,000 198,500
Socorro Independent School Dist. Rfdg. Unltd.
Tax (Cap. Appreciation) 0% 9/1/04,
(PSF Guaranteed) Aaa 3,000,000 1,773,750
Texas Muni. Pwr. Agcy. Rev. Rfdg. 9% 9/1/97,
(Escrowed to Maturity) (g) AAA 500,000 546,875
29,107,394
UTAH - 0.4%
Salt Lake County Unltd. Tax Wtr. Conservancy
Dist. Rev. (Cap. Appreciation) Series A,
0% 10/1/05, (AMBAC Insured) Aaa 1,650,000 905,438
VIRGINIA - 1.4%
Fairfax County Econ. Dev. Auth. Resource
Recovery Rev. (Ogden Martin Sys. Proj.)
Series A, 7.75% 2/1/11 (e) Aa 3,000,000 3,281,250
WASHINGTON - 2.4%
Washington Pub. Pwr. Supply Sys. Nuclear #3
Rev. Rfdg.:
Series B:
(Cap. Appreciation) 0% 7/1/07 Aa 4,000,000 1,870,000
0% 7/1/10 Aa 2,250,000 840,936
5.10% 7/1/04, (FGIC Insured) Aaa 1,955,000 1,823,035
Series C, 0% 7/1/13 Aa 4,030,000 1,224,113
5,758,084
TOTAL MUNICIPAL BONDS
(Cost $217,298,512) 210,996,225
MUNICIPAL NOTES (D) - 11.5%
CALIFORNIA - 2.6%
California Poll. Cont. Fing. Auth. Resource
Recovery Rev. (Delano Energy Co. Proj.) Series
1990, 3.90%, LOC Algemene Bank, VRDN (e) P-1 1,200,000 1,200,000
San Bernardino County TRAN, 4.50% 7/31/95 SP-1+ 5,000,000 4,950,000
6,150,000
MUNICIPAL NOTES (D) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - 1.3%
New York State Job Dev. Auth. Spl. Purp.
Bonds Series 1992, 3.90% LOC Sumitomo
Bank Ltd. Japan, VRDN (e) VMIG 1 $ 3,100,000 $ 3,100,000
PENNSYLVANIA - 0.7%
Pennsylvania State Higher Ed. Assistance Agcy.
(Student Loan) Series 1988 A, 4.10%, LOC
Student Loan Marketing Assoc., VRDN (e) VMIG 1 1,600,000 1,600,000
SOUTH CAROLINA - 1.3%
South Carolina Jobs Econ. Dev. Auth. (Wellman,
Inc. Proj.) Series 92, 4.25%, LOC Wachovia
Bank of Georgia NA, VRDN (e) - 3,200,000 3,200,000
VIRGINIA - 5.1%
Peninsula Port. Auth. Port. Fac. Rev. Rfdg. (Shell Oil &
Terminal Co. Proj.) Series 87, 3.75%, VRDN - 8,100,000 8,100,000
Richmond Ind. Dev. Auth. Fac. Rev. (Cogentrix of Richmond,
Inc.) Series 1991 A, 4.30%, LOC Banque Paribas,
VRDN (e) - 2,400,000 2,400,000
Southampton County Ind. Dev. Auth. Fac. Rev.
(Hadson Pwr. #11-Southampton Proj.)
Series 1990-A, 4.25%, LOC Cr. Suisse, VRDN (e) - 1,700,000 1,700,000
12,200,000
WYOMING - 0.5%
Uinta County Poll. Cont. Rfdg. Rev. Bonds
(Chevron USA, Inc. Proj.) Series 1993, 3.70%
VRDN (e) P-1 1,200,000 1,200,000
TOTAL MUNICIPAL NOTES
(Cost $27,514,187) 27,450,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $244,812,699) $ 238,446,225
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(b) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(c) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(d) A portion of the security was pledged to cover margin requirements for
delayed delivery purchases. At the period end, the value of securities
pledged amounted to $23,720,000.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(g) 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.
(h) Security collateralized by an amount sufficient to pay interest and
principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 51.7% AAA, AA, A 40.2%
Baa 23.2% BBB 14.4%
Ba 1.6% BB 7.6%
B 0.0% B 0.0%
Caa 0.9% 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 0.6%
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Education 27.4%
General Obligation 17.5
Industrial Development 11.4
Health Care 11.1
Others (individually less than 10%) 32.6
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1995, the aggregate cost of investment securities for
income tax purposes was $244,812,699. Net unrealized depreciation
aggregated $6,366,474, of which $741,256 related to appreciated investment
securities and $7,107,730 related to depreciated investment securities.
The fund has elected to defer to its fiscal year ending August 31, 1995
$2,716,995 of losses recognized during the period November 1, 1993 to
August 31, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
FEBRUARY 28, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $244,812,699) - $ 238,446,225
See accompanying schedule
Cash 5,075,488
Receivable for investments sold on delayed delivery 11,651,974
basis
Interest receivable 2,560,443
Receivable from investment adviser for expense 16,847
reductions
TOTAL ASSETS 257,750,977
LIABILITIES
Payable for investments purchased $ 12,091,639
Regular delivery
Delayed delivery 19,751,311
Dividends payable 143,231
Accrued management fee 92,656
TOTAL LIABILITIES 32,078,837
NET ASSETS $ 225,672,140
Net Assets consist of:
Paid in capital $ 240,044,221
Accumulated undistributed net realized gain (loss) on (8,005,607)
investments
Net unrealized appreciation (depreciation) on (6,366,474)
investments
NET ASSETS, for 23,104,286 shares outstanding $ 225,672,140
NET ASSET VALUE, offering price and redemption price per $9.77
share ($225,672,140 (divided by) 23,104,286 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
INTEREST INCOME $ 6,367,080
EXPENSES
Management fee $ 618,154
Non-interested trustees' compensation 614
Total expenses before reductions 618,768
Expense reductions (181,118) 437,650
NET INTEREST INCOME 5,929,430
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (5,416,122)
Futures contracts 127,510 (5,288,612)
Change in net unrealized appreciation (depreciation) on 2,399,180
investment securities
NET GAIN (LOSS) (2,889,432)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 3,039,998
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED AUGUST 31,
FEBRUARY 28, 1994
1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 5,929,430 $ 13,516,846
Net interest income
Net realized gain (loss) (5,288,612) (2,242,342)
Change in net unrealized appreciation (depreciation) 2,399,180 (12,347,494)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,039,998 (1,072,990)
FROM OPERATIONS
Distributions to shareholders (5,929,430) (13,516,846)
From net interest income
From net realized gain - (369,834)
In excess of net realized gain - (625,060)
TOTAL DISTRIBUTIONS (5,929,430) (14,511,740)
Share transactions 96,664,521 350,398,614
Net proceeds from sales of shares
Reinvestment of distributions 4,748,487 12,039,415
Cost of shares redeemed (129,120,214) (309,984,273)
Net increase (decrease) in net assets resulting from (27,707,206) 52,453,756
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (30,596,638) 36,869,026
NET ASSETS
Beginning of period 256,268,778 219,399,752
End of period $ 225,672,140 $ 256,268,778
OTHER INFORMATION
Shares
Sold 10,182,210 34,393,131
Issued in reinvestment of distributions 497,854 1,192,986
Redeemed (13,625,153) (30,753,385)
Net increase (decrease) (2,945,089) 4,832,732
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS YEAR ENDED APRIL 26, 1993
ENDED AUGUST 31, (COMMENCEMENT
FEBRUARY 28, OF
1995 OPERATIONS) TO
AUGUST 31,
(UNAUDITED) 1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.840 $ 10.340 $ 10.000
Income from Investment Operations .250 .514 .177
Net interest income
Net realized and unrealized gain (loss) (.070) (.460) .340
Total from investment operations .180 .054 .517
Less Distributions (.250) (.514) (.177)
From net interest income
From net realized gain on investments - (.010) -
In excess of net realized gain on - (.030) -
investments
Total distributions (.250) (.554) (.177)
Net asset value, end of period $ 9.770 $ 9.840 $ 10.340
TOTAL RETURN B, C 1.92% .52% 5.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 225,672 $ 256,269 $ 219,400
Ratio of expenses to average net assets .39% .20% -
A
Ratio of expenses to average net assets .55% .55% .55% A
before expense reductions A
Ratio of net interest income to average net 5.27% 5.09% 5.20% A
assets A
Portfolio turnover rate 28% 69% 95% A
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1995 (Unaudited)
5. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Intermediate Municipal 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 of their purchase date 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. Distributions are declared daily and
paid monthly from net interest income. Distributions from realized gains,
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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and losses deferred due to excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net interest income per share. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
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.
6. 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. With respect to purchase commitments,
the fund identifies securities as segregated in its custodial records with
a value at least equal to the amount of the commitment. Losses may arise
due to changes in the market value of the underlying securities or if the
counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond market and to fluctuations in interest rates. Buying futures,
writing puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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.
7. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $30,514,419 and $59,418,616, respectively.
The market value of futures contracts opened and closed during the period
amounted to $41,800,715 and $41,772,660, respectively.
8. 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. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$3,635 for the period.
9. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above a specified percentage of average net assets. During the
period, this expense limitation ranged from .30% to .45% of average net
assets and the reimbursement reduced expenses by $181,118.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East 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
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
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
8885 Ladue Road
Ladue, 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
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, 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
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State 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
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
United Missouri Bank, N.A.
Kansas City, MO
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S 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 Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
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 Intermediate Municipal
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 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE