SPARTAN(REGISTERED TRADEMARK)
ARIZONA
MUNICIPAL
FUNDS
SEMIANNUAL REPORT
FEBRUARY 28, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN ARIZONA MUNICIPAL
INCOME FUND
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 16 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
SPARTAN ARIZONA MUNICIPAL
MONEY MARKET FUND
PERFORMANCE 20 How the fund has done over
time.
FUND TALK 22 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 24 A summary of major shifts in
the fund's investments over
the past six months and one
year.
INVESTMENTS 25 A complete list of the fund's
investments.
FINANCIAL STATEMENTS 28 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 32 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
February proved to be a challenging month for the U.S. stock and bond
markets. Instances of profit worries and brisk selling in the
technology sector hampered the equity markets at times. Financial
shares, however, turned in their strongest performance in recent
months. Meanwhile, bond markets were unsettled by strong economic data
and Federal Reserve Chairman Alan Greenspan's concerns that the Fed's
rate cuts last fall may have overstimulated the economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while 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. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
SPARTAN ARIZONA MUNICIPAL INCOME FUND
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. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND
SPARTAN ARIZONA MUNICIPAL 2.17% 4.89% 38.58%
INCOME
LB Arizona Enhanced Municipal 2.45% 5.70% n/a
Bond
Arizona Municipal Debt Funds 1.92% 4.98% n/a
Average
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 October 11, 1994. 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 Arizona Enhanced Municipal Bond
Index - a market value-weighted index of Arizona investment-grade
municipal bonds with maturities of one year or more. To measure how
the fund's performance stacked up against its peers, you can compare
it to the Arizona municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 39 mutual
funds. These benchmarks will include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 YEAR LIFE OF FUND
SPARTAN ARIZONA MUNICIPAL 4.89% 7.72%
INCOME
LB Arizona Enhanced Municipal 5.70% n/a
Bond
Arizona Municipal Debt Funds 4.98% n/a
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
Spartan AZ Muni Income LB Municipal Bond
00434 LB015
1994/10/31 10000.00 10000.00
1994/11/30 9820.11 9819.20
1994/12/31 10064.35 10035.32
1995/01/31 10414.23 10322.13
1995/02/28 10773.06 10622.30
1995/03/31 10866.46 10744.35
1995/04/30 10885.64 10757.03
1995/05/31 11219.72 11100.28
1995/06/30 11111.21 11003.71
1995/07/31 11215.14 11108.03
1995/08/31 11372.18 11248.88
1995/09/30 11463.33 11320.08
1995/10/31 11631.80 11484.67
1995/11/30 11820.94 11675.21
1995/12/31 11925.02 11787.40
1996/01/31 12041.15 11876.40
1996/02/29 11942.15 11796.23
1996/03/31 11779.23 11645.48
1996/04/30 11735.76 11612.52
1996/05/31 11716.16 11607.88
1996/06/30 11827.94 11734.29
1996/07/31 11918.94 11841.07
1996/08/31 11908.53 11838.23
1996/09/30 12056.07 12003.96
1996/10/31 12194.14 12139.73
1996/11/30 12400.73 12361.88
1996/12/31 12343.01 12309.96
1997/01/31 12367.61 12333.23
1997/02/28 12469.45 12446.45
1997/03/31 12294.99 12280.54
1997/04/30 12389.13 12383.32
1997/05/31 12544.70 12569.57
1997/06/30 12675.15 12703.44
1997/07/31 13009.98 13055.32
1997/08/31 12880.60 12932.99
1997/09/30 13024.85 13086.51
1997/10/31 13097.69 13170.65
1997/11/30 13156.84 13248.10
1997/12/31 13326.81 13441.39
1998/01/31 13437.65 13580.10
1998/02/28 13445.37 13584.18
1998/03/31 13446.17 13596.13
1998/04/30 13383.32 13534.81
1998/05/31 13544.37 13749.07
1998/06/30 13579.60 13803.24
1998/07/31 13616.10 13837.88
1998/08/31 13803.11 14051.68
1998/09/30 13964.10 14226.76
1998/10/31 13975.18 14226.48
1998/11/30 13997.25 14276.41
1998/12/31 14033.73 14312.39
1999/01/31 14186.10 14482.57
1999/02/26 14103.25 14419.28
IMATRL PRASUN SHR__CHT 19990228 19990309 105310 R00000000000055
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Arizona Municipal Income Fund on October 31, 1994,
shortly after the fund started. As the chart shows, by February 28,
1999, the value of the investment would have grown to $14,103 - a
41.03% increase on the initial investment. For comparison, look at how
the Lehman Brothers Municipal Bond Index - a market value-weighted
index of investment-grade municipal bonds with maturities of one year
or more - did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 would have grown to $14,419 - a
44.19% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally 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.
<TABLE>
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TOTAL RETURN COMPONENTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31, OCTOBER 11, 1994
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31,
1999 1998 1997 1996 1995
Dividend returns 2.08% 4.55% 4.80% 4.92% 5.34%
Capital returns 0.09% 2.61% 3.36% -0.20% 6.40%
Total returns 2.17% 7.16% 8.16% 4.72% 11.74%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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 capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.55(cents) 22.76(cents) 46.42(cents)
Annualized dividend rate 4.21% 4.17% 4.25%
30-day annualized yield 3.69% - -
30-day annualized 6.08% - -
tax-equivalent 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
$11.00 over the past one month, $11.00 over the past six months and
$10.93 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond 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 39.26% combined effective 1999 federal and state income tax
bracket, but does not reflect the payment of the federal alternative
minimum tax, if applicable.
SPARTAN ARIZONA MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Hampered by oversupply and
sporadic demand through much of
the six-month period that ended
February 28, 1999, municipal
bonds finally began to turn the
corner in January and February. In
that six-month span, the Lehman
Brothers Municipal Bond Index -
an index of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned
2.62%. By comparison, the Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
gained 1.61%. As is often the case,
the fortunes of the municipal market
were dictated largely by supply
and demand. Early in the period,
issuance was strong and demand
had trouble keeping pace. This
was, in part, due to the global flight
to safety into U.S. Treasuries that
occurred in the late summer and
early fall. When equity markets
surged toward the end of the year,
demand for municipals became
mixed. As the municipal bond
market entered 1999, supply
began to show signs of leveling off.
This positive development, coupled
with an increase in demand from
retail investors, continued through
the first two months of the year,
helping municipal bonds
outperform Treasuries in both
January and February. In February
alone, the Lehman Brothers
Municipal Bond Index returned
- -0.44%, while the Lehman Brothers
Aggregate Bond Index returned
- -1.75%.
(photograph of Christine Thompson)
An interview with Christine Thompson, Portfolio Manager of Spartan
Arizona Municipal Income Fund
Q. HOW DID THE FUND PERFORM, CHRISTINE?
A. For the six-month period that ended February 28, 1999, the fund had
a total return of 2.17%. To get a sense of how the fund did relative
to its competitors, the Arizona municipal debt funds average returned
1.92% for the same six-month period, according to Lipper Inc.
Additionally, the Lehman Brothers Arizona Enhanced Municipal Bond
Index - which tracks the types of securities in which the fund invests
- - returned 2.45%. For the 12-month period that ended February 28,
1999, the fund had a total return of 4.89%. That compared to the 4.98%
return of the Arizona municipal debt funds average and the 5.70%
return of the Lehman Brothers index.
Q. WHAT HELPED THE FUND BEAT ITS PEERS DURING THE PAST SIX MONTHS?
A. The fund's emphasis on intermediate-maturity bonds of between five
and 15 years was a key reason why it outperformed its peers during the
past six months, because those bonds generally outpaced their
longer-term counterparts during the period. I chose to focus on
intermediate bonds because I felt that they offered the most
attractive value for their given interest-rate sensitivity - which is
the magnitude with which their prices go up and down as interest rates
fluctuate.
Q. WHAT OTHER INVESTMENTS MADE A POSITIVE CONTRIBUTION TO PERFORMANCE?
A. Long-maturity, non-callable bonds - which can't be redeemed by
their issuer before maturity - were some of the market's best
performers during the past six months. As interest rates fell, more
issuers decided to redeem their bonds before maturity to reduce their
borrowing costs. Since many investors didn't want to face the
prospects of having to invest the proceeds from called bonds at lower,
prevailing interest rates, they tended to gravitate toward
long-maturity, non-callable bonds.
Q. THROUGHOUT THE PERIOD, THE FUND'S INVESTMENTS WERE CONCENTRATED IN
HIGH-QUALITY BONDS - THOSE RATED A OR HIGHER. WHAT ACCOUNTED FOR YOUR
BIAS TOWARD QUALITY?
A. I felt that higher-quality securities offered the better value.
Around 3% of the Arizona municipal market is rated Baa, the lowest of
the investment-grade ratings. Because they were in short supply and
the demand for them was strong, I felt the few Baa-rated securities
that were available were too expensive. The additional yield Baa-rated
bonds offered was quite small, signaling that investors were less
worried about issuer defaults and didn't demand a lot of additional
yield from Baa-rated securities to compensate for their lower credit
quality.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
A. My focus on non-callable bonds and my emphasis on higher-quality
securities meant that the fund had fewer bonds that benefited from
advance refunding. Through a process known as defeasance, a bond that
is advance refunded becomes backed by U.S. government securities and
assumes a shorter maturity date equal to its first permissible call
date. This process, which generally results in a boost to the bond's
price, is a form of refinancing which usually follows a decline in
interest rates.
Q. WHAT FACTORS DO YOU CONSIDER WHEN CHOOSING VARIOUS GENERAL
OBLIGATION BONDS (GOS) - WHICH MADE UP THE FUND'S LARGEST SECTOR
CONCENTRATION THROUGHOUT THE PERIOD?
A. Let me begin by saying that a GO is backed by the full faith and
credit of its issuer and is repaid with general revenue, including
taxes and other fee revenues. I've tended to favor GOs that are issued
by cities, towns and counties. Many of these issuers have reaped the
benefits of strong local economies in Arizona, collecting higher
property tax and other revenues and enjoying better fiscal health.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. The direction of interest rates will be the most important
determinant for municipal bond performance, but no one can predict
that with any certainty. At the end of the period, it appeared that
the market had begun to turn its focus away from international events
and was more attuned to domestic issues. As a result, bond prices
reflected expectations that the Federal Reserve might raise interest
rates in order to thwart the inflationary pressures that can stem from
fast-paced economic growth. One factor that could benefit municipals
is that they were priced attractively compared to their U.S. Treasury
counterparts at the end of the period. To the extent that investors
recognize and act on that relative value by investing in them,
municipals could perform well relative to Treasuries.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
GOAL: high current tax-free
income for Arizona residents
by investing in
investment-grade municipal
securities whose interest is
free from federal and
Arizona income taxes
FUND NUMBER: 434
TRADING SYMBOL: FSAMI
START DATE: October 11,
1994
SIZE: as of February 28,
1999, more than $27 million
MANAGER: Christine Thompson,
since 1998; manager,
various Fidelity and Spartan
municipal income funds;
joined Fidelity in 1985
CHRISTINE THOMPSON ON THE
ARIZONA ECONOMY:
"Arizona's economic growth
continued to be quite rapid over the
past six months and the
unemployment rate remained low.
That said, one area of weakness
was exports. Because of the
economic crisis in Japan, trade
with that country dropped
substantially. Most of that drop
resulted from fewer orders for
electrical equipment, which
accounts for a large portion of
Arizona's total exports. That
decline was somewhat offset by
increased exports of
semiconductor equipment to
Mexico, as well as by stable U.S.
demand for the same products.
Despite this small setback,
Arizona should remain one of the
nation's fastest-growing states,
although growth will likely slow
some from 1998 levels."
(solid bullet) At the end of the period, the
fund had 7.6% of investments in
bonds issued by Puerto Rico. As
a territory of the Unites States,
Puerto Rico can issue bonds that
are free from taxes in all 50 states.
When the supply of Arizona
municipals is limited or their prices
look expensive, the manager may
invest in Puerto Rico bonds.
SPARTAN ARIZONA MUNICIPAL INCOME FUND
INVESTMENT CHANGES
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TOP FIVE SECTORS AS OF
FEBRUARY 28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 25.0 26.4
Special Tax 17.3 17.3
Electric Utilities 16.7 12.4
Water & Sewer 9.6 10.6
Health Care 9.4 8.2
AVERAGE YEARS TO MATURITY AS
OF FEBRUARY 28, 1999
6 MONTHS AGO
Years 10.7 11.2
</TABLE>
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,
1999
6 MONTHS AGO
Years 5.9 6.1
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 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, 1999
Aaa 55.9%
Aa, A 38.4%
Baa 2.4%
Short-term
investments 3.3%
Row: 1, Col: 1, Value: 55.9
Row: 1, Col: 2, Value: 38.4
Row: 1, Col: 3, Value: 2.4
Row: 1, Col: 4, Value: 3.3
AS OF AUGUST 31, 1998
Aaa 57.9%
Aa, A 32.5%
Baa 3.9%
Short-term
investments 5.7%
Row: 1, Col: 1, Value: 57.9
Row: 1, Col: 2, Value: 32.5
Row: 1, Col: 3, Value: 3.9
Row: 1, Col: 4, Value: 5.7
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
SPARTAN ARIZONA MUNICIPAL INCOME FUND
INVESTMENTS FEBRUARY 28, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
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MUNICIPAL BONDS - 96.7%
MOODY'S RATINGS (UNAUDITED) (D) PRINCIPAL AMOUNT VALUE (NOTE 1)
ARIZONA - 89.1%
Arizona Health Facilities Aaa $ 360,000 $ 402,217
Auth. Hosp. Sys. Rev. Rfdg.
(Saint Lukes Health Sys.)
7.25% 11/1/14 (Pre-Refunded
to 11/1/03 @102) (c)
Arizona Trans. Board Excise
Tax Rev.:
(Maricopa County Reg'l. Area
Road) Series A:
5.4% 7/1/01 (AMBAC Insured) Aaa 1,000,000 1,042,300
5.75% 7/1/04 (AMBAC Insured) Aaa 440,000 478,465
5.75% 7/1/05 (AMBAC Insured) Aaa 400,000 438,504
Rfdg. (Maricopa County Reg'l.
Area):
Series A, 6.5% 7/1/04 (AMBAC Aaa 100,000 112,318
Insured)
Series B, 6% 7/1/05 (AMBAC Aaa 150,000 166,517
Insured)
Arizona Trans. Board Hwy.
Rev. Sub-Series A:
6.5% 7/1/11 (Pre-Refunded to Aaa 300,000 324,435
7/1/01 @101.5) (c)
6.6% 7/1/08 (Pre-Refunded to Aaa 200,000 216,734
7/1/01 @101.5) (c)
Arizona Univ. Rev.:
Rfdg. 6% 7/1/06 A1 1,000,000 1,125,310
7% 7/1/15 (Pre-Refunded to Aaa 500,000 556,440
7/1/02 @101) (c)
Central Wtr. Conservation
District Contract Rev.:
(Central Arizona Proj.) Aaa 200,000 214,432
Series B, 6.3% 11/1/02 (MBIA
Insured)
Rfdg. (Central Arizona Proj.) A1 375,000 409,669
Series A, 5.5% 11/1/10
Chandler Gen. Oblig.:
6.25% 7/1/10 Aa3 500,000 577,735
6.5% 7/1/10 (MBIA Insured) Aaa 200,000 238,468
6.5% 7/1/11 (MBIA Insured) Aaa 225,000 269,291
Chandler Wtr. & Swr. Rev. Aaa 1,000,000 1,051,730
5.5% 7/1/15 (MBIA Insured)
Cochise County Unified School Aaa 200,000 232,612
District #68 (Sierra Vista)
Series B, 9% 7/1/02 (FGIC
Insured)
Flagstaff Gen. Oblig. 4.5% Aaa 200,000 195,806
7/1/13 (FGIC Insured)
Glendale Ind. Dev. Auth. Edl. AAA 150,000 172,809
Facilities Rev. Rfdg.
(American Graduate School
Int'l.) 6.55% 7/1/06 (Connie
Lee Insured) (Pre-Refunded
to 7/1/05 @ 101) (c)
Maricopa County Ctfs. of A2 310,000 315,847
Prtn. 5.625% 6/1/00
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (D) PRINCIPAL AMOUNT VALUE (NOTE 1)
ARIZONA - CONTINUED
Maricopa County Hosp. Rev. Baa1 $ 300,000 $ 322,140
Rfdg. (Sun Health Corp.)
6.125% 4/1/18
Maricopa County Ind. Dev. A2 500,000 519,640
Auth. Health Facilities Rev.
Rfdg. (Catholic Healthcare
West Proj.) Series A, 5%
7/1/03
Maricopa County Ind. Dev. AA+ 1,000,000 990,480
Auth. Hosp. Facilities Rev.
(Mayo Clinic Hosp.) 5.25%
11/15/37
Maricopa County School Aaa 500,000 385,410
District #1 Rfdg. (Cap.
Appreciation) (Phoenix
Elementary) 2nd Series 0%
7/1/05 (MBIA Insured)
Maricopa County School Aaa 500,000 333,150
District #3 Rfdg. (Temple
Elementary) 0% 7/1/08
(AMBAC Insured)
Maricopa County School Aaa 300,000 318,477
District #4 Rfdg. (Mesa
Univ.) 5.25% 7/1/04 (FSA
Insured)
Maricopa County School Aaa 200,000 224,228
District #14 Rfdg.
(Creighton) 6.5% 7/1/04
(FGIC Insured)
Maricopa County Unified Aaa 400,000 461,392
School District #80
(Chandler) 6.6% 7/1/06 (FGIC
Insured)
Mesa Gen. Oblig. Rfdg. 5.7% Aaa 250,000 269,085
7/1/03 (FGIC Insured)
Mesa Ind. Dev. Auth. Rev. AAA 500,000 503,630
Rfdg. (Lutheran Health Sys.)
Series A 1, 4% 1/1/00 (MBIA
Insured)
Mohave County Ind. Dev. Auth. A+ 250,000 258,973
Ind. Dev. Rev. (North Star
Steel Co. Proj.) Series B,
5.5% 12/1/20 (b)
Navajo County Poll. Cont. Baa1 200,000 207,062
Corp. Rev. Rfdg. (Arizona
Pub. Svc. Co.) Series A,
5.875% 8/15/28
Phoenix Arpt. Rev. Series D, Aaa 810,000 896,743
6.4% 7/1/12 (MBIA Insured)
(b)
Phoenix Civic Impt. Corp. Aa2 400,000 424,036
Arpt. Excise Tax Rev. Rfdg.
5.25% 7/1/09 (b)
Phoenix Civic Impt. Corp. Aa3 500,000 512,385
Wtr. Sys. Rev. 5.45% 7/1/19
Phoenix Gen. Oblig.:
Rfdg. Series A, 7.5% 7/1/08 Aa1 100,000 125,383
4.5% 7/1/18 Aa1 400,000 377,720
Phoenix Street & Hwy. User Aaa 250,000 269,775
Rev. Rfdg. 6.25% 7/1/11
(MBIA Insured)
Phoenix Wtr. Sys. Rev. Rfdg. Aa3 400,000 410,436
4.75% 7/1/01
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (D) PRINCIPAL AMOUNT VALUE (NOTE 1)
ARIZONA - CONTINUED
Pima County Ind. Dev. Auth. Aaa $ 200,000 $ 214,458
Rev. Rfdg. (Healthpartners)
Series A, 5.625% 4/1/14
(MBIA Insured)
Pima County Unified School
District #1 Rfdg. (Tucson):
5% 7/1/11 (FGIC Insured) Aaa 500,000 519,365
7.5% 7/1/10 (FGIC Insured) Aaa 250,000 320,290
Pima County Unified School Aaa 300,000 286,980
District #10 Rfdg. (Cap.
Appreciation) (Amphitheater)
0% 7/1/00 (FGIC Insured)
Salt River Proj. Agric. Impt.
& Pwr. District
Elec. Sys. Rev.: Rfdg.:
Series A, 5.75% 1/1/07 Aa2 300,000 331,197
Series B, 6.5% 1/1/04 Aa2 1,400,000 1,556,280
Series C, 6.25% 1/1/19 Aa2 500,000 536,335
Scottsdale Street & Hwy. User A1 800,000 870,224
Rev. Rfdg. 5.5% 7/1/07
Scottsdale Gen. Oblig. Rfdg.:
Series C, 6.375% 7/1/01 Aa1 250,000 266,093
5.5% 7/1/09 Aa1 100,000 110,495
Tempe Union High School
District #213:
(Proj. of 1994):
Series B, 7% 7/1/03 (FGIC Aaa 400,000 450,280
Insured)
Series C, 4% 7/1/12 (MBIA Aaa 200,000 188,646
Insured)
Rfdg. & Impt. 7% 7/1/08 (FGIC Aaa 310,000 372,552
Insured)
Tucson Gen. Oblig. Rfdg. Aaa 200,000 223,586
6.75% 7/1/03 (FGIC Insured)
Tucson Street & Hwy. User Rev.:
Rfdg. 6% 7/1/10 (MBIA Insured) Aaa 400,000 454,552
Series A, 7% 7/1/11 (MBIA Aaa 300,000 370,293
Insured)
Univ. of Arizona Univ. Rev. A1 400,000 436,028
Rfdg. 6.375% 6/1/05
Yuma County Hosp. District A 265,000 286,603
#001 6.35% 11/15/07
(Escrowed to Maturity) (c)
24,146,041
PUERTO RICO - 7.6%
Puerto Rico Commonwealth Hwy.
& Trans. Auth. Hwy. Rev.:
Series W, 5.5% 7/1/17 Baa1 100,000 103,373
Series Y, 6.25% 7/1/08 (MBIA Aaa 400,000 463,896
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (D) PRINCIPAL AMOUNT VALUE (NOTE 1)
PUERTO RICO - CONTINUED
Puerto Rico Commonwealth Aaa $ 500,000 $ 496,295
Infrastructure Fing. Auth.
Spl. Tax Rev. Series A, 5%
7/1/28 (AMBAC Insured)
Puerto Rico Elec. Pwr. Auth. Aaa 1,000,000 992,590
Pwr. Rev. Series DD, 5%
7/1/28 (MBIA Insured)
2,056,154
TOTAL MUNICIPAL BONDS 26,202,195
(Cost $25,102,808)
MUNICIPAL NOTES - 3.3%
ARIZONA - 3.3%
Maricopa County Poll. Cont. 900,000 900,000
Rev. (Arizona Pub. Svc.
Co./Palo Verde Proj.) Series
1994 B, 3.25%, LOC Morgan
Guaranty Trust Co., NY, VRDN
(a) (Cost $900,000)
TOTAL INVESTMENT IN $ 27,102,195
SECURITIES - 100%
(Cost $26,002,808)
</TABLE>
SECURITY TYPE ABBREVIATION
VRDN - VARIABLE RATE DEMAND NOTE
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) Security collateralized by an amount sufficient to pay interest
and principal.
(d) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 87.3% AAA, AA, A 91.7%
Baa 2.4% BBB 2.4%
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%
OTHER INFORMATION
The distribution of municipal securities by revenue source, as a
percentage of total value of investments in securities, is as follows:
General Obligations 25.0%
Special Tax 17.3
Electric Utilities 16.7
Water & Sewer 9.6
Health Care 9.4
Escrowed/Pre-Refunded 7.2
Education 5.7
Transportation 5.4
Others (individually less 3.7
than 5%)
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1999, the aggregate cost of investment securities for
income tax purposes was $26,002,808. Net unrealized appreciation
aggregated $1,099,387, of which $1,124,636 related to appreciated
investment securities and $25,249 related to depreciated investment
securities.
SPARTAN ARIZONA MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 27,102,195
value (cost $26,002,808) -
See accompanying schedule
Cash 22,291
Receivable for fund shares 30,000
sold
Interest receivable 258,981
TOTAL ASSETS 27,413,467
LIABILITIES
Payable for fund shares $ 30,560
redeemed
Distributions payable 20,729
Accrued management fee 11,527
Other payables and accrued 33
expenses
TOTAL LIABILITIES 62,849
NET ASSETS $ 27,350,618
Net Assets consist of:
Paid in capital $ 26,307,988
Accumulated undistributed net (56,757)
realized gain (loss) on
investments
Net unrealized appreciation 1,099,387
(depreciation) on investments
NET ASSETS, for 2,498,803 $ 27,350,618
shares outstanding
NET ASSET VALUE, offering $10.95
price and redemption price
per share ($27,350,618
(divided by) 2,498,803
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY
28, 1999 (UNAUDITED)
INTEREST INCOME $ 610,474
EXPENSES
Management fee $ 71,211
Non-interested trustees' 47
compensation
Total expenses before 71,258
reductions
Expense reductions (1,429) 69,829
NET INTEREST INCOME 540,645
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (1,712)
Futures contracts 2,503 791
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (11,788)
Futures contracts 3,487 (8,301)
NET GAIN (LOSS) (7,510)
NET INCREASE (DECREASE) IN $ 533,135
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 540,645 $ 937,350
Net realized gain (loss) 791 128,956
Change in net unrealized (8,301) 420,385
appreciation (depreciation)
NET INCREASE (DECREASE) IN 533,135 1,486,691
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (540,645) (937,350)
From net interest income
From net realized gain (91,753) (74,308)
TOTAL DISTRIBUTIONS (632,398) (1,011,658)
Share transactions Net 4,535,203 7,504,699
proceeds from sales of shares
Reinvestment of distributions 482,185 861,678
Cost of shares redeemed (2,175,384) (4,003,772)
NET INCREASE (DECREASE) IN 2,842,004 4,362,605
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 1,979 1,870
TOTAL INCREASE (DECREASE) 2,744,720 4,839,508
IN NET ASSETS
NET ASSETS
Beginning of period 24,605,898 19,766,390
End of period $ 27,350,618 $ 24,605,898
OTHER INFORMATION
Shares
Sold 412,316 689,025
Issued in reinvestment of 43,771 79,146
distributions
Redeemed (197,698) (368,079)
Net increase (decrease) 258,389 400,092
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31,
1999
(UNAUDITED) 1998 1997 1996 1995 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.980 $ 10.740 $ 10.460 $ 10.640 $ 10.000
of period
Income from Investment .228 .473 .483 .514 .504
Operations Net interest
income
Net realized and unrealized .009 .279 .351 (.022) .637
gain (loss)
Total from investment .237 .752 .834 .492 1.141
operations
Less Distributions
From net interest income (.228) (.473) (.484) (.514) (.504)
From net realized gain (.040) (.040) (.070) (.160) -
Total distributions (.268) (.513) (.554) (.674) (.504)
Redemption fees added to paid .001 .001 .000 .002 .003
in capital
Net asset value, end of period $ 10.950 $ 10.980 $ 10.740 $ 10.460 $ 10.640
TOTAL RETURN B, C 2.17% 7.16% 8.16% 4.72% 11.74%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 27,351 $ 24,606 $ 19,766 $ 20,388 $ 13,448
(000 omitted)
Ratio of expenses to average .55% A .55% .55% .30% D .06% A, D
net assets
Ratio of expenses to average .54% A, E .54% E .53% E .30% .06% A
net assets after expense
reductions
Ratio of net interest income 4.17% A 4.35% 4.55% 4.82% 5.54% A
to average net assets
Portfolio turnover rate 26% A 25% 27% 32% 56% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS 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.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
F FOR THE PERIOD OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO
AUGUST 31, 1995.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
PERFORMANCE: THE BOTTOM LINE
To evaluate a money market fund's historical performance, you can look
at either total return or yield. Total return reflects the change in
the value of an investment, assuming reinvestment of the fund's
dividend income and the effect of the fund's $5 account closeout fee
on an average-sized account. 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, the past 1 year and life of fund total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND
SPARTAN AZ MUNICIPAL MONEY 1.40% 3.11% 16.10%
MARKET
All Tax-Free Money Market 1.32% 2.86% n/a
Funds Average
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 October 11, 1994. 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. To measure how the fund's performance
stacked up against its peers, you can compare it to the all tax-free
money market funds average, which reflects the performance of all
tax-free money market funds with similar objectives tracked by IBC
Financial Data, Inc. The past six months average represents a peer
group of 436 money market funds.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 YEAR LIFE OF FUND
SPARTAN AZ MUNICIPAL MONEY 3.11% 3.46%
MARKET
All Tax-Free Money Market 2.86% n/a
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YIELDS
3/1/99 11/30/98 8/31/98 6/1/98 3/2/98
Spartan Arizona Municipal 2.60% 2.88% 3.01% 3.52% 3.20%
Money Market
If Fidelity had not 2.60% 2.88% 3.01% 3.37% 3.05%
reimbursed certain fund
expenses
All Tax-Free Money Market 2.42% 2.71% 2.80% 3.22% 2.92%
Funds Average
Spartan Arizona Municipal 4.27% 4.73% 4.96% 5.80% 5.27%
Money Market - Tax-equivalent
If Fidelity had not 4.27% 4.73% 4.96% 5.55% 5.03%
reimbursed certain fund
expenses
Portion of fund's income 3.80% 4.12% 0.00% 0.00% 0.00%
subject to state taxes
</TABLE>
Spartan Arizona
Municipal Money
Market
All Tax-Free
Money Market
Funds Average
5% -
4% -
3% -
2% -
1% -
0%
Row: 1, Col: 1, Value: 2.6
Row: 1, Col: 2, Value: 2.42
Row: 2, Col: 1, Value: 2.88
Row: 2, Col: 2, Value: 2.71
Row: 3, Col: 1, Value: 3.01
Row: 3, Col: 2, Value: 2.8
Row: 4, Col: 1, Value: 3.52
Row: 4, Col: 2, Value: 3.22
Row: 5, Col: 1, Value: 3.2
Row: 5, Col: 2, Value: 2.92
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
table above shows the fund's current seven-day yield at quarterly
intervals over the past year. You can compare these yields to the all
tax-free money market funds average tracked by IBC Financial Data,
Inc. Or you can look at the fund's tax-equivalent yield, which is
based on a combined effective 1999 federal and state income tax rate
of 39.26% and reflects that a portion of the fund's income was subject
to state taxes. A portion of the fund's income may be subject to the
federal alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT
PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
(checkmark)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.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Scott Orr)
An interview with Scott Orr, Portfolio Manager of Spartan Arizona
Municipal Money Market Fund
Q. SCOTT, WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PAST SIX
MONTHS?
A. As the period began, the market was in a state of turmoil as it
shifted from expectations that the Federal Reserve Board would
"tighten," or raise, short-term interest rates to anticipation that
the Fed would lower them instead. Looking back to early summer 1998,
signs such as a very low unemployment rate and sustained economic
growth pointed to the potential for inflationary pressures. But
inflation had remained benign, in part because economic problems
overseas helped dampen economic growth. However, those international
problems intensified in August, when Russia defaulted on some of its
outstanding debt and the value of its currency plummeted. This sparked
concerns that currency devaluations would take place in other
emerging-market countries, such as those in Latin America. Global
stock markets went into a freefall, and investors worldwide flocked to
U.S. Treasury securities in pursuit of a safe haven to withstand this
turmoil. Further problems arose in early fall when rumors of the
potential collapse of certain hedge funds hit the market.
Q. YOU MENTIONED THAT THESE DEVELOPMENTS LED TO A SHIFT IN MARKET
SENTIMENT . . .
A. That's right. Market sentiment quickly swung to an anticipation of
a Fed "easing," or cut, in the rate banks charge each other for
overnight loans - known as the fed funds rate. The easing would aim to
help sustain economic growth and maintain liquidity in the markets.
The Board followed through with three 0.25 percentage point decreases
at the end of September, on October 15 and again on November 17. In
total, the fed funds rate fell from 5.50% to 4.75%. These moves helped
bring stability back to the world markets. Throughout this turmoil,
the U.S. economy continued to chug along, with gross domestic product
growing at a brisk annual rate of 6.1% in the fourth quarter of 1998.
The manufacturing sector - one of the only parts of the domestic
economy that had shown signs of weakness - began to rebound and
employment growth continued to be strong. In spite of these
developments, inflation remained in check.
Q. WHAT WAS YOUR STRATEGY WITH THE FUND?
A. The fund, as is the case most of the time, had to deal with a lack
of supply of one-year, fixed-rate notes and bonds in the Arizona
market. Consequently, I looked for short-term, variable-rate
securities that offered compelling values. On August 31, 1998, the
fund had an average maturity of 55 days, a bit longer than its
competitors. I kept the fund in the 50- to 60-day range until December
by looking for securities that I felt locked in rates that would
perform well relative to variable-rate alternatives. By the end of
December, the maturity had rolled down to the mid-40s, and ended the
period at 29 days, as I avoided fixed-rate issues because the relative
yields on variable-rate notes were more attractive. At the end of the
period, the fund was positioned fairly defensively - with an average
maturity somewhat shorter than its competitors - because I anticipated
an environment of either steady Fed policy or, possibly, a move by the
Board to raise the fed funds rate.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on February 28, 1999, was 2.58%,
compared to 3.01% six months ago. The more recent seven-day yield was
the equivalent of a 4.25% taxable rate of return for Arizona investors
in the 39.26% combined state and federal income tax bracket, and
reflects that a portion of the fund's income was subject to state
taxes. Through February 28, 1999, the fund's six-month total return
was 1.40%, compared to 1.32% for the all tax-free money market funds
average, according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. At the end of the period, the Fed appeared content with its
interest-rate stance, adopting a "wait and see" attitude in order to
determine what effect its moves will have on the economy. The Fed
probably won't need to lower rates further as long as no new
significant global financial crisis erupts. However, I do think the
Fed is becoming wary as the economy continues to thrive and the
possibility of inflationary pressures persist. Many economists expect
the Fed to switch gears in the near future and raise rates in response
to economic strength, but I'm not ready to jump on that bandwagon yet.
Rather, I expect rates will remain unchanged for the next few months
unless we see compelling economic news consistently pointing to the
need for the Fed to slow the economy. By the summer, the Fed may have
enough ammunition to raise interest rates if the economy continues on
the same path.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
GOAL: high current tax-free
income for Arizona residents
while maintaining a stable
$1.00 share price
FUND NUMBER: 433
TRADING SYMBOL: FSAXX
START DATE: October 11,
1994
SIZE: as of February 28,
1999, more than $95 million
MANAGER: Scott Orr, since
1997; manager, various
Fidelity and Spartan
municipal money market
funds; joined Fidelity in
1989
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MATURITY DIVERSIFICATION
DAYS % OF FUND'S INVESTMENTS 2/28/99 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
8/31/98 2/28/98
0 - 30 72 60 68
31 - 90 12 24 14
91 - 180 16 4 10
181 - 397 0 12 8
WEIGHTED AVERAGE MATURITY
2/28/99 8/31/98 2/28/98
Spartan Arizona Municipal 29 DAYS 55 days 38 days
Money Market
All Tax-Free Money Market 42 DAYS 44 days 43 days
Funds Average *
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF FEBRUARY 28, 1999
Variable rate demand
notes (VRDNs) 69%
Commercial paper
(including CP mode) 15%
Tender bonds 0%
Municipal notes 0%
Other 16%
Row: 1, Col: 1, Value: 69.0
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 16.0
AS OF AUGUST 31, 1998
Variable rate demand
notes (VRDNs) 54%
Commercial paper
(including CP mode) 19%
Tender bonds 1%
Municipal notes 1%
Other 25%
Row: 1, Col: 1, Value: 54.0
Row: 1, Col: 2, Value: 18.5
Row: 1, Col: 3, Value: 1.5
Row: 1, Col: 4, Value: 1.5
Row: 1, Col: 5, Value: 24.5
*SOURCE: IBC'S MONEY FUND REPORT (REGISTERED TRADEMARK)
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
INVESTMENTS FEBRUARY 28, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL SECURITIES - 100%
PRINCIPAL AMOUNT VALUE (NOTE 1)
ARIZONA - 99.9%
Apache County Ind. Dev. Auth.
Ind. Rev.:
(Imperial Components, Inc.) $ 1,900,000 $ 1,900,000
Series 1996, 3.15%, LOC
Harris Trust & Savings Bank,
Chicago, VRDN (a)(d)
(Tucson Elec. Pwr. Co.- 1,000,000 1,000,000
Springerville Proj.) Series
1983 C, 2.95%, LOC Societe
Generale, France, VRDN (a)
(Tuscon Elec. Pwr. Co.- 2,000,000 2,000,000
Springerville Proj.) Series
1985 A, 2.9%, LOC Toronto
Dominion Bank, VRDN (a)
Arizona Edl. Ln. Marketing 11,000,000 11,000,000
Corp. Series 1991 A, 3.05%,
LOC Dresdner Bank AG, VRDN
(a)(d)
Arizona Trans. Board Excise 2,000,000 2,012,500
Tax Rev. Bond (Maricopa
County Reg'l. Area) Series
B, 5.5% 7/1/99 (AMBAC
Insured)
Arizona Trans. Board Hwy. 2,000,000 2,014,960
Rev. Bond Series A, 5.9%
7/1/99
Chandler Gen. Oblig. Bond 2,150,000 2,163,283
5.5% 7/1/99
Chandler Ind. Dev. Auth. 3,000,000 3,000,000
Multi-family Hsg. Rev. Rfdg.
(South Park Apts.) Series
1989, 3%, LOC Citibank, New
York NA, VRDN (a)
Coconino County Ind. Dev. 1,000,000 1,000,000
Rev. (Citizens Utils. Proj.)
Series 1997, 3.05%, VRDN
(a)(d)
Flagstaff Ind. Dev. Auth. 2,600,000 2,600,000
(Norton Envir., Inc. Proj.)
Series 1997, 3.1%, LOC Key
Bank, NA, VRDN (a)(d)
Glendale Ind. Dev. Auth. Rev. 1,700,000 1,700,000
(Superior Bedding Co. Proj.)
Series 1994, 3.15%, LOC
Harris Trust & Savings Bank,
Chicago, VRDN (a)(d)
Maricopa County Cmnty. 4,900,000 4,915,294
College District Bond 4.5%
7/1/99
Maricopa County Ind. Dev. 1,000,000 1,000,000
Auth. Ind. Dev. Rev.
(Clayton Homes Proj.) Series
1998, 3.05%, LOC Wachovia
Bank NA, VRDN (a)(d)
Maricopa County Poll. Cont.
Rev.:
Bonds (Southern California 1,000,000 1,000,000
Edison Co.) Series 1985 F,
3.15% 3/8/99, CP mode
(Arizona Pub. Svc. Co.) 1,500,000 1,500,000
Series 1994 E, 3.25%, LOC
Bank of America Nat'l. Trust
& Savings Assoc., VRDN (a)
(Arizona Pub. Svc. Co./Palo 1,700,000 1,700,000
Verde Proj.) Series C,
3.25%, LOC Toronto Dominion
Bank, VRDN (a)
Mohave County Ind. Dev. Auth.
Ind. Dev. Rev. Bonds:
(Citizens Util. Proj.) Series 2,900,000 2,900,000
1993 E, 2.75% 4/6/99, CP
mode (d)
(Citizens Util. Proj.) Series 2,500,000 2,500,000
1993 E, 2.85% 4/7/99, CP
mode (d)
Phoenix Civic Impt. Board 1,920,000 1,920,000
Aprt. Rev. Participating
VRDN Series PA 405, 3.01%
(Liquidity Facility Merrill
Lynch & Co.) (a)(e)
MUNICIPAL SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
ARIZONA - CONTINUED
Phoenix Gen. Oblig.:
Participating VRDN Series PA $ 2,430,000 $ 2,430,000
236, 3.01% (Liquidity
Facility Merrill Lynch &
Co.) (a)(e)
Series 1995 2, 3.2% (BPA 2,900,000 2,900,000
Morgan Guaranty Trust Co.,
NY), VRDN (a)
Phoenix Ind. Dev. Auth.
Multi-family Hsg. Rev.:
(Bell Square Apt. Proj.) 1,000,000 1,000,000
Series 1995, 3.1%, LOC Gen.
Elec. Cap. Corp., VRDN (a)
(Lynwood Apt. Proj.) Series 4,000,000 4,000,000
1994, 2.95%, LOC Fed. Home
Ln. Bank, San Francisco,
VRDN (a)
(Paradise Shadows II Apts. 3,825,000 3,825,000
Proj.) Series 1989, 3%, LOC
Citibank, New York NA, VRDN
(a)
Phoenix Ind. Dev. Auth. Rev.:
(Plastican Proj.) Series 4,000,000 4,000,000
1997, 3.1%, LOC Fleet Bank
NA, VRDN (a)(d)
Rfdg. (V.A.W. of America 1,000,000 1,000,000
Proj.) Series 1997, 3.1%,
LOC NationsBank NA, VRDN
(a)(d)
Phoenix Ind. Dev. Auth. 1,000,000 1,000,000
Participating VRDN Series PT
1082, 3.01% (Liquidity
Facility Merrill Lynch &
Co.) (a)(e)
Pima County Ind. Dev. Auth. 1,990,000 1,990,000
Multi-family Hsg. Rev. (La
Cholla Apt. Proj.) Series
1996, 3%, LOC Chase Bank of
Texas NA, VRDN (a)
Pima County Street & Hwy. 3,000,000 3,018,551
Rev. Series 1998, 5% 7/1/99
(FSA Insured)
Pinal County Ind. Dev. Auth. 3,940,000 3,940,000
Hosp. Rev. (Casa Grande Med.
Ctr. Proj.) Series 1995, 3%,
LOC Chase Manhattan Bank,
VRDN (a)
Pinal County Ind. Dev. Poll. 2,800,000 2,800,000
Cont. Rev. (Magma Copper Co.
Proj./Newmont Mining Corp.)
Series 1984, 3.2%, LOC
Nat'l. Westminster Bank PLC,
VRDN (a)
Salt River Proj. Agric. Impt.
& Pwr. District:
2.95% 4/5/99, CP 3,000,000 3,000,000
3.15% 3/9/99, CP 1,000,000 1,000,000
Tucson Arpt. Auth. Spl. 1,300,000 1,300,000
Facility Rev. (LearJet,
Inc.) Series 1998 A, 3.1%,
LOC NationsBank NA, VRDN (a)
Yavapai County Ind. Dev. 3,000,000 3,000,000
Auth. Ind. Dev. Rev. Bonds
(Citizens Util.) Series
1993, 2.75% 4/6/99, CP mode
(d)
Yuma County Ind. Dev. Auth. 2,000,000 2,000,000
Rev. (Meadowcraft, Inc.
Proj.) Series 1997, 3.1%,
LOC NationsBank NA, VRDN
(a)(d)
90,029,588
MUNICIPAL SECURITIES -
CONTINUED
SHARES VALUE (NOTE 1)
OTHER - 0.1%
Municipal Central Cash Fund $ 104,343 $ 104,343
(b)(c)
TOTAL INVESTMENT IN $ 90,133,931
SECURITIES - 100%
Total Cost for Income Tax Purposes $ 90,133,931
SECURITY TYPE ABBREVIATIONS
CP - COMMERCIAL PAPER
VRDN - VARIABLE RATE DEMAND NOTE
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(c) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 2.95%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(e) Provides evidence of ownership in one or more underlying municipal
bonds.
SPARTAN ARIZONA MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 90,133,931
value - See accompanying
schedule
Receivable for fund shares 4,983,680
sold
Interest receivable 324,987
TOTAL ASSETS 95,442,598
LIABILITIES
Payable to custodian bank $ 20,561
Payable for fund shares 94,024
redeemed
Distributions payable 9,628
Accrued management fee 35,418
Other payables and accrued 127
expenses
TOTAL LIABILITIES 159,758
NET ASSETS $ 95,282,840
Net Assets consist of:
Paid in capital $ 95,256,190
Accumulated net realized gain 26,650
(loss) on investments
NET ASSETS, for 95,256,192 $ 95,282,840
shares outstanding
NET ASSET VALUE, offering $1.00
price and redemption price
per share ($95,282,840
(divided by) 95,256,192
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY
28, 1999 (UNAUDITED)
INTEREST INCOME $ 1,515,465
EXPENSES
Management fee $ 230,086
Non-interested trustees' 174
compensation
Total expenses before 230,260
reductions
Expense reductions (1,558) 228,702
NET INTEREST INCOME 1,286,763
NET REALIZED GAIN (LOSS) ON 8
INVESTMENTS
NET INCREASE IN NET ASSETS $ 1,286,771
RESULTING FROM OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 1,286,763 $ 3,049,535
Net realized gain (loss) 8 39,199
NET INCREASE (DECREASE) IN 1,286,771 3,088,734
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,286,763) (3,049,535)
from net interest income
Share transactions at net 60,379,352 86,116,142
asset value of $1.00 per
share Proceeds from sales of
shares
Reinvestment of 1,218,671 2,968,682
distributions from net
interest income
Cost of shares redeemed (60,838,410) (82,735,176)
NET INCREASE (DECREASE) IN 759,613 6,349,648
NET ASSETS AND SHARES
RESULTING FROM SHARE
TRANSACTIONS
TOTAL INCREASE (DECREASE) 759,621 6,388,847
IN NET ASSETS
NET ASSETS
Beginning of period 94,523,219 88,134,372
End of period $ 95,282,840 $ 94,523,219
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
of period
Income from Investment .014 .034 .033 .035 .034
Operations Net interest
income
Less Distributions
From net interest income (.014) (.034) (.033) (.035) (.034)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B, C 1.40% 3.41% 3.39% 3.52% 3.43%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 95,283 $ 94,523 $ 88,134 $ 82,741 $ 52,566
(000 omitted)
Ratio of expenses to average .50% A .36% D .35% D .22% D .06% A, D
net assets
Ratio of net interest income 2.79% A 3.36% 3.34% 3.44% 3.91% A
to average net assets
</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.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FOR THE PERIOD OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO
AUGUST 31, 1995.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Arizona Municipal Income Fund (the income fund) is a fund of
Fidelity Union Street Trust. Spartan Arizona Municipal Money Market
Fund (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 financial statements have
been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the income fund and
the money market fund:
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. Securities for
which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
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. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include 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 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
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
generally accepted accounting principles. These differences, which may
result in distribution reclassifications, are primarily due to
differing treatments for futures transactions, market discount and
losses deferred due to futures. The income 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 the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the income fund
less than 180 days are subject to a short-term trading 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission (the SEC), the funds may invest
in the Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
FUTURES CONTRACTS. The income fund may use futures contracts to manage
its exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends 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 or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $5,914,690 and $3,195,952, respectively.
The market value of futures contracts opened and closed during the
period amounted to $253,988 and $627,217, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each 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 .55% and .50% of average net assets for the income
fund and money market fund, respectively.
FMR also bears the cost of providing shareholder services to the money
market fund. To offset the cost of providing these services, FMR or
its affiliates collected certain transaction fees from shareholders
which amounted to $383 for the period.
SUB-ADVISER FEE. As the money market and the income (effective January
1, 1999) funds' investment sub-adviser, Fidelity Investments Money
Management, 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.
MONEY MARKET INSURANCE. Pursuant to an Exemptive Order issued by the
SEC, the money market fund, along with other money market funds
advised by FMR or its affiliates, has entered into insurance
agreements with FIDFUNDS Mutual Limited (FIDFUNDS), an affiliated
mutual insurance company, effective January 1, 1999. FIDFUNDS provides
limited coverage for certain loss events including issuer default as
to payment of principal or interest and bankruptcy or insolvency of a
credit enhancement provider. The insurance does not cover losses
resulting from changes in interest rates, ratings downgrades or other
market conditions. The money market fund may be subject to a special
assessment of up to approximately 2.5 times the money market fund's
annual gross premium if covered losses exceed certain levels. During
the period, FMR has borne the cost of the money market fund's premium
payable to FIDFUNDS.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with the
funds' custodian and transfer agent whereby credits realized as a
result of uninvested cash balances were used to reduce a portion of
each applicable fund's expenses. During the period, the income fund's
and money market fund's expenses were reduced by $1,429 and $1,558,
respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* 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
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
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
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, 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
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 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
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 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
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, 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)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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
SUB-ADVISER
Fidelity Investments
Money Management, Inc.
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Boyce I. Greer, Vice President -
MONEY MARKET FUND
Scott A. Orr, Vice President -
MONEY MARKET FUND
Dwight D. Churchill, Vice President -
INCOME FUND
Christine J. Thompson, Vice President -
INCOME FUND
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
AZI/SPZ-SANN-0499 73877
1.700927.101
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson -
MONEY MARKET FUND
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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FIDELITY
EXPORT AND MULTINATIONAL
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of the major shifts
in the fund's investments
over the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 16 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 20 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
February proved to be a challenging month for the U.S. stock and bond
markets. Instances of profit worries and brisk selling in the
technology sector hampered the equity markets at times. Financial
shares, however, turned in their strongest performance in recent
months. Meanwhile, bond markets were unsettled by strong economic data
and Federal Reserve Chairman Alan Greenspan's concerns that the Fed's
rate cuts last fall may have overstimulated the economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories 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, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you 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. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1999 PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND
FIDELITY EXPORT AND 31.62% 15.32% 188.65%
MULTINATIONAL
FIDELITY EXPORT AND 27.67% 11.86% 179.99%
MULTINATIONAL (INCL. 3.00%
SALES CHARGE)
S&P 500 (registered trademark) 30.28% 19.74% 197.93%
Growth Funds Average 29.91% 13.19% n/a
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 October 4, 1994. 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 Standard & Poor's 500 Index - a market
capitalization-weighted index of common stocks. To measure how the
fund's performance stacked up against its peers, you can compare it to
the growth funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Inc. The past six
months average represents a peer group of 1,105 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1999 PAST 1 YEAR LIFE OF FUND
FIDELITY EXPORT AND 15.32% 27.21%
MULTINATIONAL
FIDELITY EXPORT AND 11.86% 26.33%
MULTINATIONAL (INCL. 3.00%
SALES CHARGE)
S&P 500 19.74% 28.12%
Growth Funds Average 13.19% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
Export and Multinational S&P 500
00332 SP001
1994/10/04 9700.00 10000.00
1994/10/31 10252.90 10405.06
1994/11/30 9932.80 10026.11
1994/12/31 9942.83 10174.80
1995/01/31 9729.22 10438.63
1995/02/28 10185.58 10845.42
1995/03/31 10418.61 11165.47
1995/04/30 10942.94 11494.29
1995/05/31 11389.59 11953.72
1995/06/30 12583.90 12231.41
1995/07/31 13516.04 12637.00
1995/08/31 13807.33 12668.72
1995/09/30 14302.53 13203.34
1995/10/31 13083.96 13156.20
1995/11/30 13371.84 13733.76
1995/12/31 13146.10 13998.27
1996/01/31 12753.38 14474.77
1996/02/29 13104.76 14608.95
1996/03/31 12846.39 14749.64
1996/04/30 14717.02 14967.05
1996/05/31 15843.54 15353.05
1996/06/30 14799.70 15411.54
1996/07/31 13993.57 14730.66
1996/08/31 15347.46 15041.33
1996/09/30 16887.37 15887.86
1996/10/31 16933.63 16326.04
1996/11/30 18180.93 17560.13
1996/12/31 18226.32 17212.26
1997/01/31 19205.65 18287.68
1997/02/28 18073.98 18431.06
1997/03/31 16898.79 17673.73
1997/04/30 17170.83 18728.85
1997/05/31 19183.88 19869.06
1997/06/30 20533.18 20759.20
1997/07/31 21991.28 22411.01
1997/08/31 21784.53 21155.54
1997/09/30 23808.47 22314.23
1997/10/31 22880.80 21568.93
1997/11/30 22674.22 22567.36
1997/12/31 22544.27 22954.84
1998/01/31 23007.87 23208.72
1998/02/28 24279.46 24882.54
1998/03/31 25431.84 26156.77
1998/04/30 25272.89 26419.91
1998/05/31 24345.69 25965.75
1998/06/30 26054.39 27020.48
1998/07/31 25882.20 26732.71
1998/08/31 21272.68 22867.69
1998/09/30 23100.59 24332.60
1998/10/31 23765.32 26311.81
1998/11/30 25181.25 27906.57
1998/12/31 27596.65 29514.55
1999/01/31 28651.65 30748.85
1999/02/26 27999.21 29793.17
IMATRL PRASUN SHR__CHT 19990228 19990309 111916 R00000000000056
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Export and Multinational Fund on October 4, 1994,
when the fund started and the current 3.00% sales charge was paid. As
the chart shows, by February 28, 1999, the value of the investment
would have grown to $27,999 - a 179.99% increase on the initial
investment. For comparison, look at how the Standard & Poor's 500
Index did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 would have grown to $29,793 - a
197.93% increase.
(checkmark)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
long-term growth and
short-term volatility. 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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Despite a volatile month of February,
U.S. stocks posted strong returns for
the six-month period ending
February 28, 1999. In that time, the
Standard & Poor's 500 Index - a
popular gauge of U.S. stock
performance - returned 30.28%.
The period was marked by global
uneasiness, three interest-rate cuts,
the continued strength of blue-chip
stocks and the overall moodiness of
technology and Internet stocks. In
the late summer of 1998, wary stock
investors moved into safer
investments as news of Russia's
currency devaluation and loan
defaults spread. As a result, U.S.
Treasuries and stocks of larger,
better-known companies benefited.
Shortly thereafter, the U.S. Federal
Reserve Board announced three
separate 0.25% interest-rate cuts in
an effort to replenish investor
confidence. These pre-emptive
strikes - in conjunction with
soaring Internet and technology
issues - helped get the equity
market back on its feet and then
some. At the end of 1998, the S&P
500 had recorded its fourth straight
year of 20%-plus returns. January
1999 saw the S&P 500, Dow Jones
Industrial Average and NASDAQ
all reach record highs. The market's
direction in February was largely
dictated by the daily ups and
downs of technology and Internet
stocks and fears that the Fed may
have to increase interest rates. In
February, the S&P 500 fell 3.11%,
while the technology-laden
NASDAQ declined 8.69%.
(photograph of Adam Hetnarski)
An interview with Adam Hetnarski, Portfolio Manager of Fidelity
Export and Multinational Fund
Q. HOW DID THE FUND PERFORM, ADAM?
A. The fund did well. For the six months that ended February 28, 1999,
the fund returned 31.62%. This topped the Standard & Poor's 500 Index,
which returned 30.28% during the same period. The growth funds average
- - as tracked by Lipper Inc. - had a six-month return of 29.91% as of
February 28, 1999. For the 12 months that ended February 28, 1999, the
fund returned 15.32%, while the S&P 500 and Lipper peer group returned
19.74% and 13.19%, respectively.
Q. WHAT FACTORS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE
DURING THE PERIOD?
A. Good stock picking in several key growth areas of the market -
including technology, pharmaceuticals and medical technology - helped
performance. Technology-related companies such as Nokia and Microsoft
were solid gainers, while drug stock Merck and medical technology
names such as Medtronic and Sofamor/Danek performed well. In terms of
strategies that worked well, my decision to de-emphasize companies
with exposure to corporate PC sales proved beneficial, as that area of
PC unit growth slowed during the period. Also, by adding to the fund's
positions in large multinational companies such as General Electric, I
increased the average size of the stocks in the portfolio. This
strategy also contributed positively to performance.
Q. HOW WOULD YOU DESCRIBE THE CLIMATE OVER THE PAST SIX MONTHS FOR
EXPORTERS AND MULTINATIONALS?
A. Exporters were still being hurt by problems in emerging markets,
but some of the larger, well-run multinational companies presented
good opportunities. Some of these companies - Citigroup and General
Electric being good examples - tried to leverage their business
exposure in regions such as Russia and Asia by acquiring cheap assets
with future growth potential. Citigroup, for instance, has been
growing its assets in Japan nicely, but hasn't been rewarded from an
earnings standpoint. The company is hoping that the future will bode
well in that regard.
Q. TECHNOLOGY STOCKS LED THE MARKET'S CHARGE THROUGH MUCH OF THE
PERIOD, BUT YOU DECREASED THE FUND'S HOLDINGS IN THIS AREA - FROM
AROUND 26% SIX MONTHS AGO TO JUST UNDER 13%. WHY?
A. The fund's technology holdings were lightened due in part to my
outlook on PC sales during the period. Despite the surprising strength
of consumer PC sales in November and December 1998, I continued to be
bearish on overall PC unit growth and profitability. Corporate PC
sales were weak during the period, and it's my belief that the
positive consumer PC sales numbers masked this weakness. Corporate PCs
are typically priced higher than retail boxes and thus yield higher
profit margins. Past trends also show that consumer PC sales typically
slow during the first half of the year.
Q. TWO STOCKS NEW TO THE FUND'S TOP-HOLDINGS AT THE END OF THE PERIOD
WERE LILLY (ELI) & CO. AND MEDTRONIC. WHAT DID YOU LIKE ABOUT THESE
STOCKS?
A. Both companies were in the process of developing what I felt were
promising products. Lilly - which makes the popular anti-depressant
drug Prozac - is preparing to roll out a new diabetes treatment drug
known as Actos in the summer of 1999. At the close of the period,
Lilly was still awaiting approval on Actos from the Federal Drug
Administration. Medtronic, on the other hand, has experienced solid
revenue and earnings growth from its heart rhythm management products.
Q. ASIDE FROM SOME OF THE STOCKS YOU'VE MENTIONED, WHICH OTHERS
PERFORMED WELL? WHICH DIDN'T?
A. Several of the fund's finance-related investments registered good
results. Providian, a California-based company that provides a wide
range of credit services, performed well, as did Citicorp, which
merged with Travelers during the period to form Citigroup. The biggest
disappointment was Monsanto, which suffered after American Home
Products withdrew its acquisition bid.
Q. WHAT'S YOUR OUTLOOK?
A. I'm going to be as flexible as I possibly can. I don't want to
become overly enamored with one particular group of stocks over
another. I'll be watching the PC trend I mentioned earlier, as well as
overall market valuations, which have been very high lately. The
well-worn cliche of "buy low and sell high" will be quite applicable
going forward as I try to find the Ciscos and Microsofts of tomorrow.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
GOAL: to increase the value of
the fund's shares by investing
mainly in the equity securities
of U.S. companies that are
expected to benefit from
exporting or selling their
goods or services outside the
U.S.
FUND NUMBER: 332
TRADING SYMBOL: FEXPX
START DATE: October 4, 1994
SIZE: as of February 28,
1999, more than $396 million
MANAGER: Adam Hetnarski,
since September 1998;
associate portfolio manager,
Fidelity Export and
Multinational Fund, July
1998-September 1998;
manager, Fidelity Select
Technology Portfolio,
1996-1998; analyst,
networking, electronics,
CAD/CAM and other
technology-related industries,
1994-1998; joined Fidelity
in 1991
ADAM HETNARSKI TALKS ABOUT
ENERGY STOCKS, THE INTERNET
CRAZE AND RUNNING A
CONCENTRATED FUND:
ENERGY STOCKS: "The fund's
exposure to energy stocks rose
from 1% six months ago to around
8.7% at the end of the period, but
the increase was gradual. Overall,
energy stocks detracted from
performance but I feel the sector is
poised for a rebound. Towards the
end of February, in fact, the price
of oil had started to climb back up."
INTERNET: "Several of the fund's
investments - including MCI
WorldCom, eBay and Yahoo! -
benefited from the tremendous
growth and popularity of the
Internet, but valuations got a bit
extreme during the period. It's
hard to assess the accurate value
of certain Internet stocks,
because many concepts - such as
the effectiveness of online
advertising - are still unproven."
PORTFOLIO CONCENTRATION: "At
the close of the period, the fund's
top-10 holdings represented around
40% of its total investments. I've
always felt the level of my
conviction in a particular stock
should be reflected - sort of like
putting your money where your
mouth is. The top-10 holdings are
typically my best ideas and will
generally be responsible for much
of the fund's absolute return."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF FEBRUARY
28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
Time Warner, Inc. 6.0 3.8
MCI WorldCom, Inc. 5.9 5.1
Merck & Co., Inc. 5.8 2.4
General Electric Co. 4.8 0.6
Lilly (Eli) & Co. 3.3 1.7
Citigroup, Inc. 3.1 0.7
Fannie Mae 2.9 1.2
Microsoft Corp. 2.8 4.4
Providian Financial Corp. 2.6 0.0
OY Nokia AB sponsored ADR 2.6 0.0
TOP FIVE MARKET SECTORS AS OF
FEBRUARY 28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
HEALTH 17.5 16.8
FINANCE 13.8 5.7
TECHNOLOGY 12.9 26.0
INDUSTRIAL MACHINERY & 9.0 2.4
EQUIPMENT
ENERGY 8.7 1.0
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF FEBRUARY 28, 1999 *
Stocks 96.0%
Short-term
investments 4.0%
*FOREIGN
INVESTMENTS 5.3%
Row: 1, Col: 1, Value: 96.0
Row: 1, Col: 2, Value: 4.0
AS OF AUGUST 31, 1998 **
Stocks 95.9%
Short-term
investments 4.1%
**FOREIGN
INVESTMENTS 4.0%
Row: 1, Col: 1, Value: 95.90000000000001
Row: 1, Col: 2, Value: 4.1
INVESTMENTS FEBRUARY 28, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 10,000 $ 604,375
BASIC INDUSTRIES - 1.9%
CHEMICALS & PLASTICS - 0.2%
Ivex Packaging Corp. (a) 40,000 605,000
METALS & MINING - 1.7%
Alcoa, Inc. 40,000 1,620,000
Martin Marietta Materials, 100,000 5,131,250
Inc.
6,751,250
TOTAL BASIC INDUSTRIES 7,356,250
CONSTRUCTION & REAL ESTATE -
0.0%
BUILDING MATERIALS - 0.0%
Southdown, Inc. 3,600 169,875
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES -
0.4%
AutoZone, Inc. (a) 49,000 1,715,000
ENERGY - 8.7%
ENERGY SERVICES - 1.3%
Baker Hughes, Inc. 60,000 1,080,000
ENSCO International, Inc. 225,000 1,996,875
Halliburton Co. 30,000 847,500
Marine Drilling Companies, 203,000 1,294,125
Inc. (a)
5,218,500
OIL & GAS - 7.4%
Amerada Hess Corp. 31,000 1,406,625
Anadarko Petroleum Corp. 70,000 1,925,000
BP Amoco PLC sponsored ADR 92,632 7,873,720
Chevron Corp. 35,000 2,690,625
Noble Affiliates, Inc. 113,000 2,556,625
Total SA sponsored ADR 32,500 1,677,813
USX-Marathon Group 298,400 6,173,150
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Vastar Resources, Inc. 60,100 $ 2,313,850
Weatherford International, 145,000 2,465,000
Inc. (a)
29,082,408
TOTAL ENERGY 34,300,908
FINANCE - 13.8%
BANKS - 2.7%
Bank of New York Co., Inc. 50,000 1,746,875
Bank One Corp. 80,000 4,300,000
Comerica, Inc. 70,000 4,637,500
10,684,375
CREDIT & OTHER FINANCE - 5.7%
Citigroup, Inc. 210,000 12,337,500
Providian Financial Corp. 100,350 10,248,244
22,585,744
FEDERAL SPONSORED CREDIT - 5.1%
Fannie Mae 161,400 11,298,000
Freddie Mac 145,000 8,536,875
19,834,875
SECURITIES INDUSTRY - 0.3%
Affiliated Managers Group, 45,000 1,170,000
Inc. (a)
TOTAL FINANCE 54,274,994
HEALTH - 17.5%
DRUGS & PHARMACEUTICALS - 13.3%
Amgen, Inc. (a) 30,000 3,746,250
Forest Laboratories, Inc. (a) 92,000 4,548,250
Lilly (Eli) & Co. 135,400 12,820,688
Merck & Co., Inc. 280,000 22,890,000
Schering-Plough Corp. 70,000 3,915,625
Warner-Lambert Co. 67,900 4,689,344
52,610,157
MEDICAL EQUIPMENT & SUPPLIES
- - 4.1%
AVECOR Cardiovascular, Inc. 25,000 296,875
(a)
Guidant Corp. 2,000 114,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - CONTINUED
Johnson & Johnson 64,900 $ 5,540,838
Medtronic, Inc. 142,083 10,034,612
15,986,325
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Health Management Associates, 30,000 388,125
Inc. Class A (a)
TOTAL HEALTH 68,984,607
INDUSTRIAL MACHINERY &
EQUIPMENT - 9.0%
ELECTRICAL EQUIPMENT - 6.6%
Avid Technology, Inc. (a) 40,000 1,172,500
E Tek Dynamics, Inc. (a) 86,900 2,954,600
General Electric Co. 187,000 18,758,438
General Instrument Corp. (a) 106,000 3,100,500
25,986,038
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.4%
Case Corp. 30,000 585,000
Manitowoc Co., Inc. 50,000 1,843,750
Tyco International Ltd. 95,700 7,123,669
9,552,419
TOTAL INDUSTRIAL MACHINERY & 35,538,457
EQUIPMENT
MEDIA & LEISURE - 7.4%
BROADCASTING - 7.0%
CBS Corp. 50,000 1,843,750
Jacor Communications, Inc. 28,000 1,953,000
Class A (a)
Time Warner, Inc. 365,400 23,568,292
27,365,042
LEISURE DURABLES & TOYS - 0.3%
Hasbro, Inc. 35,000 1,295,000
LODGING & GAMING - 0.1%
Mirage Resorts, Inc. (a) 20,000 390,000
TOTAL MEDIA & LEISURE 29,050,042
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - 5.4%
BEVERAGES - 2.6%
Anheuser-Busch Companies, 35,000 $ 2,684,063
Inc.
PepsiCo, Inc. 197,000 7,412,125
10,096,188
HOUSEHOLD PRODUCTS - 0.8%
Clorox Co. 27,000 3,194,438
TOBACCO - 2.0%
Philip Morris Companies, Inc. 200,000 7,825,000
TOTAL NONDURABLES 21,115,626
PRECIOUS METALS - 0.8%
Getchell Gold Corp. (a) 115,000 2,982,813
RETAIL & WHOLESALE - 8.0%
APPAREL STORES - 2.0%
Abercrombie & Fitch Co. Class 90,500 6,878,000
A (a)
Gap, Inc. 14,000 905,625
7,783,625
DRUG STORES - 0.5%
CVS Corp. 40,000 2,120,000
GENERAL MERCHANDISE STORES -
3.7%
Costco Companies, Inc. (a) 45,000 3,614,063
Dollar Tree Stores, Inc. (a) 47,200 1,888,000
Saks, Inc. (a) 147,574 5,303,441
Wal-Mart Stores, Inc. 43,000 3,714,125
14,519,629
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.8%
Home Depot, Inc. 20,000 1,193,750
Lowe's Companies, Inc. 79,400 4,709,413
Williams-Sonoma, Inc. (a) 40,300 1,377,756
7,280,919
TOTAL RETAIL & WHOLESALE 31,704,173
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 2.1%
ADVERTISING - 2.1%
Omnicom Group, Inc. 115,000 $ 7,618,750
Outdoor Systems, Inc. (a) 20,000 558,750
8,177,500
SERVICES - 0.0%
International Telecom Data 4,700 64,625
Systems, Inc.
TOTAL SERVICES 8,242,125
TECHNOLOGY - 12.9%
COMMUNICATIONS EQUIPMENT - 3.3%
Com21, Inc. (a) 120,000 2,827,500
OY Nokia AB sponsored ADR 74,000 10,036,250
12,863,750
COMPUTER SERVICES & SOFTWARE
- - 7.5%
Cadence Design Systems, Inc. 7,500 180,469
(a)
eBay, Inc. (a) 12,000 4,008,000
Exodus Communications, Inc. 12,300 902,513
(a)
Intraware, Inc. 100 1,888
Intuit, Inc. (a) 38,800 3,838,775
J.D. Edwards & Co. (a) 45,000 711,563
Microsoft Corp. (a) 72,600 10,899,075
pcOrder.com, Inc. (a) 100 4,713
VeriSign, Inc. (a) 18,500 1,813,000
Visual Networks, Inc. (a) 40,000 1,570,000
Yahoo!, Inc. (a) 36,000 5,526,000
29,455,996
COMPUTERS & OFFICE EQUIPMENT
- - 0.8%
EMC Corp. (a) 27,000 2,764,125
HMT Technology Corp. (a) 65,500 452,359
3,216,484
ELECTRONICS - 1.3%
Genesis Microchip, Inc. (a) 40,000 1,260,000
Rambus, Inc. (a) 9,700 705,069
Uniphase Corp. (a) 37,000 3,260,625
5,225,694
TOTAL TECHNOLOGY 50,761,924
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.2%
Continental Airlines, Inc. 24,000 $ 831,000
Class B (a)
UTILITIES - 7.8%
ELECTRIC UTILITY - 1.2%
AES Corp. (a) 50,000 1,859,375
PG&E Corp. 92,300 2,907,450
4,766,825
GAS - 0.5%
Williams Companies, Inc. 54,000 1,998,000
TELEPHONE SERVICES - 6.1%
Cincinnati Bell, Inc. 37,200 734,700
MCI WorldCom, Inc. (a) 282,903 23,339,498
24,074,198
TOTAL UTILITIES 30,839,023
TOTAL COMMON STOCKS 378,471,192
(Cost $304,822,898)
CASH EQUIVALENTS - 4.0%
Taxable Central Cash Fund (b) 15,738,232 15,738,232
(Cost $15,738,232)
TOTAL INVESTMENT IN $ 394,209,424
SECURITIES - 100%
(Cost $320,561,130)
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.80%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At February 28, 1999, the aggregate cost of investment securities for
income tax purposes was $320,588,592. Net unrealized appreciation
aggregated $73,620,832, of which $82,257,716 related to appreciated
investment securities and $8,636,884 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 394,209,424
value (cost $320,561,130) -
See accompanying schedule
Receivable for investments 25,280,600
sold
Receivable for fund shares 267,167
sold
Dividends receivable 197,233
Interest receivable 70,349
Other receivables 262,159
TOTAL ASSETS 420,286,932
LIABILITIES
Payable for investments $ 23,379,350
purchased
Payable for fund shares 420,906
redeemed
Accrued management fee 194,726
Other payables and accrued 99,509
expenses
TOTAL LIABILITIES 24,094,491
NET ASSETS $ 396,192,441
Net Assets consist of:
Paid in capital $ 301,082,902
Accumulated net investment (34,031)
(loss)
Accumulated undistributed net 21,495,276
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 73,648,294
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 19,647,026 $ 396,192,441
shares outstanding
NET ASSET VALUE and $20.17
redemption price per share
($396,192,441 (divided by)
19,647,026 shares)
Maximum offering price per $20.79
share (100/97.00 of $20.17)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY
28, 1999 (UNAUDITED)
INVESTMENT INCOME $ 1,286,735
Dividends
Interest (including income on 420,503
securities loaned of $5,670)
TOTAL INCOME 1,707,238
EXPENSES
Management fee $ 1,142,920
Transfer agent fees 506,397
Accounting and security 107,575
lending fees
Non-interested trustees' 724
compensation
Custodian fees and expenses 16,171
Registration fees 14,745
Audit 16,134
Legal 26,222
Miscellaneous 802
Total expenses before 1,831,690
reductions
Expense reductions (90,421) 1,741,269
NET INVESTMENT INCOME (LOSS) (34,031)
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 22,955,446
Foreign currency transactions (10,868) 22,944,578
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 82,459,746
Assets and liabilities in 62 82,459,808
foreign currencies
NET GAIN (LOSS) 105,404,386
NET INCREASE (DECREASE) IN $ 105,370,355
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ (34,031) $ (1,172,319)
income (loss)
Net realized gain (loss) 22,944,578 60,698,581
Change in net unrealized 82,459,808 (62,358,392)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 105,370,355 (2,832,130)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (16,806,980) (91,163,265)
from net realized gains
Share transactions Net 17,618,627 131,254,192
proceeds from sales of shares
Reinvestment of distributions 16,386,066 89,917,943
Cost of shares redeemed (84,078,046) (222,316,436)
NET INCREASE (DECREASE) IN (50,073,353) (1,144,301)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 19,511 186,612
TOTAL INCREASE (DECREASE) 38,509,533 (94,953,084)
IN NET ASSETS
NET ASSETS
Beginning of period 357,682,908 452,635,992
End of period (including $ 396,192,441 $ 357,682,908
accumulated net investment
loss of $34,031 and $0,
respectively)
OTHER INFORMATION
Shares
Sold 943,360 6,800,437
Issued in reinvestment of 1,021,577 4,924,895
distributions
Redeemed (4,590,349) (12,058,840)
Net increase (decrease) (2,625,412) (333,508)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 16.06 $ 20.02 $ 14.85 $ 14.22 $ 10.00
of period
Income from Investment
Operations
Net investment income (loss) D .00 (.05) (.02) (.05) (.03)
Net realized and unrealized 4.88 (.13) 6.05 1.52 4.26
gain (loss)
Total from investment 4.88 (.18) 6.03 1.47 4.23
operations
Less Distributions
From net realized gain (.77) (3.79) (.86) (.84) (.01)
Redemption fees added to paid .00 .01 - - -
in capital
Net asset value, end of period $ 20.17 $ 16.06 $ 20.02 $ 14.85 $ 14.22
TOTAL RETURN B, C 31.62% (2.35)% 41.94% 11.15% 42.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 396,192 $ 357,683 $ 452,636 $ 267,059 $ 503,427
(000 omitted)
Ratio of expenses to average .97% A .93% .98% 1.03% 1.22% A
net assets
Ratio of expenses to average .92% A, F .88% F .91% F 1.00% F 1.22% A
net assets after expense
reductions
Ratio of net investment (.02)% A (.25)% (.13)% (.39)% (.27)% A
income (loss) to average net
assets
Portfolio turnover rate 270% A 281% 429% 313% 245% A
</TABLE>
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 TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD OCTOBER 4, 1994 (COMMENCEMENT OF SALE OF SHARES) TO
AUGUST 31, 1995.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Export and Multinational 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, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. 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 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 with
remaining maturities of sixty days or less for which quotations are
not readily available 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.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
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 substantially 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. Non-cash dividends included in
dividend income, if any, are recorded at
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
the fair market value of the securities received. Interest income is
accrued as earned. Investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among 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 litigation proceeds, foreign currency transactions, net
operating losses 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.
Accumulated net investment loss and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences that will reverse
in a subsequent period. Any taxable income or gain remaining at fiscal
year end is distributed in the following year.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 90 days are subject to a short-term trading fee equal to .75% 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. 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 foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
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 for U.S. Treasury or Federal Agency obligations.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $493,308,628 and $565,444,760, 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 .2500% to .5200% for the
period. The annual individual fund fee rate is .30%. 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. For the period, the management
fee was equivalent to an annualized rate of .60% of average net
assets.
SALES LOAD. For the period, Fidelity Distributors Corporation (FDC),
an affiliate of FMR and the general distributor of the fund, received
sales charges of $36,298 on sales of shares of the fund all of which
was retained.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
agent. 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. For the period, the transfer agent fees were
equivalent to an annualized rate of .27% of average net assets.
ACCOUNTING AND SECURITY LENDINGFEES. FSC maintains the fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting 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 $95,874 for the
period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund
negotiated lenders' fees. These fees are included in interest income.
The fund receives U.S. Treasury obligations and/or cash as collateral
against the loaned securities, in an amount at least equal to 102% of
the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the
market value of the loaned securities during the period of the loan.
The market value of the loaned securities is determined at the close
of business of the fund and any additional required collateral is
delivered to the fund on the next business day. At period end there
were no loans outstanding.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $83,957 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $955 and $5,509, respectively, under these arrangements.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Abigail P. Johnson, Vice President
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
EXF-SANN-0499 73298
1.701149.101
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S GROWTH FUNDS
Aggressive Growth Fund
Blue Chip Growth Fund
Capital Appreciation Fund
ContrafundSM
ContrafundSM II
Disciplined Equity Fund
Dividend Growth Fund
Export and Multinational Fund
Fidelity FiftySM
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium Fund(registered trademark)
OTC Portfolio
Retirement Growth Fund
Small Cap Selector
Small Cap Stock Fund
Stock Selector
TechnoQuantSM Growth Fund
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
SPARTAN(REGISTERED TRADEMARK)
GINNIE MAE
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1999
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
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.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
February proved to be a challenging month for the U.S. stock and bond
markets. Instances of profit worries and brisk selling in the
technology sector hampered the equity markets at times. Financial
shares, however, turned in their strongest performance in recent
months. Meanwhile, bond markets were unsettled by strong economic data
and Federal Reserve Chairman Alan Greenspan's concerns that the Fed's
rate cuts last fall may have overstimulated the economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while 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. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you 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. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the total returns and dividends
would have been lower.
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CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
SPARTAN GINNIE MAE 2.33% 5.79% 40.32% 81.58%
LB GNMA 2.48% 6.08% 42.65% n/a
GNMA Funds Average 1.53% 5.09% 36.84% n/a
</TABLE>
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 27, 1990. 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 GNMA
Index - a market value-weighted index of fixed-rate securities that
represent interests in pools of mortgage loans with original terms of
15 and 30 years and are issued by the Government National Mortgage
Association (GNMA). To measure how the fund's performance stacked up
against its peers, you can compare it to the GNMA funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 56 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
SPARTAN GINNIE MAE 5.79% 7.01% 7.57%
LB GNMA 6.08% 7.36% n/a
GNMA Funds Average 5.09% 6.47% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
Spartan Ginnie Mae LB GNMA
00461 LB020
1990/12/31 10000.00 10000.00
1991/01/31 10104.29 10149.46
1991/02/28 10164.54 10233.72
1991/03/31 10239.66 10307.56
1991/04/30 10302.26 10404.24
1991/05/31 10368.05 10489.17
1991/06/30 10380.51 10509.12
1991/07/31 10535.21 10688.74
1991/08/31 10732.56 10887.42
1991/09/30 10902.32 11079.23
1991/10/31 11063.72 11262.17
1991/11/30 11128.99 11340.22
1991/12/31 11378.62 11604.54
1992/01/31 11291.21 11460.85
1992/02/29 11443.21 11580.81
1992/03/31 11373.35 11514.96
1992/04/30 11467.54 11620.73
1992/05/31 11671.03 11825.40
1992/06/30 11808.37 11969.98
1992/07/31 11791.74 12074.86
1992/08/31 11898.52 12236.29
1992/09/30 11982.17 12345.17
1992/10/31 11900.60 12252.70
1992/11/30 11955.78 12308.58
1992/12/31 12118.71 12464.47
1993/01/31 12269.40 12621.24
1993/02/28 12385.98 12749.41
1993/03/31 12468.37 12819.26
1993/04/30 12522.22 12866.04
1993/05/31 12592.37 12954.30
1993/06/30 12720.19 13059.63
1993/07/31 12787.91 13114.62
1993/08/31 12803.63 13147.22
1993/09/30 12802.46 13158.52
1993/10/31 12850.63 13181.14
1993/11/30 12777.48 13162.29
1993/12/31 12881.92 13284.48
1994/01/31 13025.29 13388.92
1994/02/28 12915.69 13322.39
1994/03/31 12612.69 12962.72
1994/04/30 12498.55 12874.03
1994/05/31 12515.63 12910.84
1994/06/30 12488.13 12891.99
1994/07/31 12740.52 13143.45
1994/08/31 12772.21 13183.80
1994/09/30 12606.72 12998.20
1994/10/31 12600.46 12977.58
1994/11/30 12555.14 12940.99
1994/12/31 12687.28 13084.68
1995/01/31 12956.44 13355.66
1995/02/28 13294.80 13707.56
1995/03/31 13343.77 13774.75
1995/04/30 13529.95 13978.76
1995/05/31 13956.47 14405.61
1995/06/30 14035.85 14503.63
1995/07/31 14075.42 14534.23
1995/08/31 14212.67 14683.68
1995/09/30 14349.40 14827.37
1995/10/31 14471.77 14948.89
1995/11/30 14622.51 15121.63
1995/12/31 14801.04 15315.87
1996/01/31 14909.36 15422.53
1996/02/29 14785.22 15307.23
1996/03/31 14747.77 15268.20
1996/04/30 14706.99 15228.29
1996/05/31 14649.50 15177.06
1996/06/30 14818.39 15376.41
1996/07/31 14870.63 15434.29
1996/08/31 14876.07 15440.94
1996/09/30 15110.47 15699.49
1996/10/31 15394.25 16017.03
1996/11/30 15619.54 16250.08
1996/12/31 15537.40 16163.16
1997/01/31 15639.71 16287.34
1997/02/28 15676.01 16346.10
1997/03/31 15516.41 16184.89
1997/04/30 15767.56 16450.32
1997/05/31 15923.99 16619.07
1997/06/30 16110.62 16815.97
1997/07/31 16395.44 17121.09
1997/08/31 16374.64 17084.51
1997/09/30 16565.59 17311.57
1997/10/31 16740.71 17492.07
1997/11/30 16783.63 17545.73
1997/12/31 16927.63 17704.06
1998/01/31 17088.75 17875.02
1998/02/28 17132.16 17914.94
1998/03/31 17195.72 17990.78
1998/04/30 17288.80 18095.22
1998/05/31 17431.45 18218.73
1998/06/30 17472.74 18295.45
1998/07/31 17566.12 18398.34
1998/08/31 17710.25 18543.58
1998/09/30 17941.64 18762.89
1998/10/31 17894.84 18746.70
1998/11/30 18003.56 18852.70
1998/12/31 18076.82 18930.08
1999/01/31 18179.64 19064.68
1999/02/26 18123.46 19004.15
IMATRL PRASUN SHR__CHT 19990228 19990309 111322 R00000000000101
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Ginnie Mae Fund on December 31, 1990, shortly
after the fund started. As the chart shows, by February 28, 1999, the
value of the investment would have grown to $18,123 - an 81.23%
increase on the initial investment. For comparison, look at how the
Lehman Brothers GNMA Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $19,004 - a 90.04% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally 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.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999 1998 1997 1996 1995 1994
Dividend returns 3.02% 6.87% 7.21% 6.58% 7.86% 5.23%
Capital returns -0.69% 1.29% 2.86% -1.91% 3.42% -5.48%
Total returns 2.33% 8.16% 10.07% 4.67% 11.28% -0.25%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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 capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
1999
Dividends per share 4.85(cents) 30.62(cents) 63.46(cents)
Annualized dividend rate 6.22% 6.06% 6.23%
30-day annualized yield 5.84% - -
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
$10.16 over the past one month, $10.19 over the past six months and
$10.18 over the past one 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
MARKET RECAP
Volatility was an important factor in
the performance of the taxable
fixed-income spread sectors during
the six months that ended February
28, 1999. In that time, the Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
returned 1.61%. In the early stages
of the period, U.S. Treasuries were
top performers as a global flight
to safety occurred in late summer
and early fall. This trend - spurred
primarily by economic and financial
instability in Asia and Russia -
eventually resulted in a widening in
yield spreads and, combined with
hedge-fund liquidations,
diminished liquidity. In the four
months leading up to the end of
the period, however, fixed-income
spread sectors- including
agencies, corporate bonds, and
mortgage and asset-backed
securities - outperformed
comparable duration Treasuries as
investors took advantage of
favorable spreads. Three consecutive
interest-rate cuts by the Federal
Reserve Board served as the
catalysts, boosting investor
confidence and restoring some
measure of liquidity. For a sense
of how the various spread sectors
performed, the Lehman Brothers
Treasury Index had a six-month
return of 0.60% as of February 28,
1999, while the Lehman Brothers
Corporate Bond Index and Lehman
Brothers Mortgage Backed Securities
Index returned 2.40% and 2.33%,
respectively.
(photograph of Tom Silvia)
NOTE TO SHAREHOLDERS: Tom Silvia became Portfolio Manager of Spartan
Ginnie Mae Fund on December 7, 1998.
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended February 28, 1999, the fund had
a total return of 2.33%. To get a sense of how the fund did relative
to its competitors, the GNMA funds average returned 1.53% for the same
six-month period, according to Lipper Inc. Additionally, the Lehman
Brothers GNMA Index - which tracks the types of securities in which
the fund invests - returned 2.48% for the same six-month period. For
the 12-month period that ended February 28, 1999, the fund provided a
total return of 5.79%. That compared to the 5.09% return of the GNMA
funds average and the 6.08% return of the Lehman Brothers GNMA index
for the same 12-month period.
Q. WHAT HELPED THE FUND BEAT ITS PEERS OVER THE PAST SIX MONTHS?
A. The main reason for the fund's stronger performance during the
period was that its duration - which measures its sensitivity to
interest-rate changes - was somewhat shorter than its average peer.
The shorter a fund's duration, the less its share price will rise when
interest rates fall and the less its price will fall when rates rise.
Having a relatively short duration detracted from the fund's
performance last fall when interest rates were still on the decline.
But over the past four months or so, having a shorter-than-average
duration was definitely a plus because interest rates rose quite a
bit.
Q. WHY WAS THE GINNIE MAE MARKET SO VOLATILE DURING THE PAST SIX
MONTHS?
A. The simple answer is that investors' expectations for interest
rates, inflation and economic growth shifted dramatically. At the
beginning of the period, investors were concerned about economic and
market instability in Southeast Asia, Japan, Russia and Latin America.
Mix in the impending presidential impeachment trial and the
well-publicized problems of a large hedge fund, and you had the
makings of a textbook "flight to safety," in which global investors
flocked to the liquidity and safety of U.S. Treasury securities. In
the process, they left most types of fixed-income securities -
including corporate, agency and mortgage bonds - out in the cold. Even
though Ginnie Mae is a U.S. government agency and its securities -
like Treasuries - enjoy the same full faith and credit backing of the
U.S. government, investors almost exclusively gravitated to more
liquid, or easily traded, Treasury bonds. Mortgage securities also
performed poorly because lower interest rates fanned prepayment
activity as more homeowners refinanced their home mortgages. In late
1998 and so far in 1999, however, interest and mortgage rates have
risen, causing prepayments to slow and Ginnie Mae securities to
perform better in response.
Q. WHICH OF THE FUND'S HOLDINGS PERFORMED BEST DURING THE PAST SIX
MONTHS? WHICH LAGGED?
A. Securities made up of mortgages that were resilient to prepayment
performed the best early on. Prepayment of a mortgage security can be
problematic for Ginnie Mae bondholders because it means that they may
be forced to reinvest the money back into the mortgage market when
bond yields are lower. The fund's holdings in securities containing
loans that originated between five and 10 years ago held up better
than more recently issued securities. Even though they could have
refinanced at lower interest rates, homeowners holding these
"seasoned" mortgage loans chose not to do so. On the flip side, bonds
issued more recently - between 1992 and 1996, for example - performed
poorly earlier in the period and detracted from the fund's
performance. But the best performers so far in 1999 have been the more
recently issued variety. In January, I began adding to the fund's
stake in newly issued securities because I felt they were very
attractively priced. This was in part because prepayment fears had
subsided in conjunction with evidence that the Federal Reserve may not
be able to lower interest rates given the economy's strength.
Q. WHAT'S YOUR OUTLOOK, TOM?
A. I'm fairly optimistic about the prospects for Ginnie Mae
securities. Given that they are priced attractively and offer higher
yields compared to Treasuries, I believe that Ginnie Mae securities
are poised for a period of better performance. The spread - or yield
differential - between agencies and Treasuries is quite large when
viewed on a historical basis, although the spread has narrowed some
during the past two months. If spreads narrow further - as a function
of less volatility in the fixed-income markets, for example - I think
that Ginnie Mae securities could do well.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
GOAL: to provide high current
income by investing mainly
in mortgage securities issued
by the Government National
Mortgage Association
(Ginnie Mae)
FUND NUMBER: 461
TRADING SYMBOL: SGNMX
START DATE: December 27,
1990
SIZE: as of February 28,
1999, more than $639
million
MANAGER: Tom Silvia, since
December 1998; manager,
various Fidelity and Spartan
government funds; joined
Fidelity in 1993
TOM SILVIA ON THE
GINNIE MAE MARKET:
"The Ginnie Mae market became
much more concentrated over the
past year. For example, within the
entire Ginnie Mae universe, only
5% was made up of securities
comprised of 15-year mortgages,
with the remaining 95% in 30-year
mortgages. In addition, about 87%
of the index was made up of
securities that were issued from
1992 on, which means there are
fewer `seasoned' mortgages, which
haven't been refinanced despite
homeowners being presented with
attractive opportunities to do so.
Finally, securities with 7%
mortgages made up nearly 25% of
the index, in large part because
falling interest rates prompted
large numbers of home loan
refinancings, which meant that a
lot of securities made up of
8%-10% mortgages were prepaid.
As a result, securities made up of
mortgages of between 6.5% and 8%
represented about 78% of the
index."
NOTE TO SHAREHOLDERS: On
November 19, 1998, the Board of
Trustees of Spartan Ginnie Mae
Fund voted to present a proposal to
shareholders to merge the fund
into Fidelity Ginnie Mae Fund. A
shareholder meeting is scheduled
for May 19, 1999. On or about
March 22, 1999, shareholders will
be sent proxy materials asking
them to vote on this and any
other proposals.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
FEBRUARY 28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
6 - 6.99% 20.2 16.6
7 - 7.99% 50.8 47.9
8 - 8.99% 16.9 24.8
9 - 9.99% 6.5 5.4
10% and over 3.5 3.8
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING
SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF FEBRUARY 28, 1999
6 MONTHS AGO
Years 5.9 6.3
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,
1999
6 MONTHS AGO
Years 3.3 2.3
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 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 (% OF FUND'S
INVESTMENTS)
AS OF FEBRUARY 28, 1999
Mortgage
securities* 97.9%
Short-term
investments 2.1%
*GNMA SECURITIES 96.2%
Row: 1, Col: 2, Value: 97.90000000000001
Row: 1, Col: 1, Value: 2.1
AS OF AUGUST 31, 1998
Mortgage
securities** 98.5%
Short-term
investments 1.5%
**GNMA SECURITIES 96.6%
Row: 1, Col: 2, Value: 98.5
Row: 1, Col: 1, Value: 1.5
INVESTMENTS FEBRUARY 28, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 97.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 0.2%
12.25% 6/1/15 $ 583 $ 657
12.5% 11/1/13 to 7/1/16 661,506 751,680
13.25% 9/1/11 295,623 344,254
1,096,591
FREDDIE MAC - 1.5%
8.5% 10/1/18 to 2/1/19 12,730 13,471
9% 7/1/08 to 7/1/21 2,397,084 2,517,318
9.75% 12/1/08 to 4/1/13 203,599 216,155
10% 1/1/09 to 11/1/20 2,986,621 3,208,390
10.25% 8/1/10 to 11/1/16 538,616 582,466
10.5% 1/1/16 to 12/1/20 1,658,543 1,843,656
12% 5/1/10 to 2/1/17 315,807 361,779
12.5% 11/1/12 to 5/1/15 559,522 648,519
13% 11/1/12 to 11/1/14 151,595 178,006
13.5% 1/1/13 to 12/1/14 56,863 67,447
9,637,207
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 96.2%
6% 11/15/28 to 1/15/29 18,049,968 17,514,065
6.5% 11/15/23 to 2/15/29 112,049,776 111,389,870
7% 3/15/22 to 2/15/29 207,261,081 210,195,983
7.5% 2/15/07 to 8/15/28 109,838,147 113,067,441
8% 1/15/02 to 12/15/27 80,407,501 83,824,032
8.5% 7/15/06 to 2/15/23 22,177,156 23,551,762
9% 11/15/04 to 11/15/24 17,408,976 18,629,581
9.5% 3/15/01 to 1/15/23 18,810,570 20,180,977
10% 9/15/15 to 2/15/25 6,912,625 7,513,047
10.5% 9/15/00 to 10/15/18 2,120,726 2,326,064
11% 1/15/10 to 7/15/20 2,003,005 2,236,271
11.5% 10/15/10 to 12/15/15 1,227,554 1,379,522
12% 12/15/12 to 1/15/15 237,973 268,887
13% 9/15/13 to 1/15/15 268,591 310,562
612,388,064
TOTAL U.S. GOVERNMENT AGENCY 623,121,862
- - MORTGAGE SECURITIES
(Cost $621,047,835)
CASH EQUIVALENTS - 2.1%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 13,694,545 $ 13,689,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.86%,
dated 2/26/99 due 3/1/99
(Cost $13,689,000)
TOTAL INVESTMENT IN $ 636,810,862
SECURITIES - 100%
(Cost $634,736,835)
</TABLE>
INCOME TAX INFORMATION
At February 28, 1999, the aggregate cost of investment securities for
income tax purposes was $637,284,893. Net unrealized depreciation
aggregated $474,031, of which $3,862,058 related to appreciated
investment securities and $4,336,089 related to depreciated investment
securities.
At August 31, 1998, the fund had a capital loss carryforward of
approximately $10,006,000 of which $9,271,000 and $735,000 will expire
on August 31, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 636,810,862
value (including repurchase
agreements of $13,689,000)
(cost $634,736,835) - See
accompanying schedule
Cash 847
Receivable for investments 30,228,249
sold
Receivable for fund shares 631,825
sold
Interest receivable 3,697,284
TOTAL ASSETS 671,369,067
LIABILITIES
Payable for investments $ 29,981,738
purchased
Payable for fund shares 1,078,705
redeemed
Distributions payable 724,307
Accrued management fee 319,941
Other payables and accrued 4,483
expenses
TOTAL LIABILITIES 32,109,174
NET ASSETS $ 639,259,893
Net Assets consist of:
Paid in capital $ 648,934,755
Undistributed net investment 457,999
income
Accumulated undistributed net (12,206,888)
realized gain (loss) on
investments
Net unrealized appreciation 2,074,027
(depreciation) on investments
NET ASSETS, for 63,190,148 $ 639,259,893
shares outstanding
NET ASSET VALUE, offering $10.12
price and redemption price
per share ($639,259,893
(divided by) 63,190,148
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY
28, 1999 (UNAUDITED)
INVESTMENT INCOME $ 23,286,707
Interest
EXPENSES
Management fee $ 2,112,034
Non-interested trustees' 384
compensation
Total expenses before 2,112,418
reductions
Expense reductions (603,678) 1,508,740
NET INVESTMENT INCOME 21,777,967
REALIZED AND UNREALIZED GAIN 856,207
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (7,711,050)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (6,854,843)
NET INCREASE (DECREASE) IN $ 14,923,124
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 21,777,967 $ 42,256,905
income
Net realized gain (loss) 856,207 6,735,854
Change in net unrealized (7,711,050) (1,199,453)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,923,124 47,793,306
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (19,698,763) (40,370,877)
from net investment income
Share transactions Net 66,539,843 374,959,675
proceeds from sales of shares
Reinvestment of distributions 14,753,379 32,565,429
Cost of shares redeemed (104,961,888) (280,798,602)
NET INCREASE (DECREASE) IN (23,668,666) 126,726,502
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (28,444,305) 134,148,931
IN NET ASSETS
NET ASSETS
Beginning of period 667,704,198 533,555,267
End of period (including $ 639,259,893 $ 667,704,198
under (over) distribution
of net investment income of
$457,999 and $(1,621,205),
respectively)
OTHER INFORMATION
Shares
Sold 6,529,684 36,895,821
Issued in reinvestment of 1,446,915 3,202,749
distributions
Redeemed (10,302,177) (27,638,095)
Net increase (decrease) (2,325,578) 12,460,475
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.190 $ 10.060 $ 9.780 $ 9.970 $ 9.640 $ 10.270
period
Income from Investment .339 D .698 D .687 D .639 .690 .332
Operations Net investment
income
Net realized and (.103) .100 .271 (.181) .347 (.359)
unrealized gain (loss)
Total from investment .236 .798 .958 .458 1.037 (.027)
operations
Less Distributions
From net investment income (.306) (.668) (.678) (.648) (.707) (.533)
In excess of net realized - - - - - (.070)
gain
Total distributions (.306) (.668) (.678) (.648) (.707) (.603)
Net asset value, end of $ 10.120 $ 10.190 $ 10.060 $ 9.780 $ 9.970 $ 9.640
period
TOTAL RETURN B, C 2.33% 8.16% 10.07% 4.67% 11.28% (.25)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 639,260 $ 667,704 $ 533,555 $ 434,550 $ 419,637 $ 401,018
(000 omitted)
Ratio of expenses to average .47% A, E .38% E .51% E .63% E .65% .65%
net assets
Ratio of expenses to average .46% A, F .38% .51% .62% F .65% .65%
net assets after expense
reductions
Ratio of net investment 6.70% A 6.88% 6.91% 6.77% 7.30% 7.36%
income to average net assets
Portfolio turnover rate 115% A 148% 104% 115% 229% 285%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1999 (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 financial
statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain
estimates and assumptions at the date of the financial statements. 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.
Securities for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
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 substantially 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.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among 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 paydown gains/losses on certain securities, capital
loss carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
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.
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 & 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 for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The fund may receive compensation for interest forgone in
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 $373,119,194 and $410,062,933, 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 annualized rate of .65% of the fund's average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SUB-ADVISER FEE - CONTINUED
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
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 .38% of average net assets. For the
period, the reimbursement reduced the expenses by $600,631. Effective
December 31, 1998, the fund's expense limitation was eliminated.
In addition, FMR has entered into an arrangement on behalf of the fund
with the fund's custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of the fund's
expenses. During the period, the fund's expenses were reduced by
$3,047 under this arrangement.
6. PROPOSED REORGANIZATION.
The Board of Trustees of Spartan Ginnie Mae Fund has approved an
Agreement and Plan of Reorganization ("Agreement") between the fund
and Fidelity Ginnie Mae Fund ("Reorganization"). The Agreement
provides for the transfer of all of the assets of the fund to Fidelity
Ginnie Mae Fund in exchange solely for the number of shares of
Fidelity Ginnie Mae Fund having the same aggregate net asset value as
the outstanding shares of the fund as of the close of business of the
New York Stock Exchange on the day that the Reorganization is
effective and the assumption by Fidelity Ginnie Mae Fund of all of the
liabilities of the fund. The Reorganization can be consummated only
if, among other things, it is approved by the vote of a majority (as
defined by the 1940 Act) of outstanding voting securities of the fund.
A Special Meeting of Shareholders ("Meeting") of the fund will be held
on May 19, 1999 to vote on the Agreement. A detailed description of
the proposed transaction and voting information was sent to
shareholders of the fund in March, 1999. If the Agreement is approved
at the Meeting, the Reorganization is expected to become effective on
or about May 27, 1999.
Effective June 26, 1998, the fund's shares are no longer available for
purchase or exchange to new accounts of the fund pending the proposed
Reorganization. However, existing shareholders of the fund can
continue to purchase shares of the fund.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* 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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
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
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, 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
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 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
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 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
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments
Money Management, Inc.
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Tom Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
SGM-SANN-0499 74142
1.701051.101
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan Investment Grade Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress(registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
SPARTAN(REGISTERED TRADEMARK)
MARYLAND
MUNICIPAL INCOME
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 15 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 19 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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 RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
February proved to be a challenging month for the U.S. stock and bond
markets. Instances of profit worries and brisk selling in the
technology sector hampered the equity markets at times. Financial
shares, however, turned in their strongest performance in recent
months. Meanwhile, bond markets were unsettled by strong economic data
and Federal Reserve Chairman Alan Greenspan's concerns that the Fed's
rate cuts last fall may have overstimulated the economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while 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. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you 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. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the past five years and life of
fund total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
SPARTAN MD MUNICIPAL INCOME 2.12% 5.42% 33.27% 41.45%
LB Maryland 4 Plus Year 2.52% 5.93% 37.64% n/a
Municipal Bond
Maryland Municipal Debt Funds 1.91% 5.04% 30.63% n/a
</TABLE>
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 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 Maryland 4
Plus Year Municipal Bond Index - a market value-weighted index of
Maryland investment-grade municipal bonds with maturities of four
years or more. To measure how the fund's performance stacked up
against its peers, you can compare it to the Maryland municipal debt
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Inc. The past six months average
represents a peer group of 36 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
SPARTAN MD MUNICIPAL INCOME 5.42% 5.91% 6.10%
LB Maryland 4 Plus Year 5.93% 6.60% n/a
Municipal Bond
Maryland Municipal Debt Funds 5.04% 5.48% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER LIFE OF FUND
Spartan MD Muni Income LB Municipal Bond
00429 LB015
1993/04/30 10000.00 10000.00
1993/05/31 10085.91 10056.20
1993/06/30 10290.79 10224.04
1993/07/31 10265.32 10237.43
1993/08/31 10557.40 10450.57
1993/09/30 10704.98 10569.61
1993/10/31 10689.74 10590.01
1993/11/30 10529.07 10496.71
1993/12/31 10803.25 10718.29
1994/01/31 10954.65 10840.70
1994/02/28 10622.40 10559.92
1994/03/31 10073.68 10129.92
1994/04/30 10162.95 10215.82
1994/05/31 10243.70 10304.40
1994/06/30 10206.48 10241.44
1994/07/31 10384.83 10429.16
1994/08/31 10403.21 10465.25
1994/09/30 10214.51 10311.62
1994/10/31 9973.88 10128.48
1994/11/30 9719.70 9945.36
1994/12/31 9992.19 10164.26
1995/01/31 10309.68 10454.75
1995/02/28 10621.51 10758.77
1995/03/31 10738.62 10882.39
1995/04/30 10731.40 10895.23
1995/05/31 11084.16 11242.90
1995/06/30 10985.06 11145.09
1995/07/31 11091.31 11250.74
1995/08/31 11242.66 11393.40
1995/09/30 11347.30 11465.52
1995/10/31 11476.69 11632.23
1995/11/30 11651.39 11825.21
1995/12/31 11770.51 11938.85
1996/01/31 11877.96 12028.99
1996/02/29 11794.29 11947.79
1996/03/31 11643.74 11795.10
1996/04/30 11619.17 11761.72
1996/05/31 11607.45 11757.02
1996/06/30 11712.40 11885.05
1996/07/31 11818.90 11993.20
1996/08/31 11818.37 11990.33
1996/09/30 11948.97 12158.19
1996/10/31 12080.97 12295.70
1996/11/30 12308.68 12520.71
1996/12/31 12226.50 12468.12
1997/01/31 12250.97 12491.69
1997/02/28 12369.27 12606.36
1997/03/31 12172.69 12438.32
1997/04/30 12269.49 12542.43
1997/05/31 12430.49 12731.07
1997/06/30 12577.20 12866.65
1997/07/31 12924.29 13223.06
1997/08/31 12784.46 13099.16
1997/09/30 12958.06 13254.65
1997/10/31 13045.20 13339.87
1997/11/30 13118.15 13418.31
1997/12/31 13307.36 13614.08
1998/01/31 13446.78 13754.58
1998/02/28 13428.36 13758.71
1998/03/31 13427.80 13770.82
1998/04/30 13361.66 13708.71
1998/05/31 13555.17 13925.72
1998/06/30 13604.57 13980.59
1998/07/31 13615.73 14015.68
1998/08/31 13862.61 14232.22
1998/09/30 14016.32 14409.55
1998/10/31 14027.02 14409.26
1998/11/30 14049.33 14459.84
1998/12/31 14099.95 14496.28
1999/01/31 14270.38 14668.64
1999/02/26 14156.23 14604.54
IMATRL PRASUN SHR__CHT 19990228 19990309 111456 R00000000000073
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Maryland Municipal Income Fund on April 30, 1993,
shortly after the fund started. As the chart shows, by February 28,
1999, the value of the investment would have grown to $14,156 - a
41.56% increase on the initial investment. For comparison, look at how
the Lehman Brothers Municipal Bond Index - a market value-weighted
index of investment-grade municipal bonds with maturities of one year
or more - did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 would have grown to $14,605 - a
46.05% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally 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.
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.12% 4.69% 4.89% 5.02% 6.00% 5.22%
Capital returns 0.00% 3.74% 3.28% 0.10% 2.07% -6.68%
Total returns 2.12% 8.43% 8.17% 5.12% 8.07% -1.46%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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 capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.46(cents) 22.26(cents) 45.55(cents)
Annualized dividend rate 4.26% 4.24% 4.34%
30-day annualized yield 3.69% - -
30-day annualized 6.25% - -
tax-equivalent 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
$10.60 over the past one month, $10.59 over the past six months and
$10.50 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The tax-equivalent yield shows what you would have to earn on a
taxable investment to equal the fund's tax-free yield, if you're in
the 40.99% combined effective 1999 federal and state income tax
bracket, but does not reflect the payment of the federal alternative
minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Hampered by oversupply and
sporadic demand through much of
the six-month period that ended
February 28, 1999, municipal
bonds finally began to turn the
corner in January and February. In
that six-month span, the Lehman
Brothers Municipal Bond Index -
an index of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned
2.62%. By comparison, the Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
gained 1.61%. As is often the case,
the fortunes of the municipal market
were dictated largely by supply
and demand. Early in the period,
issuance was strong and demand
had trouble keeping pace. This
was, in part, due to the global flight
to safety into U.S. Treasuries that
occurred in the late summer and
early fall. When equity markets
surged toward the end of the
year, demand for municipals
became mixed. As the municipal
bond market entered 1999, supply
began to show signs of leveling off.
This positive development, coupled
with an increase in demand from
retail investors, continued through
the first two months of the year,
helping municipal bonds
outperform Treasuries in both
January and February. In February
alone, the Lehman Brothers
Municipal Bond Index returned
- -0.44%, while the Lehman Brothers
Aggregate Bond Index returned
- -1.75%.
(photograph of George Fischer)
An interview with George Fischer, Portfolio Manager of Spartan
Maryland Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the six-month period that ended February 28, 1999, the fund had
a total return of 2.12%. To get a sense of how the fund did relative
to its competitors, the Maryland municipal debt funds average returned
1.91% for the same six-month period, according to Lipper Inc.
Additionally, the Lehman Brothers Maryland 4 Plus Year Municipal Bond
Index - which tracks the types of securities in which the fund invests
- - returned 2.52%. For the 12-month period that ended February 28,
1999, the fund had a total return of 5.42%. For the same one-year
period, the Maryland municipal debt funds average had a total return
of 5.04% and the Lehman Brothers index returned 5.93%.
Q. WHAT FACTORS HELPED THE FUND OUTPACE ITS PEERS DURING THE PAST SIX
MONTHS?
A. One factor was the fund's relatively large stake in
intermediate-term bonds with maturities of between five and 15 years,
which I emphasized because I felt they offered the best combination of
reward - or income - for the risk. For bonds with maturities of up to
about 15 years, investors were paid an appropriate amount of income
for each additional year of maturity. But for bonds with maturities of
15 years or longer, the extra income for each successive year was not,
in my opinion, as attractive given the level of risk inherent in
longer-term bonds. Throughout the past six months,
intermediate-maturity bonds performed better than a combination of
longer- and shorter-term bonds, a strategy that some of our
competitors pursued. Another factor I believe helped the fund's
performance was that I kept its duration - or sensitivity to
interest-rate changes - in line with the market as a whole as
represented by the Lehman Brothers index. By doing so, I avoided
positioning the fund incorrectly based on a prediction about the
direction of interest rates.
Q. WHAT OTHER BONDS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Non-callable bonds - which can't be redeemed by their issuers
before maturity - performed well throughout the period because
interest rates fell. Municipal bond issuers often refinance their
older, more expensive debt when rates fall, much in the same fashion
that homeowners refinance their mortgages. Once that bond is
refinanced, or called, a bond holder may be forced to reinvest the
proceeds at lower interest rates. To shield against these inopportune
calls, investors increasingly sought out non-callable bonds, creating
a strong demand for them and helping their prices.
Q. WERE THERE ANY DISAPPOINTMENTS OVER THE PAST SIX MONTHS?
A. Housing bonds - which are securities made up of pools of home
mortgages - continued to underperform the overall municipal market
during the past six months, much as they did in the prior six-month
period. A greater-than-expected number of mortgage securities were
prepaid as more and more homeowners refinanced their home loans. That
left investors dealing with the possibility of having to reinvest the
proceeds from the prepaid securities at lower interest rates. Since
few investors wanted to own housing bonds as a result, the bonds
suffered from neglect as much as anything else. However, I continued
to hold onto them because they offered attractive yields.
Q. THE FUND CONTINUED TO MAINTAIN A HIGH OVERALL CREDIT QUALITY, WITH
ABOUT 90% OF ITS INVESTMENTS IN BONDS RATED A OR ABOVE AT THE END OF
THE PERIOD. WHAT EXPLAINS THAT POSITIONING?
A. I generally didn't think that Baa-rated bonds offered enough
incremental yield - only about 0.25 to 0.45 percentage points on
average - to compensate for their added risk. Of course, an issuer's
credit rating reflects an assessment of its ability to make interest
and principal payments on its debt; the lower the rating, the riskier
the issuer. And since Maryland is such a high-quality municipal bond
issuer, the few securities that do carry a Baa-rating generally are
very expensive because they are in such short supply and high demand.
Q. GEORGE, WHAT'S YOUR OUTLOOK?
A. As for Maryland's economic situation, it appears that the defense
industry's downsizing is over. In fact, I think it's more likely that
we'll see an increase - rather than a decrease - in defense spending
over the next five to 10 years. In addition, Maryland appears to be
well positioned to benefit from an expected increase in aerospace
spending. As for the municipal market, I think municipals can continue
to gain ground on U.S. Treasuries, much as they did over the final
months of the period. But their performance, as always, mainly will
rest on interest rates, and it's anyone's guess where they will go
from here.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
GOAL: high current tax-free
income for Maryland residents
FUND NUMBER: 429
TRADING SYMBOL: SMDMX
START DATE: April 22, 1993
SIZE: as of February 28,
1999, more than $47 million
MANAGER: George Fischer,
since 1998; manager,
various Fidelity and Spartan
municipal income funds;
joined Fidelity in 1989
GEORGE FISCHER ON MARYLAND
GENERAL OBLIGATION BONDS:
"General obligation bonds (GOs)
were the fund's largest sector
concentration throughout the past
six months as well as over the past
year. A GO is backed by the full
faith and credit - which includes
the taxing power - of a city, county,
state or other issuer. GOs are repaid
through general revenues -
including individual and corporate
taxes - collected by the issuer.
When the economy is strong, as it
has been in Maryland and in the
nation as a whole, general revenues
and tax collections tend to increase
as corporate profits rise,
employment grows and wages move
higher. When evaluating
investments for the fund, I look for
GO issuers located in regions with
strong or improving economic
conditions, and strong levels of
personal income and personal
fiscal management. With the help
of Fidelity's research team, I also
try to ascertain an issuer's political
will to make spending cuts or raise
taxes if either is necessary."
INVESTMENT CHANGES
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TOP FIVE SECTORS AS OF
FEBRUARY 28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 36.1 38.6
Escrowed/Pre-Refunded 15.6 10.8
Special Tax 10.3 12.4
Resource Recovery 8.2 6.6
Housing 6.6 9.7
AVERAGE YEARS TO MATURITY AS
OF FEBRUARY 28, 1999
6 MONTHS AGO
Years 12.1 10.8
</TABLE>
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,
1999
6 MONTHS AGO
Years 6.4 6.4
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.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF FEBRUARY 28, 1999
Aaa 54.8%
Aa, A 35.3%
Baa 8.5%
Short-term
investments 1.4%
Row: 1, Col: 1, Value: 54.4
Row: 1, Col: 2, Value: 35.3
Row: 1, Col: 3, Value: 8.5
Row: 1, Col: 4, Value: 1.8
AS OF AUGUST 31, 1998
Aaa 52.3%
Aa, A 40.9%
Baa 2.5%
Short-term
investments 4.3%
Row: 1, Col: 1, Value: 52.3
Row: 1, Col: 2, Value: 40.9
Row: 1, Col: 3, Value: 2.5
Row: 1, Col: 4, Value: 4.3
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS FEBRUARY 28, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
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MUNICIPAL BONDS - 98.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MARYLAND - 89.6%
Anne Arundel County Aa2 $ 550,000 $ 635,514
Consolidated Wtr. & Swr.
Rev. 7% 8/1/04
Baltimore Consolidated Pub.
Impt.:
Rfdg. (Cap. Appreciation) Aaa 2,000,000 1,433,360
Series A, 0% 10/15/06 (FGIC
Insured)
Series A:
5.5% 10/15/14 (FGIC Insured) Aaa 1,000,000 1,069,390
5.625% 10/15/13 (FGIC Insured) Aaa 1,460,000 1,581,852
7% 10/15/09 (MBIA Insured) Aaa 500,000 613,445
Baltimore County Gen. Oblig. Aaa 485,000 495,680
Rfdg. (Pension Fdg.) 4.35%
8/1/01
Baltimore County Metropolitan Aaa 850,000 931,787
District (Spl. Assessment)
Issue 63, 6.125% 7/1/07
(Pre-Refunded to 7/1/02 @
102) (e)
Baltimore Port Facilities Aa3 2,000,000 2,191,720
Rev. (Consolidated Coal
Sales Co.) 6.5% 12/1/10
Baltimore Wtr. & Swr. Rev. Aaa 1,100,000 1,096,975
Rfdg. (Wtr. Proj.) Series A,
5% 7/1/24 (FGIC Insured)
Calvert County Gen. Oblig. Aa3 1,200,000 1,270,812
5.2% 1/1/04
Frederick County Gen. Oblig. Aa2 1,000,000 1,073,440
Rfdg. 5.75% 7/1/16
Harford County Gen. Oblig. Aa2 1,000,000 1,025,240
Rfdg. 4.9% 12/1/11
Maryland Cmnty. Dev.
Administration Dept. of Hsg.
& Cmnty. Dev.:
(Single Family Prog.) Series Aa2 500,000 534,950
7, 7.25% 4/1/19 (d)
Rfdg. (Residential Proj.) Aa2 995,000 1,012,223
Series B, 5.05% 9/1/19 (d)
Maryland Gen. Oblig.
(Maryland State & Local
Facilities Ln.):
Series 1:
4.5% 3/1/01 Aaa 615,000 627,817
5.5% 2/1/06 Aaa 1,000,000 1,062,710
Series 2:
5% 8/1/11 Aaa 1,000,000 1,045,330
5.25% 7/15/12 Aaa 1,000,000 1,061,140
Maryland Health & Higher Edl.
Facilities Auth. Rev.:
(Charity Oblig. Group) Series Aa2 985,000 1,021,356
D, 4.6% 11/1/03
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MARYLAND - CONTINUED
Maryland Health & Higher Edl.
Facilities Auth. Rev.: -
continued
(Good Samaritan Hosp.):
5.75% 7/1/13 (Escrowed to A1 $ 240,000 $ 263,004
Maturity) (e)
5.75% 7/1/13 (AMBAC Insured) Aaa 145,000 161,840
Rfdg.:
(Good Samaritan Hosp.) 5.7% A1 1,000,000 1,120,130
7/1/09 (Escrowed to
Maturity) (e)
(Helix Health Issue) 5% Aaa 1,000,000 1,000,280
7/1/17 (AMBAC Insured)
(Escrowed to Maturity) (e)
(Howard County Gen. Hosp.) Baa2 1,000,000 1,058,340
5.5% 7/1/13 (Escrowed to
Maturity) (e)
(Johns Hopkins Univ.) 6% Aa2 500,000 574,930
7/1/10
Maryland Ind. Dev. Fing. Aa3 1,000,000 1,109,150
Auth. Rev. Rfdg. (Holy Cross
Health Sys. Corp.) 5.7%
12/1/10
Maryland Trans. Auth. Rev.:
(Trans. Facilities Proj.) Aaa 1,015,000 1,212,164
6.8% 7/1/16 (Escrowed to
Maturity) (e)
Rfdg. (Trans. Facilities A1 500,000 553,675
Proj.) 5.8% 7/1/06
Rfdg. (Cap. Appreciation) Aaa 3,000,000 2,434,440
(Trans. Facilities Proj.) 0%
7/1/04 (FGIC Insured) (b)
Montgomery County
Consolidated Pub. Impt.
Series A:
5.625% 10/1/06 Aaa 1,000,000 1,098,440
6.3% 4/1/04 Aaa 500,000 558,055
Montgomery County Hsg. Aaa 1,000,000 1,060,530
Opportunity Commission
Single Family Mtg. Rev.
Series A, 6.6% 7/1/14
Northeast Maryland Waste
Disp. Auth. Resource
Recovery Rev.:
(Baltimore Resco Retrofit BBB+ 1,000,000 969,690
Proj.) 4.75% 1/1/12 (d)
Rfdg. (Southwest Facility Aaa 1,235,000 1,427,475
Proj.) 7.2% 1/1/05 (MBIA
Insured)
Northeast Maryland Waste
Disp. Auth. Solid Waste Rev.
(Montgomery County Resource
Recovery Proj.) Series A:
5.9% 7/1/05 (d) A2 760,000 824,866
6% 7/1/07 (d) A2 500,000 550,220
Prince Georges County Aaa 1,000,000 1,050,320
Consolidated Pub. Impt. 5.5%
3/15/16 (MBIA Insured)
Prince Georges County Hsg. AAA 445,000 472,247
Auth. Single Family Mtg.
Rev. Series A, 6.5% 12/1/15
(d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MARYLAND - CONTINUED
Univ. of Maryland Sys.
Auxiliary Facilities &
Tuition Rev.:
Rfdg. Series C, 5% 10/1/10 Aa3 $ 1,000,000 $ 1,039,140
Series A, 5.6% 4/1/16 Aa3 500,000 525,195
Washington D.C. Metropolitan Aaa 1,570,000 1,775,136
Area Trans. Auth. Gross Rev.
Rfdg. 6% 7/1/10 (FGIC
Insured)
Washington D.C. Suburban Aa1 1,000,000 1,115,220
Sanitation District Rfdg.
Second Series, 8% 1/1/02
41,739,228
PUERTO RICO - 9.0%
Puerto Rico Commonwealth Hwy. Baa1 2,000,000 1,940,420
& Trans. Auth. Trans. Rev.
Series A, 5% 7/1/38
Puerto Rico Commonwealth Aaa 600,000 595,554
Infrastructure Fing. Auth.
Spl. Tax Rev. Series A, 5%
7/1/28 (AMBAC Insured)
Puerto Rico Commonwealth Pub. Aaa 1,500,000 1,662,330
Impt. 6.6% 7/1/13 (MBIA
Insured) (Pre-Refunded to
7/1/02 @ 101.5) (e)
4,198,304
TOTAL MUNICIPAL BONDS 45,937,532
(Cost $44,011,408)
MUNICIPAL NOTES - 1.4%
MARYLAND - 1.4%
Maryland Cmnty. Dev. 640,000 640,000
Administration Dept. of Hsg.
& Cmnty. Dev. Participating
VRDN Series 1997 P, 2.97%
(Liquidity Facility Caisse
des Depots et Consignations)
(c)(f) (Cost $640,000)
TOTAL INVESTMENT IN $ 46,577,532
SECURITIES - 100%
(Cost $44,651,408)
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FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT UNREALIZED GAIN/(LOSS)
PURCHASED
5 Bond Buyer Municipal Bond Mar. 1999 $ 623,126 $ 1,064
Index Contracts
THE FACE VALUE OF FUTURES
PURCHASED AS A PERCENTAGE OF
TOTAL INVESTMENT IN
SECURITIES - 1.3%
</TABLE>
SECURITY TYPE ABBREVIATIONS
VRDN - VARIABLE RATE DEMAND NOTES
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Security or 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 $60,861.
(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.
(f) Provides evidence of ownership in one or more underlying municipal
bonds.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 89.1% AAA, AA, A 85.6%
Baa 6.4% BBB 4.4%
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 distribution of municipal securities by revenue source, as a
percentage of total
value of investments in securities, is as follows:
General Obligations 36.1%
Escrowed/Pre-Refunded 15.6
Special Tax 10.3
Resource Recovery 8.2
Housing 6.6
Transportation 5.3
Others (individually less 17.9
than 5%)
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1999, the aggregate cost of investment securities for
income tax purposes was $44,651,408. Net unrealized appreciation
aggregated $1,926,124, of which $1,976,680 related to appreciated
investment securities and $50,556 related to depreciated investment
securities.
At August 31, 1998, the fund had a capital loss carryforward of
approximately $1,014,000 all of which will expire on August 31, 2004.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 46,577,532
value (cost $44,651,408) -
See accompanying schedule
Cash 975,732
Interest receivable 515,313
Receivable for daily 3,125
variation on futures
contracts
Other receivables 10
TOTAL ASSETS 48,071,712
LIABILITIES
Payable for fund shares $ 118,248
redeemed
Distributions payable 40,371
Accrued management fee 20,274
Other payables and accrued 202
expenses
TOTAL LIABILITIES 179,095
NET ASSETS $ 47,892,617
Net Assets consist of:
Paid in capital $ 46,893,922
Accumulated undistributed net (928,493)
realized gain (loss) on
investments
Net unrealized appreciation 1,927,188
(depreciation) on investments
NET ASSETS, for 4,540,651 $ 47,892,617
shares outstanding
NET ASSET VALUE, offering $10.55
price and redemption price
per share ($47,892,617
(divided by) 4,540,651
shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY
28, 1999 (UNAUDITED)
INTEREST INCOME $ 1,095,274
EXPENSES
Management fee $ 126,117
Non-interested trustees' 83
compensation
Total expenses before 126,200
reductions
Expense reductions (5,919) 120,281
NET INTEREST INCOME 974,993
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 98,205
Futures contracts 14,376 112,581
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (108,559)
Futures contracts (25,788) (134,347)
NET GAIN (LOSS) (21,766)
NET INCREASE (DECREASE) IN $ 953,227
NET ASSETS RESULTING FROM
OPERATIONS
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31,
1999 1998
(UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 974,993 $ 1,799,052
Net realized gain (loss) 112,581 352,851
Change in net unrealized (134,347) 1,112,132
appreciation (depreciation)
NET INCREASE (DECREASE) IN 953,227 3,264,035
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (974,993) (1,799,052)
From net interest income
Share transactions Net 6,544,524 9,360,492
proceeds from sales of shares
Reinvestment of distributions 724,445 1,411,279
Cost of shares redeemed (3,189,464) (8,636,037)
NET INCREASE (DECREASE) IN 4,079,505 2,135,734
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 2,118 1,113
TOTAL INCREASE (DECREASE) 4,059,857 3,601,830
IN NET ASSETS
NET ASSETS
Beginning of period 43,832,760 40,230,930
End of period $ 47,892,617 $ 43,832,760
OTHER INFORMATION
Shares
Sold 617,683 896,788
Issued in reinvestment of 68,331 135,699
distributions
Redeemed (301,228) (833,035)
Net increase (decrease) 384,786 199,452
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.550 $ 10.170 $ 9.850 $ 9.840 $ 9.640 $ 10.350
period
Income from Investment .223 .461 .466 .488 .541 .543
Operations Net interest
income
Net realized and (.001) .380 .323 .009 .198 (.697)
unrealized gain (loss)
Total from investment .222 .841 .789 .497 .739 (.154)
operations
Less Distributions
From net interest income (.223) (.461) (.466) (.488) (.541) (.543)
From net realized gain - - (.003) - - -
In excess of net realized - - - - - (.020)
gain
Total distributions (.223) (.461) (.469) (.488) (.541) (.563)
Redemption fees added to paid .001 .000 .000 .001 .002 .007
in capital
Net asset value, end of $ 10.550 $ 10.550 $ 10.170 $ 9.850 $ 9.840 $ 9.640
period
TOTAL RETURN B, C 2.12% 8.43% 8.17% 5.12% 8.07% (1.46)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 47,893 $ 43,833 $ 40,231 $ 45,359 $ 43,489 $ 41,464
(000 omitted)
Ratio of expenses to average .55% A .55% .55% .40% D .15% D .03% D
net assets
Ratio of expenses to average .52% A, E .53% E .54% E .39% E .15% .03%
net assets after expense
reductions
Ratio of net interest income 4.25% A 4.44% 4.65% 4.91% 5.71% 5.45%
to average net assets
Portfolio turnover rate 10% A 23% 41% 74% 72% 64%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1999 (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, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. 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.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
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 substantially 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
among 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 transactions and capital loss carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 180 days are subject to a short-term trading 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. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end 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 or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,285,755 and $2,249,029, respectively.
The market value of futures contracts opened and closed during the
period amounted to $4,444,429 and $4,952,891, 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.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM 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.
5. EXPENSE REDUCTIONS.
FMR has entered into an arrangement on behalf of the fund with the
fund's custodian whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's expenses were reduced by $5,919 under
this arrangement.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* 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
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(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
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments
Money Management, Inc.
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
SMD-SANN-0499 74199
1.701070.101
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
SPARTAN(REGISTERED TRADEMARK)
SHORT-INTERMEDIATE
MUNICIPAL INCOME
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1999
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
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 25 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 29 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
February proved to be a challenging month for the U.S. stock and bond
markets. Instances of profit worries and brisk selling in the
technology sector hampered the equity markets at times. Financial
shares, however, turned in their strongest performance in recent
months. Meanwhile, bond markets were unsettled by strong economic data
and Federal Reserve Chairman Alan Greenspan's concerns that the Fed's
rate cuts last fall may have overstimulated the economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while 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. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you 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. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance. If Fidelity had
not reimbursed certain fund expenses, the past five year, and past 10
year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
SPARTAN SHORT-INTERMEDIATE 2.28% 4.75% 25.79% 75.11%
MUNICIPAL INCOME
LB 1-5 Year Municipal Bond 2.66% 5.34% 28.61% n/a
Short-Intermediate Municipal 2.08% 4.43% 24.54% 76.26%
Debt Funds Average
</TABLE>
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 10 years. 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 1-5 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and five years. To measure how the fund's
performance stacked up against its peers, you can compare it to the
short-intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 34 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
SPARTAN SHORT-INTERMEDIATE 4.75% 4.70% 5.76%
MUNICIPAL INCOME
LB 1-5 Year Municipal Bond 5.34% 5.16% n/a
Short-Intermediate Municipal 4.43% 4.48% 5.83%
Debt Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Spartan Short-Int. Muni LB Municipal Bond
00404 LB015
1989/02/28 10000.00 10000.00
1989/03/31 9983.15 9976.10
1989/04/30 10041.59 10212.93
1989/05/31 10153.32 10425.06
1989/06/30 10233.44 10566.63
1989/07/31 10335.43 10710.44
1989/08/31 10360.94 10605.58
1989/09/30 10377.70 10573.98
1989/10/31 10458.16 10703.30
1989/11/30 10530.15 10890.61
1989/12/31 10605.20 10979.69
1990/01/31 10610.60 10927.76
1990/02/28 10696.16 11025.02
1990/03/31 10738.19 11028.32
1990/04/30 10721.04 10948.48
1990/05/31 10819.48 11187.48
1990/06/30 10872.97 11285.82
1990/07/31 10960.02 11451.72
1990/08/31 10978.21 11285.44
1990/09/30 11043.54 11291.88
1990/10/31 11125.68 11496.71
1990/11/30 11228.94 11727.91
1990/12/31 11285.62 11778.93
1991/01/31 11389.64 11937.00
1991/02/28 11459.57 12040.85
1991/03/31 11505.64 12045.19
1991/04/30 11614.15 12205.39
1991/05/31 11684.09 12313.89
1991/06/30 11716.34 12301.70
1991/07/31 11796.72 12451.54
1991/08/31 11890.52 12615.52
1991/09/30 11984.69 12779.78
1991/10/31 12064.17 12894.80
1991/11/30 12117.61 12930.77
1991/12/31 12284.60 13208.27
1992/01/31 12336.66 13238.38
1992/02/29 12386.03 13242.62
1992/03/31 12392.09 13247.52
1992/04/30 12472.80 13365.42
1992/05/31 12541.65 13522.73
1992/06/30 12645.26 13749.64
1992/07/31 12839.39 14161.86
1992/08/31 12787.48 14023.78
1992/09/30 12851.27 14115.49
1992/10/31 12850.09 13976.74
1992/11/30 12965.60 14227.06
1992/12/31 13044.25 14372.32
1993/01/31 13175.45 14539.47
1993/02/28 13407.34 15065.36
1993/03/31 13366.14 14906.12
1993/04/30 13429.87 15056.53
1993/05/31 13481.94 15141.14
1993/06/30 13572.30 15393.85
1993/07/31 13583.16 15414.01
1993/08/31 13729.32 15734.93
1993/09/30 13820.25 15914.16
1993/10/31 13845.18 15944.87
1993/11/30 13826.38 15804.40
1993/12/31 13973.23 16138.03
1994/01/31 14066.35 16322.32
1994/02/28 13920.39 15899.57
1994/03/31 13681.01 15252.14
1994/04/30 13732.68 15381.48
1994/05/31 13814.40 15514.84
1994/06/30 13836.69 15420.04
1994/07/31 13959.57 15702.69
1994/08/31 14011.31 15757.02
1994/09/30 13975.68 15525.71
1994/10/31 13926.75 15249.97
1994/11/30 13849.38 14974.25
1994/12/31 13961.35 15303.84
1995/01/31 14116.24 15741.22
1995/02/28 14280.21 16198.98
1995/03/31 14375.96 16385.10
1995/04/30 14427.65 16404.44
1995/05/31 14598.08 16927.90
1995/06/30 14620.01 16780.63
1995/07/31 14702.53 16939.71
1995/08/31 14844.85 17154.51
1995/09/30 14896.64 17263.09
1995/10/31 14979.55 17514.10
1995/11/30 15075.49 17804.66
1995/12/31 15143.90 17975.76
1996/01/31 15242.57 18111.48
1996/02/29 15246.88 17989.23
1996/03/31 15193.40 17759.32
1996/04/30 15199.95 17709.06
1996/05/31 15223.74 17701.98
1996/06/30 15291.38 17894.76
1996/07/31 15377.32 18057.60
1996/08/31 15401.57 18053.26
1996/09/30 15486.77 18306.01
1996/10/31 15589.22 18513.05
1996/11/30 15737.22 18851.84
1996/12/31 15731.30 18772.66
1997/01/31 15788.59 18808.14
1997/02/28 15871.88 18980.80
1997/03/31 15786.32 18727.79
1997/04/30 15842.00 18884.54
1997/05/31 15979.61 19168.56
1997/06/30 16083.68 19372.71
1997/07/31 16286.11 19909.33
1997/08/31 16247.00 19722.78
1997/09/30 16351.53 19956.89
1997/10/31 16409.63 20085.21
1997/11/30 16465.76 20203.31
1997/12/31 16589.11 20498.08
1998/01/31 16696.58 20709.62
1998/02/28 16716.76 20715.83
1998/03/31 16743.05 20734.06
1998/04/30 16717.81 20640.55
1998/05/31 16860.46 20967.29
1998/06/30 16901.31 21049.90
1998/07/31 16960.62 21102.74
1998/08/31 17120.06 21428.78
1998/09/30 17244.50 21695.78
1998/10/31 17303.07 21695.34
1998/11/30 17325.57 21771.50
1998/12/31 17366.68 21826.36
1999/01/31 17527.76 22085.87
1999/02/26 17511.08 21989.36
IMATRL PRASUN SHR__CHT 19990228 19990309 111726 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Spartan Short-Intermediate Municipal Income Fund on
February 28, 1989. As the chart shows, by February 28, 1999, the value
of the investment would have grown to $17,511 - a 75.11% increase on
the initial investment. For comparison, look at how the Lehman
Brothers Municipal Bond Index - a market value-weighted index of
investment-grade municipal bonds with maturities of one year or more -
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $21,989 - a 119.89%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999 1998 1997 1996 1995 1994
Dividend returns 1.98% 4.27% 4.38% 4.25% 4.53% 4.43%
Capital returns 0.30% 1.10% 1.11% -0.50% 1.42% -2.38%
Total returns 2.28% 5.37% 5.49% 3.75% 5.95% 2.05%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital 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 capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
1999
Dividends per share 3.03(cents) 20.03(cents) 41.15(cents)
Annualized dividend rate 3.87% 3.97% 4.06%
30-day annualized yield 3.04% - -
30-day annualized 4.75% - -
tax-equivalent 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
$10.20 over the past one month, $10.18 over the past six months and
$10.13 over the past one year, you can compare the fund's income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond 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, but does not reflect payment of the
federal alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Hampered by oversupply and
sporadic demand through much of
the six-month period that ended
February 28, 1999, municipal
bonds finally began to turn the
corner in January and February. In
that six-month span, the Lehman
Brothers Municipal Bond Index -
an index of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned
2.62%. By comparison, the Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
gained 1.61%. As is often the case,
the fortunes of the municipal market
were dictated largely by supply
and demand. Early in the period,
issuance was strong and demand
had trouble keeping pace. This
was, in part, due to the global flight
to safety into U.S. Treasuries that
occurred in the late summer and
early fall. When equity markets
surged toward the end of the year,
demand for municipals became
mixed. As the municipal bond
market entered 1999, supply
began to show signs of leveling off.
This positive development, coupled
with an increase in demand from
retail investors, continued through
the first two months of the year,
helping municipal bonds
outperform Treasuries in both
January and February. In February
alone, the Lehman Brothers
Municipal Bond Index returned
- -0.44%, while the Lehman Brothers
Aggregate Bond Index returned
- -1.75%.
(photograph of Norm Lind)
An interview with Norm Lind,
Portfolio Manager of Spartan Short-Intermediate Municipal Income Fund
Q. HOW DID THE FUND PERFORM, NORM?
A. For the six-month period that ended February 28, 1999, the fund had
a total return of 2.28%. To get a sense of how the fund did relative
to its competitors, the short-intermediate municipal debt funds
average returned 2.08% for the same six-month period, according to
Lipper Inc. Additionally, the Lehman Brothers 1-5 Year Municipal Bond
Index - which tracks the types of securities in which the fund invests
- - returned 2.66% for the same six-month period. For the 12-month
period that ended February 28, 1999, the fund had a total return of
4.75%. That compared to the short-intermediate municipal debt fund
average's 4.43% return and the Lehman Brothers index's 5.34% return
for the same 12-month period.
Q. WHAT FACTORS MADE A POSITIVE CONTRIBUTION TO THE FUND'S PERFORMANCE
DURING THE PAST SIX MONTHS?
A. The main reason why the fund outpaced its peers was that it had a
relatively large stake in bonds with maturities from six to eight
years. These bonds, which offered attractive yields, generally
outpaced their shorter-term counterparts as interest rates declined
and their yields fell. Toward the end of the period, I sold many bonds
with maturities in the six-to-eight-year range because I felt they had
reached their fair value and didn't offer as much upside potential as
they had earlier. I replaced them with bonds maturing in two to three
years, which I felt offered better value and better total return
potential.
Q. WHAT OTHER STRATEGIES HELPED THE FUND'S PERFORMANCE?
A. The fund also had a relatively large stake in bonds rated Baa by
Moody's Investors Service. Falling interest rates increasingly
prompted investors to seek out bonds with relatively high yields,
including Baa-rated securities. Not only was there a growing demand
for Baa-rated bonds, but there also was a limited supply of them,
which generally helped boost their prices. That said, I kept the
majority of the fund's investments in higher-quality bonds. Throughout
the past six months, Baa-rated bonds offered a smaller and smaller
yield advantage over higher-rated securities. The yield differential
diminished so much that I felt that Baa-rated securities in many cases
no longer offered enough additional yield to compensate for their
added credit risk, which is an assessment of a municipal issuer's
ability to pay the principal and interest on its debt in a timely
fashion. More recently, I've sold some Baa-rated bonds and added more
higher-quality bonds, since I could do so without sacrificing a lot of
additional yield.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. The main disappointment had to do with the fund's relatively light
stake in bonds issued in California. In mid-1998, I had reduced the
fund's stake in those bonds because I felt that they were already
reflecting most of the improvement in that state's economy. Given that
viewpoint, I didn't believe that the bonds could appreciate much more,
even with further economic strength. As it turned out, however,
California bonds generally continued to appreciate as the state's
economy expanded. Although the fund did have some California holdings,
it didn't fully participate in the rally the state's bonds
experienced.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET AND THE FUND?
A. After lagging Treasuries during most of 1998, municipals may be in
for a fairly strong period of performance in 1999 as they play catch
up to the U.S. Treasury market. In what may turn out to be a signal of
what's to come, municipals gained a great deal of ground on their
Treasury counterparts in the final month of the six-month period. Of
course, the direction of interest rates will be the primary factor
driving municipal bond performance, and I don't spend time forecasting
interest rates. As far as the fund is concerned, I'll continue to
emphasize bonds that I think offer good value given their yields and
their risk. I'm comfortable sticking with a fairly large stake in
high-quality bonds for the time being, because I feel that most
lower-quality securities currently don't offer enough additional yield
to adequately compensate for their added risk.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
GOAL: to provide a high level
of current income exempt
from federal income tax
FUND NUMBER: 404
TRADING SYMBOL: FSTFX
START DATE: December 24,
1986
SIZE: as of February 28,
1999, more than $662
million
MANAGER: Norm Lind, since
1995; manager, various
Fidelity and Spartan
municipal income funds;
joined Fidelity in 1986
NORM LIND ON DEVELOPMENTS
IN TECHNOLOGY AND THEIR
EFFECT ON MUNICIPAL-BOND
ISSUERS:
"I'm currently keeping an eye on
two technology-related
developments and their potential
effect on municipal-bond issuers.
The first is the rise of the Internet.
As more and more people shop for
goods and services online, it's
uncertain to what extent states
and municipalities will lose out on
sales tax revenue. The question is
whether states or municipalities
will be able to tax Internet-based
sales that emanate from those
states or municipalities. Although
there's no clear sense right now of
the magnitude of potential
problems deriving from this issue,
I'm factoring it in when I evaluate
the attractiveness of issuers,
especially those that are heavily
reliant on sales-tax revenues.
"The second technology-related
issue I'm watching is the potential
problems stemming from the
so-called Year 2000 glitch, or `Y2K'.
Here I'm focusing on a couple of
things. The first is whether the
problems that arise from Y2K will
seriously compromise the
operations of a municipal issuer. I'll
also be watching the extent to
which municipal issuers adequately
budget for Y2K fixes. How
individual municipalities meet
these technology-related
challenges could affect their fiscal
health and, ultimately, their
credit-worthiness."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF
FEBRUARY 28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE HOLDINGS 6 MONTHS AGO
New York 17.9 13.9
Florida 10.9 11.7
Massachusetts 6.9 6.4
Texas 6.9 6.7
Utah 5.2 5.0
TOP FIVE SECTORS AS OF
FEBRUARY 28, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 35.8 30.0
Electric Utilities 19.6 15.4
Escrowed/Pre-Refunded 12.0 10.4
Education 8.0 12.2
Special Tax 6.5 7.4
AVERAGE YEARS TO MATURITY AS
OF FEBRUARY 28, 1999
6 MONTHS AGO
Years 2.9 3.2
</TABLE>
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,
1999
6 MONTHS AGO
Years 2.5 2.9
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.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF FEBRUARY 28, 1999
Aaa, Aa, A 87.3%
Baa 7.9%
Not Rated 1.2%
Short-term
investments 3.6%
Row: 1, Col: 1, Value: 87.0
Row: 1, Col: 2, Value: 7.9
Row: 1, Col: 3, Value: 1.5
Row: 1, Col: 4, Value: 3.6
AS OF AUGUST 31, 1998
Aaa, Aa, A 82.8%
Baa 7.6%
Not Rated 1.2%
Short-term
investments 8.4%
Row: 1, Col: 1, Value: 82.5
Row: 1, Col: 2, Value: 7.6
Row: 1, Col: 3, Value: 1.5
Row: 1, Col: 4, Value: 8.4
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS FEBRUARY 28, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 96.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
ALASKA - 0.8%
Alaska Student Ln. Corp.
Student Ln. Rev. Series A:
5% 7/1/03 (AMBAC Insured) (e) Aaa $ 500 $ 514
5.1% 7/1/04 (AMBAC Insured) Aaa 2,300 2,384
(e)
5.55% 7/1/03 (AMBAC Insured) Aaa 1,000 1,044
(e)
North Slope Borough (Cap. Aaa 1,500 1,485
Appreciation) Series A, 0%
6/30/99 (MBIA Insured)
5,427
ARIZONA - 2.0%
Arizona Trans. Board Hwy. Aaa 2,800 3,034
Rev. Sub-Series A, 6.6%
7/1/08 (Pre-Refunded to
7/1/2001 @ 101.5) (f)
Maricopa County Gen. Oblig. A2 4,000 4,076
Series C, 8.9% 7/1/99
Maricopa County School Aaa 3,850 4,052
District #6 (Washington
Elementry Proj.) Series 1996
C, 5% 7/1/05 (FGIC Insured)
Phoenix Civic Impt. Corp. Aa 1,000 1,049
Excise Tax Rev. Rfdg. (Arpt.
Impts.) Series A, 5.85%
7/1/01 (e)
Univ. of Arizona Univ. Rev. AA 1,000 1,063
Series B, 6.9% 6/1/16
(Pre-Refunded to 6/1/2000 @
102) (f)
13,274
ARKANSAS - 1.4%
Arkansas Student Ln. Auth.
Rev. Series A1:
6.05% 6/1/02 (e) Aa 4,700 4,932
6.05% 12/1/02 (e) Aa 4,455 4,706
9,638
CALIFORNIA - 3.7%
California Rural Home Mtg. Aaa 3,500 3,541
Fin. Auth. Lease Rev. (Rural
Lease Purp.) Series A, 4.45%
8/1/01 (MBIA Insured)
Clovis Unified School Aaa 5,725 5,470
District (Cap. Appreciation)
Series B, 0% 8/1/00 (MBIA
Insured) (Escrowed to
Maturity) (f)
Los Angeles Dept. of Wtr. &
Pwr. Elec. Plant Rev. Second
Issue:
9% 10/15/00 Aa3 1,300 1,418
9% 10/15/01 Aa3 2,000 2,275
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CALIFORNIA - CONTINUED
Metro. Wtr. District Aa2 $ 3,000 $ 3,289
(Southern California
Wtrwks.) Series A, 5.5%
7/1/06
San Bernardino County Ctfs. A3 4,000 4,069
of Prtn. Rfdg. (Med. Ctr.
Fing. Proj.) 4.75% 8/1/00
Santa Ana Cmmty. Redev. Agcy. AAA 1,125 1,200
Tax Allocation (Santa Ana
Redev. Proj. Area) Series B,
6.5% 12/15/14 (Pre-Refunded
to 12/15/2000 @ 102) (f)
Southern California Pub. Pwr. Aaa 3,300 3,382
Auth. Rfdg. (Palo Verde
Proj.) Series A, 5% 7/1/00
(FSA Insured)
24,644
COLORADO - 0.6%
Denver City & County Arpt.
Rev.:
Rfdg. Series C, 5.1% 11/15/01 Baa1 2,320 2,371
(e)
Series C, 6.55% 11/15/02 (e) Baa1 1,420 1,527
3,898
CONNECTICUT - 0.9%
Connecticut Spl. Assessment Aaa 6,000 6,158
Unemployment Compensation
Advisor Fund Rev. Rfdg.
Series A, 5.5% 5/15/00
(AMBAC Insured)
DISTRICT OF COLUMBIA - 0.7%
District of Columbia Gen.
Oblig.:
Rfdg. Series A1:
4.65% 6/1/02 (MBIA Insured) Aaa 3,090 3,172
4.65% 6/1/02 (MBIA Insured) Aaa 160 165
(Escrowed to Maturity) (f)
Series A, 7.5% 6/1/10 (AMBAC Aaa 1,000 1,069
Insured) (Pre-Refunded to
6/1/2000 @ 102) (f)
4,406
FLORIDA - 10.9%
Dade County Aviation Rev. Aaa 3,500 3,643
Rfdg. (Miami Int'l Arpt.)
Series A, 5.25% 10/1/01 (FSA
Insured) (e)
Dade County School District Aaa 5,910 6,199
Series 95, 6.875% 8/1/00
(MBIA Insured)
Escambia County Utils. Auth.
Util. Sys. Rev. Rfdg. Series
D:
4.2% 1/1/01 (FGIC Insured) Aaa 2,900 2,940
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
FLORIDA - CONTINUED
Escambia County Utils. Auth.
Util. Sys. Rev. Rfdg. Series
D: - continued
4.2% 1/1/02 (FGIC Insured) Aaa $ 2,835 $ 2,879
Florida Board of Ed. Cap.
Outlay:
(Pub. Ed.) Series A, 5% 6/1/06 Aa2 3,725 3,940
Rfdg. (Pub. Ed.) Series B, 5% Aa2 25,105 26,516
6/1/05
Florida Dept. of Trans. Aa2 2,725 2,963
(Right of Way Aquisition &
Bridge) 6.5% 7/1/02
Jacksonville Elec. Auth. Rev.:
Rfdg. (Saint John River Aa2 1,500 1,667
Proj.) Series 10 Issue 2,
6.5% 10/1/03
5.2% 7/1/01 (Escrowed to Aaa 1,270 1,295
Maturity) (f)
Lakeland Elec. & Wtr. Rev.
Rfdg.:
6.25% 10/1/00 (FGIC Insured) Aaa 9,175 9,588
6.25% 10/1/01 (FGIC Insured) Aaa 9,255 9,884
Tampa Health Sys. Rev. Aaa 1,000 1,063
(Catholic Health East)
Series A3, 5.5% 11/15/02
(MBIA Insured)
72,577
GEORGIA - 0.7%
Atlanta Arpt. Facilities Rev. Aaa 1,500 1,541
Rfdg. 5% 1/1/01 (AMBAC
Insured)
Georgia Gen. Oblig. Series C, Aaa 3,065 3,185
5.75% 9/1/00
4,726
HAWAII - 2.9%
Hawaii Arpt. Sys. Rev. Second Aaa 1,000 1,064
Series, 7.4% 7/1/02 (FGIC
Insured) (e)
Hawaii Gen. Oblig.:
Rfdg. Series CO, 4.625% Aaa 5,000 5,131
9/1/01 (FGIC Insured)
Series CN, 6.25% 3/1/02 (FGIC Aaa 2,000 2,142
Insured)
Series CP, 5.5% 10/1/06 (FGIC Aaa 5,675 6,173
Insured)
Honolulu City & Cnty. Gen.
Oblig. Series B:
5.5% 11/1/04 (FGIC Insured) Aaa 2,450 2,647
5.5% 11/1/04 (FGIC Insured) Aaa 2,175 2,362
(Escrowed to Maturity) (f)
19,519
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
KANSAS - 0.2%
Kansas Tpk. Auth. Tpk. Rev. Aaa $ 1,080 $ 1,091
Rfdg. 5% 9/1/99 (AMBAC
Insured)
KENTUCKY - 2.6%
Kentucky Property & Bldgs. A2 9,000 9,382
Commission Rev. Rfdg. 6%
11/1/00
Kentucky Tpk. Auth. Econ. Aaa 2,500 2,662
Dev. Road Rev.
(Revitalization Proj.) 7.5%
5/15/05 (Pre-Refunded to
5/15/2000 @ 101.5) (f)
Owensboro Elec. Lt. & Pwr. Aaa 5,450 5,102
Rev. Rfdg. Series B, 0%
1/1/01 (AMBAC Insured)
17,146
LOUISIANA - 0.3%
Louisiana Pub. Facilities Aaa 1,900 1,970
Auth. Rev. Rfdg. (Student
Ln.) Series A1, 6.2% 3/1/01
MARYLAND - 4.0%
Maryland Gen. Oblig.
(Maryland State & Local
Facilities Ln.):
Series 1, 6.6% 3/1/00 Aaa 2,000 2,071
Series 2, 5% 7/15/02 Aaa 11,820 12,336
Montgomery County
Consolidated Pub. Impt.
Series A:
5.2% 10/1/00 Aaa 5,725 5,914
5.2% 10/1/01 Aaa 4,000 4,177
7% 4/1/07 (Pre-Refunded to Aaa 2,000 2,120
4/1/2000 @ 102) (f)
26,618
MASSACHUSETTS - 6.9%
Boston Gen. Oblig. Series A, Aaa 1,575 1,605
4.5% 1/1/01 (FGIC Insured)
Holyoke Gen. Oblig. Rfdg. Aaa 500 538
5.25% 8/1/06 (FSA Insured)
Massachusetts Gen. Oblig.:
(Construction Ln.):
Series B, 9.25% 7/1/00 Aa3 4,500 4,859
Series C, 6.75% 8/1/06 Aaa 1,000 1,095
(Pre-Refunded to 8/1/2001 @
102) (f)
Rfdg.:
Series A, 5% 8/1/01 Aa3 1,000 1,036
Series C, 4.7% 8/1/02 Aa3 3,000 3,099
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Aaa $ 3,900 $ 3,926
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care)
Series B, 4.55% 1/1/21 (MBIA
Insured)
Massachusetts Ind. Fin. Agcy. BBB 3,000 3,012
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.5% 12/1/01
Massachusetts Ind. Fin. Agcy.
Rev.:
(Cap. Appreciation) A1 4,510 4,295
(Massachusetts Biomedical
Research) Series A1, 0%
8/1/00
(Massachusetts Biomedical A1 1,385 1,406
Research) Series A1, 7.1%
8/1/99
Massachusetts Wtr. Resources
Auth.:
Rfdg. Series C, 5.25% 12/1/01 A1 2,000 2,087
Series A, 7.125% 4/1/00 A1 1,500 1,563
New England Ed. Ln. Marketing
Corp. Massachusetts Student
Ln. Rev. Rfdg.:
Issue D:
6% 9/1/99 Aaa 7,000 7,097
6.2% 9/1/00 Aaa 2,000 2,073
Series B, 5.4% 6/1/00 A3 8,500 8,688
46,379
MICHIGAN - 2.1%
Detroit Convention Facilities
Rev. Rfdg. (Cobo Hall
Expansion Proj.):
4.75% 9/30/00 A 5,220 5,315
4.8% 9/30/01 A 1,000 1,025
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Med. Hosp.)
Series A:
5.25% 10/1/02 Baa2 2,040 2,098
5.25% 10/1/03 Baa2 1,000 1,030
(Mercy Health Services):
Series S, 5.75% 8/15/05 Aa3 1,275 1,389
Series T, 5.75% 8/15/05 Aa3 3,070 3,343
14,200
MINNESOTA - 1.8%
Minneapolis Gen. Oblig. (Cap.
Appreciation) Series B:
0% 12/1/02 Aaa 1,300 1,134
0% 12/1/03 Aaa 500 418
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
MINNESOTA - CONTINUED
Minneapolis Gen. Oblig. (Cap.
Appreciation) Series B: -
continued
0% 12/1/04 Aaa $ 1,500 $ 1,202
Minnesota Gen. Oblig.:
Rfdg. 4.4% 8/1/03 Aaa 1,200 1,234
5.9% 8/1/05 (Pre-Refunded to Aaa 3,815 4,101
8/1/2002 @ 100) (f)
6.4% 8/1/01 Aaa 1,310 1,400
Rosemont Independent School Aa1 2,610 2,639
District #196 Rfdg. 4% 3/1/01
12,128
MONTANA - 0.1%
Montana Higher Ed. Student A 455 465
Assistance Corp. Student Ln.
Rev. Series B, 6.6% 12/1/99
(e)
NEBRASKA - 1.1%
Nebraska Pub. Pwr. District
Rev.:
Series A, 5% 1/1/02 (MBIA Aaa 4,300 4,456
Insured)
5.4% 7/1/01 A1 3,085 3,207
7,663
NEVADA - 0.5%
Clark County Flood Cont. Rev. Aa3 1,000 1,062
Group 1, 6% 11/1/01
Clark County Hwy. Impt. Rev. Aaa 2,000 2,067
(Motor Vehicle Fuel Tax) 5%
7/1/01 (AMBAC Insured)
3,129
NEW JERSEY - 2.4%
New Jersey Gen. Oblig. Rfdg. Aa1 1,500 1,576
Series B, 6.25% 1/15/01
New Jersey Health Care A3 3,500 3,769
Facilities Fing. Auth. Rev.
Rfdg. (Atlantic City Med.
Ctr.) Series C, 6.45% 7/1/02
New Jersey Trans. Corp.
Series A:
5.25% 9/1/01 (FSA Insured) Aaa 5,000 5,170
5.4% 9/1/02 (FSA Insured) Aaa 5,000 5,243
15,758
NEW MEXICO - 0.8%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/99 (AMBAC Insured) Aaa 540 546
(e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NEW MEXICO - CONTINUED
Albuquerque Arpt. Rev. Rfdg.:
- - continued
6.25% 7/1/00 (AMBAC Insured) Aaa $ 660 $ 684
(e)
6.25% 7/1/01 (AMBAC Insured) Aaa 980 1,037
(e)
New Mexico Edl. Assistance Aaa 2,765 2,937
Foundation Student Ln. Rev.
Series IV-A1, 6.5% 3/1/04 (e)
5,204
NEW YORK - 17.9%
Long Island Pwr. Auth. New
York Elec. Sys. Rev.:
Series A, 5.5% 12/1/06 (AMBAC Aaa 4,000 4,371
Insured)
4% 4/1/00 Baa1 3,000 3,017
4.25% 4/1/00 Baa1 14,235 14,354
Muni. Assistance Corp. for
New York City:
Rfdg.:
Series E:
5.5% 7/1/00 Aa2 1,000 1,030
5.5% 7/1/01 Aa2 20,400 21,294
Series M, 5% 7/1/02 Aa2 3,000 3,117
Series G, 5.5% 7/1/01 Aa2 5,000 5,219
New York City Gen. Oblig.:
Rfdg.:
Series A, 5.7% 8/1/02 A3 1,500 1,590
Series D, 6.6% 2/1/03 A3 1,000 1,095
Series H:
5.4% 8/1/04 A3 3,935 4,190
7.875% 8/1/00 (Escrowed to Aaa 2,500 2,658
Maturity) (f)
Series F:
8.1% 11/15/99 A3 400 414
8.1% 11/15/99 (Escrowed to Aaa 150 155
Maturity) (f)
Series H:
5% 8/1/05 A3 8,050 8,408
6.9% 2/1/01 A3 400 424
Series J, 6% 2/15/04 A3 3,000 3,259
New York State Dorm. Auth. A3 1,500 1,565
Rev. (Mental Health Services
Facilities) Series A, 6%
2/15/01
New York State Envir. Baa1 5,000 5,222
Facilities Corp. Resource
Recovery Rev. (Huntington
Proj.) Series A, 7.5%
10/1/12 (e)
New York State Local Govt.
Assistance Corp.:
Rfdg. Series A, 5.5% 4/1/04 Aaa 2,700 2,904
(AMBAC Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NEW YORK - CONTINUED
New York State Local Govt.
Assistance Corp.: - continued
Series B:
7% 4/1/21 (Pre-Refunded to Aaa $ 5,150 $ 5,519
4/1/2001 @ 100) (f)
7.5% 4/1/20 (Pre-Refunded to Aaa 10,500 11,552
4/1/2001 @ 102) (f)
New York State Med. Care
Facilities Fin. Agcy. Rev.
(Mental Health Services
Facilities):
Series B, 7.875% 8/15/20 Aaa 5,000 5,420
(Pre-Refunded to 8/15/2000 @
102) (f)
Series C, 7.3% 2/15/21 Aaa 1,785 1,978
(Pre-Refunded to 8/15/2001 @
102) (f)
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge):
5.4% 4/1/03 Baa1 2,750 2,897
6% 4/1/01 Baa1 1,100 1,148
6% 4/1/03 Baa1 2,300 2,470
Triborough Bridge & Tunnel Aa3 3,885 4,182
Auth. Rev. Rfdg. Series B,
6% 1/1/03
119,452
NORTH CAROLINA - 2.3%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.
Rfdg.:
Series A:
5.2% 1/1/01 Baa1 3,000 3,061
7.875% 1/1/02 Baa1 9,255 10,142
Series B, 5.5% 1/1/02 Baa1 1,000 1,033
North Carolina Muni. Pwr. A3 1,000 1,046
Agcy. #1 Catawba Elec. Rev.
Rfdg. 5.75% 1/1/02
15,282
OHIO - 2.8%
Butler County Trans. Impt. Aaa 2,605 2,736
District Series A, 5%
4/1/04 (FSA Insured)
Cleveland Arpt. Sys. Rev. Aaa 1,000 1,070
Series A, 5.5% 1/1/05 (FSA
Insured) (e)
Franklin County Gen. Oblig. - 3,800 4,158
(Courthouse) 6.375% 12/1/17
(Pre-Refunded to 12/1/2001 @
102) (f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
OHIO - CONTINUED
Ohio Bldg. Auth. Facilities Aa3 $ 2,175 $ 2,280
(Administration Bldg. Fund
Proj.) Series A, 5.5% 10/1/01
Ohio Spl. Oblig. (Elementary Aa3 4,750 4,830
& Secondary Ed. Cap.
Facilities) Series A, 4.5%
6/1/00
Ohio Wtr. Dev. Auth. Poll. Aaa 2,310 2,484
Cont. Facilities Rev. (Wtr.
Cont. Ln. Fund) 5.25% 6/1/06
(MBIA Insured)
Ohio Wtr. Dev. Auth. Rev. Aaa 1,350 1,454
(Fresh Wtr. Proj.) 5.4%
6/1/05 (AMBAC Insured)
19,012
OKLAHOMA - 1.7%
Tulsa County Ind. School Aa2 10,875 11,080
District #1 4.4% 2/1/02
PENNSYLVANIA - 3.1%
Pennsylvania Gen. Oblig. Aa3 3,000 3,113
Second Series, 5% 10/15/01
Pennsylvania Higher Edl. A1 4,000 4,098
Facilities Auth. Health
Services Rev. Rfdg. (Univ.
of Pennsylvania) Series A,
5.125% 1/1/01
Philadelphia Gas Works Rev. Aaa 5,000 5,331
Series A, 5.25% 7/1/05 (FSA
Insured)
Philadelphia School District Aaa 3,400 3,559
Series A, 5.25% 7/1/02
(MBIA Insured)
Somerset County Gen. Auth. Aaa 4,000 4,283
Commonwealth Lease Rev.
6.25% 10/15/11 (FGIC
Insured) (Pre-Refunded to
10/15/2001 @ 100) (f)
20,384
SOUTH CAROLINA - 2.9%
Richland County School Aaa 1,100 1,160
District #2 Series B, 5.6%
3/1/02 (MBIA Insured)
South Carolina Ed. Assistance
Auth. Rev.:
(Insured Student Ln.):
6.3% 9/1/01 (e) - 1,400 1,468
6.6% 9/1/99 (e) - 2,845 2,888
Rfdg. (Guaranteed Student A 7,045 7,095
Ln.) 5% 9/1/99 (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
SOUTH CAROLINA - CONTINUED
South Carolina Pub. Svcs.
Auth. Rev. Rfdg.:
(Santee Cooper Proj.) Series Aaa $ 4,145 $ 4,502
B, 6.5% 7/1/26 (Pre-Refunded
to 7/1/2001 @ 102) (f)
Series A, 6.25% 1/1/01 (AMBAC Aaa 2,005 2,101
Insured)
19,214
SOUTH DAKOTA - 0.5%
South Dakota Student Ln. A+ 3,575 3,612
Fing. Corp. Student Ln. Rev.
Rfdg. Series A, 5.7% 8/1/99
(Escrowed to Maturity) (e)(f)
TENNESSEE - 1.2%
Memphis-Shelby County Arpt.
Auth. Arpt. Rev. Rfdg.
Series A:
5.25% 2/15/01 (MBIA Insured) Aaa 800 823
(e)
5.25% 2/15/02 (MBIA Insured) Aaa 1,000 1,037
(e)
Metro. Nashville Arpt. Auth. Aaa 2,000 2,076
Arpt. Rev. Series A, 6.25%
7/1/00 (FGIC Insured) (e)
Tennessee Gen. Oblig.:
Rfdg. Series B, 5% 5/1/00 Aaa 2,500 2,554
Series B, 6.1% 6/1/00 Aaa 1,425 1,477
7,967
TEXAS - 6.9%
Alamo Cmnty. College District Aaa 3,350 3,255
Rfdg. (Cap. Appreciation) 0%
2/15/00 (AMBAC Insured)
Alief Independent School Aaa 1,000 893
District Rfdg. (Cap.
Appreciation) 0% 2/15/02
(Permanent School Fund of
Texas Guaranteed)
Conroe Independent School Aaa 1,190 1,158
District Rfdg. 0% 2/1/00
(MBIA Insured)
Corpus Christi Independent Aaa 1,600 1,465
School District Rfdg. (Cap.
Appreciation) 0% 8/15/01
(Permanent School Fund of
Texas Guaranteed)
Dallas County Gen. Oblig. 7% Aaa 1,750 1,894
8/15/01
Deer Park Independent School Aaa 2,240 1,913
District Rfdg. 0% 2/15/03
(Permanent School Fund of
Texas Guaranteed)
Harris County Sub. Lien Rev. Aa2 3,490 3,199
Rfdg. (Cap. Appreciation)
(Toll Road Proj.) 0% 8/1/01
Houston Wtr. & Swr. Sys. Rev. Aaa 3,170 3,531
Series A, 6.375% 12/1/22
(MBIA Insured) (Pre-Refunded
to 12/1/2002 @ 102) (f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
TEXAS - CONTINUED
Irving Independent School Aaa $ 3,985 $ 3,252
District (Cap. Appreciation)
0% 2/15/04 (Permanent
School Fund of Texas
Guaranteed)
Klein Independent School
District Rfdg.:
5.25% 8/1/05 (Permanent Aaa 1,600 1,708
School Fund of Texas
Guaranteed)
5.25% 8/1/06 (Permanent Aaa 2,000 2,147
School Fund of Texas
Guaranteed)
North Texas Health Facilities Aaa 2,050 2,101
Dev. Corp. Hosp. Rev. Rfdg.
(United Reg'l. Health Care
Sys. Proj.) 4.5% 9/1/02
(MBIA Insured)
San Antonio Gen. Oblig.:
Rfdg. (Gen. Impt.) 5.5% 8/1/02 Aa2 2,875 3,041
Series 2000:
4.5% 2/1/05 (b) Aa2 1,035 1,046
5% 2/1/06 (b) Aa2 1,085 1,124
5% 2/1/07 (b) Aa2 1,135 1,181
Texas A & M Univ. Rev. Rfdg. Aa2 2,300 2,386
(Fing. Sys.) 5.25% 5/15/01
Texas Gen. Oblig. Rfdg. (Cap.
Appreciation):
(Pub. Fin. Auth.) Series A, Aaa 9,000 8,201
0% 10/1/01 (AMBAC Insured)
(Superconducting) Series C, Aaa 2,750 2,442
0% 4/1/02 (FGIC Insured)
45,937
UTAH - 5.2%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
Rfdg. Series C, 6% 7/1/01 Aaa 2,000 2,109
(MBIA Insured)
Rfdg. (Cap. Appreciation)
Series B:
0% 7/1/00 (MBIA Insured) Aaa 3,500 3,347
0% 7/1/01 (AMBAC Insured) Aaa 5,000 4,600
Series 1:
0% 7/1/15 (Pre-Refunded to Aaa 7,500 7,243
7/1/2000 @ 100) (f)
5.5% 7/1/01 (MBIA Insured) Aaa 13,825 14,425
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
UTAH - CONTINUED
Provo City Energy Sys. Rev. Aaa $ 1,000 $ 1,030
Series A, 7.625% 11/1/12
(FGIC Insured) (Pre-Refunded
to 11/1/1999 @ 100) (f)
Salt Lake City Wtr. & Swr. Aaa 1,650 1,724
Rev. Rfdg. 6% 2/1/01 (AMBAC
Insured)
34,478
VERMONT - 0.4%
Vermont Student Assistance Aaa 2,500 2,520
Corp. Ed. Ln. Rev. Rfdg.
(Fin. Prog.) Series A, 6.35%
6/15/99 (AMBAC Insured)
VIRGINIA - 0.6%
Virginia Pub. Facilities 6% Aaa 1,810 1,944
6/1/02
Virginia Pub. School Auth. Aa2 2,000 2,151
Series A, 6% 8/1/02
4,095
WASHINGTON - 3.3%
Clark County Pub. Util. Aaa 2,000 2,123
District #1 Generating Sys.
Rev. 6% 1/1/02 (FGIC Insured)
Washington Gen. Oblig. Rfdg. Aa1 1,000 1,071
Series R-96B, 5.5% 7/1/03
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #1 Rev.
Rfdg. Series A:
6.5% 7/1/02 Aa1 3,000 3,232
7.25% 7/1/99 Aa1 3,010 3,052
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.
Rfdg.:
Series A:
4.8% 7/1/04 Aa1 3,000 3,107
6.5% 7/1/02 Aa1 2,220 2,392
Series B, 5.5% 7/1/03 Aa1 2,000 2,126
Washington Pub. Pwr. Supply Aaa 5,000 5,279
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5% 7/1/06
(FSA Insured)
22,382
WISCONSIN - 0.2%
Wisconsin Gen. Oblig. Series Aa2 1,370 1,422
C, 5.25% 5/1/01
TOTAL MUNICIPAL BONDS 642,855
(Cost $629,586)
CASH EQUIVALENTS - 3.6%
SHARES (000S) VALUE (NOTE 1) (000S)
Municipal Central Cash Fund 23,901 $ 23,901
(c)(d) (Cost $23,901)
TOTAL INVESTMENT IN $ 666,756
SECURITIES - 100%
(Cost $653,487)
</TABLE>
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(d) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 2.95%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(e) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(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 investments in securities, is as follows (ratings
are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 84.4% AAA, AA, A 84.0%
Baa 7.5% BBB 4.7%
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 Moody's or S&P amounted to 1.2%.
OTHER INFORMATION
The distribution of municipal securities by revenue source, as a
percentage of total value of investments in securities, is
as follows:
General Obligations 35.8%
Electric Utilities 19.6%
Escrowed/Pre-Refunded 12.0%
Education 8.0%
Special Tax 6.5%
Transportation 5.2%
Others individually less than 12.9%
1%
TOTAL 100.0%
INCOME TAX INFORMATION
At February 28, 1999, the aggregate cost of investment securities for
income tax purposes was $653,487,000. Net unrealized appreciation
aggregated $13,269,000, of which $13,321,000 related to appreciated
investment securities and $52,000 related to depreciated investment
securities.
At August 31, 1998, the fund had a capital loss carryforward of
approximately $1,749,000 of which $837,000 and $912,000 will expire on
August 31, 2003 and 2004, respectively.
At August 31, 1998, the fund was required to defer approximately
$380,000 of losses on futures contracts.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) FEBRUARY
28, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 666,756
value (cost $653,487) - See
accompanying schedule
Receivable for fund shares 248
sold
Interest receivable 8,357
Other receivables 1
TOTAL ASSETS 675,362
LIABILITIES
Payable for investments $ 7,550
purchased Regular delivery
Delayed delivery 3,324
Payable for fund shares 980
redeemed
Distributions payable 429
Accrued management fee 279
Other payables and accrued 6
expenses
TOTAL LIABILITIES 12,568
NET ASSETS $ 662,794
Net Assets consist of:
Paid in capital $ 649,948
Accumulated undistributed net (423)
realized gain (loss) on
investments
Net unrealized appreciation 13,269
(depreciation) on investments
NET ASSETS, for 65,114 shares $ 662,794
outstanding
NET ASSET VALUE, offering $10.18
price and redemption price
per share ($662,794 (divided
by) 65,114 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED FEBRUARY 28,
1999 (UNAUDITED)
INTEREST INCOME $ 14,537
EXPENSES
Management fee $ 1,770
Non-interested trustees' 1
compensation
Total expenses before 1,771
reductions
Expense reductions (4) 1,767
NET INTEREST INCOME 12,770
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 1,818
Futures contracts (113) 1,705
Change in net unrealized 154
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 1,859
NET INCREASE (DECREASE) IN $ 14,629
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED FEBRUARY 28, YEAR ENDED AUGUST 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 12,770 $ 28,736
Net realized gain (loss) 1,705 3,674
Change in net unrealized 154 3,903
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,629 36,313
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (12,770) (28,736)
from net interest income
Share transactions Net 111,939 218,070
proceeds from sales of shares
Reinvestment of 9,920 23,954
distributions from net
interest income
Cost of shares redeemed (109,943) (326,250)
NET INCREASE (DECREASE) IN 11,916 (84,226)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 13,775 (76,649)
IN NET ASSETS
NET ASSETS
Beginning of period 649,019 725,668
End of period $ 662,794 $ 649,019
OTHER INFORMATION
Shares
Sold 10,987 21,596
Issued in reinvestment of 974 2,373
distributions
Redeemed (10,799) (32,320)
Net increase (decrease) 1,162 (8,351)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED FEBRUARY 28, YEARS ENDED AUGUST 31,
1999
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.040 $ 9.930 $ 9.980 $ 9.840 $ 10.090
period
Income from Investment .200 .419 .425 .418 .429 .443
Operations Net interest
income
Net realized and unrealized .030 .110 .110 (.050) .140 (.240)
gain (loss)
Total from investment .230 .529 .535 .368 .569 .203
operations
Less Distributions
From net interest income (.200) (.419) (.425) (.418) (.429) (.443)
In excess of net realized - - - - - (.010)
gain
Total distributions (.200) (.419) (.425) (.418) (.429) (.453)
Net asset value, end of $ 10.180 $ 10.150 $ 10.040 $ 9.930 $ 9.980 $ 9.840
period
TOTAL RETURN B, C 2.28% 5.37% 5.49% 3.75% 5.95% 2.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 663 $ 649 $ 726 $ 791 $ 909 $ 1,083
millions)
Ratio of expenses to average .55% A .55% .55% .54% D .55% .47% D
net assets
Ratio of net interest income 3.97% A 4.15% 4.25% 4.17% 4.38% 4.45%
to average net assets
Portfolio turnover rate 31% A 33% 32% 78% 51% 44%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended February 28, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Short-Intermediate 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, as an open-end management
investment company organized as a Massachusetts business trust. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. 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.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
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 substantially 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
among 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 transactions, market discount and capital loss
carryforwards. 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 the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
investments may include temporary book and tax basis differences that
will reverse in a subsequent period. Any taxable 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc., an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities is fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery 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
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, if the counterparty does not perform under the contract,
or if the issuer does not issue the securities due to political,
economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends 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 or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $112,651,000 and $95,831,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $9,342,000 and $9,455,000, 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 annualized rate of 0.55% of the fund's average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM 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.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the
fund's custodian and transfer agent whereby credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's expenses were
reduced by $4,000 under these arrangements.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Norman Lind, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
STM-SANN-0499 74206
1.701069.101
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO and
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S MUNICIPAL BOND FUNDS
Spartan(registered trademark) Arizona Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com