-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NOaI7dA4NcFK5GX5HpBshGMvR0zuSW9d2wPPhUGZCQoccIVxNyokJVazzjNA9WgF f5s/yHWFEJWAlwJ9cbC7mA== 0000035330-95-000008.txt : 19950414 0000035330-95-000008.hdr.sgml : 19950414 ACCESSION NUMBER: 0000035330-95-000008 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950411 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY UNION STREET TRUST CENTRAL INDEX KEY: 0000035330 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046343201 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02460 FILM NUMBER: 95528170 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391706 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE ST. STREET 2: MAIL ZONE ZH1 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY DAILY INCOME TRUST DATE OF NAME CHANGE: 19900626 N-30D 1 (2_FIDELITY_LOGOS)SPARTAN(registered trademark) SHORT-INTERMEDIATE MUNICIPAL FUND SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 23 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 27 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income to measure performance. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 PAST 5 LIFE OF MONTHS YEAR YEARS FUND Spartan Short-Intermediate 1.91% 2.58% 33.50% 49.45% Municipal Lehman Brothers Municipal Bond 2.80% 1.88% 46.94% n/a Index Average Short Municipal Bond Fund 1.52% 2.10% 30.85% n/a Consumer Price Index 1.28% 2.86% 17.89% 36.56% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on December 24, 1986. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Lehman Brothers Municipal Bond Index - a broad measure of the municipal bond market. To measure how the fund's performance stacked up against its peers, you can compare it to the average short municipal bond fund, which reflects the performance of 45 similar municipal bond funds tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI returns begin on the month end closest to the fund's start date.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Spartan Short-Intermediate Municipal 2.58% 5.95% 5.03% Lehman Brothers Municipal Bond Index 1.88% 8.00% n/a Average Short Municipal Bond Fund 2.10% 5.52% n/a Consumer Price Index 2.86% 3.35% 3.89% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Spartan Short-IntermMunicipal Bond Index 12/31/86 10000.00 10000.00 01/31/87 10054.19 10301.10 02/28/87 10117.69 10351.78 03/31/87 10080.93 10242.05 04/30/87 9812.59 9728.11 05/31/87 9797.34 9679.85 06/30/87 9956.04 9964.06 07/31/87 10032.45 10065.69 08/31/87 10016.91 10088.34 09/30/87 9828.72 9716.38 10/31/87 9745.55 9750.78 11/30/87 9964.64 10005.37 12/31/87 10026.49 10150.55 01/31/88 10214.94 10512.11 02/29/88 10245.99 10623.22 03/31/88 10180.98 10499.46 04/30/88 10232.40 10579.26 05/31/88 10264.93 10548.68 06/30/88 10288.76 10703.01 07/31/88 10334.17 10772.79 08/31/88 10328.99 10782.27 09/30/88 10402.52 10977.43 10/31/88 10466.30 11171.18 11/30/88 10452.79 11068.86 12/31/88 10517.08 11182.09 01/31/89 10579.27 11413.34 02/28/89 10541.79 11283.11 03/31/89 10524.02 11256.14 04/30/89 10585.63 11523.36 05/31/89 10703.42 11762.71 06/30/89 10787.88 11922.44 07/31/89 10895.39 12084.71 08/31/89 10922.28 11966.40 09/30/89 10939.95 11930.50 10/31/89 11024.77 12076.05 11/30/89 11100.67 12287.38 12/31/89 11179.78 12388.14 01/31/90 11185.47 12329.91 02/28/90 11275.66 12439.65 03/31/90 11319.98 12443.38 04/30/90 11301.90 12353.79 05/31/90 11405.67 12623.10 06/30/90 11462.06 12734.19 07/31/90 11553.83 12921.38 08/31/90 11573.00 12734.02 09/30/90 11641.87 12741.66 10/31/90 11728.47 12972.28 11/30/90 11837.33 13233.03 12/31/90 11897.08 13291.25 01/31/91 12006.73 13469.35 02/28/91 12080.45 13586.54 03/31/91 12129.01 13591.97 04/30/91 12243.41 13772.74 05/31/91 12317.14 13895.32 06/30/91 12351.13 13881.43 07/31/91 12435.87 14050.78 08/31/91 12534.74 14236.25 09/30/91 12634.01 14421.32 10/31/91 12717.80 14551.11 11/30/91 12774.13 14591.86 12/31/91 12950.17 14905.58 01/31/92 13005.05 14939.86 02/29/92 13057.09 14944.35 03/31/92 13063.49 14950.32 04/30/92 13148.56 15083.38 05/31/92 13221.15 15261.37 06/30/92 13330.37 15517.76 07/31/92 13535.01 15983.29 08/31/92 13480.29 15826.65 09/30/92 13547.53 15929.53 10/31/92 13546.29 15773.42 11/30/92 13668.06 16055.76 12/31/92 13750.97 16219.53 01/31/93 13889.29 16407.68 02/28/93 14133.74 17001.63 03/31/93 14090.31 16821.42 04/30/93 14157.50 16991.31 05/31/93 14212.39 17086.47 06/30/93 14307.64 17371.81 07/31/93 14319.09 17394.39 08/31/93 14473.17 17756.20 09/30/93 14569.02 17958.62 10/31/93 14595.30 17992.74 11/30/93 14575.48 17834.40 12/31/93 14730.29 18210.71 01/31/94 14828.46 18418.31 02/28/94 14674.59 17941.28 03/31/94 14422.25 17211.07 04/30/94 14476.71 17357.36 05/31/94 14562.86 17508.37 06/30/94 14586.36 17406.82 07/31/94 14715.89 17725.36 08/31/94 14770.43 17787.40 09/30/94 14732.88 17525.93 10/31/94 14681.29 17213.97 11/30/94 14599.74 16902.39 12/31/94 14717.76 17274.25 01/31/95 14881.05 17768.29 02/28/95 15053.91 18285.35 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Short-Intermediate Municipal Fund on December 31, 1986, shortly after the fund started. As the chart shows, by February 28, 1995, the value of your investment would have grown to $15,054 - a 50.54% increase on your initial investment. This assumes you still owned the fund on February 28, 1995, and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Lehman Brothers Municipal Bond Index - which includes longer term bonds - did over the same period. With dividends reinvested, the same $10,000 would have grown to $18,285 - an 82.85% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) TOTAL RETURN COMPONENTS SIX MONTHS YEARS ENDED AUGUST 31, ENDED FEBRUARY 28, 1995 1994 1993 1992 1991 1990 Dividend return 2.22% 4.43% 4.82% 5.47% 6.30% 5.96% Capital appreciation -0.31 -2.38% 2.53% 2.06% 2.00% -0.01% return % Total return 1.91% 2.05% 7.35% 7.53% 8.30% 5.95% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST MONTH MONTHS YEAR Dividends per share 3.30(cents) 21.48(cents) 43.73(cents) Annualized dividend rate 4.40% 4.46% 4.48% 30-day annualized yield 4.54% - - 30-day annualized tax-equivalent 7.09% - - yield DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.77 over the past month, $9.72 over the past six months and $9.77 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 36% federal tax bracket. FUND TALK: THE MANAGER'S OVERVIEW An interview with David Murphy, Portfolio Manager of Spartan Short-Intermediate Municipal Fund Q. DAVID, HOW HAS THE FUND PERFORMED? A. Better than average. For the six months ended February 28, 1995, the fund had a total return of 1.91%. That outpaced the average short municipal bond fund's return of 1.52% for the same period, according to Lipper Analytical Services. For the year ended February 28, 1995, the fund returned 2.58%, compared to the average short fund's return of 2.10%, again according to Lipper. Q. IN YOUR VIEW, WHAT DROVE THE MUNICIPAL BOND MARKET'S PERFORMANCE DURING THE PAST SIX MONTHS? A. We need to look back to early 1994 to set the stage for what happened during the past six months. From February through August last year, the Federal Reserve Board raised short-term interest rates by 1.75% to 4.75% in an effort to stave off inflation. Rising interest rates, coupled with fears of inflation and technical market factors, made for an extended period of volatility in which intermediate and long-term bonds - taxable and tax-free alike - fell. Bond prices briefly stabilized in the summer. But from September until about mid-November, the market began to fall again. That occurred in part because many investors sold municipal bonds for tax purposes, locking in their 1994 municipal bond losses to offset investment gains from other areas. That tax-loss selling - and another short-term interest rate hike of 0.75% in November- put additional pressure on municipal bond prices. From mid-December through the end of February, however, the market rebounded as tax-loss selling abated, the supply of municipal bonds fell, and investors began to believe that the economy's strong fourth-quarter 1994 performance could slow a bit in 1995. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE? A. The fund's duration - which measures how sensitive its share price is to changes in interest rates - was slightly long compared to other funds of its type. A longer duration means that the fund is more sensitive to changes in interest rates. Having a relatively long duration hurt the fund's performance when rates were rising in October and November, but helped it when the market rallied from December through February. Also, because the yield curve - or the difference in yields that bonds of various maturities pay - was steep, the extra yield from longer-term bonds helped offset much of the earlier price decline. Another factor which helped the fund's performance was its relatively high level of income. Q. WHAT TYPE OF BONDS HELP THE FUND GENERATE HIGH INCOME? A. Mostly student loan bonds, which come under the classification of education bonds, and made up about 28.8% of the fund's investments on February 28, 1995. These bonds are generally rated A or higher by Moody's Investors Service, which is an investment-grade rating. However, they can pay as much as 0.50% more in yield than similarly rated bonds. That's because they carry the risk of being prepaid. However, now that interest rates have risen, there isn't much of an incentive for borrowers to pay these loans off early. Q. WERE THERE ANY CHANGES IN THE WAY YOU ALLOCATED THE FUND'S INVESTMENTS AMONG STATES? A. One noticeable change was that I reduced the fund's holdings in Louisiana to 5.4% from 8.9% six months ago. Many of these bonds did quite well during the period, so I reduced the fund's exposure to them in favor of other opportunities. Massachusetts remained the fund's largest state concentration, and stood at 16.5% of investments at the end of the period. Continuing economic and fiscal improvements in the state made Massachusetts bonds more attractive. California was the fund's second largest state concentration at 10.9% at the end of the period, up from 7.7% six months earlier. Most of the bonds I purchased within the last six months were pre-refunded, meaning their principal and interest payments are backed by U.S. Treasury securities. As a result, these bonds carry the highest credit rating. Because pre-refunded bonds have generally done well recently, I am starting to reduce the fund's stake in them in favor of other types of bonds. Q. SUCH AS . . . A. High-quality premium bonds, which sell above face value. Recently, the law changed regarding the tax treatment of investment gains on bonds. Under the new tax law, if a bond is bought at a discount - below face value - and is sold at a gain, that gain is taxed as ordinary income, not at the lower capital gains rate. Many investors now tend to avoid discount bonds and the demand for them is more restricted. As a result, premium bonds are now more attractive. At the end of the period, premium bonds made up over half of the fund's total investments. Q. DO YOU THINK1995 LOOKS MORE POSITIVE FOR THE MUNICIPAL BOND MARKET? A. I think the Federal Reserve Board will raise interest rates one or two more times, which would have more of an impact on short-term bond prices than long-term bond prices. But it appears that the municipal bond market is starting to anticipate that we're nearing the end of the Fed's actions to raise interest rates. What's more, fixed-income investments, with their relatively high current yields, are attractive compared to other investments. I believe that these yields could help attract investors, which ultimately could benefit the municipal market. FUND FACTS GOAL: to provide a current income exempt from federal income taxes by investing in higher-grade and upper medium-grade securities START DATE: December 24, 1986 SIZE: As of February 28, 1995, more than $920 million MANAGER: David Murphy, since December 1989; manager, Spartan California Intermediate Municipal Portfolio, since 1993; Spartan New York Intermediate Portfolio, since 1993; Spartan Intermediate Municipal Fund, since April 1993; Spartan New Jersey Municipal High Yield Portfolio, since 1991; Fidelity Limited Term Municipals, since 1989; joined Fidelity in 1989 (checkmark) DAVID MURPHY ON HIS INVESTMENT STRATEGY: "During the fall of 1994, I used a strategy known as a barbell. If you picture a barbell, the ends are heavy and the middle is light. On one end of the barbell, I bought bonds with maturities of between five and seven years. Because the yield curve - meaning the difference in yield that bonds of various maturities pay - was steep at that time, intermediate bonds in the five- to seven-year range added additional yield to the fund. I balanced the additional interest rate risk of those bonds with securities that matured in one-and-a-half years. However, by the end of the period the yield curve was relatively flat, so that there now isn't much incentive to take on the added risk of intermediate bonds in the five-to-seven-year range. So I have begun to "bullet" the fund, concentrating its holdings in bonds in the two- to four-year range." INVESTMENT CHANGES TOP FIVE STATES AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Massachusetts 16.5 11.2 California 10.9 7.7 Texas 8.1 9.8 Louisiana 5.4 8.9 Montana 4.8 4.2 TOP FIVE SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Education 31.7 28.9 General Obligation 19.0 22.7 Escrowed/Pre-Refunded 14.7 11.3 Electric Revenue 10.1 10.4 Transportation 6.9 5.5 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 3.3 3.4 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 2.8 3.1 DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994 Row: 1, Col: 1, Value: 3.4 Row: 1, Col: 2, Value: 1.8 Row: 1, Col: 3, Value: 2.7 Row: 1, Col: 4, Value: 43.1 Row: 1, Col: 5, Value: 49.0 Row: 1, Col: 1, Value: 6.8 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 3.0 Row: 1, Col: 4, Value: 44.0 Row: 1, Col: 5, Value: 45.0 Aaa, Aa, A 93.1% Baa 2.3% Non-rated 1.2% Short-term investments 3.4% Aaa, Aa, A 90.5% Baa 2.5% Non-rated 0.2% Short-term investments 6.8% WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities MUNICIPAL BONDS - 96.6% PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) ALASKA - 3.7% Alaska Student Loan Corp. Student Loan Rev. 6.90% 7/1/96, (AMBAC Insured) (d) $ 3,800 $ 3,900 North Slope Borough: Rfdg.: Series G, 8.35% 6/30/98, (MBIA Insured) 8,000 8,740 Series 1988 G, 7.50% 6/30/97, (AMBAC Insured) 9,015 9,466 Series B, 0% 1/1/99, (MBIA Insured) 7,450 5,979 Gen. Oblig. Series B, 6.10% 6/30/99, (Capital Guaranty Insured) 6,500 6,671 34,756 ARIZONA - 4.5% Arizona Trans. Board Excise Tax Rev. (Maricopa County Reg. Area) 7.40% 7/1/98 3,750 4,017 Maricopa County School Dist. #4 Mesa Unified: Rfdg. 6% 7/1/97, (AMBAC Insured) 5,000 5,137 (Cap. Appreciation) 0% 7/1/98, (FGIC Insured) 2,600 2,194 (Mesa Elementary) Series D, 6% 7/1/01, (Pre-Refunded to 7/1/98 @ 101) (FGIC Insured) (e) 9,300 9,672 Phoenix Arpt. Rev. Rfdg. Series A: 4.80% 7/1/96, (MBIA Insured) (a) 2,880 2,887 5.05% 7/1/97, (MBIA Insured) (a) 2,885 2,903 5.40% 7/1/99, (MBIA Insured) (a) 6,070 6,138 Phoenix Civic Impt. Corp. (Arpt. Impts.) Series A, Excise Tax Rev. Rfdg. (a)(d): 5.25% 7/1/97 2,845 2,845 5.60% 7/1/99 3,240 3,260 5.75% 7/1/00 2,000 2,020 5.85% 7/1/01 1,000 1,011 42,084 CALIFORNIA - 9.8% Brea California Redev. Agcy. 8.40% 9/15/05, (Pre-Refunded to 9/15/96 @ 102.50) (e) 5,675 6,136 California Pub. Works Board Lease Rev.: (Dept. of Corrections) Rfdg. Series A, 4.50% 12/1/98, (AMBAC Insured) 4,600 4,410 (Dept. of Corrections State Prisons) Series E: 4.50% 6/1/00 4,035 3,752 4.625% 6/1/01 4,795 4,429 Clovis Unified School Dist. Spl. Tax Series B, (Cap. Appreciation) 0% 8/1/00, (MBIA Insured) 7,000 5,276 Los Angeles Dept. of Wtr. and Pwr. Rev.: Second Issue (Electric Plant) 9% 10/15/00 1,300 1,537 9% 10/15/01 2,000 2,407 Los Angeles Ctfs. of Prtn. 8.125% 6/1/08, (Pre-Refunded to 6/1/97 @ 102) (e) 6,000 6,532 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) CALIFORNIA - CONTINUED Los Angeles Wastewtr. Sys. Rev. Series B, 9% 6/1/96, (AMBAC Insured) $ 2,305 $ 2,414 Mountain View Ctfs. of Prtn. 7.90% 12/1/08, (Pre-Refunded to 12/1/97 @ 102) (e) 6,835 7,484 Northern California Pwr. Agcy. Pub. Pwr. Rev.: Rfdg. (Geothermal Proj. #3) Series A, 8.80% 7/1/95 2,750 2,788 7.75% 7/1/99, (Pre-Refunded to 7/1/96 @ 102) (e) 1,585 1,682 7.80% 7/1/00, (Pre-Refunded to 7/1/96 @ 102) (e) 1,990 2,112 7.80% 7/1/01, (Pre-Refunded to 7/1/96 @ 102) (e) 1,455 1,544 7.875% 7/1/06, (Pre-Refunded to 7/1/96 @ 102) (e) 3,495 3,713 Pasadena Ctfs. of Prtn. (Cap. Impt. Proj.) 6.75% 8/1/15, (Pre-Refunded to 8/1/00 @ 102) (e) 7,500 8,231 Rancho Wtr. Dist. Ctfs. of Prtn. (Pre-Refunded to 9/1/97 @ 102) (FGIC insured) (e): 8% 9/1/00 1,085 1,187 8.40% 9/1/07 5,500 6,064 Rosemead Redev. Agcy. (Sub. Lien Tax Allocation Proj. Area 1) (Escrowed to Maturity) (e): 0% 10/1/96 2,235 2,078 0% 10/1/97 1,875 1,655 0% 10/1/98 1,000 835 0% 10/1/99 2,205 1,742 Sacramento Ctfs. of Prtn. 8% 8/1/05, (Pre-Refunded to 8/1/97 @ 102.5) (e) 5,830 6,391 San Bernardino County Ctfs. of Prtn. (Medical Center Fing. Proj.) 4.75% 8/1/00 4,000 3,825 Univ. of California Rev. Rfdg. (Multi-Purp. Projs.) Series C, 10% 9/1/99, (AMBAC Insured) 2,605 3,100 91,324 COLORADO - 3.3% Aurora Ctfs. of Prtn. Rfdg. 4.75% 12/1/96 500 498 Boulder County Sales & Use Spl. Tax Rev. 5.40% 12/15/01, (FGIC Insured) 500 506 Colorado Ctfs. of Prtn. (Rfdg. & Acquisition Projs.): 4.75% 5/1/97, (AMBAC Insured) 4,000 4,000 4.75% 11/1/97, (AMBAC Insured) 2,750 2,750 Denver City & County Arpt. Rev.: (Stapleton Int'l. Arpt.) 10% 12/1/95, (Escrowed to Maturity) (e) 200 208 Series B, 4.25% 12/1/25, (LOC Sumitomo Bank) 15,000 14,944 Jefferson County School Dist. #R-1 Rfdg. Series A, 5.50% 12/15/01 5,000 4,956 Pueblo Wtr. Rfdg. Series 1984 B, 9.50% 11/1/98, (MBIA Insured) 2,250 2,624 30,486 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) CONNECTICUT - 0.3% Connecticut Resources Recovery Auth. Rev. (Bridgeport Resco Co. LP Proj.) Series B: 8.10% 1/1/96 $ 1,460 $ 1,491 8.20% 1/1/97 1,490 1,548 3,039 DELAWARE - 0.6% Delaware Trans. Auth. Trans. Sys. Rev.: 7.50% 7/1/02, (MBIA Insured) 3,500 3,776 Jr. 7.75% 7/1/06, (Pre-Refunded to 7/1/98 @ 101.50) (MBIA Insured) (e) 1,500 1,648 5,424 DISTRICT OF COLUMBIA - 0.8% District of Columbia: Gen. Oblig. Series E, 5% 6/1/02, (FGIC Insured) 3,850 3,653 Series E, 4.75% 6/1/00, (FGIC Insured) 1,825 1,731 Unltd. Tax Series B, 5.50% 6/1/98, (MBIA Insured) 2,165 2,173 7,557 FLORIDA - 0.9% Florida Lease Ctfs. of Prtn. (Consolidated Equip. Prog.) : 5.75% 11/15/95 2,310 2,336 5.90% 5/15/96 5,865 5,909 8,245 GEORGIA - 0.4% Gwinnett County Wtr. & Swr. Ctfs. of Prtn. 7.75% 8/1/96 3,850 4,023 HAWAII - 0.3% Hawaii Arpts. Sys. Rev.: Rfdg. Series 1993, 5.10% 7/1/97, (MBIA Insured) 1,860 1,867 2nd Series, 7.40% 7/1/02, (FGIC Insured) (d) 1,000 1,108 2,975 ILLINOIS - 2.7% Illinois Edl. Facs. Auth. Rev. (DePaul Univ.) Series A, 9.10% 10/1/97, (Pre-Refunded to 10/1/95 @ 103) (e) 500 528 Illinois Scholarship Commission Student Loan Rev.: Series G, 8.10% 3/1/98 (Pre-Refunded to 3/1/95 @ 102) (d)(e) 3,500 3,570 Series I, 0.02% 3/1/96 (d) 8,725 8,321 McHenry County Conservation Dist. (Cap. Appreciation) 0% 2/1/96, (AMBAC Insured) 1,630 1,565 Metropolitan Pier & Export Auth. Dedicated Tax Rev. (McCormick Place Expansion Proj.): 0% 6/15/95, (AMBAC Insured) 2,500 2,472 Series A, 0% 6/15/96, (AMBAC Insured) 4,055 3,832 Metropolitan Wtr. Reclamation Dist. of Greater Chicago (Cap. Impt.) 5.55% 12/1/98 3,500 3,513 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) ILLINOIS - CONTINUED Rock Island County Ctfs. of Prtn.: 10% 12/1/95, (FGIC Insured) $ 790 $ 824 10% 12/1/96, (FGIC Insured) 840 919 25,544 KANSAS - 0.4% Johnson Cnty. Unified School Dist. #233 Rfdg. & Impt. 8% 9/1/99, (AMBAC Insured) 3,050 3,393 KENTUCKY - 2.3% Louisville & Jefferson County (Reg. Arpt. Auth. Arpt. Sys.) Rev. Series C, 4.75% 7/1/00, (MBIA Insured) (d) 6,480 6,334 Owensboro Elec. Lt. and Pwr. Rev. Rfdg. Series B: 0% 1/1/96, (AMBAC Insured) 1,425 1,375 0% 7/1/96, (AMBAC Insured) 1,400 1,321 0% 1/1/97, (AMBAC Insured) 3,025 2,783 0% 7/1/97, (AMBAC Insured) 1,000 899 0% 1/1/98, (AMBAC Insured) 2,000 1,745 0% 1/1/99, (AMBAC Insured) 3,300 2,727 0% 1/1/01, (AMBAC Insured) 5,450 3,999 21,183 LOUISIANA - 5.1% East Baton Rouge Parish Sales and Use Tax (Pub. Impt.) 12% 2/1/97, (MBIA Insured) 1,000 1,134 Jefferson Sales Tax Dist. Spl. Sales Tax Rev. Series A, 6.25% 12/1/98, (FGIC Insured) 3,000 3,146 Louisiana Pub. Facs. Auth. Rev.: (Browning-Ferris Ind., Inc.) 3.85% 11/1/96 (d) 5,000 4,900 (Loyola Univ.) 9% 10/1/95 9,710 9,953 (Student Loan): Sr. Series A-2, 5.90% 3/1/98 (d) 3,000 3,056 Sr. Series A-1, 5.90% 3/1/99 2,140 2,169 (Supplemental Student Loan): Series B, 8.125% 12/1/99, (AMBAC Insured) 8,545 9,592 Series C, 8.125% 12/1/99, (AMBAC Insured) 4,065 4,563 Louisiana Gen. Oblig.: Rfdg. Series A, 6.40% 8/1/96 3,000 3,053 Series A: 6.50% 9/1/95 1,000 1,008 8% 5/1/98, (MBIA Insured) 1,000 1,081 8% 9/1/95 3,365 3,415 Ouachita Parish Hosp. Svc. Dist. #1 Rev. (Glenwood Regional Med. Ctr.): 6.50% 7/1/95 395 396 6.70% 7/1/96 475 483 47,949 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) MAINE - 1.4% Maine Edl. Loan Auth. Edl. Loan Rev.(Supplemental Ed. Loan Prog.) Series A-1, 5.60% 12/1/96 (d) $ 2,720 $ 2,744 Maine Edl. Loan. Marketing Corp. Student Loan Rev. Rfdg. (d): Series A-1, 4.95% 5/1/96 1,200 1,199 Series A-1, 5.20% 5/1/97 1,750 1,748 6.20% 11/1/95 7,250 7,304 12,995 MARYLAND - 0.7% Northeast Waste Disp. Auth. Resources Recovery Rev. Rfdg. (Southwest Resource Recovery Fac.) 6.85% 1/1/99, (MBIA Insured) 4,000 4,240 Prince Georges County 6.2% 3/15/99, (MBIA Insured) 1,985 2,057 6,297 MASSACHUSETTS - 16.5% Massachusetts Bay Trans. Auth. 1985 Series A, 8.60% 3/1/04 (Pre-Refunded to 3/1/95 @ 103) (e) 300 309 Massachusetts Gen. Oblig.: Series A: Consolidated Loan (Cap. Appreciation) 0% 6/1/97 1,930 1,718 (Dedicated Income Tax) 7.875% 6/1/97 28,200 29,821 (Dedicated Income Tax) 7.875% 6/1/97, (FGIC Insured) 9,930 10,526 9.25% 7/1/00 4,500 5,304 Massachusetts Health & Edl. Facs. Auth. Rev. (Salem Hosp.) Series A, 6.75% 7/1/00 (Pre-Refunded to 7/1/97 @ 100) (e) 4,720 4,932 Massachusetts Ind. Fin. Agcy. Rev.: Rfdg. (Morton Hosp. & Med. Ctr.) Series A, 8.75% 7/1/11 (Pre-Refunded to 7/1/99 @ 102) (e) 4,075 4,645 (Massachusetts Biomedical Research) Series A-1: 7.10% 8/1/99 4,500 4,770 (Cap. Appreciation) 0% 8/1/00 4,510 3,332 New England Ed. Loan Marketing Corp. Rfdg. (Massachusetts Student Loan) Series E, 5% 7/1/99 (b) 25,400 24,765 New England Ed. Loan Marketing Corp. Rev. Rfdg. (Mass. Student Loan): Sr. Issue D, 6% 9/1/99 7,000 7,245 Series A, 6.00% 9/1/98 11,500 11,845 Series B, 5.40% 6/1/00 10,500 10,356 Series G: 4.70% 8/1/98 6,600 6,435 5% 8/1/00 8,350 8,079 Series H, 4.75% 12/1/99 20,000 19,250 153,332 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) MICHIGAN - 1.8% Detroit, Michigan Gen. Oblig. Rfdg. (Distributable Aid) 3.40% 5/1/95, Non-Callable, (AMBAC Insured) $ 4,240 $ 4,229 Detroit, Michigan Convention Fac. Rev. (Cobo Hall Expansion Project) Rfdg.: 3.75% 9/30/96 2,090 2,051 4% 9/30/97 2,000 1,943 4.75% 9/30/00 5,220 5,011 4.80% 9/30/01 3,855 3,672 16,906 MINNESOTA - 0.8% Southern Minnesota Muni. Pwr. Agcy. Pwr.: 4.40% 1/1/00 2,500 2,387 5.10% 1/1/00, (Escrowed to Maturity) (e) 1,430 1,435 5.10% 1/1/99 2,945 2,941 Western Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev. Series A 8.45% 1/1/96 500 517 7,280 MISSISSIPPI - 1.6% Mississippi Higher Ed. Assist Corp. Student Loan Rev. Series B, 4.80% 9/1/98 (d) 15,500 15,248 MONTANA - 4.8% Montana Dept. Hwy. Trans. Rev. Rfdg. 4.50% 7/1/98 2,000 1,990 Montana Higher Ed. Student Assistance Corp. Student Loan Rev. (d): Sr. Series A, 4.75% 12/1/98 1,600 1,590 Sr. Series B: 4.50% 12/1/97 3,770 3,742 4.70% 12/1/98 9,225 9,144 4.90% 12/1/99 12,420 12,311 Series B: 4.30% 12/1/96 3,500 3,474 6.20% 12/1/97 4,190 4,284 6.40% 6/1/98 3,765 3,864 6.40% 12/1/98 4,330 4,454 44,853 MULTIPLE STATES - 1.1% California Higher Ed. Loan Student Loan Auth. Rev. Rfdg. Series E-2, 5.70% 12/1/98 (d) 4,000 4,055 New England Ed. Loan Marketing Corp. Student Loan Rev. Rfdg. Sr. Issue D, 6.20% 9/1/00 1,100 1,149 Washington DC Metro Area Transit Auth. Gross Rev. Rfdg. 4.60% 1/1/02, (FGIC Insured) 4,930 4,597 9,801 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) NEW HAMPSHIRE - 1.6% New Hampshire Higher Edl. & Health Facs. Auth. Rev. (Frisbie Mem. Hosp.) 9.50% 10/1/08 (Pre-Refunded to 10/1/97 @ 103) (e) $ 13,500 $ 15,356 NEW JERSEY - 2.6% Jersey City School Unltd. Tax 6.40% 2/15/96 1,675 1,698 New Jersey Health Care Facs. Fing. Auth. Rev. (Atlantic City Med. Ctr.): Series B, 8.375% 8/1/20, (Pre-Refunded to 2/1/98 @102) (FHA Guaranteed) (e) 6,820 7,579 Series C: 5.30% 7/1/95 3,615 3,624 5.60% 7/1/96 3,300 3,337 5.80% 7/1/97 4,005 4,070 6.45% 7/1/02 3,500 3,596 23,904 NEW MEXICO - 2.2% New Mexico Edl. Assistance Foundation Student Loan Rev. (d): Sr. Series: 1-A, 4.80% 12/1/95 1,750 1,754 IV-A1: 6.40% 3/1/03 (a) 5,375 5,496 6.50% 3/1/04 (a) 3,370 3,475 Series A: 6.05% 4/1/97, (AMBAC Insured ) 2,025 2,055 6.255% 4/1/98, (AMBAC Insured) 4,775 4,882 6.55% 4/1/00, (AMBAC Insured) 2,700 2,805 20,467 NEW YORK - 2.3% New York City Ind. Dev. Agcy. (Term. One Group Assoc. Proj.) Spl. Fac. Rev. 5.40% 1/1/01 (d) 1,000 979 New York State Gen. Oblig. Crossover Rfdg.: 7.80% 11/15/98 12,820 13,862 7.80% 11/15/99 3,780 4,158 New York City Muni. Wtr. Fing. Auth. Rev. (Wtr. & Swr. Sys.) Series B, 4.75% 6/15/01 3,000 2,888 21,887 NEW YORK & NEW JERSEY - 1.1% New York & New Jersey Port Auth. Series SS, 4.90% 9/1/97 (d) 10,000 9,974 NORTH CAROLINA - 1.7% North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg. Series A, 7.875% 1/1/02 8,000 8,870 North Carolina Muni. Pwr. Agcy. Rev. #1 (Catawba Elec.) 4.20% 1/1/98 7,000 6,816 15,686 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) NORTH DAKOTA - 0.3% North Dakota Student Loan Rev. Rfdg. Series A, 5.70% 7/1/97 $ 2,315 $ 2,350 OHIO - 1.4% Cincinnati City School Dist.: Ltd. Tax 5.40% 6/1/96 4,000 4,010 5.35% 6/15/96 1,700 1,700 Franklin County Rev. (OCLC-Online Computer Library Ctr.): Series 1991, 6% 7/15/95 745 747 Series 1993, 4.70% 4/15/96 270 268 Montgomery County Hosp. Facs. Rev. (Miami Valley Hosp.) Series A, 9% 12/1/96 1,500 1,575 Ohio Dev. Commty. (Globe Ind. Proj.) Series 1, 7.75% 6/1/96, (d) 695 698 Student Loan Funding Corp. Ohio Student Loan Series A, 5.50% 12/1/01 (d) 4,000 3,950 12,948 OKLAHOMA - 0.3% Oklahoma Student Loan Auth. Rev. Rfdg. (Student Loan) Series A, 5.35% 9/1/96 (d) 1,930 1,928 Tulsa Ind. Auth. Hosp. Rev. (Tulsa Reg'l. Med. Ctr.): Series A, 7% 6/1/96 500 509 6.75% 6/1/95 500 502 2,939 OREGON - 0.2% Tri City Svc. Dist. Oregon Advanced Swr. Rfdg. 5% 9/1/00 2,100 2,069 PENNSYLVANIA - 2.4% Erie County School Dist. (Cap. Appreciation) (Escrowed to Maturity) (e): 0% 6/1/96 785 743 0% 12/1/96 1,125 1,036 0% 6/1/97 1,435 1,290 0% 12/1/97 1,405 1,233 0% 6/1/98 905 776 0% 12/1/98 1,770 1,476 Northampton County Ind. Dev. Auth. Rev. (Poll. Cont.) (Metro Edison Co.) 10.50% 9/1/95 4,000 4,115 Philadelphia Gas Wks. Rev. Fifteenth Series Rfdg.: 4.10% 8/1/99, (AMBAC Insured) 2,000 1,875 4.10% 8/1/99, (MBIA Insured) 3,845 3,600 4.25% 8/1/00, (AMBAC Insured) 2,325 2,162 Philadelphia School Dist. Rfdg. Series A, 6.25% 7/1/97, (AMBAC Insured) 3,500 3,596 21,902 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) RHODE ISLAND - 2.1% Rhode Island Consolidated Cap. Loan Unltd. Tax Rev. 8% 8/1/98 $ 4,470 $ 4,861 Rhode Island Student Loan Auth. Student Loan Rev. Rfdg. Series A, 6% 12/1/97 (b) 14,000 14,280 19,141 SOUTH DAKOTA - 0.4% South Dakota Student Loan Fin. Corp. Student Loan Rev. Series A, 5.70% 8/1/99 (d) 3,575 3,602 TEXAS - 8.1% Alamo Community Dist. Rfdg. (Cap. Appreciation): 0% 2/15/99, (AMBAC Insured) 3,530 2,873 0% 2/15/00, (AMBAC Insured) 3,350 2,563 Arlington Independent School Dist. Rfdg. (Cap. Appreciation) 0% 8/15/97, (MBIA Insured) 1,250 1,111 Austin Util. Sys. Rev. Rfdg.: Series A, 0% 11/15/98, (MBIA Insured) 3,000 2,479 Series B, 7% 11/15/98, (FGIC Insured) 5,000 5,312 Austin Wtr. Swr. & Elec. Rev. Rfdg. 11% 11/15/96 12,505 13,584 Brazos Higher Ed. Auth. Student Loan Rev. Rfdg. Series C: 4.95% 6/1/98 (b)(d) 11,700 11,612 5.15% 6/1/99 (d) 9,875 9,789 Colorado River Water Resources Auth. 8.50% 1/1/01 2,200 2,547 Dallas Independent School Dist. Ref. (Cap. Appreciation) 0% 8/15/96 5,000 4,681 Harris County Rfdg. Toll Road Sub. Lien. Rev. Unltd. Tax Rfdg. (Cap. Appreciation) 0% 8/1/01 3,490 2,487 North Texas Higher Ed. Auth. Student Loan Rev. Series B, 4.85% 4/1/98 (d) 4,815 4,761 Panhandle-Plains Higher Ed. Auth. Student Loan Rev. Series C, 4.15% 9/1/97 2,800 2,758 San Antonio Elec. & Gas Rev. 6.40% 2/1/98 3,000 3,064 San Antonio Wtr. 0% 5/1/09, (Pre-Refunded to 5/1/00 @ 102) (AMBAC Insured) (e) 6,415 2,630 Texas Gen. Oblig. Superconducting Series C, (Cap. Appreciation) 0% 4/1/02, (FGIC Insured) 3,000 2,033 Texas Higher Ed. Coordinating Board College Student Loan Rev. (Sr. Lien) 6.60% 4/1/96 (d) 885 899 75,183 UTAH - 1.0% Intermountain Pwr. Agcy. Pwr. Supply Rev.: Rfdg. Series B 0% 7/1/01, (AMBAC Insured) 5,000 3,569 0% 7/1/15 (Pre-Refunded to 7/1/00 @ 101) (b)(e) 7,500 5,738 9,307 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) VERMONT - 0.6% Vermont Student Assistance Corp. Edl. Loan Rev. Rfdg. Fing. Prog. Series A: 6.25% 6/15/98, (AMBAC Insured) $ 3,250 $ 3,356 6.35% 6/15/99, (AMBAC Insured) 2,500 2,597 5,953 WASHINGTON - 4.4% Washington Health Care Facs. Auth. Rev.: (Franciscan Health Sys. St. Francis) 9.25% 7/1/15, (BIG Insured) (Pre-Refunded to 7/1/95 @ 102) (e) 17,175 17,776 (Group Health Coop. Puget Sound Seattle) Series 1988 A, 7.40% 12/1/98, (MBIA Insured) 2,750 2,998 (Pooled Cap. Facs. & Equip.) 7.30% 4/1/96, (MBIA Insured) 580 581 Washington Pub. Pwr. Supply Sys. Rev. Rfdg. (Nuclear Proj. #1) : Series A: 4.625% 7/1/98 2,400 2,310 7.25% 7/1/99 2,760 2,939 6.50% 7/1/02 1,000 1,044 6.50% 7/1/02 2,220 2,317 Series B, 5% 7/1/01 2,500 2,366 Series C: 7.10% 7/1/96 2,235 2,291 7.10% 7/1/98 1,000 1,050 7.70% 7/1/02 2,500 2,788 7.20% 7/1/99 1,000 1,064 (Nuclear Proj. #2) Rev. Rfdg. Series A, 5.10% 7/1/98 1,000 983 40,507 WISCONSIN - 0.1% Milwaukee Wisconsin Rfdg. 4.50% 12/1/98 1,000 968 TOTAL MUNICIPAL BONDS (Cost $905,603) 898,837 MUNICIPAL NOTES (C) - 3.4% CALIFORNIA - 1.1% Ventura County TRAN 4.50% 8/1/95 10,000 9,994 ILLINOIS - 0.9% Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg. (Garden Glen Apts.) Series 93, 4.10%, VRDN 1,000 1,000 Illinois Health Facs. Auth. Rev.: (Central Dupage Hosp. Assoc. Proj.) Series 1990, 3.80%, LOC Industrial Bank of Japan, VRDN 2,200 2,200 (LaGrange Mem. Health Sys.) Series 1990, 3.80%, LOC First Nat'l. Bank of Chicago, VRDN 5,000 5,000 8,200 MUNICIPAL NOTES (C) - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (000S) (000S) LOUISIANA - 0.3% Louisiana Pub. Facs. Auth. Dev. Rev. Ind. Dev. (Kenner Hotel Ltd.) 4%, LOC Long-Term Cr. Bank of Japan, VRDN $ 2,600 $ 2,600 VIRGINIA - 0.8% Campbell County Ind. Dev. Auth. Facs. Rev. (Hadson Pwr. #12-Altavista Proj.) Series 1990-A, 4.25%, LOC Barclays Bank PLC, VRDN (d) 3,000 3,000 Hopewell Ind. Dev. Auth. Rev. (Hadson Pwr. 13-Hopewell Proj.) Series 1990 A, 4.25% LOC Cr. Suisse Bank, VRDN (d) 1,300 1,300 Richmond Ind. Dev. Auth. (Cogentrix of Richmond, Inc.) (d): Series 1991 A, 4.30%, LOC Banque Paribas, VRDN 1,600 1,600 Series 1991 B, 4.30%, LOC Banque Paribas, VRDN 1,700 1,700 7,600 WYOMING - 0.3% Lincoln County Poll. Cont. Rev. (Exxon Co. Proj.) Series 1984 D, 3.90%, VRDN 3,500 3,500 TOTAL MUNICIPAL NOTES (Cost $31,894) 31,894 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $937,497) $ 930,731 SECURITY TYPE ABBREVIATIONS TRAN - Tax and Revenue Anticipation Notes VRDN - Variable Rate Demand Notes LEGEND (a) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). (b) A portion of the security was pledged to cover for delayed delivery purchases. At the period end, the value of securities pledged amounted to $38,572,000. (c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (d) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. (e) Security collateralized by an amount sufficient to pay interest and principal. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 86.0% AAA, AA, A 72.8% Baa 2.2% BBB 0.1% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 1.2%. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Education 31.7% General Obligation 19.0 Escrowed/Pre-Refunded 14.7 Electric Revenue 10.1 Others (individually less than 10%) 24.5 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $937,497,000. Net unrealized depreciation aggregated $6,766,000, of which $8,319,000 related to appreciated investment securities and $15,085,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) FEBRUARY 28, 1995 (UNAUDITED) ASSETS Investment in securities, at value (cost $937,497) - $ 930,731 See accompanying schedule Cash 1,048 Receivable for investments sold 9,590 Regular delivery Delayed delivery 4,819 Interest receivable 13,042 TOTAL ASSETS 959,230 LIABILITIES Payable for investments purchased $ 8,065 Regular delivery Delayed delivery 29,665 Dividends payable 560 Accrued management fee 387 TOTAL LIABILITIES 38,677 NET ASSETS $ 920,553 Net Assets consist of: Paid in capital $ 936,803 Accumulated undistributed net realized gain (loss) on (9,484) investments Net unrealized appreciation (depreciation) on (6,766) investments NET ASSETS, for 93,870 shares outstanding $ 920,553 NET ASSET VALUE, offering price and redemption price per $9.81 share ($920,553 (divided by) 93,870 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) INTEREST INCOME $ 24,928 EXPENSES Management fee $ 2,724 Non-interested trustees' compensation 3 TOTAL EXPENSES 2,727 NET INTEREST INCOME 22,201 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (3,484) Futures contracts (790) (4,274) Change in net unrealized appreciation (depreciation) on (2,731) investment securities NET GAIN (LOSS) (7,005) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 15,196 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED FEBRUARY AUGUST 31, 28, 1994 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 22,201 $ 49,446 Net interest income Net realized gain (loss) (4,274) (3,465) Change in net unrealized appreciation (depreciation) (2,731) (27,205) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 15,196 18,776 FROM OPERATIONS Distributions to shareholders (22,201) (49,456) From net interest income In excess of net realized gain - (1,110) TOTAL DISTRIBUTIONS (22,201) (50,566) Share transactions 197,410 1,202,475 Net proceeds from sales of shares Reinvestment of distributions 19,128 43,957 Cost of shares redeemed (371,716) (1,098,806) Net increase (decrease) in net assets resulting from (155,178) 147,626 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS (162,183) 115,836 NET ASSETS Beginning of period 1,082,736 966,900 End of period $ 920,553 $ 1,082,736 OTHER INFORMATION Shares Sold 20,276 120,280 Issued in reinvestment of distributions 1,968 4,418 Redeemed (38,359) (110,516) Net increase (decrease) (16,115) 14,182
FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS SIX MONTHS YEAR ENDED EIGHT YEARS ENDED DECEMBER 31, ENDED FEBRUARY AUGUST 31, MONTHS 28, 1995 ENDED AUGUST 31, (UNAUDITED) 1994 1993 1992 1991 1990 1989 SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.840 $ 10.090 $ 9.880 $ 9.780 $ 9.520 $ 9.490 $ 9.450 Income from Investment Operations .215 .443 .303 .490 .559 .562 .536 Net interest income Net realized and unrealized gain (loss) (.030) (.240) .210 .100 .260 .030 .040 Total from investment operations .185 .203 .513 .590 .819 .592 .576 Less Distributions (.215) (.443) (.303) (.490) (.559) (.562) (.536) From net interest income In excess of net realized gain on investments - (.010) - - - - - Total distributions (.215) (.453) (.303) (.490) (.559) (.562) (.536) Net asset value, end of period $ 9.810 $ 9.840 $ 10.090 $ 9.880 $ 9.780 $ 9.520 $ 9.490 TOTAL RETURN B, C 1.92% 2.05% 5.25% 6.18% 8.85% 6.42% 6.30% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 921 $ 1,083 $ 967 $ 659 $ 244 $ 59 $ 58 Ratio of expenses to average net assets .55% A .47% .55% .55% .55% .60% .58% A Ratio of expenses to average net assets before expense .55% A .55% .55% .55% .75% .89% .87% reductions A Ratio of net interest income to average net assets 4.48% A 4.45% 4.55% 4.95% 5.68% 5.90% 5.69% A Portfolio turnover rate 45% A 44% 56% 28% 59% 75% 82% A
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. SEMIANNUAL REPORT 26 NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan Short-Intermediate Municipal Fund (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net interest income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures and options transactions and market discount. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect net interest income per share. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. With respect to purchase commitments, the fund identifies securities as segregated in its custodial records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the bond market and to fluctuations in interest rates. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $216,884,000 and $339,636,000, respectively. The market value of futures contracts opened and closed during the period amounted to $86,939,000 and $86,008,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .55% of the fund's average net assets. 4. FEES AND OTHER TRANSACTIONS - CONTINUED FMR also bears the cost of providing shareholder services to the fund. To offset the cost of providing these services, FMR or its affiliates collect certain transaction fees from the fund's shareholders which amounted to $11,000 for the period. DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or the fund's distributor, Fidelity Distributors Corporation (FDC), an affiliate of FMR, may use their resources to pay administrative and promotional expenses related to the sale of the fund's shares. Subject to the approval of the Board of Trustees, the Plan also authorizes payments to third parties that assist in the sale of the fund's shares or render shareholder support services. FMR or FDC has informed the fund that no payments were made to third parties under the Plan. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President David Murphy, Vice President Gary L. Swayze, Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA UMB Bank, n.a. Kansas City, MO (registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 CUSTODIAN UMB Bank, n.a. Kansas City, MO FIDELITY'S TAX-FREE BOND FUNDS Aggressive Tax-Free California Tax-Free High Yield California Tax-Free Insured High Yield Tax-Free Insured Tax-Free Limited Term Municipals Massachusetts Tax-Free High Yield Michigan Tax-Free High Yield Minnesota Tax-Free Municipal Bond New York Tax-Free High Yield New York Tax-Free Insured Ohio Tax-Free High Yield Spartan Aggressive Municipal (registered trademark) Spartan Arizona Municipal Income Spartan California Intermediate Municipal Spartan California Municipal High Yield Spartan Connecticut Municipal High Yield Spartan Florida Municipal Income Spartan Intermediate Municipal Spartan Maryland Municipal Income Spartan Municipal Income Spartan New Jersey Municipal High Yield Spartan New York Intermediate Municipal Spartan New York Municipal High Yield Spartan Pennsylvania Municipal High Yield Spartan Short-Intermediate Municipal THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)SPARTAN(registered trademark) AGGRESSIVE MUNICIPAL FUND SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 18 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 22 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income to measure performance. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Spartan Aggressive Municipal 2.20% 0.68% 8.63% Lehman Brothers Municipal Bond Index 2.80% 1.88% n/a Average High Yield Municipal Bond Fund 2.43% 1.06% n/a Consumer Price Index 1.28% 2.86% 4.79% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on April 29, 1993. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Lehman Brothers Municipal Bond index - a broad gauge of the municipal bond market. To measure how the fund's performance stacked up against its peers, you can compare it to the average high yield municipal bond fund, which reflects the performance of 38 funds with similar objectives tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI returns begin on the month end closest to the fund's start date.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF YEAR FUND Spartan Aggressive Municipal 0.68% 4.60% Lehman Brothers Municipal Bond Index 1.88% n/a Average High Yield Municipal Bond Fund 1.06% n/a Consumer Price Index 2.86% 2.58% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Spartan Aggressive MMunicipal Bond Index 04/30/93 10000.00 10000.00 05/31/93 10111.64 10056.00 06/30/93 10292.53 10223.94 07/31/93 10315.65 10237.23 08/31/93 10551.38 10450.16 09/30/93 10724.42 10569.29 10/31/93 10748.10 10589.37 11/30/93 10656.40 10496.19 12/31/93 10896.03 10717.66 01/31/94 11021.66 10839.84 02/28/94 10776.71 10559.09 03/31/94 10253.21 10129.33 04/30/94 10327.49 10215.43 05/31/94 10413.95 10304.31 06/30/94 10368.72 10244.54 07/31/94 10562.24 10432.02 08/31/94 10616.12 10468.53 09/30/94 10464.17 10314.64 10/31/94 10258.74 10131.04 11/30/94 9996.55 9947.67 12/31/94 10230.34 10166.52 01/31/95 10543.13 10457.28 02/28/95 10850.76 10761.59 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Aggressive Municipal Fund on April 30, 1993, shortly after the fund started. As the chart shows, by February 28, 1995, the value of your investment with dividends reinvested would have grown to $10,851 - an 8.51% increase on your initial investment. This assumes you still owned the fund on February 28, 1995 and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Lehman Brothers Municipal Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $10,762 - a 7.62% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) TOTAL RETURN COMPONENTS APRIL 29, 1993 SIX MONTHS (COMMENCEM ENDED YEAR ENDED ENT OF FEBRUARY 28, AUGUST 31, OPERATIONS) TO 1995 1994 AUGUST 31, 1993 Dividend return 3.23% 5.84% 2.14% Capital appreciation return -1.03% -5.24% 3.49% Total return 2.20% 0.60% 5.63% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST MONTH MONTHS 1 YEAR Dividends per share 4.60(cents) 30.25(cents) 60.42(cents) Annualized dividend rate 6.25% 6.50% 6.30% 30-day annualized yield 6.46% - - 30-day annualized tax-equivalent 10.09% - - yield DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.60 over the past month, $9.39 over the past six months and $9.59 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 36% tax bracket. FUND TALK: THE MANAGER'S OVERVIEW An interview with Maureen Newman, Portfolio Manager of Spartan Aggressive Municipal Fund Q. MAUREEN, HOW DID THE FUND PERFORM? A. About average during the most recent period. For the six months ended February 28, 1995, the fund had a total return of 2.20%. That compared to the average high yield municipal bond fund's return of 2.43% for the same period, according to Lipper Analytical Services. For the 12 months ended February 28, 1995, the fund returned 0.68%, lagging the average fund's return of 1.06%, again according to Lipper. Q. CAN YOU UPDATE US ON WHAT'S BEEN HAPPENING WITH THE MUNICIPAL BOND MARKET? A. From September to November, bond prices continued to decline because of signs of economic strength and the fear of inflation. Starting in November and throughout February, however, bond prices rebounded as investors began to believe that the Federal Reserve Board's interest rate hikes were having their intended effect of slowing down the economy, thereby reducing the risk of inflation. Q. WHAT ACCOUNTS FOR THE FUND'S PERFORMANCE DURING THE PAST SIX MONTHS? A. On the negative side, health care bonds - which made up 29.3% of the fund's investments at the end of the period - performed poorly during the past six months due to continued concerns about consolidation of the health care industry. Q. WHAT WERE SOME OF THE POSITIVES? A. In terms of credit quality, insured and other high-quality bonds performed well during the last six months. In terms of sectors, some industrial revenue bonds were strong performers. Industrial revenue bonds are issued for corporations for various public purposes and therefore are tax-exempt. In particular, airline bonds such as Delta Airlines and supermarket bonds like Kroger were among the fund's top performers. Airlines in general did well on the heels of an improving economy and internal cost-cutting programs. Many investors now believe that there is the potential for these bonds to be upgraded in the future, which also has helped boost their prices. Kroger, too, benefited from an improving economy and expectations that its bonds could be upgraded. While neither of these has yet been upgraded, I believe that each could be, which might help their prices even more. As a result, I'll most likely continue to hold on to these bonds for the foreseeable future. Q. THERE'S BEEN AN INCREASE IN THE FUND'S STAKE IN RESOURCE RECOVERY BONDS OVER THE PAST SIX MONTHS. WHAT'S BEHIND THAT MOVE? A. Resource recovery bonds are issued to fund waste recycling projects. One type of resource recycling project I've purchased recently is bonds issued for paper recycling plants. There are a number of reasons these issues are attractive. First, President Clinton recently mandated that all federal agencies must use a certain amount of recycled paper, which in turn, created an increased demand for recycled products. At the same time, the collection of paper and other waste has become more cost effective. Finally, these bonds offer relatively high yields. At the end of the period, resource recovery bonds made up 6.5% of the fund's investments. Q. HAVE YOU MADE ANY CHANGES IN HOW YOU'RE ALLOCATING THE FUND'S INVESTMENTS IN BONDS WITH VARIOUS MATURITIES? A. Yes. I've recently started selling some longer-term bonds - with maturities of 20 years or more - and in their place bought intermediate-term bonds - with maturities in the 10- to 15-year range. That change and others resulted in a shorter duration for the fund. Duration measures how sensitive the fund's share price is to changing interest rates. The shorter the duration, the less sensitive the fund's share price is when interest rates are rising or falling. Since I believe the market will be less volatile in 1995 than it was in 1994, I most likely will maintain this shorter duration and focus on generating income for the fund. Q. IN TERMS OF STATE CONCENTRATIONS, HOW HAVE YOU ALLOCATED THE FUND'S INVESTMENTS? A. Bonds from Michigan issuers made up the fund's largest state concentration, at 17.2% of investments at the end of the period, and accounted for a portion of the fund's health care bonds. Unlike some states which tend to have more private hospitals, Michigan has many that are tax-exempt. That means that the supply of tax-exempt hospital bonds is fairly abundant, and they also provide attractive yields. California was the fund's second largest state concentration at 10.8%. Almost two-thirds of the fund's California bonds are insured. In general, I think that the California economy is doing a bit better - evidenced by rising housing and retail sales and declining unemployment. So I'll probably maintain the fund's stake in California going forward. Investors probably have heard that Orange County, California, declared bankruptcy because of losses in its investment pool. The fund holds two bonds - which made up less than 3% of the fund's investments at the end of the period - affected by this situation. However, both bonds are insured, so their principal and interest payments are guaranteed by an AAA-rated municipal bond insurance company. Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET IN 1995? A. Overall, I think the municipal bond market will be less volatile in 1995 than it was in 1994. Turning to the high-yield sector of the municipal bond market, there are a couple of positives. In my view, the supply of high-yielding, lower-quality bonds could remain low this year. Demand for municipal bonds, on the other hand, has started to rise again, a trend that could continue. The combination of low supply and stable demand could work in the favor of lower-quality, high-yielding bonds. In my view, investors who focus on high-yielding investments could do well this year. FUND FACTS GOAL: to provide high current income exempt from federal taxes by investing primarily in medium- and lower-quality securities START DATE: April 29, 1993 SIZE: as of February 28, 1995, more than $64 million MANAGER: Maureen Newman, since October 1994; manager, Fidelity Michigan Tax-Free High Yield Portfolio, since July 1994; Spartan Arizona Municipal Income Portfolio, since October 1994; Spartan Connecticut Municipal High Yield Portfolio, since July 1994; bond analyst, 1985 to 1994; joined Fidelity in 1985 (checkmark) MAUREEN NEWMAN'S INVESTMENT STRATEGY: "I start with fundamental research - checking investment options issuer by issuer - to come up with investment ideas relating to changes in credit quality. I try to stay ahead of the market and rating agencies, looking for quality trends before they happen, in order to buy into good situations on their way up and get out of securities before the market realizes potential problems. Diversification is also a key, as I try to keep a good mix of coupons and maturities in the fund which can reduce its overall volatility. I also balance the fund's higher-yielding bonds with higher-rated bonds such as insured bonds." (solid bullet) Inverse floaters, one of the financial arrangements known as derivatives, made up less than 2.4% of the fund's investments at the end of the period. The yield on inverse floaters rises as short-term rates fall and vice versa. By using various derivatives, the manager hopes to achieve higher levels of tax-exempt income and increased flexibility in managing the fund's overall sensitivity to changes in interest rates. However, these strategies can involve additional risk to the fund and don't always work as intended. (solid bullet) As of October 1, 1994, Maureen Newman became the fund manager. INVESTMENT CHANGES TOP FIVE STATES AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Michigan 17.2 8.1 California 10.8 13.1 Pennsylvania 8.7 9.1 Kentucky 8.2 9.7 Maryland 6.1 0.0 TOP FIVE SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Health Care 29.3 24.6 Industrial Development 21.3 24.6 Special Tax 10.2 7.6 Electric Revenue 8.1 10.4 Resource Recovery 6.5 1.8 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 17.8 20.4 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 7.7 9.1 DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994 11 Aaa 20.8% Aa, A 11.7% Baa 18.1% Ba or B 18.2% Non-rated 24.9% Short-term investments 6.3% Aaa 14.0% Aa, A 20.4% Baa 18.7% Ba or B 24.3% Non-rated 20.3% Short-term investments 2.3% Row: 1, Col: 1, Value: 6.3 Row: 1, Col: 2, Value: 24.9 Row: 1, Col: 3, Value: 18.2 Row: 1, Col: 4, Value: 18.1 Row: 1, Col: 5, Value: 11.7 Row: 1, Col: 6, Value: 20.8 Row: 1, Col: 1, Value: 2.3 Row: 1, Col: 2, Value: 22.1 Row: 1, Col: 3, Value: 23.7 Row: 1, Col: 4, Value: 18.4 Row: 1, Col: 5, Value: 19.8 Row: 1, Col: 6, Value: 13.7 WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT FEBRUARY 28, 1995 AND AUGUST 31, 1994 ACCOUNT FOR 22.5% AND 17.7%, RESPECTIVELY, OF THE FUND'S INVESTMENTS. INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities MUNICIPAL BONDS - 93.7% MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) ALABAMA - 1.1% Cullman Med. Park South Med. Clinic Board Rev. (Cullman Reg. Med. Ctr.) Series A, 6.50% 2/15/13 Baa $ 750,000 $ 681,563 ARKANSAS - 0.9% Fayetteville Pub. Facs. Board. Rev. Rfdg. (Butterfield Trail Village Proj.) Series A, 8.25% 9/1/00 - 550,000 551,375 CALIFORNIA - 10.8% Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.) 5.375% 6/1/09, (MBIA Insured) Aaa 770,000 730,538 California Statewide Commty. Dev. Corp. Rev. Ctfs. of Prtn. (Sisters of Charity Leavenworth) 5% 12/1/23 Aa 500,000 396,250 La Quinta Redev. Agcy. Tax Allocation Rfdg. (Redev. Proj. Area #1) 7.30% 9/1/12, (MBIA Insured) Aaa 470,000 536,975 Los Angeles Bldg. Auth. Lease Rev. Rfdg. (California St. Dept. Gen. Svcs.) Series A, 5.625% 5/1/11 A 1,000,000 910,000 San Bernardino County Ctfs. of Prtn. (Med Ctr. Fing. Proj.) 5.50% 8/1/17 Baa1 1,000,000 833,750 Santa Clara County Fin. Auth. Lease Rev. (VMC Replacement Proj.) Series A, 7.75% 11/15/08, (AMBAC Insured) Aaa 1,000,000 1,190,000 Santa Margarita/Dana Point Auth. Rev. (Impt. Dists. 1-2-2A & 8) Series A, 7.25% 8/1/10, (MBIA Insured) Aaa 1,045,000 1,189,994 So. Orange County Pub. Fin. Auth. Spl. Tax Rev. (Foothill Area) Series C, 8% 8/15/08, (FGIC Insured) Aaa 500,000 605,000 Upland Ctfs. of Prtn. (San Antonio Commty. Hosp.) 5.25% 1/1/08 A 500,000 444,375 6,836,882 COLORADO - 5.3% Colorado Health Facs. Auth. Rev.: (Hosp.-Swedish Med. Ctr. Proj.) Series A, 6.80% 1/1/23 Baa1 500,000 489,375 (PSL Health Sys. Proj.) Series A, 6.875% 2/15/23 Baa1 1,850,000 1,782,938 (Rocky Mountain Adventist) 6.625% 2/1/13 Baa 1,000,000 937,500 Colorado Springs Arpt. Rev. (Cap. Appreciation) Series C, 0% 1/1/06 BBB 250,000 125,938 3,335,751 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) CONNECTICUT - 2.3% Connecticut Health & Ed. Facs. Auth. Rev. (Quinnipiac Coll.) Series D, 6% 7/1/13 BBB- $ 1,000,000 $ 902,500 Connecticut Hsg. Fin. Auth. (Hsg. Mortgage Fin. Prog.) Subseries B-1, 6.50% 5/15/18 Aa 200,000 201,250 Eastern Connecticut Res. Recovery Auth. Solid Waste Rev. (Wheelabrator Lisbon Proj.) Series A, 5.50% 1/1/20 (c) A 400,000 334,500 1,438,250 FLORIDA - 1.7% Martin County Ind. Dev. Auth. Rev. Rfdg. (Indiantown Cogeneration L.P. Proj.) 8.05% 12/15/25 (c) Baa3 1,000,000 1,072,500 ILLINOIS - 2.5% Illinois Dev. Fin. Auth. Solid Wst. Disp. Rev. (Ford Heights Wst. Tire Proj.) 7.875% 4/1/11 (c) - 1,100,000 1,046,375 Metropolitan Pier & Expo Auth. Rfdg. (Cap. Appreciation) (McCormick Place Expansion Proj.) 0% 6/15/08, (MBIA Insured) Aaa 1,155,000 516,863 1,563,238 INDIANA - 4.9% Fishers Econ. Dev. Rev. (1st Mtg. United Student Funds, Inc.) 8.375% 9/1/14 - 1,500,000 1,561,875 Greensburg Ind. Economic Dev. (Kroger Co. Proj.) Rev. Rfdg. 7.25% 6/1/11 Ba2 1,000,000 1,017,500 Indiana Bond Bank Rev. (State Revolving Fund Program) Series A, 7% 2/1/05 A 500,000 535,000 3,114,375 KENTUCKY - 8.2% Kenton County Arpt. Board Arpt. Rev. (Spl. Facs. Delta Airlines Proj.) Series A (c): 6.125% 2/1/22 Ba1 1,420,000 1,235,400 7.125% 2/1/21 Ba1 2,000,000 1,965,000 Owensboro Hosp. Rev. (Children's Psychiatric Hosp. Western Proj.) 13% 11/1/10 - 915,000 947,025 Winchester Ind. Bldg. Rev. Rfdg. (Kroger Co.) 7.75% 7/1/12 (b) Ba2 1,000,000 1,061,250 5,208,675 LOUISIANA - 1.6% Port New Orleans Ind. Dev. Rev. Rfdg. (Continental Grain Co. Proj.) 7.50% 7/1/13 (b) BB- 1,000,000 997,500 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) MARYLAND - 4.7% Baltimore County Poll. Cont. Rev. Rfdg. (Bethlehem Steel Proj.) Series B, 7.50% 6/1/15 - $ 1,000,000 $ 1,005,000 Maryland Energy Fing. Administration Ltd. Oblig. Solid Waste Disp. Facs. Recycling Rev. Bonds (Hagerstown Fiber Ltd. Partners 94) 9% 10/15/16 (c) - 1,000,000 1,031,250 Northeast Maryland Waste Disp. Auth. Solid Waste Rev. (Montgomery County Resources Recovery Proj.) Series A, 6.30% 7/1/16 (c) A 1,000,000 961,250 2,997,500 MASSACHUSETTS - 4.6% Massachusetts Health & Edl. Facs. Auth. Rev. (Beth Israel Hosp.) Series G, 5.75% 7/1/12, (AMBAC Insured) Aaa 2,500,000 2,418,743 Massachusetts Ind. Fin. Agcy. (Reeds Landing Lifecare Center Proj.) 8.625% 10/1/23 - 300,000 292,875 Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev. (Reg. Inflos) Series A, 5.47% 7/1/18 (d) Aaa 250,000 203,438 2,915,056 MICHIGAN - 13.9% Detroit Convention Facs. Rev. Rfdg. (Cobo Hall Expansion Proj.) 5.25% 9/30/12 A 1,500,000 1,316,250 Greater Detroit Resources Recovery Auth. Rev. Series G, 9.25% 12/13/08 BBB- 1,000,000 1,045,000 Michigan Hosp. Fin. Auth. Rev. Rfdg.: (Detroit-Macomb Hosp. Corp.) Series A: 7.30% 6/1/01 B 750,000 735,938 7.40% 6/1/13 B 500,000 458,750 (Pontiac Osteopathic Hosp.) 6% 2/1/24 (b) Baa1 1,000,000 806,250 (Port Huron Hosp.) Series A, 7.625% 7/1/15 Baa 1,000,000 1,000,000 (Saratoga Commty. Hosp.) 8.75% 6/1/10 - 485,000 509,856 Michigan Strategic Fund Ltd. Gen. Oblig. Rev. (Great Lakes Pulp & Fiber Proj.) 10.25% 12/1/16 (c) - 1,000,000 1,048,750 Three Rivers Area Hosp. Auth. Rev. Series A: 10.80% 11/1/04 - 180,000 185,850 10.90% 11/1/05 - 215,000 222,256 11% 11/1/06 - 235,000 242,931 11% 11/1/07 - 265,000 273,944 Warren Consolidated School Dist. Rfdg. (Macomb & Oakland Counties) 5.50% 5/1/14, (MBIA Insured) Aaa 1,000,000 933,750 8,779,525 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) MISSOURI - 0.8% Kansas City Ind. Dev. Auth. (Kingswood United Methodist Manor Proj.) Series 1993, 9% 11/15/13 - $ 500,000 $ 520,000 NEVADA - 0.7% Las Vegas Redev. Agcy. Tax Increment Rev. (Sub. Lien Fremont St. Proj. A) 6.10% 6/15/14 BBB+ 500,000 466,250 NEW JERSEY - 0.8% Camden County Impt. Auth. Lease Rev. (Holt Hauling) 8.40% 4/1/24 (c) - 500,000 506,250 NEW MEXICO - 4.0% Albuquerque Retirement Facs. Rev. Rfdg. (La Vida Liena Proj.) Series A, 8.85% 2/1/23 - 200,000 204,250 Farmington Poll. Cont. Rev.: (Pub. Svc. Co. of New Mexico San Juan Proj.) Series A, 6% 3/1/08 Ba2 2,040,000 1,858,950 6.40% 8/15/23 Ba2 500,000 442,500 2,505,700 NEW YORK - 5.8% New York City Gen. Oblig. Series B, 5.60% 8/15/06 Baa1 350,000 317,188 New York City Ind. Dev. Agcy. Spl. Facs. Rev. (Terminal One Group Assoc. Proj.) 6% 1/1/19 (c) A 1,000,000 931,250 New York State Dorm. Auth. Rev. Rfdg. (State Univ. Edl. Facs.) Series A: 5.25% 5/15/15 Baa1 650,000 560,625 5.50% 5/15/13 Baa1 250,000 224,688 New York State Local Govt. Asst. Corp. Rfdg. Series C, 5.50% 4/1/17 A 850,000 784,125 New York State Tollway Auth. Gen. Rev. Series B, 5% 1/1/14, (MBIA Insured) Aaa 1,000,000 881,250 3,699,126 OHIO - 1.6% Ohio Solid Waste Rev. (Republic Engineered Steels Proj.) 8.25% 10/1/14 (c) - 1,000,000 996,250 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) PENNSYLVANIA - 8.7% Delaware County Auth. Rev. (1st. Mtg.) (Riddle Village Proj.): 7% 6/1/00 - $ 600,000 $ 592,500 8% 6/1/99 - 350,000 357,438 Montgomery County Higher Ed. & Health Auth. Hosp. Rev. (United Hosp., Inc.): Series A, 8.375% 11/1/03 Ba1 135,000 140,400 Series B, 7.50% 11/1/15 Ba1 165,000 157,163 Pennsylvania Convention Ctr. Auth. Rev. Rfdg. Series A, 6.70% 9/1/14 Ba 1,500,000 1,430,625 Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev. (Graduate Health System) Series A, 6.25% 7/1/13 Baa1 250,000 221,563 Philadelphia Ind. Dev. Auth. Dev. Rev. (Long Term Care, Maplewood) 8% 1/1/24 - 500,000 467,500 Somerset County Hosp. Auth. Rev. (Health Care 1st Mortgage-GF) 8.40% 6/1/09 - 415,000 404,106 Southern Pennsylvania Trans. Auth. Spl. 6.50% 3/1/05, (FGIC Insured) Aaa 1,000,000 1,068,750 Warren County Ind. Dev. Auth. Specialized Dev. Rev. Rfdg. (Beverly Enterprises, Inc.): 8.75% 11/1/06 - 125,000 134,531 9% 11/1/12 - 500,000 544,375 5,518,951 TEXAS - 3.3% East Texas Health Facs. Dev. Corp. Hosp. Rev. (Palestine) 7.80% 8/15/18 - 850,000 823,438 El Paso Prop. Fin. Auth. Single Family Mtg. Rev. Series A, 8.70% 12/1/18, (GNMA Coll.) (c) Aaa 795,000 856,613 Harris County Cultural & Ed. Facs. Fin. Corp. (Space Ctr. Houston Proj.) 9.25% 8/15/15 - 300,000 264,000 Texas Nat'l. Research Lab Commission Fing. Corp. Lease Rev. (Superconducting Supercollider Proj.) 6.95% 12/1/12 A 150,000 153,375 2,097,426 VIRGINIA - 1.6% Loudoun County Ind. Dev. Auth. Residential Care Facs. Rev. (Falcons Landing Proj.) Series A, 8.75% 11/1/24 - 1,055,000 1,044,450 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (A) AMOUNT (NOTE 1) WASHINGTON - 3.9% Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.: Rfdg. Series A, 0% 7/1/11, (MBIA Insured) (b) Aaa $ 1,350,000 $ 491,063 5.12% 7/1/12 (d) Aa 500,000 387,500 5.41% 7/1/10, (FGIC Insured) Aaa 700,000 665,875 5.47% 7/1/10, (FGIC Insured) (d) Aaa 1,000,000 896,250 2,440,688 TOTAL MUNICIPAL BONDS (Cost $60,259,810) 59,287,281 MUNICIPAL NOTES (E) - 6.3% ARIZONA - 0.7% Apache County Ind. Dev. Auth. (Tucson Elec. Pwr. Co.) Series 1981B, 4.15% 10/1/21, LOC Mitsubishi Bank Ltd., VRDN VMIG 1 200,000 200,000 Maricopa County Hosp. Rev. (Samaritan Health Sys.) 3.80% 12/1/08, (MBIA Insured) LOC Bank of America, VRDN VMIG 1 200,000 200,000 400,000 KANSAS - 0.9% Olathe Edl. Facs. Rev. (College Assoc. Pooled Ed. Loan Prog.) Series 1989 A, 4.20%, LOC Marine Midland Bank, VRDN VMIG 1 560,000 560,000 MARYLAND - 1.4% Montgomery County Hsg. Opportunity Commission Hsg. Rev. (Draper Lane Apts.) 4.15%, (FGIC Insured) BPA Sumitomo Bank Ltd., VRDN VMIG 1 900,000 900,000 MICHIGAN - 3.3% Michigan Higher Ed. Student Loan Auth. Rev., Series XII-D, 4.05%, (AMBAC Insured) LOC Fuji Bank, VRDN VMIG 1 2,100,000 2,100,000 TOTAL MUNICIPAL NOTES (Cost $3,960,000) 3,960,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $64,219,810) $ 63,247,281 FUTURES CONTRACTS AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) SOLD 10 Municipal Bond Index Futures Contracts March 1995 $ 906,875 $ (66,028) 20 U.S. Treasury Bond Futures Contracts March 1995 2,079,375 (125,182) THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 4.7% $ (191,210) SECURITY TYPE ABBREVIATIONS VRDN -Variable Rate Demand Notes LEGEND (a) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (b) A portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $865,181. (c) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. (d) Coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. The rate shown is the rate at period end. (e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 28.3% AAA, AA, A 30.8% Baa 14.1% BBB 15.2% Ba 14.7% BB 12.5% B 0.0% B 1.9% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 24.9%. FMR has determined that unrated debt securities that are lower quality account for 22.5% of the total value of investment in securities. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Health Care 29.3% Industrial Development 21.3 Special Tax 10.2 Others (individually less than 10%) 39.2 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $64,219,810. Net unrealized depreciation aggregated $972,529, of which $1,003,260 related to appreciated investment securities and $1,975,789 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending August 31, 1995, $726,000 of losses recognized during the period November 1, 1993 to August 31, 1994. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) ASSETS Investment in securities, at value (cost $64,219,810) - $ 63,247,281 See accompanying schedule Cash 1,211,114 Interest receivable 1,027,865 Redemption fees receivable 42 TOTAL ASSETS 65,486,302 LIABILITIES Payable for investments purchased $ 1,077,065 Payable for fund shares redeemed 2,291 Dividends payable 83,685 Accrued management fee 28,388 Payable for daily variation on futures contracts 11,563 TOTAL LIABILITIES 1,202,992 NET ASSETS $ 64,283,310 Net Assets consist of: Paid in capital $ 67,382,493 Accumulated undistributed net realized gain (loss) on (1,935,444) investments Net unrealized appreciation (depreciation) on (1,163,739) investments NET ASSETS, for 6,635,814 shares outstanding $ 64,283,310 NET ASSET VALUE, offering price and redemption price per $9.69 share ($64,283,310 (divided by) 6,635,814 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) INTEREST INCOME $ 2,070,064 EXPENSES Management fee $ 175,186 Non-interested trustees' compensation 147 TOTAL EXPENSES 175,333 NET INTEREST INCOME 1,894,731 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (1,206,312) Futures contracts 4,092 (1,202,220) Change in net unrealized appreciation (depreciation) on: Investment securities 671,906 Futures contracts (191,210) 480,696 NET GAIN (LOSS) (721,524) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,173,207 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED FEBRUARY AUGUST 31, 28, 1994 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 1,894,731 $ 2,447,990 Net interest income Net realized gain (loss) (1,202,220) (715,018) Change in net unrealized appreciation (depreciation) 480,696 (1,891,220) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,173,207 (158,248) FROM OPERATIONS Distributions to shareholders: (1,894,731) (2,448,988) From net interest income From net realized gain - (26,999) In excess of net realized gain - (29,073) TOTAL DISTRIBUTIONS (1,894,731) (2,505,060) Share transactions 24,912,611 65,586,929 Net proceeds from sales of shares Reinvestment of distributions 1,330,283 1,818,173 Cost of shares redeemed (22,988,199) (20,434,677) Redemption fees 77,199 98,511 Net increase (decrease) in net assets resulting from 3,331,894 47,068,936 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 2,610,370 44,405,628 NET ASSETS Beginning of period 61,672,940 17,267,312 End of period $ 64,283,310 $ 61,672,940 OTHER INFORMATION Shares Sold 2,662,208 6,489,653 Issued in reinvestment of distributions 141,614 181,929 Redeemed (2,467,844) (2,039,295) Net increase (decrease) 335,978 4,632,287
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED APRIL 29, 1993 ENDED AUGUST 31, (COMMENCEME FEBRUARY 28, NT OF 1995 OPERATIONS) TO AUGUST 31, (UNAUDITED) 1994 1993 SELECTED PER-SHARE DATA Net asset value, beginning of period $ 9.790 $ 10.350 $ 10.000 Income from Investment Operations .303 .603 .209 Net interest income Net realized and unrealized gain (loss) (.112) (.564) .346 Total from investment operations .191 .039 .555 Less Distributions (.303) (.603) (.209) From net interest income From net realized gain on investments - (.010) - In excess of net realized gain on - (.010) - investments Total distributions (.303) (.623) (.209) Redemption fees added to paid in capital .012 .024 .004 Net asset value, end of period $ 9.690 $ 9.790 $ 10.350 TOTAL RETURN B 2.21% .61% 5.64% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 64,283 $ 61,673 $ 17,267 Ratio of expenses to average net assets .60% .60% .60% A A Ratio of net interest income to average net 6.48% 6.03% 6.24% assets A A Portfolio turnover rate 74% 64% 53% A A
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan Aggressive Municipal Fund (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures, market discount and losses deferred due to excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect net interest income per share. Any taxable gain remaining at fiscal year end is distributed in the following year. REDEMPTION FEES. Shares held in the fund less than 180 days are subject to a redemption fee equal to 1% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the bond market and to fluctuations in interest rates. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Futures contracts and written options involve, to varying degrees, risk of loss in excess of the futures variation margin or the option value reflected in the Statement of Assets and Liabilities. The underlying face amount at value is shown in the schedule of investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $21,465,990 and $20,592,972, respectively. The market value of futures contracts opened and closed during the period amounted to $7,613,336 and $4,814,204, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .60% of the fund's average net assets. FMR also bears the cost of providing shareholder services to the fund. To offset the cost of providing these services, FMR or its affiliates collect certain transaction fees from the fund's shareholders which amounted to $775 for the period. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Gary L. Swayze, Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA United Missouri Bank, N.A. Kansas City, MO CUSTODIAN United Missouri Bank, N.A. Kansas City, MO (registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 FIDELITY'S TAX-FREE BOND FUNDS Aggressive Tax-Free California Tax-Free High Yield California Tax-Free Insured High Yield Tax-Free Insured Tax-Free Limited Term Municipals Massachusetts Tax-Free High Yield Michigan Tax-Free High Yield Minnesota Tax-Free Municipal Bond New York Tax-Free High Yield New York Tax-Free Insured Ohio Tax-Free High Yield Spartan Aggressive Municipal (registered trademark) Spartan Arizona Municipal Income Spartan California Intermediate Municipal Spartan California Municipal High Yield Spartan Connecticut Municipal High Yield Spartan Florida Municipal Income Spartan Intermediate Municipal Spartan Maryland Municipal Income Spartan Municipal Income Spartan New Jersey Municipal High Yield Spartan New York Intermediate Municipal Spartan New York Municipal High Yield Spartan Pennsylvania Municipal High Yield Spartan Short-Intermediate Municipal THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE SPARTAN(registered trademark) (registered trademark) ARIZONA MUNICIPAL PORTFOLIOS SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT SUMMARY 9 A summary of the fund's investments. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 13 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO PERFORMANCE 17 How the fund has done over time. FUND TALK 19 The manager's review of fund performance, strategy and outlook. INVESTMENT SUMMARY 21 A summary of the fund's investments. INVESTMENTS 22 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 25 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 29 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each figure includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends, and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIOD ENDED FEBRUARY 28, 1995 LIFE OF FUND Spartan Arizona Municipal Income 5.85% Lehman Brothers Municipal Bond Index n/a Average Arizona Municipal Bond Fund n/a Consumer Price Index 1.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, since the fund started on October 11, 1994. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. Once the fund is six months old, you can compare the fund's returns to the performance of the Lehman Brothers Municipal Bond Index - a broad gauge of the municipal bond market. To measure how the fund's performance stacked up against its peers (again, once it's six months old), you can compare it to the average Arizona municipal bond fund, which reflects the performance of 30 Arizona municipal bond funds with similar objectives tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI returns begin on the month end closest to the fund's start date.) AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. Average annual returns for the fund and its benchmarks will appear in the fund's next annual report, once the fund is older; this next report will also show the effect of investing $10,000 OVER THE LIFE OF THE FUND for both the fund and the Lehman Brothers Municipal Bond Index. TOTAL RETURN COMPONENTS OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 Dividend return 2.26% Capital appreciation return 3.59% Total return 5.85% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1995 PAST LIFE OF MONTH FUND Dividends per share 4.66(cents) 21.44(cents) Annualized dividend rate 5.93% 5.70% 30-day annualized yield 5.85% - 30-day annualized tax-equivalent yield 9.68% - DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $10.25 over the past month and $9.73 over the life of fund, you can compare the fund's income over these two periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 39.58% combined effective 1995 federal and state income tax bracket. If the advisor had not reimbursed certain portfolio expenses during the period shown, the yield and tax-equivalent yield would have been 5.30% and 8.77%, respectively. A portion of the fund's income may be subject to the alternative minimum tax. SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW An interview with Maureen Newman, Portfolio Manager of Spartan Arizona Municipal Income Portfolio Q. MAUREEN, HOW HAS THE FUND PERFORMED? A. Fairly well, but since the fund has been operating for such a short time, any comparison of its performance with other funds of its type would be misleading. That said, from the start of its operations on October 11, 1994, through February 28, 1995, the fund returned 5.85%. Q. WHAT HAS THE MUNICIPAL BOND MARKET BEEN LIKE SINCE OCTOBER? A. In October, bond prices continued to decline due to signs of economic strength and the fear of higher inflation. From November through February, however, bond prices rebounded as investors began to believe that the Federal Reserve Board's interest rate hikes were having their intended effect of slowing down the economy, thereby reducing the risk of inflation. Q. HOW HAVE YOU INVESTED THE FUND SO FAR? A. I have purchased bonds with a variety of credit qualities, but emphasized high-quality bonds. At the end of February, 53.3% of the fund's investments were in high-quality bonds, or those rated Aa or Aaa by Moody's Investors' Services. I did invest some of the fund in high-yielding, lower-quality investment-grade and non-investment grade bonds because they can provide additional income to the fund. Lower-quality investment-grade bonds rated A and Baa were 37.1% of investments at the end of February. Finally, bonds rated below Baa made up just 3.3% of the fund's investments. Q. HOW DO BONDS ISSUED BY GUAM, PUERTO RICO AND THE U.S. VIRGIN ISLANDS QUALIFY FOR INCLUSION IN THE FUND? A. As territories of the United States, Guam, Puerto Rico and the U.S. Virgin Islands may issue municipal bonds free from local, state and federal income taxes in all 50 states. Demand for these bonds is very strong because of that broad tax-exempt status. I think that demand will continue to be strong because supply in the overall municipal market has dropped off substantially since 1993. For state municipal bond mutual funds that must invest in bonds exempt from state taxes, these territorial bonds serve as a good tax-free proxy for bonds issued in the home state. At the end of February, the fund's stake in territorial bonds was about 27%, of which about one third are pre-refunded. That means that their principal and interest payments are backed by treasury securities. Going forward, I'll most likely reduce the fund's stake in U.S. territorial bonds as opportunities to purchase Arizona securities arise. Q. WHAT SECTORS ARE YOU EMPHASIZING CURRENTLY? A. Electric revenue bonds, for one. They made up 25.1% of the fund's investments at the end of February. Some of the fund's largest holdings in this sector include Salt River Project, which is an electric utility in the Phoenix area and Public Service of New Mexico (PSNM). The Salt River bond is rated Aa, and the utility has a strong management team and low consumer rates. PSNM has been aggressively reducing its debt and its bonds have the potential for a credit rating upgrade. While PSNM is headquartered in New Mexico, it owns a portion of a plant in Arizona, so some of its bonds have tax-exempt status in Arizona. There has been concern about increased competition in the electric utility sector, so I've concentrated the fund's electric holdings in utilities that I think are less susceptible to competitive pressures. Since the U.S. territories are islands, there is virtually no competition from electric producers elsewhere, so I've also invested in Puerto Rico Electric and Guam Power. Local and state general obligation bonds were the fund's largest sector concentration at the end of the period. In this sector, I've emphasized local school districts and some local insured bonds. Q. DURING 1994, MARICOPA COUNTY'S CREDIT RATING WAS DOWNGRADED BECAUSE OF SOME FISCAL PROBLEMS THE COUNTY EXPERIENCED. IS THE FUND INVESTED IN ANY MARICOPA COUNTY BONDS? A. Yes, the fund had roughly 6.5% of investments in securities issued by Maricopa County at the end of the period. Since the fund commenced operations after the downgrade, I bought these at their new credit rating of A, which is an investment-grade rating. In my view, the downgrade reflects some short-term problems which won't affect the county's viability over the long-term. The problems Maricopa County experienced stemmed mostly from inadequate administrative and financial controls, which recently it has taken steps to remedy. What's more, the county's economy is quite strong. Together, improving fiscal controls and a strong economy are positives for Maricopa bonds. Once the county has worked through its problems, which may take a couple of years, it's credit rating could be upgraded. Improvements in credit quality could, in turn, help the prices of securities issued by the county. Q. WHAT'S YOUR OUTLOOK FOR ARIZONA MUNICIPAL BONDS? A. The state's economy is well diversified and has been very strong recently, which has translated into a very favorable fiscal picture. After the period ended, the legislature passed a reduction in the top state income tax bracket from 6.9% to 5.6%. Despite this modification, Arizona tax-free bonds currently remain attractive investments. Q. WHAT CAN INVESTORS EXPECT IN 1995? A. I believe that interest rates probably will be more stable in 1995 than they were in 1994. If I am correct, it's likely that bond prices will be more stable as well. In that type of environment, the fund's total return will be less dependent on bond prices rising and more dependent on the level of income the bonds pay. So I'll continue to concentrate on pursuing a high level of income for the fund. I'll do that primarily by investing a limited portion of the fund in higher-yielding, lower-rated investment-grade bonds, with improving credit fundamentals. FUND FACTS GOAL: to provide a high level of current income exempt from Arizona state and federal income taxes by investing primarily in long-term, investment-grade Arizona municipal securities START DATE: October 11, 1994 SIZE: as of February 28, 1995, more than $6 million MANAGER: Maureen Newman, since October 1994; manager, Fidelity Michigan Tax-Free High Yield Portfolio, since July 1994; Spartan Aggressive Municipal Fund, since October 1994; Spartan Connecticut Municipal High Yield Portfolio, since July 1994; bond analyst, 1985 to 1994; joined Fidelity in 1985 (checkmark) MAUREEN NEWMAN'S INVESTMENT STRATEGY: "I start with fundamental research - checking investment options issuer by issuer - to come up with investment ideas relating to changes in credit quality. Improvements in a bond's credit quality can translate into a higher price for that bond. I try to stay ahead of the market and the rating agencies, looking for quality trends before they happen, in order to buy into good situations on their way up and to get out of securities before the market realizes potential problems. Diversification is also a key, as I try to keep a good mix of coupons - stated interest rates - and maturities in the fund, which can reduce its overall volatility." SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO INVESTMENT SUMMARY TOP FIVE SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS General Obligation 29.7 Electric Revenue 25.1 Water & Sewer 11.7 Transportation 9.9 Escrowed/Pre-refunded 7.8 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 Years 14.7 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 Years 7.7 DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THE ABOVE EXAMPLE. QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995 Aaa 39.2% Aa, A 27.3% Baa 23.9% Ba, B 3.3% Non-rated 1.6% Short-term investments 4.7% Row: 1, Col: 1, Value: 39.2 Row: 1, Col: 2, Value: 27.3 Row: 1, Col: 3, Value: 23.9 Row: 1, Col: 4, Value: 3.5 Row: 1, Col: 5, Value: 2.0 Row: 1, Col: 6, Value: 4.7 SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investments MUNICIPAL BONDS - 95.3% MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) ARIZONA - 68.8% Arizona Pwr. Auth. Pwr. Resources Rev. Rfdg. (Hoover Uprating Proj.) 5.25% 10/1/17 (MBIA Insured) Aaa $ 100,000 $ 89,250 Arizona Trans. Board Hwy. Rev. Rfdg. 5.25% 7/1/09 Aa 300,000 279,375 Arizona Univ. Rev. Rfdg. Series A, 5.75% 7/1/12 A1 100,000 97,875 Central Arizona Wtr. Conservation Dist. Contract Rev. Rfdg. (Central Arizona Proj.) Series A, 5.50% 11/1/10 A1 100,000 97,000 Cochise County Unified School Dist. #68 (Sierra Vista) 9% 7/1/02 (FGIC Insured) Aaa 200,000 242,750 Glendale Ind. Dev. Auth. Edl. Facs. Rev. Rfdg. (American Graduate School Int'l.) 6.55% 7/1/06 (Connie Lee Insured) AAA 150,000 161,438 Maricopa County Cfts. of Prtn. 5.625% 6/1/00 Baa 450,000 438,188 Maricopa County Poll. Cont. Corp. Poll. Cont. Rev. (Pub. Svc. Co. New Mexico - Palo Verde) 7.75% 11/1/09 Ba2 200,000 207,750 Maricopa County School Dist. #6 (Washington Elementary) Series A, 5.50% 7/1/11 (AMBAC Insured) Aaa 200,000 191,250 Maricopa County Unified School Dist. #69 (Paradise Valley) 5% 7/1/08 (AMBAC Insured) (f) Aaa 300,000 275,250 Phoenix Civic Impt. Corp. Wtr. Sys. Rev. (Jr. Lien) 5.45% 7/1/19 A1 500,000 458,125 Phoenix Gen. Oblig. Rfdg. Series B, 5.50% 7/1/16 Aa 100,000 92,125 Phoenix Street & Hwy. User Rev. Rfdg. (Jr. Lien): Series A, 0% 7/1/13 (FGIC Insured) Aaa 350,000 112,875 6.25% 7/1/11 (MBIA Insured) Aaa 250,000 257,813 Salt River Proj. Agricultural Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg. Series B, 6.50% 1/1/04 Aa 400,000 436,000 Scottsdale Gen. Oblig. Rfdg. 5.50% 7/1/09 Aa1 100,000 96,000 Tempe Union High School Dist. #213 Rfdg. & Impt. 7% 7/1/08 (FGIC Insured) Aaa 310,000 349,912 Tucson Gen. Oblig.: Series 1984 G, 6.25% 7/1/18 (FGIC Insured) Aaa 100,000 101,750 6.75% 7/1/03 (FGIC Insured) (e) Aaa 200,000 217,747 Tucson Wtr. Rev. Rfdg. Series A, 5.75% 7/1/18 A1 200,000 191,500 4,393,973 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL VALUE (UNAUDITED) (B) AMOUNT (NOTE 1) PUERTO RICO - 21.1% Puerto Rico Commonwealth Hwy. & Trans. Auth. Hwy. Rev. 5.50% 7/1/17 Baa1 $ 100,000 $ 91,625 Puerto Rico Commonwealth Pub. Impt. Gen. Oblig. 6.80% 7/1/21 (Pre-refunded to 7/1/02 @ 101.5) (d) AAA 250,000 280,000 Puerto Rico Elec. Pwr. Auth. Pwr. Rev.: Rfdg. Series N, 5% 7/1/12 Baa1 150,000 131,625 Series O, 5% 7/1/12 Baa1 450,000 394,875 7.125% 7/1/14 (Pre-refunded to 7/1/99 @ 101.5) (d) AAA 200,000 220,000 Puerto Rico Pub. Bldgs. Auth. Guaranteed Pub. Ed. & Health Facs. Rfdg. Series M, 5.50% 7/1/21 Baa1 250,000 225,938 1,344,063 U.S. VIRGIN ISLANDS - 1.6% Virgin Islands Pub. Fin. Auth. Rev. Rfdg. Series A, 7.25% 10/1/18 - 100,000 103,125 GUAM - 3.8% Guam Pwr. Auth. Rev. Series A, 6.30% 10/1/22 BBB 250,000 241,875 TOTAL MUNICIPAL BONDS (Cost $5,823,337) 6,083,036 MUNICIPAL NOTES (A) - 4.7% ARIZONA - 4.7% Maricopa County Poll. Cont. Rev. (Arizona Pub. Svc.) Series 1994 B, 3.90%, LOC Morgan Guaranty Trust, VRDN P-1 100,000 100,000 Pinal County Ind. Dev. Poll. Cont. Rev. (Newmont Mining Corp.) (Magna Copper Co. Proj.) 3.75%, LOC Nat'l. Westminster Bank, VRDN P-1 100,000 100,000 Yuma Ind. Dev. Auth. Ind. Rev. (Ardco Inc. Proj.) 4.15%, LOC Bank of Montreal & Harris Trust, VRDN (c) A-1+ 100,000 100,000 TOTAL MUNICIPAL NOTES (Cost $300,000) 300,000 TOTAL INVESTMENTS - 100% (Cost $6,123,337) $ 6,383,036 SECURITY TYPE ABBREVIATIONS VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (c) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals (AMT securities). (d) Security collateralized by an amount sufficient to pay interest and principal. (e) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). (f) Security was pledged to cover margin requirements for delayed delivery purchases. At the period end, the value of securities pledged amounted to $275,250. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows: MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 64.0% AAA, AA, A 79.8% Baa 20.1% BBB 10.6% Ba 3.3% BB 3.3% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 1.6%. The distribution of municipal securities by revenue source, as a percentage of total value of investments, is as follows: General Obligation 29.7% Electric Revenue 25.1 Water & Sewer 11.7 Others (individually less than 10%) 33.5 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $6,123,337. Net unrealized appreciation aggregated $259,699, of which $260,076 related to appreciated investment securities and $377 related to depreciated investment securities SPARTAN ARIZONA MUNICIPAL INCOME PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) 1.ASSETS 2. 3. 4.Investment in securities, at value (cost $6,123,337) - 5. $ 6,383,036 See accompanying schedule 6.Cash 7. 694,457 8.Receivable for investments sold 9. 201,348 10.Interest receivable 11. 72,537 12.Receivable from investment adviser for expense 13. 2,525 reductions 14. 15.TOTAL ASSETS 16. 7,353,903 17.LIABILITIES 18. 19. 20.Payable for investments purchased $ 278,134 21. Regular delivery 22. Delayed delivery 218,985 23. 24.Dividends payable 4,912 25. 26.Accrued management fee 2,525 27. 28. 29.TOTAL LIABILITIES 30. 504,556 31.32.NET ASSETS 33. $ 6,849,347 34.Net Assets consist of: 35. 36. 37.Paid in capital 38. $ 6,560,550 39.Accumulated undistributed net realized gain (loss) on 40. 29,098 investments 41.Net unrealized appreciation (depreciation) on 42. 259,699 investments 43.44.NET ASSETS, for 661,433 shares outstanding 45. $ 6,849,347 46.47.NET ASSET VALUE, offering price and redemption 48. $10.36 price per share ($6,849,347 (divided by) 661,433 shares)
STATEMENT OF OPERATIONS
OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) 49.50.INTEREST INCOME 51. $ 93,237 52.EXPENSES 53. 54. 55.Management fee $ 8,844 56. 57.Non-interested trustees' compensation - 58. 59. Total expenses before reductions 8,844 60. 61. Expense reductions (8,844) - 62.63.NET INTEREST INCOME 64. 93,237 65.REALIZED AND UNREALIZED GAIN (LOSS) 67. 29,098 66.Net realized gain (loss) on investment securities 68.Change in net unrealized appreciation (depreciation) 69. 259,699 on investment securities 70.71.NET GAIN (LOSS) 72. 288,797 73.74.NET INCREASE (DECREASE) IN NET ASSETS 75. $ 382,034 RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) 76.INCREASE (DECREASE) IN NET ASSETS 77.Operations $ 93,237 Net interest income 78. Net realized gain (loss) 29,098 79. Change in net unrealized appreciation (depreciation) 259,699 80. 81.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM 382,034 OPERATIONS 82.Dividends to shareholders from net interest income (93,237) 83.Share transactions 8,566,199 Net proceeds from sales of shares 84. Reinvestment of dividends from net interest income 80,094 85. Cost of shares redeemed (2,086,071) 86. Redemption fees 328 87. Net increase (decrease) in net assets resulting from share 6,560,550 transactions 88. 89.TOTAL INCREASE (DECREASE) IN NET ASSETS 6,849,347 90.NET ASSETS 91. 92. Beginning of period - 93. End of period $ 6,849,347 94.OTHER INFORMATION 96. 95.Shares 97. Sold 864,055 98. Issued in reinvestment of distributions 8,033 99. Redeemed (210,655) 100. Net increase (decrease) 661,433
FINANCIAL HIGHLIGHTS
101. OCTOBER 11, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 102. (UNAUDITED) 103.SELECTED PER-SHARE DATA 104.Net asset value, beginning of period $ 10.000 105.Income from Investment Operations .214 Net interest income 106. Net realized and unrealized gain (loss) .359 107. Total from investment operations .573 108.Less Distributions (.214) From net interest income 109.Redemption fees added to paid in capital .001 110.Net asset value, end of period $ 10.360 111.TOTAL RETURN B 5.86% 112.RATIOS AND SUPPLEMENTAL DATA 113.Net assets, end of period (000 omitted) $ 6,849 114.Ratio of expenses to average net assets - 115.Ratio of expenses to average net assets before expense reductions .55%A 116.Ratio of net interest income to average net assets 5.80%A 117.Portfolio turnover rate 60%A
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO PERFORMANCE: THE BOTTOM LINE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects the change in a fund's share price over a given period, reinvestment of its dividends (or income), and the effect of the fund's $5 account closeout fee. Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIOD ENDED FEBRUARY 28, 1995 LIFE OF FUND Spartan Arizona Municipal Money Market 1.40% Average All Tax-Free Money Market Fun 1.05% d Consumer Price Index 1.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a specific period - in this case, since the fund started on October 12, 1994. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. To measure how the fund's performance stacked up against its peers, you can compare it to the average all tax-free money market fund's total return which reflects the performance of 381 all tax-free money market funds tracked by IBC/Donoghue during the period covered by this report. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI and IBC/Donoghue returns are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. Average annual returns for the fund and its benchmarks will appear in the fund's next annual report, once the fund is older. YIELDS
11/28/94 2/27/95 Spartan Arizona Municipal Money Market 3.76% 4.15% If Fidelity had not reimbursed certain fund expenses 3.26% 3.65% Average All Tax-Free Money Market Fund 3.10% 3.48% Spartan Arizona Municipal Money Market - Tax-equivalent 6.22% 6.87% If Fidelity had not reimbursed certain fund expenses 5.40% 6.04%
Spartan Arizona Municipal Money Market Average All Tax-Free Money Market Fund Row: 1, Col: 1, Value: 3.76 Row: 1, Col: 2, Value: 3.1 Row: 2, Col: 1, Value: 4.149999999999999 Row: 2, Col: 2, Value: 3.48 5% - 4% - 3% - 2% - 1% - 0% YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals. You can compare these yields to the average all tax-free money market fund. Or you can look at the fund's tax-equivalent yield, which is based on a combined effective 1995 federal and state income tax rate of 39.58%. A portion of the fund's income may be subject to the alternative minimum tax. A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE. COMPARING PERFORMANCE Yields on tax-free investments are usually lower than yields on taxable investments. However, a straight comparison between the two may be misleading because it ignores the way taxes reduce taxable returns. Tax-equivalent yield - the yield you'd have to earn on a similar taxable investment to match the tax-free yield - makes the comparison more meaningful. Keep in mind that the U.S. government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money fund will maintain a $1 share price. (checkmark) SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW An interview with Scott Orr, Portfolio Manager of Spartan Arizona Municipal Money Market Portfolio Q. SCOTT, HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT SINCE THE FUND BEGAN OPERATING LAST OCTOBER? A. Because the fund is new, it avoided much of the turmoil that accompanied the rapid series of rate increases by the Federal Reserve Board earlier in the year. As recently as February 1994, the federal funds rate - the rate banks charge each other for overnight loans - was only 3%. By the time the fund opened to shareholders in October, there had already been five rate increases in 1994 totalling one and three-quarters percentage points, and the federal funds rate was 4.75%. Since then, while the rate increases have continued, they've been both more predictable and more widely spaced than before: three-quarters of a percentage point in November 1994, followed by half a point in February 1995. By the end of the period, the federal funds rate was 6%, higher than it had been in several years. Changes in the federal funds rate are significant because they influence tax-free rates. Q. WHAT CAN YOU TELL US ABOUT YOUR INVESTMENT STRATEGY? A. As long as rates are rising, I'll usually try to shorten the fund's average maturity in order to keep pace with market yields. That's been my strategy so far. Throughout the fall and winter, therefore, I've been defensive with the fund's average maturity, staying between 30 and 40 days. In terms of security selection, Arizona is unlike most other states in that the supply of general obligation bonds - securities issued by municipalities for their short-term needs - is extremely limited. That's partly a reflection of the strength of the Arizona economy. The upshot is that while other state tax-free money market funds may be as much as 50% invested in general obligation bonds, with this fund, the figure is closer to 12%. That's not a problem. It just means that the fund focuses more on tax-free securities issued by schools, hospitals and utilities. Q. HOW DID THE FUND PERFORM? A. The fund's seven day yield on February 28, 1995, was 4.15%, which is the equivalent of a 6.87% taxable yield for Arizona investors in the 39.58% combined state and federal tax bracket. There's no point in making a comparison now with the fund's yield in October because yields fluctuate sharply when a fund is just starting out. That said, the fund's total return from October 12, 1994, when the fund started through February 28, 1995 was 1.40%. Q. WHAT CAN WE EXPECT IN THE MONTHS AHEAD? A. While it's not clear yet where the economy is heading, signs have been accumulating lately that point toward a possible slow-down in the growth rate. My own feeling is that while rates are unlikely to climb much higher in the months ahead, it's too early to say whether they've peaked or not. That's why I'll probably want to extend the fund's average maturity only slightly in the months ahead - possibly beyond 40 days, but not much farther than that, at least not until I see more firm signs of weakness in key economic indicators such as job creation and consumer spending. FUND FACTS GOAL: tax-free income and stability by investing in high-quality, short-term, Arizona municipal securities START DATE: October 12, 1994 SIZE: as of February 28, 1995, more than $23 million MANAGER: Scott Orr, since October 1994; manager, Fidelity Connecticut Municipal Money Market Portfolio and Fidelity Michigan Municipal Money Market Portfolio, since October 1993; Fidelity New Jersey Tax-Free Money Market Portfolio and Spartan New Jersey Municipal Money Market Portfolio, since January 1992; joined Fidelity in 1989 (checkmark) WORDS TO KNOW COMMERCIAL PAPER: A security issued by a municipality to finance capital or operating needs. FEDERAL FUNDS RATE: The interest rate banks charge each other for overnight loans. MATURITY: The time remaining before an issuer is scheduled to repay the principal amount on a debt security. When the fund's average maturity - weighted by dollar amount - is short, the fund manager is anticipating a rise in interest rates. When the average maturity is long, the manager is expecting rates to fall. When the average maturity is neutral, the manager wants the flexibility to respond to rising rates, while still capturing a portion of the higher yields available from issues with longer maturities. MUNICIPAL NOTE: A security issued in advance of future tax or other revenues and payable from those specific sources. TENDER BOND: A variable-rate, long-term security that gives the bond holder the option to redeem the bond at face value before maturity. VARIABLE RATE DEMAND NOTE (VRDN): A tender bond that can be redeemed on short notice, typically one or seven days. VRDNs are useful in managing the fund's average maturity and liquidity. SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO INVESTMENT SUMMARY MATURITY DIVERSIFICATION DAYS % OF FUND ASSETS 2/28/95 0 - 30 68 31 - 90 23 91 - 180 5 181 - 397 4 WEIGHTED AVERAGE MATURITY 2/28/95 Spartan Arizona Municipal Money Market 35 days Average All Tax-Free Money Market Fund* 39 days ASSET ALLOCATION AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 64.0 Row: 1, Col: 2, Value: 26.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 10.0 Variable rate demand notes (VRDNs) 64% Commercial paper 26% Tender bonds 0% Municipal notes 0% Other 10% * SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark) SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investments MUNICIPAL SECURITIES (A) - 100% PRINCIPAL VALUE AMOUNT (NOTE 1) ARIZONA - 95.0% Apache County Ind. Dev. Auth. Rev. (Tucson Elec. Pwr. Co. Springerville Proj.), VRDN: Series 1983 B, 4.20%, LOC Bank of New York $ 200,000 $ 200,000 Series 1983 C, 4.10%, LOC Bankers Trust 300,000 300,000 Arizona Ed. Loan Mktg. Corp., VRDN (b): Series 1990 A, 4.20%, LOC Fuji Bank (MBIA Insured) 200,000 200,000 Series 1991 A, 4.25%, LOC Dresdner Bank 900,000 900,000 Arizona Health Facs. Auth. Hosp. Sys. Rev. Bonds (Samaritan Health Svcs.) 5.30% 12/1/95 (MBIA Insured) 1,000,000 1,003,961 Arizona Health Facs. Auth. Rev., VRDN: (Samcor 1986 Loan Pool-Samaritan Health Care) 4.40% (FGIC Insured) 900,000 900,000 (Voluntary Hosp. Federation Pooled Loan Prog.): Series 1985 A, 4.10% (FGIC Insured) 225,000 225,000 Series 1985 B, 4.10% (FGIC Insured) 200,000 200,000 Chandler Ind. Dev. Auth. Multi-Family Hsg. Rev. Rfdg. (Southpark Apts.) 4.05%, LOC Citibank, VRDN 900,000 900,000 Coconino County Poll. Cont. Corp. Poll. Cont. Rev. (Arizona Pub. Svc. Co.-Navajo Proj.) Series 1994 A, 4.30%, LOC Bank of America, VRDN (b) 900,000 900,000 Glendale Gen. Oblig. Bonds 7% 7/1/95 (FGIC Insured) 250,000 252,287 Maricopa County Ind. Dev. Auth. Rev. (Privado Park Apt. Proj.) Series 1994 A, 4.25%, LOC Bank One, VRDN (b) 1,300,000 1,300,000 Maricopa County Poll. Cont. Rev. Bonds: Series 1985 D: 4.10%, tender 4/7/95 400,000 400,000 4.25%, tender 5/16/95 500,000 500,000 Series 1985 E: 4.25%, tender 5/12/95 250,000 250,000 4.20%, tender 5/18/95 100,000 100,000 Series 1985 F, 4.10%, tender 4/10/95 600,000 600,000 Maricopa County Poll. Cont. Rev. (Pub. Svc. Co. of New Mexico Palo Verde Proj.) Series 1992 A, 4%, LOC Canadian Imperial Bank of Commerce, VRDN (b) 700,000 700,000 Maricopa County Unified School Dist. #69 Participating VRDN, Series PA-25, 4.20% (Liquidity Facility Merrill Lynch) (c) 800,000 800,000 Mohave County Ind. Dev. Auth. Ind. Dev. Rev. Bonds Series 1993 E (b): 4%, tender 3/7/95 300,000 300,000 4.35%, tender 5/1/95 500,000 500,000 Phoenix Gen. Oblig. Bonds Series 1992 B, 5.80% 7/1/95 400,000 401,825 Phoenix Gen. Oblig. Rev. Series 1994-2, 3.75% (BPA Morgan Guaranty Trust Co.), VRDN 200,000 200,000 Phoenix Ind. Dev. Board Multi-Family Hsg. Rev. (Lynwood Apt. Proj.) Series 1994, 4.15%, LOC FHLB, VRDN 900,000 900,000 Pima County Ind. Dev. Auth. Ind. Rev. Rfdg. (Tucson Retirement Ctr. Proj.) 4%, LOC Swiss Bank Corp., VRDN 1,000,000 1,000,000 MUNICIPAL SECURITIES (A) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) ARIZONA - CONTINUED Pima County Ind. Dev. Auth. Multi-Family Rev. (Quail Ridge Apt.-B) 4.25%, LOC Bank One, VRDN $ 500,000 $ 500,000 Pinal County Ind. Dev. Auth. Ind. Dev. Rev. (Sunbelt Refining Co. LP Proj.) Series 1988, 4.45%, LOC Bankers Trust, VRDN (b) 600,000 600,000 Pinal County Ind. Dev. Poll. Cont. Rev. (Magna Copper Co. Proj.) VRDN: Series 1984, 3.75%, LOC Nat'l. Westminster Bank PLC 900,000 900,000 Series 1984A, 3.75%, LOC Nat'l. Westminster Bank PLC 1,000,000 1,000,000 Salt River Proj. Agricultural Impt. and Pwr. Dist., CP: 4.10% 4/6/95 200,000 200,000 4.05% 4/10/95 300,000 300,000 4.05% 4/12/95 700,000 700,000 4.10% 4/12/95 300,000 300,000 4.20% 5/18/95 251,000 251,000 Scottsdale Gen. Oblig. Bonds Series 1994, 8.25% 7/1/95 225,000 228,056 Tempe Ind. Dev. Auth. Multi-Family Hsg. Rev. (Elliot's Crossing Apts.) Series 1985, 3.85%, LOC Citibank, VRDN 800,000 800,000 Tucson Ind. Dev. Auth. Multi-Family Hsg. Rev., VRDN: Rfdg. (Freedom Park Apts. Proj.) Series 1989 A, 4.20%, LOC Sumitomo Bank Ltd. 600,000 600,000 (Lincoln Garden Proj.) 4.10%, LOC Sumitomo Bank Ltd. 300,000 300,000 Yavapai County Ind. Dev. Auth. Ind. Dev. Rev. Bonds Series 1993, 4.30%, tender 5/11/95 (b) 600,000 600,000 Yuma Ind. Dev. Auth. Ind. Rev. (Ardco Inc. Proj.) 4.15%, LOC Bank of Montreal & Harris Trust, VRDN (b) 400,000 400,000 21,612,129 PUERTO RICO - 5.0% Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Series J, 9.125% 7/1/15 320,000 334,773 Puerto Rico Gov't. Dev. Bank, CP: 3.25% 3/1/95 300,000 300,000 3.40% 3/6/95 300,000 300,000 4.10% 5/8/95 300,000 300,000 Puerto Rico Ind. Higher Ed. Rev. Bonds (Inter-American Univ.) Series 1994 A, 4.10%, tender 5/8/95, LOC Banque Paribas 200,000 200,000 1,434,773 TOTAL INVESTMENTS - 100% $ 23,046,902 Total Cost for Income Tax Purposes $ 23,046,902 SECURITY TYPE ABBREVIATIONS CP - Commercial Paper VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals (AMT securities). (c) Provides evidence of ownership in one or more underlying municipal bonds. SPARTAN ARIZONA MUNICIPAL MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1995 (UNAUDITED) 118.ASSETS 119. 120. 121.Investment in securities, at value - See 122. $ 23,046,902 accompanying schedule 123.Cash 124. 364,646 125.Interest receivable 126. 113,202 127. 128.TOTAL ASSETS 129. 23,524,750 130.LIABILITIES 131. 132. 133.Dividends payable 842 134.135.NET ASSETS 136. $ 23,523,908 137.Net Assets consist of: 138. 139. 140.Paid in capital 141. $ 23,523,918 142.Accumulated net realized gain (loss) on 143. (10) investments 144.145.NET ASSETS, for 23,523,918 shares 146. $ 23,523,908 outstanding 147.148.NET ASSET VALUE, offering price and 149. $1.00 redemption price per share ($23,523,908 (divided by) 23,523,918 shares) STATEMENT OF OPERATIONS
OCTOBER 12, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) 150.151.INTEREST INCOME 152. $ 178,888 153.EXPENSES 154. 155. 156.Management fee $ 23,107 157. 158.Non-interested trustees' compensation - 159. 160. Total expenses before reductions 23,107 161. 162. Expense reductions (23,107) - 163.164.NET INTEREST INCOME 165. 178,888 166.167.NET REALIZED GAIN (LOSS) ON INVESTMENTS 168. (10) 169.170.NET INCREASE IN NET ASSETS RESULTING FROM 171. $ 178,878 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
OCTOBER 12, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) 172.INCREASE (DECREASE) IN NET ASSETS 173.Operations $ 178,888 Net interest income 174. Net realized gain (loss) (10) 175. 178,878 176.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 177.Dividends to shareholders from net interest income (178,888) 178.Share transactions at net asset value of $1.00 per share 30,848,033 Proceeds from sales of shares 179. Reinvestment of dividends from net interest income 174,761 180. Cost of shares redeemed (7,498,876) 181. 23,523,918 Net increase (decrease) in net assets and shares resulting from share transactions 182. 23,523,908 183.TOTAL INCREASE (DECREASE) IN NET ASSETS 184.NET ASSETS 185. 186. Beginning of period - 187. End of period $ 23,523,908
FINANCIAL HIGHLIGHTS
188. OCTOBER 12, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 189. (UNAUDITED) 190.SELECTED PER-SHARE DATA 191.Net asset value, beginning of period $ 1.000 192.Income from Investment Operations .014 Net interest income 193.Less Distributions (.014) From net interest income 194.Net asset value, end of period $ 1.000 195.TOTAL RETURN B 1.40% 196.RATIOS AND SUPPLEMENTAL DATA 197.Net assets, end of period (000 omitted) $ 23,524 198.Ratio of expenses to average net assets - 199.Ratio of expenses to average net assets before expense reductions .50% A 200.Ratio of net interest income to average net assets 3.87% A
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan Arizona Municipal Income Portfolio (the income fund) is a fund of Fidelity Union Street Trust. Spartan Arizona Municipal Money Market Portfolio (the money market fund) is a fund of Fidelity Union Street Trust II. Each trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. Fidelity Union Street Trust and Fidelity Union Street Trust II (the trusts) are organized as a Massachusetts business trust and a Delaware business trust, respectively. Each fund is authorized to issue an unlimited number of shares. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION. INCOME FUND. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. INCOME TAXES. Each fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. By so qualifying, each fund will not be subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The income fund's schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. For the money market fund, accretion of market discount represents unrealized gain until realized at the time of a security disposition or maturity. EXPENSES. Most expenses of each trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income. Distributions to shareholders from realized capital gains on investments, if any, are recorded on the ex-dividend date. REDEMPTION FEES. Shares held in the income fund less than 180 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The market value of the securities purchased or sold on a when-issued or forward commitment basis are identified as such in the fund's schedule of investments. Each fund may receive compensation for interest forgone in the purchase of a delayed delivery security. With respect to purchase commitments, the fund identifies securities as segregated in its custodial records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. 3. PURCHASES AND SALES OF INVESTMENTS. INCOME FUND. Purchases and sales of securities, other than short-term securities, aggregated $6,811,675 and $1,019,190, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .55% and .50% of average net assets for the income and money market funds, respectively. FMR also bears the cost of providing shareholder services to each fund. To offset the cost of providing these services, FMR or its affiliates collected certain transaction fees from shareholders which amounted to $0 and $57 for the income and money market funds, respectively. SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect, and after reducing the fee for any payments by FMR pursuant to the fund's Distribution and Service Plan. 5. EXPENSE REDUCTIONS. FMR voluntarily agreed to reimburse each fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses). For the period, the reimbursements reduced the expenses by $8,844 and $23,107 for the income and money market funds, respectively. 6. BENEFICIAL INTEREST. At the end of the period, an affiliate of FMR was record owner of approximately 23% of the total outstanding shares of the income fund. INVESTMENT ADVISER (registered trademark) Fidelity Management & Research Company Boston, MA SUB-ADVISER FMR Texas Inc. Irving, TX OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Fred L. Henning, Jr. , Vice President - MONEY MARKET FUND Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer Thomas D. Maher, Assistant Vice President - MONEY MARKET FUND Michael D. Conway, Assistant Treasurer- MONEY MARKET FUND John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENTS United Missouri Bank, N.A. Kansas City, MO and Fidelity Service Co. Boston, MA CUSTODIAN United Missouri Bank, N.A. Kansas City, MO THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE SPARTAN (registered trademark) (registered trademark) MARYLAND MUNICIPAL INCOME FUND SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months and one year. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 15 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 19 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each figure includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns and dividends would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Spartan Maryland Municipal Income 2.08% -0.02% 6.11% Lehman Brothers Municipal Bond Index 2.80% 1.88% n/a Average Maryland Municipal Bond 2.51% 0.29% n/a Consumer Price Index (CPI) 1.28% 2.86% 4.79% CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period - - in this case, six months, one year or since the fund started on April 22, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Lehman Brothers Municipal Bond Index. You can also compare them to the average Maryland municipal bond fund, which reflects the performance of 24 Maryland municipal bond funds with similar objectives tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the CPI helps show how your fund did compared to inflation. (The periods covered by CPI numbers are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF YEAR FUND Spartan Maryland Municipal Income -0.02% 3.24% Lehman Brothers Municipal Bond Index 1.88% n/a Average Maryland Municipal Bond 0.29% n/a Consumer Price Index 2.86% 2.58% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Spartan Maryland MunMunicipal Bond Index 04/30/93 10000.00 10000.00 05/31/93 10085.91 10056.00 06/30/93 10290.79 10223.94 07/31/93 10265.31 10237.23 08/31/93 10557.39 10450.16 09/30/93 10704.98 10569.29 10/31/93 10689.74 10589.37 11/30/93 10529.06 10496.19 12/31/93 10803.25 10717.66 01/31/94 10954.64 10839.84 02/28/94 10622.39 10559.09 03/31/94 10073.67 10129.33 04/30/94 10162.94 10215.43 05/31/94 10243.70 10304.31 06/30/94 10206.48 10244.54 07/31/94 10384.84 10432.02 08/31/94 10403.21 10468.53 09/30/94 10214.50 10314.64 10/31/94 9973.88 10131.04 11/30/94 9719.70 9947.67 12/31/94 9992.19 10166.52 01/31/95 10309.68 10457.28 02/28/95 10621.51 10761.59 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Maryland Municipal Income Fund on April 30, 1993, shortly after the fund started. As the chart shows, by February 28, 1995, the value of your investment would have grown to $10,622 - a 6.22% increase on your initial investment. This assumes you still own the fund on February 28, 1995 and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Lehman Brothers Municipal Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $10,762 - a 7.62% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) TOTAL RETURN COMPONENTS APRIL 22, 1993 SIX MONTHS YEAR (COMMENCEMENT ENDED ENDED OF OPERATIONS) TO FEBRUARY 28, AUGUST 31, AUGUST 31, 1995 1994 1993 Dividend returns 3.03% 5.22% 1.99% Capital appreciation returns -0.95% -6.70% 3.48% Total returns 2.08% -1.48% 5.47% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 4.16(cents) 27.85(cents) 55.52(cents) Annualized dividend rate 5.73% 6.09% 5.88% 30-day annualized yield 5.91% - - 30-day annualized tax-equivalent yield 10.15% - -
DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.46 over the past month, $9.22 over the past six months and $9.44 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 41.76% combined effective 1995 federal and state income tax bracket. FUND TALK: THE MANAGER'S OVERVIEW An interview with Steven Harvey, Portfolio Manager of Spartan Maryland Municipal Income Fund Q. STEVE, HOW HAS THE FUND PERFORMED? A. For the six months ended February 28, 1995, the fund had a total return of 2.08%. That lagged the average Maryland municipal fund's return of 2.51% for the same period, according to Lipper Analytical Services. For the year ended February 28, 1995, the fund returned -0.02%, compared to the average fund's return of 0.29%, again according to Lipper. Q. WHAT FACTORS DETERMINED THE MUNICIPAL BOND MARKET'S PERFORMANCE OVER THE PAST SIX MONTHS? A. The major factor continued to be the Federal Reserve Board raising short-term interest rates. In early September, the bond market began to anticipate that the Fed was near the end of its actions, and the market was somewhat more positive. But later in the month, economic indicators continued to point to strength in the manufacturing, retail, and auto sectors, and employment growth remained healthy, which caused some additional inflationary fears. From that point through November, the bond market fell. Accelerating the decline was the fact that many municipal bond mutual funds were forced to sell to meet shareholder redemptions. However, the market stabilized in December as the mutual fund selling abated and the rate of issuance of municipal bonds - which is typically quite high during this period - slowed. From year-end through the end of February, the municipal bond market rallied. Q. WHY DID THE FUND LAG THE AVERAGE? A. Mostly because of its relatively large stake in discount bonds, which are bonds that sell below face value. Generally, the prices of discount bonds are more sensitive to changes in interest rates, and as a result, they performed poorly when interest rates were rising. Also, discounts fell out of favor among investors because of a recent change in the tax law. Prior to the change, gains on discount bonds were not taxed or were taxed as capital gains. Under the new law, some gains are taxed at the much higher ordinary income rate. During the recent municipal bond market rally, however, discount bonds did quite well and as their prices rose, many of them no longer sold at a deep discount. As a result, the fund's stake in them has naturally declined. Q. WHAT WERE SOME OF THE BRIGHT SPOTS IN THE FUND? A. A pollution control bond backed by Bethlehem Steel was one. Steel is a cyclical industry that was very much in an upward trend over the past six months. That reflected the overall strength of the auto sector and the economy. But because I expect a more mixed economic picture going forward, and softness in the domestic auto industry, I sold the bond in late February. That reduced the fund's stake in pollution control bonds to 0.5% of investments at the end of the period, down from 4.9% six months earlier. Q. THE FUND'S STAKE IN RESOURCE RECOVERY BONDS HAS RISEN SHARPLY OVER THE PAST SIX MONTHS. WHERE ARE YOU FINDING OPPORTUNITIES IN THIS SECTOR? A. Mainly in Northeast Maryland Solid Waste Disposal Authority bonds, which were issued to fund construction of a comprehensive waste collection and resource recovery program for Montgomery County. About a year ago, resource recovery bonds were hurt when the U.S. Supreme Court ruled that municipalities could not dictate where waste haulers ultimately sent waste. A lot of resource recovery plants were built on the notion that all waste haulers in a given county had to take waste to that municipality's plant. However, after the Supreme Court ruling, these plants found themselves competing with each other on the basis of fees, and could no longer count on revenues that were mandated. The Northeast Maryland Solid Waste Disposal project is financed partly by service fees imposed on county residents, so its revenues are less dependent on competitive rates. We also like the bond because the project is administered by Montgomery County, which is an excellent manager. At the end of the period, resource recovery bonds were 7.5% of the fund's investments, up from 2.6% six months ago. Q. WHY DID YOU ALSO REDUCE THE FUND'S STAKE IN LOWER-QUALITY BONDS? A. As I mentioned, I see more signs of economic weakness on the horizon. As news of weakness appears, investors may be more wary of lower-quality bonds and as a result, their performance could lag higher-quality bonds over the next three to six months. I thought it was better to sell some of them, locking in their recent strength. Likewise, my focus on higher credit quality is one reason I've selectively reduced the fund's stake in lower-quality health care bonds. Another reason was that I felt the advantages of cost cutting were now behind some of the health care institutions that back these bonds. Finally, I weeded out hospitals that I thought might have a difficult time increasing revenues. If the economy does slow, I'll re-evaluate lower-quality bonds, looking for those that may have inexpensive prices relative to their credit. Q. HOW DO YOU THINK 1995 SHAPES UP FOR THE MUNICIPAL BOND MARKET? A. During the next year, I think there will be some additional interest rate volatility as the battle between forces of economic acceleration and deceleration goes on. While the economy's growth may slow a bit from the torrid pace of the fourth quarter, there are still signs that manufacturing is strong, and lower interest rates could provide additional strength for housing and auto sales. I believe we could see at least one more, and maybe as many as three more, interest rate hikes by the Federal Reserve Board in the next six to nine months. FUND FACTS GOAL: to provide high current income exempt from federal, Maryland state and county income taxes by investing primarily in long-term, investment grade Maryland municipal bonds START DATE: April 22, 1993 SIZE: as of February 28, 1995, more than $40 million MANAGER: Steven Harvey, since April 1993; manager, Fidelity Ohio Tax-Free Portfolio, since 1994; Fidelity Minnesota Tax-Free Portfolio and Spartan Pennsylvania Municipal Portfolio, since 1993; joined Fidelity in 1986 (checkmark) STEVEN HARVEY ON HIS INVESTMENT STRATEGY: "The yield curve - or the difference in yields that bonds of varying maturities pay - is relatively flat right now. That means there currently isn't much difference in yields between intermediate-term and long-term bonds, and I can buy intermediate securities without sacrificing much income. Recently, I've been buying more bonds in the eight- to 15-year range, which offer an attractive risk/reward tradeoff. In essence, I've reduced the fund's interest rate risk but given up very little in added income. As always, I'll attempt to identify sectors and individual bonds that I think can outperform over the next six to 12 months. While I often buy bonds just for their relative stability, I'm also on the lookout for bonds with the potential of price appreciation as a result of an improving credit quality. Generally, I try to buy bonds when they're out of favor, before improving credit fundamentals are apparent, and sell them before any deteriorating credit news has pushed prices down." INVESTMENT CHANGES TOP FIVE SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENT INVESTMENTS S IN THESE SECTORS 6 MONTHS AGO General Obligation 24.5 22.3 Health Care 20.7 24.7 Transportation 15.9 20.4 Housing 15.2 11.3 Resource Recovery 7.5 2.6 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 16.0 18.3 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 8.3 9.2 DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS CAN ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THE ABOVE EXAMPLE. QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994 Aaa 32.5% Aa, A 34.5% Baa 21.0% Ba, B 0.0% Non-rated 0.3% Short-term investments 11.7% Aaa 32.8% Aa, A 30.4% Baa 26.7% Ba, B 0.0% Non-rated 5.5% Short-term investments 4.6% Row: 1, Col: 1, Value: 32.5 Row: 1, Col: 2, Value: 34.5 Row: 1, Col: 3, Value: 21.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 1.3 Row: 1, Col: 6, Value: 11.7 Row: 1, Col: 1, Value: 32.8 Row: 1, Col: 2, Value: 30.4 Row: 1, Col: 3, Value: 26.7 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 5.5 Row: 1, Col: 6, Value: 4.6 SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW ACCOUNTED FOR 0.3% AND 5.5% OF THE FUND'S INVESTMENTS ON FEBRUARY 28, 1995, AND AUGUST 31, 1994, RESPECTIVELY. INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investments MUNICIPAL BONDS - 88.3% MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (NOTE 1) MARYLAND - 69.7% Anne Arundel County Consolidated Gen. Impt. Ltd. Tax 5.25% 7/15/11 Aa $ 500,000 $ 462,500 Anne Arundel County Gen. Oblig. 7% 8/1/04 Aa 550,000 613,938 Baltimore County Mtg. Rev. Rfdg. (Kingswood IV) Series A, 5.75% 9/1/20 (FHA Guaranteed) AAA 1,000,000 925,000 Baltimore Consolidated Pub. Impt.: Rfdg. Series D: 6% 10/15/04 (AMBAC Insured) Aaa 500,000 521,875 5% 10/15/08 (AMBAC Insured) Aaa 750,000 692,813 5.40% 10/15/12 (AMBAC Insured) Aaa 700,000 658,875 Series B, 7.05% 10/15/07 (MBIA Insured) Aaa 1,000,000 1,123,750 7% 10/15/09 Aaa 500,000 563,810 Baltimore Rev. Rfdg. (Kidder Wastewtr. Proj.) Series A, 5.65% 7/1/20 (MBIA insured) Aaa 2,000,000 1,877,500 Calvert County Rfdg. (Consolidated Pub. Impt. Proj.): Unltd. Tax 4.50% 7/15/03 Aa 500,000 460,000 4.875% 7/15/10 Aa 500,000 445,000 Maryland Commty. Dev. Administration Dept. Hsg. & Commty. Dev. (Single Family Prog.): 4th Series, 6.45% 4/1/14 Aa 500,000 506,250 7th Series, 7.25% 4/1/19 (b) Aa 500,000 525,625 Maryland Health & Higher Ed. Facs. Auth. Rev.: Rfdg.: (Doctors Commty. Hosp.) 5.75% 7/1/13 Baa 500,000 417,500 (Howard County Gen. Hosp.) 5.50% 7/1/13 Baa1 2,000,000 1,672,500 (John Hopkins Health Sys.) Series 1988, 7.50% 7/1/20 Aa1 1,000,000 1,058,750 (Frederick Mem. Hosp.) 5.20% 7/1/08 (FGIC Insured) Aaa 1,500,000 1,387,500 (Good Samaritan Hosp.) 5.75% 7/1/13 A 385,000 359,975 Maryland Wtr. Quality Fing. Revolving Loan Fund Rev. 7.25% 9/1/12 Aa 1,000,000 1,083,750 Montgomery County Rev. Auth. Lease Rev. Rfdg. (Olney Indoor Swim Center) Project C, 5.25% 10/1/12 AA- 1,000,000 920,000 Montgomery County Rev. Hsg. Opportunity Commission (Single Family Mtg.) Series A, 6.60% 7/1/14 Aa 1,000,000 1,007,500 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (NOTE 1) MARYLAND - CONTINUED Northeast Waste Disp. Auth. Solid Waste Rev. (Montgomery County Resource Recovery Proj.) Series A: 5.90% 7/1/05 (b) A $ 600,000 $ 590,250 6% 7/1/07 (b) A 500,000 486,875 6.30% 7/1/16 A 2,000,000 1,922,500 Prince George's County Hosp. Rev. (Greater Southeast Health Care Sys.): 6.375% 1/1/13 Baa 470,000 421,825 6.375% 1/1/23 Baa 2,660,000 2,307,550 Prince George's County Hsg. Auth.: (Single Family Rev.) Series A, 6.50% 12/1/15 (b) AAA 500,000 505,625 6.70% 6/20/20 AAA 1,000,000 1,027,500 Prince George's County Rfdg. Consolidated Pub. Impt. Ltd. Tax 5.25% 10/1/11 A 1,000,000 925,000 Rockville Gen. Oblig. Rfdg. 5.00% 4/15/08 Aa1 500,000 456,875 Univ. of Maryland Sys. Auxiliary Facs. & Tuition Rev. 5% 10/1/09 Aa 1,000,000 901,250 Washington Suburban San. Dist. Rev. 6.75% 6/1/01 Aa1 590,000 632,038 Washington Suburban San. Dist. Rfdg. Swr. Disp. 4.90% 12/1/05 Aa1 355,000 332,811 Worcester County San. Dist. Rfdg. Series J, 6% 8/15/02 Aa 100,000 103,375 27,897,885 PUERTO RICO - 7.0% Puerto Rico Commonwealth Hwy. & Trans. Auth. Rev. Series W, 5.50% 7/1/13 Baa1 2,000,000 1,847,500 Puerto Rico Pub. Ed. & Health Facs. Rfdg. Series M, 5.75% 7/1/15 Baa1 1,000,000 948,750 2,796,250 U.S. VIRGIN ISLANDS - 0.3% Virgin Islands Pub. Fin. Auth. Rev. Rfdg. Series A, 7.25% 10/1/18 (Escrowed to Maturity)(d) - 100,000 103,125 GUAM - 2.0% Guam Arpt. Auth. Gen. Rev. Series B: 6.40% 10/1/05 (b) BBB 500,000 502,500 6.70% 10/1/23 (b) BBB 300,000 298,875 801,375 MUNICIPAL BONDS - CONTINUED MOODY'S PRINCIPAL VALUE RATINGS (C) AMOUNT (NOTE 1) MULTIPLE STATE - 9.3% Washington Metropolitan Area Trans. Auth. Gross Rev. Rfdg.: 4.50% 7/1/01 (FGIC Insured) Aaa $ 525,000 $ 491,531 6% 7/1/09 (FGIC Insured) Aaa 600,000 617,340 6% 7/1/10 (FGIC Insured)(e) Aaa 2,570,000 2,608,550 3,717,421 TOTAL MUNICIPAL BONDS (Cost $37,047,423) 35,316,056 MUNICIPAL NOTES (A) - 11.7% MARYLAND - 11.7% Baltimore County Econ. Dev. Rev. Rfdg. (Blue Circle, Inc. Proj.) Series 1992, 4.15%, LOC Den Danske Bank Group, VRDN VMIG 1 1,400,000 1,400,000 Maryland Health & Higher Edl. Facs. Rev. (Pooled Loan Prog.) Series A, 4.35% LOC Dai-Ichi Kangyo Bank Ltd., VRDN VMIG 1 1,700,000 1,700,000 Montgomery County Hsg. Opportunity Commission Hsg. Rev. (Draper Lane Apts.) 4.15%, BPA Sumitomo Bank Ltd. (FGIC Insured), VRDN (b) VMIG 1 1,600,000 1,600,000 TOTAL MUNICIPAL NOTES (Cost $4,700,000) 4,700,000 TOTAL INVESTMENTS - 100% (Cost $41,747,423) $ 40,016,056 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) SOLD 10 Municipal Bond Contacts March, 95 $ 906,875 $ (57,591) THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 2.1% SECURITY TYPE ABBREVIATIONS VRDN - Variable Rate Demand Notes LEGEND (a) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (b) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. (c) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (d) Security collateralized by an amount sufficient to pay interest and principal. (e) A portion of the Security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $2,608,550. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 58.5% AAA, AA, A 61.1% Baa 19.0% BBB 7.2% Ba 0.0% BB 0.0% B 0.0% B 0.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 0.3%. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: General Obligation 24.5% Health Care 20.7 Transportation 15.9 Housing 15.2 Others (individually less than 10%) 23.7 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $47,747,423. Net unrealized depreciation aggregated $1,731,367, of which $276,489 related to appreciated investment securities and $2,007,856 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending August 31, 1995, $86,337 of losses recognized during the period November 1, 1993 to August 31, 1994. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) 1.ASSETS 2. 3. 4.Investment in securities, at value (cost $41,747,423) - 5. $ 40,016,056 See accompanying schedule 6.Cash 7. 999,480 8.Interest receivable 9. 519,934 10.Receivable from investment adviser for expense 11. 13,329 reductions 12. 13.TOTAL ASSETS 14. 41,548,799 15.LIABILITIES 16. 17. 18.Payable for investments purchased $ 1,201,610 19. 20.Dividends payable 37,072 21. 22.Accrued management fee 16,290 23. 24.Payable for daily variation on futures contracts 4,063 25. 26. 27.TOTAL LIABILITIES 28. 1,259,035 29.30.NET ASSETS 31. $ 40,289,764 32.Net Assets consist of: 33. 34. 35.Paid in capital 36. $ 43,311,236 37.Accumulated undistributed net realized gain (loss) on 38. (1,232,514) investments 39.Net unrealized appreciation (depreciation) on 40. (1,788,958) investments 41.42.NET ASSETS, for 4,217,964 shares outstanding 43. $ 40,289,764 44.45.NET ASSET VALUE, offering price and redemption 46. $9.55 price per share ($40,289,764 (divided by) 4,217,964 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) 47.48.INTEREST INCOME 49. $ 1,167,744 50.EXPENSES 51. 52. 53.Management fee $ 103,754 54. 55.Non-interested trustees' compensation 101 56. 57. Total expenses before reductions 103,855 58. 59. Expense reductions (84,972) 18,883 60.61.NET INTEREST INCOME 62. 1,148,861 63.REALIZED AND UNREALIZED GAIN (LOSS) 65. 66. 64.Net realized gain (loss) on: 67. Investment securities (1,229,442) 68. 69. Futures contracts 60,190 (1,169,252) 70.Change in net unrealized appreciation (depreciation) 71. 72. on: 73. Investment securities 688,271 74. 75. Futures contracts (36,784) 651,487 76.77.NET GAIN (LOSS) 78. (517,765) 79.80.NET INCREASE (DECREASE) IN NET ASSETS 81. $ 631,096 RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, 1995 AUGUST 31, (UNAUDITED) 1994 82.INCREASE (DECREASE) IN NET ASSETS 83.Operations $ 1,148,861 $ 2,136,472 Net interest income 84. Net realized gain (loss) (1,169,252) 11,813 85. Change in net unrealized appreciation (depreciation) 651,487 (3,036,700) 86. 87.NET INCREASE (DECREASE) IN NET ASSETS 631,096 (888,415) RESULTING FROM OPERATIONS 88.Distributions to shareholders: (1,148,861) (2,136,472) From net interest income 89. From net realized gain - (11,813) 90. In excess of net realized gain - (62,420) 91. 92.TOTAL DISTRIBUTIONS (1,148,861) (2,210,705) 93.Share transactions 6,381,901 27,396,237 Net proceeds from sales of shares 94. Reinvestment of distributions 872,030 1,711,392 95. Cost of shares redeemed (7,913,981) (13,513,074) 96. Redemption fees 3,600 27,464 97. Net increase (decrease) in net assets resulting (656,450) 15,622,019 from share transactions 98. 99.TOTAL INCREASE (DECREASE) IN NET ASSETS (1,174,215) 12,522,899 100.NET ASSETS 101. 102. 103. Beginning of period 41,463,979 28,941,080 104. End of period $ 40,289,764 $ 41,463,979 105.OTHER INFORMATION 107. 108. 106.Shares 109. Sold 690,835 2,692,013 110. Issued in reinvestment of distributions 94,619 172,096 111. Redeemed (869,163) (1,360,016) 112. Net increase (decrease) (83,709) 1,504,093
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR APRIL 22, 1993 ENDED ENDED (COMMENCEME FEBRUARY 28, 1995 AUGUST 31, NT OF OPERATIONS) AUGUST 31, (UNAUDITED) 1994 1993 113.SELECTED PER-SHARE DATA 114.Net asset value, beginning of period $ 9.640 $ 10.350 $ 10.000 115.Income from Investment Operations .278 .543 .194 Net interest income 116. Net realized and unrealized gain (loss) (.091) (.697) .348 117. Total from investment operations .187 (.154) .542 118.Less Distributions (.278) (.543) (.194) From net interest income 119. In excess of net realized gain on - (.020) - investments 120. Total distributions (.278) (.563) (.194) 121.Redemption fees added to paid in capital .001 .007 .002 122.Net asset value, end of period $ 9.550 $ 9.640 $ 10.350 123.TOTAL RETURN B 2.10% -1.46% 5.49% 124.RATIOS AND SUPPLEMENTAL DATA 125.Net assets, end of period (000 omitted) $ 40,290 $ 41,464 $ 28,941 126.Ratio of expenses to average net assets .10% .03% - A 127.Ratio of expenses to average net assets .55% .55% .55%A A before expense reductions 128.Ratio of net interest income to average 6.08% 5.45% 5.46%A net assets A 129.Portfolio turnover rate 69% 64% 29%A A
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan Maryland Municipal Income Fund (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures and options transactions, market discount, net operating losses, capital loss carryforwards, expiring capital loss carryforwards and losses deferred due to wash sales, futures and options and excise tax regulations. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. REDEMPTION FEES. Shares held in the fund less than 180 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the bond market and to fluctuations in interest rates. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Futures contracts and written options involve, to varying degrees, risk of loss in excess of the futures variation margin or the option value reflected in the Statement of Assets and Liabilities. The underlying face amount at value is shown in the schedule of investments under the caption "Futures Contracts". This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $12,218,840 and $15,600,366, respectively. The market value of futures contracts opened and closed during the period amounted to $9,586,592 and $10,730,686, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .55% of the fund's average net assets. FMR also bears the cost of providing shareholder services to the fund. To offset the cost of providing these services, FMR or its affiliates collect certain transaction fees from the fund's shareholders which amounted to $880 for the period. 5. EXPENSE REDUCTIONS. FMR voluntarily agreed to reimburse the fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above an annual rate of .10% of average net assets. For the period, the reimbursement reduced the expenses by $84,972. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN United Missouri Bank, N.A. Kansas City, MO (registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 FIDELITY TAX-FREE BOND FUNDS Aggressive Tax-Free California Tax-Free High Yield California Tax-Free Insured High Yield Tax-Free Insured Tax-Free Limited Term Municipals Massachusetts Tax-Free High Yield Michigan Tax-Free High Yield Minnesota Tax-Free Municipal Bond New York Tax-Free High Yield New York Tax-Free Insured Ohio Tax-Free High Yield Spartan Aggressive Tax-Free Spartan Arizona Municipal Income Spartan California Intermediate Municipal Spartan California Municipal High Yield Spartan Connecticut Municipal High Yield Spartan Florida Municipal Income Spartan Intermediate Municipal Spartan Maryland Municipal Income Spartan Municipal Income Spartan New Jersey Municipal High Yield Spartan New York Intermediate Municipal Spartan New York Municipal High Yield Spartan Pennsylvania Municipal High Yield Spartan Short-Intermediate Municipal THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (registered trademark) EXPORT FUND SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 5 The manager's review of fund performance, strategy and outlook. INVESTMENT SUMMARY 8 A summary of the fund's investments. INVESTMENTS 9 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 19 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 23 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMA- TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term, as we witnessed last year. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). Export Fund has a 3% sales charge which has been waived since the fund's start on October 4, 1994 through December 31, 1995. CUMULATIVE TOTAL RETURN PERIOD ENDED FEBRUARY 28, 1995 LIFE OF FUND Export Fund 5.01% CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set period - in this case, since the fund began on October 4, 1994. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. Once the fund has a longer record, you may want to compare it to the Standard & Poor's Composite Index of 500 Stocks - a common proxy for the U.S. stock market. You may also want to look at the performance of the average growth fund, as tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any. They will appear in the fund's next report six months from now. AVERAGE ANNUAL RETURNS will appear once the fund is a year old, and the growth of a hypothetical $10,000 INVESTMENT in the fund will appear in the fund's next report six months from now. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW An interview with Arieh Coll, Portfolio Manager of Fidelity Export Fund Q. ARIEH, HOW HAS THE FUND PERFORMED SO FAR? A. The fund had a total return of 5.01% from its inception date - October 4, 1994 - through February 28, 1995. For the closest available comparison to its peers, we can look at the period from October 6, 1994, through February 28, 1995. During that time, the fund had a total return of 9.50%, compared to 14.56% for the average growth fund tracked by Lipper Analytical Services. Q. GRANTED, EXPORT FUND'S TRACK RECORD IS SHORT, BUT WHY DID IT UNDERPERFORM THE AVERAGE FUND? A. The fund did quite well in October, but its performance slowed somewhat from November through January. The main reason is that the fund tends to invest in smaller companies than many of its peers, and these companies have underperformed broad stock market averages recently. But I continue to believe that many of the fund's small and mid-sized stocks are extremely attractive. In many cases, I've increased the fund's investments in these companies. In addition, it's important to maintain a proper mind-set about performance. Shareholders in the fund should have a long-term investing horizon, and five-month figures provide little in the way of historical perspective. Q. BEFORE WE TALK ABOUT SPECIFIC STOCKS, CAN YOU FILL US IN ON THE PHILOSOPHY BEHIND THE FUND? A. Sure, it's really quite simple. The fund invests in North American companies that derive, or I expect will derive, 10% or more of their annual revenues from the sales of exported goods or services. While 10% may not sound like a lot, the truth is that most U.S. companies fall far below this threshold. The theory behind the fund is that if a company can export successfully, it probably has superior products and business expertise. That's because there are many obstacles to exporting - tariffs, increased transportation costs, and long distances between the companies and their customers, among them. If a company can succeed in foreign markets despite those hurdles, it is most likely an aggressive and well-managed company. Q. WHAT ARE SOME OF THE RISKS INHERENT IN THE FUND? A. I mentioned earlier the fund's bias toward small and medium-sized companies, often in young, fast-growing industries. While these stocks have the potential for strong long-term gains, they're often more volatile than the broad stock market. So, again, shareholders should have a long-term view. In addition, I plan to weight the fund's assets in its top 20 or so investments - the investments in which I'm most confident. While I believe that strategy will help the fund achieve long-term success, it also may contribute to volatility in the short run. Finally, companies that export tend to be clustered in a few key industries. Bad news surrounding any one of these industries could negatively impact the fund more than some of its peers. Q. WHICH SECTORS LEND THEMSELVES TO EXPORTING? A. Technology - 23.7% of the fund's investments on February 28 - is one. The U.S. has become the world leader in technology, and many U.S. companies are expanding market share by selling their products overseas. The stock of semiconductor manufacturer Altera has risen 64% over the past four months on the heels of strong earnings. New management and successful new products have helped boost the stock of network software manufacturer Novell. In addition, the health care sector is home to many exporters. Medical supply companies Becton Dickinson and St. Jude Medical are examples of companies that seem to have excellent earnings prospects. Even though both stocks have performed well, they appear to remain relatively cheap. Q. MANY OF THE FUND'S STOCKS MUST FALL OUTSIDE OF THOSE SECTORS . . . A. They do. Although most share the common thread of exporting, the fund's investments fall into several different industry classifications. Its second largest investment at the end of February was Scientific Games Holdings, a company that manufactures instant lottery tickets. This company is a great example of what the fund is all about. It has more than a 50% market share in the U.S., and derives about 10% of its sales from exports. Now, consider that half of all lottery tickets sold worldwide are sold overseas, and you can see the long-term earnings potential. The fund's largest holding is the brokerage firm Lehman Brothers. As the stock market suffered in 1994, so did brokerage companies. But I felt that Lehman's stock was oversold, and was too cheap to ignore. When other investors also began to believe that Lehman's business would eventually recover, they helped drive up the company's stock price by roughly 30%. Q. WHICH STOCKS HAVEN'T FARED WELL SO FAR? A. Brock Control Systems was a disappointment. The company sells sales force automation software, but didn't enhance its product quickly enough to keep up with competitors. That caused the company's sales, profits and stock price to fall. American Safety Razor is another stock that has languished recently. The company makes razors that are sold under private labels. Because its earnings growth and business prospects appear solid, I'm hopeful its stock price should eventually rise accordingly. Q. LET'S TALK ABOUT YOUR OUTLOOK. WHAT'S ON THE HORIZON? A. My outlook for 1995 is optimistic. Although the U.S. may see slower economic growth as a result of higher interest rates, other world economies - - particularly in Europe and Japan - appear to be on the upswing. This could bode well for many companies that the fund holds because Europe and Japan are two of the primary recipients of U.S. exports. Foreign export markets could provide a hedge of sorts for these companies, should economic growth slow in the U.S. In addition, the declining dollar has helped make U.S. exports cheaper, though it's difficult to say how long that will last. Despite those positives, I expect a fair amount of volatility going forward. The full effect of higher interest rates on corporate earnings in the U.S. and overseas is yet to be seen. If earnings growth slows, stocks could run into trouble. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in the stocks of North American companies that are expected to benefit from exporting goods or services START DATE: October 4, 1994 SIZE: As of February 28, 1995, more than $117 million MANAGER: Arieh Coll, since October 1994; manager, Fidelity Select Brokerage and Investment Management Portfolio, 1993-1995; Fidelity Select Software and Computer Services Portfolio, 1991-1994; Fidelity Select Technology Portfolio 1992-1993; joined Fidelity in 1989 (checkmark) ARIEH COLL ON HIS INVESTING STYLE: "I would consider myself a growth investor, with an eye toward value. WMS Industries is a good example of a value stock with growth potential. The company sells pinball and other gaming machines. Last fall, its sales and earnings were declining, and its stock seemed to be extremely cheap. But WMS was planning to launch new video game and slot machine products in 1995 that I felt would reinvigorate its growth prospects. When other investors began to see the same potential, the stock rose nicely. "Semiconductor manufacturer Altera is an example of a growth stock with value characteristics. Last fall, its earnings were growing rapidly, but its stock valuation - - its price relative to earnings - - was attractively low. Although the stock has since risen to more fairly reflect the company's earnings potential, I think it still has further to go." (solid bullet) At least 65% of the fund's assets must be invested in North American companies that are expected to benefit from exporting goods or services. One exception among the fund's top 10 investments is Nokia, a Finnish cellular phone manufacturer. The company is expanding its worldwide market share in the rapidly growing cellular industry. For example, as Asian countries install new telephone networks, they are largely using cellular systems, which are much less expensive than their land-based counterparts. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Lehman Brothers Holdings, Inc. 4.2 Scientific Games Holdings Corp. 4.1 Becton, Dickinson & Co. 3.1 Novell, Inc. 2.8 TSX Corp. 2.7 RJR Nabisco Holdings Corp. 2.5 Altera Corp. 2.4 Cominco Fertilizer Ltd. 2.3 St. Jude Medical, Inc. 2.2 Nokia Corp. AB sponsored ADR 1.9 TOP FIVE MARKET SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Technology 23.7 Health 11.7 Media & Leisure 10.7 Basic Industries 8.0 Construction & Real Estate 7.5 ASSET ALLOCATION AS OF FEBRUARY 28, 1995 * Row: 1, Col: 1, Value: 5.0 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 46.0 Row: 1, Col: 4, Value: 47.0 Stocks 94.5% Bonds 0.1% Short-term investments 5.4% Foreign investments 17.1% * INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investments COMMON STOCKS - 94.5% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.7% AEROSPACE & DEFENSE - 0.3% Lockheed Corp. 50 $ 3,881 Northrop Corp. 7,600 337,250 341,131 DEFENSE ELECTRONICS - 0.4% Tracor, Inc. 50,000 531,250 TOTAL AEROSPACE & DEFENSE 872,381 BASIC INDUSTRIES - 8.0% CHEMICALS & PLASTICS - 7.2% Cominco Fertilizer Ltd. (a) 100,600 2,669,650 Cytec Industries, Inc. (a) 10,200 395,250 Ferro Corp. 1,000 25,625 First Mississippi Corp. 22,000 533,500 Great Lakes Chemical Corp. 50 3,006 Hanna (M.A.) Co. 100 2,438 Intertape Polymer Group, Inc. 59,100 1,020,762 Kemira OY (a) 40,000 328,265 Mississippi Chemical Corp. 19,200 350,400 OM Group, Inc. 85,800 2,059,200 Union Carbide Corp. 33,100 947,488 8,335,584 METALS & MINING - 0.8% Alcan Aluminium Ltd. 14,500 353,487 Aluminum Co. of America 9,400 366,600 Castech Aluminum Group (a) 14,100 202,688 922,775 TOTAL BASIC INDUSTRIES 9,258,359 CONSTRUCTION & REAL ESTATE - 7.5% BUILDING MATERIALS - 0.9% RB&W Corp. (a) 117,700 1,029,875 CONSTRUCTION - 6.1% American Homestar Corp. (a) 34,000 323,000 Beazer Homes USA, Inc. (a) 131,000 1,915,875 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) CONSTRUCTION & REAL ESTATE - CONTINUED CONSTRUCTION - CONTINUED Engle Homes, Inc. 10,000 $ 82,500 Kaufman & Broad Home Corp. 73,600 1,076,400 Pulte Corp. 7,200 165,600 Redman Industries (a) 48,000 948,000 Southern Energy Homes, Inc. (a) 10,000 112,500 Standard Pacific Corp. 139,400 958,375 U.S. Home Corp. (a) 82,900 1,512,925 7,095,175 REAL ESTATE - 0.5% Hovnanian Enterprises, Inc. Class A (a) 10,000 60,000 Sun Hung Kai Properties Ltd. 85,000 571,687 631,687 TOTAL CONSTRUCTION & REAL ESTATE 8,756,737 DURABLES - 1.9% AUTOS, TIRES, & ACCESSORIES - 0.6% Allen Group, Inc. (The) 9,000 211,500 Magna International, Inc. Class A 11,500 442,769 654,269 CONSUMER DURABLES - 1.1% Sola Group Ltd. 75,000 1,275,000 CONSUMER ELECTRONICS - 0.0% Duracraft Corp. (a) 100 3,575 TEXTILES & APPAREL - 0.2% Farah, Inc. (a) 100 738 Stride Rite Corp. 20,000 257,500 Westpoint Stevens, Inc. Class A (a) 500 6,938 265,176 TOTAL DURABLES 2,198,020 ENERGY - 1.4% COAL - 0.1% Zeigler Coal Holding Co. 10,000 107,500 ENERGY SERVICES - 0.3% Halliburton Co. 9,000 335,250 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ENERGY - CONTINUED OIL & GAS - 1.0% Anderson Exploration Ltd. (a) 497 $ 4,694 Beau Canada Exploration 2,700 3,187 Canadian Natural Resources Ltd. (a) 1,400 14,231 Northstar Energy Corp. (a) 50,200 361,268 Ranchmen's Resources Ltd. (a) 900 3,400 Renaissance Energy Ltd. (a) 19,000 379,439 Richland Petroleum Corp. Class A (a) 60,300 368,861 1,135,080 TOTAL ENERGY 1,577,830 FINANCE - 6.6% BANKS - 0.8% Bankers Trust New York Corp. 15,000 946,875 INSURANCE - 0.1% GMIS, Inc. (a) 200 4,300 NAC Re Corp. 1,900 63,175 67,475 SECURITIES INDUSTRY - 5.7% Duff & Phelps Credit Rating Co. 10,000 108,750 First Marathon Inc. Class A (non-vtg.) 25,000 215,897 Lehman Brothers Holdings, Inc. 268,900 4,873,813 Merrill Lynch & Co., Inc. 1,000 41,000 Midland Walwyn Inc. 50,000 256,378 Peregrine Investments Holdings 951,000 1,162,379 6,658,217 TOTAL FINANCE 7,672,567 HEALTH - 11.7% DRUGS & PHARMACEUTICALS - 1.8% Biogen, Inc. 10,100 416,625 Bristol-Myers Squibb Co. 18,500 1,147,000 North American Biologicals, Inc. (a) 18,800 159,800 Phoenix International Life Sciences, Inc. (a) 41,600 209,564 Phoenix International Life Sciences, Inc. (a)(c) 27,000 136,015 2,069,004 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - 9.9% Advanced Technology Laboratories, Inc. (a) 100 $ 1,550 American Medical Electronics, Inc. (a) 7,200 46,800 Ballard Medical Products 43,600 501,400 Beckman Instruments, Inc. 49,200 1,500,600 Becton, Dickinson & Co. 69,400 3,643,500 Elscint Ltd. 3,600 7,200 Minntech Corp. 10,000 157,500 St. Jude Medical, Inc. 69,600 2,523,000 Sofamor/Danek Group, Inc. (a) 70,400 1,469,600 U.S. Surgical Corp. 77,700 1,631,700 11,482,850 TOTAL HEALTH 13,551,854 HOLDING COMPANIES - 0.7% Catena AB Class A Free shares 27,300 239,602 Jardine Matheson Holdings Ltd. 64,800 596,160 835,762 INDUSTRIAL MACHINERY & EQUIPMENT - 5.9% ELECTRICAL EQUIPMENT - 5.7% C COR Electronics, Inc. (a) 22,200 593,850 California Amplifier, Inc. (a) 124,000 806,000 California Microwave Corp. (a) 100 2,925 Hutchison Whampoa Ltd. Ord. 136,000 576,965 Oak Industries, Inc. (a) 100 2,675 Scientific-Atlanta, Inc. 63,700 1,488,988 TSX Corp. (a) 191,600 3,161,400 6,632,803 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% Cascade Corp. 10,000 252,500 Harnischfeger Industries, Inc. 100 2,788 255,288 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 6,888,091 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDIA & LEISURE - 10.7% BROADCASTING - 0.3% Capital Cities/ABC, Inc. 100 $ 8,850 Grupo Televisa GDS (c) 200 3,300 Valuevision International, Inc. (a) 54,500 313,375 325,525 ENTERTAINMENT - 5.9% American Classic Voyages Co. 29,500 287,625 Cinergi Pictures Entertainment, Inc. (a) 9,400 64,038 Disney (Walt) Co. 16,500 880,688 Players International, Inc. (a) 37,600 902,400 Scientific Games Holdings Corp. (a) 104,450 4,700,250 6,835,001 LEISURE DURABLES & TOYS - 3.1% ARCTCO, Inc. 20,500 338,250 Cobra Golf, Inc. (a) 64,100 2,087,256 First Team Sports, Inc. (a) 16,500 307,313 Rawlings Sporting Goods, Inc. (a) 72,000 864,000 3,596,819 LODGING & GAMING - 1.4% President Casinos, Inc. (a) 33,600 218,400 Video Lottery Technologies, Inc. 40,000 315,000 WMS Industries, Inc. (a) 51,100 1,111,425 1,644,825 TOTAL MEDIA & LEISURE 12,402,170 NONDURABLES - 6.6% FOODS - 0.1% Archer-Daniels-Midland Co. 500 9,500 Chiquita Brands International, Inc. 10,000 133,750 Dole Food, Inc. 100 2,600 145,850 HOUSEHOLD PRODUCTS - 1.6% American Safety Razor Co. (a) 48,800 597,800 Colgate-Palmolive Co. 19,100 1,231,950 Safety First, Inc. (a) 100 2,300 Tambrands, Inc. 100 4,325 1,836,375 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) NONDURABLES - CONTINUED TOBACCO - 4.9% Philip Morris Companies, Inc. 26,000 $ 1,579,500 RJR Nabisco Holdings Corp. (a) 518,900 2,918,813 Sampoerna, Hanjaya Mandala (For. Reg.) 205,000 1,146,854 5,645,167 TOTAL NONDURABLES 7,627,392 PRECIOUS METALS - 0.7% Euro-Nevada Mining Corp. 40,000 780,828 RETAIL & WHOLESALE - 0.2% APPAREL STORES - 0.1% Sportmart, Inc. Class A (non-vtg) (a) 15,900 107,325 APPLIANCE STORES - 0.0% Cellstar Corp. (a) 2,300 51,175 RETAIL & WHOLESALE, MISC - 0.1% Sodak Gaming, Inc. (a) 7,300 116,800 U.S. Office Products Co. 500 5,625 122,425 TOTAL RETAIL & WHOLESALE 280,925 SERVICES - 2.2% LEASING & RENTAL - 0.2% Hollywood Entertainment Corp. (a) 10,000 280,000 SERVICES - 2.0% Career Horizons, Inc. 8,500 163,625 Craig (Jenny), Inc. 41,000 297,250 HCIA, Inc. 500 9,375 Lazare Kaplan International, Inc. (a) 206,300 1,805,125 2,275,375 TOTAL SERVICES 2,555,375 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TECHNOLOGY - 23.7% COMMUNICATIONS EQUIPMENT - 3.1% DSC Communications Corp. (a) 100 $ 3,600 Digital Systems International, Inc. (a) 200 1,375 Ericsson (L.M.) Telephone Co. Class B ADR 200 11,375 Inter-Tel, Inc. (a) 35,900 408,363 Nokia Corp. AB 6,000 898,293 Nokia Corp. AB sponsored ADR (a) 30,000 2,257,500 3,580,506 COMPUTER SERVICES & SOFTWARE - 11.1% Alias Research, Inc. (a) 2,700 78,300 Bachman Information Systems, Inc. (a) 30,000 135,000 Brock Control Systems, Inc.(a) 30,800 192,500 Business Objects SA sponsored ADR (a) 100 3,013 Clinicom, Inc. (a) 10,000 172,500 Cognos, Inc. (a) 300 6,369 CompUSA, Inc. (a) 1,400 26,425 Comshare, Inc. (a) 100 1,656 Corel Systems Corp. 30,000 410,205 ECI Telecom Ltd. 20,000 305,000 EIS International, Inc. (a) 100 1,550 Electronics for Imaging, Inc. (a) 56,700 2,225,475 Investment Technology Group, Inc. (a) 154,500 1,023,563 MDL Information Systems, Inc. (a) 114,200 1,213,375 Manugistics Group, Inc. (a) 500 5,313 Modatech Systems, Inc. (a) 309,800 154,900 Novell, Inc. (a) 160,100 3,254,534 Platinum Technology, Inc. 900 21,375 Ross Systems, Inc. (a) 195,500 977,500 Ross Systems, Inc. (a)(b) 70,000 297,500 SHL Systemhouse, Inc. (a) 185,100 1,110,600 Shared Medical Systems Corp. 100 3,444 Structural Dynamics Research Corp. (a) 300 2,213 Systems & Computer Technology Corp. (a) 70,000 1,233,750 TGV Software, Inc. (a) 100 1,600 Transaction Systems Architects 500 8,938 Wavefront Technologies, Inc. (a) 5,900 90,713 12,957,311 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - 4.0% Amdahl Corp. (a) 60,000 $ 667,500 Compaq Computer Corp. 20,000 690,000 Diebold, Inc. 30,100 1,064,788 Digital Equipment Corp. (a) 50 1,675 Pinnacle Micro, Inc. (a) 105,000 1,391,250 RETIX 100,000 487,500 Silicon Graphics, Inc. (a) 400 13,850 Telxon Corp. 22,700 314,963 4,631,526 ELECTRONIC INSTRUMENTS - 0.4% Electro Scientific Industries, Inc. (a) 50 944 Megatest Corp. 42,300 470,588 Silicon Valley Group, Inc. 100 2,344 473,876 ELECTRONICS - 5.1% Advanced Micro Devices, Inc. (a) 100 3,038 Altera Corp. (a) 49,300 2,803,938 Integrated Device Technology, Inc. (a) 100 3,813 Integrated Silicon Solution (a) 500 14,250 LSI Logic Corp. (a) 33,300 1,814,850 Micron Technology, Inc. 13,000 806,000 S-3, Inc. (a) 23,600 430,700 Tencor Instruments (a) 100 4,750 5,881,339 TOTAL TECHNOLOGY 27,524,558 TRANSPORTATION - 3.8% AIR TRANSPORTATION - 1.4% AMR Corp. (a) 5,000 305,625 Northwest Airlines Corp. Class A (a) 7,500 184,688 Pittston Company Services Group 43,000 1,075,000 1,565,313 RAILROADS - 1.0% Bombardier, Inc. Class B 61,800 1,184,142 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TRANSPORTATION - CONTINUED TRUCKING & FREIGHT - 1.4% Airborne Freight Corp. 31,400 $ 749,675 Hunt (J.B.) Transport Services Inc. 46,700 910,650 1,660,325 TOTAL TRANSPORTATION 4,409,780 UTILITIES - 2.2% CELLULAR - 1.2% BCE Mobile Communications, Inc. (a) 15,700 526,798 Vodafone Group PLC sponsored ADR 29,100 887,550 1,414,348 TELEPHONE SERVICES - 1.0% BellSouth Corp. 18,500 1,091,500 TOTAL UTILITIES 2,505,848 TOTAL COMMON STOCKS (Cost $104,657,310) 109,698,477 NONCONVERTIBLE BONDS - 0.1% MOODY'S RATINGS PRINCIPAL AMOUNT NONDURABLES - 0.1% HOUSEHOLD PRODUCTS - 0.1% Revlon Worldwide Corp. secured 0%, 3/15/98 (Cost $117,749) B3 $ 200,000 121,000 REPURCHASE AGREEMENTS - 5.4% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 6,226,051 $ 6,225,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $111,000,059) $ 116,044,477 LEGEND (a) Non-income producing (b) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Ross Systems, Inc. 1/4/95 $262,500 (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $139,315 or 0.1% of net assets. OTHER INFORMATION Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 82.9% Canada 9.3 Finland 3.0 Hong Kong 2.5 Indonesia 1.0 Others (individually less than 1%) 1.3 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $111,000,059. Net unrealized appreciation aggregated $5,044,418, of which $7,944,771 related to appreciated investment securities and $2,900,353 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 116,044,477 agreements of $6,225,000) (cost $111,000,059) - See accompanying schedule Cash 221 Receivable for investments sold 8,460,523 Receivable for fund shares sold 3,438,140 Dividends receivable 61,729 TOTAL ASSETS 128,005,090 LIABILITIES Payable for investments purchased $ 9,726,983 Payable for fund shares redeemed 980,271 Accrued management fee 51,308 Other payables and accrued expenses 124,629 TOTAL LIABILITIES 10,883,191 NET ASSETS $ 117,121,899 Net Assets consist of: Paid in capital $ 116,468,256 Distributions in excess of net investment income (132,824) Accumulated undistributed net realized gain (loss) on (4,257,967) investments and foreign currency transactions Net unrealized appreciation (depreciation) on 5,044,434 investments and assets and liabilities in foreign currencies NET ASSETS, for 11,168,146 shares outstanding $ 117,121,899 NET ASSET VALUE, offering price and redemption price per $10.49 share ($117,121,899 (divided by) 11,168,146 shares)
STATEMENT OF OPERATIONS
OCTOBER 4, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) INVESTMENT INCOME $ 137,434 Dividends Interest 207,599 TOTAL INCOME 345,033 EXPENSES Management fee $ 156,739 Transfer agent fees 139,052 Accounting fees and expenses 19,488 Custodian fees and expenses 45,000 Registration fees 41,091 Audit 13,262 Interest 1,773 TOTAL EXPENSES 416,405 NET INVESTMENT INCOME (LOSS) (71,372) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (4,256,459) Foreign currency transactions (1,508) (4,257,967) Change in net unrealized appreciation (depreciation) on: Investment securities 5,044,418 Assets and liabilities in foreign currencies 16 5,044,434 NET GAIN (LOSS) 786,467 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 715,095 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
OCTOBER 4, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ (71,372) Net investment income (loss) Net realized gain (loss) (4,257,967) Change in net unrealized appreciation (depreciation) 5,044,434 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 715,095 Distributions to shareholders from net investment income (61,452) Share transactions 189,049,431 Net proceeds from sales of shares Reinvestment of distributions 60,633 Cost of shares redeemed (72,641,808) Net increase (decrease) in net assets resulting from share transactions 116,468,256 TOTAL INCREASE (DECREASE) IN NET ASSETS 117,121,899 NET ASSETS Beginning of period - End of period (including distributions in excess of net investment $ 117,121,899 income of $132,824) OTHER INFORMATION Shares Sold 18,267,046 Issued in reinvestment of distributions 6,125 Redeemed (7,105,025) Net increase (decrease) 11,168,146
FINANCIAL HIGHLIGHTS OCTOBER 4, 1994 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1995 (UNAUDITED) SELECTED PER-SHARE DATA Net asset value, beginning of period $ 10.00 Income from Investment Operations Net investment income (.01) C Net realized and unrealized gain (loss) .51 Total from investment operations .50 Less Distributions (.01) From net investment income Net asset value, end of period $ 10.49 TOTAL RETURN B 5.01% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 117,122 Ratio of expenses to average net assets 1.65% A Ratio of net investment income to average net assets (.28)% A Portfolio turnover rate 467% A A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE-TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Export Fund (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange), are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. The fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. By so qualifying, the fund will not be subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED EXPENSES. Most expenses of trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect net investment income per share. Distributions in excess of net investment income may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. FMR, the fund's investment adviser, is responsible for determining that the value of these underlying securities remains at least equal to the resale price. 2. OPERATING POLICIES - CONTINUED RESTRICTED SECURITIES. The fund is permitted to invest in privately placed restricted securities. These securities may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $297,500 or .3% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $232,213,908 and $123,185,389, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2700% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. For the period, the management fee was equivalent to an annualized rate of .62% of average net assets. SALES LOAD. For the period October 4, 1994 through December 31, 1995, Fidelity Distributors Corporation, an affiliate of FMR and the general distributor of the fund, will voluntarily waive the sales charge (3.00% of the offering price) on the sales of shares. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. During the period October 4, 1994 to December 31, 1994, FSC received fees based on the type, size, number of accounts and the number of transactions made by shareholders. Effective January 1, 1995, the Board of Trustees approved a revised transfer agent contract pursuant to which FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $97,065 for the period. 5. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $7,255,000 and $5,206,000, respectively. The weighted average interest rate was 6.1%. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. 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Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. 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(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA 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 J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Growth Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)SPARTAN(registered trademark) MUNICIPAL INCOME PORTFOLIO SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 23 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 27 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income to measure performance. If Fidelity had not reimbursed certain fund expenses, the life of fund figures would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Spartan Municipal Income 2.29% -0.28% 44.18% Lehman Brothers Municipal Bond 2.80% 1.88% n/a Index Average General Municipal Bond Fund 2.53% 0.64% n/a Consumer Price Index 1.28% 2.86% 16.80% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on June 4, 1990. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Lehman Brothers Municipal Bond index - a broad measure of the municipal bond market. To measure how the fund's performance stacked up against its peers, you can compare it to the average general municipal bond fund, which reflects the performance of 210 funds with similar objectives tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI returns begin on the month end closest to the fund's start date). AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF YEAR FUND Spartan Municipal Income -0.28% 8.02% Lehman Brothers Municipal Bond Index 1.88% n/a Average General Municipal Bond Fund 0.64% n/a Consumer Price Index 2.86% 3.32% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Spartan Municipal InMunicipal Bond Index 06/30/90 10000.00 10000.00 07/31/90 10181.47 10147.00 08/31/90 9974.13 9999.87 09/30/90 10017.45 10005.87 10/31/90 10121.87 10186.97 11/30/90 10359.04 10391.73 12/31/90 10425.75 10437.46 01/31/91 10552.62 10577.32 02/28/91 10615.56 10669.34 03/31/91 10668.63 10673.61 04/30/91 10826.12 10815.57 05/31/91 10964.36 10911.83 06/30/91 10953.34 10900.91 07/31/91 11104.20 11033.91 08/31/91 11235.66 11179.55 09/30/91 11366.05 11324.89 10/31/91 11464.39 11426.81 11/30/91 11473.45 11458.81 12/31/91 11749.14 11705.17 01/31/92 11748.27 11732.09 02/29/92 11767.02 11735.61 03/31/92 11790.52 11740.31 04/30/92 11901.96 11844.80 05/31/92 12060.83 11984.56 06/30/92 12251.68 12185.90 07/31/92 12617.13 12551.48 08/31/92 12463.74 12428.48 09/30/92 12528.61 12509.26 10/31/92 12314.71 12386.67 11/30/92 12593.68 12608.39 12/31/92 12733.78 12737.00 01/31/93 12911.16 12884.75 02/28/93 13428.90 13351.18 03/31/93 13302.89 13209.65 04/30/93 13405.33 13343.07 05/31/93 13522.61 13417.79 06/30/93 13771.91 13641.87 07/31/93 13813.56 13659.60 08/31/93 14152.92 13943.72 09/30/93 14341.56 14102.68 10/31/93 14355.77 14129.48 11/30/93 14225.06 14005.14 12/31/93 14556.51 14300.65 01/31/94 14731.99 14463.67 02/28/94 14312.83 14089.06 03/31/94 13549.62 13515.64 04/30/94 13630.75 13630.52 05/31/94 13756.39 13749.11 06/30/94 13646.92 13669.36 07/31/94 13923.31 13919.51 08/31/94 13952.60 13968.23 09/30/94 13717.16 13762.90 10/31/94 13384.66 13517.92 11/30/94 13046.97 13273.24 12/31/94 13377.35 13565.25 01/31/95 13835.68 13953.22 02/28/95 14273.16 14359.26 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Municipal Income Portfolio on June 30, 1990, shortly after the fund started. As the chart shows, by February 28, 1995, the value of your investment would have grown to $14,273 - a 42.73% increase on your initial investment. This assumes you still owned the fund on February 28, 1995, and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Lehman Brothers Municipal Bond index did over the same period. With dividends reinvested, the same $10,000 would have grown to $14,359 - a 43.59% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) TOTAL RETURN COMPONENTS
JUNE 4, 1990 SIX MONTHS (COMMENCEM ENDED ENT OF FEBRUARY 28, YEARS ENDED AUGUST 31, OPERATIONS) TO AUGUST 31, 1995 1994 1993 1992 1991 1990
Dividend return 3.17% 5.54% 6.69% 7.15% 7.90% 1.86% Capital appreciation -0.88 -6.96% 6.86% 3.77% 4.74% -1.11% % return Total return 2.29% -1.42% 13.55% 10.92% 12.64% 0.75% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 4.48(cents) 30.18(cents) 60.90(cents) Annualized dividend rate 5.95% 6.37% 6.19% 30-day annualized yield 6.03% - - 30-day annualized tax-equivalent yield 9.42% - -
DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.81 over the past month, $9.56 over the past six months and $9.84 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 36% federal tax bracket. FUND TALK: THE MANAGER'S OVERVIEW An interview with Norman Lind, Portfolio Manager of Spartan Municipal Income Portfolio Q. NORM, HOW DID THE FUND DO? A. For the six months ended February 28, 1995, the fund had a total return of 2.29%. That lagged the average municipal bond fund's return of 2.53% for the same period, according to Lipper Analytical Services. For the year ended February 28, 1995, the fund returned -0.28%, compared to the average fund's return of 0.64%, again according to Lipper. Q. IN YOUR VIEW, WHAT FACTORS DROVE THE MUNICIPAL MARKET'S PERFORMANCE DURING THE PAST SIX MONTHS? A. There were several, but the most important was higher interest rates. The Federal Reserve Board continued raising rates - a process they started in February 1994 - in an effort to stave off inflation. Between August 31, 1994, and February 28, 1995, the Fed raised short-term interest rates twice to 6.00%. Higher interest rates generally pushed bond prices - taxable and tax-free alike - down from mid-September through mid-November. Exacerbating the decline was selling by investors who wanted to take their 1994 municipal bond losses and offset them against gains from other investments for tax purposes. By January, inflation seemed relatively stable and tax-loss selling abated. That set the stage for a market rally that pushed municipal bond prices higher and lasted until the end of the period. Q. WHAT ACCOUNTS FOR THE FUND'S PERFORMANCE? A. There were two factors, but the primary factor was that the fund owned certain types of bonds which underperformed the market throughout much of the period. The bonds I'm referring to included non-callable and discount bonds. Non-callable bonds, which can't be redeemed by their issuer before a scheduled maturity date, and discount bonds, which sell below face value, are more sensitive to rising interest rates than other types of bonds. As a result, these bonds commanded a high price and did very well when interest rates fell in 1993, but fell out of favor and underperformed when rates rose in 1994. Discount bonds also were penalized because of a law that changed the way capital gains for discounts are taxed. From November through February, however, the bond market rallied, bringing both non-callable and discount bonds back into favor and helping the fund's performance. Going forward, there may be a limited supply of these bonds available, which could help their prices if they continue to be favored among investors. Q. AND THE SECOND FACTOR? A. The fund's stake in lower-quality investment-grade and below-investment grade bonds also hurt its performance. I had purchased many of these bonds because of their relatively high yields. However, in October and November, credit spreads widened. By that I mean that lower quality bonds had to offer higher yields than normal, relative to higher-quality bonds, in order to attract investors. As the yields on lower-quality bonds rose, their prices fell. But during the market's rally in 1995, spreads again narrowed and these bonds have done quite well. Going forward, I'll most likely take advantage of the market's recent strength and reduce the fund's stake in these lower-quality bonds. Q. NEW YORK WAS THE FUND'S SECOND LARGEST STATE CONCENTRATION AT THE END OF THE PERIOD. HOW DID THOSE BONDS FARE OVER THE PAST SIX MONTHS? A. Fairly well. Much of the fund's 12.3% New York stake was in state-appropriated bonds, which rely on annual appropriations by the state legislature to meet all or part of their principal and interest payments, and were among the fund's top performers. As the New York economy showed signs of improvement, and the state made progress on debt reform, investors seemed to expect these bonds to get upgraded, and their values generally increased. Recently, I've taken advantage of their strong prices and reduced the fund's holdings in them. On the other hand, I increased the fund's stake in New York City bonds toward the end of the period, partly because their prices have been relatively attractive relative to their credit fundamentals. Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF LOSSES IN ITS INVESTMENT POOL. IS THE FUND INVESTED IN ANY ORANGE COUNTY BONDS? A. The fund has a very small stake - about 0.5% of investments - in an insured Orange County bond. Because the bond is insured, its principal and interest payments are guaranteed. While the news of the Orange County bankruptcy did put pressure on California bonds in general, I continue to hold onto some of them. That's because I think the state's economy has stopped deteriorating and California bond prices have started to reflect that recently. I've used that recent strength to pare back the fund's stake in California to 12.3% of investments at the end of the period, from 14.3% six months ago. Q. WHAT'S AHEAD FOR THE FUND? A. There's some uncertainty about which direction the economy and inflation will move in 1995. As for interest rates, I believe that the worst is over. While the Fed may be close to the end of the cycle of raising interest rates, I think there will probably be some continued volatility in the bond market. To help guard against that volatility, I'll most likely keep the fund's duration - which is a measure of its sensitivity to changes in interest rates - neutral, or more in line with the municipal bond market as a whole. Also, I'll concentrate on finding individual bonds that I think can outperform the overall market. In particular, I'll look for the types of bonds I think investors will want to own in the future, in order to invest in these bonds early. FUND FACTS GOAL: to provide high current income exempt from federal taxes START DATE: June 4, 1990 SIZE: as of February 28, 1995, more than $575 million MANAGER: Norman Lind, since June 1990; manager, Fidelity New York Tax-Free Insured Portfolio, since March 1994; Fidelity New York Tax-Free High Yield and Spartan New York Municipal High Yield Portfolios, since 1993; joined Fidelity in 1986 (checkmark) NORM LIND ON HIS INVESTMENT STRATEGY: "The municipal bond market was quite strong during December, January and February. Going forward, I plan to take advantage of the market's recent strength, selectively selling bonds with prices that have risen to what I believe are at or near their peak. At the same time, I plan to look for opportunities in individual bonds or sectors that are attractively priced, and have the potential to rise in value. I'll focus on bonds that I think will rise as the result of improving credit fundamentals, or sectors that may become more favored among investors in the future." (solid bullet) Inverse floaters, one of the financial arrangements known as derivatives, made up less than 3% of the fund's investments as of February 28, 1995. The yield on inverse floaters rises as short-term interest rates fall, and vice versa. By using various derivatives, the manager hopes to achieve higher levels of tax-exempt income and increased flexibility in managing the fund's overall sensitivity to changes in interest rates. INVESTMENT CHANGES TOP FIVE STATES AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO California 12.3 14.3 New York 12.3 13.1 Washington 9.1 6.8 Illinois 8.9 5.8 Pennsylvania 6.5 6.5 TOP FIVE SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Electric Revenue 20.1 21.3 Health Care 17.3 13.2 Lease Revenue 12.2 11.6 Industrial Development 11.0 8.6 General Obligation 10.5 9.0 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 17.3 19.9 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 8.4 10.3 DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994 Row: 1, Col: 1, Value: 9.300000000000001 Row: 1, Col: 2, Value: 12.5 Row: 1, Col: 3, Value: 2.7 Row: 1, Col: 4, Value: 17.2 Row: 1, Col: 5, Value: 58.3 Row: 1, Col: 1, Value: 2.1 Row: 1, Col: 2, Value: 11.4 Row: 1, Col: 3, Value: 2.7 Row: 1, Col: 4, Value: 18.8 Row: 1, Col: 5, Value: 65.0 Aaa, Aa, A 58.3% Baa 17.2% Ba, B 2.7% Non-rated 12.5% Short-term investments 9.3% Aaa, Aa, A 65.0% Baa 18.8% Ba, B 2.7% Non-rated 11.4% Short-term investments 2.1% WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT FEBRUARY 28, 1995 AND AUGUST 31, 1994 ACCOUNT FOR 11.1% AND 10.2%, RESPECTIVELY, OF THE FUND'S INVESTMENTS. INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities MUNICIPAL BONDS - 90.7% MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) ALASKA - 0.2% North Slope Borough Gen. Oblig. (Cap. Appreciation) Series B, 0% 6/30/05, (Cap. Guaranty Insured) Aaa $ 2,500,000 $ 1,359,375 ARIZONA - 0.7% Chandler: 7.375% 7/1/09, (FGIC Insured) Aaa 1,000,000 1,152,500 4.375% 7/1/12, (FGIC Insured) Aaa 1,000,000 811,250 Tucson Wtr. Rev. Series D: 9.75% 7/1/07 A1 500,000 676,250 9.75% 7/1/08 A1 500,000 673,750 9.75% 7/1/09 A1 750,000 1,021,875 4,335,625 CALIFORNIA - 11.7% California Gen. Oblig. 4.75% 9/1/23 A1 8,150,000 6,438,500 California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series 1983 A, 0% 2/1/15 Aa 187,000 25,946 California Pub. Wks. Board Lease Rev.: Rfdg. (Dept. Corrections St. Prisons) Series A, 5% 12/1/19, (AMBAC Insured)(b) Aaa 5,000,000 4,256,250 (California Univ. Proj.) Series A: 5.50% 6/1/14 A 3,000,000 2,640,000 5.50% 12/1/18 A 2,500,000 2,168,750 California Univ. Rev. Rfdg. (Multiple Purp. Projs.) Series C, 5.125% 9/1/13, (AMBAC Insured) Aaa 1,800,000 1,602,000 Culver City Redev. Fing. Auth. Rev. Rfdg. Tax Allocation 5.50% 11/1/14, (AMBAC Insured) Aaa 2,000,000 1,860,000 Metropolitan Wtr. Dist. Southern California Wtrwks. Rev. Rfdg. Series A, 5.75% 7/1/21 Aa 9,000,000 8,516,250 Northern California Pwr. Agcy. Pub. Pwr. Rev. Rfdg. (Geothermal Proj. #3) Series A, 5.85% 7/1/10 A 1,750,000 1,658,125 Sacramento City Fing. Auth. Lease Rev. Rfdg.: Series A, 5.40% 11/1/20, (AMBAC Insured) Aaa 10,000,000 9,025,000 Series B, 5.40% 11/1/20 Aa 3,000,000 2,658,750 5% 11/1/14 Aa 4,020,000 3,432,075 San Bernardino County Ctfs. of Prtn. (Med Ctr. Fing. Proj.) 5.50% 8/1/17 Baa1 4,000,000 3,335,000 San Joaquin County Ctfs. of Prtn. Rfdg. (Cap. Facs. Proj.) 4.90% 11/15/08, (MBIA Insured)(b) Aaa 4,000,000 3,610,000 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED San Jose Redev. Agcy. Tax Allocation (Merged Area Redev. Proj.) 5% 8/1/20, (MBIA Insured) Aaa $ 3,550,000 $ 3,017,500 South Orange County California Spl. Tax Rev. (Foothill Area) Series C, 7.50% 8/15/07, (FGIC Insured) Aaa 2,500,000 2,912,500 Southern California Pub. Pwr. Auth. (Transmission Proj. Rev.) Rfdg. Sub-Series A, 4.75% 7/1/23, (MBIA Insured) Aaa 3,110,000 2,491,888 Three Valleys Muni. Wtr. Dist. Rev. Rfdg. Ctfs. of Prtn. 5% 11/1/14, (FGIC Insured) Aaa 2,790,000 2,427,300 West & Central Basin Wtr. Rfdg. (West Basin Proj.)(e): 5.67% 8/1/07, (AMBAC Insured) INFL Aaa 2,900,000 2,544,750 5.72% 8/1/08, (AMBAC Insured) INFL Aaa 3,050,000 2,649,688 67,270,272 COLORADO - 4.0% Adams County Single Family Mtg. Rev. Rfdg. Series A-2, 8.70% 6/1/12, (FSA Insured) Aaa 5,000,000 5,462,500 Colorado Health Facs. Auth. Rev.: Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 Baa 7,500,000 7,031,250 (PSL Health Sys. Proj.): Series A, 6.875% 2/15/23 Baa1 4,000,000 3,855,000 Series B, 8.50% 2/15/21 Baa1 2,250,000 2,449,688 Denver City & County Arpt. Rev. (Cap. Appreciation)(d): Series A, 0% 11/15/05 Baa 4,615,000 2,180,588 Series D, 0% 11/15/05 Baa 5,000,000 2,362,500 23,341,526 CONNECTICUT - 0.5% Connecticut Health & Ed. Facs. Auth. Rev. (St. Raphael Hosp.) 5.30% 7/1/10, (AMBAC Insured) Aaa 2,990,000 2,825,550 DISTRICT OF COLUMBIA - 1.6% District of Columbia Hosp. Rev. (Hosp. for Sick Children) Series A, 8.875% 1/1/21 - 3,430,000 3,661,525 District of Columbia Rev. (Georgetown Univ.) Series A, 7.40% 4/1/18 A1 2,380,000 2,519,825 Metropolitan Washington Arpt. Auth. Gen. Arpt. Rev. Series A, 7.25% 10/1/10, (FGIC Insured)(d) Aaa 3,000,000 3,232,500 9,413,850 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) GEORGIA - 3.2% Cobb-Marrieta Coliseum & Exhibit Hall Auth. Rev. Rfdg. 5.50% 10/1/12, (MBIA Insured) Aaa $ 3,975,000 $ 3,776,250 Georgia Gen. Oblig.: 6.50% 12/1/01 Aaa 5,000,000 5,350,000 6.75% 12/1/01 Aaa 3,585,000 3,907,650 6.50% 8/1/02 Aaa 2,000,000 2,145,000 Georgia Residential Fin. Auth. Home Ownership Mtg. Series 1984 B, 0% 12/1/15 (b) Aa 29,785,000 3,164,656 18,343,556 HAWAII - 1.0% Hawaii Arpts. Sys. Rev. 2nd Series, 7.50% 7/1/20, (FGIC Insured)(d) Aaa 1,500,000 1,603,125 Honolulu City & County Rfdg. & Impt. Series B, 5% 10/1/13 Aa 5,000,000 4,475,000 6,078,125 IDAHO - 0.8% Idaho Falls Elec. Rfdg. 0% 4/1/07, (FGIC Insured) Aaa 4,000,000 1,995,000 Idaho Hsg. Agcy. Single Family Mtg. Series 1991 B, 7.50% 7/1/24 (d) AA 2,360,000 2,454,400 4,449,400 ILLINOIS - 5.6% Chicago Gen. Oblig. Rfdg. Series B, 5.125% 1/1/15, (AMBAC Insured) Aaa 2,250,000 2,005,313 Chicago O'Hare Int'l. Arpt. Rev. Rfdg. Sr. Lien Series A, 5% 1/1/12 A1 7,500,000 6,506,250 Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev. (United Airlines, Inc.) 8.25% 5/1/99 (d) Baa3 4,395,000 4,675,181 Chicago Residential Mtg. Rev. Rfdg. (Cap. Appreciation) Series B, 0% 10/1/09, (MBIA Insured) Aaa 9,000,000 3,172,500 Chicago Single Family Mtg. Rev. (Cap. Appreciation) Series A, 0% 12/1/16, (FGIC Insured) Aaa 34,590,000 4,323,750 DeKalb Single Family Mtg. Rev. 7.45% 12/1/09, (GNMA Coll.)(d) Aaa 1,950,000 2,047,500 Illinois Dev. Fin. Auth. Solid Waste Disp. Rev. (Ford Heights Waste Tire Proj.) 7.875% 4/1/11 (d) - 10,000,000 9,512,500 32,242,994 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) KANSAS - 0.2% Reno County Mtg. Rev. Rfdg. (Single Family) Series B, 8.70% 9/1/11 A1 $ 925,000 $ 996,688 KENTUCKY - 0.9% Kenton County Arpt. Board Arpt. Rev. (Spl. Facs. Delta) Series A, 7.50% 2/1/20 (d) Ba1 3,600,000 3,618,000 Owensboro Elec. Lt. & Pwr. Rev. Series B, 0% 1/1/10, (AMBAC Insured) Aaa 4,000,000 1,640,000 5,258,000 LOUISIANA - 1.5% Louisiana Gen. Oblig. 6.75% 5/15/04, (MBIA Insured) Aaa 7,865,000 8,572,850 MARYLAND - 1.3% Maryland Health & Higher Ed. Facs. Auth. Rev.: Rfdg. (Doctors Commty. Hosp.): 5.75% 7/1/13 Baa 2,000,000 1,670,000 5.50% 7/1/24 Baa 4,000,000 3,055,000 Rfdg. (Howard County Gen. Hosp.) 5.50% 7/1/13 Baa1 3,000,000 2,508,750 7,233,750 MASSACHUSETTS - 1.3% Massachusetts Bay Trans. Auth. Rfdg. (Gen. Trans. Sys.) Series A, 5.50% 3/1/12 A1 5,000,000 4,706,250 Massachusetts Health & Edl. Facs. Auth. Rev. (St. Anne's Hosp.) Series A, 9.375% 7/1/14 Ba 1,000,000 1,007,500 Massachusetts Ind. Fin. Agcy. Rev. (Reeds Landing Proj.) 8.625% 10/1/23 - 1,945,000 1,898,806 Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev. 13.625% 7/1/17, (Pre-Refunded to 7/1/95 @ 100)(f) Baa1 5,000 5,154 7,617,710 MICHIGAN - 4.3% Detroit Swr. Disp. Rev. 6.867% 7/1/23, (FGIC Insured) INFL (e) Aaa 3,000,000 2,610,000 Michigan Hosp. Fin. Auth. Rev. Rfdg.: (Pontiac Osteopathic Hosp.): Series A, 6% 2/1/14 Baa1 1,500,000 1,263,750 6% 2/1/24 Baa1 3,500,000 2,821,875 (Sisters of Mercy Health Corp.) 5.375% 8/15/14, (MBIA Insured) Aaa 2,840,000 2,619,900 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) MICHIGAN - CONTINUED Michigan Strategic Fund Ltd. Oblig. Rev.: (Great Lakes Pulp & Fiber Proj.) 10.25% 12/1/16 - $ 10,000,000 $ 10,487,500 (Mercy Svcs. for Aging Proj.) 9.40% 5/15/20 - 3,900,000 4,104,750 Waterford Township Econ. Dev. Corp. Rev. Ltd. Tax Oblig. (Canterbury Health Care) 8.375% 7/1/23 - 800,000 820,000 24,727,775 MINNESOTA - 3.5% Minneapolis & St. Paul Hsg. & Redev. Auth. Healthcare Sys. Rev. (Healthspan Health Sys. Corp.) (Health One Sys.) Series A, 4.75% 11/15/18, (AMBAC Insured) Aaa 5,000,000 4,081,250 Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev. Series A, 4.75% 1/1/16 (b) A 19,500,000 16,209,375 20,290,625 MISSISSIPPI - 0.3% Mississippi Hosp. Equip. & Facs. Auth. Rev. (Rush Med. Foundation Proj.) Series A, 8.75% 1/1/16 Baa 1,500,000 1,633,125 MISSOURI - 1.7% Kansas City Ind. Dev. Auth. Econ. Dev. Rev. Rfdg. (Encore Nursing Ctr.) (Beverly Enterprises, Inc.) 8% 12/1/02 - 3,175,000 3,234,531 Missouri Health & Edl. Facs. Auth. Health Facs. Rev. (Still Reg'l. Med. Ctr. Proj.) 7.70% 2/1/13 Baa 2,000,000 2,015,000 St. Louis Reg'l. Convention & Sports Complex Auth. Series C: 7.75% 8/15/01 - 895,000 919,613 7.90% 8/15/21 - 3,500,000 3,696,875 9,866,019 MONTANA - 1.7% Montana Board of Investment Payroll Tax (Workers Compensation) 6.875% 6/1/20, (MBIA Insured) Aaa 7,130,000 7,575,625 Montana Coal Severance Tax Rfdg. (Broadwater Pwr. Proj.) Series A, 6.875% 12/1/11 (d) A1 2,000,000 2,080,000 9,655,625 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) NEBRASKA - 1.6% Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 $ 4,500,000 $ 3,864,375 Omaha Pub. Pwr. Dist. Elec. Rev. Series C, 5.50% 2/1/14 Aa 5,650,000 5,275,688 9,140,063 NEW JERSEY - 1.7% Camden County Impt. Auth. Lease Rev. (Dockside Refridgerated Holt) 8.40% 4/1/24 (d) - 3,000,000 3,037,500 Jersey City Swr. Auth. Swr. Rev. Rfdg. 4.50% 1/1/19, (FGIC Insured) Aaa 1,850,000 1,468,433 New Jersey Econ. Dev. Auth. Econ. Dev. Rev. Rfdg. (Holt Hauling & Warehouse) Series G, 8.40% 12/15/15 - 5,000,000 5,137,500 9,643,433 NEW MEXICO - 0.8% Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. San Juan Proj.) Series A, 6.40% 8/15/23 Ba2 3,250,000 2,876,250 Hobbs Single Family Mtg. Rev. Rfdg. 8.75% 7/1/11 A 1,840,000 1,984,900 4,861,150 NEW YORK - 12.3% Metropolitan Trans. Auth. Svc. Contract: Rfdg. (Trans. Facs.) Series 7, 0% 7/1/09 Baa1 7,500,000 3,000,000 (Commuter Facs.) Series O, 5.75% 7/1/13 Baa1 1,000,000 927,500 Series O, 5.75% 7/1/13 Baa1 2,000,000 1,855,000 New York City Gen. Oblig. Series A, 7.75% 8/15/07 Baa1 4,000,000 4,280,000 New York City Ind. Dev. Agcy. Spl. Facs. Rev. (Terminal One Group Assoc. Proj.) 6% 1/1/19 (d) A 5,000,000 4,656,250 New York State Dorm. Auth. Rev.: Rfdg. (State Univ. Edl. Facs.) Series A: 5.50% 5/15/09 Baa1 4,000,000 3,700,000 5.50% 5/15/13 Baa1 13,100,000 11,773,625 5.25% 5/15/15 (b) Baa1 5,000,000 4,312,500 (Suffolk County Judicial Facs.) Series A, 9.50% 4/15/14 Baa1 7,000,000 8,163,750 New York State Energy Research & Dev. Auth. Elec. Facs. Rev. (Long Island Ltg.) Series A, 6.90% 8/1/22 (d) Ba1 5,000,000 4,562,500 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) NEW YORK - CONTINUED New York State Local Gov't. Assistance Corp. Rfdg.: Series C, 5.50% 4/1/17 A $ 15,000,000 $ 13,837,500 Series E, 5.25% 4/1/16 A 4,075,000 3,657,313 Triborough Bridge & Tunnel Auth. Rev. Rfdg. (Gen. Purp.) Series Y, 5.50% 1/1/17 Aa 6,500,000 6,020,625 70,746,563 NORTH CAROLINA - 1.0% North Carolina Muni. Pwr. Agcy. #1 Catawba Elec. Rev. 5.25% 1/1/09 A 6,155,000 5,531,806 NORTH DAKOTA - 1.0% Mercer County Poll. Cont. Rev. Rfdg. (Basin Electric Pwr.) (Antelope Valley Station) 7.20% 6/30/13, (AMBAC Insured) Aaa 5,000,000 5,643,750 OHIO - 1.7% Bedford Hosp. Impt. Rev. Rfdg. (Bedford Commty. Hosp.) Series 1990, 8.50% 5/15/09, (Escrowed to Maturity)(f) - 1,020,000 1,188,300 Ohio Bldg. Auth. (Workers Compensation Bldg. A) 4.75% 4/1/14 A 8,000,000 6,690,000 Ohio Hsg. Fin. Agcy. Mtg. Rev. (Oakleaf-Toledo Apts. Proj.) 10.25% 12/20/25, (GNMA Coll.) AAA 1,590,000 1,836,450 9,714,750 OKLAHOMA - 1.6% Grand River Dam Auth. Rev. Rfdg. 5.50% 6/1/10 A 9,450,000 9,036,563 OREGON - 0.6% Port Morrow Poll. Ctr. Rev. (Pacific Northwest) Series A, 8% 7/15/11 AA- 3,420,000 3,851,775 PENNSYLVANIA - 5.8% Clarion County Hosp. Auth. Hosp. Rev. (Clarion Hosp. Proj.) 8.50% 7/1/21 BBB- 2,500,000 2,671,875 Delaware County Auth. Rev. (First Mtg. Riddle Village Proj.): 8% 6/1/99 - 3,875,000 3,957,344 7% 6/1/00 - 700,000 691,250 8.25% 6/1/22 - 1,660,000 1,614,350 9.25% 6/1/22 - 4,915,000 5,216,044 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) PENNSYLVANIA - CONTINUED Pennsylvania Convention Ctr. Auth. Rev. Rfdg. Series A: 6.70% 9/1/14 Ba $ 1,500,000 $ 1,430,625 6.75% 9/1/19 Ba 2,250,000 2,134,688 Pennsylvania Intergovernmental Coop. Auth. Spl. Tax Rev. Rfdg. Series A, 5% 6/15/15 Baa1 3,000,000 2,587,500 Pennsylvania Rfdg. & Proj. First Series, 5.375% 4/15/12 A1 2,000,000 1,857,500 Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev. (Temple Univ. Hosp.) Series A, 6.50% 11/15/08 Baa1 2,000,000 1,977,500 Philadelphia Wtr. & Wastewtr. Rev. 6.06% 6/15/12, (FGIC Insured) INFL (e) Aaa 6,000,000 5,362,500 Somerset County Pennsylvania Hosp. Auth. Rev. (Health Care 1st Mtg.) 8.50% 6/1/24 - 2,000,000 1,962,500 Wilkins Area Ind. Dev. Auth. Rev. (1st Mtg.) (Fairview Extended Care) Series A, 10.25% 1/1/21 (b) - 2,000,000 2,172,500 33,636,176 PUERTO RICO - 0.2% Puerto Rico Commonwealth Hwy. & Trans. Auth. Hwy. Rev. Series W, 5.50% 7/1/15 Baa1 1,500,000 1,380,000 SOUTH DAKOTA - 0.3% South Dakota Health & Edl. Facs. Auth. Rev. Rfdg. (Prairie Lakes Healthcare) 7.25% 4/1/22 Baa 2,000,000 1,925,000 TENNESSEE - 0.3% Metropolitan Gov't. Nashville & Davidson County Wtr. & Swr. Rev. Rfdg. 5.20% 1/1/13, (FGIC Insured) Aaa 2,000,000 1,822,500 TEXAS - 4.7% Alliance Arpt. Auth. Spl. Facs. Rev. (American Airlines, Inc.) 7% 12/1/11 (b)(d) Baa1 10,000,000 9,887,500 Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation) Series A, 0% 11/15/08, (MBIA Insured) Aaa 3,895,000 1,743,013 Dallas Wtrwks. & Swr. Sys. Rev. 4.50% 4/1/00 Aa 5,000,000 4,768,750 East Texas Health Facs. Dev. Corp. Hosp. Rev. (Mem. Hosp. Foundation Palestine) 7.80% 8/15/18 - 3,000,000 2,906,250 El Paso Prop. Fin. Auth. Single Family Mtg. Rev. Series A, 8.70% 12/1/18, (GNMA Coll.)(d) Aaa 1,370,000 1,476,175 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) TEXAS - CONTINUED Harris County Cultural & Ed. Facs. Fin. Corp. (Space Ctr. Houston Proj.) 9.25% 8/15/15 - $ 3,315,000 $ 2,917,200 San Antonio Elec. & Gas Rev. Rfdg. (Cap. Appreciation) Series B: 0% 2/1/08, (FGIC Insured) Aaa 2,000,000 932,500 0% 2/1/09, (FGIC Insured) Aaa 2,000,000 875,000 Victoria Hsg. Fin. Corp. Single Family Mtg. Rev. Rfdg. Series A, 8.50% 1/1/11 A 980,000 1,049,825 Winters Wtrwks. & Swr. Sys. Rev. Rfdg. 8.50% 8/1/17, (Pre-Refunded to 8/1/03 @ 100)(f) - 500,000 604,375 27,160,588 UTAH - 0.5% Intermountain Pwr. Agcy. Pwr. Supply Series A 6.607% 7/1/21 INFL (e) Aa 1,000,000 817,500 Utah Hsg. Fin. Agcy.: (Residential Mtg.) Series 1983 A, 0% 7/1/16 A+ 7,635,042 868,486 (Single Family Mtg.) Series G, 9.25% 7/1/19, (FHA Guaranteed)(d) AA 1,010,000 1,078,175 2,764,161 VERMONT - 0.7% Vermont Hsg. Fin. Agcy. Single Family Series 2, 7.30% 5/1/25 (d) A 1 1,500,000 1,546,875 Vermont Ind. Dev. Auth. Ind. Dev. Rev. (Radisson Hotel) Series B-1, 7.75% 11/15/15 - 2,350,000 2,379,375 3,926,250 VIRGINIA - 0.8% Virginia Gen. Oblig. 6% 6/1/03 Aaa 4,000,000 4,195,000 Virginia Hsg. Dev. Auth. Residential Mtg. (Single Family Mtg.) Series 1983 B, 0% 9/1/14 Aa 2,430,000 328,050 4,523,050 WASHINGTON - 9.1% Douglas County Pub. Util. Dist. #1 Wells Hydroelec. Rev. Rfdg. (Pacific Pwr. & Lt. Co.) 8.75% 9/1/18 A 1,395,000 1,729,800 Washington Pub. Pwr. Supply Sys. Nuclear Proj. #1 Rev. Rfdg. Series C, 5.30% 7/1/10 Aa 2,500,000 2,253,125 MUNICIPAL BONDS - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) WASHINGTON - CONTINUED Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.: Rfdg. Series C, 0% 7/1/05, (MBIA Insured) Aaa $ 11,000,000 $ 6,008,750 5.26% 7/1/12 Aa 28,000,000 24,990,000 Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev. 5.26% 7/1/12 Aa 20,000,000 17,825,000 52,806,675 TOTAL MUNICIPAL BONDS (Cost $542,993,363) 523,626,693 MUNICIPAL NOTES (C) - 9.3% CALIFORNIA - 0.6% Ventura County TRAN 4.50% 8/1/95 MIG 1 3,800,000 3,797,758 ILLINOIS - 3.3% Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg. (Garden Glen Apts.) Series 93, 4.10%, VRDN A-1+ 3,000,000 3,000,000 Illinois Health Facs. Auth. Rev.: (Central Dupage Hosp. Assoc. Proj.) Series 1990, 3.80%, LOC Industrial Bank of Japan, VRDN VMIG 1 11,700,000 11,700,000 (LaGrange Mem. Health Sys.) Series 1990, 3.80%, LOC First Nat'l. Bank of Chicago, VRDN VMIG 1 4,500,000 4,500,000 19,200,000 INDIANA - 0.6% Indiana Hosp. Equip. Fing. Auth. Rev. Series 1985 A, 4.10%, (MBIA Insured) BPA Bank of New York, VRDN VMIG 1 3,500,000 3,500,000 MICHIGAN - 0.3% Farmington Hills Hosp. Fin. Auth. Hosp. Rev. (Botsford Hosp.) 3.80%, (MBIA Insured) BPA Comerica Bank, Detroit, VRDN VMIG 1 1,500,000 1,500,000 MISSISSIPPI - 2.4% Jackson County Poll. Cont. Rev. Rfdg. (Chevron USA, Inc.) Series 1993, 3.90%, VRDN P-1 13,800,000 13,800,000 MUNICIPAL NOTES (C) - CONTINUED MOODY'S RATINGS (A) PRINCIPAL VALUE AMOUNT (NOTE 1) MISSOURI - 0.4% Kansas City Ind. Dev. Auth. Hosp. Rev. Rfdg. & Impt. (Research Health Sys. Svc.) Series 1985, 3.80%, (MBIA Insured) BPA Mitsui Bank, VRDN A-1 $ 2,200,000 $ 2,200,000 NORTH CAROLINA - 0.7% Halifax County Ind. Facs. Poll. Cont. Facs. Auth. (Westmoreland Hadson Proj.) (Roanoke Valley Proj.) Series 1991, 4.20%, LOC Cr. Suisse, VRDN (d) - 4,115,000 4,115,000 PENNSYLVANIA - 0.7% Pennsylvania Higher Ed. Assistance Agcy. (Student Loan) Series 1988 A, 4.10%, LOC Fuji Bank, VRDN (d) VMIG 1 2,000,000 2,000,000 Schuylkill County Ind. Dev. Auth. Resources Recovery Rev. (Westwood Energy Prop.) Series 1985, 4.05%, LOC Fuji Bank, VRDN P-1 1,800,000 1,800,000 3,800,000 TEXAS - 0.3% North Central Health Fac. Dev. Corp. Hosp. Rev. (Presbyterian Med. Ctr. Proj.) Series D, 3.80%, (MBIA Insured) LOC Nationsbank of Texas, VRDN VMIG 1 1,800,000 1,800,000 TOTAL MUNICIPAL NOTES (Cost $53,726,685) 53,712,758 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $596,720,048) $577,339,451 FUTURES CONTRACTS EXPIRATION UNDERLYING FACE UNREALIZED DATE AMOUNT AT VALUE GAIN/(LOSS) SOLD 295 Municipal Bond Futures Contracts March 1995 $ 26,752,813 $ (996,332) THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 4.6% SECURITY TYPE ABBREVIATIONS TRAN - Tax and Revenue Anticipation Notes VRDN - Variable Rate Demand Notes LEGEND (a) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (b) A portion of the Security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $26,293,238. (c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (d) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. (e) Coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. The rate shown is the rate at period end. (f) Security collateralized by an amount sufficient to pay interest and principal. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 56.6% AAA, AA, A 59.0% Baa 16.7% BBB 10.2% Ba 2.7% BB 5.8% B 0.0% B 0.2% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 12.5%. FMR has determined that unrated debt securities that are lower quality account for 11.1% of the total value of investment in securities. The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Electric Revenue 20.1% Health Care 17.3 Lease Revenue 12.2 Industrial Development 11.0 General Obligation 10.5 Others (individually less than 10%) 28.9 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $596,720,048. Net unrealized depreciation aggregated $19,380,597, of which $7,737,949 related to appreciated investment securities and $27,118,546 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) ASSETS Investment in securities, at value (cost $596,720,048) - $ 577,339,451 See accompanying schedule Receivable for investments sold 3,767,790 Interest receivable 7,463,665 TOTAL ASSETS 588,570,906 LIABILITIES Payable to custodian bank $ 237,437 Payable for investments purchased 12,040,123 Dividends payable 615,879 Accrued management fee 238,315 Payable for daily variation on futures contracts 116,657 TOTAL LIABILITIES 13,248,411 NET ASSETS $ 575,322,495 Net Assets consist of: Paid in capital $ 612,768,730 Accumulated undistributed net realized gain (loss) (17,069,306) on investments Net unrealized appreciation (depreciation) on (20,376,929) investments NET ASSETS, for 58,138,264 shares outstanding $ 575,322,495 NET ASSET VALUE, offering price and redemption price per $9.90 share ($575,322,495 (divided by) 58,138,264 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) INTEREST INCOME $ 20,306,697 EXPENSES Management fee $ 1,624,557 Non-interested Trustees' compensation 1,621 TOTAL EXPENSES 1,626,178 NET INTEREST INCOME 18,680,519 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (16,393,709) Futures contracts 308,729 (16,084,980) Change in net unrealized appreciation (depreciation) on: Investment securities 4,931,068 Futures contracts (933,463) 3,997,605 NET GAIN (LOSS) (12,087,375) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,593,144 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED FEBRUARY AUGUST 31, 28, 1994 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 18,680,519 $ 45,667,244 Net interest income Net realized gain (loss) (16,084,980) 19,535,273 Change in net unrealized appreciation (depreciation) 3,997,605 (77,059,116) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,593,144 (11,856,599) FROM OPERATIONS Distributions to shareholders: (18,680,519) (45,674,031) From net interest income From net realized gain (5,309,623) (43,781,431) TOTAL DISTRIBUTIONS (23,990,142) (89,455,462) Share transactions 50,902,501 144,360,608 Net proceeds from sales of shares Reinvestment of distributions 17,994,488 70,984,626 Cost of shares redeemed (156,393,079) (346,734,933) Redemption fees 39,787 167,057 Net increase (decrease) in net assets resulting from (87,456,303) (131,222,642) share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS (104,853,301) (232,534,703) NET ASSETS Beginning of period 680,175,796 912,710,499 End of period $ 575,322,495 $ 680,175,796 OTHER INFORMATION Shares Sold 5,328,453 13,609,404 Issued in reinvestment of distributions 1,878,421 6,585,102 Redeemed (16,609,556) (32,895,616) Net increase (decrease) (9,402,682) (12,701,110)
FINANCIAL HIGHLIGHTS JUNE 4, 1990 SIX MONTHS (COMMENCEMENT ENDED OF OPERATIONS) TO FEBRUARY 28, 1995 YEARS ENDED AUGUST 31, AUGUST 31, (UNAUDITED) 1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA Net asset value, beginning $ 10.070 $ 11.370 $ 10.710 $ 10.360 $ 9.890 $ 10.000 of period Income from Investment .302 .611 .663 .704 .739 .187 Operations Net interest income Net realized and (.091) (.752) .727 .387 .463 (.120) unrealized gain (loss) Total from investment .211 (.141) 1.390 1.091 1.202 .067 operations Less Distributions (.302) (.611) (.663) (.704) (.739) (.187) From net interest income From net realized gain (.080) (.550) (.070) (.040) - - on investments Total distributions (.382) (1.161) (.733) (.744) (.739) (.187) Redemption fees added to .001 .002 .003 .003 .007 .010 paid in capital Net asset value, end $ 9.900 $ 10.070 $ 11.370 $ 10.710 $ 10.360 $ 9.890 of period TOTAL RETURN B, C 2.30% (1.42) 13.55 10.93 12.65 .76% % % % % RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 575 $ 680 $ 913 $ 871 $ 551 $ 93 (in millions) Ratio of expenses to .55% .55% .47 .36 .23 - average net assets A % % % Ratio of expenses to .55% .55% .55 .55 .55 .55% average net assets A % % % A before expense reductions Ratio of net interest 6.34% 5.76% 6.09 6.68 7.24 7.91% income to average net A % % % A assets Portfolio turnover rate 45% 48% 50 62 78 116% A % % % A
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSE FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan Municipal Income Portfolio (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net interest income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures and options transactions, market discount and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect net interest income per share. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED REDEMPTION FEES. Shares held in the fund less than 180 days are subject to a redemption fee equal to .50% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the bond market and to fluctuations in interest rates. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Futures contracts and written options involve, to varying degrees, risk of loss in excess of the futures variation margin or the option value reflected in the Statement of Assets and Liabilities. The underlying face amount at value is shown in the schedule of investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $128,027,218 and $256,280,799, respectively. The market value of futures contracts opened and closed during the period amounted to $516,120,463 and $497,771,292, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .55% of the fund's average net assets. FMR also bears the cost of providing shareholder services to the fund. To offset the cost of providing these services, FMR or its affiliates collect certain transaction fees from the fund's shareholders which amounted to $8,180 for the period. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Norman Lind, Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA United Missouri Bank, N.A. Kansas City, MO (registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 CUSTODIAN United Missouri Bank, N.A. Kansas City, MO FIDELITY'S TAX-FREE BOND FUNDS Aggressive Tax-Free California Tax-Free High Yield California Tax-Free Insured High Yield Tax-Free Insured Tax-Free Limited Term Municipals Massachusetts Tax-Free High Yield Michigan Tax-Free High Yield Minnesota Tax-Free Municipal Bond New York Tax-Free High Yield New York Tax-Free Insured Ohio Tax-Free High Yield Spartan Aggressive Municipal (registered trademark) Spartan Arizona Municipal Income Spartan California Intermediate Municipal Spartan California Municipal High Yield Spartan Connecticut Municipal High Yield Spartan Florida Municipal Income Spartan Intermediate Municipal Spartan Maryland Municipal Income Spartan Municipal Income Spartan New Jersey Municipal High Yield Spartan New York Intermediate Municipal Spartan New York Municipal High Yield Spartan Pennsylvania Municipal High Yield Spartan Short-Intermediate Municipal THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)SPARTAN(registered trademark) GINNIE MAE FUND SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 13 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 17 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income to measure performance. If Fidelity had not reimbursed certain fund expenses, the life of fund figures would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Spartan Ginnie Mae 4.08% 2.92% 33.19% Salomon Brothers GNMA Pass-Through 4.22% 3.08% n/a Index Average GNMA Fund 3.31% 1.78% n/a Consumer Price Index 1.28% 2.86% 12.78% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on December 27, 1990. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Salomon Brothers GNMA Pass-Through Index - a broad measure of the GNMA market. To measure how the fund's performance stacked up against its peers, you can compare it to the average GNMA fund, which reflects the performance of 54 GNMA funds tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI returns begin on the month end closest to the fund's start date). AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF YEAR FUND Spartan Ginnie Mae 2.92% 7.10% Salomon Brothers GNMA Pass-Through Index 3.08% n/a Average GNMA Fund 1.78% n/a Consumer Price Index 2.86% 2.93% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Spartan Ginnie Mae FSB GNMA Index (SB19) 12/31/90 10000.00 10000.00 01/31/91 10104.29 10141.00 02/28/91 10164.55 10200.83 03/31/91 10239.68 10279.38 04/30/91 10302.27 10387.31 05/31/91 10368.06 10469.37 06/30/91 10380.53 10491.36 07/31/91 10535.23 10669.71 08/31/91 10732.58 10862.83 09/30/91 10902.34 11065.97 10/31/91 11063.73 11231.96 11/30/91 11129.01 11304.96 12/31/91 11378.64 11587.59 01/31/92 11291.23 11457.81 02/29/92 11443.23 11563.22 03/31/92 11373.38 11522.75 04/30/92 11467.56 11621.84 05/31/92 11671.06 11826.39 06/30/92 11808.40 11988.41 07/31/92 11791.77 12079.52 08/31/92 11898.54 12246.22 09/30/92 11982.19 12344.19 10/31/92 11900.61 12259.01 11/30/92 11955.80 12325.21 12/31/92 12118.74 12466.95 01/31/93 12269.42 12641.49 02/28/93 12386.01 12752.73 03/31/93 12468.41 12835.63 04/30/93 12522.25 12901.09 05/31/93 12592.40 12973.34 06/30/93 12720.23 13104.37 07/31/93 12787.95 13156.78 08/31/93 12803.67 13183.10 09/30/93 12802.51 13192.33 10/31/93 12850.68 13222.67 11/30/93 12777.53 13204.16 12/31/93 12881.97 13304.51 01/31/94 13025.35 13418.93 02/28/94 12915.75 13354.52 03/31/94 12612.75 13016.65 04/30/94 12498.61 12938.55 05/31/94 12515.69 12981.24 06/30/94 12488.19 12955.28 07/31/94 12740.57 13194.95 08/31/94 12772.26 13208.15 09/30/94 12606.77 13050.97 10/31/94 12600.51 13036.62 11/30/94 12555.19 12990.99 12/31/94 12687.33 13128.69 01/31/95 12956.49 13408.33 02/28/95 13294.85 13766.34 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Ginnie Mae Fund on December 31, 1990, shortly after the fund started. As the chart shows, by February 28, 1995, the value of your investment would have grown to $13,295 - a 32.95% increase on your initial investment. This assumes you still owned the fund on February 28, 1995 and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Salomon Brothers GNMA Pass-Through Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $13,766 - a 37.66% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) TOTAL RETURN COMPONENTS YEARS ENDED AUGUST 31, DECEMBER 27, 1990 SIX MONTHS (COMMENCEME ENDED NT FEBRUARY 28, OF OPERATIONS) TO AUGUST 31, 1995 1994 1993 1992 1991 Dividend return 3.99% 5.24% 6.51% 8.30% 5.93% Capital appreciation 0.09% -5.50% 1.08% 2.55% 1.60% return Total return 4.08% -0.26% 7.59% 10.85% 7.53% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee on an average sized account. DIVIDENDS AND YIELD PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 5.71(cents) 36.93(cents) 65.42(cents) Annualized dividend rate 7.83% 7.92% 6.86% 30-day annualized yield 7.22% - - DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.51 over the past month, $9.40 over the past six months and $9.53 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: On February 13, 1995, Kevin Grant (right photo) became portfolio manager of Spartan Ginnie Mae Portfolio. The following is an interview with Bob Ives - who managed the fund during the period covered by this report - with some comments from Kevin Grant on his outlook and strategy: Q. BOB, HOW HAS THE FUND PERFORMED? B.I. For the six and 12 months ended February 28, 1995, the fund had total returns of 4.08% and 2.92%, respectively. During the same period, the average GNMA fund returned 3.31% and 1.78%, respectively, according to Lipper Analytical Services. The Salomon Brothers GNMA Pass-through index returned 4.22% and 3.08%, respectively, during the same periods. Q. WHAT HELPED THE FUND BEAT THE AVERAGE GNMA FUND? A. First, Ginnie Maes generally outperformed other sectors of the mortgage-backed securities market and Treasury bonds over the past six months. Other GNMA fund managers may have kept core positions in Treasury bonds, while I had most of the fund invested in Ginnie Maes. Second, I focused the fund's investments on seasoned - or older - mortgages, and they did well during the period. Finally, the fund's duration - its sensitivity to changes in interest rates - was probably a bit longer than the duration of other funds over the last two months of the period, meaning the fund was more sensitive to interest rate changes. That longer duration probably made a difference in January and February of this year, when longer-term interest rates for mortgage-backed securities actually dropped. As these rates dropped, the prices of the fund's bonds rose - more so, it appears, than the prices of bonds in other funds, because the fund had a longer duration. Q. DESCRIBE THE MORTGAGE-BACKED SECURITIES ENVIRONMENT OVER THE PAST SIX MONTHS. A. In general, these securities have performed better than Treasuries and other sectors of the bond market, in part because they generally offer higher yields and shorter durations - a good combination in the generally rising interest rate environment of the past six months. Mortgage-backed securities typically pay higher yields than Treasuries to help compensate investors for prepayment risk - the risk that mortgage holders will pay off their loans before they are due. During the period, these securities offered attractive yields and were less susceptible to prepayment risk. That's because the rise in interest rates helped create an environment in which mortgage holders were less likely to prepay. Q. WHAT'S YOUR READ ON WHY THE PERFORMANCE OF GINNIE MAES IMPROVED DURING THE PAST SIX MONTHS? A. They were priced fairly cheaply at the beginning of the period, because many investors were concerned about rising interest rates. The duration of Ginnie Maes tends to be longer than other mortgage-backed securities. That's because Ginnie Mae borrowers tend to prepay - or pay off their loan's principal - more slowly than borrowers in other mortgage programs. Rising interest rates made it even less likely that Ginnie Mae borrowers would prepay. So as interest rates were rising, investors didn't want to lose value by holding longer-duration Ginnie Maes. However, investors gradually came to appreciate the inherent value offered by Ginnie Maes. This increased investor interest helped drive prices up. Q. WHAT HAS BEEN THE EFFECT OF TALK IN THE NEWS LATELY ABOUT POSSIBLE REDUCTIONS IN THE SUPPLY OF GINNIE MAES? A. It's another reason Ginnie Maes have outperformed other segments of the market. The possible changes are a result of Washington's move toward reducing the role of government. If the changes come about, there probably would be a reduction in the supply of Ginnie Maes going forward. The possibility that this might occur has helped increase investor interest in the sector, especially among those who are required to invest in, or are attracted to, bonds that are backed by the full faith and credit of the U.S. government, such as Ginnie Maes. If the most drastic scenario comes about, and the program is cut back significantly, it is likely to help Ginnie Mae securities in the short term because there will be less supply going forward, causing Ginnie Mae prices to rise. Q. YOU HAD MENTIONED SEASONED MORTGAGES EARLIER . . . A. This is a sector I've been active in throughout my tenure on the fund. A mortgage security's age can help indicate how prepayment risk is likely to change under different conditions. On average, that risk has not always been priced all that efficiently relative to the more actively traded sectors of the market, which are the newer issues. My strategy has been to try to purchase very seasoned bonds at cheaper prices, then sell them when the market realizes their value. Q. TURNING TO YOU, KEVIN: AS YOU PREPARED TO TAKE OVER THE FUND ON FEBRUARY 13, WHAT WAS YOUR OUTLOOK FOR THE YEAR AHEAD? K.G. The mortgage market today generally has less risk than it's had in about five years. The main reason is that most home buyers have refinanced into mortgages with interest rates that are low relative to the current market. At the end of the period, the average rate on the outstanding universe of mortgages was about 7.5%, and the average rate on a new mortgage was about 8.75%. Therefore, at these rates there's no economic incentive for most people to refinance. Historically, the mortgage market has provided returns above Treasuries of about 1%. This year, I don't think we'll get much more or less than that, and the primary reason is that the world knows there's little prepayment risk, so there are fewer opportunities within the mortgage market than there were last year. Nevertheless, that 1% return advantage would be reasonable. FUND FACTS GOAL: to provide high current income by investing primarily in GNMA securities START DATE: December 27, 1990 SIZE: as of February 28, 1995, more than $360 million MANAGER: Robert Ives, 1993 - - February 1995. Kevin Grant, starting February 13, 1995; also manager, Fidelity Mortgage Securities Portfolio since 1993, Fidelity Ginnie Mae Portfolio since February 1995; joined Fidelity in 1993 (checkmark) KEVIN GRANT'S INVESTMENT APPROACH: "First, I try to avoid predicting interest rate movements. Second, I'm a value-oriented investor. I use extensive quantitative analysis to help me find securities that appear undervalued in the marketplace - those whose prices are very low relative to their potential for gains. Third, my mandate is to do this within the Ginnie Mae market. I will always look for the cheapest alternatives within that market. "At times, Treasury bonds might be a good alternative, if investors aren't going to be well-paid for the added prepayment risk one can find in Ginnie Maes. But, most of the time that will not be the case. Normally, I'll stay with Ginnie Maes. "My approach is simple, because this is a simple fund. I can invest up to 35% of the fund in other mortgage-backed securities, such as Freddie Macs or Fannie Maes. If I do so, it probably will be when Ginnie Maes are relatively overpriced. But, for the most part, I expect to be fully oriented toward the Ginnie Mae market." INVESTMENT CHANGES COUPON DISTRIBUTION AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO 6 - 6.99% 3.9 6.6 7 - 7.99% 42.2 37.5 8 - 8.99% 27.5 19.7 9 - 9.99% 14.0 23.7 10 - 10.99% 4.6 6.2 11 - 11.99% 1.3 1.9 12 - 12.99% 2.8 3.1 13% and over 0.6 0.6 COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS. AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 9.1 9.2 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 4.8 4.9 DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. ASSET ALLOCATION AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994 Row: 1, Col: 1, Value: 3.1 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 46.4 Row: 1, Col: 4, Value: 49.5 Mortgage-backed securities** 99.3% Collateralized mortgage obligations (CMOs) - Other 0.7% Mortgage-backed securities* 96.4% Collateralized mortgage obligations (CMOs) 0.5% Other 3.1% Row: 1, Col: 1, Value: 2.6 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 48.0 Row: 1, Col: 4, Value: 48.0 * GNMA SECURITIES - 87.5% ** GNMA SECURITIES - 91.2% INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 96.4% PRINCIPAL VALUE AMOUNT (NOTE 1) FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.8% 8 1/2%, 10/1/18 to 2/1/19 $ 33,624 $ 33,834 9%, 11/1/08 to 8/1/20 6,528,740 6,718,880 9 3/4%, 12/1/08 to 4/1/13 680,204 709,492 10%, 1/1/09 to 11/1/20 8,953,392 9,485,123 10 1/4%, 8/1/10 to 11/1/16 1,405,702 1,489,537 10 1/2%, 1/1/16 to 12/1/20 5,314,053 5,659,742 11 1/4%, 9/1/13 276,659 295,104 11 1/2%, 6/1/19 578,150 622,957 12%, 2/1/13 to 2/1/17 865,172 940,262 12 1/2%, 11/1/12 to 5/1/15 1,523,267 1,719,386 13%, 11/1/12 to 11/1/14 371,211 422,716 13 1/2%, 1/1/13 to 12/1/14 170,852 195,945 28,292,978 FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.1% 11%, 8/1/10 843,561 915,786 12 1/4%, 12/1/14 to 6/1/15 56,901 62,373 12 1/2%, 11/1/13 to 5/1/21 1,943,263 2,137,590 13 1/4%, 9/1/11 637,806 720,721 3,836,470 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 87.5% 6 1/2%, 9/15/23 to 5/15/24 15,496,125 14,024,644 7%, 1/15/08 to 6/15/24 90,634,385 85,611,764 7 1/2%, 10/15/22 to 12/15/23 69,881,878 67,588,350 8%, 12/15/16 to 11/15/23 48,933,748 48,784,957 8 1/2%, 3/15/25 (a) 4,400,000 4,474,272 8 1/2%, 2/15/16 to 1/15/22 45,142,767 46,311,740 9%, 1/15/05 to 2/15/25 14,075,458 14,597,238 9 1/2%, 3/15/01 to 1/15/23 26,898,886 28,594,138 10 1/2%, 9/15/00 245,987 259,900 11%, 7/15/10 to 1/15/16 478,246 526,516 11 1/2%, 10/15/10 to 12/15/15 336,852 372,223 12%, 12/15/12 to 1/15/15 1,129,253 1,249,817 12 1/2%, 4/15/10 to 10/15/15 3,538,149 3,980,518 13%, 9/15/13 to 1/15/15 785,605 890,187 317,266,264 TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE- BACKED SECURITIES (Cost $342,459,623) 349,395,712 COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5% PRINCIPAL VALUE AMOUNT (NOTE 1) U.S. GOVERNMENT AGENCY - 0.5% Federal National Mortgage Association Z Bond Series 1987-2, 11%, 11/25/17 (Cost $1,914,820) $ 1,769,547 $ 1,937,654 REPURCHASE AGREEMENTS - 3.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 11,290,907 11,289,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $355,663,443) $ 362,622,366 LEGEND (a) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $359,822,185. Net unrealized appreciation aggregated $2,800,181, of which $8,266,583 related to appreciated investment securities and $5,466,402 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending August 31, 1995 $14,733,812 of losses recognized during the period November 1, 1993 to August 31, 1994. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 362,622,366 agreements of $11,289,000) (cost $355,663,443) - See accompanying schedule Cash 69,828 Receivable for investments sold 571,364 Interest receivable 2,508,649 TOTAL ASSETS 365,772,207 LIABILITIES Payable for investments purchased $ 43,945 Regular delivery Delayed delivery 4,404,583 Payable for fund shares redeemed 184,616 Dividends payable 530,452 Accrued management fee 175,742 TOTAL LIABILITIES 5,339,338 NET ASSETS $ 360,432,869 Net Assets consist of: Paid in capital $ 389,949,316 Distributions in excess of net investment income (816,554) Accumulated undistributed net realized gain (loss) (35,658,816) on investments Net unrealized appreciation (depreciation) on 6,958,923 investments NET ASSETS, for 37,361,729 shares outstanding $ 360,432,869 NET ASSET VALUE, offering price and redemption price per $9.65 share ($360,432,869 (divided by) 37,361,729 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) INVESTMENT INCOME $ 15,169,223 Interest EXPENSES Management fee $ 1,180,031 Non-interested trustees' compensation 993 TOTAL EXPENSES 1,181,024 NET INVESTMENT INCOME 13,988,199 REALIZED AND UNREALIZED GAIN (LOSS) (9,756,989) Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on: Investment securities 9,146,059 Delayed delivery commitments (9,799) 9,136,260 NET GAIN (LOSS) (620,729) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 13,367,470 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED FEBRUARY AUGUST 31, 28, 1995 1994 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 13,988,199 $ 37,828,118 Net investment income Net realized gain (loss) (9,756,989) (33,092,333) Change in net unrealized appreciation (depreciation) 9,136,260 (6,929,550) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,367,470 (2,193,765) FROM OPERATIONS Distributions to shareholders: (14,313,071) (27,176,375) From net investment income From net realized gain - - In excess of net realized gain - (4,300,957) TOTAL DISTRIBUTIONS (14,313,071) (31,477,332) Share transactions 20,773,426 78,976,702 Net proceeds from sales of shares Reinvestment of distributions 10,419,351 23,657,169 Cost of shares redeemed (70,831,855) (351,849,693) Net increase (decrease) in net assets resulting from (39,639,078) (249,215,822) share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS (40,584,679) (282,886,919) NET ASSETS Beginning of period 401,017,548 683,904,467 End of period (including distributions in excess of net $ 360,432,869 $ 401,017,548 investment income of $816,554 and $491,682, respectively) OTHER INFORMATION Shares Sold 2,203,188 7,887,946 Issued in reinvestment of distributions 1,105,841 2,380,934 Redeemed (7,553,864) (35,239,181) Net increase (decrease) (4,244,835) (24,970,301)
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED AUGUST 31, DECEMBER 27, ENDED FEBRUARY 1990 28, 1995 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, (UNAUDITED) 1994 1993 1992 1991
SELECTED PER-SHARE DATA Net asset value, $ 9.640 $ 10.270 $ 10.400 $ 10.160 $ 10.000 beginning of period Income from Investment .359 .332 D .800 .832 .578 Operations Net investment income Net realized and .020 E (.359) (.050) .236 .154 unrealized gain (loss) Total from investment .379 (.027) .750 1.068 .732 operations Less Distributions (.369) (.533) (.640) (.808) (.572) From net investment income From net realized gain - - (.240) (.020) - on investments In excess of net - (.070) - - - realized gain on investments Total distributions (.369) (.603) (.880) (.828) (.572) Net asset value, end of $ 9.650 $ 9.640 $ 10.270 $ 10.400 $ 10.160 period TOTAL RETURN B, C 4.09% (.25) 7.61 10.86 7.53% % % % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 360,433 $ 401,018 $ 683,904 $ 837,588 $ 422,498 period (000 omitted) Ratio of expenses to .65% .65% .41 .17 .25%A average net assets A % % Ratio of expenses to .65% .65% .65 .65 .65%A average net assets A % % before expense reductions Ratio of net investment 7.70% 7.36% 7.63 8.09 8.69%A income to average net A % % assets Portfolio turnover rate 200% 285% 241 168 41%A A % %
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D EFFECTIVE SEPTEMBER 1, 1993, THE FUND BEGAN REFLECTING IN NET INVESTMENT INCOME PER SHARE CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES IN ACCORDANCE WITH NEW GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN (LOSS) ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Spartan Ginnie Mae Fund (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Interest income, which includes accretion of original issue discount, is accrued as earned. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for paydown gains/losses on mortgage-backed securities and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect net investment income per share. Distributions in excess of net investment income may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management and Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. FMR, the fund's investment adviser, is responsible for determining that the value of these underlying securities remains at least equal to the resale price. DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The market value of the securities purchased or sold on a when-issued or forward commitment basis are identified as such in the fund's schedule of investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery security. With respect to purchase commitments, the fund identifies securities as segregated in its custodial records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of long-term U.S. government and government agency obligations aggregated $364,651,659 and $416,200,061, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .65% of the fund's average net assets. FMR also bears the cost of providing shareholder services to the fund. To offset the cost of providing these services, FMR or its affiliates collect certain transaction fees from the fund's shareholders which amounted to $7,739 for the period. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. 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(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN The Bank of New York New York, NY * INDEPENDENT TRUSTEES FIDELITY'S TAXABLE BOND FUNDS Capital & Income Ginnie Mae Global Bond Government Securities Intermediate Bond Investment Grade Bond Mortgage Securities New Markets Income Short-Intermediate Government Short-Term Bond Short-Term World Income Spartan(registered trademark) Ginnie Mae Spartan Government Income Spartan High Income Spartan Investment Grade Bond Spartan Limited Maturity Government Spartan Long-Term Government Bond Spartan Short-Intermediate Government Spartan Short-Term Income THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) AUTOMATED LINES FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)SPARTAN(registered trademark) INTERMEDIATE MUNICIPAL FUND SEMIANNUAL REPORT FEBRUARY 28, 1995 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 7 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 18 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 22 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although there have been a few positive market indications so far in 1995, no one can predict what lies ahead for investors. Last year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. Keeping in mind that the effects of interest rate changes on your bond investments will only be "paper" gains or losses unless you sell your shares, staying in your bond fund may be appropriate if your investment horizon is at least a year or more. The longer your investing time frame, the more likely it is that you will retain your principal investment through both up and down markets. For example, a 10-year time frame, such as saving for a college education, enables you to weather these ups and downs in a long-term fund, which has higher potential returns. An intermediate-length fund could be appropriate if your investment horizon is two to four years, and a short-term bond fund could be the right choice if you need your money in one or two years. If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. No matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells bonds that have grown in value), and the effect of the $5 account closeout fee. You can also look at the fund's income to measure performance. If Fidelity had not reimbursed certain fund expenses during the periods shown, the total returns, dividends and yields would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Spartan Intermediate Municipal 1.91% 0.94% 7.78% Lehman Brothers Municipal Bond 2.80% 1.88% n/a Index Average Intermediate Municipal Bond 1.85% 1.65% n/a Fund Consumer Price Index 1.28% 2.86% 4.79% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on April 26, 1993. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Lehman Brothers Municipal Bond Index - a broad measure of the municipal bond market. To measure how the fund's performance stacked up against its peers, you can compare it to the average intermediate municipal bond fund, which reflects the performance of 98 funds with similar objectives tracked by Lipper Analytical Services during the period covered by this report. Both benchmarks include reinvested dividends and capital gains, if any. Comparing the fund's performance to the consumer price index (CPI) helps show how your fund did compared to inflation. (The CPI returns begin on the month end closest to the fund's start date). AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF YEAR FUND Spartan Intermediate Municipal 0.94% 4.14% Lehman Brothers Municipal Bond Index 1.88% n/a Average Intermediate Municipal Bond Fund 1.65% n/a Consumer Price Index 2.86% 2.58% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Spartan IntermediateMunicipal Bond Index 04/30/93 10000.00 10000.00 05/31/93 10042.52 10056.00 06/30/93 10223.32 10223.94 07/31/93 10237.67 10237.23 08/31/93 10494.62 10450.16 09/30/93 10638.84 10569.29 10/31/93 10653.55 10589.37 11/30/93 10584.30 10496.19 12/31/93 10814.45 10717.66 01/31/94 10921.60 10839.84 02/28/94 10650.21 10559.09 03/31/94 10215.13 10129.33 04/30/94 10249.15 10215.43 05/31/94 10369.19 10304.31 06/30/94 10349.97 10244.54 07/31/94 10513.55 10432.02 08/31/94 10549.03 10468.53 09/30/94 10432.96 10314.64 10/31/94 10296.33 10131.04 11/30/94 10081.49 9947.67 12/31/94 10270.04 10166.52 01/31/95 10513.10 10457.28 02/28/95 10751.29 10761.59 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan Intermediate Municipal Fund on April 30, 1993, shortly after the fund started. As the chart shows, by February 28, 1995, the value of your investment with dividends reinvested would have grown to $10,751 - a 7.51% increase on your initial investment. This assumes you still owned the fund on February 28, 1995, and therefore does not include the effect of the $5 account closeout fee. For comparison, look at how the Lehman Brothers Municipal Bond Index did over the same period. With dividends reinvested, the same $10,000 would have grown to $10,762 - a 7.62% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, move in the opposite direction of interest rates. In turn, the share price, return, and yield of a fund that invests in bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) TOTAL RETURN COMPONENTS APRIL 26, 1993 SIX MONTHS (COMMENCEM ENDED YEAR ENDED ENT OF FEBRUARY 28, AUGUST 31, OPERATIONS) TO 1995 1994 AUGUST 31, 1993 Dividend return 2.63% 4.99% 1.82% Capital appreciation return -0.72% -4.48% 3.39% Total return 1.91% 0.51% 5.21% DIVIDEND returns and capital appreciation returns are both part of a bond fund's total return. A dividend return reflects the actual dividends paid by the fund. A capital appreciation return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or gains are reinvested. Capital appreciation and total returns include the effect of the $5 account closeout fee. DIVIDENDS AND YIELD
PERIODS ENDED FEBRUARY 28, 1995 PAST PAST 6 PAST 1 MONTH MONTHS YEAR Dividends per share 3.73(cents) 24.97(cents) 50.85(cents) Annualized dividend rate 5.02% 5.28% 5.25% 30-day annualized yield 5.23% - - 30-day annualized tax-equivalent yield 8.17% - -
DIVIDENDS per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $9.69 over the past month, $9.53 over the past six months and $9.68 over the past year, you can compare the fund's income over these three periods. The 30-day annualized YIELD is a standard formula for all funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. The tax-equivalent yield shows what you would have to earn on a taxable investment to equal the fund's tax-free yield, if you're in the 36% federal tax bracket. If the advisor had not reimbursed certain portfolio expenses during the period shown, the yield and tax-equivalent yield would have been 5.13% and 8.02%, respectively. FUND TALK: THE MANAGER'S OVERVIEW An interview with David Murphy, Portfolio Manager of Spartan Intermediate Municipal Fund Q. DAVID, HOW DID THE FUND DO? A. A little bit better than average during the past six months. For the six months ended February 28, 1995, the fund had a total return of 1.91%. That compared to the average intermediate municipal bond fund's return of 1.85% for the same period, according to Lipper Analytical Services. For the year ended February 28, 1995, the fund returned 0.94%, compared to the average fund's return of 1.65%, again according to Lipper. Q. IN YOUR OPINION, WHAT DROVE THE MUNICIPAL BOND MARKET'S PERFORMANCE DURING THE PAST SIX MONTHS? A. We need to look back to early 1994 to set the stage for what happened during the past six months. From February through August last year, the Federal Reserve Board raised short-term interest rates by 1.75 percentage points to 4.75%, in an effort to stave off inflation. Rising interest rates, coupled with fears of inflation and technical market factors, made for an extended period of volatility in which intermediate- and long-term bond prices - taxable and tax-free alike - fell. Bond prices stabilized in the summer. But from September until about mid-November, the market began to fall again. That occurred in part because many investors sold municipal bonds for tax purposes, locking in their 1994 municipal bond losses to offset investment gains from other areas. That tax-loss selling - and another short-term interest rate hike of 0.75% in November- put additional pressure on municipal bond prices. From December through the end of February, however, the market rebounded and prices rose as tax-loss selling abated, the supply of municipal bonds fell, and some investors began to believe that the economy's strong fourth-quarter 1994 performance could slow a bit in 1995. Q. WHAT FACTOR INFLUENCED THE FUND'S PERFORMANCE? A. The primary factor was the fund's duration. Duration measures how sensitive the fund's share price is to changes in interest rates. Because the fund had a long duration in the first quarter of 1994, it was more sensitive to rising interest rates than other funds of its type. During the summer, however, I reduced the fund's duration, bringing it more in line with other funds. That helped the fund's performance relative to its competitors. Q. WHY ARE EDUCATION BONDS THE FUND'S LARGEST SECTOR CONCENTRATION? A. Mainly because they offer relatively high yields. Of the fund's 27.4% stake in education bonds, 25.4% of the fund's total investments are student loan bonds. Because these bonds can be difficult to understand and carry some risk of being pre-paid before their maturity, they offer yields as much as 0.7% higher than similarly-rated general obligation bonds. Likewise, health care bonds, which were the fund's fourth largest sector concentration at 11.1% at the end of the period, are also attractive because of their high yields. I also invested in them because an expanding economy will help their underlying credit fundamentals. Q. ONE OF THE FUND'S LARGEST HOLDINGS IS DENVER AIRPORT BONDS. HOW DID THEY FARE OVER THE PAST SIX MONTHS? A. At 4.3% of the fund's investments at the end of the period, Denver Airport bonds were one of the fund's - and the municipal market's - best performers over the past six months. Delays in opening the airport caused a major rating agency to downgrade the bonds to below-investment-grade last year and, as a result, their prices took quite a beating. But by late 1994, these bonds bounced back nicely as investors became convinced that problems eventually would be ironed out. The airport finally opened on February 28, 1995, without any major glitches. From here, there's a possibility that the bonds may get a credit upgrade, which could boost their prices further. Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF LOSSES IN ITS INVESTMENT POOL. DOES THE FUND HAVE INVESTMENTS IN SECURITIES DIRECTLY AFFECTED BY THE BANKRUPTCY? A. Yes, at the end of the period the fund had about 1% of investments in a bond issued by the Orange County Development Agency. The bond currently is rated Caa by Moody's Investors Service and BBB by Standard & Poor's. The difference in ratings stems from the nature of the relationship between Orange County and the Development Agency. It is Fidelity's view that the Development Agency is an entity separate from the county, and has a distinct revenue flow to cover debt service - meaning the payment of interest and current maturities of principal on outstanding debt. On March 1, immediately after the fund's fiscal year ended, the scheduled debt service payment was made on time and in full. That is a positive development for our outlook on the bond. I'll continue to monitor the situation as it develops. Q. DO YOU THINK 1995 LOOKS MORE POSITIVE FOR THE MUNICIPAL BOND MARKET? A. I think that the Federal Reserve Board could raise interest rates one or two more times, which in my opinion would have more of an impact on short-term bond prices than long-term bond prices. It appears that the municipal market is starting to anticipate that we're nearing the end of the Fed's cycle of raising interest rates. That has given a positive tone to the municipal bond market in the past three months. What's more, fixed-income investments, with their relatively high current yields, are attractive compared to other investments. I believe that these yields could attract investors, potentially benefiting the municipal market. FUND FACTS GOAL: to provide high current income by investing primarily in GNMA securities START DATE: December 27, 1990 SIZE: as of February 28, 1995, more than $360 million MANAGER: Robert Ives, 1993 - - February 1995. Kevin Grant, starting February 13, 1995; also manager, Fidelity Mortgage Securities Portfolio since 1993, Fidelity Ginnie Mae Portfolio since February 1995; joined Fidelity in 1993 (checkmark) KEVIN GRANT'S INVESTMENT APPROACH: "First, I try to avoid predicting interest rate movements. Second, I'm a value-oriented investor. I use extensive quantitative analysis to help me find securities that appear undervalued in the marketplace - those whose prices are very low relative to their potential for gains. Third, my mandate is to do this within the Ginnie Mae market. I will always look for the cheapest alternatives within that market. "At times, Treasury bonds might be a good alternative, if investors aren't going to be well-paid for the added prepayment risk one can find in Ginnie Maes. But, most of the time that will not be the case. Normally, I'll stay with Ginnie Maes. "My approach is simple, because this is a simple fund. I can invest up to 35% of the fund in other mortgage-backed securities, such as Freddie Macs or Fannie Maes. If I do so, it probably will be when Ginnie Maes are relatively overpriced. But, for the most part, I expect to be fully oriented toward the Ginnie Mae market." INVESTMENT CHANGES TOP FIVE STATES AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO California 13.4 15.4 Texas 12.2 12.4 New York 10.3 9.1 Virginia 6.5 0.7 Michigan 5.7 5.2 TOP FIVE SECTORS AS OF FEBRUARY 28, 1995 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Education 27.4 27.3 General Obligation 17.5 17.2 Industrial Development 11.4 6.6 Health Care 11.1 11.7 Special Tax 9.9 9.1 AVERAGE YEARS TO MATURITY AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 8.1 9.0 AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR AMOUNT. DURATION AS OF FEBRUARY 28, 1995 6 MONTHS AGO Years 6.1 7.0 DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A FIVE-YEAR DURATION IS LIKELY TO LOSE 5% OF ITS VALUE. OTHER FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. QUALITY DIVERSIFICATION (MOODY'S RATINGS) AS OF FEBRUARY 28, 1995 AS OF AUGUST 31, 1994 Row: 1, Col: 1, Value: 11.5 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 1.8 Row: 1, Col: 4, Value: 2.1 Row: 1, Col: 5, Value: 26.8 Row: 1, Col: 6, Value: 57.6 Row: 1, Col: 1, Value: 9.199999999999999 Row: 1, Col: 2, Value: 1.5 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 1.5 Row: 1, Col: 5, Value: 26.9 Row: 1, Col: 6, Value: 62.9 Aaa, Aa, A 58.6% Baa 26.8% Ba 1.6% Caa 0.9% Non-rated 0.6% Short-term investments 11.5% Aaa, Aa, A 61.9% Baa 26.9% Ba 1.5% Caa 0.0% Non-rated 0.5% Short-term investments 9.2% WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. INVESTMENTS FEBRUARY 28, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities MUNICIPAL BONDS - 88.5% PRINCIPAL VALUE AMOUNT (NOTE 1) ALASKA - 5.0% North Slope Borough (Cap. Appreciation) Series A: 0% 6/30/01, (MBIA Insured) (c) Aaa $ 12,000,000 $ 8,385,000 0% 6/30/02, (MBIA Insured) Aaa 3,950,000 2,597,125 0% 6/30/03, (MBIA Insured) Aaa 1,500,000 943,125 11,925,250 ARIZONA - 2.3% Maricopa County School Dist. #28 Rfdg. (Kyrene Elementary) Series C, 0% 1/1/07, (FGIC Insured) Aaa 5,900,000 2,964,750 Phoenix Civic Impt. Corp. Excise Tax Rev. Rfdg. Arpt. Impts. Series A, 5.85% 7/1/01 (b) (e) Aa 2,420,000 2,447,225 5,411,975 CALIFORNIA - 10.8% California Pub. Wks. Board Lease Rev. Rfdg. (Dept. of Correction State Prisons) Series A, 5.25% 12/1/04 A 4,075,000 3,820,313 California Statewide Commty. Dev. Auth. Rev. Ctfs. of Prtn. Rfdg. (Hosp. Triad Healthcare) 5.90% 8/1/01 A 1,115,000 1,094,094 Carson Redev. Agcy. Rfdg. (Redev. Proj. Area 2) (Tax Allocation): 5.40% 10/1/01 Baa 1,350,000 1,301,063 5.50% 10/1/02 Baa 1,320,000 1,267,200 5.60% 10/1/03 Baa 1,500,000 1,434,375 5.625% 10/1/04 Baa 1,085,000 1,028,038 Central Valley Fin. Auth. Cogeneration Proj. Rev. (Carson Ice Gen. Proj.): 5.50% 7/1/01 BBB- 2,300,000 2,245,375 5.60% 7/1/02 BBB- 1,800,000 1,750,500 5.80% 7/1/04 BBB- 1,300,000 1,262,625 Clovis Unified School Dist. (Cap. Appreciation) Series B, 0% 8/1/02, (MBIA Insured) Aaa 5,700,000 3,819,000 Los Angeles Hosp. Rev. Ctfs. of Prtn. (Insured Health Facs. Construction Loan Prog.) (Hollywood Presbyterian Hosp.) 9% 7/1/13 A 100,000 102,750 Orange County Dev. Agcy. Tax Allocation (Santa Ana Heights Proj.): 5.70% 9/1/02 Caa 1,170,000 1,050,075 6% 9/1/05 Caa 1,335,000 1,169,794 San Bernardino County Ctfs. of Prtn. (Med. Ctr. Fing. Proj.) 5% 8/1/03 Baa1 2,000,000 1,845,000 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) CALIFORNIA - CONTINUED Sequoia Hosp. Dist. Rev. Rfdg.: 5.10% 8/15/04 A $ 1,345,000 $ 1,235,719 5.25% 8/15/05 A 1,415,000 1,298,263 25,724,184 COLORADO - 5.1% Colorado Health Facs. Auth. Rev. (Rocky Mountain Adventist) 6.25% 2/1/04 Baa 2,000,000 1,972,500 Denver City & County Arpt. Rev. (e): Series A: (Cap. Appreciation) 0% 11/15/04 Baa 2,070,000 1,055,700 8.25% 11/15/02 Baa 730,000 777,450 Series C: 5.35% 11/15/96 Baa 1,035,000 1,018,181 6.55% 11/15/03 Baa 2,660,000 2,566,900 (Cap. Appreciation) Series D: 0% 11/15/03 Baa 5,320,000 2,919,350 0% 11/15/06 Baa 4,500,000 1,963,125 12,273,206 CONNECTICUT - 1.4% Connecticut Health & Ed. Facs. Auth. Rev. (Quinnipiac College) Series D: 4.90% 7/1/98 BBB- 2,300,000 2,222,375 5.625% 7/1/03 BBB- 1,100,000 1,036,750 3,259,125 DISTRICT OF COLUMBIA - 2.8% District of Columbia Gen. Oblig. 5.625% 6/1/02, (MBIA Insured) Aaa 1,000,000 982,500 District of Columbia Hosp. Rev. Rfdg. (Medlantic Healthcare Group, Washington Hosp. Ctr.): Series A, 5.50% 8/15/06, (MBIA Insured) Aaa 1,100,000 1,075,250 Series B, 6.125% 8/15/99 Baa1 4,520,000 4,525,650 6,583,400 ILLINOIS - 1.0% Illinois Dev. Fin. Auth. Poll. Cont. Rev. Rfdg. (Commonwealth Edison) 5.30% 1/15/04 Baa2 2,500,000 2,337,500 IOWA - 1.8% Iowa Student Loan Liquidity Corp. Student Loan Rev. Rfdg. Sr. Series B, 5.75% 12/1/07 (e) Aaa 4,500,000 4,387,500 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) MARYLAND - 2.9% Maryland Health & Higher Ed. Facs. Auth. Rev. Rfdg. (Howard County Gen. Hosp.) 5.125% 7/1/03 Baa1 $ 2,220,000 $ 2,084,025 Northeast Maryland Waste Disp. Auth. Solid Waste Rev. (Montgomery County Resource Recovery Proj.) Series A, 5.80% 7/1/04 (e) A 3,375,000 3,324,375 Prince George's County Rev. Rfdg. (Dimensions Health Corp. Proj.) 4.75% 7/1/03 A 1,750,000 1,605,625 7,014,025 MASSACHUSETTS - 4.6% New England Ed. Loan Marketing Corp. Rfdg. (Student Loan): Series A, 5.70% 7/1/05 (e) A1 7,230,000 7,022,138 Series E, 5% 7/1/99 A1 4,000,000 3,900,000 10,922,138 MICHIGAN - 5.7% Detroit Convention Facs. Rev. Rfdg. (Cobo Hall Expansion Proj.) 5.125% 9/30/05 (c) A 10,830,000 10,071,900 Michigan Hosp. Fin. Auth. Rev. (Daughters of Charity) 10% 11/1/15 Aa 3,385,000 3,575,406 13,647,306 MISSISSIPPI - 2.9% Mississippi Higher Ed. Assistance Corp. Student Loan Rev. Sr. Series B, 5.10% 9/1/00 (e) Aaa 4,000,000 3,880,000 Rankin County School Dist.: 7.75% 2/1/02, (MBIA Insured) Aaa 1,280,000 1,460,800 7.75% 2/1/03, (MBIA Insured) Aaa 1,370,000 1,582,350 6,923,150 MONTANA - 5.1% Montana Higher Ed. Student Loan Assistance Corp. Student Loan Rev. Sr. Series B, 5% 12/1/00 (c) (e) Aaa 12,580,000 12,186,875 NEW HAMPSHIRE - 1.6% New Hampshire Higher Ed. & Health Facs. Auth. Rev. (Frisbie Mem. Hosp.) 5.70% 10/1/04 Baa 4,145,000 3,839,306 NEW MEXICO - 2.3% New Mexico Edl. Assistance Foundation Student Loan Rev. Sr. Series IV A-1, 7.05% 3/1/10 (b) (e) Aaa 5,375,000 5,542,969 NEW YORK - 9.0% Hempstead Town Ind. Dev. Agcy. Resource Recovery Rev. (American RefFuel Co.) 7.40% 12/1/10 Baa1 7,345,000 7,647,981 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) NEW YORK - CONTINUED New York City Gen. Oblig. Short Rites Series C, 7.91589% 8/1/03 INFL (f) Baa1 $ 4,000,000 $ 4,085,000 New York State Ctfs. of Prtn. 6.70% 9/1/97 Baa1 1,800,000 1,856,250 New York State Dorm. Auth. Rev. (City Univ. Sys.) Series B, 5.75% 7/1/06 Baa1 1,080,000 1,048,950 New York State Energy Research & Dev. Auth. Poll. Cont. Rev. 5.90% 12/1/06, (MBIA Insured) Aaa 4,000,000 4,050,000 New York State Urban Dev. Corp. Rev. 5.30% 1/1/05 Baa1 2,900,000 2,682,500 21,370,681 OHIO - 1.5% Franklin County Rev. (Online Computer Library Ctr. Proj.): 4.80% 4/15/97 - 500,000 493,750 5% 4/15/98 - 560,000 551,600 5.65% 4/15/01 - 340,000 337,450 Ohio Bldg. Auth. 6.30% 10/1/11 A1 2,000,000 2,042,500 Ohio Econ. Dev. Rev. (Ohio State Commission Globe Ind. Proj.) Series 1, 7.75% 6/1/96 (e) A- 155,000 155,581 3,580,881 PENNSYLVANIA - 4.2% Allegheny County Ind. Dev. Agcy. Rev. Rfdg. Environmental Impt. Series B, 5.30% 12/1/96 Baa3 4,010,000 3,994,963 Pennsylvania Convention Ctr. Auth. Rev Rfdg. Series A, 6.60% 9/1/09 Ba 4,000,000 3,840,000 Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev. (Temple Univ. Hosp.) Series A, 5.60% 11/15/97 Baa1 2,100,000 2,092,125 9,927,088 SOUTH DAKOTA - 2.1% South Dakota Student Loan Fing. Corp. Student Loan Rev. Series A, 6.15% 8/1/03 (e) A+ 5,000,000 5,087,500 TEXAS - 12.2% Alief Independent School Dist.: 7% 2/15/03, (PSF Guaranteed) Aaa 1,125,000 1,241,719 7% 2/15/04, (PSF Guaranteed) Aaa 1,125,000 1,248,750 7% 2/15/05, (PSF Guaranteed) Aaa 1,125,000 1,254,375 Arlington Independent School Dist.: 6.50% 2/15/02, (PSF Guaranteed) Aaa 1,000,000 1,067,500 6.50% 2/15/03, (PSF Guaranteed) Aaa 1,500,000 1,606,875 6.50% 2/15/05, (PSF Guaranteed) Aaa 1,500,000 1,616,250 MUNICIPAL BONDS - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) TEXAS - CONTINUED Brazos Higher Ed. Auth. Student Loan Rev. Rfdg. Series C-1 (e): 5.50% 6/1/02 Aaa $ 4,680,000 $ 4,639,050 5.60% 6/1/03 Aaa 6,750,000 6,682,500 5.70% 6/1/04 Aaa 2,500,000 2,475,000 Central Texas Higher Ed. Auth. Student Loan Rev. Rfdg. Sr. Series A, 5.10% 12/1/03 (e) Aaa 5,000,000 4,756,250 Katy Independent School Dist. Rfdg. Ltd. Tax (Cap. Appreciation) Series A, 0% 2/15/07, (PSF Guaranteed) Aaa 400,000 198,500 Socorro Independent School Dist. Rfdg. Unltd. Tax (Cap. Appreciation) 0% 9/1/04, (PSF Guaranteed) Aaa 3,000,000 1,773,750 Texas Muni. Pwr. Agcy. Rev. Rfdg. 9% 9/1/97, (Escrowed to Maturity) (g) AAA 500,000 546,875 29,107,394 UTAH - 0.4% Salt Lake County Unltd. Tax Wtr. Conservancy Dist. Rev. (Cap. Appreciation) Series A, 0% 10/1/05, (AMBAC Insured) Aaa 1,650,000 905,438 VIRGINIA - 1.4% Fairfax County Econ. Dev. Auth. Resource Recovery Rev. (Ogden Martin Sys. Proj.) Series A, 7.75% 2/1/11 (e) Aa 3,000,000 3,281,250 WASHINGTON - 2.4% Washington Pub. Pwr. Supply Sys. Nuclear #3 Rev. Rfdg.: Series B: (Cap. Appreciation) 0% 7/1/07 Aa 4,000,000 1,870,000 0% 7/1/10 Aa 2,250,000 840,936 5.10% 7/1/04, (FGIC Insured) Aaa 1,955,000 1,823,035 Series C, 0% 7/1/13 Aa 4,030,000 1,224,113 5,758,084 TOTAL MUNICIPAL BONDS (Cost $217,298,512) 210,996,225 MUNICIPAL NOTES (D) - 11.5% CALIFORNIA - 2.6% California Poll. Cont. Fing. Auth. Resource Recovery Rev. (Delano Energy Co. Proj.) Series 1990, 3.90%, LOC Algemene Bank, VRDN (e) P-1 1,200,000 1,200,000 San Bernardino County TRAN, 4.50% 7/31/95 SP-1+ 5,000,000 4,950,000 6,150,000 MUNICIPAL NOTES (D) - CONTINUED PRINCIPAL VALUE AMOUNT (NOTE 1) NEW YORK - 1.3% New York State Job Dev. Auth. Spl. Purp. Bonds Series 1992, 3.90% LOC Sumitomo Bank Ltd. Japan, VRDN (e) VMIG 1 $ 3,100,000 $ 3,100,000 PENNSYLVANIA - 0.7% Pennsylvania State Higher Ed. Assistance Agcy. (Student Loan) Series 1988 A, 4.10%, LOC Student Loan Marketing Assoc., VRDN (e) VMIG 1 1,600,000 1,600,000 SOUTH CAROLINA - 1.3% South Carolina Jobs Econ. Dev. Auth. (Wellman, Inc. Proj.) Series 92, 4.25%, LOC Wachovia Bank of Georgia NA, VRDN (e) - 3,200,000 3,200,000 VIRGINIA - 5.1% Peninsula Port. Auth. Port. Fac. Rev. Rfdg. (Shell Oil & Terminal Co. Proj.) Series 87, 3.75%, VRDN - 8,100,000 8,100,000 Richmond Ind. Dev. Auth. Fac. Rev. (Cogentrix of Richmond, Inc.) Series 1991 A, 4.30%, LOC Banque Paribas, VRDN (e) - 2,400,000 2,400,000 Southampton County Ind. Dev. Auth. Fac. Rev. (Hadson Pwr. #11-Southampton Proj.) Series 1990-A, 4.25%, LOC Cr. Suisse, VRDN (e) - 1,700,000 1,700,000 12,200,000 WYOMING - 0.5% Uinta County Poll. Cont. Rfdg. Rev. Bonds (Chevron USA, Inc. Proj.) Series 1993, 3.70% VRDN (e) P-1 1,200,000 1,200,000 TOTAL MUNICIPAL NOTES (Cost $27,514,187) 27,450,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $244,812,699) $ 238,446,225 SECURITY TYPE ABBREVIATIONS TRAN - Tax and Revenue Anticipation Notes VRDN - Variable Rate Demand Notes LEGEND (b) Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (c) Security purchased on a delayed delivery basis (see Note 2 of Notes to Financial Statements). (d) A portion of the security was pledged to cover margin requirements for delayed delivery purchases. At the period end, the value of securities pledged amounted to $23,720,000. (e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. (f) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. (g) Coupon is inversely indexed to a floating interest rate. The price will be more volatile than the price of a comparable fixed rate security. The rate shown is the rate at period end. (h) Security collateralized by an amount sufficient to pay interest and principal. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 51.7% AAA, AA, A 40.2% Baa 23.2% BBB 14.4% Ba 1.6% BB 7.6% B 0.0% B 0.0% Caa 0.9% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 0.6% The distribution of municipal securities by revenue source, as a percentage of total value of investment in securities, is as follows: Education 27.4% General Obligation 17.5 Industrial Development 11.4 Health Care 11.1 Others (individually less than 10%) 32.6 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $244,812,699. Net unrealized depreciation aggregated $6,366,474, of which $741,256 related to appreciated investment securities and $7,107,730 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending August 31, 1995 $2,716,995 of losses recognized during the period November 1, 1993 to August 31, 1994. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) ASSETS Investment in securities, at value (cost $244,812,699) - $ 238,446,225 See accompanying schedule Cash 5,075,488 Receivable for investments sold on delayed delivery 11,651,974 basis Interest receivable 2,560,443 Receivable from investment adviser for expense 16,847 reductions TOTAL ASSETS 257,750,977 LIABILITIES Payable for investments purchased $ 12,091,639 Regular delivery Delayed delivery 19,751,311 Dividends payable 143,231 Accrued management fee 92,656 TOTAL LIABILITIES 32,078,837 NET ASSETS $ 225,672,140 Net Assets consist of: Paid in capital $ 240,044,221 Accumulated undistributed net realized gain (loss) on (8,005,607) investments Net unrealized appreciation (depreciation) on (6,366,474) investments NET ASSETS, for 23,104,286 shares outstanding $ 225,672,140 NET ASSET VALUE, offering price and redemption price per $9.77 share ($225,672,140 (divided by) 23,104,286 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) INTEREST INCOME $ 6,367,080 EXPENSES Management fee $ 618,154 Non-interested trustees' compensation 614 Total expenses before reductions 618,768 Expense reductions (181,118) 437,650 NET INTEREST INCOME 5,929,430 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (5,416,122) Futures contracts 127,510 (5,288,612) Change in net unrealized appreciation (depreciation) on 2,399,180 investment securities NET GAIN (LOSS) (2,889,432) NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 3,039,998 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR ENDED ENDED AUGUST 31, FEBRUARY 28, 1994 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 5,929,430 $ 13,516,846 Net interest income Net realized gain (loss) (5,288,612) (2,242,342) Change in net unrealized appreciation (depreciation) 2,399,180 (12,347,494) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,039,998 (1,072,990) FROM OPERATIONS Distributions to shareholders (5,929,430) (13,516,846) From net interest income From net realized gain - (369,834) In excess of net realized gain - (625,060) TOTAL DISTRIBUTIONS (5,929,430) (14,511,740) Share transactions 96,664,521 350,398,614 Net proceeds from sales of shares Reinvestment of distributions 4,748,487 12,039,415 Cost of shares redeemed (129,120,214) (309,984,273) Net increase (decrease) in net assets resulting from (27,707,206) 52,453,756 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS (30,596,638) 36,869,026 NET ASSETS Beginning of period 256,268,778 219,399,752 End of period $ 225,672,140 $ 256,268,778 OTHER INFORMATION Shares Sold 10,182,210 34,393,131 Issued in reinvestment of distributions 497,854 1,192,986 Redeemed (13,625,153) (30,753,385) Net increase (decrease) (2,945,089) 4,832,732
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED APRIL 26, 1993 ENDED AUGUST 31, (COMMENCEMENT FEBRUARY 28, OF 1995 OPERATIONS) TO AUGUST 31, (UNAUDITED) 1994 1993 SELECTED PER-SHARE DATA Net asset value, beginning of period $ 9.840 $ 10.340 $ 10.000 Income from Investment Operations .250 .514 .177 Net interest income Net realized and unrealized gain (loss) (.070) (.460) .340 Total from investment operations .180 .054 .517 Less Distributions (.250) (.514) (.177) From net interest income From net realized gain on investments - (.010) - In excess of net realized gain on - (.030) - investments Total distributions (.250) (.554) (.177) Net asset value, end of period $ 9.770 $ 9.840 $ 10.340 TOTAL RETURN B, C 1.92% .52% 5.22% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 225,672 $ 256,269 $ 219,400 Ratio of expenses to average net assets .39% .20% - A Ratio of expenses to average net assets .55% .55% .55% A before expense reductions A Ratio of net interest income to average net 5.27% 5.09% 5.20% A assets A Portfolio turnover rate 28% 69% 95% A A
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 (Unaudited) 5. SIGNIFICANT ACCOUNTING POLICIES. Spartan Intermediate Municipal Fund (the fund) is a fund of Fidelity Union Street Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities are valued based upon a computerized matrix system and/or appraisals by a pricing service, both of which consider market transactions and dealer-supplied valuations. Short-term securities maturing within sixty days of their purchase date are valued either at amortized cost or original cost plus accrued interest, both of which approximate current value. Securities for which quotations are not readily available through the pricing service are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INTEREST INCOME. Interest income, which includes amortization of premium and accretion of original issue discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid monthly from net interest income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for futures and options transactions and losses deferred due to excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect net interest income per share. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 6. OPERATING POLICIES. DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. With respect to purchase commitments, the fund identifies securities as segregated in its custodial records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the bond market and to fluctuations in interest rates. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 7. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $30,514,419 and $59,418,616, respectively. The market value of futures contracts opened and closed during the period amounted to $41,800,715 and $41,772,660, respectively. 8. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management & Research Company (FMR) pays all expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest, taxes, brokerage commissions and extraordinary expenses. FMR receives a fee that is computed daily at an annual rate of .55% of the fund's average net assets. FMR also bears the cost of providing shareholder services to the fund. To offset the cost of providing these services, FMR or its affiliates collect certain transaction fees from the fund's shareholders which amounted to $3,635 for the period. 9. EXPENSE REDUCTIONS. FMR voluntarily agreed to reimburse the fund's operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above a specified percentage of average net assets. During the period, this expense limitation ranged from .30% to .45% of average net assets and the reimbursement reduced expenses by $181,118. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Arthur S. Loring, Secretary Stephen P. Jonas, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA United Missouri Bank, N.A. Kansas City, MO CUSTODIAN United Missouri Bank, N.A. Kansas City, MO (registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 FIDELITY'S TAX-FREE BOND FUNDS Aggressive Tax-Free California Tax-Free High Yield California Tax-Free Insured High Yield Tax-Free Insured Tax-Free Limited Term Municipals Massachusetts Tax-Free High Yield Michigan Tax-Free High Yield Minnesota Tax-Free Municipal Bond New York Tax-Free High Yield New York Tax-Free Insured Ohio Tax-Free High Yield Spartan Aggressive Municipal (registered trademark) Spartan Arizona Municipal Income Spartan California Intermediate Municipal Spartan California Municipal High Yield Spartan Connecticut Municipal High Yield Spartan Florida Municipal Income Spartan Intermediate Municipal Spartan Maryland Municipal Income Spartan Municipal Income Spartan New Jersey Municipal High Yield Spartan New York Intermediate Municipal Spartan New York Municipal High Yield Spartan Pennsylvania Municipal High Yield Spartan Short-Intermediate Municipal THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----