SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO 2-55725)
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 65 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No.
Fidelity Municipal Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number (617) 570-7000
Arthur S. Loring, Secretary
82 Devonshire Street,
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) Immediately upon filing pursuant to paragraph (b)
(x) On February 25, 1994 pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a) of Rule 485
( ) On ( ) pursuant to paragraph (a) of Rule 485
Registrant intends to file a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the Notice required by
such Rule on or before February 28, 1994.
FIDELITY INSURED TAX-FREE PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Fund at a Glance; Who May Want
to Invest
3 a .............................. Financial Highlights
b .............................. Financial Highlights
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment Principles;
Securities and Investment Practices
b .............................. Securities and Investment Practices
c .............................. Who May Want to Invest; Investment Principles;
Securities and Investment Practices
5 a .............................. Charter
b i............................. Doing Business with Fidelity; Charter
ii........................... Charter; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Charter; Breakdown of Expenses; Cover Page;
FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g .............................. *
5A .............................. Annual Reports
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... *
b ............................. *
c .............................. Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How to Buy Shares;
How to Sell Shares; Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions
9 .............................. *
</TABLE>
* Not Applicable
CROSS REFERENCE SHEET
(CONTINUED)
FIDELITY INSURED TAX-FREE PORTFOLIO
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i........................... FMR
ii.......................... Trustees and Officers
iii......................... Management Contract
b ............................ Management Contract
c, d ............................ Interest of FMR Affiliates
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Interest of FMR Affiliates
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption Information
b ............................ Additional Purchase and Redemption Information;
Valuation of Portfolio Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Interest of FMR Affiliates
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated February 17, 1994 has been
filed with the Securities and Exchange Commission, and is incorporated
herein by reference (is legally considered a part of this prospectus). The
Statement of Additional Information is available free upon request by
calling Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, savings association, insured depository
institution or government agency, nor are they federally insured or
otherwise protected by the FDIC, the Federal Reserve Board, or any other
agency. Investments in the fund involve investment risk, including
possible loss of principal. The value of the investment and its return will
fluctuate and are not guaranteed. When sold, the value of the investment
may be higher or lower than the amount originally invested.
Insured Tax-Free seeks a high level of federally tax-free income with
preservation of capital by investing primarily in municipal bonds whose
interest and principal payments are insured.
FIDELITY
INSURED TAX-FREE
PORTFOLIO
PROSPECTUS
FEBRUARY 17, 1994(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
ITP-pro-294
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES AND PERFORMANCE EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
DIVIDENDS, CAPITAL GAINS, AND
TAXES
SHAREHOLDER AND TRANSACTION DETAILS Share price
ACCOUNT POLICIES calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
THE FUND IN DETAIL CHARTER How the fund is
organized.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
INVESTMENT PRINCIPLES The fund's
overall approach to investing.
SECURITIES AND INVESTMENT
PRACTICES
<r>KEY FACTS</r>
THE FUND AT A GLANCE
GOAL: High federally tax-free income with preservation of capital. As with
any mutual fund, there is no assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in long-term municipal bonds that are covered by
insurance guaranteeing the timely payment of principal and interest.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager.
SIZE: As of December 31, 1993, the fund had over $ 448 million in
assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors in higher tax brackets who seek
high current income that is free from federal income tax. The fund is
designed for those who want to pursue this goal through investments that,
because of the insurance coverage, have an extra degree of credit
safety. Insurance covers the timely payment of principal and interest,
but its cost lowers the fund's yield.
By itself, the fund does not constitute a balanced investment plan. The
value of the fund's investments and the income they generate will vary from
day to day, generally reflecting changes in interest rates, market
conditions, and other political and economic news. When you sell your
shares, they may be worth more or less than what you paid for them.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Insured
Tax-Free is in the INCOME
category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(arrow) INCOME Seeks income by
investing in bonds.
(bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES AND PERFORMANCE
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. It also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and fund reports. The fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
Management fee .42 %
12b-1 fee None
Other expenses .19 %
Total fund operating expenses .61 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 year $ 6
After 3 years $ 20
After 5 years $ 34
After 10 years $ 76
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows has been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in the fund's
Annual Report. The Annual Report is incorporated by reference into (is
legally a part of) the Statement of Additional Information.
SELECTED PER-SHARE DATA
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1.Year ended 1985B 1986 1987 1988 1989 1990 1991 1992 1993
December 31
2.Net asset value, $ 10.00 $ 10.23 $ 11.33 $ 10.36 $ 10.78 $ 11.05 $ 11.09 $ 11.63 $ 11.72
beginning of period 0 0 0 0 0 0 0 0 0
3.Income from .072 .732 .717 .706 .717 .713 .702 .689 .655
Investment
Operations
Net interest
income
4. Net realized .230 1.100 (.960) .420 .270 .040 .540 .200 .930
and
unrealized gain
(loss)
on investments
5. Total from .302 1.832 (.243) 1.126 .987 .753 1.242 .889 1.585
investment
operations
6.Less (.072) (.732) (.717) (.706) (.717) (.713) (.702) (.689) (.655)
Distributions
From net interest
income
7. From net -- -- (.010) -- -- -- -- (.110) (.280)
realized gain
on investments
8. Total (.072) (.732) (.727) (.706) (.717) (.713) (.702) (.799) (.935)
distributions
9.Net asset value, $ 10.23 $ 11.33 $ 10.36 $ 10.78 $ 11.05 $ 11.09 $ 11.63 $ 11.72 $ 12.37
end of period 0 0 0 0 0 0 0 0 0
10.Total return 3.02% 18.33 (2.10) 11.19 9.45% 7.08% 11.57 7.91% 13.85
% % % % %
11.RATIOS AND SUPPLEMENTAL DATA
12.Net assets, end $ 9,490 $ 146,2 $ 144,9 $ 153,7 $ 175,3 $ 198,5 $ 303,3 $ 371,1 $ 448,3
of period (000 80 96 02 01 85 51 22 96
omitted)
13.Ratio of .60% A .60% .62% .70% .70% .67% .65% .63% .61%
expenses to
average net assets
14.Ratio of 1.50% .88% .81% .76% .70% .67% .65% .63% .61%
expenses to A
average net assets
before expense
reductions
15.Ratio of net 7.89% 6.52% 6.73% 6.64% 6.57% 6.52% 6.23% 5.91% 5.31%
interest income to A
average net assets
16.Portfolio -% 23% 57% 35% 51% 66% 62% 69% 78%
turnover rate
</TABLE>
A ANNUALIZED
B NOVEMBER 13, 1985 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1985
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The tables
below show the fund's performance over past fiscal years compared to a
measure of inflation. The chart on page 8 helps you compare the
yields of this fund to those of its competitors.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
December 31, 1993 year years fundA
Insured Tax-Free 13.85% 9.94% 9.75%
Consumer Price
Index 2.75% 3.89% 3.66%
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
December 31, 1993 year years fundA
Insured Tax-Free 13.85% 60.65% 113.18%
Consumer Price
Index 2.75% 21.00% 34.13%
A FROM NOVEMBER 13, 1985
EXPLANATION OF TERMS
UNDERSTANDING
PERFORMANCE
YIELD illustrates the income
earned by a fund over a
recent period. 30-day yields
are usually used for bond
funds. Yields change daily,
reflecting changes in interest
rates.
TOTAL RETURN reflects both the
reinvestment of income and
capital gain distributions and
any change in a fund's share
price.
(checkmark)
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. A
TAX-EQUIVALENT YIELD shows what an investor would have to earn before taxes
to equal a tax-free yield. Yields are calculated according to a standard
that is required for all stock and bond funds. Because this differs from
other accounting methods, the quoted yield may not equal the income
actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Insured Municipal Debt Funds,
which currently reflects the performance of over 35 mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
30-DAY YIELDS
Percentage (%)
Row: 1, Col: 1, Value: 6.33
Row: 1, Col: 2, Value: 6.58
Row: 2, Col: 1, Value: 6.14
Row: 2, Col: 2, Value: 6.4
Row: 3, Col: 1, Value: 6.359999999999999
Row: 3, Col: 2, Value: 6.03
Row: 4, Col: 1, Value: 6.119999999999999
Row: 4, Col: 2, Value: 5.94
Row: 5, Col: 1, Value: 6.149999999999999
Row: 5, Col: 2, Value: 5.92
Row: 6, Col: 1, Value: 6.27
Row: 6, Col: 2, Value: 5.98
Row: 7, Col: 1, Value: 6.48
Row: 7, Col: 2, Value: 5.9
Row: 8, Col: 1, Value: 6.22
Row: 8, Col: 2, Value: 5.819999999999999
Row: 9, Col: 1, Value: 6.25
Row: 9, Col: 2, Value: 5.81
Row: 10, Col: 1, Value: 6.1
Row: 10, Col: 2, Value: 5.72
Row: 11, Col: 1, Value: 5.970000000000001
Row: 11, Col: 2, Value: 5.72
Row: 12, Col: 1, Value: 5.96
Row: 12, Col: 2, Value: 5.659999999999999
Row: 13, Col: 1, Value: nil
Row: 13, Col: 2, Value: 5.42
Row: 14, Col: 1, Value: 5.84
Row: 14, Col: 2, Value: 5.58
Row: 15, Col: 1, Value: 6.01
Row: 15, Col: 2, Value: 5.63
Row: 16, Col: 1, Value: 5.930000000000001
Row: 16, Col: 2, Value: 5.649999999999999
Row: 17, Col: 1, Value: 6.0
Row: 17, Col: 2, Value: 5.6
Row: 18, Col: 1, Value: 5.75
Row: 18, Col: 2, Value: 5.49
Row: 19, Col: 1, Value: 5.38
Row: 19, Col: 2, Value: 5.08
Row: 20, Col: 1, Value: 5.619999999999999
Row: 20, Col: 2, Value: 5.0
Row: 21, Col: 1, Value: 5.63
Row: 21, Col: 2, Value: 5.02
Row: 22, Col: 1, Value: 5.87
Row: 22, Col: 2, Value: 5.19
Row: 23, Col: 1, Value: 5.68
Row: 23, Col: 2, Value: 5.14
Row: 24, Col: 1, Value: 5.619999999999999
Row: 24, Col: 2, Value: 5.07
Row: 25, Col: 1, Value: 5.5
Row: 25, Col: 2, Value: 4.95
Row: 26, Col: 1, Value: 5.06
Row: 26, Col: 2, Value: 4.73
Row: 27, Col: 1, Value: 5.14
Row: 27, Col: 2, Value: 4.659999999999999
Row: 28, Col: 1, Value: 5.05
Row: 28, Col: 2, Value: 4.64
Row: 29, Col: 1, Value: 5.19
Row: 29, Col: 2, Value: 4.619999999999999
Row: 30, Col: 1, Value: 4.970000000000001
Row: 30, Col: 2, Value: 4.55
Row: 31, Col: 1, Value: 4.970000000000001
Row: 31, Col: 2, Value: 4.57
Row: 32, Col: 1, Value: 4.87
Row: 32, Col: 2, Value: 4.430000000000001
Row: 33, Col: 1, Value: 4.69
Row: 33, Col: 2, Value: 4.19
Row: 34, Col: 1, Value: 4.659999999999999
Row: 34, Col: 2, Value: 4.2
Row: 35, Col: 1, Value: 4.91
Row: 35, Col: 2, Value: 4.359999999999999
Insured
Tax-Free
Competitive
funds average
1991
1992
1993
THE CHART SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST DAY OF EACH MONTH FROM
JANUARY 1991 THROUGH NOVEMBER 1993 .
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
<r>YOUR ACCOUNT</r>
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business
days to ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
TO ADD TO AN ACCOUNT $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
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<CAPTION>
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to " Fidelity
check payable to Insured Tax-Free
"Fidelity Insured Portfolio ." Indicate your
Tax-Free Portfolio ." fund account number
Mail to the address on your check and m ail
indicated on the to the address printed
application. on your account
statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Wire to:
set up your account Bankers Trust
and to arrange a wire Company,
transaction. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify " Fidelity
Bank Routing Insured Tax-Free
#021001033, Portfolio " and include
Account #00163053. your account number
Specify " Fidelity and your name.
Insured Tax-Free
Portfolio " and include
your new account
number and your
name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
$100,000.
(bullet) For Money Line transfers to
your bank account; minimum:
$ 10 ; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
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Check (check_graphic) All account types (bullet) Minimum check: $500.
(bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
<TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For complete policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
<TABLE>
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in February
and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days , or longer for a
December ex-dividend date.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31. Fidelity will send you and the IRS a
statement showing the tax status of the distributions paid to you in the
previous year.
The fund does not currently intend to purchase any municipal obligations
whose interest is subject to the federal alternative minimum tax.
A portion of the fund's dividends may be free from state or local taxes.
Income from investments in your state are often tax-free to you. Each year,
Fidelity will send you a breakdown of the fund's income from each state to
help you calculate your taxes.
During fiscal 1993, 100 % of the fund's income dividends were
free from federal income tax.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
SHAREHOLDER AND ACCOUNT POLICIES
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's net asset value as of the
close of business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they are of
a size that would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
(bullet) You begin to earn dividends as of the first business day
following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you
a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when the fund is priced on the following business day. If payment is
not received by that time, the financial institution could be held liable
for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Shares will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to
earn dividends until the next business day.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
(bullet) If you sell shares by writing a check and the amount of the check
is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the fund without reimbursement
from the fund. Qualified recipients are securities dealers who have sold
fund shares or others, including banks and other financial institutions,
under special arrangements in connection with FDC's sales activities. In
some instances, these incentives may be offered only to certain
institutions whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
THE FUND IN DETAIL
CHARTER
INSURED TAX-FREE IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. In technical terms, the fund
is currently a diversified fund of Fidelity Municipal Trust, an open-end
management investment company organized as a Massachusetts business trust
on June 22, 1984.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over 200
(bullet) Assets in Fidelity mutual
funds: over $ 225 billion
(bullet) Number of shareholder
accounts: over 15 million
(bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
Guy Wickwire is manager of Insured Tax-Free, which he has managed since
October 1993. Mr. Wickwire also manages Massachusetts Tax-Free High Yield.
Previously, he managed Advisor High Income Municipal and High Yield
Tax-Free. He joined Fidelity in 1981.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
United Missouri Bank, N.A., is the fund's transfer agent, although it
employs FSC to perform these functions for the fund. It is located at 1010
Grand Avenue, Kansas City, Missouri.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained at
right.
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .37%, and it drops as
total assets under management increase.
For December 1993, the group fee rate was .1621 %. The individual
fund fee rate is .25%. The total management fee rate for fiscal 1993 was
.41%.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in
FMR's total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
(checkmark)
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
FSC performs many transaction and accounting functions. These services
include processing shareholder transactions, valuing the fund's
investments, and handling securities loans. In fiscal 1993, FSC received
fees equal to .15 % of the fund's average net assets.
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for fiscal 1993 was 78 %. This
rate varies from year to year.
INVESTMENT PRINCIPLES
THE FUND SEEKS AS HIGH A LEVEL OF FEDERALLY TAX-FREE INCOME as is
consistent with preservation of capital. FMR normally invests so that at
least 80% of the fund's assets are invested in municipal securities whose
interest is free from federal income tax.
The fund invests primarily in municipal bonds that are covered by insurance
guaranteeing the timely payment of interest and principal. It is important
to note, however, that the insurance does not guarantee the market value of
a security or of the fund's shares. The insurance coverage is either
obtained by the bond's issuer or underwriter, or purchased by the fund .
FMR reviews the credit of insurance companies. The fund pays premiums
for the insurance either directly or indirectly, which increases the credit
safety of the fund's investments, but decreases its yield.
The fund's level of risk and potential reward depend on the quality and
maturity of its investments. The insurance feature provides high credit
quality to the fund's portfolio, but the fund may also invest in some
uninsured securities that are judged by FMR to be of investment-grade
quality. The fund normally invests in long-term bonds, generally
maintaining a dollar-weighted average maturity of 20 years or longer, but
it may invest in obligations of any maturity.
The fund's yield and share price will change based on changes in interest
rates. In general, bond prices rise when interest rates fall, and vice
versa. FMR may use various investment techniques to hedge the fund's risks,
but there is no guarantee that these strategies will work as intended. When
you sell your shares, they may be worth more or less than what you paid for
them.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally taxable obligations. When FMR
considers it appropriate for defensive purposes , however, it
temporarily may invest substantially in short-term instruments,
may hold a substantial amount of uninvested cash , or may invest more
than normally permitted in federally taxable obligations.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive financial reports
every six months detailing fund holdings and describing recent investment
activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and changes in the financial condition of
issuers.
RESTRICTIONS: The fund does not currently intend to invest more than
35% of its total assets in uninsured obligations , and does not
currently intend to invest in uninsured securities judged by FMR
to be below investment-grade quality. The fund does not currently intend
to invest more than 5% of its assets in securities rated
below Baa by Moody's Investors Service, Inc. or below
BBB by Standard & Poor's Corporation, and does not currently
intend to invest in uninsured securities rated lower than B.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal securities
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. A security's credit may be
enhanced by a bank, insurance company, or other financial institution.
The fund may own a municipal security directly or through a
participation interest.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include general obligations of U.S.
territories and possessions such as Guam, the Virgin Islands, and Puerto
Rico, and their political subdivisions and public corporations. The economy
of Puerto Rico is closely linked to the U.S. economy, and will depend on
the strength of the U.S. dollar, interest rates, the price stability of oil
imports, and the continued existence of favorable tax incentives. Recent
legislation reduced these incentives, but it is impossible to predict what
impact the changes will have.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ASSET-BACKED SECURITIES may include pools of purchase contracts, financing
leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE- AND FLOATING-RATE INSTRUMENTS may have interest rates that move
in tandem with a benchmark, helping to stabilize their prices. Inverse
floaters have interest rates that move in the opposite direction from the
benchmark, making the instrument's market value more volatile.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to
the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: With respect to 75% of assets, the fund may not invest more
than 5% of its total assets in any one issuer. This limitation does not
apply to U.S. government securities. The fund may invest more than 25% of
its total assets in tax-free securities that finance similar types of
projects. The fund may also invest more than 25% of its assets in bonds
insured by the same insurance company.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks to provide as high a level of federally tax-free income as
is consistent with preservation of capital by investing primarily in a
portfolio of municipal bonds that are covered by insurance guaranteeing the
timely payment of principal and interest. FMR will invest the fund's assets
primarily in municipal bonds that are: (1) insured under an insurance
policy obtained by the issuer or underwriter; or (2) insured under an
insurance policy purchased by the fund. Insurance will cover the timely
payment of interest and principal on municipal obligations and will be
obtained from recognized insurers. The fund may invest in uninsured
municipal obligations judged to be of quality equivalent to the four
highest ratings assigned by Moody's and S&P (Baa, BBB, or better).
Under normal market conditions, such uninsured obligations may not exceed
35% of the fund's total assets. The fund may enter into futures
contracts solely as a hedge against the effect that anticipated interest
rate variations may have on the value of its holdings. The fund will
normally invest at least 80% of its assets in municipal securities
whose interest is exempt from federal taxes. During periods when FMR
determines that a temporary defensive posture in the market is appropriate,
it will consider investments in cash or cash equivalent short-term
obligations, including short-term municipal obligations as well as those
which may be federally taxable. With respect to 75% of its assets,
the fund will not invest more than 5% of its total assets in any one
issuer. The fund may borrow only for temporary or emergency purposes, but
not in an amount exceeding 33% of its total assets.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY INSURED TAX-FREE PORTFOLIO
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1994
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated February 17, 1994). Please retain
this document for future reference. The Annual Report for the fiscal year
ended December 31, 1993 is incorporated herein by reference. To obtain
an additional copy of the Prospectus or Annual Report, please
call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Distribution and Service Plan
Interest of FMR Affiliates
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
United Missouri Bank, N.A. (United Missouri) and Fidelity Service Co. (FSC)
ITP -ptB-294
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the fund's investment
policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) purchase the securities of any issuer (except the United States
government, its agencies or its instrumentalities) if, with respect to 75%
of its assets, it would cause more than 5% of its total assets to be
invested in the securities of that issuer (As used in this document and in
the Prospectus, the entity which has the ultimate responsibility for the
payment of interest and principal on a particular security will be treated
as its issuer.);
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) With respect to 75% of its total assets, the fund does not currently
intend to purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, the fund would own more than 10% of the
outstanding voting securities of such issuer.
(ii) The fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and amount
to the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser, or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest more than 25% of its
total assets in industrial revenue bonds related to a single industry.
(vii) The fund does not currently intend to engage in repurchase
agreements or make loans, but this limitation does not apply to purchases
of debt securities.
(vi ii ) The fund does not currently intend to (a) purchase securities
of other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (b) purchase
or retain securities issued by other open-end investment companies.
Limitations (a) and (b) do not apply to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
( ix ) The fund does not currently intend to purchase the securities
of any issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
( x ) The fund does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.
( xi ) The fund does not currently intend to purchase the securities
of any issuer if those officers and Trustees of the trust and those
officers and directors of FMR who individually own more than 1/2 of 1% of
the securities of such issuer together own more than 5% of such issuer's
securities.
For purposes of limitations (1), (5) and (i), FMR identifies the issuer of
a security depending on its terms and conditions. In identifying the
issuer, FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" on page
7.
INSURANCE FEATURE. Under normal market conditions, the fund will invest at
least 65% of its total assets in municipal bonds that, at the time of
purchase, either (1) are insured under portfolio insurance issued to the
fund by an insurer or (2) are insured under an insurance policy obtained by
the issuer or underwriter of such municipal bonds at the time of original
issuance thereof (issuer insurance). If a municipal bond is already
covered by issuer insurance when acquired by the fund, then coverage will
not be duplicated by portfolio insurance; if a municipal bond is not
covered by issuer insurance, it may be covered by portfolio insurance
purchased by the fund. The fund may also purchase municipal notes that are
insured, although, in general, municipal notes are not presently issued
with issuer insurance, and the fund does not generally expect to cover
municipal notes under its portfolio insurance. Accordingly, the fund does
not presently expect that any significant portion of the municipal notes it
purchases will be covered by insurance. Securities other than municipal
bonds and notes purchased by the fund will not be covered by insurance.
Based upon the expected composition of the fund, FMR estimates that the
annual premiums for portfolio insurance will range from .10% to .35% of the
fund's average net assets. In the 1993 fiscal year, no portfolio insurance
was purchased. Although the insurance feature reduces certain financial
risks, the premiums for portfolio insurance, which are paid from the fund's
assets, and the restrictions on investments imposed by portfolio insurance
guidelines, reduce the fund's yield. Normally, an insurer may not
withdraw or cancel coverage on insured securities held by the fund unless
the fund fails to pay premiums when they are due. Generally, an insurer may
cease offering new policies on particular municipal obligations upon 90
days' written notice. In addition, the Board of Trustees may terminate
particular portfolio insurance policies if it determines that the benefits
to the fund are not justified by the expense.
Insurance will cover the timely payment of interest and principal on
municipal obligations and will be obtained from recognized insurers. In
order to be considered as eligible insurance by the fund, such insurance
policies must guarantee the timely payment of all principal and interest on
the municipal bonds as they become due. However, such insurance may
provide that in the event of non-payment of interest or principal when due,
with respect to an insured municipal bond, the insurer is not obligated to
make such payment until a specified time period (which may be 30 days or
more) after it has been notified by the fund that such non-payment has
occurred. For these purposes, a payment of principal is due only at final
maturity of the municipal bond and not at the time any earlier sinking fund
payment is due. The insurance does not guarantee the market value of the
municipal bonds or the value of the shares of the fund and, except as
described below and in the section entitled "Valuation of Portfolio
Securities," has no effect on the price or redemption value of fund shares.
Municipal bonds are generally eligible to be insured under portfolio
insurance if, at the time of purchase by the fund, they are identified
separately or by category in qualitative guidelines furnished by the
portfolio insurer and are in compliance with the aggregate limitations on
amounts set forth in such guidelines. Premium variations are based in part
on the rating of the municipal bond being insured at the time the fund
purchases the bond. The insurer may prospectively withdraw particular
municipal bonds from the classifications of bonds eligible for insurance or
change the aggregate amount limitation of each issue or category of
eligible municipal bonds, but must continue to insure the full amount of
bonds previously acquired which the insurer has indicated are eligible so
long as they remain in the fund's portfolio. The qualitative guidelines
and aggregate amount limitations established by the insurer from time to
time will not necessarily be the same as those the fund or FMR would use to
govern selection of municipal bonds for the fund's investments. Therefore,
from time to time, such guidelines and limitations may affect investment
decisions.
Because coverage under portfolio insurance terminates upon sale of a
municipal bond from the fund's portfolio, the insurance does not have any
effect on the resale value of such a bond. Therefore, FMR may decide to
retain any insured municipal bonds that are in default or, in FMR's view,
in significant risk of default, and place a value on the insurance. This
value will be equal to the difference between the market value of the
defaulted municipal bond and the market value of similar municipal bonds
that are not in default. As a result, FMR may be limited in its ability to
manage the fund's portfolio to the extent that it holds defaulted municipal
bonds, which will limit its ability in certain circumstances to purchase
other municipal bonds. While a defaulted municipal bond is held by the
fund, the fund continues to pay the insurance premium thereon but also
collects interest payments from the insurer and retains the right to
collect the full amount of principal from the insurer when the municipal
bond comes due. The fund expects that the market value of a defaulted
municipal bond covered by issuer insurance will generally be greater than
the market value of an otherwise comparable defaulted municipal bond
covered by portfolio insurance.
PRINCIPAL BOND INSURERS. AMBAC Indemnity Corporation (AMBAC Indemnity) is
a Wisconsin-domiciled stock insurance corporation regulated by the Office
of the Commissioner of Insurance of the State of Wisconsin and licensed to
do business in 50 states, the District of Columbia, and the Commonwealth of
Puerto Rico, with admitted assets of approximately $1,936,000,000
(unaudited) and statutory capital of approximately $1,096,000,000
(unaudited) as of September 30, 1993. Statutory capital consists of
AMBAC Indemnity's policyholders' surplus and statutory contingency reserve.
AMBAC Indemnity is a wholly owned subsidiary of AMBAC Inc., a 100%
publicly-held company. Moody's and S&P have both assigned a triple-A
claims-paying ability rating to AMBAC Indemnity.
Capital Guaranty Insurance Company is a "Aaa/AAA" rated monoline stock
insurance company incorporated in the State of Maryland, and is a wholly
owned subsidiary of Capital Guaranty Corporation, a Maryland insurance
holding company. Capital Guaranty Corporation is a publicly owned company
whose shares are traded on the New York Stock Exchange.
Capital Guaranty Insurance Company is authorized to provide insurance in
49 states, the District of Columbia and three U.S. territories. Capital
Guaranty focuses on insuring municipal securities. Their policies guaranty
the timely payment of principal and interest when due for payment on new
issue and secondary market issue municipal bond transactions. Capital
Guaranty's claims-paying ability is rated "Triple-A" by both Moody's and
Standard & Poor's. Therefore, if Capital Guaranty insures an issue with
a stand alone rating of less than "Triple-A," such issue would be
"upgraded" to "Aaa/AAA" by virtue of Capital Guaranty's insurance.
As of September 30, 1993, Capital Guaranty had $13.6 billion in net
exposure outstanding. The total statutory policyholders' surplus and
contingency reserve of Capital Guaranty was $181,383,432 (unaudited) and
the total admitted assets were $270,021,126 (unaudited) as reported to the
Insurance Department of the State of Maryland as of September 30, 1993.
FGIC Corporation, through its wholly owned subsidiary Financial Guaranty
Insurance Company, is a leading insurer of municipal bonds, including new
issues and bonds held in unit investment trusts and mutual funds.
Municipal bonds insured by Financial Guaranty are rated Aaa/AAA/AAA by
Moody's, S&P, and Fitch, respectively. In accordance with statutory
accounting principles, Financial Guaranty's capital base as of December 31,
1993 totalled $1.03 billion , comprised of capital and surplus of
$777 million and a contingency reserve of $253 million .
Municipal Bond Investors Assurance Corporation (MBIA) is the principal
operating subsidiary of MBIA Inc., a New York Stock Exchange listed
company. MBIA Inc. is not obligated to pay the debts of, or claims against,
MBIA. MBIA is a limited liability corporation rather than a several
liability association. MBIA is domiciled in the state of New York and
licensed to do business in all 50 states, the District of Columbia and the
Commonwealth of Puerto Rico. Moody's rates all bond issues insured by MBIA
"Aaa" and short-term loans "MIG-1," both designated to be of the highest
quality; S&P rates all new issues insured by MBIA "AAA" Prime Grade. As
of September 30, 1993, the Insurer had admitted assets of $3 billion
(unaudited), total liabilities of $2 billion (unaudited), and total capital
and surplus of $951 million (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance
regulatory authorities.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders issued by the
Securities and Exchange Commission (SEC), the fund may engage in
transactions with banks that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. Such
transactions may be entered into only pursuant to procedures established
and periodically reviewed by the Boards of Trustees. These transactions
may include repurchase agreements with custodian banks; purchases, as
principal, of short-term obligations of, and repurchase agreements with,
the 50 largest U.S. banks (measured by deposits); transactions in municipal
securities; and transactions in U.S. government securities with affiliated
banks that are primary dealers in these securities.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The fund may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities
until the delivery date, these risks are in addition to the risks
associated with the fund's other investments. If the fund remains
substantially fully invested at a time when delayed-delivery purchases are
outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, the fund
will set aside appropriate liquid assets in a segregated custodial account
to cover its purchase obligations. When the fund has sold a
security on a delayed-delivery basis, the fund does not participate in
further gains or losses with respect to the security. If the other party
to a delayed-delivery transaction fails to deliver or pay for the
securities, the fund could miss a favorable price or yield opportunity, or
could suffer a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
they fail to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure their
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under refunding contracts.
INVERSE FLOATERS are instruments whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an
index. Changes in the interest rate on the other security or index
inversely affect the residual interest rate paid on the inverse floater,
with the result that the inverse floater's price will be considerably more
volatile than that of a fixed-rate bond. For example, a municipal issuer
may decide to issue two variable-rate instruments instead of a single
long-term, fixed-rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument
(the inverse floater) reflects the approximate rate the issuer would have
paid on a fixed-rate bond, multiplied by two, minus the interest rate paid
on the short-term instrument. Depending on market availability, the two
portions may be recombined to form a fixed-rate municipal bond. The market
for inverse floaters is relatively new.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain
participation interests in municipal instruments, have interest rate
adjustment formulas that help stabilize their market values. Many variable
and floating rate instruments also carry demand features that permit
the fund to sell them at par value plus accrued interest on short
notice.
In many instances bonds and participation interests have tender options or
demand features that permit a fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in
this way (Participating VRDOs) to be essentially equivalent to other VRDOs
it purchases. The IRS has not ruled whether the interest on Participating
VRDOs is Tax-exempt and, accordingly, the fund intends to purchase
these instruments based on opinions of bond counsel. T he fund may
invest in fixed-rate bonds that are subject to third party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as
income a portion of the difference between a zero coupon bond's purchase
price and its face value.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. T he fund
may acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a
third party, although it could sell the underlying municipal security to a
third party at any time. The fund may purchase standby commitments
separate from or in conjunction with the purchase of securities subject to
such commitments. In the latter case, the fund would pay a higher price
for the securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
MUNICIPAL LEASE OBLIGATIONS. The fund may invest a portion of its assets
in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase,
or a conditional sale contract, are issued by state and local governments
and authorities to acquire land and a wide variety of equipment and
facilities. Generally, the fund will not hold such obligations directly as
a lessor of the property, but will purchase a participation interest in a
municipal obligation from a bank or other third party. A participation
interest gives the fund a specified, undivided interest in the
obligation in proportion to its purchased interest in the total amount of
the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
FEDERALLY TAXABLE OBLIGATIONS. The fund does not intend to invest in
securities whose interest is federally taxable; however, from time to time,
the fund may invest a portion of its assets on a temporary basis in
fixed-income obligations whose interest is subject to federal income tax.
For example, the fund may invest in obligations whose interest is federally
taxable pending the investment or reinvestment in municipal securities of
proceeds from the sale of its shares or sales of portfolio securities.
Should the fund invest in federally taxable obligations, it would
purchase securities that in FMR's judgment are of high quality. These
would include obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities; obligations of domestic banks; and
repurchase agreements. The fund's standards for high-quality taxable
obligations are essentially the same as those described by Moody's
Investors Service, Inc. (Moody's) in rating corporate obligations within
its two highest ratings of Prime-1 and Prime-2, and those described by
Standard & Poor's Corporation (S&P) in rating corporate obligations
within its two highest ratings of A-1 and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the fund's distributions. If such
proposals were enacted, the availability of municipal obligations and the
value of the fund's holdings would be affected and the Trustees would
reevaluate the fund's investment objective and policies.
The fund anticipates being as fully invested as practicable in municipal
securities; however, there may be occasions when, as a result of maturities
of portfolio securities, sales of fund shares, or in order to meet
redemption requests, the fund may hold cash that is not earning
income. In addition, there may be occasions when, in order to raise cash
to meet redemptions, the fund may be required to sell securities at
a loss.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement is a taxable
obligation which involves the obligation of the seller to pay the
agreed-upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed-upon resale price and marked to
market daily) of the underlying security. The fund may engage in
repurchase agreements with respect to any security in which it is
authorized to invest. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
of a decline in the market value of the underlying securities, as well as
delays and costs to a fund in connection with bankruptcy proceedings), it
is the fund's policy to limit repurchase agreement transactions to parties
whose creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
T he fund will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the
fund's assets and may be viewed as a form of leverage.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from
FMR, the Board monitors investments in illiquid instruments. In
determining the liquidity of the fund's investments, FMR may
consider various factors, including (1) the frequency of trades and
quotations, (2) the number of dealers and prospective purchasers in the
marketplace, (3) dealer undertakings to make a market, (4) the nature of
the security (including any demand or tender features), and (5) the nature
of the marketplace for trades (including the ability to assign or offset
the fund's rights and obligations relating to the investment). Investments
currently considered by the fund to be illiquid include over-the-counter
options. Also, FMR may determine some restricted securities and municipal
lease obligations to be illiquid. However, with respect to over-the-counter
options the fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover
the option and the nature and terms of any agreement the fund may have to
close out the option before expiration. In the absence of market
quotations, illiquid investments are priced at fair value as determined in
good faith by a committee appointed by the Board of Trustees. If through a
change in values, net assets, or other circumstances, the fund were
in a position where more than 10% its net assets were invested in illiquid
securities , it would seek to take appropriate steps to protect
liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund
might obtain a less favorable price than prevailed when it decided to seek
registration of the security.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon
rates or principal payments may change by several percentage points for
every 1% interest rate change. One example of indexed securities is
inverse floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Section 4.5 of the
regulations under the Commodity Exchange Act which limits the extent to
which the fund can commit assets to initial margin deposits and
option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When the fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when the fund enters into the
contract. Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on
indices of securities prices, such as the Bond Buyer Municipal Bond Index.
Futures can be held until their delivery dates, or can be closed out before
then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a
futures contract, by contrast, the value of its futures position will tend
to move in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of
the bankruptcy of an FCM that holds margin on behalf of the fund,
the fund may be entitled to return of margin owed to it only in proportion
to the amount received by the FCM's other customers, potentially resulting
in losses to the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the
fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right,
the fund pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures contracts.
The fund may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is
allowed to expire, the fund will lose the entire premium it paid. If the
fund exercises the option, it completes the sale of the underlying
instrument at the strike price. The fund may also terminate a put
option position by closing it out in the secondary market at its current
price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM
as described above for futures contracts. The fund may seek to
terminate its position in a put option it writes before exercise by closing
out the option in the secondary market at its current price. If the
secondary market is not liquid for a put option the fund has
written, however, the fund must continue to be prepared to pay the strike
price while the option is outstanding, regardless of price changes, and
must continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the
option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options are
similar to those of writing put options, except that writing calls
generally is a profitable strategy if prices remain the same or fall.
Through receipt of the option premium, a call writer mitigates the effects
of a price decline. At the same time, because a call writer must be
prepared to deliver the underlying instrument in return for the strike
price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
COMBINED POSITIONS. The fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the fund may purchase a put option and write
a call option on the same underlying instrument, in order to construct a
combined position whose risk and return characteristics are similar to
selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in
the event of a substantial price increase. Because combined options
positions involve multiple trades, they result in higher transaction costs
and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current
or anticipated investments exactly. The fund may invest in options
and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures
position will not track the performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may
purchase or sell options and futures contracts with a greater or lesser
value than the securities it wishes to hedge or intends to purchase in
order to attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in all
cases. If price changes in the fund's options or futures positions
are poorly correlated with its other investments, the positions may fail to
produce anticipated gains or result in losses that are not offset by gains
in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular option or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for
the fund to enter into new positions or close out existing
positions. If the secondary market for a contract is not liquid because of
price fluctuation limits or otherwise, it could prevent prompt liquidation
of unfavorable positions, and potentially could require the fund to
continue to hold a position until delivery or expiration regardless of
changes in its value. As a result, the fund's access to other assets held
to cover its options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows
the fund greater flexibility to tailor an option to its needs, OTC
options generally involve greater credit risk than exchange-traded options,
which are guaranteed by the clearing organization of the exchanges where
they are traded.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so require
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they
are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of the fund's
assets could impede portfolio management or the fund's ability to meet
redemption requests or other current obligations.
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, or may experience in the future, problems, including (a) the
effects of inflation upon construction and operating costs, (b) the
availability and cost of fuel, (c) the availability and cost of capital,
(d) the effects of conservation on energy demand, (e) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (f) timely and sufficient rate
increases, (g) opposition to nuclear power, and (h) increased competition.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
medical and technological advances which dramatically alter the need for
health services or the way in which such services are delivered; and
efforts by employers, insurers, and governmental agencies to reduce the
costs of health insurance and healthcare services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They are secured by
the revenues derived from mortgages purchased with the proceeds of the bond
issue. It is extremely difficult to predict the supply of available
mortgages to be purchased with the proceeds of an issue or the future cash
flow from the underlying mortgages. Consequently, there are risks that
proceeds will exceed supply, resulting in early retirement of bonds, or
that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR will
consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations), based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such information
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity
funds, to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair and
reasonable and comparable to commissions charged by non-affiliated,
qualified broker-dealer firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members
of national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such requirements, the Board of
Trustees has authorized FBSI to execute fund portfolio transactions on
national securities exchanges in accordance with approved procedures and
applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine whether they are reasonable in relation to
the benefits to the fund.
For the 1993 and 1992 fiscal year s ended December 31, the fund's
annual portfolio turnover rates amounted to 78% and 69%,
respectively.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seek s to recapture soliciting broker-dealer fees
on the tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for each of
the fund are made independently from those of other funds managed by FMR or
accounts managed by FMR affiliates. It sometimes happens that the same
security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several funds are
managed by the same investment adviser, particularly when the same security
is suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to the fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as each of the funds is
concerned. In other cases, however, the ability of the fund to participate
in volume transactions will produce better executions and prices for the
fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Valuations of portfolio securities furnished by the pricing service
employed by the fund are based upon a computerized matrix system or
appraisals by the pricing service, in each case in reliance upon
information concerning market transactions and quotations from recognized
municipal securities dealers. The methods used by the pricing service and
the quality of valuations so established are reviewed by officers of the
fund and FSC under the general supervision of the Trustees. There are a
number of pricing services available and the Trustees, on the basis of
on-going evaluation of these services, may use other pricing services or
discontinue the use of any pricing service in whole or in part.
The portfolio insurance of the fund may affect the value of the
fund's shares under certain circumstances. Unless a secondary market
insurance policy is purchased with respect to the portfolio security, the
fund intends to hold any defaulted securities or securities for which there
is a significant risk of default in its portfolio until the default has
been cured or the principal and interest are paid by the issuer or the
insurer. In such circumstances, the fund's Board of Trustees has
instructed FMR to consider in its evaluation of these securities the value
of the insurance guaranteeing the interest and principal payments, as well
as the market value of the portfolio securities and the market value of the
securities of similar issuers whose securities carry similar interest
rates. Absent any unusual or unforeseen circumstances, as a result of the
insurance policy FMR would likely recommend that the fund value the
defaulted securities, or securities for which there is a significant risk
of default, at the same price as securities of a similar nature which are
not in default.
PERFORMANCE
The fund may quote performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. T he fund's share price, yield,
and total returns fluctuate in response to market conditions and other
factors, and the value of the fund's shares when redeemed may be more or
less than their original cost.
YIELD CALCULATIONS. The fund's yield used in advertising is computed by
dividing the fund's interest income for a given 30-day or one-month period,
net of expenses, by the average number of shares entitled to receive
dividends during the period, dividing this figure by the fund's net asset
value per share at the end of the period, and annualizing the result
(assuming compounding of income) in order to arrive at an annual percentage
rate. Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond fund s .
In general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at
a discount by adding a portion of the discount to daily income. Capital
gains and losses generally are excluded from the calculation.
Income calculated for the purposes of determining the fund's yields differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, the fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
The fund's tax-equivalent yield is the rate an investor would have
to earn from a fully taxable investment after taxes to equal the fund's
tax-free yield. Tax-equivalent yields are calculated by dividing
the fund's yield by the result of one minus a stated federal or
combined federal and state tax rate. (If only a portion of the
fund's yield is tax-exempt, only that portion is adjusted in the
calculation.)
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 199 4 . It shows
the approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 4% to 7.0%. Of course, no assurance
can be given that the fund will achieve any specific tax-exempt yield.
While the fund invest principally in obligations whose interest is exempt
from federal income tax, other income received by the fund may be taxable.
199 4 TAX RATES AND TAX-EQUIVALENT YIELDS
Federal If individual tax-exempt yield is:
Single Return Joint Return Tax 4% 5% 6% 7%
___ Taxable Income:* Taxable Income:* Bracket** Then
taxable-equivalent yield is:
$ 22,751 - $ 55,100 $ 38,001 - $ 91,850 28% 5.56% 6.94% 8.33% 9.72%
$ 55,101 - $ 115,000 $ 91,851 - $ 140,000 31% 5.80 7.25 8.70 10.14
$ 115,001 - $ 250,000 $ 140,001 - $ 250,000 36% 6.25 7.81 9.38
10.94
$ 250,001 -above $ 250,001 - above 39.6% 6.62 8.28 9.93 11.59
* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only; does not include impact of preferential rate
on long-term capital gain income.
** Excludes the impact of the phaseout of personal exemptions, limitation
on itemized deductions, and other credits, exclusions, and adjustments
which may raise a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
The fund may invest a portion of its assets in obligations that are subject
to federal income tax. When the fund invests in these obligations,
its tax-equivalent yield will be lower. In the table above, tax-equivalent
yields are calculated assuming investments are 100% federally tax-free.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yields fluctuate, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of the respective investment companies they have
chosen to consider.
Investors should recognize that in periods of declining interest rates the
fund's yields will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the current yields of the fund. In
periods of rising interest rates, the opposite can be expected to occur.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's returns, including the effect of reinvesting
dividends and capital gain distributions (if any), and any change in the
fund's net asset value per share (NAV) over the period. Average annual
total returns are calculated by determining the growth or decline in value
of a hypothetical historical investment in the fund over a stated
period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in
value had been constant over the period. For example, a cumulative total
return of 100% over ten years would produce an average annual total return
of 7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual returns
are a convenient means of comparing investment alternatives, investors
should realize that the fund's performance is not constant over time, but
changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of the
fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
NET ASSET VALUES. Charts and graphs using the fund's net asset
value, adjusted net asset value, and benchmark indices may be used to
exhibit performance. An adjusted NAV includes any distributions paid by the
fund and reflects all elements of its return. Unless otherwise indicated,
the fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table shows the fund's 30-day yields
and tax-equivalent yields (assuming a 31% federal income tax rate) as of
December 31, 1993. The table also shows the fund's average annual and
cumulative total returns for the fiscal year December 31, 1993.
Average Annual Total Returns Cumulative Total Returns
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
30-Day Tax-Equivalent One Five Life of One Five Life of
Yield Yield Year Years Fund** Year Years Fund*
5.32% 7.72% 13.85% 9.94% 9.75% 13.85% 60.65% 113.18
</TABLE>
* Life of Fund November 13, 1985 (commencement of operations) through
December 31, 1993.
The following tables show the income and capital elements of the fund's
total returns and compares them to the cost of living (as measured by the
Consumer Price Index, or CPI) over the same period. During the periods
quoted, interest rates and bond prices fluctuated widely; thus the tables
should not be considered representative of the dividend income or capital
gain or loss that could be realized from an investment in the fund today.
INSURED TAX-FREE. During the period from November 13, 1985 (commencement of
operations) through December 31, 1993, a hypothetical $10,000 investment in
Insured Tax-Free would have grown to $21,318 , assuming all
distributions were reinvested.
INSURED TAX-FREE INDEX
Value of Value of Value of
Initial Reinvested Reinvested Cost
Period Ended $10,000 Income Capital Gain Total of
December 31 Investment Dividends Distributions Value Living
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1993 $ 12,370 $ 8,278 $ 670 $ 21,318 $13,413
1992 11,720 6,820 185 18,725 13,054
1991 11,630 5,712 11 17,352 12,686
1990 11,090 4,452 10 15,552 12,309
1989 11,050 3,464 10 14,524 11,601
1988 10,780 2,480 10 13,270 11,086
1987 10,360 1,565 10 11,935 10,616
1986 11,330 860 0 12,190 10,166
1985* 10,230 72 0 10,302 10,055
</TABLE>
* From commencement of operations, November 13, 1985.
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
13, 1985, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 18,140 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 5,704 for
income dividends and $ 400 for capital gain distributions. If FMR
had not reimbursed certain fund expenses during the period shown above, the
fund's returns would have been lower. Tax consequences of different
investments have not been factored into the above figures.
The fund's performance may be compared to the performance of other mutual
fund in general, or to the performance of particular types of mutual fund.
These comparisons may be expressed as mutual fund rankings prepared by
Lipper Analytical Services, Inc. (Lipper), an independent service located
in Summit, New Jersey that monitors the performance of mutual fund s .
Lipper generally ranks fund s on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank fund s based on yield. In
addition to the mutual fund rankings, the fund's performance may be
compared to mutual fund performance indices prepared by Lipper.
From time to time, the fund's performance may also be compared to other
mutual fund s tracked by financial or business publications and
periodicals. For example, the fund may quote Morningstar, Inc. in its
advertising materials. Morningstar, Inc. is a mutual fund rating service
that rates mutual fund s on the basis of risk-adjusted performance.
Rankings that compare the performance of Fidelity fund to one another in
appropriate categories over specific periods of time may also be quoted in
advertising.
The fund may also quote the Lehman Brothers Muni Bond Index, an index of
municipal bonds that have been issued within the last five years as part of
a deal of at least $50 million. The index includes issues with maturities
of at least two years and those rated at least Baa by Moody's or BBB by
S&P. The index excludes bonds subject to the federal alternative
minimum tax.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation fund s and other Fidelity fund s , products,
and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity fund s may use the performance of these capital markets in
order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to
those of the fund. Ibbotson calculates total returns in the same method as
the fund. The fund may also compare performance to that of other
compilations or indices that may be developed and made available in the
future.
The fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The Bond Fund Report AverageS(Trademark)/ Municipal ,
which is reported in the BOND FUND REPORT(registered trademark), covers
over 361 Tax-Free bond fund s . When evaluating comparisons to
money market fund s , investors should consider the relevant
differences in investment objectives and policies. Specifically, money
market fund s invest in short-term, high-quality instruments and seek
to maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual fund s , individual municipal bonds offer a stated
rate of interest and, if held to maturity, repayment of principal.
Although some individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund that invests in many
different securities. The initial investment requirements and sales
charges of many tax-free mutual fund s are lower than the purchase
cost of individual municipal bonds, which are generally issued in $5,000
denominations and are subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity fund; retirement investing;
brokerage products and services; the effects of periodic investment plans
and dollar cost averaging; saving for college; charitable giving; and the
Fidelity credit card. In addition, Fidelity may quote financial or
business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. Fidelity may also reprint, and use as advertising
and sales literature, articles from Fidelity Focus, a quarterly magazine
provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and
CUSIP number, and discuss or quote its current portfolio manager.
The fund may advertise examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In
such a program, an investor invests a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when prices are high
and more shares when prices are low. While such a strategy does not assure
a profit or guard against loss in a declining market, the investor's
average cost per share can be lower than if fixed numbers of shares are
purchased at the same intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares during periods
of low price levels.
According to the Investment Company Institute, over the past ten years,
assets in tax-exempt fund increased from $45 billion in 1984 to
approximately $291 billion at the end of 1992. As of December 31, 1993,
FMR advised 42 tax-free funds with a total value of over $ 25 billion
in assets.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when
investors do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), the fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is derived from federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. The fund will send each shareholder a notice in
January describing the tax status of dividends and capital gain
distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to one half of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchase municipal obligations based on opinions of bond counsel
regarding the federal income tax status of the obligations. These opinions
generally will be based upon covenants by the issuers regarding continuing
compliance with federal tax requirements. If the issuer of an obligation
fails to comply with its covenants at any time, interest on the obligation
could become federally taxable retroactive to the date the obligation was
issued.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities (referred to as "qualified bonds" in the Internal
Revenue Code) is subject to the federal alternative minimum tax (AMT),
although the interest continues to be excludable from gross income for
other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the fund's policies of investing so
that at least 80% of assets are invested in federally tax-exempt municipal
securities . Interest from private activity securities is a
tax-preference item for the purposes of determining whether a taxpayer is
subject to the AMT and the amount of AMT to be paid, if any. Private
activity securities issued after August 7, 1986 to benefit a private or
industrial user or to finance a private facility are affected by this rule.
It is the current position of the Staff of the SEC that a fund which uses
the word "tax-free" in its name may not derive more than 20% of its income
from municipal obligations whose interest is a preference item for purposes
of the AMT. Under this position, at least 80% of the fund's income
distributions would have to be exempt from the AMT as well as federal
taxes. Corporate investors should note that a tax preference item for
purposes of the corporate AMT is 75% of the amount by which adjusted
current earnings (which includes tax-exempt interest) exceed the
alternative minimum taxable income of the corporation. If a shareholder
receives an exempt-interest dividend and sells shares at a loss after
holding them for a period of six months or less, the loss will be
disallowed to the extent of the amount of exempt-interest dividend.
The fund does not currently intend to purchase private activity securities
whose interest is a tax preference item for purposes of the AMT.
Nevertheless, the fund reserve the right to purchase such obligations in
the future, subject to notice to shareholders, if the Board of
Trustees determines that it is in the best interest of the shareholders to
do so.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time that
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are
held six months or less and are sold at a loss, the portion of the loss
equal to the amount of the long-term capital gain distribution will be
considered a long-term loss for tax purposes.
A portion of the gain on bonds purchase at a discount after April 30, 1993
and short-term capital gains distributed by the fund are federally taxable
to shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction. Dividend distributions resulting from a recharacterization of
gain from the sale of bonds purchased at a discount after April 30, 1993
are not considered income for purposes of the fund's policy of investing
so that at least 80% of its assets are invested in federally tax-free
municipal securities .
TAX STATUS OF THE FUND. The fund has qualified and intends to continue to
qualify each year as a "regulated investment company" for tax purposes, so
that it will not be liable for federal tax at the fund level on income and
capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes, the fund intends to distribute substantially all of its net
investment income and net realized capital gains (if any) within each
calendar year as well as on a fiscal year basis. The fund also intends to
comply with other tax rules applicable to regulated investment companies,
including a requirement that capital gains from the sale of securities held
less than three months constitute less than 30% of the fund's gross income
for each fiscal year. Gains from some futures contracts and options are
included in this 30% calculation, which may limit the fund's
investment in such instruments. Fidelity Municipal Trust treats the fund
as a separate entity for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax considerations generally affecting the fund and their shareholders;
no attempt has been made to discuss individual tax consequences.
Distributions from the fund may be subject to state and local taxes.
Investors should consult their tax advisers to determine whether the fund
are suitable to their particular tax situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the fund advised by
FMR; Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for certain institutional customers; and
Fidelity Investments Retail Marketing Company, which provides marketing
services to various companies within the Fidelity organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc.
(FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far
East), both wholly owned subsidiaries of FMR formed in 1986, supply
investment research, and may supply portfolio management services, to FMR
in connection with certain fund advised by FMR. Analysts employed by FMR,
FMR U.K., and FMR Far East research and visit thousands of domestic and
foreign companies each year. FMR Texas, a wholly owned subsidiary of FMR
formed in 1989, supplies portfolio management and research services in
connection with certain money market fund advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
and officers also serve in similar capacities for other fund s
advised by FMR. Unless otherwise noted, the business address of each
Trustee and officer is 82 Devonshire Street, Boston, Massachusetts 02109,
which is also the address of FMR. Those Trustees who are "interested
persons" (as defined in the Investment Company Act of 1940) by virtue of
their affiliation with either a trust or FMR, are indicated by an asterisk
(*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Prior to his retirement in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264 Bridgehampton , NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he
serves as a Trustee of First Union Real Estate Investments, Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwhich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software, 1988), Georgia Power Company (electric utility), Gerber
Alley & Associates, Inc. (computer software), National Life Insurance
Company of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President-Legal of FMR Corp., and Vice President and Clerk of
FDC.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of December 31, 1993, the Trustees and Officers of the fund owned, in
the aggregate, less than 1% of the fund's total outstanding shares.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with the fund, FMR acts as investment
adviser and, subject to the supervision of the Boards of Trustees, directs
the investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trusts, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trusts or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the
Boards of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include providing
facilities for maintaining the fund's organization; supervising relations
with custodians, transfer and pricing agents, accountants, underwriters,
and other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Boards of Trustees.
In addition to the management fee payable to FMR and the fees payable to
United Missouri Bank, the fund pays all of its expenses, without
limitation, that are not assumed by those parties. the fund pays for
typesetting, printing, and mailing proxy material to shareholders, legal
expenses, and the fees of the custodian, auditor, and non-interested
Trustees. Although the fund's management contract provides that the fund
will pay for typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to existing shareholders,
United Missouri has entered into a revised sub-transfer agent agreement
with FSC, pursuant to which FSC bears the cost of providing these services
to existing shareholders. Other expenses paid by the fund include
interest, taxes, brokerage commissions, the fund's proportionate share of
insurance premiums and Investment Company Institute dues, and the costs of
registering shares under federal and state securities laws. T he
fund is also liable for such nonrecurring expenses as may arise, including
costs of any litigation to which the fund may be a party and any
obligation it may have to indemnify the trust's officers and Trustees with
respect to litigation.
FMR is the fund's manager pursuant to management contract dated
January 1, 1994 , which was approved by shareholders on December 15,
1993.
For the services of FMR under the contract , the fund pays FMR a
monthly management fee composed of the sum of two elements: a group fee
rate and an individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left. On the right, the effective fee rate schedule
shows the results of cummulatively applying the annualized rates at varying
asset levels. For example, the effective annual fee rate at $ 233
billion of group net assets - their approximate level for December 1993 -
was .1621% , which is the weighted average of the respective fee
rates for each level of group net assets up to $ 233 billion.
GROUP FEE RATE SCHEDULE * EFFECTIVE ANNUAL FEE
RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .3700% $ 0.5 billion .3700%
3 - 6 .3400 25 .2664
6 - 9 .3100 50 .2188
9 - 12 .2800 75 .1986
12 - 15 .2500 100 .1869
15 - 18 .2200 125 .1793
18 - 21 .2000 150 .1736
21 - 24 .1900 175 .1695
24 - 30 .1800 200 .1658
30 - 36 .1750 225 .1629
36 - 42 .1700 250 .1604
42 - 48 .1650 275 .1583
48 - 66 .1600 300 .1565
66 - 84 .1550 325 .1548
84 - 120 .1500 350 .1533
120 - 174 .1450
174 - 228 .1400
228 - 282 .1375
282 - 336 .1350
Over 336 .1325
* Prior to January 1, 1992, the group fee rate was based on a schedule with
breakpoints ending at .150 0 % for average group assets in excess of
$84 billion. The group fee breakpoints shown for average group assets
between $84 billion and $228 billion were voluntarily adopted by FMR on
January 1, 1992. Additional breakpoints for average group assets in excess
of $228 billion were voluntarily adopted by FMR on November 1, 1993. The
fund's management contract dated January 1, 1994 reflects these extensions
of the group fee rate schedule.
The individual fund fee rate for the fund is .25%. Based on the
average net assets of funds advised by FMR for December 1993, the annual
management fee rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
. 1621 % + .25% = .4121 %
One twelfth of this annual management fee rate is then applied to the
fund's average net assets for the current month, giving a dollar amount
which is the fee for that month.
Management fees paid to FMR for the fiscal years ended December 31, 1993,
1992, and 1991 for FMR's services as investment adviser were $1,770,056,
$1,415,532, and $1,066,556 respectively .
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2 % of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this
regulation, the fund may exclude interest, taxes, brokerage commissions,
and extraordinary expenses, as well as a portion of its distribution plan
expenses.
DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the plan) under Rule
12b-1 under the Investment Company Act of 1940 (the Rule). The Rule
provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by the
fund under the Rule. The Board of Trustees has adopted the plan to allow
the fund and FMR to incur certain expenses that might be considered to
constitute indirect payment by the fund of distribution expenses. Under
the plan, if payment by the fund to FMR of management fees should be
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the fund's plan.
The plans specifically recognize that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the fund. In addition, the
plans provide that FMR may use its resources, including its management fee
revenue, to make payments to third parties that provide assistance in
selling the fund's shares, or to third parties, including banks, that
render shareholder support services. During the fiscal year ended December
31, 1993 FMR made payments to third parties amounting to $21,127 .
As required by the Rule, the Trustees carefully considered all pertinent
factors relating to the implementation of the plans prior to their
approval, and have determined that there is a reasonable likelihood that
the plans will benefit the fund and their shareholders. In particular, the
Trustees noted that the plans do not authorize payments by the fund other
than those made to FMR under its management contract with the fund. To the
extent that the plan give s FMR and FDC greater flexibility in
connection with the distribution of shares of the fund, additional sales of
the fund's shares may result. Additionally, certain shareholder support
services may be provided more effectively under the plan by local entities
with whom shareholders have other relationships. The plan was
approved by shareholders of the fund at a shareholder meeting held
December 31, 1986.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. The fund may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the plans. No preference will be shown in the
selection of investments for the instruments of such depository
institutions. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers
pursuant to state law.
INTEREST OF FMR AFFILIATES
United Missouri is the fund's custodian and transfer agent. United
Missouri has entered into sub-contracts with FSC, an affiliate of FMR,
under the terms of which FSC performs the processing activities associated
with the transfer agent and shareholder servicing functions for the fund.
Under the sub-contracts, FSC bears the expense of typesetting, printing,
and mailing prospectuses, statements of additional information, and all
other reports, notices, and statements to shareholders, except proxy
statements. FSC also pays out-of-pocket expenses associated with transfer
agent services.
United Missouri pays FSC an annual fee of $25.50 per regular account with a
balance of $5,000 or more, $15 per regular account with a balance of less
than $5,000, and a supplemental activity charge of $5.61 for monetary
transactions. These fees and charges are subject to annual cost escalation
based on postal rate changes and changes in wage and price levels as
measured by the National Consumer Price Index for Urban Areas. With
respect to institutional client master accounts, the fund pays FSC a
per-account fee of $95 and monetary transaction charges of $20 or $17.50,
depending on the nature of services provided. With respect to certain
institutional broker-dealer accounts, the fund pays FSC a per-account fee
of $30 and a charge of $6 for monetary transactions. Fees for certain
institutional retirement plan accounts are based on the net assets of all
such accounts in the fund.
Prior to March 26, 1992, State Street Bank and Trust Company (State Street)
served as the fund's custodian and transfer agent and also sub-contracted
with FSC to perform the processing activities associated with providing
transfer agent and shareholder servicing functions for the fund. Beginning
on June 1, 1989, FSC was compensated by State Street on the same basis as
it is currently compensated by United Missouri (although fee rates and
charges were adjusted periodically to reflect postal rate changes and
changes in wage and price levels as measured by the National Consumer Price
Index for Urban Areas).
Transfer agent fees, including reimbursement for out-of-pocket expenses,
paid to FSC for the fiscal years ended December 31, 1993, 1992, and 1991
were $462,702, $373,638, and $265,272, respectively.
United Missouri has an additional sub-contract with FSC, pursuant to which
FSC performs the calculations necessary to determine the fund's net asset
value per share and dividends and maintains the fund's accounting records.
The annual fee rates for these pricing and bookkeeping services are based
on the fund's average net assets, specifically, .04% for the first $500
million of average net assets and .02% for average net assets in excess of
$500 million. The fee is limited to a minimum of $45,000 and a maximum of
$750,000 per year.
Prior to March 26, 1992, State Street subcontracted with FSC for pricing
and bookkeeping services. Beginning July 1, 1991, FSC was compensated for
these services by State Street on the same basis as it is currently
compensated by United Missouri. Prior to July 1, 1991, the annual fee paid
to FSC for pricing and bookkeeping services was based on two schedules, one
pertaining to the fund's average net assets and one pertaining to the type
and number of transactions the fund made.
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid to FSC for fiscal 1993, 1992, and 1991 were $171,146,
$169,647, and $129,739 .
The transfer agent fees and pricing and bookkeeping fees described above
are paid to FSC by United Missouri, which is entitled to reimbursement from
the fund for these expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreements call for FDC to
use all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at net
asset value. Promotional and administrative expenses in connection with
the offer and sale of shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Insured Tax-Free Portfolio is a fund
of Fidelity Municipal Trust , an open-end management investment
company originally organized as a Maryland corporation on November 22, 1976
and reorganized as a Massachusetts business trust on June 22, 1984, at
which time its name changed from Fidelity Municipal Bond Fund, Inc. to
Fidelity Municipal Bond Fund. On March 1, 1986, the trust's name was
changed to Fidelity Municipal Trust. Currently, there are eight fund s
of the trust : Fidelity Municipal Bond Portfolio; Fidelity Aggressive
Tax-Free Portfolio; Spartan Short-Intermediate Municipal Fund; Fidelity
Insured Tax-Free Portfolio; Fidelity Ohio Tax-Free High Yield Fund;
Fidelity Michigan Tax-Free High Yield Fund; Fidelity Minnesota Tax-Free
Portfolio; and Spartan Pennsylvania Municipal High Yield Portfolio. The
Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the
trust or a fund, the right of the trust or a fund to use the
identifying names "Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund, and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are
to be charged with the liabilities with respect to such fund and with a
share of the general expenses of the trust . Expenses with respect
to the trust are to be allocated in proportion to the asset value of
the r espective funds , except where allocations of direct
expense can otherwise be fairly made. The officers of the trust,
subject to the general supervision of the Board of Trustees, have
the power to determine which expenses are allocable to a given fund, or
which are general or allocable to all of the funds . In the event of
the dissolution or liquidation of the trust, shareholders of
each fund are entitled to receive as a class the underlying
assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed
by the trust or the Trustees include a provision limiting the
obligations created thereby to the trust and its assets. The Declaration
of Trust provides for indemnification out of each fund's property of
any shareholder held personally liable for the obligations of the fund.
The Declaration of Trust also provides that each fund shall, upon
request, assume the defense of any claim made against any shareholder for
any act or obligation of the fund and satisfy any judgment thereon. Thus,
the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a fund
itself would be unable to meet its obligations. FMR believes that, in view
of the above, the risk of personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protect s
Trustees against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their
office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder , you receive one vote for each dollar of
net asset value per share you own. The shares have no preemptive or
conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the Prospectus.
Shares are fully paid and nonassessable, except as set forth under the
heading "Shareholder and Trustee Liability" above.
Shareholders representing 10% or more of the trust or a fund
may, as set forth in the Declaration of Trust, call meetings of the trust
or a fund for any purpose related to the trust or fund, as the case
may be, including, in the case of a meeting of the entire trust, the
purpose of voting on removal of one or more Trustees.
The trust or any fund may be terminated upon the sale of its assets
to another open-end management investment company , or upon
liquidation and distribution of its assets , if approved by vote of
the holders of a majority of the trust or the fund, as determined by the
current value of each shareholder's investment in the fund or trust.
If not so terminated, th e trust and it's funds will continue
indefinitely.
CUSTODIAN. United Missouri, 1010 Grand Avenue, Kansas City, Missouri is
custodian of the assets of the fund. The custodian is responsible for the
safekeeping of the fund's assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the
investment policies of the fund or in deciding which securities are
purchased or sold by a fund. The fund may, however, invest in
obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the
trust ' s Trustees may from time to time have transactions with
various banks, including banks serving as custodian for certain of the fund
advised by FMR. Transactions that have occurred to date include mortgages
and personal and general business loans. In the judgment of FMR, the terms
and conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the trust ' s independent accountant. The
auditor examines financial statements for the fund and provides other
audit, tax, and related services.
FINANCIAL STATEMENTS
The Annual Report for the fiscal year ended December 31, 1993 is a separate
report supplied with this Statement of Additional Information and is
incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long - term risks appear somewhat
larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds rated Baa are considered as medium - grade obligations,
i.e, they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
C - Bonds rated C are the lowest - rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S MUNICIPAL BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category
is also used for debt subordinated to senior debt that is assigned an
actual or implied BB or BB- rating.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The Financial Statements for Fidelity Insured Tax-Free Portfolio for
the fiscal year ended December 31, 1993, are incorporated by reference in
the fund's Statement of Additional Information and are filed herein as
Exhibit 24(a).
(b) Exhibits.
1. (a) Declaration of Trust of Registrant, dated as of June 22, 1984, is
incorporated herein by reference to Exhibit 1 to Post-Effective Amendment
No. 28 to Registration Statement No. 2-55725.
(b) Supplement to Declaration of Trust, dated as of January 14, 1985, is
incorporated herein by reference to Post-Effective Amendment No. 30.
(c) Supplement to Declaration of Trust, dated as of March 1, 1986, is
incorporated herein by reference to Exhibit 1(c) to Post-Effective
Amendment No. 39.
(d) Supplement to Declaration of Trust, dated as of January 1, 1987, is
incorporated herein by reference to Exhibit 1(d) to Post-Effective
Amendment No. 43.
(e) Supplement to Declaration of Trust, dated as of December 1, 1988, is
incorporated herein by reference to Exhibit 1(e) as Exhibit 1(e) to
Post-Effective Amendment No. 47.
2. By-laws of Registrant are incorporated herein by reference to Exhibit 2
to Post-Effective Amendment No. 28.
(a) Supplement to the By-laws of Registrant are incorporated herein by
reference to Exhibit 2(a) to Post-Effective Amendment No. 47.
3. Not applicable.
4. Not applicable.
5. (a) Form of Management Contract between Fidelity Municipal Trust:
Fidelity Aggressive Tax-Free Portfolio and Fidelity Management &
Research Company was filed as Exhibit 5(a) to Post-Effective Amendment No.
60.
(b) Form of Management Contract between Fidelity Municipal Trust:
Fidelity Municipal Bond Portfolio and Fidelity Management & Research
Company was filed as Exhibit 5(b) to Post-Effective Amendment No. 64.
(c) Form of Management Contract between Fidelity Municipal Trust:
Fidelity Insured Tax-Free Portfolio and Fidelity Management & Research
Company was filed as Exhibit 5(c) to Post-Effective Amendment No. 64.
(d) Management Contract, dated January 1, 1994, between Fidelity
Municipal Trust: Fidelity Michigan Tax-Free High Yield Portfolio and
Fidelity Management & Research Company is incorporated herein by
reference to Exhibit 5(d) to Post-Effective Amendment No. 64.
(e) Management Contract, dated January 1, 1994, between Fidelity
Municipal Trust: Fidelity Minnesota Tax-Free Portfolio and Fidelity
Management & Research Company is incorporated herein by reference to
Exhibit 5(e) to Post-Effective Amendment No. 64.
(f) Management Contract, dated January 1, 1994, between Fidelity
Municipal Trust: Fidelity Ohio Tax-Free High Yield Portfolio and Fidelity
Management & Research Company is incorporated herein by reference to
Exhibit 5(f) to Post-Effective Amendment No. 64.
(g) Management Contract, dated August 1, 1990, between Fidelity Municipal
Trust: Spartan Pennsylvania Municipal High Yield Portfolio and Fidelity
Management & Research Company is incorporated herein by reference to
Exhibit 5(n) to Post-Effective Amendment No. 55.
6. (a) General Distribution Agreement between Fidelity Municipal Trust:
Insured Tax-Free Portfolio and Fidelity Distributors Corporation, dated
April 1, 1987, is incorporated herein by reference to Exhibit 6(a) to
Post-Effective Amendment No. 44.
(b) General Distribution Agreement between Fidelity Municipal Trust:
Aggressive Tax-Free Portfolio and Fidelity Distributors Corporation, dated
April 1, 1987, is incorporated herein by reference to Exhibit 6(b) to
Post-Effective Amendment No. 44.
(c) General Distribution Agreement between Fidelity Municipal Trust:
Municipal Bond Portfolio and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(c) to
Post-Effective Amendment No. 44.
(d) General Distribution Agreement between Fidelity Municipal Trust:
Ohio Tax-Free High Yield Portfolio and Fidelity Distributors Corporation,
dated April 1, 1987, is incorporated herein by reference to Exhibit 6(d) to
Post-Effective Amendment No. 44.
(e) General Distribution Agreement between Fidelity Municipal Trust:
Michigan Tax-Free High Yield Portfolio and Fidelity Distributors
Corporations, dated April 1, 1987, is incorporated herein by reference to
Exhibit 6(e) to Post-Effective Amendment No. 44.
(f) General Distribution Agreement between Fidelity Municipal Trust:
Minnesota Tax-Free Portfolio and Fidelity Distributors Corporation, dated
April 1, 1987, is incorporated herein by reference to Exhibit 6(f) to
Post-Effective Amendment No. 44.
(g) General Distribution Agreement between Fidelity Municipal Trust:
Pennsylvania Tax-Free High Yield Portfolio and Fidelity Distributors
Corporation, dated April 1, 1987, is incorporated herein by reference to
Exhibit 6(j) to Post-Effective Amendment No. 44.
(h) Amendment to General Distribution Agreement, dated January 1, 1988,
between Fidelity Municipal Trust: (Insured Tax-Free Portfolio; Aggressive
Tax-Free Portfolio; Municipal Bond Portfolio; Minnesota Tax-Free Portfolio;
and Pennsylvania Tax-Free High Yield Portfolio) and Fidelity Distributors
Corporation is incorporated herein by reference to Exhibit 6(k) to
Post-Effective Amendment No. 47.
7. Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 1, 1989, is incorporated herein by
reference to Exhibit 7 to Post-Effective Amendment No. 57.
8. (a) Custodian Contract, dated July 18, 1991, between Fidelity Municipal
Trust and United Missouri Bank, N.A. is incorporated herein by reference to
Exhibit 8(a) to Post-Effective Amendment No. 57.
(b) Appendix A, dated October 1, 1991, to Custodian Contract dated July
18, 1991 between Fidelity Municipal Trust and United Missouri Bank, N.A. is
incorporated herein by reference to Exhibit 8(b) to Post-Effective
Amendment No. 57.
9. (a) Transfer Agency Agreement between the Registrant and State Street
Bank and Trust Company, dated October 1, 1984, is incorporated herein by
reference to Exhibit 9(a) to Post-Effective Amendment No. 33.
(b) Pricing Agreement between the Registrant and State Street Bank and
Trust Company, dated August 31, 1985, is incorporated herein by reference
to Exhibit 9(b) to Post-Effective Amendment No. 38.
(c) Amendment to Transfer Agency Agreement, dated July 1986, is
incorporated herein by reference to Exhibit 9(c) to Post-Effective
Amendment No. 47.
(d) Amended Transfer Agency Agreement between Fidelity Municipal Trust
and Shawmut Bank, dated June 1, 1989, is incorporated herein by reference
to Exhibit 9(d) to Post-Effective Amendment No. 55.
(e) Appointment of Sub-Transfer Agent and Schedule A for Fidelity Ohio
Tax-Free Portfolio, dated June 1, 1989, is incorporated herein by reference
to Exhibit 9(e) to Post-Effective Amendment No. 55.
(f) Appointment of Sub-Transfer Agent and Schedule A for Michigan
Tax-Free Portfolio, dated June 1, 1989, is incorporated herein by reference
to Exhibit 9(g) to Post-Effective Amendment No. 55.
(g) Appointment of Sub-Transfer Agent and Schedule A for Minnesota
Tax-Free Portfolio, dated June 1, 1989, is incorporated herein by reference
to Exhibit 9(i) to Post-Effective Amendment No. 55.
(h) Appointment of Sub-Transfer Agent and Schedule A for Spartan
Pennsylvania Municipal High Yield Portfolio, dated March 1, 1990, is
incorporated herein by reference to Exhibit 9(j) to Post-Effective
Amendment No. 55.
(i) Amended Service agreement between Fidelity Municipal Trust and
Shawmut Bank, N.A., dated June 1, 1989, is incorporated herein by reference
to Exhibit 9(l) to Post-Effective Amendment No. 55.
(j) Appointment of Sub-Servicing Agent and Schedules B and C for Fidelity
Ohio Tax-Free High Yield Portfolio, dated June 1, 1989, is incorporated
herein by reference to Exhibit 9(m) to Post-Effective Amendment No. 55.
(k) Appointment of Sub-Servicing Agent and Schedules B and C for Fidelity
Michigan Tax-Free Portfolio, dated June 1, 1989, is incorporated herein by
reference to Exhibit 9(o) to Post-Effective Amendment No. 55.
(l) Appointment of Sub-Servicing Agent and Schedules B and C for Fidelity
Minnesota Tax-Free Portfolio, dated June 1, 1989, is incorporated herein by
reference to Exhibit 9(q) to Post-Effective Amendment No. 55.
(m) Appointment of Sub-Servicing Agent and Schedules B and C for Spartan
Pennsylvania Municipal High Yield Portfolio, dated March 1, 1990, is
incorporated herein by reference to Exhibit 9(r) to Post-Effective
Amendment No. 55.
10. Not applicable.
11. Consent of Coopers & Lybrand is filed herein as Exhibit 11.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Insured Tax-Free Portfolio is incorporated by reference to Exhibit 15(a) to
Post-Effective Amendment No. 34.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Ohio Tax-Free High Yield Portfolio is incorporated herein by reference to
Exhibit 15(b) to Post-Effective Amendment No. 34.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Michigan Tax-Free High Yield Portfolio is incorporated herein by reference
to Exhibit 15(c) to Post-Effective Amendment No. 34.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Minnesota Tax-Free Portfolio is incorporated herein by reference to Exhibit
15(d) to Post-Effective Amendment No. 34.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Pennsylvania Tax-Free High Yield Portfolio is incorporated herein by
reference to Exhibit 15(g) to Post-Effective Amendment No. 37.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Bond Portfolio is incorporated herein by reference to Exhibit
15(h) to Post-Effective Amendment No. 43.
(g) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Aggressive Tax-Free Portfolio is incorporated herein by reference to
Exhibit 15(j) to Post-Effective Amendment No. 43.
16. (a) A schedule for computation of performance is incorporated herein
by reference to Exhibit 16 to Post-Effective Amendment No. 48.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is substantially the same as the
boards of other funds advised by FMR, each of which has Fidelity Management
& Research Company as its investment adviser. In addition, the officers
of these funds are substantially identical. Nonetheless, Registrant takes
the position that it is not under common control with these other funds
since the power residing in the respective boards and officers arises as
the result of an official position with the respective funds.
Item 26. Number of Holders of Securities
December 31, 1993
Title of Class: Shares of Beneficial Interest
Title of Series: Number of Record Holders
Fidelity Aggressive Tax-Free Portfolio: 33,915
Fidelity Municipal Bond Portfolio: 33,381
Fidelity Insured Tax-Free Portfolio: 16,279
Fidelity Ohio Tax-Free High Yield Portfolio: 14,507
Fidelity Michigan Tax-Free High Yield Portfolio: 18,126
Fidelity Minnesota Tax-Free Portfolio: 11,835
Spartan Pennsylvania Municipal High Yield Portfolio: 7,669
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.)
Inc. and Fidelity Management & Research (Far East)
Inc.; President and Trustee of funds advised by FMR;
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc. (1989), Fidelity
Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR (1990) and of a fund advised by
FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Charles F. Dornbush Senior Vice President of FMR (1991); Chief Financial
Officer of the Fidelity funds; Treasurer of FMR Texas Inc.
(1989), Fidelity Management & Research (U.K.) Inc.,
and Fidelity Management & Research (Far East) Inc.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR (1991).
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR (1991) and Treasurer of the funds
advised by FMR (1991). Prior to assuming the position as
Treasurer he was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991)
(Vice President, 1990-1991); and Senior Vice President,
Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR (1989); Income/Growth
Group Leader (1990) and International Group Leader
(1990).
Robert Haber Vice President of FMR (1991) and of funds advised by
FMR.
Daniel Harmetz Vice President of FMR (1991) and of a fund advised by
FMR.
Ellen S. Heller Vice President of FMR (1991).
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR (1989); and Director of Technical
Research.
Stephan Jonas Vice President of FMR (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Group Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR (1991) and of funds advised by
FMR.
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR (1991) and of funds advised by
FMR.
Jacques Perold Vice President of FMR (1991).
Brian Posner Vice President of FMR (1993) and of a fund advised by
FMR.
Anne Punzak Vice President of FMR (1990) and of funds advised by
FMR.
Richard A. Spillane Vice President of FMR (1990) and of funds advised by
FMR; and Director of Equity Research (1989).
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Head.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader (1990).
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
The Victory Funds
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Co., 82 Devonshire Street, Boston, MA 02109, or the fund's
custodian United Missouri Bank, N.A., 1010 Grand Avenue, Kansas City, MO.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant on behalf of Fidelity Insured Tax-Free Portfolio,
undertakes, provided the information required by Item 5A is contained in
the annual report, to furnish each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the
Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 65 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and Commonwealth of Massachusetts, on the 25th day
of February 1994.
FIDELITY MUNICIPAL TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee February 25, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer February 25, 1994
Gary L. French
/s/J. Gary Burkhead Trustee February 25, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee February 25, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee February 25, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee February 25, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee February 25, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee February 25, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee February 25, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee February 25, 1994
Edward H. Malone
Trustee February , 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee February 25, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee February 25, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity, all
Pre-Effective Amendments to any Registration Statements of the Funds, any
and all subsequent Post-Effective Amendments to said Registration
Statements, any Registration Statements on Form N-14, and any supplements
or other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series IV Fidelity School Street Trust
Fidelity Advisor Series VI Fidelity Select Portfolios
Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P.
Fidelity Beacon Street Trust Fidelity Trend Fund
Fidelity Capital Trust Fidelity Union Street Trust
Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Phyllis Burke Davis October 20, 1993
Phyllis Burke Davis
EXHIBIT 24(A)
(2_FIDELITY_LOGOS)FIDELITY
INSURED TAX-FREE
PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1993
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 26 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 30 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 33 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments, either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Insured Tax-Free 13.85% 60.65% 113.18%
Lehman Brothers Municipal Bond Index 12.29% 62.86% n/a
Average Insured Municipal Bond Fund 11.93% 57.10% n/a
Consumer Price Index 2.75% 21.00% 34.13%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on November 13, 1985. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, you would have $1,050. You
can compare these figures to the performance of the Lehman Brothers
Municipal Bond Index - a broad gauge of the municipal bond market which
includes both insured and uninsured bonds. To measure how the fund stacked
up against its peers, you can look at the average insured municipal bond
fund, which reflects the perform- ance of 39 insured municipal bond funds
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital gains, if any. Comparing the fund's performance to
the consumer price index helps show how your fund did compared to
inflation. (The periods covered by the CPI numbers are the closest
available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1993 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Insured Tax-Free 13.85% 9.94% 9.75%
Lehman Brothers Municipal Bond Index 12.29% 10.25% n/a
Average Insured Municipal Bond Fund 11.93% 9.44% n/a
Consumer Price Index 2.75% 3.89% 3.66%
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
Insured Tax Free (013) Lehman Bros. Muni Bond Index
11/30/85 10000.00 10000.00
12/31/85 10295.36 10087.90
01/31/86 10885.74 10682.08
02/28/86 11306.78 11105.62
03/31/86 11410.97 11109.18
04/30/86 11321.24 11117.62
05/31/86 11127.05 10936.62
06/30/86 11220.70 11040.96
07/31/86 11219.99 11107.98
08/31/86 11777.10 11605.28
09/30/86 11745.09 11634.41
10/31/86 12006.08 11835.34
11/30/86 12205.07 12069.80
12/31/86 12182.75 12036.48
01/31/87 12482.28 12398.90
02/28/87 12577.71 12459.90
03/31/87 12446.26 12327.83
04/30/87 11631.11 11709.22
05/31/87 11511.52 11651.14
06/30/87 11686.57 11993.22
07/31/87 11795.85 12115.55
08/31/87 11863.24 12142.81
09/30/87 11201.36 11695.10
10/31/87 11429.84 11736.50
11/30/87 11710.99 12042.94
12/31/87 11927.47 12217.69
01/31/88 12503.15 12652.88
02/29/88 12606.82 12786.62
03/31/88 12236.22 12637.66
04/30/88 12306.70 12733.70
05/31/88 12340.72 12696.90
06/30/88 12550.66 12882.66
07/31/88 12620.07 12966.65
08/31/88 12666.36 12978.07
09/30/88 12903.74 13212.97
10/31/88 13239.60 13446.18
11/30/88 13030.50 13323.01
12/31/88 13261.98 13459.30
01/31/89 13470.40 13737.64
02/28/89 13321.11 13580.90
03/31/89 13321.24 13548.44
04/30/89 13683.55 13870.08
05/31/89 13947.50 14158.16
06/30/89 14136.33 14350.43
07/31/89 14251.73 14545.74
08/31/89 14110.93 14403.33
09/30/89 14061.96 14360.12
10/31/89 14214.19 14535.32
11/30/89 14447.03 14789.69
12/31/89 14515.15 14910.96
01/31/90 14420.23 14840.88
02/28/90 14564.00 14972.96
03/31/90 14579.17 14977.46
04/30/90 14388.74 14869.62
05/31/90 14749.81 15193.78
06/30/90 14870.12 15327.48
07/31/90 15099.44 15552.79
08/31/90 14853.20 15327.28
09/30/90 14922.26 15336.48
10/31/90 15142.32 15614.07
11/30/90 15501.27 15927.91
12/31/90 15542.75 15997.99
01/31/91 15764.85 16212.36
02/28/91 15874.01 16353.41
03/31/91 15829.02 16359.95
04/30/91 16009.80 16577.54
05/31/91 16177.76 16725.08
06/30/91 16134.70 16708.36
07/31/91 16364.83 16912.20
08/31/91 16552.61 17135.44
09/30/91 16771.33 17358.20
10/31/91 16918.67 17514.42
11/30/91 16943.74 17563.46
12/31/91 17341.78 17941.08
01/31/92 17353.04 17982.34
02/29/92 17361.26 17987.74
03/31/92 17316.35 17994.93
04/30/92 17463.85 18155.09
05/31/92 17691.94 18369.32
06/30/92 17976.24 18677.92
07/31/92 18539.98 19238.26
08/31/92 18290.38 19049.72
09/30/92 18393.37 19173.55
10/31/92 17969.70 18985.65
11/30/92 18495.19 19325.49
12/31/92 18713.82 19522.61
01/31/93 18949.87 19749.07
02/28/93 19866.98 20463.99
03/31/93 19603.79 20247.07
04/30/93 19820.07 20451.57
05/31/93 19897.60 20566.09
06/30/93 20263.73 20909.55
07/31/93 20256.30 20936.73
08/31/93 20760.06 21372.21
09/30/93 21012.79 21615.86
10/31/93 20986.46 21656.93
11/30/93 20738.53 21466.35
12/31/93 21304.80 21919.29
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Insured Tax-Free Portfolio on November 30, 1985, shortly after the fund
started. As the chart shows, by December 31, 1993, the value of your
investment would have grown to $21,305 - a 113.05% increase on your initial
investment. 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 $21,919 - a 119.19% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
INCOME
YEARS ENDED DECEMBER 31, 1993 1992 1991 1990 1989
Income return 5.77% 6.13% 6.70% 6.72% 6.94%
Capital gain return 2.53% 1.00% 0% 0% 0%
Change in share price 5.55% 0.78% 4.87% 0.36% 2.51%
Total return 13.85% 7.91% 11.57% 7.08% 9.45%
Income returns, capital gain returns, and changes in share price are all
part of a bond fund's total return. An income return reflects the dividends
paid by the fund. A capital gain return reflects the amount paid by the
fund to shareholders based on the profits it has from selling bonds that
have grown in value. Both returns assume the dividends or gains are
reinvested. Changes in the fund's share price include changes in the prices
of the bonds owned by the fund.
DIVIDENDS AND YIELD
PERIODS ENDED DECEMBER 31, 1993 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 32.35(cents) 65.49(cents)
Annualized dividend rate n/a 5.52% 5.32%
Annualized yield 5.32% n/a n/a
Tax-equivalent yield 7.72% n/a n/a
Dividends per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $12.49 over
the past six months and $12.30 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized yield is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. 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
MARKET RECAP
Generally, interest rates fell
during the 12 months ended
December 31, 1993. As a result,
bond prices rose and most
fixed-income investors -
including those in tax-free bonds
- - enjoyed attractive returns. The
period began with worries of
rising interest rates. The
economic recovery was finally
taking hold, and the spending
plans of the president-elect were
still unclear. But the bond market
signaled its approval as
President Clinton promised to
reduce the deficit and fight
inflation. The yield on the
benchmark 30-year Treasury
bond declined steadily and
reached an historic low of 5.79%
in mid-October. By year-end, mild
inflation fears, fueled by a
strengthening economy, had
pushed up the yield on the
30-year bond to 6.35%. Two
factors affected tax-free bonds
specifically: on the positive side,
higher federal taxes - discussed
all year and approved in August
- - boosted demand. At the same
time, record new issuance kept
supplies high, which somewhat
dampened prices. Overall during
the period, tax-free bonds
performed well compared to other
fixed-income investments. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
tax-free bond market - rose
12.29%. By comparison, the
Lehman Brothers Aggregate
Bond Index - which tracks
investment-grade taxable bonds
- - rose only 9.75%, due in part to
relatively poor performance by
mortgage-backed securities.
An interview with Guy Wickwire, Portfolio Manager of Fidelity
Insured Tax-Free Portfolio
Q. GUY, HOW HAS THE FUND PERFORMED?
A. It was a good year. The fund gained 13.85% for the year ended December
31, 1993. That beat the average insured municipal bond fund, which
delivered a total return of 11.93% during the period, according to Lipper
Analytical Services.
Q. ALTHOUGH YOU JUST TOOK OVER THE FUND IN OCTOBER, CAN YOU REVIEW ITS
PERFORMANCE OVER THE PAST YEAR?
A. Sure, two factors helped the fund. First, its duration - a measure of
how its price changes with interest rates - was relatively long, ranging
from 8.5 years at the start of 1993 to around 10.4 years by year end. Since
declines in interest rates tend to boost the prices of longer duration
bonds, the fund's strategy amounted to a bet that interest rates would
fall. That's precisely what happened, which significantly helped our
performance.
Q. AND THE SECOND FACTOR?
A. A substantial stake in municipal bonds of Colorado issuers, which
amounted to 8% of the fund's investments at the start of the year. In late
1992, residents of Colorado voted to limit the amount of new municipal
issues. Many municipalities in the state rushed to issue new bonds before
the vote, and the increase in supply pushed prices down. We were able to
buy many of them for the fund at bargain prices. After the vote, the supply
of Colorado issues declined sharply and the bonds' prices rebounded. As
that occurred, we sold some of them at significant profits, trimming the
fund's stake in Colorado to around 5.6% at year-end.
Q. WHAT STATES DID YOU EMPHASIZE DURING THE YEAR?
A. During 1993 California issues increased from 6.3% to 10.2% of
investments, making this the fund's largest state concentration. California
residents pay unusually high income taxes - the state's top bracket is 11%
- - which generally boosts demand for California tax-free bonds and increases
their prices. But the state has been in recession during the past several
years. That raised questions about the ability of issuers to meet their
principal and interest payments. As that happened, demand declined, so we
were able to buy California bonds cheaply. I think that as the California
economy continues to recover, the bonds could deliver significant gains.
The recent Los Angeles earthquake hasn't had any impact on the Calfornia
municipal bond markert so far. Even if there are some negative effects in
the future, the fund's stake in California bonds won't be hurt since
they're insured.
Q. HAVE YOU MADE SIGNIFICANT CHANGES IN THE FUND SINCE TAKING OVER?
A. In general, my strategy has been to continue doing the things that were
working well for the fund, such as maintaining a relatively long duration
and investing in California bonds. However, I did boost the fund's stake in
health-care bonds to 27% by the end of the year.
Q. ARE YOU CONCERNED THAT CLINTON'S PROPOSALS TO REFORM THE HEALTH-CARE
SYSTEM COULD CAUSE THOSE HEALTH-CARE BONDS' PRICES TO DECLINE?
A. No. The bonds are insured, so the impact of health-care reform won't
affect their ability to meet interest and principal payments. Moreover,
they offer very attractive yields.
Q. WHAT MADE ELECTRIC UTILITIES
ATTRACTIVE?
A. In recent years demand for electricity has been flat, so utility
companies haven't issued many new bonds. This year, however, many issuers
replaced their old electric utility bonds with new, lower-rate debt; as a
result, there were a sizable number of new issues selling at attractive
prices. We boosted the fund's stake in those bonds from 14.8% to around
20%. I think that as the supply of new electric utility bonds subsides, the
scarcity of existing bonds will make them more valuable.
Q. WHAT'S YOUR OUTLOOK FOR INTEREST RATES AND THE MUNICIPAL MARKET?
A. Barring a recession, which seems unlikely, it will be tough for interest
rates to decline much further. So it's probably unrealistic for investors
to expect continued double-digit returns in the municipal market. But that
doesn't mean municipal bonds aren't attractive. The new, higher tax rates
will increase demand for tax-free bonds. Moreover, many municipalities have
replaced old bonds with lower-yielding ones. As that surge in refundings
slows, the supply of new municipal issues is likely to decline by as much
as 50%. The combination of increased demand and lower supply should support
solid returns in the municipal market.
FUND FACTS
GOAL: to provide high current
income exempt from federal
income taxes while
preserving capital
START DATE: November 13, 1985
SIZE: as of December 31,
1993, over $448 million
MANAGER: Guy Wickwire,
since October 1993;
manager, Fidelity
Massachusetts Tax-Free
High Yield Portfolio, since
1983; Fidelity High Yield
Tax-Free Portfolio, 1981 -
1993; Fidelity Advisor High
Income Municipal Portfolio,
1987 - 1992
(checkmark)
GUY WICKWIRE ON HIS
INVESTMENT STRATEGY:
"If it becomes clear that the
economy is likely to grow at a
3% annual rate or better
during the first half of the year,
causing interest rates to rise
significantly, I'll reduce the
duration of the fund. But my
feeling is that growth will slow
to less than 3%, and there
seem to be no immediate
inflationary pressures. Until I
see evidence that suggests
my outlook is wrong, the fund
will maintain a relatively long
duration, which allows it to
pick up the extra yield on
longer-term bonds. For
example, insured municipal
bonds that mature in 25 years
recently yielded roughly
5.40%, versus 4.40% for
ten-year bonds."
(bullet) The fund's duration as of
December 31 was 10.4 years.
That means that if interest
rates rose one percentage
point, the fund's share price
would decline around 10.4%.
But if interest rates declined
one percentage point, the
fund's share price would rise
roughly 10.4%.
DISTRIBUTION
The Board of Trustees of
Fidelity Insured Tax-Free
Portfolio voted to pay on
February 7, 1994, to
shareholders of record at the
opening o f business on
February 4, 1994, a
distribution of $.12 derived
from capital gains realized
from sales of portfolio
securities.
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1993
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 10.2 7.2
Illinois 6.7 7.0
Colorado 5.6 6.3
Pennsylvania 5.5 3.3
Texas 5.5 4.8
TOP FIVE SECTORS AS OF DECEMBER 31, 1993
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Health Care 27.2 20.3
Electric Revenue 20.5 25.1
General Obligation 9.6 11.1
Water & Sewer 8.9 4.5
Lease Revenue 8.4 5.3
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 20.49 20.23
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE
BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF DECEMBER 31, 1993
6 MONTHS AGO
Years 10.4 9.2
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A
FIVE-YEAR DURATION WILL FALL 5%.
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1993
(MOODY'S RATINGS)
Aaa 88.8%
Aa, A 10.2
Baa 0.7
Ba or B 0.0
Non-rated 0.3
Row: 1, Col: 1, Value: 1.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 1.0
Row: 1, Col: 4, Value: 10.2
Row: 1, Col: 5, Value: 88.8
THIS CHART EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS DECEMBER 31, 1993
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 100.0%
PRINCIPAL VALUE (NOTE 1)
AMOUNT
ARIZONA - 3.6%
Arizona Univ. Ctfs. of Prtns. Rfdg. West Campus Proj.
5.20% 7/15/08, (MBIA Insured) $ 2,000,000 $ 1,987,500 040660bh
Mesa Rfdg. 5% 7/1/03, (MBIA Insured) 2,000,000 2,040,000 590485LN
Pima County Ind. Dev. Auth. Health Care Corp.
Rev. (Cardondelet Health Care Corp.):
5.25% 7/1/11,(MBIA Insured) 1,000,000 1,005,000 721902CN
(St. Joseph & St. Mary's Hosp.) 8% 7/1/13, (MBIA Insured) 1,875,000
2,179,688 721902AQ
Pima County Ind. Dev. Auth. Ind. Rev. Rfdg. (Lease Oblig.)
(Irvington Proj. Tucson Elec. Pwr. Co.) Series A,
7.25% 7/15/10, (FSA Insured) 8,000,000 9,050,000 721774DA
16,262,188
ARKANSAS - 0.7%
Arkansas Dev. Fin. Auth. Wtr. Rev. Rfdg.
Revolving Loan Fund Series B, 5% 6/1/15,
(MBIA Insured) 1,000,000 970,000 041086FK
North Little Rock Elec. Rev. Rfdg. Series A,
6.50% 7/1/15, (MBIA Insured) 1,000,000 1,190,000 660546DX
Pulaski County Spl. School Dist. Rfdg. 5.25% 2/1/13,
(FSA Insured) 1,000,000 996,250 745400SN
3,156,250
CALIFORNIA - 10.2%
Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.)
5.375% 6/1/09, (MBIA Insured) 1,000,000 1,011,250 010891KG
Anaheim Ctfs. of Prtn. Rfdg. (Anaheim Mem.
Hosp. Assoc.) 5% 5/15/13, (AMBAC Insured) 3,330,000 3,175,988 032540LL
California Poll. Cont. Fing. Solid Waste Disp. Rev.
(North County Recylcing Ctr.) Series A,
6.75% 7/1/11, LOC Union Bank of Switzerland 1,850,000 2,053,500
130536BQ
California Pub. Wrks. Board Lease Rev.:
Rfdg. (Dept. Corrections St. Prisons) Series A,
5% 12/1/19, (AMBAC Insured) 2,500,000 2,415,625 13068GPA
Unltd. Tax (Secretary of State) Series A, 6.50%
12/1/08, (AMBAC Insured) 1,000,000 1,153,750 13068GKS
(Dept. of Corrections State Prison) Series A, 5.25%
12/105, (AMBAC Insured) 2,000,000 2,090,000
Desert Hosp. Rev. Ctfs. of Prtn. RIB (Desert Hosp. Corp.)
Series 1992, 9.659% 7/28/20,
(Cap. Guaranty Insured) (d)(f) 1,500,000 1,798,125 25041MAZ
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg. 5%
6/1/14, (MBIA Insured) 1,200,000 1,159,500 271014GG
Fresno Swr. Rev. Series A-1, 5.25% 9/1/19
(AMBAC Insured) 2,500,000 2,471,875 358229CM
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
CALIFORNIA - CONTINUED
Los Angeles County Cap. Asset Leasing Corp.
Leasehold Rev. 4.05% 12/1/10, (AMBAC Insured) $ 1,500,000 $ 1,586,250
544900CF
Palm Desert Fing. Auth. Tax Allocation RIB
9.905% 4/1/22, (MBIA Insured) (d)(f) 1,500,000 1,764,375 696617BG
Pleasant Hill Jt. Pwrs. Fin. Auth. Lease Rev. Cap.
Impt. Prog. Series A, 5% 12/1/12, (MBIA Insured) 1,490,000 1,435,988
72833EAT
Redding Ca. Redev. Agcy. Tax Alloc. Nts. Rfdg.
Canby Hilltop Cypress D, 5% 9/1/11, (CAPG Insured) 2,000,000 1,932,500
757295CM
Riverside County Trans. Commission Sales Tax Rev.
Series A, 5.75% 6/1/09, (AMBAC Insured) 1,000,000 1,056,250 769125BC
Sacramento City Fing. Auth. Lease Rev. Rfdg. Series A,
5.375% 11/1/14, (AMBAC Insured) 4,000,000 4,040,000 785846BL
Sacramento City Fing. Auth. (Cap. Appreciation)
(Tax Allocation Proj.) Series B, 0% 11/1/07,
(MBIA Insured) 1,810,000 891,425 785849BH
Sacramento Muni. Util. Dist. Elec. Rev. 5.25%
11/15/12, (FGIC Insured) 500,000 499,375 7860042B
San Jose Redev. Agcy. Tax Alloc. Merged Area Redev. Proj.:
6% 8/1/15, (MBIA Insured) 2,000,000 2,187,500 798147LE
5% 8/1/20, (MBIA Insured) 4,000,000 3,830,000 798147KW
Sulphur Springs Unified School Dist. Series A, 0%
9/1/11, (MBIA Insured) 3,000,000 1,155,000 865480FB
Univ. Calif. Ctfs. or Prtn. Rfdg. UCLA Ctr. Chiller,
5.40% 11/1/11 5,000,000 4,968,750 914106NM
West & Ctrl. Basin Fing. Auth. Rev. (West Basin Ref.
Proj.) Series A, 5% 8/1/13, (AMBAC Insured) 4,000,000 3,885,000
95122EAU
46,562,026
COLORADO - 5.6%
Adams County School Dist. #12 Unltd. Tax Rfdg. (Thorton):
6.20% 12/15/09, (FGIC Insured) 1,440,000 1,575,000 005644A2
6.20% 12/15/10, (FGIC Insured) 3,650,000 3,978,500 005644A3
Adams County Single Family Mtg. Rev. Rfdg.
Series A-2, 8.70% 6/1/12, (FSA Insured) 5,000,000 5,631,250 005706JS
Colorado Colleges Board Trustees Auxiliary Facs.
Sys. Rev. (Western College Proj.) Series A,
6.625% 5/1/15, (Connie Lee Insured) 1,000,000 1,103,750 196722AL
Colorado Health Facs. Auth. Rev. (PSL Health Sys. Proj.)
Series A:
7.25% 2/15/16, (FSA Insured) 2,000,000 2,320,000 196473C2
6.25% 2/15/21, (FSA Insured) 4,000,000 4,285,000 196473C4
Colorado Postsecondary Edl. Facs. Auth. Rev.
(Denver Univ.) 6.25% 3/1/18, (Connie Lee Insured) 1,000,000 1,066,250
196547DF
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
COLORADO - CONTINUED
Colorado Univ. Hosp. Auth. Hosp. Rev. Series A:
6.25% 11/15/12, (AMBAC Insured) $ 1,000,000 $ 1,095,000 914173AL
6.40% 11/15/22, (AMBAC Insured) 1,385,000 1,526,963 914173AM
Jefferson County School Dist. #R-001,
6% 12/15/12, (AMBAC Insured) 1,000,000 1,075,000 472736XB
Jefferson County Single Family Mtg. Rev.
Series 1991 A, 8.875% 10/1/13, (MBIA Insured) 235,000 255,563 472744BW
Thornton City Gen. Oblig. Wtr. Rfdg. (Cap. Appreciation)
Series 1991, 0% 12/1/12, (FGIC Insured) 4,770,000 1,764,900 885273KX
25,677,176
CONNECTICUT - 0.8%
Bridgeport Gen. Oblig. 8.75% 8/15/04, (FGIC Insured) 510,000 666,825
108151PM
Connecticut Health & Edl. Facs. Auth. Rev.
(St. Raphael Hosp.) Series H, 5.25% 7/1/12
(AMBAC Insured) 3,035,000 3,080,525 207742S6
3,747,350
DELAWARE - 0.4%
Delaware Health Facs. Auth. Rev. Rfdg. (Kent Gen.
Hosp. Proj.) 5.25% 7/1/13, (MBIA Insured) 2,000,000 1,957,500 246388GZ
DISTRICT OF COLUMBIA - 1.6%
District of Columbia Series B, 6.30% 6/1/12,
(MBIA Insured) 5,695,000 6,150,600 254760YC
Washington D.C. Metro Area Trans. Auth.
Gross Rev. Rfdg. 5.25% 7/1/14 (FGIC Insured) 1,300,000 1,300,000
938782BH
7,450,600
FLORIDA - 1.3%
Dade County Wtr. & Swr. Sys. Rev. Rfdg.
5% 10/1/13, (FGIC Insured) 2,000,000 1,942,500 233620CJ
Hillsboro County Aviation Auth. Rev. Rfdg.
(Tampa Intl. Arpt.) Series B, 5.60% 10/1/19
(FGIC Insured) 2,000,000 2,050,000 432308LJ
Kissimmee Util. Auth. Elec. Sys. Rev. Rfdg. & Impt.
5.25% 10/1/18, (FGIC Insured) 2,000,000 1,987,500 497850DA
5,980,000
GEORGIA - 3.4%
Dalton-Whitfield Cnty. Hosp. Auth. Rev. Rfdg.
Antic Nts. 5.25% 7/1/13, (MBIA Insured) 1,000,000 996,250 235640FC
Fayette County Wtr. Rev. Rfdg. Series A,
6.20% 10/1/20, (FGIC Insured) 1,915,000 2,075,381 312245FH
Floyd County Hosp. Auth. Rev. Antic Ctfs. Floyd
Med. Ctr. Proj. 5.20% 7/1/11, (FGIC Insured) 1,500,000 1,481,250
343575DX
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
GEORGIA - CONTINUED
Medical Ctr. Hosp. Auth. Rev. Antic Ctfs. Columbia
Reg. Healthcare Sys. 5% 8/1/18, (MBIA Insured) $ 1,500,000 $ 1,432,500
584521BG
Muni. Elec. Auth. Spl. Oblig.:
Rfdg. Second Crossover Series, 7.80% 1/1/20,
(AMBAC Insured) 1,500,000 1,715,625 625919AY
Fifth Crossover Series Proj. #1, 6.40% 1/1/13,
(AMBAC Insured) 4,550,000 5,204,063 625919DA
Fouth Crossover Series Proj. #1, 6.50% 1/1/20 2,250,000 2,607,188
625919CL
15,512,257
HAWAII - 0.4%
Hawaii County Rfdg. & Impt. Series A,
5.60% 5/1/12, (FGIC Insured) 1,000,000 1,061,250 419722QC
Honolulu City & County Multi-Family Rev.
(Hale Pauahi) Series A, 8.70% 12/1/28,
(FHA Guaranteed) (MBIA Insured) 725,000 750,375 438697AW
1,811,625
IDAHO - 1.2%
Canyon County School Dist. # 139 Class A, 5% 8/1/13 1,290,000 1,246,463
138843EQ
Idaho Health Facs. Auth. Health Care Corp.
Rev. St. Joes Reg. Med. Ctr. 5.25% 7/1/13,
(MBIA Insured) 1,000,000 1,000,000 451293AQ
Idaho Health Facs. Auth. Rev. Rfdg,
(IHC Hosps., Inc.) 8.70% 2/15/21 (d)(f) 2,500,000 3,031,250 451295KE
5,277,713
ILLINOIS - 6.7%
Chicago FGIC Rfdg. Series B, 5.125% 1/1/15
(AMBAC Insured) 2,250,000 2,190,938 1674833X
Chicago Motor Fuel Tax Rev. Rfdg. Series A,
5.375% 1/1/14, (AMBAC Insured) 2,000,000 2,005,000 16756KBF
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.:
Series A, 5% 1/1/12 1,840,000 1,784,800 167592LP
2nd Lien Series C-1, 5.0% 1/1/18, (MBIA Insured) 2,000,000 1,897,500
167592KR
Chicago Single Family Mtg. Rev. (Cap. Appreciation)
Series A, 0% 12/1/16, (FGIC Insured) 53,580,000 6,161,700 167685EF
Chicago Residential Mtg. Rev. Rfdg.
(Cap. Appreciation) Series B, 0% 10/1/09,
(MBIA Insured) 9,000,000 3,116,250 16768RAB
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13, (FGIC Insured) 2,000,000 2,012,500 167727EP
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
ILLINOIS - CONTINUED
Illinois Health Facs. Auth. Rev.:
Rfdg. (Sherman Hosp. Proj.) 6.75% 8/1/11,
(MBIA Insured) $ 1,750,000 $ 1,942,500
( 45201HV6Childrens Mem. Hosp.) 6.25% 8/15/13,
(MBIA Insured) 2,000,000 2,200,000 45200KH3
(Rush Presbyterian - St. Luke's) 5.25% 11/15/20
(MBIA Insured) 2,000,000 1,922,500 45200KN4
(Swedish American Hosp.) 5.375% 11/15/13,
(AMBAC Insured) 3,000,000 2,988,750 45200KL7
Metropolitan Pier & Exposition Auth. Dedicated
Tax Rev. (McCormick Place Expansion Proj.)
Series A, 0% 6/15/09, (FGIC Insured) 6,000,000 2,580,000 592247CQ
30,802,438
INDIANA - 2.0%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Gen'l. Hosp.) 7% 8/15/15,
(Cap. Guaranty Insured) 2,000,000 2,387,500 454797SM
Indiana Hsg. Fin. Auth. Single Family Mtg. Rev.
Series 1984 A, 11.25% 1/1/14 685,000 702,125 455052EA
Jasper County Poll. Cont. Rev. Rfdg. (Northern Indiana Pub.
Svc.) 7.10% 7/1/17, (MBIA Insured) 2,000,000 2,310,000 471373AW
Marion County Gen. Oblig. 3.20% 12/30/94 3,600,000 3,613,500 569016HX
9,013,125
KANSAS - 1.5%
Labette County Mtg. Loan Rev. Series A,
6.25% 5/1/12, (GNMA Coll.) 2,065,000 2,250,850 50539EBD
Reno County Mtg. Rev. Rfdg. (Single Family)
Series B, 8.70% 9/1/11 1,045,000 1,142,969 759753BY
Wichita Hosp. Rev. RIB Series II-A, 10.111% 10/1/17,
(MBIA Insured) (d)(f) 3,000,000 3,510,000 967250NS
6,903,819
KENTUCKY - 3.8%
Hardin Hospital Rev. 5.20% 10/1/14 (AMBAC Insured) 1,890,000 1,842,750
411854CZ
Jefferson County Health Facs. Rev. (Jewish Hosp. Healthcare
Svcs., Inc.) 6.55% 5/1/22, (AMBAC Insured) 2,500,000 2,765,625
472902DJ
Jefferson County Hosp. Rev. 9.664% 10/1/08,
(MBIA Insured) (d)(f) 2,000,000 2,400,000 473033CC
Kentucky Dev. Fin. Auth. Hosp. Rev. (St. Luke's
Hosp., Inc.) Series A, 7% 10/1/21, (MBIA Insured) 3,000,000 3,435,000
491265HM
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
KENTUCKY - CONTINUED
Kentucky Tpk. Auth. Econ. Dev. Rev. Rfdg.:
(Cap. Appreciation) 0% 1/1/04, (FGIC Insured) $ 2,000,000 $ 1,225,000
491552FP
(Revitalization Proj.)
5.50% 7/1/07, (AMBAC Insured) 3,000,000 3,161,250 491552GK
5.50% 7/1/11, (AMBAC Insured) 2,500,000 2,553,125 491552GS
17,382,750
LOUISIANA - 2.3%
Calcasieu Parish Pub. Trust Auth. Mtg. Rev. Rfdg.
Series A, 7.75% 6/1/12 1,645,000 1,723,138
East Baton Rouge Parish Sales & Use Tax Series ST-A
4.80% 2/1/12, (FGIC Insured) 1,000,000 955,000 270848ER
Jefferson Parish Hospital Svc. Dist. #1 Hosp. Rev.
5.25% 1/1/19, (FGIC Insured) 1,500,000 1,445,625 474682DD
Louisiana Gen. Oblig. Rfdg. Series A,
5.625% 8/1/07, (MBIA Insured) 2,500,000 2,656,250 546415DJ
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation):
0% 9/1/09, (AMBAC Insured) 3,000,000 1,293,750 647634XU
0% 9/1/10, (AMBAC Insured) 1,775,000 721,094 647634XV
0% 9/1/11, (AMBAC Insured) 1,220,000 469,700 647634XW
New Orleans Pub. Impt. Unltd. Tax
7% 9/1/19, (FGIC Insured) 1,000,000 1,155,000 647634A7
10,419,557
MARYLAND - 1.2%
Baltimore Rfdg. Cons. Pub. Impt. Series D,
5.40% 10/15/12, (AMBAC Insured) 2,000,000 2,040,000 059185Q7
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Francis Scott Key Medical Ctr.)
5% 7/1/13 (FGIC Insured) 1,500,000 1,458,750 574216CW
(Frederick Mem. Hosp.) 5.25% 7/1/13, (FGIC Insured) 2,000,000
2,017,500 574216KD
5,516,250
MASSACHUSETTS - 3.6%
Holyoke Gen. Oblig. Ltd. Tax 8.15% 6/15/06,
(MBIA Insured) 2,205,000 2,786,569 436704YC
Massachusetts Health & Ed. Facs. Auth. Rev.:
Rfdg. (Massachusetts Gen. Hosp.) Series F,
6.25% 7/1/12, (AMBAC Insured) 2,000,000 2,232,500 575851PX
(Blood Institute) Series A, 6.50% 2/1/22 1,300,000 1,405,625 575851KH
(Falmouth Hosp.) Series C, 5.625% 7/1/11,
(MBIA Insured) 1,500,000 1,533,750 575851UT
(Lahey Clinic Med. Ctr.) Series B, 5.625%
7/1/15, (MBIA Insured) 3,050,000 3,095,750 575851XR
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
MASSACHUSETTS - CONTINUED
Massachusetts Hsg. Fin. Agcy. (Hsg. Proj.)
Series A, 6.15% 10/1/15, (AMBAC Insured) $ 1,270,000 $ 1,309,688
575852VS
Massachusetts Hsg. Fin. Agcy. Multi-Family Hsg.
Rev. Series A, 8.875% 7/1/18, (MBIA Insured) 2,000,000 2,122,500
575854PW
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. (Reg. Inflos) Series A,
7.72% 7/1/18 (d)(f) 2,000,000 1,970,000 575765MV
16,456,382
MICHIGAN - 2.2%
Central Michigan Univ. Rev. Rfdg.
(Cap. Appreciation) 6% 10/1/13, (MBIA Insured) 1,000,000 1,060,000
154123QQ
Detroit Dis. Aid. 5.20% 5/1/07 (AMBAC Insured) 2,000,000 2,002,500
251093JS
Detroit Wtr. Supply Sys. Rev. Rfdg.
6.50% 7/1/15, (FGIC Insured) 1,000,000 1,158,750 251255TP
Jackson County Hosp. Fin. Auth. Hosp. Rev.
Rfdg. (WA Foote Mem. Hosp.) Series A, 4.75%
6/1/15, (FGIC Insured) 2,000,000 1,842,500 467148BK
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of
Mercy Health Corp.) 5.375% 8/15/14,
(MBIA Insured) 2,000,000 2,015,000 59465CX2
Wayne Charter County Arpt. Rev. Rfdg. Sub. Lien
Detroit Metro C, 5.25% 12/1/13 (MBIA Insured) 2,000,000 1,987,500
944314DZ
10,066,250
MINNESOTA - 3.2%
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) 4,000,000 3,695,000 603695DF
Minneapolis Health Care Fac. Rev. Rfdg.
Fairview Hosp. & Healthcare Series A:
5.30%11/15/08, (MBIA Insured) 1,000,000 1,006,250 603908FA
5.25%11/15/19, (MBIA Insured) 1,750,000 1,734,688 603908FC
Northern Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 0% 1/1/11, (AMBAC Insured) 3,140,000 1,271,700 665444CB
St. Cloud Hosp. Facs. Auth. Rev. Rfdg.
Benedictine Sisters, Series C:
5.25% 10/1/13, (AMBAC Insured) 2,700,000 2,693,250 789162CD
5.30% 10/1/20, (AMBAC Insured) 2,000,000 1,980,000 789162CE
St. Louis Park Hosp. Facs. Auth. Rev.
(Healthsystem Obligated A) 5.20% 7/1/23,
(AMBAC Insured) 2,500,000 2,437,500 791748CQ
14,818,388
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
MISSISSIPPI - 0.4%
Mississippi Hosp. Equip. & Facs. Auth. Rev.
(Singing River Hosp. Sys. Proj.), 5.50% 3/1/13 $ 2,000,000 $ 2,020,000
605360HB
MISSOURI - 3.9%
Kansas City Ind. Dev. Auth. Hosp. Rev.
(Research Health Svcs. Sys.) 9.375% 4/15/14,
(MBIA Insured) 900,000 988,875 484901AU
Kansas City School Dist. Bldg. Corp. Inds.
Leasehold Rev. Elementary School Proj., Series D,
5% 2/1/14 (FGIC Insured) 3,875,000 3,739,375 485085ER
Missouri Health & Edl. Facs. Auth Health Facs. Rev.:
(Barnes Jewish/Christian):
Rfdg. 5.15% 5/15/10 500,000 493,750 60635RJD
5.20% 5/15/11 500,000 493,750 60635RJE
5.25% 5/15/12 2,390,000 2,360,125 60635RJF
(SSM Health Care) Series AA, 6.25% 6/1/07,
(MBIA Insured) 1,000,000 1,112,500 60635RCM
Sikest Elec. Rev. Rfdg. 6.25% 6/1/22, (MBIA Insured) 8,000,000
8,650,000 826775DB
17,838,375
MONTANA - 1.3%
Montana Univ. Rev. Rfdg. Higher Ed., Series A,
5.05% 11/15/16, (MBIA Insured) 1,500,000 1,462,500 612136Y4
Silver Bow Wtr. Inc., Wtr. Sys. Rev. (Butte Silver
Bow Proj.) 5.25% 11/1/14, (FGIC Insured) 1,750,000 1,745,625 827429BJ
Univ. of Montana Revs. Rfdg. Higher Edl., Series A,
4.50% 11/15/15, (MBIA Insured) 3,000,000 2,707,500 914505G7
5,915,625
NEVADA - 0.4%
Las Vegas-Clark County Library Dist. Lt. Tax Series A,
6.90% 6/1/11, (FGIC Insured) 1,300,000 1,460,875 517667CF
NEW JERSEY - 0.2%
Warren County Poll. Cont. Fing. Auth. Rev.
(Resource Recovery) 6.55% 12/1/06, (MBIA Insured) 1,000,000 1,141,250
935110CD
NEW MEXICO - 2.6%
Farmington Poll. Cont. Rev. Rfdg. (Southern
California Edison) 5.875% 6/1/23, (MBIA Insured) 2,500,000 2,615,625
311450CS
Farmington Util. Sys. Rev.:
Rfdg. 5.75% 5/15/13, (FGIC Insured) 4,000,000 4,150,000 311457CH
9.625% 5/15/05, (FGIC Insured) 675,000 772,875 311457AV
New Mexico Mtg. Fin. Auth. Series A2, 6.85% 7/1/12 4,000,000 4,300,000
647198VA
11,838,500
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
NEW YORK - 2.2%
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.) Series A, 5.25%
5/15/15, (AMBAC Insured) $ 2,500,000 $ 2,531,250 649834DR
New York State Local Govt. Assistance Corp. Rfdg.
Series C, 5.50% 4/1/17 1,000,000 1,026,250
New York State Med. Care Facs. Fin. Agcy. Rev.
(Hosp. & Nursing Home) Series B, 8.10% 2/15/22,
(FHA Guaranteed) 2,250,000 2,573,438 649881B7
New York State Twy Auth. Gen. Rev., Series B,
5% 1/1/20, (MBIA Insured) 2,000,000 1,932,500 650009EX
New York State Urban Dev. Corp. Rev:.
5.10% 1/1/09, (AMBAC Insured) 1,000,000 992,500 650033C7
5% 1/1/17, (AMBAC Insured) 1,000,000 953,750 650033C9
10,009,688
NORTH CAROLINA - 4.4%
Charlotte Ctfs. of Prtn. Rfdg. Convention Fac. Proj., Series C:
5.25% 12/1/20, (AMBAC Insured) 2,000,000 1,975,000 161037CK
5% 12/1/21(AMBAC Insured) 1,600,000 1,540,000 161037CX
Fayetteville Public Works Commn. Rev. Rfdg.
4.75% 3/1/14, (FGIC Insured) 2,000,000 1,905,000 312805BV
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
6% 1/1/18, (AMBAC Insured) 5,250,000 5,755,313 658196QD
Series B, 5.50% 1/1/21, (FGIC Insured) 2,500,000 2,493,750 658196QG
North Carolina Med. Care Commn. Hosp. Rev.
Rfdg. Wesley Long Comnty. Hosp. 5.25%
11/1/17, (AMBAC Insured) 2,000,000 1,980,000 6582026R
North Carolina Muni. Pwr. Agcy. #1 Catawba Elec.
Rev. Rfdg. 6% 11/1/11, (MBIA Insured) 4,000,000 4,410,000 658203QS
20,059,063
NORTH DAKOTA - 1.1%
Mercer County Poll. Cont. Rev. Rfdg.
(Basin Electric Pwr.) (Antelope Valley Station)
7.20% 6/30/13, (AMBAC Insured) (b) 3,500,000 4,081,875 587850DA
North Dakota Hsg. Fin. Agcy. Single Family Mtg.
Rev. Series C, 8.75% 1/1/19 820,000 879,450 658887KE
4,961,325
OHIO - 0.4%
Cleveland Wtrwks. Rev. (First Mtg.) Series 1992 B,
6.50% 1/1/11, (AMBAC Insured) 1,000,000 1,108,750 186432RK
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
OHIO - CONTINUED
Ohio Hsg. Fin. Agcy. Single Family Mtg. Rev.:
Series 1985 B, 9% 1/15/09, (FGIC Insured) $ 550,000 $ 572,688 677377GF
Series C, 9.40% 9/15/08, (FGIC Insured) 115,000 122,331 677377HR
1,803,769
OKLAHOMA - 2.2%
Grand River Dam Auth. Rev. Rfdg. 5.75%
6/1/08, (FSA Insured) 4,250,000 4,552,813 386442PH
Oklahoma Muni. Pwr. Auth. Pwr. Supply Sys. Rev.:
Series A, 5% 1/1/15, (FGIC Insured) 1,000,000 982,500
Series B, 5.875% 1/1/15, (MBIA Insured) 2,000,000 2,175,000 67910HEN
67910HFS
Series B, 5.875% 1/1/12, (MBIA Insured) 2,000,000 2,170,000 67910HFA
9,880,313
OREGON - 0.6%
Northern Wasco Cnty. Peoples Util. Dist. or
Hydroelectric Rev. McNary Dam Fishway
5.10%12/1/12 2,250,000 2,230,313 666051AM
Oregon Hsg. Edl. & Cultural Facs. Auth.
Rev. (Lewis & Clark College Proj.) Series A,
7.125% 7/1/20, (MBIA Insured) 500,000 580,625 68608LAK
2,810,938
PENNSYLVANIA - 5.5%
Cambria County Hosp. Dev. Auth. Hosp. Rev.
Rfdg. & Impt. (Conemaugh Valley Hosp.)
Series 1992 B, 6.375% 7/1/18,
(Connie Lee Insured) 2,000,000 2,155,000 132037DZ
Harrisburg Auth. Wtr. Rev. 8.82% 7/15/15,
(FGIC Insured) (d)(f) 3,150,000 3,488,625 41473MCB
Montgomery County Higher Ed. & Health Auth.
Rev. (St. Joseph's Univ.) 6.50% 12/15/22,
(Connie Lee Insured) 3,000,000 3,311,250 613603FZ
Pennsylvania Convention Ctr. Auth. Rev.
Series A, 6.70% 9/1/16, (FGIC Insured) 2,000,000 2,405,000 708681AU
Pennsylvania Convention Ctr. Rev. Series A,
6% 9/1/19, (FGIC Insured) 1,000,000 1,111,250 708681AV
Pennsylvania Hsg. Fin. Agcy. Muni. Forwards
Rfdg. (Multi-Family Section 8) Series C,
8.10% 7/1/13, (FHA Guaranteed) 2,000,000 2,272,500 708791WD
Pennsylvania Intergovernmental Coop. Auth. Spl.
Tax Rev. Rfdg. Series A, 5% 6/15/22,
(MBIA Insured) 7,755,000 7,386,638 708840CJ
Philadelphia Wtr. & Wastewtr. Rev. Rfdg.
5% 6/15/12, (FGIC Insured) 2,000,000 1,937,500 717893BG
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
PENNSYLVANIA - CONTINUED
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rfdg., Series A, 5% 9/1/09, (FGIC Insured) $ 1,000,000 $ 987,500
725304DA
Ringold School Dist. Rfdg. 0% 12/15/15,
(MBIA Insured) 1,155,000 347,944 766809GQ
25,403,207
RHODE ISLAND - 1.5%
Rhode Island Convention Ctr. Auth Rev. Rfdg.,
Series B, 5.25% 5/15/15, (MBIA Insured) 3,000,000 2,973,750 212474CB
Rhode Island Depositors Econ. Protection Corp.
Spl. Oblig. Rfdg., Series A, 5.50% 8/1/20,
(FSA Insured) 2,500,000 2,518,750 76218KER
Rhode Island Health & Ed. Bldg. Corp. Rev.
(Higher Ed.) (Johnson & Wales Univ.)
6.25% 4/1/22, (Connie Lee Insured) 1,450,000 1,562,375 762242CC
7,054,875
SOUTH CAROLINA - 2.3%
Lexington County Health Svcs. Dist. Inc.
Hosp. Rev. 7% 10/1/08, (FSA Insured) 3,000,000 3,453,750 529050AL
North Charleston Ctfs. of Prtn.
(Coliseum Cap. Impts. Proj.) 6% 1/1/11, (FGIC Insured) 1,000,000
1,062,500 658556AU
Piedmont Muni. Pwr. Agcy. Elec. Rev. Rfdg.
6.25% 1/1/21, (FGIC Insured) 1,350,000 1,542,375 720175FR
Richland County Hosp. Facs. Rev. (Commty.
Provider Pooled Loan) Series A, 7.125%
7/1/17, (Cap. Guaranty Insured) 1,500,000 1,734,375 763634FE
Rock Hill Util. Sys. Rev. 7% 1/1/20,
(AMBAC Insured) 850,000 988,125 772249EB
South Carolina Pub. Svc. Auth. Rev.
(Santee Cooper) Series D, 6.50% 7/1/14,
(AMBAC Insured) 1,465,000 1,613,331 837147FM
10,394,456
SOUTH DAKOTA - 0.2%
South Dakota Lease Rev. (Trust Cfts.) Series A,
6.625% 9/1/12, (Cap. Guaranty Insured) 1,000,000 1,142,500 83756PCF
TENNESSEE - 2.5%
Knox County Health, Edl. & Hsg. Facs. Auth.
Sanders Alliance Hosp. Facs. Rev.,
Series C, 7.25% 1/1/10, (MBIA Insured) (d)(f) 2,500,000 3,040,625
499523MN
Knox County Health, Edl. & Hsg. Facs. Brd.
Hosp. Facs. Rev. Rfdg. Ft. Sanders Alliance,
Series C, 6.25% 1/1/13, (MBIA Insured) 1,000,000 1,111,250 499523MR
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
TENNESSEE - CONTINUED
Metro Govt. Nashville & Davidson County
Health & Edl. Facs. Brd. Rev. Adventist Health/Sunbelt:
5% 11/15/13, (CGIS Insured) $ 750,000 $ 709,688 592040U7
5.25% 11/15/23, (CGIC Insured) 1,500,000 1,445,625 592040U8
Metropolitan Gov't. Nashville & Davidson
County Wtr. & Swr. Rev. Rfdg. 0% 1/1/12,
(FGIC Insured) stepped coupon (a)(e) 5,600,000 5,229,000 592098VM
11,536,188
TEXAS - 5.5%
Austin Util. Sys. Rev. Rfdg.:
(Cap. Appreciation) 0% 11/15/10, (AMBAC Insured) 13,500,000 5,450,625
052473R6
0% 11/15/11, (AMBAC Insured) 7,000,000 2,651,250 052473R7
Brazos River Auth. Poll. Ctl. Rev. Rfdg. Coll.
Util. Elec. Co. Proj. A, 5.50% 5/1/22, (AMBAC Insured) 2,000,000
2,000,000 106213CH
Conroe Independent School Dist. Rfdg.
0% 2/1/08, (PSF Guaranteed) 1,000,000 437,500 208417SP
East Texas Criminal Justice Facs. Fing. Corp.
Mtg. Rev. (Rust Cnty. Proj.) Series B,
5.25% 5/1/14, (MBIA Insured) 1,000,000 980,000 27557PAX
Harris County Flood Cont. Dist. Rfdg.
Series B, 0% 10/1/06 2,000,000 930,000 414018J9
Harris County Health Facs. Dev. Corp. Hosp. Rev.
(St. Luke's Episcopal Hosp. Proj.)
6.75% 2/15/21 2,000,000 2,187,500 414152FZ
Houston Wtr. & Swr. Sys. Rev. Exchange
Rfdg. Jr. Lien 9.375% 12/1/13, (FGIC Insured) 30,000 33,938 442436MH
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Sr. Lien)
Series C, 0% 12/1/06, (AMBAC Insured) 6,735,000 3,476,944 442436LA
Matagorda County Navigation Dist.# 1 Rev. Rfdg.
(Houston Lt. & Pwr. Proj.) Series C,
7.125% 7/1/19, (FGIC insured) 1,700,000 1,908,250 57652TAC
North Central Health Facs. Dev. Corp. Hosp. Rev.
Rfdg. (Methodist Hosp. Dallas) Series A,
9.50% 10/1/15, (MBIA Insured) 250,000 280,625 658546BT
Tarrant Cnty. Health Facs. Dev. Corp. Adventist
Health Sys./Sunbelt Inc. 5% 11/15/13,
(CGIC Insured) 1,000,000 950,000 875906FZ
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg.
(Cap. Appreciation) Series 1990, 0% 2/1/10,
(MBIA Insured) 1,250,000 523,438 88275MBP
Texas State Pub. Prop. Fin. Corp. Rev. Rfdg.
Mental Health & Retardation 5.50%
9/1/13, (CGIC Insured) 3,500,000 3,486,875 882758BX
25,296,945
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
VIRGINIA - 3.1%
Chesapeake Bay Bridge & Tunnel Commission
Dist. Rev. Rfdg. (Gen. Resolution) 5.75%
7/1/25, (MBIA Insured) $ 500,000 $ 510,625 165141AK
Chesapeake Rfdg. 5.50% 12/1/09 1,225,000 1,274,000 165321K7
Fairfax County Swr. Rev. Rfdg. 5.65%
11/15/15, (AMBAC Insured) 1,000,000 1,031,250 303867BU
Roanoke Cnty. Wtr. Sys. Rev. Rfdg.
5.125% 7/1/13, (FGIC Insured) 2,000,000 1,980,000 769839BH
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr.
Series A, 5.15% 7/1/09, (MBIA Insured) 2,000,000 2,022,500 842056ET
Stafford Cnty. Wtr. & Swr. Rev. Rfdg.
5.25% 6/1/12, (FGIC Insured) 2,000,000 2,000,000 852440AV
Upper Occoguan Swr. Auth. Regl. Swr. Rev. Rfdg.
5% 7/1/21, (FGIC Insured) 2,000,000 1,905,000 916277ED
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
Virginia Beach Gen. Hosp. Proj.
6% 2/15/13, (AMBAC Insured) 1,460,000 1,584,100 927739DG
Virginia Hsg. Dev. Auth. Residential Mtg.
(Single Family Mtg.) Series 1983 B,
0% 9/1/14 1,215,000 153,394 928136FA
Virginia Trans. Board Trans. Contract Rev.
(Route 58 Corridor Dev. Proj.) Series B,
5.50% 5/15/18 1,500,000 1,520,625 928184EG
13,981,494
WASHINGTON - 2.9%
Washington Health Care Facs. Auth. Rev.:
(Empire Health Svcs. Spokane) 5.65% 11/1/05,
(MBIA Insured) 1,000,000 1,061,250 9397802W
(Swedish Hosp. Med. Ctr.) 6.30% 11/15/22,
(AMBAC Insured) 2,000,000 2,147,500 939780Y7
Washington Pub. Pwr. Supply Sys. Rev. Rfdg.:
Nuclear Proj. #1 Series B, 7.25% 7/1/12, (FGIC Insured) 1,500,000
1,717,500 939827LW
Nuclear Proj. #2:
7.97% 7/1/10, (FGIC Insured) (d)(f) 4,000,000 4,040,000 939828RS
Series A, 0% 7/1/11, (MBIA Insured) 2,365,000 889,820 939828PS
Series C, 7.375% 7/1/11, (FGIC Insured) 2,200,000 2,560,250 939828MR
Nuclear Proj. #3 Series B, 7% 7/1/05, (FGIC Insured) 750,000 855,000
939830HF
13,271,320
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT
WISCONSIN - 0.9%
Wisconsin Health & Edl. Facs. Auth. Rev.
(Wheaton Franciscan Svcs., Inc.)
6.10% 8/15/08, (MBIA Insured) $ 2,000,000 $ 2,172,500 97710AFC
Wisconsin St. Health & Edl. Facs. Auth. Rev.
Aurora Healthcare 5.25% 8/15/12, (MBIA Insured) 2,000,000 1,947,500
97710AUJ
4,120,000
WYOMING - 0.2%
Wyoming Farm Loan Board Cap. Facs. Rev. Rfdg.
5.75% 10/1/20 1,000,000 1,046,250 983478CJ
TOTAL INVESTMENTS - 100%
(Cost $428,873,524) $ 457,760,600
LEGEND
1. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
2. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
3. Security collateralized by an amount sufficient to pay interest and
principal.
4. Inverse floating rate security is a security where the coupon is
inversely indexed to a floating interest rate. The price will be more
volatile than the price of a comparable fixed rate security.
5. Security pledged to cover for delayed delivery purchases. At the period
end, the value of securities pledged amounted to $5,229,000.
6. 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 97.0% AAA, AA, A 97.0%
Baa 0.7% BBB 0.0%
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:
Health Care 27.2%
Electric Revenue 20.5%
Others (individually less
than 10%) 52.3%
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1993, the aggregate cost of investment securities for
income tax purposes was $428,873,964. Net unrealized appreciation
aggregated $28,886,636, of which $29,315,230 related to appreciated
investment securities and $428,594 related to depreciated investment
securities.
The fund hereby designates $3,861,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1993
ASSETS 7. 8.
9.Investment in securities, at value (cost $428,873,524) 10. $ 457,760,600
(Notes 1 and 2) - See accompanying schedule
11.Interest receivable 12. 6,183,440
13. TOTAL ASSETS 14. 463,944,040
LIABILITIES 15. 16.
17.Payable to custodian bank $ 85,434 18.
19.Payable for investments purchased 11,115,252 20.
Regular delivery
21. Delayed delivery (Note 2) 3,542,280 22.
23.Dividends payable 532,319 24.
25.Accrued management fee 154,099 26.
27.Other payables and accrued expenses 118,223 28.
29. TOTAL LIABILITIES 30. 15,547,607
31.NET ASSETS 32. $ 448,396,433
33.Net Assets consist of: 34. 35.
36.Paid in capital 37. $ 412,484,548
38.Accumulated undistributed net realized gain (loss) on 39. 7,024,809
investments
40.Net unrealized appreciation (depreciation) on 41. 28,887,076
investment securities
42.NET ASSETS, for 36,248,452 shares outstanding 43. $ 448,396,433
44.NET ASSET VALUE, offering price and redemption price 45. $12.37
per share ($448,396,433 (divided by) 36,248,452 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
INTEREST INCOME 46. $ 25,241,997
EXPENSES 47. 48.
49.Management fee (Note 4) $ 1,770,056 50.
51.Transfer agent, accounting and custodian fees and 665,162 52.
expenses (Note 4)
53.Non-interested trustees' compensation 1,347 54.
55.Registration fees 89,760 56.
57.Audit 27,698 58.
59.Legal 4,393 60.
61.Reports to shareholders 27,965 62.
63.Miscellaneous 5,604 64.
65. TOTAL EXPENSES 66. 2,591,985
67.NET INTEREST INCOME 68. 22,650,012
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 70. 71.
(NOTES 1 AND 3)
69.Net realized gain (loss) on:
72. Investment securities 16,747,306 73.
74. Futures contracts 597,749 17,345,055
75.Change in net unrealized appreciation (depreciation) 76. 77.
on:
78. Investment securities 14,450,875 79.
80. Futures contracts (53,365) 14,397,510
81.NET GAIN (LOSS) 82. 31,742,565
83.NET INCREASE (DECREASE) IN NET ASSETS RESULTING 84. $ 54,392,577
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
INCREASE (DECREASE) IN NET ASSETS
85.Operations $ 22,650,012 $ 19,849,649
Net interest income
86. Net realized gain (loss) on investments 17,345,055 6,356,679
87. Change in net unrealized appreciation (depreciation) 14,397,510 (103,080)
on investments
88. NET INCREASE (DECREASE) IN NET ASSETS RESULTING 54,392,577 26,103,248
FROM OPERATIONS
89.Distributions to shareholders from: (22,650,012) (19,849,649)
Net interest income
90. Net realized gain (9,941,439) (3,403,031)
91. TOTAL DISTRIBUTIONS (32,591,451) (23,252,680)
92.Share transactions 322,573,485 279,489,875
Net proceeds from sales of shares
93. Reinvestment of distributions from: 15,998,959 14,120,077
Net interest income
94. Net realized gain 7,488,577 2,602,019
95. Cost of shares redeemed (290,587,864) (231,291,520)
96. Net increase (decrease) in net assets resulting 55,473,157 64,920,451
from
share transactions
97. TOTAL INCREASE (DECREASE) IN NET ASSETS 77,274,283 67,771,019
NET ASSETS 98. 99.
100. Beginning of period 371,122,150 303,351,131
101. End of period $ 448,396,433 $ 371,122,150
OTHER INFORMATION 103. 104.
102.Shares
105. Sold 26,281,608 24,143,328
106. Issued in reinvestment of distributions from: 1,299,523 1,211,579
Net interest income
107. 610,814 223,349
Net realized gain
108. Redeemed (23,612,917) (19,988,720)
109. Net increase (decrease) 4,579,028 5,589,536
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
110. YEARS ENDED DECEMBER 31,
111. 1993 1992 1991 1990 1989
112.SELECTED PER-SHARE DATA
113.Net asset value, $ 11.720 $ 11.630 $ 11.090 $ 11.050 $ 10.780
beginning of period
114.Income from .655 .689 .702 .713 .717
Investment
Operations
Net interest income
115. Net realized and .930 .200 .540 .040 .270
unrealized gain
(loss)
on investments
116. Total from 1.585 .889 1.242 .753 .987
investment
operations
117.Less Distributions (.655) (.689) (.702) (.713) (.717)
From net interest
income
118. From net realized (.280) (.110) - - -
gain
on investments
119. Total distributions (.935) (.799) (.702) (.713) (.717)
120.Net asset value, $ 12.370 $ 11.720 $ 11.630 $ 11.090 $ 11.050
end of period
121.TOTAL RETURN 13.85% 7.91% 11.57% 7.08% 9.45%
122.RATIOS AND SUPPLEMENTAL DATA
123.Net assets, end of $ 448,396 $ 371,122 $ 303,351 $ 198,585 $ 175,301
period (000 omitted)
124.Ratio of expenses .61% .63% .65% .67% .70%
to average net assets
125.Ratio of net 5.31% 5.91% 6.23% 6.52% 6.57%
interest income to
average net assets
126.Portfolio turnover 78% 69% 62% 66% 51%
rate
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1993
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Insured Tax-Free Portfolio (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which quotations are not readily available through the
pricing service are valued at their fair value as determined in good faith
under consistently applied procedures under the general supervision of the
Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. 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.
Dividends are declared daily and paid monthly from net interest income.
Distributions to shareholders from realized capital gains on investments,
if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures transactions 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 reclassification 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective January
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of December 31, 1992 have been reclassified to
reflect a decrease in paid in capital of $120,531, and an increase in
accumulated net realized gain on investments of $120,531.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures contracts and
write options. These investments involve, to varying degrees, elements of
market risk and risks in excess of the amount recognized in the Statement
of Assets and Liabilities. The face or contract amounts reflect the extent
of the involvement the fund has in the particular classes of instruments.
Risks may be caused by an imperfect correlation between movements in the
price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary
market for the instruments, or due to the inability of counterparties to
perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange 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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the purchase commitment.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $390,848,195 and $321,797,711, respectively.
The face value of futures contracts opened and closed amounted to
$318,757,327 and $329,692,869, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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 ranging from .15% to .37% and is
based on the monthly average net assets of all the mutual funds advised by
FMR. The annual individual fund fee rate is .25%. For the period, the
management fee was equivalent to an annual rate of .42% of average net
assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from.1325% to.3700%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
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
payments made to third parties under the Plan amounted to $21,127 for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. United Missouri Bank, N.A. (the Bank)
is the custodian and transfer and shareholder servicing agent for the fund.
The Bank has entered into a sub-contract with Fidelity Service Co. (FSC),
an affiliate of FMR, under which FSC performs the activities associated
with the fund's transfer and shareholder servicing agent and accounting
functions. The fund pays transfer agent fees based on the type, size,
number of accounts and number of transactions made by shareholders. FSC
pays for typesetting, printing and mailing of all shareholder reports,
except proxy statements. The accounting fee is based on the level of
average net assets for the month plus out-of-pocket expenses. For the
period, FSC received transfer agent and accounting fees amounting to
$462,702 and $171,146 respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Insured Tax-Free Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Insured Tax-Free Portfolio, including
the schedule of portfolio investments, as of December 31,1993, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1993 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Municipal Trust: Fidelity Insured TaxFree Portfolio as of
December 31, 1993, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 28, 1994
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. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO WRITE FIDELITY
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. Please send ALL correspondence about retirement
accounts to Dallas.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 2269
Boston, MA 02107-2269
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30280
Salt Lake City, UT 84130-0280
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
Additional Payments
P.O. Box 2656
Boston, MA 02293-0656
Fidelity Investments
Additional Payments
P.O. Box 620024
Dallas, TX 75262-0024
Fidelity Investments
Additional Payments
P.O. Box 31455
Salt Lake City, UT 84131-0455
OVERNIGHT EXPRESS
Fidelity Investments
Additional Payments
World Trade Center
164 Northern Avenue
Boston, MA 02210
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02103-0878
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 02101-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 620024
Dallas, TX 75262-0024
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
32 West Central Boulevard
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8300 Boone Boulevard
Vienna, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
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
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
SpartanAggressive 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 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
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Statement of
Additional Information constituting part of this Post-Effective Amendment
No. 65 to the Registration Statement on Form N-1A (the "Registration
Statement") of Fidelity Municipal Trust: Fidelity Insured Tax-Free
Portfolio of our report dated January 28, 1994, relating to the financial
statements and financial highlights which are incorporated by reference in
such Registration Statement.
We further consent to the references to our Firm in the Prospectus and
Statement of Additional Information under the headings "Financial
Highlights" and "Auditor".
/s/COOPERS & LYBRAND
COOPERS & LYBRAND
Boston, Massachusetts
February 25, 1994
