FIDELITY
(registered trademark)
MINNESOTA
TAX-FREE
PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 23 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 26 The auditors' opinion.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
into the fourth quarter of 1994. The Board raised the federal funds rate -
the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. A sixth increase in
November lifted the rate to 5.50%. The Fed rate hikes were intended to
forestall inflation that could result from an improving U.S. economy, and
they led to negative returns for many bond investments and below-average
returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Minnesota Tax-Free Portfolio -6.01% 32.30% 86.19%
Lehman Brothers Municipal Bond Index -5.17% 39.04% n/a
Average Minnesota Tax-Exempt
Municipal Bond Fund -5.87% 34.25% n/a
Consumer Price Index 2.67% 18.72% 37.34%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years, or since the fund started on November
21, 1985. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, you would end up with $1,050. You can compare
these figures to the performance of the Lehman Brothers Municipal Bond
index - a broad gauge of the municipal bond market. To measure how the fund
stacked up against its peers, you can look at the average Minnesota
tax-exempt municipal bond fund, which currently reflects the performance of
28 Minnesota 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 (CPI) 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, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Minnesota Tax-Free Portfolio -6.01% 5.76% 7.06%
Lehman Brothers Municipal Bond Index -5.17% 6.81% n/a
Average Minnesota Tax-Exempt
Municipal Bond Fund -5.87% 6.07% n/a
Consumer Price Index 2.67% 3.49% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
$10,000 OVER LIFE OF FUND
Minnesota Tax Free (Municipal Bond Index
11/30/85 10000.00 10000.00
12/31/85 10135.31 10087.90
01/31/86 10595.82 10682.08
02/28/86 10969.26 11105.73
03/31/86 11078.08 11109.28
04/30/86 10981.04 11117.73
05/31/86 10810.83 10936.73
06/30/86 10880.08 11041.07
07/31/86 10965.67 11108.08
08/31/86 11428.87 11605.39
09/30/86 11433.00 11634.52
10/31/86 11734.15 11835.45
11/30/86 11893.81 12069.91
12/31/86 11862.07 12036.60
01/31/87 12110.24 12399.02
02/28/87 12273.22 12460.02
03/31/87 12164.46 12327.95
04/30/87 11162.90 11709.33
05/31/87 11041.26 11651.25
06/30/87 11273.78 11993.33
07/31/87 11449.74 12115.67
08/31/87 11505.32 12142.93
09/30/87 10803.01 11695.22
10/31/87 10927.92 11736.62
11/30/87 11190.18 12043.06
12/31/87 11407.87 12217.81
01/31/88 11893.94 12653.00
02/29/88 12053.86 12786.75
03/31/88 11758.56 12637.78
04/30/88 11828.78 12733.83
05/31/88 11934.90 12697.03
06/30/88 12112.46 12882.78
07/31/88 12171.11 12966.78
08/31/88 12193.84 12978.19
09/30/88 12412.08 13213.10
10/31/88 12695.60 13446.31
11/30/88 12610.15 13323.14
12/31/88 12846.45 13459.43
01/31/89 13021.61 13737.78
02/28/89 12934.78 13581.03
03/31/89 12948.76 13548.57
04/30/89 13279.03 13870.21
05/31/89 13457.37 14158.30
06/30/89 13609.87 14350.57
07/31/89 13711.70 14545.88
08/31/89 13618.38 14403.47
09/30/89 13553.26 14360.26
10/31/89 13744.65 14535.46
11/30/89 13939.72 14789.83
12/31/89 14033.02 14911.10
01/31/90 13936.01 14841.02
02/28/90 14094.12 14973.11
03/31/90 14108.44 14977.60
04/30/90 13927.54 14869.76
05/31/90 14211.07 15193.92
06/30/90 14345.59 15327.63
07/31/90 14591.07 15552.94
08/31/90 14352.96 15327.43
09/30/90 14477.05 15336.62
10/31/90 14656.23 15614.22
11/30/90 14977.46 15928.06
12/31/90 15046.14 15998.14
01/31/91 15172.93 16212.52
02/28/91 15272.21 16353.57
03/31/91 15298.18 16360.11
04/30/91 15483.15 16577.70
05/31/91 15638.53 16725.24
06/30/91 15575.96 16708.52
07/31/91 15778.31 16912.36
08/31/91 15936.69 17135.60
09/30/91 16051.32 17358.37
10/31/91 16106.26 17514.59
11/30/91 16071.58 17563.63
12/31/91 16324.85 17941.25
01/31/92 16396.23 17982.52
02/29/92 16464.72 17987.91
03/31/92 16490.85 17995.11
04/30/92 16607.42 18155.26
05/31/92 16789.84 18369.49
06/30/92 17016.36 18678.10
07/31/92 17435.03 19238.44
08/31/92 17256.55 19049.91
09/30/92 17297.40 19173.73
10/31/92 16974.36 18985.83
11/30/92 17366.89 19325.68
12/31/92 17569.95 19522.80
01/31/93 17837.90 19749.26
02/28/93 18388.52 20464.19
03/31/93 18216.91 20247.26
04/30/93 18387.73 20451.76
05/31/93 18512.97 20566.29
06/30/93 18815.79 20909.75
07/31/93 18839.48 20936.93
08/31/93 19233.58 21372.42
09/30/93 19508.67 21616.07
10/31/93 19533.46 21657.14
11/30/93 19369.54 21466.55
12/31/93 19752.48 21919.50
01/31/94 19981.81 22169.38
02/28/94 19459.72 21595.19
03/31/94 18614.98 20716.27
04/30/94 18722.25 20892.36
05/31/94 18851.53 21074.12
06/30/94 18783.69 20951.89
07/31/94 19127.81 21335.31
08/31/94 19169.93 21409.98
09/30/94 18921.51 21095.26
10/31/94 18511.30 20719.76
11/30/94 18100.56 20344.73
12/30/94 18565.46 20792.32
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Minnesota Tax-Free Portfolio on November 30, 1985, shortly after the fund
started. As the chart shows, by December 31, 1994, the value of your
investment would have grown to $18,565 - an 85.65% 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 $20,792 - a 107.92% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend returns 5.42% 6.25% 6.51% 6.79% 6.93%
Capital appreciation
returns -11.43% 6.17% 1.12% 1.71% 0.29%
Total returns -6.01% 12.42% 7.63% 8.50% 7.22%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.52(cents) 31.97(cents) 63.30(cents)
Annualized dividend rate 6.45% 6.12% 5.93%
30-day annualized yield 6.38% - -
30-day annualized tax-equivalent yield 10.89% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.08 over
the past month, $10.37 over the past six months and $10.67 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 41.44% combined effective 1994 federal and state tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Steven Harvey, Portfolio Manager of Fidelity
Minnesota Tax-Free Portfolio
Q. STEVE, 1994 WAS A TOUGH YEAR FOR THE MUNICIPAL BOND MARKET. HOW DID THE
FUND PERFORM DURING THOSE 12 MONTHS?
A. It's true; 1994 was the worst year for the tax-exempt bond market since
1927. Few funds, including this one, escaped the market's decline. Against
that backdrop, the fund's total return for the year ended December 31,
1994, was -6.01%. That lagged the average Minnesota tax-free bond fund,
which returned -5.87% for the same period, according to Lipper Analytical
Services.
Q. WHAT'S THE STORY BEHIND THOSE NUMBERS?
A. The fund had a longer duration than many other funds of its type, which
hurt its performance. Duration is a measure of how sensitive the fund's
share price is to changes in interest rates. The longer the fund's
duration, the more sensitive its share price is when interest rates rise or
fall. In this case, the fund's longer-than-average duration caused its
share price to fall more than similar funds as interest rates rose.
Entering 1994, I had intentionally kept the fund's duration long, partly by
investing in discount bonds. These bonds sell below their face value, and
are more sensitive to changes in interest rates than bonds that sell at
face value or higher. In part, my strategy was to take advantage of what I
expected to be a limited supply of bonds available in 1994, 1995 and 1996.
There was a limited supply of new bonds issued in 1994. But supply remained
higher than I expected, boosted by short-term investors who bought in 1993
and sold in early 1994 to lock in short-term gains. Unfortunately, that
overhang of supply stayed with us through the first half of 1994
and didn't help firm bond prices.
Q. ONCE INTEREST RATES STARTED TO CLIMB, DID YOU TAKE ANY STEPS TO MAKE THE
FUND LESS SENSITIVE?
A. Yes, I used a number of measures. It's important to remember that in
general, when interest rates rise a bond's price declines and its duration
lengthens. Therefore, I wanted to temper the fund's lengthening duration.
At times I used futures and options contracts to do that. As the municipal
bond market fell, the futures position rose. At other times I kept an
above-average level of cash in the fund to help cushion the market's
volatility. That also allowed me to buy bonds that were sold at distressed
prices. However, many of the down drafts in the market were so severe and
dramatic that these measures weren't sufficient enough to prevent losses to
the fund.
Q. BUT THERE MUST HAVE BEEN SOME POSITIVES...
A. That's true. What helped offset some of the effects of having a long
duration was the fund's stake in lower-quality, higher- yielding bonds -
namely from the health care and housing sectors. In general, when the
municipal bond market started to fall, higher- quality, lower-yielding
bonds were among the first to be sold because they were so liquid, or
easily traded. The lower-quality, higher-yielding bonds were less liquid
and generally were the last to suffer price declines. What's more, as
current yields crept higher, lower- yielding bonds became less attractive
and investors were eager to hold onto higher-yielding bonds. Their high
yields are one reason I like health care and housing bonds. But there are
others. I continue to focus on health care bonds that I feel can survive
under more competitive conditions. One of the fund's largest investments -
Health East - is a good example. This St. Paul-based hospital chain has
prospered through aggressive cost cutting and has successfully marketed its
services to major employers. Housing bonds were helped by the fact that as
interest rates rise, fewer people pre-pay their mortgages. That reduces
some of the risk of owning housing bonds and makes these bonds more
attractive.
Q. WHAT'S AHEAD FOR INVESTORS IN 1995?
A. The municipal bond market could continue to have a rough time if rates
continue to rise. However, after that, I'm optimistic that municipal bonds
can do better in 1995 than in 1994. For one thing, it would be very unusual
to have two back-to-back years with such negative returns. Also, I think
we'll see the economy start to slow and long-term interest rates come down
a bit beginning in mid-1995. That would most likely be a positive scenario
for municipal bonds. Yields on municipal bonds are attractive right now,
both on their own merits and when you compare them to taxable bonds. Those
attractive yields, coupled with the fact that the supply of municipal bonds
is expected to stay low for the next two years, could eventually help firm
municipal bond prices.
FUND FACTS
GOAL: to provide a high level
of current income exempt from
federal and Minnesota state
income taxes
START DATE: November 21,
1985
SIZE: as of December 31,
1994, more than $276 million
MANAGER: Steven Harvey,
since October 1993; manager,
Spartan Pennsylvania High
Yield Portfolio, since October
1993; Spartan Maryland
Municipal Income Portfolio,
since April 1993; joined Fidelity
in 1986
(checkmark)
STEVE HARVEY'S STRATEGY:
"At this point there appears to
be evidence to suggest that
interest rates could rise or fall
another half a percentage
point or more over the next six
months. But it's not certain
which way interest rates will
go. So I plan to keep the
fund's duration - which
measures its sensitivity to
changes in interest rates -
neutral during that time. By
neutral I mean that the fund's
duration will be in line with the
duration of similar funds, and
which essentially means I
won't try to predict the
direction of interest rates.
Rather, I'll continue to try to
generate an above-average
income."
(medium solid bullet) Inverse floaters, one of the
financial arrangements known
as derivatives, made up 2.6%
of the fund's investments at
the end of the period. The
yield on inverse floaters rises
as short-term interest rates
fall and vice versa. By using
various derivatives, the
manager hopes to achieve
higher levels of tax-exempt
income and increased
flexibility in managing the
fund's overall sensitivity to
changes in interest rates.
However, these strategies
can involve additional risk to
the fund and don't always
work as intended.
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
Health Care 32.3 32.5
Housing 15.7 15.2
Electric Revenue 13.2 14.0
General Obligation 9.7 11.8
Education 6.4 5.9
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 20.3 20.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 9.2 8.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 28.1%
Aa, A 46.6%
Baa 14.6%
Caa 4.1%
Non-rated 5.8%
Short-term and other
investments 0.8%
Aaa 25.8%
Aa, A 48.9%
Baa 13.8%
Caa 3.4%
Non-rated 5.2%
Short-term
investments 2.9%
Row: 1, Col: 1, Value: 28.1
Row: 1, Col: 2, Value: 46.6
Row: 1, Col: 3, Value: 14.6
Row: 1, Col: 4, Value: 4.1
Row: 1, Col: 5, Value: 5.8
Row: 1, Col: 6, Value: 0.08
Row: 1, Col: 1, Value: 25.8
Row: 1, Col: 2, Value: 48.9
Row: 1, Col: 3, Value: 13.8
Row: 1, Col: 4, Value: 3.4
Row: 1, Col: 5, Value: 5.2
Row: 1, Col: 6, Value: 2.9
SHOWN AS A PERCENTAGE OF THE THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS
ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT
ARE EQUIVALENT TO BA AND BELOW ACCOUNT FOR 4.0% AND 3.6% OF THE FUND'S
INVESTMENTS AT DECEMBER 31, 1994 AND JUNE 30, 1994, RESPECTIVELY.
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 99.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 94.2%
Albany Health Care Facs. Rev. Rfdg.
(Mother Mercy Nursing Home)
8.75% 12/1/19 - $ 1,100,000 $ 1,105,500
Anoka County Solid Waste Disp. Rev.
(Nat'l. Rural Util.) Series A,
6.95% 12/1/08 (b) Aa3 1,000,000 1,025,000
Apple Valley Ind. Dev. Rev. Rfdg.
(Kmart Corp. Proj.) 6.50% 10/1/08 A 800,000 740,000
Bagley Independent School Dist. Unltd. Tax
(School Dist. #162):
4.85% 2/1/13 AA 1,020,000 826,200
4.85% 2/1/14 AA 1,100,000 880,000
Bass Brook Poll. Cont. Rev. Rfdg.
(Minnesota Pwr. & Lt. Co.)
6% 7/1/22 A2 1,500,000 1,320,000
Bemidji Hosp. Facs. Rev. (1st Mtg. North
Country Health) Series A, 7% 9/1/21 A 1,000,000 990,000
Breckenridge Hosp. Facs. Rev.
(Franciscan Sisters Healthcare)
Series B-2, 9.375% 9/1/17 (e) A- 445,000 496,731
Chisago City Health Facs. Rev.
(Point Pleasant Heights Proj.)
9.25% 7/1/15 - 3,700,000 3,755,500
Coon Rapids Hosp. Rev. (Health Ctr. Sys. Proj.)
Series B, 9% 10/1/14
(Pre-Refunded to 10/1/95 @ 103) (e) A 2,000,000 2,122,880
Dakota County Hsg. & Redev. Auth. Interest for
South St. Paul Rev. (Single Family Mtg.):
Rfdg. Series A, 8.10% 9/1/12,
(GNMA Coll.) AAA 395,000 408,331
(Burnsville & Inver.) 9.375% 5/1/18,
(FGIC Insured) Aaa 10,000 10,150
Duluth Swr. Util. 8.60% 2/1/03 A 270,000 270,675
Eagan Wtr. Gen. Oblig. Unltd. Tax
Series A, 7.30% 12/1/10 Aa 820,000 878,425
East Grand Forks Poll. Cont. Rev. Rfdg.
(American Crystal Sugar Co.) Series A,
7.75% 4/1/18 BBB+ 1,000,000 1,035,000
Eden Prairie Multi-Family Hsg. Rev.
(Preserve Place Apts.)
8% 7/1/28 (FHA Guaranteed) AAA 1,000,000 1,013,750
Hennepin County Lease Rev. Ctfs. of Prtn.
6.80% 5/15/17 Aa 5,000,000 5,025,000
Minneapolis Commty. Dev. Agcy. Supported
Dev. Rev. Ltd. Tax (Common Board Fund)
Series 1991-5A, 7.40% 12/1/21 BBB+ 1,250,000 1,254,688
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Commty. Dev. Agcy. Tax Increment
Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) Aaa $ 2,860,000 $ 1,297,725
0% 9/1/08 (MBIA Insured) Aaa 4,600,000 1,937,750
Minneapolis Convention Ctr. Sales Tax Rev.
(Chamber Bldg.-Skyway Proj.)
0% 2/1/06 (f) - 713,000 356,500
Minneapolis Gen. Oblig.:
Rfdg. Series B:
5.10% 9/1/08 Aaa 2,000,000 1,742,500
5.20% 3/1/13 Aaa 1,000,000 855,000
(Cap. Appreciation) Series A:
0% 12/1/11 Aaa 2,830,000 948,050
0% 12/1/12 Aaa 2,000,000 627,500
Series A, 4.75% 12/1/02 Aaa 2,240,000 2,080,400
Minneapolis Gen. Oblig. Convention Ctr. Facs.
Series 1990, 5.35% 4/1/11 Aaa 5,000,000 4,437,500
Minneapolis Health Care Facs. Rev.:
Rfdg. (Fairview Hosp. & Healthcare)
Series A, 5.25%11/15/19,
(MBIA Insured) Aaa 1,000,000 821,250
(Baptist Residence Proj.) 8.70% 11/1/09 - 1,885,000 2,019,306
Minneapolis Hosp. Rev.:
(Childrens Med. Ctr. Proj.) Series C,
7% 12/1/20 A 2,500,000 2,496,875
(Lifespan, Inc. Proj.) Series B,
8.125% 8/1/17 A 3,000,000 3,187,500
Minneapolis Spl. School Dist. #1 Ctfs. of Prtn.
7.375% 2/1/15
(Pre-Refunded to 2/1/98 @ 100) (e) A1 1,000,000 1,055,000
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev.:
(Health One Obligated Group) Series A,
7.40% 8/15/11 (MBIA Insured) Aaa 2,750,000 2,904,688
(Healthspan Health Sys. Corp.) Series A,
4.75% 11/15/18 (AMBAC Insured) Aaa 23,110,000 17,448,050
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Phase IX)
7.25% 8/1/21 (b) AAA 2,500,000 2,456,250
Minneapolis & St. Paul Metropolitan Arpt.
Commission Unltd. Tax Series 7,
7.80% 1/1/15 (b) Aaa 3,000,000 3,210,000
Minnesota Agric. & Econ. Dev. Board Rev.
(Small Bus. Dev. Prog. Lot 1) Series B,
8.375% 8/1/10 (b) - 1,000,000 1,012,500
Minnesota Energy & Econ. Dev. Auth. Rev.
(Small Bus. Dev. Lot 1 2D)
10% 8/1/06 - 75,000 79,219
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Gen. Oblig.:
Rfdg. Unltd. Tax. 5.40% 8/1/09 Aa1 $ 1,400,000 $ 1,272,250
Infrastructure Dev. 7% 8/1/96 Aa1 1,000,000 1,028,750
4.90% 8/1/11 Aa1 1,290,000 1,080,375
Minnesota Higher Ed. Facs. Auth. Mtg. Rev.:
Rfdg. (Mac Alester College) Series 3-J,
6.40% 3/1/22 Aa 1,675,000 1,580,781
(Northwestern College) Series 2-X:
8.25% 10/1/00 - 750,000 786,563
8.50% 10/1/05 - 1,750,000 1,822,188
(St. Mary's College)
Series 3-Q, 6.15% 10/1/23 Baa 1,965,000 1,702,181
(St. Thomas Univ.)
Series 3 C, 6.25% 9/1/16 A1 2,310,000 2,125,200
Minnesota Higher Ed. Facs. Auth. Rev.:
Rfdg.(St. Thomas Univ.):
Series 3-R1, 5% 10/1/01 A1 1,000,000 956,250
Series 3-R1, 5.60% 10/1/15 A1 1,000,000 865,000
(Carleton College) Series 3-L1,
5.75% 11/1/12 Aa 2,000,000 1,832,500
(St. Thomas Univ.):
Series 3-R2, 5.6-% 9/1/14 A1 3,275,000 2,796,031
5.45% 9/1/07 A1 650,000 598,000
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series A:
6.95% 7/1/16 Aa 955,000 962,163
7.45% 7/1/22 (b) Aa 2,870,000 2,981,213
7.95% 7/1/22 (b) Aa 2,740,000 2,811,925
8% 7/1/29 (b) Aa 545,000 549,769
Series B:
7.25% 7/1/16 Aa 1,200,000 1,210,500
5.80% 7/1/25 (b) Aa 9,160,000 7,911,950
Series D:
7.35% 7/1/16 Aa 2,770,000 2,825,400
8.80% 7/1/16 Aa 1,250,000 1,278,125
Series E, 6.85% 1/1/24 (b) Aa 1,000,000 982,500
Series H, 6.50% 1/1/26 (b) Aa 1,800,000 1,687,500
Minnesota Hsg. Fin. Agcy.
(State Assisted Home Impt. Prog.)
Series E, 7.50% 8/1/07 (b) A1 1,170,000 1,184,625
Minnesota Hsg. Fin. Agcy. Hsg. Dev. Series A:
6.95% 2/1/14 A1 1,000,000 997,500
6.95% 8/1/17 A1 1,000,000 991,250
7.05% 8/1/27 A1 1,250,000 1,239,063
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.:
Series A:
7% 3/1/09 AA+ 1,000,000 1,027,500
7.10% 3/1/12 AA+ 3,100,000 3,193,000
6.95% 3/1/13 AA+ 4,500,000 4,618,125
Series B, 6.70% 3/1/13 AA+ 5,350,000 5,410,188
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnetonka Multi-Family Hsg. Rev.
(Cedar Hills East Proj.) 7.50% 12/1/27,
(FHA Guaranteed) AA $ 600,000 $ 595,500
Montevideo Independent School Unltd. Tax:
(Dist. #129) 4.90% 2/1/15 Aa 1,000,000 815,000
Northern Minnesota Muni. Pwr. Agcy. Elec.
Sys. Rev. Rfdg.:
Series A:
0% 1/1/10 (AMBAC Insured) Aaa 2,405,000 919,913
7.25% 1/1/16 A 2,630,000 2,754,925
5% 1/1/21 A 1,000,000 773,750
Series B, 5.50% 1/1/18,
(AMBAC Insured) Aaa 6,000,000 5,220,000
Northfield College Facs. Rev.
(St. Olaf College Proj.):
6.30% 10/1/12 A1 1,085,000 1,051,094
6.40% 10/1/21 A1 1,100,000 1,058,750
Redwood Falls Independent School Dist. Rfdg.
Series 1993, 5.125% 4/1/15,
(AMBAC Insured) Aaa 1,700,000 1,419,500
Robbinsdale Hosp. Rev. Rfdg.
(North Mem. Med. Ctr. Proj.) Series A,
5.50% 5/15/23 (AMBAC Insured) Aaa 2,000,000 1,690,000
Rochester Health Care Facs. Rev.
(Mayo Foundation/Mayo Med. Ctr..):
Series H:
7.78% 11/15/15, INFL (d) AA+ 2,000,000 1,715,000
5.60% 11/15/19, INFL (d) AA+ 10,000,000 5,475,000
Series I:
5.90% 11/15/10 AA+ 2,250,000 2,044,688
5.75% 11/15/21 AA+ 1,250,000 1,070,313
Rosemont Independent School Dist. #196
(Dist. #5 School Credit Enhance Prog.)
Series B, 0% 6/1/13
(Cap. Guaranty Insured) Aaa 2,000,000 600,000
St. Cloud Hosp. Facs. Rev. Rfdg.
(Benedictine Sisters) Series C,
5.30% 10/1/20 (AMBAC Insured) Aaa 1,000,000 821,250
St. Louis County Jail Rev. Series A,
4.75% 12/1/08 (AMBAC Insured) Aaa 1,420,000 1,192,800
St. Louis Park Health Care Facs. Auth. Rev.
(Healthsystem Obligated A)
5.20% 7/1/23 (AMBAC Insured) Aaa 12,045,000 9,651,056
St. Louis Park Mtg. Rev. (Park Ridge Apt.
Proj.) 9.375% 9/20/20 (GNMA Coll.) AAA 1,200,000 1,216,500
St. Paul Gen. Oblig. Unltd. Tax (Cap. Impt.)
Series A, 4% 4/1/96 Aa 1,300,000 1,280,500
St. Paul Hsg. & Redev. Auth. Commercial
Dev. Rev. Rfdg. (Beverly Enterprises)
7.75% 11/1/02 - 1,800,000 1,775,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
St. Paul Hsg. & Redev. Auth. Health Care
Facs. Rev. (Childrens Hosp.) 7% 12/1/19 A $ 3,000,000 $ 3,000,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Health East Proj.):
Series A:
6.625% 11/1/17 Baa 12,000,000 10,350,000
9.75% 11/1/17 Baa 2,380,000 2,597,175
Series B:
9.625% 11/1/08 Baa 2,500,000 2,709,375
9.75% 11/1/17 Baa 3,000,000 3,258,750
6.625% 11/1/17 Baa 4,000,000 3,450,000
St. Paul Hsg. & Redev. Auth. Rev.:
(Downtown & 7th Place Redev. Proj.):
Series A, 0% 9/1/04 (AMBAC Insured) Aaa 1,000,000 545,000
Series B, 0% 9/1/08 (AMBAC Insured) Aaa 2,500,000 1,025,000
(Rent Hsg.) 8% 2/1/21,
(FNMA Mtg. Backed) (b) AAA 3,065,000 3,076,494
St. Paul Port Auth. Hsg. & Redev. Multi-Family
Hsg. Rev.:
Series 1985 J:
9.50% 12/1/11 CCC 500,000 481,250
9.50% 12/1/14 CCC 2,000,000 1,915,000
Rental Series C, 7% 9/1/22 CCC 2,800,000 2,019,500
St. Paul Port Auth. Ind. Dev. Rev.:
Rfdg. (Tenth & Jackson Hotel Ltd.)
Series H, 8.50% 9/1/11 CCC 1,750,000 1,540,000
(Riverview II Proj.) Series 1983 A, 10%
1/1/13 CCC 945,000 943,819
(Viking Drill & Tool) 1982-G,
12.875% 5/1/12 CCC 875,000 875,000
(Woods Chocolate) Series A:
7.80% 12/1/08 CCC 1,110,000 926,850
8% 12/1/13 CCC 1,030,000 856,188
Series 1981-M, 13.50% 11/1/11 CCC 920,000 920,000
Series Q, 9.375% 12/1/15 CCC 650,000 615,063
St. Paul Swr. Rev. Series A, 8% 12/1/08 A 2,500,000 2,703,125
Seaway Port Auth. Duluth Ind. Dev. Rev. Dock &
Wharf Rev. Rfdg. (Cargill, Inc. Proj.)
Series B, 6.80% 5/1/12 (g) Aa3 2,750,000 2,746,563
Southern Minnesota Muni. Pwr. Agcy:
5.75% 1/1/18 (e) A 1,005,000 899,475
5.75% 1/1/18 A 1,995,000 1,765,575
Southern Minnesota Muni. Pwr. Agcy. Pwr.
Supply Sys. Rev.:
Rfdg. Series A, 6.80% 1/1/95 A 1,000,000 1,000,000
Rfdg. Series A, 5% 1/1/09 A 2,000,000 1,712,500
Series A:
4.75% 1/1/16 A 12,500,000 9,531,250
0% 1/1/20 (MBIA Insured) Aaa 12,500,000 2,312,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Southern Minnesota Muni. Pwr. Agcy. Pwr.
Supply Sys. Rev. - continued
Series B:
5% 1/1/09 A $ 2,000,000 $ 1,712,500
5% 1/1/13 A 6,100,000 4,971,500
Virginia Independent School Dist. #706 Unltd.
Tax Series A:
5% 4/1/11 (AMBAC Insured) Aaa 630,000 534,713
5% 4/1/13 (AMBAC Insured) Aaa 1,180,000 985,300
Washington County Hsg. & Redev. Auth.
Jail Facs. Rev. Unltd. Tax Lease Oblig.
7% 2/1/12 (MBIA Insured)
(Pre-Refunded to 2/1/02 @100) (e) Aaa 1,000,000 1,068,750
Western Minnesota Muni. Pwr. Agcy. Pwr.
Supply Rev.:
Rfdg. Series A, 6.875% 1/1/07 A 800,000 833,000
Series A, 6.375% 1/1/16 (e) Aaa 2,000,000 1,980,000
White Bear Lake First Mtg. Nursing Home
Rev. Rfdg. (White Bear Lake Care Center)
8.25% 11/1/12 - 3,000,000 2,966,250
256,408,012
PUERTO RICO - 5.0%
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Hwy. Rev.:
Rfdg. Series X:
5.50% 7/1/13 Baa1 10,000,000 8,625,000
5.50% 7/1/15 Baa1 530,000 453,150
Series W, 5.50% 7/1/15 Baa1 1,500,000 1,282,500
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series S, 6.125% 7/1/08 Baa1 3,375,000 3,189,368
13,550,018
TOTAL MUNICIPAL BONDS
(Cost $288,206,760) 269,958,030
MUNICIPAL NOTES (A) - 0.8%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 0.8%
Fridley Ind. Dev. Auth. Rev. (Longview Fibre
Co. Proj.) Series 1988, 5.50%,
LOC Algemene Bank, VRDN - $ 1,240,000 $ 1,240,000
Minnesota Gen. Oblig. Participating VRDN,
3.55% (Liquidity Facility Merrill
Lynch & Co.) - 1,000,000 1,000,000
TOTAL MUNICIPAL NOTES
(Cost $2,240,000) 2,240,000
PURCHASED OPTIONS - 0.0%
AMOUNTS IN THOUSANDS EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
140 Put Options on February U.S. Treasury
Bond Futures (Cost $38,468) Jan. 95/97 $ 3,062,500 $ 30,625
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $290,485,228) $ 272,228,655
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
(e) Security collateralized by an amount sufficient to pay interest and
principal.
(f) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(g) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $2,746,563 or 1.0% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $290,493,089. Net unrealized depreciation
aggregated $18,264,434, of which $3,826,973 related to appreciated
investment securities and $22,091,407 related to depreciated investment
securities.
The fund hereby designates $164,201 as a capital gain dividend for the
purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending December 31,
1995 $1,453,486 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994, the fund was required to defer $455,192 of losses on
futures contracts and options.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 61.0% AAA, AA, A 73.4%
Baa 13.8% BBB 10.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 4.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 5.8%. FMR has
determined that unrated debt securities that are lower quality account for
4.0% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Health Care 32.3%
Housing 15.7
Electric Revenue 13.2
Others
(individually less than 10%) 38.8
TOTAL 100.0%
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $290,485,228) 5. $ 272,228,655
- -
See accompanying schedule
6.Receivable for investments sold 7. 2,589,721
8.Interest receivable 9. 5,772,702
10. 11.TOTAL ASSETS 12. 280,591,078
13.LIABILITIES 14. 15.
16.Payable to custodian bank $ 66,029 17.
18.Payable for investments purchased 1,318,505 19.
20.Payable for fund shares redeemed 1,662,618 21.
22.Dividends payable 446,927 23.
24.Accrued management fee 94,365 25.
26.Other payables and accrued expenses 68,524 27.
28. 29.TOTAL LIABILITIES 30. 3,656,968
31.32.NET ASSETS 33. $ 276,934,110
34.Net Assets consist of: 35. 36.
37.Paid in capital 38. $ 297,099,379
39.Accumulated undistributed net realized gain (loss) on 40. (1,908,696)
investments
41.Net unrealized appreciation (depreciation) 42. (18,256,573)
on investments
43.44.NET ASSETS, for 27,330,139 shares outstanding 45. $ 276,934,110
46.47.NET ASSET VALUE, offering price and redemption 48. $10.13
price per share ($276,934,110 (divided by) 27,330,139 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
49.50.INTEREST INCOME 51. $ 20,493,924
52.EXPENSES 53. 54.
55.Management fee $ 1,277,538 56.
57.Transfer agent, accounting and custodian fees 527,596 58.
and expenses
59.Non-interested trustees' compensation 5,524 60.
61.Registration fees 6,001 62.
63.Audit 29,465 64.
65.Legal 2,674 66.
67.Miscellaneous 1,082 68.
69. 70.TOTAL EXPENSES 71. 1,849,880
72.73.NET INTEREST INCOME 74. 18,644,044
75.REALIZED AND UNREALIZED GAIN (LOSS) 77. 78.
76.Net realized gain (loss) on:
79. Investment securities (1,641,084) 80.
81. Futures contracts 1,415,227 (225,857)
82.Change in net unrealized appreciation (depreciation) 83. (39,051,604)
on investment securities
84.85.NET GAIN (LOSS) 86. (39,277,461)
87.88.NET INCREASE (DECREASE) IN NET ASSETS 89. $ (20,633,417)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
90.INCREASE (DECREASE) IN NET ASSETS
91.Operations $ 18,644,044 $ 18,344,909
Net interest income
92. Net realized gain (loss) (225,857) 8,682,093
93. Change in net unrealized appreciation (depreciation) (39,051,604) 10,030,669
94. 95.NET INCREASE (DECREASE) IN NET ASSETS (20,633,417) 37,057,671
RESULTING FROM OPERATIONS
96.Distributions to shareholders: (18,644,044) (18,344,909)
From net interest income
97. From net realized gain (1,890,231) -
98. Distributions in excess of net realized gain (492,725) -
99. 100.TOTAL DISTRIBUTIONS (21,027,000) (18,344,909)
101.Share transactions 97,124,422 128,301,957
Net proceeds from sales of shares
102. Reinvestment of distributions 16,525,742 14,954,530
103. Cost of shares redeemed (137,252,013) (100,553,675)
104. (23,601,849) 42,702,812
Net increase (decrease) in net assets resulting from
share transactions
105. (65,262,266) 61,415,574
106.TOTAL INCREASE (DECREASE) IN NET ASSETS
107.NET ASSETS 108. 109.
110. Beginning of period 342,196,376 280,780,802
111. End of period $ 276,934,110 $ 342,196,376
112.OTHER INFORMATION 114. 115.
113.Shares
116. Sold 9,067,760 11,442,704
117. Issued in reinvestment of distributions 1,544,855 1,324,247
118. Redeemed (12,977,467) (8,949,771)
119. Net increase (decrease) (2,364,852) 3,817,180
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
120. YEARS ENDED DECEMBER 31,
121. 1994 1993 1992 1991 1990
122.SELECTED PER-SHARE
DATA
123.Net asset value, $ 11.520 $ 10.850 $ 10.730 $ 10.550 $ 10.520
beginning of period
124.Income from Invest .633 .647 .674 .690 .699
ment
Operations
Net interest income
125. Net realized and (1.310) .670 .120 .180 .030
unrealized gain (loss)
126. Total from investme (.677) 1.317 .794 .870 .729
nt
operations
127.Less Distributions (.633) (.647) (.674) (.690) (.699)
From net interest
income
128. From net realized g (.060) - - - -
ain
on investments
129. In excess of net rea (.020) - - - -
lized
gain on investments
130. Total distributions (.713) (.647) (.674) (.690) (.699)
131.Net asset value, $ 10.130 $ 11.520 $ 10.850 $ 10.730 $ 10.550
end of period
132.TOTAL RETURN -6.01 12.42 7.63 8.50 7.22
% % % % %
133.RATIOS AND SUPPLEMENTAL DATA
134.Net assets, end of p $ 276,934 $ 342,196 $ 280,781 $ 221,788 $ 167,127
eriod
(000 omitted)
135.Ratio of expenses to .59 .61 .67 .72 .76
% % % % %
average net assets
136.Ratio of net interest 5.97 5.73 6.25 6.47 6.72
income to average % % % % %
net assets
137.Portfolio turnover rat 26 37 12 14 29
e % % % % %
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Minnesota 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 of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
losses deferred due to wash sales, futures and options transactions and
excise tax regulations. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS AND OPTIONS -
CONTINUED
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Futures contracts and written options involve, to
varying degrees, risk of loss in excess of the futures variation margin or
the option value reflected in the Statement of Assets and Liabilities. The
underlying face amount at value is shown in the schedule of investments
under the caption "Purchased Options.",. This amount reflects each
contract's exposure to the underlying instrument at period end. Losses may
arise from changes in the value of the underlying instruments, if there is
an illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $77,387,546 and $95,171,308 respectively.
The market value of futures contracts opened and closed during the period
amounted to $180,192,029 and $179,153,309, 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 on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1325% to
..3700% for the period January 1, 1994 to July 31, 1994 and .1200% to .3700%
for the period August 1, 1994 to December 31, 1994. In the event that these
rates were lower than the contractual rates in effect during those periods,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .25%. For
the period, the management fee was equivalent to an annual rate of .41% of
average net assets.
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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN -
CONTINUED
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 $28,477 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
$387,656 and $135,450, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Minnesota Tax Free-Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Minnesota Tax-Free Portfolio, including
the schedule of portfolio investments, as of December 31, 1994, 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, 1994 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 Minnesota Tax-Free Portfolio as of
December 31, 1994, 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 L.L.P.
Boston, Massachusetts
January 27, 1995
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
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
4611 Sharon Road
Charlotte, 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
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
Page 31 = BLANK
Do NOT strip-in this type
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
Leonard M. Rush, 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
Marvin L. Mann*
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(registered trademark) Aggressive Tax-Free
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
Spartan California Municipal High Yield
Spartan Connecticut Municipal High Yield
Spartan Florida Municipal Income
Spartan Intermediate Municipal
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal High Yield
Spartan New York Intermediate Municipal
Spartan New York Municipal High Yield
Spartan Pennsylvania Municipal High Yield
Spartan Short-Intermediate Municipal
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
MICHIGAN
MUNICIPAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 20 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 24 How the fund has done over time.
FUND TALK 26 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 28 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 29 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 33 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 37 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 40 The auditors' opinion.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
into the fourth quarter of 1994. The Board raised the federal funds rate -
the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. A sixth increase in
November lifted the rate to 5.50%. The Fed rate hikes were intended to
forestall inflation that could result from an improving U.S. economy, and
they led to negative returns for many bond investments and below-average
returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Tax-Free High Yield Portfoli -7.50% 35.86% 102.93%
o
Lehman Brothers Municipal Bond Index -5.17% 39.04% n/a
Average Michigan Tax-Exempt
Municipal Bond Fund -5.89% 37.18% n/a
Consumer Price Index 2.67% 18.72% 37.72%
</TABLE>
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years, or since the fund started on November
12, 1985. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, you would end up with $1,050. You can compare
these figures to the performance of the Lehman Brothers Municipal Bond
index - a broad gauge of the municipal bond market. To measure how the fund
stacked up against its peers, you can look at the average Michigan
tax-exempt municipal bond fund, which currently reflects the performance of
25 Michigan 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Tax-Free High Yield Portfoli -7.50% 6.32% 8.05%
o
Lehman Brothers Municipal Bond Index -5.17% 6.81% n/a
Average Michigan Tax-Exempt
Municipal Bond Fund -5.89% 6.52% n/a
Consumer Price Index 2.67% 3.49% 3.55%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
$10,000 OVER LIFE OF FUND
Michigan Tax Free (0Municipal Bond Index
11/30/85 10000.00 10000.00
12/31/85 10228.04 10087.90
01/31/86 10687.19 10682.08
02/28/86 11127.76 11105.73
03/31/86 11215.73 11109.28
04/30/86 11211.16 11117.73
05/31/86 11014.05 10936.73
06/30/86 11104.96 11041.07
07/31/86 11192.51 11108.08
08/31/86 11728.63 11605.39
09/30/86 11744.86 11634.52
10/31/86 11980.10 11835.45
11/30/86 12202.92 12069.91
12/31/86 12174.63 12036.60
01/31/87 12524.17 12399.02
02/28/87 12647.80 12460.02
03/31/87 12511.95 12327.95
04/30/87 11594.89 11709.33
05/31/87 11456.19 11651.25
06/30/87 11689.71 11993.33
07/31/87 11879.96 12115.67
08/31/87 11906.65 12142.93
09/30/87 11314.43 11695.22
10/31/87 11388.40 11736.62
11/30/87 11631.88 12043.06
12/31/87 11832.70 12217.81
01/31/88 12356.20 12653.00
02/29/88 12509.85 12786.75
03/31/88 12221.63 12637.78
04/30/88 12272.39 12733.83
05/31/88 12347.33 12697.03
06/30/88 12576.27 12882.78
07/31/88 12686.04 12966.78
08/31/88 12749.39 12978.19
09/30/88 12970.04 13213.10
10/31/88 13241.11 13446.31
11/30/88 13134.04 13323.14
12/31/88 13372.66 13459.43
01/31/89 13563.89 13737.78
02/28/89 13481.08 13581.03
03/31/89 13486.10 13548.57
04/30/89 13881.01 13870.21
05/31/89 14164.98 14158.30
06/30/89 14347.57 14350.57
07/31/89 14479.62 14545.88
08/31/89 14366.23 14403.47
09/30/89 14332.92 14360.26
10/31/89 14477.63 14535.46
11/30/89 14678.29 14789.83
12/31/89 14738.67 14911.10
01/31/90 14647.76 14841.02
02/28/90 14772.60 14973.11
03/31/90 14766.57 14977.60
04/30/90 14511.72 14869.76
05/31/90 14855.92 15193.92
06/30/90 14983.11 15327.63
07/31/90 15193.41 15552.94
08/31/90 14963.53 15327.43
09/30/90 15038.11 15336.62
10/31/90 15180.59 15614.22
11/30/90 15477.85 15928.06
12/31/90 15497.50 15998.14
01/31/91 15644.75 16212.52
02/28/91 15761.71 16353.57
03/31/91 15792.95 16360.11
04/30/91 16055.17 16577.70
05/31/91 16128.95 16725.24
06/30/91 16105.12 16708.52
07/31/91 16359.20 16912.36
08/31/91 16555.78 17135.60
09/30/91 16737.51 17358.37
10/31/91 16919.67 17514.59
11/30/91 16981.94 17563.63
12/31/91 17362.94 17941.25
01/31/92 17425.81 17982.52
02/29/92 17454.90 17987.91
03/31/92 17474.70 17995.11
04/30/92 17629.58 18155.26
05/31/92 17820.61 18369.49
06/30/92 18133.46 18678.10
07/31/92 18795.51 19238.44
08/31/92 18530.13 19049.91
09/30/92 18655.94 19173.73
10/31/92 18340.70 18985.83
11/30/92 18789.33 19325.68
12/31/92 19018.73 19522.80
01/31/93 19297.47 19749.26
02/28/93 20073.13 20464.19
03/31/93 19844.03 20247.26
04/30/93 20055.87 20451.76
05/31/93 20189.52 20566.29
06/30/93 20536.19 20909.75
07/31/93 20521.04 20936.93
08/31/93 21007.44 21372.42
09/30/93 21273.22 21616.07
10/31/93 21305.56 21657.14
11/30/93 21166.56 21466.55
12/31/93 21649.22 21919.50
01/31/94 21943.25 22169.38
02/28/94 21309.59 21595.19
03/31/94 20346.30 20716.27
04/30/94 20447.35 20892.36
05/31/94 20552.01 21074.12
06/30/94 20491.65 20951.89
07/31/94 20852.78 21335.31
08/31/94 20904.43 21409.98
09/30/94 20622.06 21095.26
10/31/94 20194.37 20719.76
11/30/94 19558.64 20344.73
12/30/94 20024.49 20792.32
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Michigan Tax-Free High Yield Portfolio on November 30, 1985, shortly after
the fund started. As the chart shows, by December 31, 1994, the value of
your investment would have grown to $20,024 - a 100.24% 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 $20,792 - a 107.92% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend returns 5.40% 6.28% 6.72% 7.26% 7.04%
Capital appreciation
returns -12.90% 7.55% 2.82% 4.78% -1.89%
Total returns -7.50% 13.83% 9.54% 12.04% 5.15%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.87(cents) 34.73(cents) 68.71(cents)
Annualized dividend rate 6.54% 6.25% 6.04%
30-day annualized yield 6.52% - -
30-day annualized tax-equivalent yield 10.66% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.58 over
the past month, $11.02 over the past six months and $11.37 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 38.86% combined effective 1994 federal and state tax bracket.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Maureen Newman,
Portfolio Manager of Fidelity
Michigan Tax-Free High Yield
Q. MAUREEN, HOW DID THE FUND PERFORM IN 1994?
A. Last year was a difficult time for municipal bond funds, this one
included. For the year ended December 31, 1994, the fund had a total return
of -7.50%. That lagged the average Michigan municipal fund, which returned
- -5.89% for the same period, according to Lipper Analytical Services.
Q. WHAT WERE SOME OF THE FACTORS THAT CREATED SUCH A NEGATIVE ENVIRONMENT?
A. The Federal Reserve Board increased the federal funds rate - the
interest banks charge each other for overnight loans - six times from
February through the end of the year. The outlook in February was that the
economy was improving, but that inflation - the usual result of rapid
economic growth and a negative for bond investors because it diminishes the
value of fixed-income payments - was not going to be a problem. Although
some may have applauded the Fed's vigilance at trying to check inflation,
the Fed's move kindled inflation fears, sparking a severe drop in price in
all bond markets.
Q. WHY DID THE FUND TRAIL THE AVERAGE MICHIGAN FUND?
A. For several reasons. First it had a longer-than-average duration.
Duration measures how sensitive the fund's share price is to changes in
interest rates. The longer the fund's duration, the more its share price
falls when interest rates rise. The fund's longer duration was in part due
to its fairly large stake in bonds with very long maturities and its high
percentage of volatile zero coupon bonds, which are sold at a discount to
their face value, pay no interest, but are redeemed at face value at
maturity. Since July, I've shortened the fund's duration by using various
measures. I sold some bonds with maturities longer than 20 years and some
zero coupon bonds and bought 20-year bonds. At times, I also decreased the
fund's interest-rate sensitivity by using derivative investments known as
futures - which are widely employed for this purpose. At other times, I
built up the fund's stake in cash.
Q. WHAT OTHER FACTORS AFFECTED PERFORMANCE?
A. Some lower-quality health care bonds were drags on the fund's
performance. These bonds underperformed the overall municipal market during
the year, in part because investors were worried about the continued
consolidation in the Michigan health care industry. Although I'm
comfortable with most of the specific holdings in the health care sector, I
have sold some health care recently. While their high yields are
attractive, in the long run I'll most likely reduce the fund's stake in
health care bonds.
Q. BY SELLING HIGH YIELDING HEALTH CARE BONDS, ARE YOU REDUCING THE FUND'S
INCOME?
A. I'm only selling health care bonds when I can find attractive
opportunities in other sectors with high yields. For example, I've found
high-yielding opportunities in resource recovery bonds, like the Greater
Detroit Project which funds solid waste disposal systems. These bonds are
rated lower-investment-grade but have a short duration and also can offer a
relatively high current yield with a stable credit outlook.
Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF
LOSSES IN ITS INVESTMENT FUND. ARE THERE MICHIGAN MUNICIPALITIES
EXPERIENCING SIMILAR PROBLEMS?
A. From what we are aware of at this time, there are no Michigan
municipalities with similar problems. However, after the period ended, we
discovered that one of our hospital holdings had suffered unrealized losses
from derivatives. It doesn't appear that the financial performance of this
hospital will be substantially affected by those unrealized losses. But as
a precaution, I reduced the fund's stake in these bonds from 2% of
investments at the end of the period, to less than 1% by the end of January
1995. As far as the general municipal market is concerned, Orange County
caused a temporary disruption, but the market bounced back as it sorted out
the issues.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. In my view, interest rates probably will be more stable in 1995 than
they were in 1994. If I am correct, it's likely that bond prices will be
more stable as well. In that type of environment, the fund's total return
should be less dependent on bond price changes and more dependent on the
level of income the bonds pay. So I'll continue to concentrate on producing
a relatively high level of current income. I'll do that primarily by
seeking opportunities in higher-yielding, lower-rated bonds.
FUND FACTS
GOAL: to provide a high level
of current income exempt from
federal and Michigan state
income taxes
START DATE: November 12,
1985
SIZE: as of December 31,
1994, more than $433 million
MANAGER: Maureen Newman,
since July 1994; manager
Connecticut Tax-Free High
Yield Fund since July 1994,
Spartan Aggressive Municipal
Fund, since October 1994
and Spartan Arizona
Municipal Income Fund since
October 1994; bond analyst
1985 to 1994; joined Fidelity
in 1985
(checkmark)
MAUREEN NEWMAN ON
INVESTMENT STRATEGY:
"I start with fundamental
research - checking
investment options issuer by
issuer - to come up with
investment ideas relating to
changes in credit quality. I try
to stay ahead of the market
and the rating agencies,
looking for quality trends
before they happen, in order
to buy into good situations on
their way up and to get out of
securities before the market
realizes potential problems.
Diversification is also a key,
as I try to keep a good mix of
coupons and maturities in the
fund, which can reduce the
overall volatility of the fund."
(medium solid bullet) As of July 1994, Maureen
Newman became the fund
manager. Ms. Newman was
previously a research analyst.
(medium solid bullet) Inverse floaters, one of the
financial arrangements known
as derivatives, made up less
than 2% of the fund's
investments at the end of the
period. The yield on inverse
floaters rises as short-term
rates fall and vice versa. By
using various derivatives, the
manager hopes to achieve
higher levels of tax-exempt
income and increased
flexibility in managing the
fund's overall sensitivity to
changes in interest rates.
However, these strategies
can involve additional risk to
the fund and don't always
work as intended.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Health Care 28.1 27.9
General Obligation 12.5 12.2
Electric Revenue 8.8 11.9
Escrowed/prerefunded 8.5 6.8
Industrial Development 7.2 5.8
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 17.3 18.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 8.7 9.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 30.9%
Aa, A 24.3%
Baa 22.7%
Ba, B 7.9%
Non-rated 11.0%
Short-term investments 3.2%
Aaa 31.3%
Aa, A 30.1%
Baa 18.5%
Ba, B 7.7%
Non-rated 11.0%
Short-term investments 1.4%
Row: 1, Col: 1, Value: 30.9
Row: 1, Col: 2, Value: 24.3
Row: 1, Col: 3, Value: 22.7
Row: 1, Col: 4, Value: 7.9
Row: 1, Col: 5, Value: 11.0
Row: 1, Col: 6, Value: 3.2
Row: 1, Col: 1, Value: 31.3
Row: 1, Col: 2, Value: 30.1
Row: 1, Col: 3, Value: 18.5
Row: 1, Col: 4, Value: 7.7
Row: 1, Col: 5, Value: 11.0
Row: 1, Col: 6, Value: 2.0
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNT FOR 10.5% AND 8.7% OF THE FUND'S
INVESTMENTS AT DECEMBER 31, 1994 AND JUNE 30, 1994, RESPECTIVELY.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 96.8%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - 87.7%
Ann Arbor School Dist. Pub. Schools Ultd.
Tax (Cap. Appreciation) 0% 5/1/05 Aa $ 1,500,000 $ 768,750
Bay City Street Impt. Gen. Oblig.
(Cap. Appreciation) 0% 6/1/07
(AMBAC Insured) Aaa 1,595,000 727,719
Brighton Area School Dist.:
Rfdg. (Livingston County) Series II,
0% 5/1/15 (AMBAC Insured) Aaa 12,950,000 3,253,688
Unltd. Tax Series I, 0% 5/1/05,
(AMBAC Insured) Aaa 3,080,000 1,636,250
Brighton, Livingston County Wtr. Supply
Sys. Ltd. Tax:
5.25% 11/1/08 A 200,000 173,500
5.25% 11/1/09 A 200,000 170,000
Clinton Township Bldg. Auth.
4.75% 11/1/10 (AMBAC Insured) Aaa 2,810,000 2,311,225
Comstock Pub. Schools (Cap. Appreciation)
0% 5/1/05 (CGIC Insured) Aaa 1,300,000 690,625
Detroit City School Dist.
7.15% 5/1/11 (AMBAC Insured)
(Pre-Refunded to 5/1/01 @102) (e) Aaa 2,000,000 2,180,000
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.):
5.25% 9/30/07 A 6,500,000 5,622,500
5.25% 9/30/12 A 13,500,000 11,036,237
Detroit Econ. Dev. Corp. Ltd. Oblig. Rev.
(Michigan Health Care Corp. Proj.)
9.10% 12/1/09 - 3,790,000 3,221,500
Detroit Gen. Oblig.:
(Distributable State Aid):
Rfdg. 5.25% 5/1/08 (AMBAC Insured) Aaa 7,000,000 6,090,000
Rfdg. 5.25% 5/1/09 (AMBAC Insured) Aaa 4,000,000 3,515,000
5.125% 5/1/95 Baa 5,000,000 4,993,750
6.35% 4/1/14 Ba1 1,750,000 1,564,063
Detroit Hosp. Fin. Auth. Facs. Rev.
(Michigan Healthcare Corp. Proj.)
10% 12/1/20 B1 14,590,000 12,401,500
Detroit Swr. Disp. Rev. 6.908% 7/1/23,
(FGIC Insured) INFL (d) Aaa 9,000,000 6,367,500
Detroit Wtr. Supply Sys. Rev. Rfdg.
6.50% 7/1/15 (FGIC Insured) Aaa 15,000,000 14,906,250
Flint Hosp. Bldg. Auth. Rev.:
Rfdg. (Hurley Med. Ctr.) 9.50% 7/1/06 Baa1 5,670,000 5,861,363
(Hurley Med. Ctr.) 6.50% 7/1/20 Baa1 5,570,000 4,811,088
Forest Hills Pub. Schools Gen. Oblig.
Unltd. Tax 7.375% 5/1/15
(Pre-Refunded to 5/1/00 @ 101) (e) Aa 2,000,000 2,167,500
Fraser Bldg. Auth. Ltd. Tax 5% 11/1/18 Baa1 1,000,000 766,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Grand Haven Elec. Rev. Rfdg.
5.25% 7/1/16 (MBIA Insured) Aaa $ 5,500,000 $ 4,640,625
Grand Rapids San. Swr. Sys. Rev.
Impt. & Rfdg. 7% 1/1/16 A1 1,000,000 1,012,500
Grand Valley Univ. Gen. Oblig. Rev.:
Rfdg. 5.15% 10/1/09 (AMBAC Insured) Aaa 2,750,000 2,423,438
7.875% 10/1/08 A 1,000,000 1,095,000
Greater Detroit Resource Recovery Auth. Rev.:
Series C, 9.25% 12/13/08 BBB- 6,490,000 6,773,938
Series G, 9.25% 12/13/08 BBB- 3,000,000 3,131,250
Series H, 9.25% 12/13/08 BBB- 3,550,000 3,705,313
Gull Lake Commty. School Dist.
(Cap. Appreciation) 0% 5/1/13,
(FGIC Insured) Aaa 3,000,000 888,750
Harbor Springs Pub. Schools Unltd. Tax:
0% 5/1/11 (AMBAC Insured) Aaa 1,280,000 428,800
0% 5/1/12 (AMBAC Insured) Aaa 1,390,000 432,638
0% 5/1/13 (AMBAC Insured) Aaa 1,455,000 421,950
Haslett Pub. School Dist. Unltd. Tax
7.50% 5/1/20
(Pre-Refunded to 5/1/00 @ 101) (e) A1 1,500,000 1,633,125
Howell Pub. Schools Unltd. Tax Rfdg.
(Cap. Appreciation):
0% 5/1/10 (AMBAC Insured) Aaa 1,130,000 402,563
0% 5/1/11 (AMBAC Insured) Aaa 1,800,000 594,000
0% 5/1/12 (AMBAC Insured) Aaa 1,255,000 387,481
0% 5/1/13 (AMBAC Insured) Aaa 1,000,000 286,250
0% 5/1/14 (AMBAC Insured) Aaa 1,000,000 267,500
0% 5/1/14 (AMBAC Insured) Aaa 1,600,000 400,000
Huron Valley School Dist. Gen. Oblig.
Unltd. Tax:
Rfdg. 0% 5/1/11 (FGIC Insured) Aaa 5,830,000 1,982,200
7.10% 5/1/08 (FGIC Insured)
(Pre-Refunded to 5/1/01
@102) (e) A1 2,500,000 2,703,125
Imlay City Commty. School Dist. Rfdg. (Cap.
Appreciation) 0% 5/1/06
(FGIC Insured) Aaa 1,375,000 682,344
Kalamazoo City School Dist. Unltd. Tax
(School Bldg. & Site) 0% 5/1/07 Aa 1,195,000 540,738
Kent County Refuse Disp. Sys. Ltd. Tax
Rfdg. 8.40% 11/1/10 A1 2,000,000 2,142,500
Kent Hosp. Fin. Auth. Hosp. Facs. Rev.
Rfdg. (Butterworth Hosp.) Series A,
7.25% 1/15/13 A1 3,685,000 3,790,944
Lansing Bldg. Auth. Rev. (Deferred Interest):
0% 6/1/10 (AMBAC Insured) Aaa 2,500,000 893,750
0% 6/1/12 (AMBAC Insured) Aaa 3,000,000 922,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Lowell Area Schools Unltd. Tax:
Rfdg. (Cap. Appreciation) 0% 5/1/16
(FGIC Insured) Aaa $ 2,000,000 $ 467,500
(Cap. Appreciation) 0% 5/1/05
(FGIC Insured) (Pre-Refunded to
5/1/05 @ 49) (e) Aaa 8,775,000 2,270,531
Marquette City Hosp. Fin. Auth. Rev.
Rfdg. (Marquette Gen. Hosp.) Series C:
7.50% 4/1/07 A 1,000,000 1,041,250
7.50% 4/1/19 A 1,190,000 1,221,238
Michigan Bldg. Auth. Rev.:
(Detroit Regional) Series I:
0% 10/1/99 (Escrowed to Maturity) (e) Aaa 2,000,000 1,540,000
0% 10/1/01 (Escrowed to Maturity) (e) Aaa 1,000,000 686,250
0% 10/1/02 (Escrowed to Maturity) (e) Aaa 2,000,000 1,265,000
(Cap. Appreciation) 0% 10/1/04
(Escrowed to Maturity) (e) A 8,120,000 4,516,750
(Chippewa Correctional) Series I,
0% 10/1/00 (Escrowed to Maturity) (e) Aaa 2,275,000 1,640,844
Series II, 6.75% 10/1/11 A 1,000,000 993,750
Michigan Comprehensive Trans. Rev. Rfdg.
Series II, 7.625% 5/1/11 A1 2,145,000 2,273,700
Michigan Hosp. Fin. Auth. Rev.:
Rfdg.:
(Bay Med. Ctr.) Series A, 8.25% 7/1/12 Baa1 3,000,000 3,116,250
(Brighton Hosp.) Series A,
8.625% 10/1/18 - 1,100,000 1,104,125
(Detroit Macomb Hosp. Corp.):
Series A:
7.30% 6/1/01 B 1,250,000 1,201,563
7.40% 6/1/13 B 13,495,000 11,909,338
7% 6/1/15 B 1,345,000 1,129,800
(Detroit Medical Ctr.):
Series A, 6.50% 8/15/18 A 4,000,000 3,615,000
Series B, 5.50% 8/15/23 A 5,000,000 3,800,000
(Gratiot Commty. Hosp.) Series A,
8.75% 10/1/07 B 4,400,000 4,295,500
(McLaren Obligated Group) Series A,
5.375% 10/15/13 A1 4,280,000 3,498,900
(Pontiac Osteopathic Hosp.) Series A:
6% 2/1/14 Baa1 3,600,000 2,911,500
6% 2/1/24 Baa1 2,000,000 1,530,000
(Port Huron Hosp.) Series A:
7.50% 7/1/05 Baa 1,000,000 1,001,250
7.625% 7/1/15 Baa 2,250,000 2,303,438
(Saratoga Commty. Hosp.) 8.75% 6/1/10 - 1,840,000 1,886,000
(Sisters of Mercy Health Corp.)
5.375% 8/15/14 (MBIA Insured) Aaa 9,950,000 8,507,250
(Crittenton Hosp.) 5.25% 3/1/14 A 4,620,000 3,597,825
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev. - continued
(Daughters of Charity) (Providence Hosp.)
7% 11/1/21 Aa $ 1,000,000 $ 998,750
(Garden City Osteopathic Hosp.)
8.50% 9/1/17 Ba 2,000,000 2,035,000
(Harper Grace & Huron Valley Hosp.)
Series A, 10% 10/1/16 A 10,000 10,488
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.
Series B:
5.80% 4/1/19 A+ 4,650,000 3,969,938
7.55% 4/1/23 A+ 4,750,000 4,934,063
Michigan Hsg. Dev. Auth. Single Family
Mtg. Rev. Series A, 7.70% 12/1/16 AA+ 3,005,000 3,083,881
Michigan Muni. Bond Auth. Rev.
(Local Gov't. Loan Prog.):
Rfdg. (Cap. Appreciation) Series A,
0% 12/1/07 (FGIC Insured) Aaa 1,000,000 430,000
Rfdg. Series A:
0% 12/1/04 (FGIC Insured) Aaa 2,000,000 1,077,500
0% 12/1/05 (FGIC Insured) Aaa 1,855,000 929,819
0% 12/1/06 (FGIC Insured) Aaa 5,000,000 2,325,000
4.75% 12/1/09 (FGIC Insured) Aaa 6,000,000 5,032,500
Group 9, 8.75% 11/1/17 A 500,000 538,125
Group 19, 7.50% 11/1/09
(AMBAC Insured) Aaa 1,000,000 1,073,750
(Wayne County Proj.) Series A, 7%
12/1/09 (FGIC Insured)
(Pre-Refunded 6/1/00 @ 102) (e) Aaa 5,750,000 6,202,813
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.):
Series A, 5.25% 1/1/18 A1 7,000,000 5,643,750
Series B, 5% 1/1/19 A1 15,500,000 11,935,000
Michigan South Central Pwr. Agcy. Pwr.
Supply Sys. Rev. Rfdg.:
5.90% 11/1/06 (MBIA Insured) Aaa 3,000,000 2,913,750
5% 11/1/09 (AMBAC Insured) Aaa 1,675,000 1,446,781
6.75% 11/1/10 Baa1 2,000,000 1,942,500
Michigan Strategic Fund Ltd. Oblig. Rev.:
Rfdg.:
(Environmental Research Institute):
6.25% 8/15/06 A- 2,660,000 2,560,250
8.125% 10/1/14 - 9,000,000 9,461,250
(Detroit Edison Co.) Series BB:
7% 7/15/08 (MBIA Insured) Aaa 2,000,000 2,120,000
7% 5/1/21 (AMBAC Insured) Aaa 8,500,000 8,755,000
(Ford Co. Proj.) Series A,
7.10% 2/1/06 A2 4,000,000 4,180,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Oblig. Rev. - continued
Rfdg.: - continued
(Kmart Corp. Proj.):
(Eaton Twp.) 6.25% 9/1/06 BBB+ $ 1,200,000 $ 1,110,000
(Roseville) 6.25% 10/1/06 BBB+ 2,100,000 1,942,500
(Environmental Research Institute)
6.375% 8/15/12 A- 2,000,000 1,897,500
(Gladwin Pines Nursing Home Proj.)
(Midland Hosp. Ctr.) 8.75% 1/1/08 A- 1,640,000 1,748,650
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 - 8,150,000 8,160,188
(Mercy Svcs. for Aging Proj.)
9.40% 5/15/20 - 8,900,000 9,278,250
(Michigan Health Care Corp. Proj.)
9.10% 12/1/14 - 1,830,000 1,555,500
Michigan Trunkline Rfdg. Series B-1,
5.50% 10/1/21 A1 2,300,000 1,920,500
Midland County Econ. Dev. Corp. Poll.
Cont. Rev. Rfdg. (Subordinated Ltd. Oblig.)
Series B, 9.50% 7/23/09 (b) - 2,200,000 2,307,250
Monroe County Econ. Dev. Corp. Ltd. Oblig.
Rev. Rfdg. (Detroit Edison Co.) Series AA,
6.95% 9/1/22 (FGIC Insured) Aaa 1,000,000 1,022,500
Okemos Pub. School Dist. Unltd. Tax Rfdg.:
(Cap. Appreciation)
0% 5/1/12 (MBIA Insured) Aaa 2,500,000 781,250
0% 5/1/13 (MBIA Insured) Aaa 1,700,000 493,000
0% 5/1/14 (MBIA Insured) Aaa 1,600,000 432,000
0% 5/1/15 (MBIA Insured) Aaa 2,600,000 656,500
0% 5/1/16 (MBIA Insured) Aaa 3,500,000 826,875
Pontiac Gen. Bldg. Auth. Rev. Rfdg.
6.875% 4/1/06 (AMBAC Insured) Aaa 2,000,000 2,082,500
Pontiac Hosp. Fin. Auth. Rev.
(North Oakland Med. Ctr. Group):
Rfdg. 6% 8/1/23 Baa 6,000,000 4,537,500
6% 8/1/18 (f) Baa 6,000,000 4,642,500
Pontiac Stadium Bldg. Auth. Rev.
6.60% 3/1/03 Baa 1,145,000 1,107,788
Port Huron Area School Dist. Unltd. Tax
(Cap. Appreciation) 0% 5/1/08 A1 1,975,000 807,281
Rochester Commty. School Dist. Unltd. Tax
Rfdg. 5.625% 5/1/11 (FGIC Insured) Aaa 1,000,000 903,750
Romulus Commty. Schools (Cap. Appreciation):
Series 1, 0% 5/1/06 (FSA Insured) Aaa 3,610,000 1,791,463
0% 5/1/20 (FGIC Insured) Aaa 1,390,000 244,988
Royal Oak City School Dist. Unltd. Tax
(School Bldg. & Site) 0% 5/1/05
(AMBAC Insured) Aaa 3,000,000 1,601,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Royal Oak Hosp. Fin. Auth. Hosp. Rev.
(William Beaumont Hosp.)
Series C, 7.375% 1/1/20
(Pre-Refunded to 1/9/99 @102) (e) Aaa $ 4,070,000 $ 4,410,863
St. Clair Shores Econ. Dev. Corp. Ltd. Oblig.
Rev. (Bon Secours Health Sys.) Series B,
7.50% 9/1/15 A1 2,100,000 2,184,000
Tawas City Hosp. Fin. Auth. Hosp. Rev.
(St. Joseph Hosp. Proj.) Series A,
8.50% 3/15/12 - 2,460,000 2,530,725
Three Rivers Area Hosp. Auth. Series A:
11% 11/1/08 - 300,000 310,125
11% 11/1/09 - 300,000 310,125
Univ. of Michigan Univ. Hosp. Rev. 7% 12/1/21
(Pre-Refunded to 12/1/00 @102) (e) Aa 1,000,000 1,078,750
Univ. of Michigan Univ. Rev. Rfdg.
(Parking Sys.) Series A, 5% 6/1/15 Aa1 2,125,000 1,700,000
Vicksburg Commty. Schools
7% 5/1/07 (MBIA Insured)
(Pre-Refunded to 5/1/01 @ 102) (e) Aaa 2,250,000 2,435,625
Waterford Township Econ. Dev. Corp. Rev. Ltd.
Tax Oblig. (Canterbury Health Care):
8% 7/1/08 - 550,000 545,875
8.375% 7/1/23 - 1,300,000 1,314,625
Wayne Charter County Arpt. Rev.:
(Subordinated Lien Detroit Metropolitan Arpt.):
Series B, 6.875% 12/1/11,
(MBIA Insured) (b) Aaa 1,500,000 1,520,625
Series C, 5.25% 12/1/13
(MBIA Insured) Aaa 2,000,000 1,672,500
Wayne Charter County Spl. Arpt. Facs. Rev.
(Republic Airlines, Inc. Proj.) Series C,
10.375% 12/1/15 (f) - 4,475,000 4,698,750
Wayne County Bldg. Auth. Ltd. Tax
Series A, 8% 3/1/17
(Pre-Refunded to 3/1/02 @ 102) (e) Baa 2,250,000 2,548,125
West Ottawa Pub. School Dist. Unltd. Tax
Gen. Oblig. (Cap. Appreciation
Bldg. & Site) 0% 5/1/06 (MBIA Insured) Aaa 4,110,000 2,019,038
Western Michigan Univ. Rev.:
Rfdg. Series A, 5.50% 7/15/16
(FGIC Insured) Aaa 1,000,000 866,250
Series A, 5% 7/15/21 (FGIC Insured) Aaa 3,600,000 2,812,500
1.47% 7/15/17 (FGIC Insured) INFL (d) Aaa 2,500,000 1,759,375
Western Townships Util. Auth. Swr. Disp. Sys.
Ltd. Tax 8.20% 1/1/18 BBB+ 2,500,000 2,640,625
Williamston Gen. Oblig. Rfdg.
6.90% 11/1/17 (AMBAC Insured) Aaa 1,000,000 1,012,500
384,966,424
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PUERTO RICO - 8.1%
Puerto Rico Commonwealth Aqueduct & Swr.
Auth. Rev. Series A, 7.875% 7/1/17 Baa $ 2,000,000 $ 2,127,500
Puerto Rico Commonwealth Unltd. Tax
Gen. Oblig. 5% 7/1/21 Baa1 5,000,000 3,843,750
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Hwy. Rev. :
Rfdg. Series W, 5.50% 7/1/13 Baa1 13,000,000 11,212,500
Rfdg. Series X, 5.50% 7/1/15 Baa1 4,000,000 3,420,000
Series W, 5.50% 7/1/15 Baa1 5,000,000 4,275,000
Puerto Rico Commonwealth Hsg. Banking &
Fin. Agcy. Single Family Rfdg.:
5.125% 12/1/04 Baa 3,450,000 3,014,438
5.125% 12/1/05 Baa 2,890,000 2,481,788
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Rfdg.
7.875% 10/1/04 Baa1 2,800,000 3,031,000
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series S, 6.125% 7/1/09 Baa1 2,000,000 1,912,500
35,318,476
U.S. VIRGIN ISLANDS - 0.4%
Virgin Islands Pub. Fin. Auth. Rev. Rfdg.
Series A, 7.25% 10/1/18
(Escrowed to Maturity) (e) - 1,500,000 1,486,875
GUAM - 0.6%
Guam Pwr. Auth. Rev. Series A,
5.25% 10/1/13 BBB 3,500,000 2,804,375
TOTAL MUNICIPAL BONDS
(Cost $447,740,196) 424,576,150
MUNICIPAL NOTES (A) - 3.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - 3.2%
Cornell Township Econ. Dev. Corp. Envir.
Impt. Rev. Rfdg. (Mead Escanaba Paper
Co. Proj.) Series 1986, 5.85%,
LOC Swiss Bank, VRDN A-1+ $ 1,400,000 $ 1,400,000
Delta County Econ. Dev. Corp. Environ. Impt.
Rev. (Mead Escanaba Paper Co. Proj.)
Series 1992, 5.90%, LOC Union Bank of
Switzerland, VRDN (b) A-1+ 4,000,000 4,000,000
Farmington Hills Hosp. Fin. Auth. Hosp. Rev.
(Botsford Gen. Hosp.) 6% (MBIA Insured)
BPA Comerica Bank, VRDN VMIG 1 1,300,000 1,300,000
Flint Hosp. Bldg. Auth. Rev.
(Hurley Med. Ctr.) Series 1985, 5.50%,
LOC Comerica Bank, VRDN VMIG 1 2,200,000 2,200,000
Grand Rapids Ind. Dev. Rev. (Rowe Int'l. Inc.)
5.80%, LOC Marine Midland Bank, VRDN A-2 2,300,000 2,300,000
Michigan Strategic Fund Poll. Cont. Rev.
Rfdg. (Consumers Pwr. Co. Proj.)
Series 1988 A, 5.25%, LOC Union
Bank of Switzerland, VRDN P-1 3,000,000 3,000,000
TOTAL MUNICIPAL NOTES
(Cost $14,200,000) 14,200,000
TOTAL INVESTMENTS - 100%
(Cost $461,940,196) $ 438,776,150
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
10 Municipal Bond Contracts March 1995 $ 849,063 $ (19,466)
60 Treasury Bond Contracts March 1995 5,949,375 (86,795)
$ (106,261)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.5%
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
VRDN - Variable Rate Demand Notes
LEGEND
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals (AMT securities).
(j) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(k) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
(l) Security collateralized by an amount sufficient to pay interest and
principal.
(m) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $9,341,250.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 46.8% AAA, AA, A 59.7%
Baa 17.6% BBB 13.8%
Ba 0.8% BB 0.0%
B 3.8% B 6.1%
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 11.0%. FMR
has determined that unrated debt securities that are lower quality account
for 10.5% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Health Care 28.1%
General Obligation 12.5
Others
(individually less than 10%) 59.4
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1994 the aggregate cost of investment securities for income
tax purposes was $461,940,196. Net unrealized depreciation aggregated
$23,164,046, of which $10,137,103 related to appreciated investment
securities and $33,301,149 related to depreciated investment securities.
The fund hereby designates $4,040,330 as a capital gain dividend for the
purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending December 31,
1995 $5,128,984 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994, the fund was required to defer $2,095,232 of losses
on futures contracts and options.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $461,940,196) 9. $ 438,776,150
- -
See accompanying schedule
10.Cash 11. 25,796
12.Interest receivable 13. 7,553,796
14.Receivable for daily variation on futures contracts 15. 21,250
16. 17.TOTAL ASSETS 18. 446,376,992
19.LIABILITIES 20. 21.
22.Payable for investments purchased $ 8,156,961 23.
24.Payable for fund shares redeemed 2,915,892 25.
26.Dividends payable 1,368,662 27.
28.Accrued management fee 149,964 29.
30.Other payables and accrued expenses 91,257 31.
32. 33.TOTAL LIABILITIES 34. 12,682,736
35.36.NET ASSETS 37. $ 433,694,256
38.Net Assets consist of: 39. 40.
41.Paid in capital 42. $ 464,202,281
43.Accumulated undistributed net realized gain (loss) on 44. (7,237,718)
investments
45.Net unrealized appreciation (depreciation) 46. (23,270,307)
on investments
47.48.NET ASSETS, for 41,001,286 shares outstanding 49. $ 433,694,256
50.51.NET ASSET VALUE, offering price and redemption 52. $10.58
price per share ($433,694,256 (divided by) 41,001,286 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
53.54.INTEREST INCOME 55. $ 33,499,483
56.EXPENSES 57. 58.
59.Management fee $ 2,071,121 60.
61.Transfer agent, accounting and custodian fees 782,308 62.
and expenses
63.Non-interested trustees' compensation 8,934 64.
65.Registration fees 1,550 66.
67.Audit 30,621 68.
69.Legal 9,161 70.
71.Reports to shareholders 1,671 72.
73.Miscellaneous 1,052 74.
75. 76.TOTAL EXPENSES 77. 2,906,418
78.79.NET INTEREST INCOME 80. 30,593,065
81.REALIZED AND UNREALIZED GAIN (LOSS) 83. 84.
82.Net realized gain (loss) on:
85. Investment securities (46,540) 86.
87. Futures contracts 1,919,086 1,872,546
88.Change in net unrealized appreciation (depreciation) 89. 90.
on:
91. Investment securities (73,807,927) 92.
93. Futures contracts (106,261) (73,914,188)
94.95.NET GAIN (LOSS) 96. (72,041,642)
97.98.NET INCREASE (DECREASE) IN NET ASSETS 99. $ (41,448,577)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
100.INCREASE (DECREASE) IN NET ASSETS
101.Operations $ 30,593,065 $ 30,604,558
Net interest income
102. Net realized gain (loss) 1,872,546 12,872,382
103. Change in net unrealized appreciation (73,914,188) 23,940,952
(depreciation)
104. (41,448,577) 67,417,892
105.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
106.Distributions to shareholders: (30,593,065) (30,604,558)
From net interest income
107. From net realized gain (3,640,536) (10,681,220)
108. Distributions in excess of net realized gain (3,743,750) -
109. 110.TOTAL DISTRIBUTIONS (37,977,351) (41,285,778)
111.Share transactions 123,015,698 223,810,116
Net proceeds from sales of shares
112. Reinvestment of distributions 29,488,133 32,353,664
113. Cost of shares redeemed (202,876,014) (182,619,793)
114. (50,372,183) 73,543,987
Net increase (decrease) in net assets resulting from
share transactions
115. (129,798,111) 99,676,101
116.TOTAL INCREASE (DECREASE) IN NET ASSETS
117.NET ASSETS 118. 119.
120. Beginning of period 563,492,367 463,816,266
121. End of period $ 433,694,256 $ 563,492,367
122.OTHER INFORMATION 124. 125.
123.Shares
126. Sold 10,688,197 18,029,885
127. Issued in reinvestment of distributions 2,612,382 2,639,716
128. Redeemed (17,972,179) (14,614,309)
129. Net increase (decrease) (4,671,600) 6,055,292
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
130. YEARS ENDED DECEMBER 31,
131. 1994 1993 1992 1991 1990
132.SELECTED PER-SHARE
DATA
133.Net asset value, $ 12.340 $ 11.710 $ 11.410 $ 10.890 $ 11.100
beginning of period
134.Income from .687 .709 .733 .745 .758
Investment Operations
Net interest income
135. Net realized and (1.590) .870 .320 .520 (.210)
unrealized gain (loss)
136. Total from (.903) 1.579 1.053 1.265 .548
investment operations
137.Less Distributions (.687) (.709) (.733) (.745) (.758)
From net interest
income
138. From net realized (.080) (.240) (.020) - -
gain on investments
139. In excess of net rea (.090) - - - -
lized
gain on investments
140. Total distributions (.857) (.949) (.753) (.745) (.758)
141.Net asset value, $ 10.580 $ 12.340 $ 11.710 $ 11.410 $ 10.890
end of period
142.TOTAL RETURN -7.50 13.83 9.54 12.04 5.15
% % % % %
143.RATIOS AND SUPPLEMENTAL DATA
144.Net assets, end of $ 433,694 $ 563,492 $ 463,816 $ 379,175 $ 279,429
period (000 omitted)
145.Ratio of expenses to .57 .59 .61 .62 .64
average net assets % % % % %
146.Ratio of net interest 6.04 5.79 6.36 6.73 6.98
income to average % % % % %
net assets
147.Portfolio turnover 18 33 15 12 18
rate % % % % %
</TABLE>
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period and reinvestment of its dividends (or income). Yield
measures the income paid by a fund. Since a money market fund tries to
maintain a $1 share price, yield is an important measure of performance. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 LIFE OF
YEAR FUND
Fidelity Michigan Municipal
Money Market Portfolio 2.44% 18.39%
Consumer Price Index 2.67% 18.72%
Average All Tax-Free Money Market Fund 2.38% 17.09%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year or since the fund started on January 12, 1990. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, you would end up with $1,050. Comparing the fund's performance
to the consumer price index (CPI) helps show how your investment did
compared to inflation. To measure how the fund stacked up against its
peers, you can compare its return to the average all tax-free money market
fund's total return. This average currently reflects the performance of 373
all tax-free money market funds tracked by IBC/Donoghue. (The periods
covered by the CPI and IBC/Donoghue numbers are the closest available match
to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 LIFE OF
YEAR FUND
Fidelity Michigan Municipal
Money Market Portfolio 2.44% 3.45%
Consumer Price Index 2.67% 3.49%
Average All Tax-Free Money Market Fund 2.38% 3.26%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
12/31/93 3/31/94 6/30/94 9/30/94 12/31/94
Fidelity Michigan Municipal 2.31% 1.89% 2.22% 2.83% 4.15%
Money Market Portfolio
Average All Tax-Free 2.16% 1.77% 2.27% 2.81% 3.78%
Money Market Fund
Fidelity Michigan Municipal 3.78% 3.09% 3.63% 4.63% 6.79%
Money Market Portfolio
Tax-equivalent
Average All Taxable 2.72% 2.93% 3.64% 4.20% 5.12%
Money Market Fund
</TABLE>
Row: 1, Col: 1, Value: 2.31
Row: 1, Col: 2, Value: 2.16
Row: 2, Col: 1, Value: 1.89
Row: 2, Col: 2, Value: 1.77
Row: 3, Col: 1, Value: 2.22
Row: 3, Col: 2, Value: 2.27
Row: 4, Col: 1, Value: 2.83
Row: 4, Col: 2, Value: 2.81
Row: 5, Col: 1, Value: 4.149999999999999
Row: 5, Col: 2, Value: 3.78
Fidelity Michigan
Municipal Money
Market Portfolio
Average All
Tax-Free Money
Market Fund
4% -
3% -
2% -
1% -
0%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the average all tax-free money market fund. Or you
can look at the fund's tax-equivalent yield, which is based on a combined
effective 1994 federal and state income tax rate of 38.86%. The
tax-equivalent figures are useful in seeing how the fund stacked up against
the average taxable money market fund as tracked by IBC/Donoghue.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more meaningful.
Keep in mind that the U.S.
government neither insures nor
guarantees a money market
fund. And there is no
assurance that a money fund
will maintain a $1 share price.
(checkmark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Scott Orr, Portfolio
Manager of Fidelity Michigan
Municipal Money Market Portfolio
Q. SCOTT, INTEREST RATES HAVE BEEN CLIMBING STEADILY FOR ALMOST A YEAR. CAN
YOU BRING US UP TO DATE ON DEVELOPMENTS?
A. The initial increase came last February, when the Federal Reserve Board
pushed the federal funds rate - what banks charge each other for overnight
loans - up one-quarter percentage point to 3.25%. That brought a long
period of stability in short-term interest rates to an abrupt end and
opened the door to further increases. There were two additional
quarter-point rate increases in March and April, two half-point increases
in May and August, and finally a three-quarter-point jump in November. By
year's end, the federal funds rate stood at 5.50%, and the consensus among
economists was that it probably would head still higher in 1995.
Q. HOW DID YOU COPE IN THAT KIND OF ENVIRONMENT?
A. When interest rates are rising, my overall strategy is to shorten the
fund's average maturity. That's not to say I won't occasionally buy
longer-term securities to take advantage of attractive opportunities as
they present themselves. Still, the basic idea is to shorten up and let the
fund's yield rise with the market. Accordingly, I let the fund's average
maturity roll down from 57 days at the beginning of the period to 50 days
by the end of February and 45 days by the end of March. During the summer
borrowing season - when new issues traditionally flood the market - I
extended the fund briefly before letting it fall back into the mid-40s. As
supplies rose again in November, I took the fund back out to 60 days, but
only for a short time. The fund ended the period with an average maturity
of 40 days.
Q. WHAT'S THE PERCENTAGE OF VRDNS IN THE FUND?
A. VRDN, for those who may not be familiar with the term, is the acronym
for variable rate demand note. VRDNs have yields that adjust to prevailing
rates at daily, weekly or monthly intervals, and so can help the fund keep
pace with rising rates. I began the period with VRDNs at 51% of the fund's
total assets. As you might expect, that percentage rose during the year to
60% at the end of December.
Q. HOW DID THE FUND PERFORM?
A. On December 31, 1994, the fund's seven-day yield was 4.15%, compared to
2.31% a year earlier. The change reflects the sharp increase in interest
rates during 1994. The fund's year-end yield was the equivalent of a 6.79%
taxable yield for Michigan investors in the 38.86% combined effective 1994
federal and state tax bracket. The fund's total return for all of 1994 was
2.44%. During the same period the average tax-free money market fund had a
total return of 2.38%, according to IBC/Donoghue.
Q. WHAT'S THE OUTLOOK FOR THE COMING YEAR?
A. Almost everyone would agree that interest rates are likely to go on
rising in 1995. The Fed, hoping to stifle inflation before it becomes a
threat, has targeted an annual growth rate of 2.5%. And since we ended the
year with the economy apparently growing at more than 4%, it follows that
the Fed will almost certainly have to act again in the months ahead. I'd
say we could see a federal funds rate of 7% or even higher before the year
is over. My plan, then, at least for the next few months, will be to
maintain an average maturity well within the neutral to defensive range, or
somewhere around 40 days.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality, short-term,
Michigan municipal securities
START DATE: January 12, 1990
SIZE: as of December 31,
1994, more than $221 million
MANAGER: Scott Orr, since
October 1993; manager,
Fidelity
Connecticut Municipal Money
Market Portfolio, since
October 1993; Fidelity New
Jersey Tax-Free Money
Market Portfolio and Spartan
New Jersey Money Market
Portfolio, since January 1992;
Spartan Arizona Money
Market, since October 1994;
joined Fidelity in 1989
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face
value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/94 6/30/94 12/31/93
0 - 30 71 62 59
31 - 90 7 8 9
91 - 180 20 21 20
181 - 397 2 9 12
WEIGHTED AVERAGE MATURITY
12/31/94 6/30/94 12/31/93
Michigan Municipal
Money Market Portfolio 40 days 58 days 57 days
Average All Tax-Free
Money Market Fund* 47 days 46 days 62 days
ASSET ALLOCATION
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Row: 1, Col: 1, Value: 60.0
Row: 1, Col: 2, Value: 16.0
Row: 1, Col: 3, Value: 6.0
Row: 1, Col: 4, Value: 17.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 53.0
Row: 1, Col: 2, Value: 16.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 9.0
Variable rate
demand notes
(VRDNs) 60%
Commercial
paper 16%
Tender bonds 6%
Municipal
notes 17%
Other 1%
Variable rate
demand notes
(VRDNs) 53%
Commercial
paper 16%
Tender bonds 3%
Municipal
notes 19%
Other 9%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 100.0%
Battle Creek Rfdg. Bonds 4.50% 4/1/95 $ 500,000 $ 500,000
Bruce Township Hosp. Fin. Auth. Sisters of Charity
Health Care Sys. Rev. Bonds (St. Joseph Hosp. Ctr. Proj.)
3.90% tender, 5/1/95 (MBIA Insured)
BPA Morgan Guaranty 7,900,000 7,900,000
Comstock Park Pub. Schools Participating VRDN,
Series 94-B1, 5.70% (FGIC Insured)
(Liquidity Facility Norwest) (c) 3,145,000 3,145,000
Cornell Township Econ. Dev. Corp. Envir. Impt. Rev. Rfdg.
(Mead Escanaba Paper Co. Proj.) Series 1986, 5.85%,
LOC Swiss Bank, VRDN 1,500,000 1,500,000
Delta County Poll. Cont. Rev. Bonds (Mead Escanaba Proj.)
Series A, 3.60%, tender 1/17/95,
LOC Swiss Bank 1,000,000 1,000,000
Detroit City School Dist. RAN 5% 5/1/95 10,000,000 10,033,804
Detroit Wtr. Supply Sys. Participating VRDN,
Series PA-28, 5.50% (FGIC Insured)
(Liquidity Facility Merrill Lynch & Co.) (c) 4,440,000 4,440,000
Flint Econ. Dev. Corp. Ltd. Oblig. Rev.
(Genessee County Real Estate Proj.) 5.65%,
LOC Nat'l. Bank of Detroit, VRDN (b) 1,300,000 1,300,000
Genesee County Econ. Dev. Corp. Ltd. Oblig. Econ. Dev.
Rev. (Creative Foam Corp. Proj.) Series 1994, 5.65%,
LOC Nat'l. Bank of Detroit, VRDN (b) 3,000,000 3,000,000
Georgetown Charter Township Ltd. Oblig. Ind. Rev.
(J&F Steel Corp. Proj.) Series 1989, 5.10%,
LOC Societe Generale, VRDN (b) 1,000,000 1,000,000
Grand Rapids Downtown Dev. Auth. Tax Increment
Rev. Bonds 5% 6/1/95 (MBIA Insured) 935,000 938,009
Grand Rapids Econ. Dev. Auth. Rev.
(Calder Plaza Proj.) Series 1992 A, 5.65%,
LOC Old Kent Bank & Trust Co., VRDN 1,200,000 1,200,000
Grand Rapids Econ. Dev. Corp. Econ. Dev. Rev. Rfdg.
(Amway Hotel Corp. Proj.) Series 1991 A, 6.05%,
LOC Sakura Bank, VRDN 1,100,000 1,100,000
Grand Rapids Ind. Rev. (Rowe Int'l.) 5.80%,
LOC Marine Midland Bank, VRDN 3,000,000 3,000,000
Kalamazoo Econ. Dev. Corp. Rev. Rfdg.
(La Quinta Motor Inns) Series 1991, 5.65%,
LOC NationsBank, VRDN 2,190,000 2,190,000
Kent County Hosp. Fin. Auth. Participating VRDN,
Series 94-C1, 5.70% (MBIA Insured)
(Liquidity Facility Norwest) (c) 4,000,000 4,000,000
Livonia Econ. Dev. Corp., VRDN (b):
(Ajluni Proj.) 5.65%, LOC Nat'l. Bank of Detroit 2,300,000 2,300,000
(Foodland Distributors Corp.) 5.60%,
LOC Comerica 2,100,000 2,100,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan General Oblig. School Loan BAN
4.25% 4/11/95 $ 10,000,000 $ 10,012,088
Michigan Higher Ed. Student Loan Auth. Rev., VRDN (b):
Rfdg. Series XII-B, 5.05% (AMBAC Insured)
BPA Krediet Bank 12,100,000 12,100,000
Series XII-D, 5.05% (AMBAC Insured)
BPA Fuji Bank 3,300,000 3,300,000
Michigan Hosp. Fin. Auth. Rev., VRDN:
Rfdg. (Mt. Clemens General Hospital)
Series 1994, 5.65%, LOC Comerica, VRDN 7,300,000 7,300,000
(Equip. Loan Prog.):
Series 1991, 4.95%, LOC Comerica 915,000 915,000
Series A, 5.60%, LOC First of America Bank 8,600,000 8,600,000
Michigan Hsg. Dev. Auth. Participating VRDN (b) (c):
Series PT-19, 5.75%
(Liquidity Facility Credit Suisse) 11,580,000 11,580,000
Series PT-38, 5.75% (FSA Insured)
(Liquidity Facility Industrial Bank of Japan) 4,710,000 4,710,000
Michigan Hsg. Dev. Auth. Multi-Family Hsg. Rev. Bonds
Series 1988 A (b):
3.50%, tender 1/20/95, LOC Sanwa Bank Ltd. 4,935,000 4,935,000
3.60%, tender 1/26/95, LOC Sanwa Bank Ltd. 1,100,000 1,100,000
3.60%, tender 1/26/95, LOC Sanwa Bank Ltd. 2,700,000 2,700,000
3.60%, tender 1/27/95, LOC Sanwa Bank Ltd. 3,700,000 3,700,000
4.35%, tender 2/13/95, LOC Sanwa Bank Ltd. 1,800,000 1,800,000
3.90%, tender 2/17/95, LOC Sanwa Bank Ltd. 2,300,000 2,300,000
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Bonds, Series 1994 C, 3.10%, tender 2/28/95,
LOC Credit Suisse 5,000,000 5,000,000
Series 1992 B, 5.70%, LOC Sumitomo Bank, VRDN 4,100,000 4,100,000
Michigan Muni. Bond Auth. RAN:
Series 1994 A, 4.25% 5/5/95 13,500,000 13,526,698
Series 1994 B, 4.75% 7/20/95 5,000,000 5,019,753
Michigan Strategic Fund Econ. Dev. Rev. (Yamaha
Musical Prod., Inc. Proj.) Series 1988, 6.10%,
LOC Dai-Ichi Kangyo Bank, VRDN (b) 6,000,000 6,000,000
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN:
(Alpha Tech Corp. Proj.) Series 1987, 5.70%,
LOC Bank of Tokyo (b) 6,000,000 6,000,000
(Donnelly Corp. Proj.) Series 1990 A, 5.70%,
LOC Bank of Tokyo (b) 3,500,000 3,500,000
(Hi Tech Mold & Engineering) 5.65%,
LOC Nat'l. Bank of Detroit (b) 1,600,000 1,600,000
(The Spiratex Co. Proj.) Series 1994, 5.65%,
LOC Nat'l. Bank of Detroit (b) 3,000,000 3,000,000
(Uni Boring Co. Inc. Proj.) Series 1992, 5.65%,
LOC Nat'l. Bank of Detroit 2,200,000 2,200,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Poll. Cont. Rev.:
Rfdg. (Consumers Pwr. Co. Proj.) Series 1988 A, 5.25%,
LOC Union Bank of Switzerland, VRDN $ 5,500,000 $ 5,500,000
Michigan Strategic Fund Rev. Bonds:
(Dow Chemical Co. Proj.):
Series 1986, 3.90%, tender 2/14/95 1,000,000 1,000,000
Series 1987, 3.80%, tender 1/23/95 2,720,000 2,720,000
Series 1988 (b):
3.65%, tender 1/17/95 2,700,000 2,700,000
3.90%, tender 1/11/95 3,190,000 3,190,000
3.60%, tender 1/24/95 2,000,000 2,000,000
4.55%, tender 3/9/95 3,700,000 3,700,000
4.40%, tender 3/13/95 2,400,000 2,400,000
Michigan Strategic Fund Rev.
Series 1992, 6.90%, VRDN (b) 700,000 700,000
Michigan Strategic Fund Solid Waste Disp. Rev.
(Grayling Gen. Station Proj.) Series 1990, 5.75%,
LOC Barclays Bank, VRDN (b) 6,200,000 6,200,000
Midland County Econ. Dev. Corp. Rev. (Dow Chemical
Co. Proj.) Series 1993 A, 6.90%, VRDN (b) 1,400,000 1,400,000
Monroe County Econ. Dev. Corp. Rev. Rfdg.
(Detroit Edison Proj.) Series 1992 CC, 5.85%,
LOC Barclays Bank, VRDN 1,300,000 1,300,000
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cardell Corp.) 5.80%, LOC Comerica, VRDN (b) 300,000 300,000
Saline Econ. Dev. Corp. Rev. (Associated Springs Proj.)
Series 1988, 5.90%, LOC Fuji Bank, VRDN (b) 5,000,000 5,000,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 5.70%,
LOC Comerica Bank, VRDN (b) 5,300,000 5,300,000
University of Michigan Hosp. Rev.
Series 1992 A, 6.15%, VRDN 1,200,000 1,200,000
TOTAL INVESTMENTS - 100% $ 220,255,352
Total Cost for Income Tax Purposes $ 220,255,352
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $52,800 of which $1,600, $1,700, $10,300 and $39,200 will
expire on December 31, 1998, 1999, 2001 and 2002, respectively.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
148.ASSETS 149. 150.
151.Investment in securities, at value - See 152. $ 220,255,352
accompanying schedule
153.Cash 154. 1,751,178
155.Interest receivable 156. 1,728,573
157. 158.TOTAL ASSETS 159. 223,735,103
160.LIABILITIES 161. 162.
163.Payable to custodian bank $ 131,096 164.
165.Payable for investments purchased 1,700,000 166.
167.Dividends payable 43,035 168.
169.Accrued management fee 72,503 170.
171.Other payables and accrued expenses 53,605 172.
173. 174.TOTAL LIABILITIES 175. 2,000,239
176.177.NET ASSETS 178. $ 221,734,864
179.Net Assets consist of: 180. 181.
182.Paid in capital 183. $ 221,787,592
184.Accumulated net realized gain (loss) on 185. (52,728)
investments
186.187.NET ASSETS, for 221,787,592 shares 188. $ 221,734,864
outstanding
189.190.NET ASSET VALUE, offering price and 191. $1.00
redemption price per share ($221,734,864 (divided by)
221,787,592 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
192.193.INTEREST INCOME 194. $ 6,011,683
195.EXPENSES 196. 197.
198.Management fee $ 803,963 199.
200.Transfer agent, accounting and custodian fees 360,470 201.
and expenses
202.Non-interested trustees' compensation 310 203.
204.Registration fees 2,518 205.
206.Audit 21,497 207.
208.Legal 4,893 209.
210.Miscellaneous 1,619 211.
212. 213.TOTAL EXPENSES 214. 1,195,270
215.216.NET INTEREST INCOME 217. 4,816,413
218.219.NET REALIZED GAIN (LOSS) ON INVESTMENTS 220. (39,157)
221.222.NET INCREASE IN NET ASSETS RESULTING FROM 223. $ 4,777,256
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
224.INCREASE (DECREASE) IN NET ASSETS
225.Operations $ 4,816,413 $ 3,163,865
Net interest income
226. Net realized gain (loss) (39,157) (10,242)
227. 4,777,256 3,153,623
228.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
229.Dividends to shareholders from net interest income (4,816,413) (3,163,865)
230.Share transactions at net asset value of $1.00 per 440,390,901 305,331,423
share
Proceeds from sales of shares
231. Reinvestment of dividends from net interest 4,529,069 2,958,037
income
232. Cost of shares redeemed (398,336,000) (293,906,431)
233. 46,583,970 14,383,029
Net increase (decrease) in net assets and shares
resulting from share transactions
234. 46,544,813 14,372,787
235.TOTAL INCREASE (DECREASE) IN NET ASSETS
236.NET ASSETS 237. 238.
239. Beginning of period 175,190,051 160,817,264
240. End of period $ 221,734,864 $ 175,190,051
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
241. YEARS ENDED DECEMBER 31, JANUARY 12, 1990
(COMMENCEMEN
T
OF OPERATIONS) TO
DECEMBER 31,
242. 1994 1993 1992 1991 1990
243.SELECTED PER-SHARE DATA
244.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
245.Income from .024 .020 .026 .044 .055
Investment
Operations
Net interest income
246. Dividends from (.024) (.020) (.026) (.044) (.055)
net interest income
247.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
248.TOTAL RETURN B 2.44 2.66 4.46 5.66%
% 1.98 % %
%
249.RATIOS AND SUPPLEMENTAL
DATA
250.Net assets, $ 221,735 $ 175,190 $ 160,817 $ 175,150 $ 169,397
end of period
(000 omitted)
251.Ratio of .61 .62 .49 .21 .22%A
expenses to average % % % %
net assets
252.Ratio of .61 .62 .61 .65 .77%A
expenses to average % % % %
net assets before
expense reductions
253.Ratio of net 2.45 1.96 2.64 4.38 5.78%A
interest income to % % % %
average
net assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Michigan Tax-Free High Yield Portfolio (the high yield fund) is a
fund of Fidelity Municipal Trust. Fidelity Michigan Municipal Money Market
Portfolio (the money market fund) is a fund of Fidelity Municipal Trust II.
Each trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company.
Fidelity Municipal Trust and Fidelity Municipal Trust II (the trusts) are
organized as a Massachusetts business trust and a Delaware business trust,
respectively. The individual investment objective, policies and limitations
of the money market fund remain the same. Each fund is authorized to issue
an unlimited number of shares. The following summarizes the significant
accounting policies of the high yield and the money market funds :
SECURITY VALUATION.
HIGH YIELD FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date. 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 losses
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
deferred due to wash sales and, for the high yield fund, futures and
options transactions and excise tax regulations. The high yield 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.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The high yield fund may use futures and
options contracts to manage its exposure to the bond market and to
fluctuations in interest rates. Buying futures, writing puts, and buying
calls tend to increase the fund's exposure to the underlying instrument.
Selling futures, buying puts, and writing calls tend to decrease the fund's
exposure to the underlying instrument, or hedge other fund investments.
Futures contracts and written options involve, to varying degrees, risk of
loss in excess of the futures variation margin or the option value
reflected in the Statement of Assets and Liabilities. The underlying face
amount at value is shown in the schedule of investments under the caption
"Futures Contracts". This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparties do not perform under the
contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
HIGH YIELD FUND. Purchases and sales of securities, other than short-term
securities, aggregated $89,960,196 and $138,867,590, respectively.
The market value of futures contracts opened and closed during the period
amounted to $312,414,436 and $303,486,251, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of each fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1325% to
..3700% for the period January 1, 1994 to July 31, 1994 and .1200% to .3700%
for the period
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE. - CONTINUED
August 1, 1994 to December 31, 1994. In the event that these rates were
lower than the contractual rates in effect during those periods, FMR
voluntarily implemented the above rates, as they resulted in the same or a
lower management fee. The annual individual fund fee rate is .25%. For the
period, the management fee was equivalent to an annual rate of .41% of
average net assets for the high yield and money market funds.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans), and in accordance with Rule 12b-1 of the 1940 Act, FMR
or the funds' distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of each fund's shares. Subject to
the approval of each Board of Trustees, the Plans also authorize payments
to third parties that assist in the sale of each fund's shares or render
shareholder support services.
FMR or FDC has informed the funds that payments made to third parties under
the Plans amounted to $31,879 and $19,339 for the high yield and money
market funds, respectively, 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
funds. 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 funds' transfer and shareholder servicing agent and
accounting functions. The funds pay 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
$553,386 and $216,724 for the high yield fund and $299,975 and $40,958 for
the money market fund, respectively.
Shareholders participating in the Fidelity Ultra Service Account(registered
trademark) Program (the Program) pay a $5.00 monthly fee to Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, for performing
services associated with the Program. For the period, fees paid to FBSI by
shareholders participating in the Program amounted to $8,465.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Fidelity Michigan Tax-Free High Yield Portfolio and
Fidelity Michigan Municipal Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of
Fidelity Michigan High Yield Portfolio, a portfolio of Fidelity Municipal
Trust, and Fidelity Michigan Municipal Money Market Portfolio, a portfolio
of Fidelity Municipal Trust II, including the schedules of portfolio
investments, as of December 31, 1994, and the related statements of
operations for the year then ended, the statements 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 for the
Fidelity Michigan Tax-Free High Yield Portfolio, and the financial
highlights for each of the four years in the period then ended and for the
period January 12, 1990 (commencement of operations) to December 31, 1990
for the Fidelity Michigan Municipal Money Market Portfolio. 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, 1994 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 Michigan High Yield Portfolio and Fidelity Michigan Money
Market Portfolio as of December 31, 1994, the results of their operations
for the year then ended, the changes in their 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 for the Fidelity Michigan
Tax-Free High Yield Portfolio, and the financial highlights for each of the
four years in the period then ended and for the period January 12, 1990
(commencement of operations) to December 31, 1990 for the Fidelity Michigan
Municipal Money Market Portfolio , in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 27, 1995
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
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(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
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PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
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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
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
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
4611 Sharon Road
Charlotte, 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
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
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MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
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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.
Page 45 = BLANK
Do NOT strip-in this type
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INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President -
MONEY MARKET FUND
Scott A. Orr, Assistant, Vice President -
MONEY MARKET FUND
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, 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 AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
OHIO
MUNICIPAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 25 How the fund has done over time.
FUND TALK 27 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 29 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 30 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 36 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 40 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 43 The auditor's opinion.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
into the fourth quarter of 1994. The Board raised the federal funds rate -
the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. A sixth increase in
November lifted the rate to 5.50%. The Fed rate hikes were intended to
forestall inflation that could result from an improving U.S. economy, and
they led to negative returns for many bond investments and below-average
returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal High Yield Portfolio -5.55% 38.40% 99.63%
Lehman Brothers Municipal Bond Index -5.17% 39.04% n/a
Average Ohio Tax-Exempt
Municipal Bond Fund -6.08% 37.32% n/a
Consumer Price Index 2.67% 18.72% 37.34%
</TABLE>
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years, or since the fund started on November
15, 1985. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, you would end up with $1,050. You can compare
these figures to the performance of the Lehman Brothers Municipal Bond
index - a broad gauge of the municipal bond market. To measure how the fund
stacked up against its peers, you can look at the average Ohio tax-exempt
municipal bond fund, which currently reflects the performance of 37 Ohio
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 (CPI) 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal High Yield Portfolio -5.55% 6.72% 7.86%
Lehman Brothers Municipal Bond Index -5.17% 6.81% n/a
Average Ohio Tax-Exempt
Municipal Bond Fund -6.08% 6.55% n/a
Consumer Price Index 2.67% 3.49% 3.55%
</TABLE>
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
Ohio Tax Free (088) Municipal Bond Index
11/30/85 10000.00 10000.00
12/31/85 10222.80 10087.90
01/31/86 10749.09 10682.08
02/28/86 11073.37 11105.73
03/31/86 11161.00 11109.28
04/30/86 11072.97 11117.73
05/31/86 10944.21 10936.73
06/30/86 11012.12 11041.07
07/31/86 11068.97 11108.08
08/31/86 11526.58 11605.39
09/30/86 11519.26 11634.52
10/31/86 11765.60 11835.45
11/30/86 11978.65 12069.91
12/31/86 11905.20 12036.60
01/31/87 12310.19 12399.02
02/28/87 12431.90 12460.02
03/31/87 12355.81 12327.95
04/30/87 11391.80 11709.33
05/31/87 11282.79 11651.25
06/30/87 11527.96 11993.33
07/31/87 11696.64 12115.67
08/31/87 11708.49 12142.93
09/30/87 11096.64 11695.22
10/31/87 11110.44 11736.62
11/30/87 11411.72 12043.06
12/31/87 11622.03 12217.81
01/31/88 12158.17 12653.00
02/29/88 12320.35 12786.75
03/31/88 12000.79 12637.78
04/30/88 12059.93 12733.83
05/31/88 12143.87 12697.03
06/30/88 12371.68 12882.78
07/31/88 12480.80 12966.78
08/31/88 12506.32 12978.19
09/30/88 12738.78 13213.10
10/31/88 13009.43 13446.31
11/30/88 12911.14 13323.14
12/31/88 13124.55 13459.43
01/31/89 13313.64 13737.78
02/28/89 13201.16 13581.03
03/31/89 13202.43 13548.57
04/30/89 13559.05 13870.21
05/31/89 13853.97 14158.30
06/30/89 14034.67 14350.57
07/31/89 14150.68 14545.88
08/31/89 14004.90 14403.47
09/30/89 13938.64 14360.26
10/31/89 14118.49 14535.46
11/30/89 14322.17 14789.83
12/31/89 14435.12 14911.10
01/31/90 14299.67 14841.02
02/28/90 14461.42 14973.11
03/31/90 14477.87 14977.60
04/30/90 14257.79 14869.76
05/31/90 14627.17 15193.92
06/30/90 14778.15 15327.63
07/31/90 15000.32 15552.94
08/31/90 14764.39 15327.43
09/30/90 14877.17 15336.62
10/31/90 15089.30 15614.22
11/30/90 15443.68 15928.06
12/31/90 15517.64 15998.14
01/31/91 15689.71 16212.52
02/28/91 15788.58 16353.57
03/31/91 15817.52 16360.11
04/30/91 16064.27 16577.70
05/31/91 16195.73 16725.24
06/30/91 16137.44 16708.52
07/31/91 16359.71 16912.36
08/31/91 16523.33 17135.60
09/30/91 16718.81 17358.37
10/31/91 16869.42 17514.59
11/30/91 16898.75 17563.63
12/31/91 17293.79 17941.25
01/31/92 17324.53 17982.52
02/29/92 17335.75 17987.91
03/31/92 17322.95 17995.11
04/30/92 17462.35 18155.26
05/31/92 17698.81 18369.49
06/30/92 18011.01 18678.10
07/31/92 18531.14 19238.44
08/31/92 18324.40 19049.91
09/30/92 18433.24 19173.73
10/31/92 18097.76 18985.83
11/30/92 18579.99 19325.68
12/31/92 18792.03 19522.80
01/31/93 19037.57 19749.26
02/28/93 19715.74 20464.19
03/31/93 19485.45 20247.26
04/30/93 19664.22 20451.76
05/31/93 19763.22 20566.29
06/30/93 20091.93 20909.75
07/31/93 20121.74 20936.93
08/31/93 20590.13 21372.42
09/30/93 20836.47 21616.07
10/31/93 20850.17 21657.14
11/30/93 20672.87 21466.55
12/31/93 21152.11 21919.50
01/31/94 21409.21 22169.38
02/28/94 20840.86 21595.19
03/31/94 19959.05 20716.27
04/30/94 20111.21 20892.36
05/31/94 20247.80 21074.12
06/30/94 20216.88 20951.89
07/31/94 20536.45 21335.31
08/31/94 20601.58 21409.98
09/30/94 20350.62 21095.26
10/31/94 19954.77 20719.76
11/30/94 19516.53 20344.73
12/30/94 19978.87 20792.32
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Ohio
Municipal High Yield Portfolio on November 30, 1985, shortly after the fund
started. As the chart shows, by December 31, 1994, the value of your
investment would have grown to $19,979 - a 99.79% 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 $20,792 - a 107.92% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend returns 5.37% 6.19% 6.63% 7.02% 7.04%
Capital appreciation
returns -10.92% 6.37% 2.03% 4.43% 0.46%
Total returns -5.55% 12.56% 8.66% 11.45% 7.50%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.61(cents) 33.10(cents) 65.73(cents)
Annualized dividend rate 6.27% 6.04% 5.89%
30-day annualized yield 6.36% - -
30-day annualized tax-equivalent yield 10.74% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.53 over
the past month, $10.87 over the past six months and $11.16 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 40.80% combined effective 1994 federal and state tax bracket.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Steven Harvey, Portfolio Manager of Fidelity Ohio
Tax-Free High Yield Portfolio
Q. STEVE, EVEN THOUGH YOU JUST TOOK OVER THE FUND THIS PAST JULY, CAN YOU
TELL US HOW IT PERFORMED DURING 1994?
A. It was a particularly difficult time for all municipal bond funds,
including this one. In fact, 1994 was the worst year for the tax-exempt
bond market since 1927. Against that backdrop, the fund's total return for
the year ended December 31, 1994, was -5.55%. That beat the average Ohio
tax-free bond fund, which returned -6.08% for the same period, according to
Lipper Analytical Services.
Q. DESPITE ITS LOSSES, THE FUND DID BETTER THAN THE AVERAGE. WHY?
A. The fund's stake in lower-quality, higher-yielding bonds was the primary
reason. In general, when the municipal bond market started to fall,
higher-quality, lower-yielding bonds were among the first to be sold
because they were so liquid, or easily traded. Lower-quality,
higher-yielding bonds were less liquid and generally were the last to
suffer price declines. What's more, as interest rates rose and current
yields crept higher, lower-yielding bonds became less attractive and
investors were eager to hold onto their higher-yielding bonds. At the end
of the period, the fund had 30.2% of investments that were deemed
lower-investment-grade or below-investment-grade - Baa or lower - by
Moody's Investor Services, Standard & Poor's or
Fidelity's own internal rating system.
Q. WHAT OTHER FACTORS AFFECTED
PERFORMANCE?
A. The fund's duration was in line with the average Ohio fund. Duration is
a measure of how sensitive the fund's share price is to changes in interest
rates. The longer the fund's duration, the more sensitive its share price
when interest rates rise or fall. In this case, the fund's neutral duration
caused its share price to fall about the same as similar funds as interest
rates rose. It's important to remember that, in general, when interest
rates rise a bond's price declines and its duration lengthens. When
interest rates rose, prices of the bonds in the fund declined and its
duration naturally lengthened. Beginning in July, I took steps to temper
the fund's lengthening duration. At times, I used futures and options to
help temporarily reduce the fund's duration. As the market fell, the values
of the futures and options positions rose. At other times, I built up the
fund's stake in cash, which also helped temper its volatility.
Unfortunately, many of the market's down drafts were so severe and dramatic
that these measures weren't sufficient enough to prevent losses for the
fund.
Q. ABOUT 7% OF THE FUND'S INVESTMENTS WERE INVESTED IN CUYAHOGA COUNTY AS
OF DECEMBER 31, 1994. DID THE COUNTY'S LOSSES ON INVESTMENTS HURT THOSE
HOLDINGS?
A. No, but let's start with a review of what happened before we discuss the
impact on the fund. In October, Cuyahoga County disclosed that it had
suffered a loss of about $100 million in an investment pool in which the
county and 75 cities, villages, school districts and other counties were
participants. On news of the losses, the investment pool was voluntarily
liquidated and Cuyahoga County allowed all of its investors to exit the
pool with the total amount of their initial investment. For the
participants, that was good news and the price of their bonds remained
relatively steady. The impact of losses on Cuyahoga County is still being
determined. While a loss of this magnitude is difficult to deal with, the
county has been very quick to recognize the problem and take steps to
remedy the situation. It cut its budget by 11%, which could help offset
some of its investment losses. Moody's recently downgraded the county's
credit rating from AA to A1, which it describes as upper-medium grade.
Turning back to the fund, 70% of its Cuyahoga holdings are insured, which
means principal and interest payments are guaranteed. The uninsured bonds
are only about 2% of the fund. After careful review, I'm confident that
this type of problem is confined to Cuyahoga County and shouldn't occur
with any of our other Ohio investments. However, with the help of
Fidelity's research staff, I'll continue to carefully monitor both the
Cuyahoga situation and the rest of the fund's investments.
Q. WHAT'S AHEAD FOR INVESTORS?
A. The municipal bond market could have a rough time if interest rates
continue to rise. However, after that, I'm optimistic that municipal bonds
can do better in 1995 than they did in 1994. It would be very unusual to
have back-to-back years with such negative returns. Also, I think we'll see
the economy start to slow and long- term interest rates come down a bit
beginning in mid-1995. That would most likely be a positive scenario for
municipal bonds. Yields on municipal bonds are attractive right now. Those
attractive yields, coupled with the fact that the supply of municipal bonds
is expected to stay low for the next two years, could ultimately help firm
municipal bond prices.
FUND FACTS
GOAL: to provide a high level
of current income exempt from
Ohio state and federal income
taxes
START DATE: November 15,
1985
SIZE: as of December 31,
1994, more than $350 million
MANAGER: Steven Harvey,
since July 1994; manager,
Spartan Pennsylvania High
Yield Portfolio, since October
1993; Spartan Maryland
Municipal Income Portfolio,
since April 1993; joined Fidelity
in 1986
(checkmark)
STEVE HARVEY'S STRATEGY:
"At this point, there appears to
be evidence to suggest that
interest rates could rise or fall
another half a percentage
point or more over the next six
months. But it's not certain in
which direction interest rates
will move. So for now, I plan to
keep the fund's duration -
which measures how
sensitive its share price is to
changes in interest rates -
neutral during that time. By
neutral I mean that the fund's
duration will be more in line
with the duration of similar
funds, and I won't try to
predict the direction of
interest rates. Rather, I'll
focus on generating
above-average income."
(medium solid bullet) At the end of the period the
fund had no investments in
inverse floaters, one of the
financial arrangements known
as derivatives. That
compared to six months ago
when inverse floaters made
up less than 5% of the fund's
investments.
(medium solid bullet) As of December 31, 1994,
state and local general
obligation (GO) bonds were
the fund's largest sector
concentration and made up
23.3% of investments. GOs
are backed by the taxing
power of
the issuer.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S INVESTMENT % OF FUND'S INVESTMENT
S S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 23.3 23.8
Health Care 18.6 20.2
Water & Sewer 18.4 14.3
Industrial Development 9.7 10.8
Education 7.4 6.3
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 17.7 17.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 8.8 8.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 29.2%
Aa, A 20.1%
Baa 19.3%
Ba, B 7.2%
Non-rated 21.5%
Short-term and
other investments 2.7%
Aaa 24.8%
Aa, A 26.2%
Baa 21.6%
Ba, B 6.1%
Non-rated 18.1%
Short-term
investments 3.2%
Row: 1, Col: 1, Value: 29.2
Row: 1, Col: 2, Value: 20.1
Row: 1, Col: 3, Value: 19.3
Row: 1, Col: 4, Value: 7.2
Row: 1, Col: 5, Value: 21.5
Row: 1, Col: 6, Value: 2.7
Row: 1, Col: 1, Value: 24.8
Row: 1, Col: 2, Value: 26.2
Row: 1, Col: 3, Value: 21.6
Row: 1, Col: 4, Value: 6.1
Row: 1, Col: 5, Value: 18.1
Row: 1, Col: 6, Value: 3.2
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNT FOR 12.9% AND 10.9% OF THE FUND'S
INVESTMENTS AT DECEMBER 31, 1994 AND JUNE 30, 1994, RESPECTIVELY.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 97.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 88.9%
Akron Parking Facs. Ltd. Tax:
8.75% 11/1/03 A $ 160,000 $ 187,800
8.75% 11/1/04 A 160,000 188,800
8.75% 11/1/05 A 160,000 189,600
Akron Str. Impt. Ltd. Tax Series 1985-1:
8.75% 11/1/03 A 200,000 234,750
8.75% 11/1/04 A 200,000 236,000
8.75% 11/1/05 A 200,000 237,000
Alliance Wtrwks. Rev. (Cap. Appreciation)
0% 10/15/06 (FGIC Insured) Aaa 765,000 371,981
Bedford Hosp. Impt. Rev. Rfdg. (Bedford
Commty. Hosp.) Series 1990,
8.50% 5/15/09 - 865,000 979,613
Berea Gen. Oblig. Ltd. Tax Rfdg.:
0% 12/1/04 Aa 535,000 284,888
5.125% 12/1/13 Aa 1,215,000 1,031,231
Berea Wtrwks. Rfdg. 0% 12/1/06 Aa 510,000 232,688
Berlin & Milan Local School Dist.
7.45% 12/1/11 A 675,000 707,063
Bexley City School Dist.
0% 12/1/06 Aa 440,000 205,150
0% 12/1/07 Aa 540,000 233,550
0% 12/1/08 Aa 540,000 216,000
Blue Ash Ind. Dev. Rev. Rfdg. (1st. Mtg.)
(K mart Corp.) Series A, 6.75%
11/1/06 BBB+ 515,000 506,631
Brunswick Gen. Oblig. Unltd. Tax
7.35% 12/1/10 A 1,000,000 1,040,000
Buckeye Local School Dist. Rfdg.
(Jefferson County)
0% 12/1/07 (AMBAC Insured) Aaa 760,000 340,100
(Cap. Appreciation) 0% 12/1/06,
(AMBAC Insured) Aaa 375,000 180,938
Butler County Hosp. Facs. Auth. Rev. Rfdg.
(Fort Hamilton-Hughes Hosp.) 7.50%
1/1/10 Baa 1,500,000 1,432,500
Cambridge Hosp. Impt. Rev. Rfdg.
(Guernsey Mem. Hosp.) 8% 12/1/11 BBB 1,500,000 1,500,000
Canton Gen. Oblig. Ltd. Tax 7.875%
12/1/08 (Pre-Refunded to 12/1/98
@ 103) (d) Baa 1,250,000 1,382,813
Clark County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp.) Series A, 9.375%
4/1/08 A 800,000 836,000
Cleveland Gen. Oblig. Rfdg.:
5.30% 9/1/07 (AMBAC Insured) Aaa 2,000,000 1,790,000
5.375% 9/1/10 (AMBAC Insured) Aaa 1,025,000 914,813
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cleveland Pub. Pwr. Sys. Rev. (Cap. Appreciation)
(First Mtg.) Series A, 0% 11/15/08
(MBIA Insured) Aaa $ 5,480,000 $ 2,281,050
Cleveland Wtrwks. Rev. Rfdg. First Mtg.
Series G:
5.50% 1/1/08 (MBIA Insured) Aaa 3,700,000 3,367,000
5.50% 1/1/13 (MBIA Insured) Aaa 11,475,000 10,356,188
5.50% 1/1/21 (MBIA Insured) Aaa 26,725,000 23,317,563
Columbus Gen. Oblig. Rev. 9.50% 4/15/04 Aa1 500,000 616,875
Columbus Sewer Sys. Impt. Ltd. Tax
9.375% 4/15/07 Aa1 590,000 734,550
Cuyahoga County Cap. Appreciation
Unltd. Tax Rdfg. Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 1,690,000
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 1,638,000
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 1,812,500
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 816,000
0% 1/1/12 (MBIA Insured) Aaa 1,505,000 475,956
0% 1/1/13 (MBIA Insured) Aaa 4,000,000 1,185,000
Cuyahoga County Gen. Oblig.:
Rfdg. Series B, 5.25% 10/1/12,
(MBIA Insured) Aaa 7,000,000 5,941,250
5.60% 5/15/13 (MBIA Insured) Aaa 3,435,000 3,035,681
Cuyahoga County Health Care Facs. Rev.
(Judson Retirement Commty.)
8.875% 11/15/19 - 2,500,000 2,640,625
Cuyahoga County Hosp. Rev. Rfdg.
(Cleveland Clinic Foundation) Series A:
8% 12/1/08 Aa 1,000,000 1,066,250
8% 12/1/15 Aa 2,250,000 2,396,250
Cuyahoga County Gen. Oblig. Ltd. Tax
5.65% 5/15/18 Aa 1,295,000 1,128,269
Defiance County Econ. Dev. Rev.
(Kroger Co. Proj.) 8% 10/15/15 - 2,325,000 2,426,719
Defiance Spl. Assessments 7% 12/1/11 A 365,000 371,388
Delaware City School Dist. (Cap.
Appreciation) Construction & Impt.
Series B, 0% 12/1/08
(FGIC Insured) Aaa 1,100,000 456,500
Dublin School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 12/1/04
(AMBAC Insured) Aaa 1,930,000 1,073,563
Fairfield Econ. Dev. Rev. Rfdg.
(Beverly Enterprises Proj.) 8.50%
1/1/03 - 1,060,000 1,085,175
Fairfield School Dist. 7.45% 12/1/14 - 1,000,000 1,030,000
Franklin School Dist. Unltd. Tax
(Warren County Impt.) 7% 12/1/14 A 1,250,000 1,270,313
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Franklin County Rev.
(Online Computer Library Ctr.):
7.20% 7/15/06 - $ 1,000,000 $ 1,026,250
9.75% 7/15/09 - 5,000,000 5,175,000
6% 4/15/13 - 3,500,000 3,128,125
Franklin County Rfdg. Ltd. Tax 5.375%
12/1/21 Aaa 4,000,000 3,335,000
Gateway Econ. Dev. Corp. of Greater
Cleveland (Ohio Stadium) Series 1990,
6.50% 9/15/14 - 12,000,000 10,935,000
Granville Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 625,000 301,563
0% 12/1/07 (AMBAC Insured) Aaa 665,000 297,588
0% 12/1/08 (AMBAC Insured) Aaa 650,000 269,750
0% 12/1/09 (AMBAC Insured) Aaa 645,000 245,906
Green County 1st Mtg. Rev. (Fairview Extended
Care) Series A, 10.125% 1/1/11 - 5,930,000 6,359,925
Green County Swr. Sys. Rev.
(Cap. Appreciation) 0% 12/1/09
(AMBAC Insured) Aaa 775,000 298,375
Hamilton County Health Sys. Rev. Rfdg.
(Providence Hosp.-Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa 5,000,000 4,400,000
Hamilton County Hosp. Facs. Rev. (Children's
Hosp. Med. Ctr.) Series D, 5% 5/15/13
(FGIC Insured) Aaa 1,195,000 993,344
Hamilton County Swr. Sys. Rev. Rfdg. & Impt.
Metropolitan Swr. Dist. Series A, 5.45%
12/1/09 (FGIC Insured) Aaa 1,000,000 912,500
Hamilton County Swr. Sys. Rev. Series A,
5.40% 12/1/08 (FGIC Insured) Aaa 3,715,000 3,376,006
Hamilton Gas Sys. Rev. Series A, 4.75%
10/15/23 (MBIA Insured) Aaa 1,000,000 760,000
Hamilton Ind. Dev. Rev. Rfdg.
(Kroger Co. Proj.)
6.15% 6/1/01 Ba2 2,005,000 1,947,356
Hilliard Ind. Dev. Rev. Rfdg.
(Kroger Co.)
8.10% 7/1/12 Ba2 3,600,000 3,762,000
Lake County Ind. Dev. Rev. Rfdg. 1st Mtg.
(Kmart Corp.) Series A, 6.40% 8/1/06 A 1,000,000 948,750
Lakota Local School Dist. Rfdg.:
(Cap. Appreciation):
0% 12/1/00 A1 625,000 442,969
0% 12/1/01 A1 590,000 388,663
0% 12/1/02 A1 555,000 342,019
0% 12/1/03 A1 260,000 149,175
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Lakota Local School Dist. Rfdg. - continued
(Cap. Appreciation) Impt.:
0% 12/1/04 A1 $ 730,000 $ 390,550
0% 12/1/05 A1 690,000 342,413
0% 12/1/06 A1 650,000 299,000
0% 12/1/07 A1 610,000 260,012
Unltd. Tax (Cap. Appreciation)
0% 12/1/99 A1 445,000 338,756
Logan Hocking Local School Dist. Rfdg.
Series B, 0% 12/1/08 (AMBAC Insured) Aaa 1,065,000 439,312
Lorain County Rev. (1st Mtg. Kendal at
Oberlin Proj.) Series A, 8.625% 2/1/22 - 4,250,000 4,404,062
Lorain Gen. Oblig. Ltd. Tax 7.875%
12/1/09 Baa 1,000,000 1,046,250
Lorain Swr. Sys. Mtg. Rev. Rfdg.
8.75% 4/1/11 BBB- 2,815,000 3,043,719
Lowellville San. Swr. Sys. Rev. (Browning-Ferris
Industries, Inc.) 7.25% 6/1/06 (b) A 1,600,000 1,608,000
Lucas County Convention Ctr. Site Acquisition
Bonds Ltd. Tax:
6.50% 12/1/09 Baa1 340,000 331,075
6.50% 12/1/10 Baa1 340,000 329,375
6.50% 12/1/11 Baa1 340,000 327,250
6.50% 12/1/12 Baa1 340,000 326,825
Lucas County Hosp. Rev. Rfdg. (Riverside
Hosp. Proj.) 7.625% 6/1/15 Baa1 7,485,000 7,466,287
Lucas County Ind. Dev. Rev. Rfdg.
(Kroger Co.) 8.50% 7/1/11 Ba2 3,600,000 3,838,500
Madeira Econ. Dev. Rev. Rfdg. (Kroger Co.)
6.2% 10/1/13 Ba2 1,910,000 1,649,762
Mahoning County Hosp. Facs. Rev.
(YHA, Inc. Proj.) Series A, 7%
10/15/14 (MBIA Insured) Aaa 1,000,000 1,025,000
Mahoning County San. Swr. Sys. Rev.
7.50% 2/1/19 (BIG Insured) Aaa 1,000,000 1,045,000
Mahoning Valley San. Dist.:
7.85% 12/15/12 - 1,200,000 1,186,500
7.85% 12/15/13 - 1,275,000 1,260,656
Mahoning Valley San. Dist. Wtr. Rev.
7.75% 5/15/14 - 3,250,000 3,172,812
Marion County Health Care Facs. Rev.
Rfdg. & Impt. (United Church Homes,
Inc. Proj.) 6.30% 11/15/15 BBB- 1,800,000 1,534,500
Marysville Exempt Village School Rfdg.
(Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa 795,000 409,425
0% 12/1/06 (AMBAC Insured) Aaa 750,000 359,062
0% 12/1/07 (AMBAC Insured) Aaa 690,000 307,050
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Marysville Swr. Sys. Ltd. Tax 7.15%
12/1/11 A $ 500,000 $ 513,750
Mentor Exempt Village School Dist. Rdfg.
(Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa 755,000 545,488
0% 12/1/01 (MBIA Insured) Aaa 795,000 538,612
0% 12/1/02 (MBIA Insured) Aaa 845,000 536,575
0% 12/1/03 (MBIA Insured) Aaa 840,000 499,800
Mentor Gen. Oblig. Ltd. Tax Series 1991,
7.15% 12/1/11 A 500,000 515,625
Miami County Hosp. Facs. Rev. (Upper
Valley Med. Ctr.) Project B, 8.25%
5/1/04 (BIG Insured) Aaa 475,000 512,406
Miami Univ. Gen. Receipts (Cap. Appreciation)
0% 12/1/07 (FGIC Insured) Aaa 500,000 223,750
Middleburg Heights Hosp. Impt. Rev.
(Southwest Gen. Hosp.) 7.20% 8/15/19 A 2,000,000 2,010,000
Mount Vernon Hosp. Rev. (Knox Commty.
Hosp.) 7.875% 6/1/12 - 7,000,000 7,105,000
Muskingum County Rev. (Franciscan Health
Advisory Svcs.) 7.50% 3/1/12 BBB+ 2,000,000 2,005,000
Newark Wtr. (Cap. Appreciation) 0%
12/1/07 (AMBAC Insured) Aaa 455,000 202,475
Ohio Air Quality Dev. Auth. Rev. Rfdg.
(Ohio Pwr. Co. Proj.) Series B, 7.40%
8/1/09 Baa1 3,250,000 3,302,812
Ohio Bldg. Auth. Facs.:
(Administration Bldg. Fund Proj.):
Series A, 5.60% 10/1/07 A1 3,330,000 3,105,225
(Ohio Ctr. for Arts) Series A:
5.35% 10/1/06 A1 3,060,000 2,803,725
5.45% 10/1/07 A1 2,000,000 1,825,000
(Workers Comp.) 4.75% 4/1/14 A 13,620,000 10,504,425
Ohio Cap. Corp. for Hsg. Multi-Family Hsg.
Rev. Rfdg.:
Series A, 7.50% 1/1/24,
(FNMA Coll.) AAA 1,000,000 1,037,500
Series C, 7.375% 7/1/23,
(FNMA Coll.) AAA 2,000,000 2,030,000
Ohio Econ. Dev. Rev. Rfdg. (Kroger Co.
Proj.) Series 1992, 7.50% 9/1/10 Ba2 2,000,000 2,007,500
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.):
8% 10/1/95 (Escrowed to Maturity) (d) - 210,000 211,050
8.25% 10/1/06 (Pre-Refunded
to 4/1/00 @ 101) (d) - 1,150,000 1,196,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Gen. Oblig. Infrastructure Impt.:
Rfdg. Series R, 0% 9/1/00 Aa $ 3,260,000 $ 2,396,100
(Cap. Appreciation) Series 1989, 0%
9/1/07 Aa 7,225,000 3,260,280
(College Savings Bonds):
0% 8/1/09 Aa 2,290,000 898,825
0% 8/1/10 Aa 2,000,000 730,000
Ohio Higher Edl. Facs. Commission Rev.:
(Case Western Reserve Proj.):
Series A, 7.70% 10/1/18
(Pre-Refunded to 10/1/97 @ 102) (d) Aa 2,000,000 2,107,500
(Kenyon College Proj.) 5.30% 12/1/08 A 1,115,000 983,987
(Oberlin Coll. Proj.) 5.375% 10/1/15 AA 1,000,000 853,750
Ohio Higher Edl. Fac. Rev. (Case Western
Reserve Univ. Proj.):
Rfdg.:
6% 10/1/14 Aa 1,500,000 1,421,250
6.125% 10/1/15 Aa 2,000,000 1,910,000
6.25% 10/1/16 Aa 2,500,000 2,421,875
Series B, 6.50% 10/1/20 Aa 1,750,000 1,743,437
Ohio Ind. Dev. Rev. Rfdg. (Kroger Co.)
8.65% 6/1/11 Ba2 2,300,000 2,463,875
Ohio Muni. Elec. Gen. Agcy.
(Joint Venture 5) 5.375% 2/15/24,
(AMBAC Insured) Aaa 3,000,000 2,478,750
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 A1 3,100,000 3,061,250
Ohio Solid Waste Rev. (Republic Engineered
Steels Proj.) 8.25% 10/1/14 (b) - 4,200,000 3,995,250
Ohio Wtr. Dev. Auth. Rev. (Pure Wtr.):
Rfdg. & Impt.
5.50% 12/1/11 (AMBAC Insured) Aaa 1,500,000 1,348,125
5.50% 12/1/18 (AMBAC Insured) Aaa 5,000,000 4,293,750
Series I, 6% 12/1/16 (AMBAC Insured)
(Escrowed to Maturity) (d) Aaa 1,685,000 1,575,475
Olentangy Local School Dist. Unltd. Tax:
7.75% 12/1/07 (BIG Insured) Aaa 500,000 560,000
7.75% 12/1/09 (BIG Insured) Aaa 100,000 112,125
7.75% 12/1/11 (BIG Insured) Aaa 190,000 212,800
Ottawa County Gen. Oblig. Ltd. Tax
7.50% 10/1/14 A1 500,000 548,750
Ottawa County San. Swr. Sys. Rev. Rfdg.
(Cap. Appreciation) (Danbury Proj.) 0%
10/1/06 (AMBAC Insured) Aaa 1,445,000 702,631
Pickerington Local School Dist. Construction &
Impt. 5.8% 12/1/09 (FGIC Insured) Aaa 1,000,000 936,250
Pickerington Local School Dist. Rfdg.
(Cap. Appreciation) 0% 12/1/12,
(AMBAC Insured) Aaa 2,180,000 673,075
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Rural Lorian County Wtr. Auth. Wtr. Resource
Rev. Rfdg. & Impt. 5.45% 10/1/18
(AMBAC Insured) Aaa $ 3,500,000 $ 3,018,750
Sandusky County Hosp. Facs. Rev. Rfdg.
(Mem. Hosp. Proj.) 7.75% 12/1/09 BB 5,250,000 4,967,812
Solon School Dist. Rfdg. (Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 1,370,000 661,025
0% 12/1/07 (AMBAC Insured) Aaa 1,200,000 537,000
0% 12/1/08 (AMBAC Insured) Aaa 1,100,000 456,500
Southwest Local School Dist. (Hamilton County):
0% 12/1/04 (AMBAC Insured) Aaa 500,000 277,500
0% 12/1/05 (AMBAC Insured) Aaa 525,000 273,000
0% 12/1/06 (AMBAC Insured) Aaa 525,000 254,625
0% 12/1/07 (AMBAC Insured) Aaa 520,000 234,000
Springboro Spl. Assessment 6.10% 6/1/23 - 1,350,000 1,189,687
Stark County Health Care Facs. Rev.
(Rose Lane Hosp. Proj.) 9% 12/1/23 - 6,135,000 6,480,094
Stark County Hosp. Rev. (Doctors Hosp. of
Stark County) 6% 4/1/13 Baa 5,840,000 4,737,700
Stark County Ind. Dev. Rev. Rfdg.
(Kroger Co.) 7.20% 9/1/12 Ba2 3,100,000 3,026,375
Stow School Dist. School Impt. Unltd.
Tax 9.125% 12/1/06 A 590,000 716,850
Student Loan Fund Corp. Student Loan Rev.: (b)
Rfdg. Series A, 7.25% 2/1/08 A 2,000,000 2,015,000
Series B, 8.875% 8/1/08 - 4,685,000 4,720,137
Summit County Ind. Dev. Rev. Rfdg.
(Surnow Assoc. Proj.) 7.65% 10/1/06 Ba3 1,025,000 1,044,219
Tiffin San. Swr. Impt. Gen. Oblig. Ltd. Tax
7.10% 12/1/11 A 1,000,000 1,027,500
Union County Gen. Oblig. (Mem. Hosp.)
7.40% 12/1/10 A1 680,000 700,400
Warren County Gen. Oblig. 6.10% 12/1/12 Aa 500,000 477,500
Warren County Gen. Oblig. Ltd. Tax
6.65% 12/1/11 Aa 500,000 508,750
Warren Hosp. Rev. Rfdg. (Warren Gen.
Hosp. Proj.) Series B, 7.30% 11/15/14 BBB 4,105,000 3,868,962
Warren Hsg. Dev. Corp. Rev. (1st Mtg. Rev.)
Section 8:
7.25% 6/1/04 - 200,000 196,500
7.25% 6/1/05 - 200,000 196,250
7.25% 6/1/06 - 200,000 196,250
7.25% 6/1/07 - 200,000 196,000
7.25% 6/1/08 - 200,000 195,750
Willoughby Road Impt. Ltd. Tax
7.40% 12/1/11 A 1,200,000 1,294,500
Wright State Univ. Gen. Receipts
5.15% 5/1/11 (AMBAC Insured) Aaa 1,000,000 866,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Xenia Hsg. Dev. Corp. Rev. 1st Lien
(Xenia Tower Proj.) Section 8, 7.75%
2/1/10 - $ 2,030,000 $ 2,070,600
Youngstown Gen. Oblig. Ltd. Tax
7.55% 12/1/11 Baa 1,500,000 1,539,375
307,074,680
PUERTO RICO - 8.0%
Puerto Rico Commonwealth Gen. Oblig.:
Rfdg.:
Series 1988, 0% 7/1/07 Baa1 2,760,000 1,173,000
Unltd. Tax 5% 7/1/21 Baa1 5,000,000 3,843,750
Unltd. Tax Series 1991:
0% 7/1/06 Baa1 3,850,000 1,775,813
0% 7/1/07 Baa1 3,150,000 1,338,750
Puerto Rico Commonwealth Hwy. & Trns.
Auth. Rev. Series W, 5.50% 7/1/13 Baa1 15,250,000 13,153,125
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series S, 6.125% 7/1/09 Baa1 2,000,000 1,912,500
Puerto Rico Infrastructure Fing. Auth. Spl. Tax
Series 1988 A, 7.75% 7/1/08 Baa1 2,500,000 2,653,125
Puerto Rico Pub. Bldgs. Auth. Rev. Rfdg.
Series L, 5.50% 7/1/21 Baa1 2,000,000 1,672,500
27,522,563
U.S. VIRGIN ISLANDS - 0.4%
Virgin Islands Pub. Fin. Auth. Rev.
Series A, 7.25% 10/1/18 - 1,500,000 1,486,875
TOTAL MUNICIPAL BONDS
(Cost $351,819,105) 336,084,118
MUNICIPAL NOTES (A) - 2.7%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 2.7%
Ohio Air Quality Dev. Auth. Envir. Impt. Rev.
Rfdg. (The Mead Corp.) Series 1986 A,
5.85%, LOC Deutsche Bank, VRDN A-1+ $ 900,000 $ 900,000
Ohio State Univ. Rev. (Gen. Receipts):
Series 1985 B, 5.40%, LOC Industrial
Bank of Japan, VRDN VMIG 1 3,100,000 3,100,000
Series 1986 B, 5.40%,
BPA Fuji Bank, VRDN VMIG 1 5,400,000 5,400,000
TOTAL MUNICIPAL NOTES
(Cost $9,400,000) 9,400,000
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
200 Put Options on Feb. U.S. Treasury
Bond Futures (Cost $54,954) Jan. 95/97 $ 4,375,000 43,750
TOTAL INVESTMENTS - 100%
(Cost $361,274,059) $ 345,527,868
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(f) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(g) Security collateralized by an amount sufficient to pay interest and
principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 47.5% AAA, AA, A 51.4%
Baa 15.7% BBB 9.6%
Ba 5.7% BB 1.4%
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 21.5%. FMR
has determined that unrated debt securities that are lower quality account
for 12.9% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 23.3%
Health Care 18.6
Water & Sewer 18.4
Others
(individually less than 10%) 39.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $361,274,059. Net unrealized depreciation
aggregated $15,746,191, of which $5,719,433 related to appreciated
investment securities and $21,465,624 related to depreciated investment
securities.
The fund intends to elect to defer to its fiscal year ending December 31,
1995, $1,923,373 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994 the fund was required to defer $431,887 of losses on
futures contracts.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $361,274,059) 9. $ 345,527,868
- -
See accompanying schedule
10.Cash 11. 84,002
12.Interest receivable 13. 6,124,876
14. 15.TOTAL ASSETS 16. 351,736,746
17.LIABILITIES 18. 19.
20.Payable for fund shares redeemed $ 840,813 21.
22.Dividends payable 432,612 23.
24.Accrued management fee 120,203 25.
26.Other payables and accrued expenses 76,602 27.
28. 29.TOTAL LIABILITIES 30. 1,470,230
31.32.NET ASSETS 33. $ 350,266,516
34.Net Assets consist of: 35. 36.
37.Paid in capital 38. $ 368,356,763
39.Accumulated undistributed net realized gain (loss) on 40. (2,344,056)
investments
41.Net unrealized appreciation (depreciation) 42. (15,746,191)
on investments
43.44.NET ASSETS, for 33,294,271 shares outstanding 45. $ 350,266,516
46.47.NET ASSET VALUE, offering price and redemption 48. $10.52
price per share ($350,266,516 (divided by) 33,294,271 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
49.50.INTEREST INCOME 51. $ 25,926,751
52.EXPENSES 53. 54.
55.Management fee $ 1,643,714 56.
57.Transfer agent, accounting and custodian fees 600,180 58.
and expenses
59.Non-interested trustees' compensation 7,586 60.
61.Audit 30,724 62.
63.Legal 4,370 64.
65.Reports to shareholders 12,107 66.
67.Miscellaneous 914 68.
69. 70.TOTAL EXPENSES 71. 2,299,595
72.73.NET INTEREST INCOME 74. 23,627,156
75.REALIZED AND UNREALIZED GAIN (LOSS) 77. 78.
76.Net realized gain (loss) on:
79. Investment securities 3,877,509 80.
81. Futures contracts 862,490 4,739,999
82.Change in net unrealized appreciation (depreciation) 83. (53,200,362)
on investment securities
84.85.NET GAIN (LOSS) 86. (48,460,363)
87.88.NET INCREASE (DECREASE) IN NET ASSETS 89. $ (24,833,207)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
90.INCREASE (DECREASE) IN NET ASSETS
91.Operations $ 23,627,156 $ 25,073,052
Net interest income
92. Net realized gain (loss) 4,739,999 12,762,502
93. Change in net unrealized appreciation (depreciation) (53,200,362) 12,881,566
94. 95.NET INCREASE (DECREASE) IN NET ASSETS (24,833,207) 50,717,120
RESULTING FROM OPERATIONS
96.Distributions to shareholders: (23,627,156) (25,073,052)
From net interest income
97. From net realized gain (6,768,869) (9,306,252)
98. 99.TOTAL DISTRIBUTIONS (30,396,025) (34,379,304)
100.Share transactions 98,297,570 158,431,961
Net proceeds from sales of shares
101. Reinvestment of distributions 23,452,964 26,970,189
102. Cost of shares redeemed (174,126,840) (128,728,993)
103. (52,376,306) 56,673,157
Net increase (decrease) in net assets resulting from
share transactions
104. (107,605,538) 73,010,973
105.TOTAL INCREASE (DECREASE) IN NET ASSETS
106.NET ASSETS 107. 108.
109. Beginning of period 457,872,054 384,861,081
110. End of period $ 350,266,516 $ 457,872,054
111.OTHER INFORMATION 113. 114.
112.Shares
115. Sold 8,731,920 13,275,725
116. Issued in reinvestment of distributions 2,111,339 2,252,702
117. Redeemed (15,641,231) (10,764,781)
118. Net increase (decrease) (4,797,972) 4,763,646
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
119. YEARS ENDED DECEMBER 31,
120. 1994 1993 1992 1991 1990
121.SELECTED PER-SHARE
DATA
122.Net asset value, $ 12.020 $ 11.550 $ 11.320 $ 10.840 $ 10.790
beginning of period
123.Income from .657 .693 .718 .719 .726
Investment Operations
Net interest income
124. Net realized and (1.310) .720 .230 .480 .050
unrealized gain (loss)
125. Total from (.653) 1.413 .948 1.199 .776
investment operations
126.Less Distributions (.657) (.693) (.718) (.719) (.726)
From net interest
income
127. From net realized (.190) (.250) - - -
gain on investments
128. Total distributions (.847) (.943) (.718) (.719) (.726)
129.Net asset value, $ 10.520 $ 12.020 $ 11.550 $ 11.320 $ 10.840
end of period
130.TOTAL RETURN -5.55 12.56 8.66 11.45 7.50
% % % % %
131.RATIOS AND SUPPLEMENTAL DATA
132.Net assets, end of $ 350,267 $ 457,872 $ 384,861 $ 327,767 $ 241,616
period (000 omitted)
133.Ratio of expenses to .57 .57 .61 .64 .66
average net assets % % % % %
134.Ratio of net interest 5.88 5.67 6.31 6.53 6.82
income to average % % % % %
net assets
135.Portfolio turnover 22 41 20 11 12
rate % % % % %
</TABLE>
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period and reinvestment of its dividends (or income). Yield
measures the income paid by a fund. Since a money market fund tries to
maintain a $1 share price, yield is an important measure of performance. If
Fidelity had not reimbursed certain fund expenses during the periods shown,
the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal Money Market
Portfolio 2.50% 19.05% 21.61%
Consumer Price Index 2.67% 18.72% 20.14%
Average Ohio Tax-Free
Money Market Fund 2.46% 18.12% n/a
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years or since the fund started on August
29, 1989. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, you would end up with $1,050. Comparing the
fund's performance to the consumer price index (CPI) helps show how your
investment did compared to inflation. To measure how the fund stacked up
against its peers, you can compare its return to the average Ohio tax-free
money market fund's total return. This average currently reflects the
performance of 11 Ohio tax-free money market funds tracked by IBC/Donoghue.
(The periods covered by the CPI and IBC/Donoghue numbers are the closest
available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal Money Market
Portfolio 2.50% 3.55% 3.73%
Consumer Price Index 2.67% 3.49% 3.50%
Average Ohio Tax-Free
Money Market Fund 2.46% 3.39% n/a
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.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
12/31/93 3/31/94 6/30/94 9/30/94 12/31/94
Fidelity Ohio Municipal 2.44% 1.93% 2.30% 2.94% 4.15%
Money Market Portfolio
Average Ohio Tax-Free 2.20% 1.83% 2.34% 2.84% 3.78%
Money Market Fund
Ohio Municipal Money 4.12% 3.26% 3.89% 4.97% 6.99%
Market Tax-equivalent
Average All Taxable 2.72% 2.93% 3.64% 4.20% 5.12%
Money Market Fund
</TABLE>
Row: 1, Col: 1, Value: 2.44
Row: 1, Col: 2, Value: 2.2
Row: 2, Col: 1, Value: 1.93
Row: 2, Col: 2, Value: 1.83
Row: 3, Col: 1, Value: 2.3
Row: 3, Col: 2, Value: 2.34
Row: 4, Col: 1, Value: 2.94
Row: 4, Col: 2, Value: 2.84
Row: 5, Col: 1, Value: 4.149999999999999
Row: 5, Col: 2, Value: 3.78
5% -
4% -
3% -
2% -
1% -
0%
Ohio Municipal
Money Market
Average Ohio
Tax-Free Money
Market Fund
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the average Ohio tax-free money market fund. Or you
can look at the fund's tax-equivalent yield, which is based on a combined
effective 1994 federal and state income tax rate of 40.80% and reflects
that on December 31, 1994, approximately 3.9% of the income was subject to
state taxes. The tax-equivalent figures are useful in seeing how the fund
stacked up against the average taxable money market fund as tracked by
IBC/Donoghue. A portion of the fund's income may be subject to the
alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more meaningful.
Keep in mind that the U.S.
government neither insures nor
guarantees a money market
fund. And there is no
assurance that a money fund
will maintain a $1 share price.
(checkmark)
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Janice Bradburn, Portfolio Manager of Fidelity Ohio
Municipal Money Market Portfolio
Q. JANICE, HOW WOULD YOU DESCRIBE THE INTEREST RATE ENVIRONMENT YOU'VE BEEN
OPERATING IN FOR THE PAST YEAR?
A. In a word, volatile. After so many months of stable short-term rates,
many of us were surprised when on February 4, 1994, the Federal Reserve
raised the federal funds rate - what banks charge each other for overnight
loans - one-quarter percentage point. We expected rates would rise
eventually, just not that soon. Afterwards, there were two more
quarter-point increases in March and April, two half-point increases in May
and August, and finally a three-quarter-point increase in November. The
federal funds rate had started 1994 at 3%; by year's end, it was 5.50%.
Q. HOW DID YOU POSITION THE FUND IN THE FACE OF RISING RATES?
A. The simple answer is, by rolling back the fund's average maturity. But
there were times during the year when I was presented with buying
opportunities that led me briefly to extend the fund's average maturity.
The fund began the year with a fairly aggressive average maturity of 78
days. By February, when rates started rising, it was already down into the
mid-60s, and by March it was in the low 50s. Then in early April I bought
some attractively priced six-month securities, and that brought the fund
back out to 71 days. By the end of June I had let the maturity roll down
into the mid- to high 40s. More buying opportunities led me to extend again
into the mid-60s following the Fed increase in August. Since November,
however, I've been gradually letting the maturity roll down. It was 54 days
at the end of December.
Q. THIS PAST OCTOBER, AN INVESTMENT POOL IN CUYAHOGA COUNTY WAS LIQUIDATED.
HOW WAS THE FUND AFFECTED?
A. Not at all. The fund did not have any direct credit exposure to Cuyahoga
County. While the fund did have a small position in the securities of a
pool participant, that participant withdrew from the investment pool prior
to the liquidation.
Q. HOW DID THE FUND PERFORM?
A. On December 31, 1994, the fund's seven-day yield was 4.15%, compared to
2.44% a year ago. The difference reflects the sharp increase in short-term
interest rates during the period. The fund's year-end yield was the
equivalent to a 6.99% yield on a taxable investment for investors in Ohio's
40.80% combined state and federal tax bracket. The fund's total return for
the year ended December 31, 1994, was 2.50%. That beat the 2.46% total
return for the average Ohio tax-free money market fund during the same
period, according to IBC/Donoghue.
Q. WHAT'S YOUR OUTLOOK AS WE BEGIN THE NEW YEAR?
A. I think it's likely interest rates will continue to rise. The Fed has
targeted an annual growth rate of 2.5% to make sure inflation remains under
control, and yet the economy has been expanding lately at a more than 4%
annual rate. Accordingly, I wouldn't be surprised if the federal funds rate
reached 7% or even higher by the end of 1995. In terms of my strategy, I'll
likely aim to keep the fund's average maturity in the neutral-to-defensive
range, meaning anywhere from the mid-40s to the high 50s.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality short-term Ohio
municipal securities
START DATE: August 29, 1989
SIZE: as of December 31,
1994, more than $301 million
MANAGER: Janice Bradburn,
since October 1993; manager,
Fidelity and Spartan
Massachusetts Municipal
Money Market funds, since
January 1992;
Fidelity New York Tax-Free
Money Market Portfolio, since
September 1989; and Spartan
New York Municipal Money
Market Portfolio, since
February 1990; joined Fidelity
in 1989
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face
value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/94 6/30/94 12/31/93
0 - 30 61 61 50
31 - 90 16 17 12
91 - 180 15 15 22
181 - 397 8 7 16
WEIGHTED AVERAGE MATURITY
12/31/94 6/30/94 12/31/93
Ohio Municipal
Money Market 54 days 49 days 78 days
Average Ohio Tax-Free
Money Market Fund* 55 days 57 days 71 days
ASSET ALLOCATION
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Row: 1, Col: 1, Value: 57.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 8.0
Row: 1, Col: 4, Value: 21.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 13.0
Row: 1, Col: 4, Value: 20.0
Row: 1, Col: 5, Value: 3.0
Variable rate
demand notes
(VRDNs) 57%
Commercial
paper 14%
Tender bonds 8%
Municipal
notes 21%
Other 0%
Variable rate
demand notes
(VRDNs) 50%
Commercial
paper 14%
Tender bonds 13%
Municipal
notes 20%
Other 3%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 96.9%
Aurora City School Dist. BAN 5.30% 5/10/95 $ 4,000,000 $ 4,007,662
Bedford Heights Ind. Dev. Rev. (Olympic Steel) Series 1989,
5.65%, LOC Nat'l. City Bank Cleveland, VRDN (b) 1,550,000 1,550,000
Brook Park BAN:
4.21% 3/30/95 2,245,000 2,246,652
4.19% 7/6/95 840,000 840,987
Brookville Ind. Dev. Rev. (Green Tokai Bank Proj.)
Series 1988, 5.95%, LOC Tokai Bank, VRDN (b) 4,000,000 4,000,000
Butler County BAN 4.50% 5/29/95 4,150,000 4,159,061
Cincinnati & Hamilton Port Auth. Econ. Dev. Rev.
(Kenwood Office Assoc. Proj.) 6%,
LOC Fuji Bank, VRDN 1,200,000 1,200,000
Cleveland-Cuyahoga County Port Auth. Rev. (Rock'n Roll
Hall of Fame & Museum Proj.), 5.60%,
LOC Credit Local De France, VRDN 5,400,000 5,400,000
Columbus Elec. Sys. Rev. Series 1984, 3.90%,
LOC Dai-Ichi Kangyo Bank, VRDN 10,000,000 10,000,000
Cuyahoga Hosp. Impt. Rev. (Univ. Hosp. of
Cleveland) Series 1985 S, 6.05%,
LOC Dai-Ichi Kangyo Bank, VRDN 6,100,000 6,100,000
Dayton Spl. Facs. Rev. Rfdg. (Emery Air Freight Corp.), VRDN:
Series 1988 C, 6%, LOC Mellon Bank 2,200,000 2,200,000
Series 1988 D, 6%, LOC Mellon Bank (b) 10,000,000 10,000,000
Series 1993 E, 5.45%, LOC Mellon Bank 6,000,000 6,000,000
Fairfax Ind. Dev. Rev. (Johnson & Hardin Co. Proj.)
Series 1990, 5.65%, LOC Central Co., VRDN (b) 3,400,000 3,400,000
Fairfield County Jail Impt. & San. Swr. Impt. BAN
4.88% 10/26/95 3,085,000 3,096,567
Fairfield School Dist. BAN 5.55% 6/20/95 8,000,000 8,020,026
Franklin County Ind. Dev. Rev.:
Rfdg. (Alco Standard Corp. Proj.) Series 1994, 5.65%,
LOC Nationsbank NC, VRDN 1,700,000 1,700,000
(Inland Products Inc.), 5.65%,
LOC PNC Bank Ohio, VRDN (b) 1,000,000 1,000,000
Greene County BAN 4.32% 7/19/95 3,000,000 3,003,473
Hamilton County Health Care Facs. Rev. (West Park
Retirement Commty.) Series 1989, 5.40%,
LOC Fifth Third Bank Cincinnati, VRDN 1,000,000 1,000,000
Hamilton County Ind. Dev. Rev. (Visual Management Group
Proj.) Series 1989, 5.65% LOC Nat'l. Bank of
Detroit, VRDN (b) 870,000 870,000
Hamilton County Participating VRDN, Series PA-15, 5.30%,
(Liquidity Facility Merrill Lynch) (c) 4,280,000 4,280,000
Highland County Ind. Dev. Rev. Rfdg. Bonds
(Lancaster Colony Corp.) Series 1990,
3.75%, tender 3/1/95, LOC PNC Bank NA 3,200,000 3,200,000
Holmes County Ind. Dev. Rev. (Poultry Processing, Inc.)
Series 1990, 5.80%, LOC Rabobank Nederland, VRDN (b) 500,000 500,000
Lake County BAN 4.75% 10/12/95 2,890,000 2,899,692
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Mahoning County BAN 4.50% 7/14/95 $ 4,660,000 $ 4,676,690
Marion County Hosp. Impt. Rev. Bonds (Pooled Lease Prog.):
Series 1991, 4%, tender 5/1/95,
LOC Bank One Columbus 3,500,000 3,500,000
Series 1992, 4%, tender 4/1/95, LOC Bank One Akron 13,100,000
13,100,000
Medina County Ind. Dev. Rev. (North American Roto
Engravers, Inc. Proj.) Series 1988, 5.75%,
LOC Bank One Akron, VRDN (b) 900,000 900,000
Middletown Ind. Dev. Rev. (Pilot Chemical Proj.) 5.75%,
LOC Bank One Dayton, VRDN (b) 3,000,000 3,000,000
Montgomery County BAN, Series 1994 B, 4.50% 4/27/95 3,730,000 3,738,154
Montgomery County Ind. Dev. Rev. (Modern Industrial
Plastics Inc.) Series 1988, 5.875%,
LOC Ind. Bank of Japan, VRDN 2,000,000 2,000,000
Montgomery County Miami Valley Hosp. Auth. Bonds:
Series B, 3.85%, tender 1/30/95, LOC Fuji Bank 4,750,000 4,750,000
Series C:
3.65%, tender 1/23/95, LOC Fuji Bank 1,200,000 1,200,000
4.30%, tender 2/21/95, LOC Fuji Bank 5,000,000 5,000,000
Montgomery County Solid Waste BAN, Series B,
4.50% 4/27/95 3,940,000 3,948,614
Muskingum County Ind. Dev. Rev. (Elder-Beerman
Stores Inc.) 3.90%, LOC Mitsubishi Bank, VRDN 700,000 700,000
Ohio Air Dev. Auth. Air Quality Dev. Rev. (JMG Funding):
Series 1994-A, 5.60%, LOC Societe Generale, VRDN (b) 9,500,000
9,500,000
Series 1994-B, 5.75%, LOC Societe Generale, VRDN (b) 3,000,000
3,000,000
Ohio Air Quality Dev. Auth. Bonds (Cleveland Electric):
4.25%, tender 2/7/95 (FGIC Insured) 4,500,000 4,500,000
4.30%, tender 2/7/95 (FGIC Insured) 6,300,000 6,300,000
Ohio Air Quality Dev. Auth. Poll. Cont. Rev. Bonds,
(Duquesne Light Co.) Series 1988, 4.30%, tender 2/21/95,
LOC Toronto-Dominion Bank (b) 1,000,000 1,000,000
Ohio Higher Ed. Cap. Facs. Participating VRDN,
Series BTP-29, 4.361% (Liquidity Facility Banker's Trust) (c) 4,940,000
4,940,000
Ohio Higher Ed. Participating VRDN, Series P-13, 5.65%,
BPA Merrill Lynch (c) 2,400,000 2,400,000
Ohio Hsg. Fin. Agcy. (Kenwood Congregate Retirement
Commty. Proj.) 3.85%, LOC Morgan Guaranty
Trust Co., VRDN 2,200,000 2,200,000
Ohio Ind. Dev. Rev., VRDN: (b)
(Aerolite Extrusion) Series 1991 IA, 5.80%,
LOC Nat'l. City Bank Columbus 185,000 185,000
(Anomatic Corp.) Series 1989 I, 5.80%,
LOC Nat'l. City Bank Columbus 265,000 265,000
(Arthur Corp.) Series 1989 IIIA, 5.80%,
LOC Nat'l. City Bank Columbus 285,000 285,000
(Burnham Corp. Proj.):
Series 1987 N, 5.80%, LOC Bank One Columbus 505,000 505,000
Series 1988 II, 5.80%, LOC Central Trust Co. Cincinnati 440,000
440,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev., VRDN: (b) - continued
(CCE Inc.) Series 1989 I, 5.80%, LOC Nat'l. City
Bank Columbus $ 975,000 $ 975,000
(Carpenter/Clapp & Haney Tool Co.) Series 1987 P, 5.80%,
LOC Bank One Columbus 400,000 400,000
(Cole Tool & Die) Series 1988 H, 5.80%,
LOC Bank One Columbus 275,000 275,000
(Corpad Head Co.) Series 1988 II, 5.80%,
LOC Central Trust Co. Cincinnati 615,000 615,000
(Die Matic Inc.) Series O, 5.80%,
LOC Bank One Columbus 405,000 405,000
(Dramex Int'l., Inc.):
Series 1988 I, 5.80%, LOC Bank One Columbus 1,000,000 1,000,000
Series 1988 II, 5.80%, LOC Central Trust Co. Cincinnati 200,000
200,000
(EF Realty) Series A, 5.80%,
LOC Nat'l. City Bank Cleveland 185,000 185,000
(EPIC Technologies Inc.) Series 1988 D, 5.80%,
LOC Bank One Columbus 280,000 280,000
(Economy Machine & Tool North Inc. Proj.)
Series 1988 II, 5.80%, LOC Central Trust Co. 205,000 205,000
(Gary W. James) Series 1986 B, 5.80%,
LOC Nat'l. City Bank Cleveland 290,000 290,000
(HGN Realty/Shalmet Ohio, Inc.) Series 1989 III A, 5.80%,
LOC Nat'l. City Bank Columbus 1,780,000 1,780,000
(Hydro Tube Corp.) 5.80%, LOC Nat'l. City Bank Columbus 90,000 90,000
(K&S Realty) Series 1989 I, 5.80%,
LOC Nat'l. City Bank Columbus 320,000 320,000
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III, 5.80%,
LOC Nat'l. City Bank Columbus 255,000 255,000
(Kaufmans Bakery) Series K, 5.80%,
LOC Bank One Columbus 895,000 895,000
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I, 5.80%,
LOC Nat'l. City Bank Columbus 585,000 585,000
(Morrow Macke Realty) Series 1988 C, 5.80%,
LOC Bank One Columbus 720,000 720,000
(Oak Printing) Series 1991 IA, 5.80%,
LOC Nat'l. City Bank Columbus 600,000 600,000
(Plasticos Co.) Series 1989 IIIA, 5.80%,
LOC Nat'l. City Bank Columbus 695,000 695,000
(Prentke Romich) Series 1989 III, 5.80%,
LOC Nat'l. City Bank Columbus 120,000 120,000
(SBD Properties Co.) Series 1986 L, 5.80%,
LOC Nat'l. City Bank Cleveland 205,000 205,000
(Samuel and Annie Sherman) Series 1989 III A, 5.80%,
LOC Nat'l. City Bank Columbus 350,000 350,000
(Sheffield Steel) Series 1988 B, 5.80%,
LOC Bank One Columbus 70,000 70,000
(Southwest Fin. Svcs.) Series 1986, 5.80%,
LOC Nat'l. City Bank Cleveland 80,000 80,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev., VRDN: (b) - continued
(Standby Screw & Machine) Series 1991 IA, 5.80%,
LOC Nat'l. City Bank Columbus $ 840,000 $ 840,000
(Steubenville Area) Series 1988 II, 5.80%,
LOC Central Trust Co. Cincinnati 360,000 360,000
(Thomas K. Issacs) Series 1990 IB, 5.80%,
LOC Nat'l. City Bank Columbus 250,000 250,000
(Thompson Steel Co.) Series 1988 P, 5.80%,
LOC Bank One Columbus 400,000 400,000
(United Steel Svc.) Series 1988 J, 5.80%,
LOC Bank One Columbus 715,000 715,000
(VRE Inc.) Series F, 5.80%, LOC Bank One Columbus 210,000 210,000
(Walker-Williams Lumber Co.) Series 1989 IIIA, 5.80%,
LOC Nat'l. City Bank Columbus 1,250,000 1,250,000
(Wooster Iron Metal Co.) Series 1988 R, 5.80%,
LOC Bank One Columbus 525,000 525,000
Ohio Pub. Facs. Commission Higher Ed. Cap. Facs.
Participating VRDN, Series PA-76I, 5.70%
(AMBAC Insured) (Liquidity Facility Merrill Lynch) (c) 4,740,000
4,740,000
Ohio Wtr. Dev. Auth. Collateralized Poll. Cont. Rev. Rfdg.
Bonds (Cleveland Elec. Proj.) Series 1988 A, 3.85%,
tender 3/10/95 (FGIC Insured) 7,000,000 7,000,000
Ohio Wtr. Dev. Auth. Participating VRDN: (c)
Series PA-1016A, 5.65% (Liquidity Facility Merrill Lynch) 2,520,000
2,520,000
Series PA-1016B, 5.65% (Liquidity Facility Merrill Lynch) 3,080,000
3,080,000
Ohio Wtr. Dev. Auth. Poll. Cont. Rev. Bonds
(Duquesne Light Co. Proj.): (b)
3.65%, tender 1/17/95, LOC Toronto-Dominion Bank 3,500,000 3,500,000
3.65%, tender 1/18/95, LOC Toronto Dominion Bank 1,000,000 1,000,000
3.65%, tender 1/19/95, LOC Toronto-Dominion Bank 1,500,000 1,500,000
3.70%, tender 2/17/95, LOC Toronto-Dominion Bank 1,500,000 1,500,000
3.80%, tender 2/22/95, LOC Toronto-Dominion Bank 1,000,000 1,000,000
Olentangy School Dist. BAN 4.90% 4/13/95 2,200,000 2,203,647
Scioto County Marine Term. Facs. Rev. (Norfolk Southern
Corp. Proj.) 5.40%, VRDN 4,900,000 4,900,000
Sharonville Ind. Dev. Rev., VRDN:
(Duke Realty Proj.) 5.55%, LOC Nat'l. City Bank
Cleveland 6,275,000 6,275,000
(Xtec, Inc.) Series 1991, 5.75%,
LOC Fifth Third Bank (b) 1,600,000 1,600,000
Stark County Ind. Dev. Rev. (Liquid Control Corp. Proj.)
Series 1987, 5.75%, LOC Bank One Akron,
VRDN (b) 390,000 390,000
Student Loan Fund Corp. Rev., VRDN:
Series 1983 A, 5%, LOC Fuji Bank 3,700,000 3,700,000
Series 1990-A1, 5.10%, LOC Nat'l. Westminster (b) 2,900,000 2,900,000
Series 1990-A2, 5.10%, LOC Nat'l. Westminster (b) 5,200,000 5,200,000
Series 1990-A3, 5.10%, LOC Nat'l. Westminster (b) 4,700,000 4,700,000
Summit County BAN Series C, 3.85% 3/9/95 1,250,000 1,250,558
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Summit County Ind. Dev. Rev., VRDN: (b)
(Keltec Inc. Proj.) Series 1987, 5.75%,
LOC Bank One Akron $ 400,000 $ 400,000
(Kuchar Proj.) Series 1987, 5.75%,
LOC Bank One Akron 760,000 760,000
(Mannix County Proj.) Series 1987, 5.75%,
LOC Bank One Akron 1,840,000 1,840,000
Summit County Ind. Dev. Rev. Bonds: (b)
(Kuchar Proj.) 4.05%, tender 4/1/95,
LOC Bank One Akron 545,000 545,000
(SGS Tool Co. Proj.) 4% tender 4/1/95,
LOC Bank One Akron 2,800,000 2,800,000
(Spark Tec Int'l. Proj.) Series 1989, 4.15%, tender 5/1/95,
LOC Bank One Akron 415,000 415,000
Toledo-Lucas County Convention & Visitors Bureau Rev. Rfdg.
(Toledo-Lucas County Convention Ctr. Proj.)
Series 1991, 5.70%, LOC Marine Midland Bank, VRDN 2,175,000 2,175,000
Toledo-Lucas County Port. Auth. Rev. Bonds
(CSX Trans. Inc. Proj.) Series 1992:
3.35%, tender 1/12/95, LOC Bank of Nova Scotia 2,500,000 2,500,000
3.55%, tender 1/13/95, LOC Bank of Nova Scotia 1,500,000 1,500,000
Troy BAN 4.85% 11/21/95 3,500,000 3,507,425
Trumbull County Ind. Dev. Rev. (McDonald Steel Corp.)
Series 1990, 5.65%, LOC Pittsburgh Nat'l. Bank, VRDN (b) 2,200,000
2,200,000
University of Cincinnati BAN:
Series K-1, 4% 3/23/95 9,000,000 9,014,500
Series Q, 4% 3/23/95 800,000 801,289
University of Cincinnati General Receipt BAN
4.75% 8/30/95 5,600,000 5,624,910
Van Wert County Ind. Dev. Auth. Rev. (Toledo Molding & Die Inc.)
Series 1994, 5.75%, LOC Bank One Columbus, VRDN (b) 4,000,000 4,000,000
Warren County Ind. Dev. Rev. (Johnson & Hardin Enterprise)
Series 1990 A, 5.65%, LOC Central Trust Co., VRDN (b) 3,100,000
3,100,000
Washington County Ind. Dev. Rev. (Forma Scientific, Inc. Proj.)
5.65%, LOC Bank One Akron, VRDN (b) 800,000 800,000
289,794,907
SOUTH CAROLINA - 2.5%
South Carolina Jobs Econ. Dev. Auth. (St. Francis Hosp.)
6.05%, LOC Chemical Bank, VRDN 7,500,000 7,500,000
TEXAS - 0.6%
Gulf Coast Ind. Dev. Auth. Solid Waste Disp. Rev.
(Citgo Petroleum) 5.65% LOC Wachovia Bank, VRDN (b) 1,900,000 1,900,000
TOTAL INVESTMENTS - 100% $ 299,194,907
Total Cost for Income Tax Purposes $ 299,194,907
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $22,200 of which $5,100, $6,100, and $11,000 will expire on
December 31, 1998, 2000, and 2002 respectively.
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
136.ASSETS 137. 138.
139.Investment in securities, at value - See 140. $ 299,194,907
accompanying schedule
141.Cash 142. 10,861,829
143.Interest receivable 144. 1,846,506
145. 146.TOTAL ASSETS 147. 311,903,242
148.LIABILITIES 149. 150.
151.Payable for investments purchased $ 10,030,986 152.
153.Dividends payable 20,000 154.
155.Accrued management fee 99,527 156.
157.Other payables and accrued expenses 61,474 158.
159. 160.TOTAL LIABILITIES 161. 10,211,987
162.163.NET ASSETS 164. $ 301,691,255
165.Net Assets consist of: 166. 167.
168.Paid in capital 169. $ 301,713,493
170.Accumulated net realized gain (loss) on 171. (22,238)
investments
172.173.NET ASSETS, for 301,713,493 shares 174. $ 301,691,255
outstanding
175.176.NET ASSET VALUE, offering price and 177. $1.00
redemption price per share ($301,691,255 (divided by)
301,713,493 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
178.179.INTEREST INCOME 180. $ 8,678,434
181.EXPENSES 182. 183.
184.Management fee $ 1,161,251 185.
186.Transfer agent, accounting and custodian fees 426,040 187.
and expenses
188.Non-interested trustees' compensation 3,157 189.
190.Registration fees 2,457 191.
192.Audit 20,506 193.
194.Legal 4,532 195.
196.Miscellaneous 6,638 197.
198. 199.TOTAL EXPENSES 200. 1,624,581
201.202.NET INTEREST INCOME 203. 7,053,853
204.205.NET REALIZED GAIN (LOSS) ON INVESTMENTS 206. (11,009)
207.208.NET INCREASE IN NET ASSETS RESULTING FROM 209. $ 7,042,844
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
210.INCREASE (DECREASE) IN NET ASSETS
211.Operations $ 7,053,853 $ 5,050,161
Net interest income
212. Net realized gain (loss) (11,009) 2,115
213. 7,042,844 5,052,276
214.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
215.Dividends to shareholders from net interest income (7,053,853) (5,050,161)
216.Share transactions at net asset value of $1.00 per 547,410,061 376,255,537
share
Proceeds from sales of shares
217. Reinvestment of dividends from net interest 6,760,085 4,776,146
income
218. Cost of shares redeemed (514,839,223) (388,910,557)
219. 39,330,923 (7,878,874)
Net increase (decrease) in net assets and shares
resulting from share transactions
220. 39,319,914 (7,876,759)
221.TOTAL INCREASE (DECREASE) IN NET ASSETS
222.NET ASSETS 223. 224.
225. Beginning of period 262,371,341 270,248,100
226. End of period $ 301,691,255 $ 262,371,341
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
227. YEARS ENDED DECEMBER 31,
228. 1994 1993 1992 1991 1990
229.SELECTED PER-SHARE
DATA
230.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
231.Income from .025 .021 .028 .044 .058
Investment Operations
Net interest income
232. Dividends from net (.025) (.021) (.028) (.044) (.058)
interest income
233.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
234.TOTAL RETURN 2.50 2.09 2.81 4.50 5.90
% % % % %
235.RATIOS AND SUPPLEMENTAL DATA
236.Net assets, end of $ 301,691 $ 262,371 $ 270,248 $ 247,885 $ 213,658
period (000 omitted)
237.Ratio of expenses to .57 .59 .58 .47 .23
average net assets % % % % %
238.Ratio of expenses to .57 .59 .59 .64 .69
average net assets % % % % %
before expense
reductions
239.Ratio of net interest 2.48 2.07 2.78 4.41 5.77
income to average % % % % %
net assets
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Ohio Tax-Free High Yield Portfolio (the high yield fund) is a fund
of Fidelity Municipal Trust. Fidelity Ohio Municipal Money Market Portfolio
(the money market fund) is a fund of Fidelity Municipal Trust II. Each
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company. Fidelity
Municipal Trust and Fidelity Municipal Trust II (the trusts) are organized
as a Massachusetts business trust and a Delaware business trust,
respectively. Each fund is authorized to issue an unlimited number of
shares. The following summarizes the significant accounting policies of the
high yield fund and the money market fund:
SECURITY VALUATION.
HIGH YIELD FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures and options transactions, losses deferred due to wash sales, and
excise tax regulations. The high yield 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The high yield fund may use futures and
options contracts to manage its exposure to the bond market and to
fluctuations in interest rates. Buying futures, writing puts, and buying
calls tend to increase the fund's exposure to the underlying instrument.
Selling futures, buying puts, and writing calls tend to decrease the fund's
exposure to the underlying instrument, or hedge other fund investments.
Futures contracts and written options involve, to varying degrees, risk of
loss in excess of the futures variation margin or the option value
reflected in the Statement of Assets and Liabilities. The underlying face
amount at value is shown in the schedule of investments under the caption
"Purchased Options." This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparties do not perform under the
contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
HIGH YIELD FUND. Purchases and sales of securities, other than short-term
securities, aggregated $85,411,603 and $151,769,468, respectively.
The market value of futures contracts opened and closed during the period
amounted to $177,108,635 and $176,246,145, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly basic fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate applied
to the average net assets of each fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1325% to
..3700% for the period January 1, 1994 to July 31, 1994 and .1200% to .3700%
for the period August 1, 1994 to December 31, 1994, for both the high yield
and money market funds. In the event that these rates were lower than the
contractual rates in effect during those periods, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. The annual individual fund fee rate is .25%. For the
period, the management fees were equivalent to annual rates of .41% of
average net assets for both the high yield and money market funds.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
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 $3,073 and $89,613 for the high yield and money market
fund, respectively, 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
$418,755 and $175,407 for the high yield fund and $338,604 and $60,657 for
the money market fund, respectively.
Shareholders participating in the Fidelity Ultra Service Account(registered
trademark) Program (the Program) pay a $5.00 monthly fee to Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, for performing
services associated with the Program. For the period, fees paid to FBSI by
shareholders participating in the Program amounted to $7,730.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Fidelity Ohio Tax-Free High Yield Portfolio and
Fidelity Ohio Municipal Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of
Fidelity Ohio Tax-Free High Yield Portfolio, a portfolio of Fidelity
Municipal Trust, and Fidelity Ohio Municipal Money Market Portfolio, a
portfolio of Fidelity Municipal Trust II, including the schedule of
portfolio investments, as of December 31, 1994, and the related statements
of operations for the year then ended, the statements 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
funds' 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, 1994 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 Ohio Tax-Free High Yield Portfolio and Fidelity Ohio Municipal
Money Market Portfolio as of December 31, 1994, the results of their
operations for the year then ended, the changes in their 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 L.L.P.
Boston, Massachusetts
January 27, 1995
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
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
4611 Sharon Road
Charlotte, 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
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President -
MONEY MARKET FUND
Janice S. Bradburn, Vice President -
MONEY MARKET FUND
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, 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
Marvin L. Mann*
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(registered trademark)
PENNSYLVANIA
MUNICIPAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 22 How the fund has done over time.
FUND TALK 24 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 26 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 27 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 32 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 36 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 39 The auditors' opinion.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888
FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued
into the fourth quarter of 1994. The Board raised the federal funds rate -
the rate banks charge each other for overnight loans - five times from
February through August, taking it from 3.00% to 4.75%. A sixth increase in
November lifted the rate to 5.50%. The Fed rate hikes were intended to
forestall inflation that could result from an improving U.S. economy, and
they led to negative returns for many bond investments and below-average
returns for many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value), and the effect of the $5 account closeout fee.
You can also look at the fund's income. If Fidelity had not reimbursed
certain fund expenses during the periods shown, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal High Yield Portfolio -5.04% 41.41% 77.61%
Lehman Brothers Municipal Bond Index -5.17% 39.04% n/a
Average Pennsylvania Tax-Exempt
Municipal Bond Fund -6.71% 38.13% n/a
Consumer Price Index 2.67% 18.72% 36.71%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years, or since the fund started on August
6, 1986. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, you would end up with $1,050. You can compare these
figures to the performance of the Lehman Brothers Municipal Bond index - a
broad gauge of the municipal bond market. To measure how the fund stacked
up against its peers, you can look at the average Pennsylvania tax-exempt
municipal bond fund, which currently reflects the performance of 44
Pennsylvania 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 (CPI) helps
show how your fund did compared to inflation. (The periods covered by CPI
numbers are the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal High Yield Portfolio -5.04% 7.18% 7.07%
Lehman Brothers Municipal Bond Index -5.17% 6.81% n/a
Average Pennsylvania Tax-Exempt
Municipal Bond Fund -6.71% 6.67% n/a
Consumer Price Index 2.67% 3.49% 3.78%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spartan Penn: High YMunicipal Bond Index
08/31/86 10000.01 10000.00
09/30/86 10054.67 10025.10
10/31/86 10247.94 10198.23
11/30/86 10389.98 10400.26
12/31/86 10329.58 10371.56
01/31/87 10619.06 10683.84
02/28/87 10726.54 10736.41
03/31/87 10633.81 10622.60
04/30/87 9635.80 10089.56
05/31/87 9511.25 10039.52
06/30/87 9731.51 10334.28
07/31/87 9912.36 10439.69
08/31/87 9930.00 10463.17
09/30/87 9312.07 10077.40
10/31/87 9290.87 10113.07
11/30/87 9561.05 10377.12
12/31/87 9737.58 10527.70
01/31/88 10226.62 10902.69
02/29/88 10395.52 11017.93
03/31/88 10077.29 10889.57
04/30/88 10138.64 10972.34
05/31/88 10210.17 10940.63
06/30/88 10412.66 11100.69
07/31/88 10481.85 11173.06
08/31/88 10499.01 11182.90
09/30/88 10728.60 11385.31
10/31/88 11039.46 11586.26
11/30/88 10943.15 11480.13
12/31/88 11121.72 11597.57
01/31/89 11278.34 11837.41
02/28/89 11181.44 11702.34
03/31/89 11178.65 11674.37
04/30/89 11467.63 11951.52
05/31/89 11675.62 12199.76
06/30/89 11859.07 12365.43
07/31/89 11973.29 12533.72
08/31/89 11860.42 12411.02
09/30/89 11821.57 12373.78
10/31/89 11984.64 12524.74
11/30/89 12126.31 12743.93
12/31/89 12212.13 12848.43
01/31/90 12144.67 12788.04
02/28/90 12252.25 12901.85
03/31/90 12254.25 12905.72
04/30/90 12074.26 12812.80
05/31/90 12375.67 13092.12
06/30/90 12488.21 13207.33
07/31/90 12651.30 13401.48
08/31/90 12468.04 13207.16
09/30/90 12531.04 13215.08
10/31/90 12711.90 13454.28
11/30/90 12984.66 13724.71
12/31/90 13091.24 13785.09
01/31/91 13261.52 13969.82
02/28/91 13338.07 14091.35
03/31/91 13367.31 14096.99
04/30/91 13577.20 14284.48
05/31/91 13739.13 14411.61
06/30/91 13670.81 14397.20
07/31/91 13874.86 14572.85
08/31/91 14065.38 14765.21
09/30/91 14228.89 14957.15
10/31/91 14351.80 15091.77
11/30/91 14390.39 15134.03
12/31/91 14726.72 15459.41
01/31/92 14766.44 15494.96
02/29/92 14774.39 15499.61
03/31/92 14773.29 15505.81
04/30/92 14928.17 15643.81
05/31/92 15114.54 15828.41
06/30/92 15358.30 16094.33
07/31/92 15841.46 16577.16
08/31/92 15676.38 16414.70
09/30/92 15760.31 16521.40
10/31/92 15518.08 16359.49
11/30/92 15887.95 16652.32
12/31/92 16068.88 16822.18
01/31/93 16280.58 17017.31
02/28/93 16918.93 17633.34
03/31/93 16726.16 17446.43
04/30/93 16889.04 17622.64
05/31/93 16992.34 17721.32
06/30/93 17280.04 18017.27
07/31/93 17258.87 18040.69
08/31/93 17691.98 18415.94
09/30/93 17952.08 18625.88
10/31/93 17961.08 18661.27
11/30/93 17807.68 18497.05
12/31/93 18186.79 18887.34
01/31/94 18423.83 19102.65
02/28/94 17976.47 18607.89
03/31/94 17185.50 17850.55
04/30/94 17274.97 18002.28
05/31/94 17469.43 18158.90
06/30/94 17440.63 18053.58
07/31/94 17721.78 18383.96
08/31/94 17782.37 18448.30
09/30/94 17530.21 18177.11
10/31/94 17228.54 17853.56
11/30/94 16818.77 17530.41
12/30/94 17270.96 17916.08
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Pennsylvania Municipal High Yield Portfolio on August 31, 1986, shortly
after the fund started. As the chart shows, by December 31, 1994, the value
of your investment would have grown to $17,271 - a 72.71% increase on your
initial investment. This assumes you still own the fund on December 31, and
therefore does not include the effect of the $5 account closeout fee. For
comparison, look at how the Lehman Brothers Municipal Bond index did over
the same period. With dividends reinvested, the same $10,000 would have
grown to $17,916 - a 79.16% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend returns 5.73% 6.68% 7.00% 7.53% 7.40%
Capital appreciation
returns -10.77% 6.49% 2.11% 4.95% -0.21%
Total returns -5.04% 13.17% 9.11% 12.48% 7.19%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.60(cents) 32.98(cents) 65.18(cents)
Annualized dividend rate 6.82% 6.53% 6.33%
30-day annualized yield 6.91% - -
30-day annualized tax-equivalent yield 11.11% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $9.67 over
the past month, $10.02 over the past six months and $10.30 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 37.79% combined effective 1994 federal and state tax bracket.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Steven Harvey, Portfolio Manager of Spartan
Pennsylvania Municipal High Yield
Portfolio
Q. STEVE, 1994 WAS A TOUGH YEAR FOR THE MUNICIPAL BOND MARKET. HOW DID THE
FUND PERFORM OVER THOSE 12 MONTHS?
A. It was a particularly difficult time for all municipal bond funds, but
the fund performed better than many of its competitors. In fact, 1994 was
the worst year for the tax-exempt bond market since 1927. Against that
backdrop, the fund's total return for the year ended December 31, 1994, was
- -5.04%. That beat the average Pennsylvania tax-exempt municipal bond fund,
which returned -6.71% for the same period, according to Lipper Analytical
Services.
Q. WHY DID THE FUND OUTPERFORM THE AVERAGE?
A. Mostly because of its large stake in lower-quality, higher-yielding
bonds. Of course, a bond's total return is calculated by combining its
price appreciation, or depreciation, and its income. All municipal bond
prices depreciated in 1994. However, I was able to offset some of the
effects of declining prices with a higher level of income. Higher-yielding
nursing home and life care bonds were two sectors that helped the fund's
performance. Their high yields are one reason these bonds are attractive,
but there are others. There's a shortage of nursing home beds in
Pennsylvania and as the population ages, that shortage could continue. Life
care facilities, which offer housing and medical care for retired people,
could also benefit from the aging population. I particularly favor life
care facilities that have strong sponsorship from a hospital, like Riddle
Village, located outside Philadelphia.
Q. SIX MONTHS AGO YOU INVESTED IN ANOTHER HIGH-YIELDING SECTOR - BONDS
ISSUED BY PHILADELPHIA AND BONDS SECURED BY THE CITY. HOW DID THOSE FARE IN
1994?
A. Those, too, held up relatively well and helped the fund's performance.
What cushioned them against the broader market's decline was their high
income and the perception that the city's fiscal and economic conditions
were improving. I anticipate that these bonds could get upgraded to
investment-grade - or Baa - in 1995. Many investors may have heard that
Orange County, California, declared bankruptcy because of losses stemming
from its investments and may be concerned that Pennsylvania municipalities
could be sitting on a similar time bomb. After a thorough review of our
holdings and to the best of our knowledge, no Pennsylvania issuer in the
fund should experience this type of problem. As always, Fidelity's research
department will continue to carefully monitor all our investments.
Q. WHEN INTEREST RATES ROSE, HOW DID YOU MANAGE THE FUND'S DURATION, WHICH
MEASURES HOW SENSITIVE ITS SHARE PRICE IS TO CHANGES IN INTEREST RATES?
A. The duration of the fund was slightly shorter than its competitors
through most of 1994. The shorter the duration, the less sensitive the
fund's share price is to rising or falling interest rates. The fund's
shorter duration was partly due to its stake in lower-quality,
higher-yielding bonds. When municipal bond prices began to fall,
higher-quality, lower-yielding bonds were among the first to be sold
because they were so liquid, or easily traded. The lower-quality, higher-
yielding bonds were less liquid and generally were the last to suffer price
declines. What's more, as current yields crept up and lower-yielding bonds
became less attractive, investors were eager to hold onto higher-yielding
bonds. Throughout the period, I used several measures to keep the fund's
duration shorter than average. At times, I built up a larger-than-normal
cash position, as high as 7% in some instances. In normal market
conditions, I would keep the fund's cash position at around 3%. At other
times, I used futures and options to temper the fund's duration. As the
market fell, the value of the futures and options positions rose.
Unfortunately, many of the market's down drafts were so severe and dramatic
that these measures weren't sufficient enough to prevent losses for the
fund.
Q. WHAT'S AHEAD FOR INVESTORS IN 1995?
A. The municipal bond market could have a rough time if interest rates
continue to rise - which I think they may over the next six months.
However, after that, I'm optimistic that municipal bonds can do better in
1995 than they did in 1994. For one thing, it would be very unusual to have
two back-to-back years with such negative returns. Also, I think we'll see
the economy start to slow and long-term interest rates come down a bit
beginning in mid-1995. That would most likely be a positive scenario for
the municipal bond market. What's more, yields on municipal bonds are
attractive right now, both on their own merits and when you compare them to
taxable bonds. Those attractive yields, coupled with the fact that the
supply of municipal bonds is expected to stay low for the next two years,
could ultimately help firm municipal bond prices.
FUND FACTS
GOAL: to provide high current
income exempt from federal
and Pennsylvania state
income taxes
START DATE: August 6, 1986
SIZE: as of December 31,
1994, more than $241 million
MANAGER: Steven Harvey,
since October 1993; manager,
Fidelity Ohio Tax-Free High
Yield Portfolio, since July 1994;
Fidelity Minnesota Tax-Free
Portfolio, since October 1993;
Spartan Maryland Municipal
Income Portfolio, since April
1993; joined Fidelity in 1986
(checkmark)
STEVE HARVEY'S STRATEGY FOR
1995:
"Beginning in 1994, I sold
some callable bonds, which
can be redeemed by their
issuers before their scheduled
maturity date, and added to the
fund's stake in non-callable
bonds. I believe that eventually
the economy will slow and
long-term interest rates will fall.
If that is the case, I don't want
to own bonds that issuers will
call early. At the same time,
I've started to reduce the fund's
stake in higher- yielding,
lower-quality bonds. I did that
because I'm concerned that a
year from now the economy
will slow down and investors
will worry about the health of
these bonds. Recently, there's
been a relatively strong
demand for these bonds. If that
continues, I'm willing to reduce
the fund's stake in them at
prices that are attractive. "
(medium solid bullet) Inverse floaters, one of the
financial arrangements known
as derivatives, made up about
4% of the fund's investments at
the end of the period. The yield
on inverse floaters rises as
short-term interest rates fall
and vice versa. By using
various derivatives, the
manager hopes to achieve
higher levels of tax-exempt
income and increased flexibility
in managing the overall
sensitivity to changes in
interest rates. However, these
strategies can involve
additional risk to the fund and
don't always work as intended.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
Health Care 18.6 20.3
General Obligation 16.1 15.6
Water & Sewer 15.9 13.2
Other 11.4 10.0
Special Tax 9.2 9.1
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 18.7 19.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 9.4 8.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 31.3%
Aa, A 5.3%
Baa 28.7%
Ba, B 11.1%
Non-rated 22.3%
Short-term investments 1.3%
Aaa 29.4%
Aa, A 8.2%
Baa 28.4%
Ba, B 10.1%
Non-rated 21.5%
Short-term investments 2.4%
Row: 1, Col: 1, Value: 31.3
Row: 1, Col: 2, Value: 5.3
Row: 1, Col: 3, Value: 28.7
Row: 1, Col: 4, Value: 11.1
Row: 1, Col: 5, Value: 22.3
Row: 1, Col: 6, Value: 1.8
Row: 1, Col: 1, Value: 29.4
Row: 1, Col: 2, Value: 8.199999999999999
Row: 1, Col: 3, Value: 28.4
Row: 1, Col: 4, Value: 10.1
Row: 1, Col: 5, Value: 21.5
Row: 1, Col: 6, Value: 2.4
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNT FOR 20.7% AND 20.0% OF THE FUND'S
INVESTMENTS AT DECEMBER 31, 1994 AND JUNE 30, 1994, RESPECTIVELY.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 98.7%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 91.9%
Aliquippa Unltd. Tax Gen. Oblig.
8.25% 9/15/01 - $ 1,430,000 $ 1,426,425
Allegheny County Gen. Oblig.
0% 4/1/11 (MBIA Insured) Aaa 2,560,000 886,400
Allegheny County Higher Ed. Bldg. Auth.
Rev. Rfdg. (La Roche College)
7.625% 12/1/06 - 1,000,000 1,016,250
Allegheny County Hosp. Dev. Auth. Health
Facs. Rev. (Allegheny Valley School)
8.50% 2/1/15 Baa 3,000,000 3,101,250
Allegheny County Hosp. Dev. Auth. Rev.
Rfdg. (South Side Hosp.) Series A,
8.75% 6/1/10 BBB 3,750,000 3,904,687
Allegheny County Ind. Dev. Auth. Rev.
(YMCA Pittsburgh Proj.) Series 1990,
8.75% 3/1/10 - 2,715,000 2,813,419
Allegheny County Residential Fin. Auth.
Single Family Mtg. Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 225,000 228,094
Series 1990, 7.95% 6/1/23,
(GNMA Coll.) (a) Aaa 1,600,000 1,628,000
Allegheny County San. Auth. Swr. Rev.:
Series B, 7.50% 12/1/16 (FGIC Insured) Aaa 750,000 808,125
0% 12/1/12 (FGIC Insured) Aaa 2,260,000 678,000
Beaver County Ind. Dev. Auth. Poll. Cont.
Rev. (Toledo Edison Co.) (Beaver Valley)
Series A, 13.25% 11/15/14 Ba3 1,000,000 1,038,750
Beaver County Ind. Dev. Auth. Rev. Rfdg.
(Washington Plaza Assoc. Proj.)
6% 2/15/07 Ba3 1,650,000 1,466,438
Berks County 2nd Series:
0% 5/15/11 (FGIC Insured) Aaa 3,310,000 1,137,813
0% 5/15/12 (FGIC Insured) Aaa 3,395,000 1,086,400
Bucks County Wtr. & Swr. Auth. Rev.
(Neshaminy Interceptor Swr. Sys.)
Series A, 0% 12/1/14 (FGIC Insured) Aaa 4,400,000 1,155,000
Butler County Ind. Dev. Auth. 1st Mtg. Rev.
Rfdg. (Sherwood Oaks Proj.) (Lifetime Care
Commty.) Series A, 8.75% 6/1/16 A- 675,000 720,563
Clarion County Hosp. Auth. Hosp. Rev.
(Clarion Hosp. Proj.):
Rfdg. 8.10% 7/1/12 BBB- 6,000,000 6,120,000
8.50% 7/1/13 BBB- 2,885,000 3,011,219
8.50% 7/1/21 BBB- 1,665,000 1,737,844
Clearfield County Ind. Dev. Auth. Ind. Dev.
Rev. Rfdg. (Washington Plaza Assoc. Proj.)
7% 12/1/06 Ba2 1,715,000 1,654,975
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Dauphin County Ind. Dev. Auth. Wtr. Dev. Rev.
(Dauphin Consolidated Wtr. Supply)
Series A, 6.90% 6/1/24 (a) A3 $ 1,000,000 $ 950,000
Delaware County Auth. Hosp. Rev.
(Crozer - Chester):
6% 12/15/09 Baa1 1,000,000 877,500
6% 12/15/20 Baa1 1,000,000 806,250
Delaware County Auth. Rev.
(First Mtg. Riddle Village Proj.):
7% 6/1/00 - 1,200,000 1,174,500
8.25% 6/1/22 - 2,800,000 2,670,500
9.25% 6/1/22 - 1,800,000 1,887,750
Series 1992, 8.75% 6/1/10 - 2,870,000 2,938,163
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resources Recovery Proj.) Series A,
8.10% 12/1/13, LOC Swiss Bank Aa3 1,400,000 1,478,750
Erie County Ind. Dev. Auth. Rev. Rfdg. (Beverly
Enterprises Proj.) 6.875% 10/1/02 - 550,000 508,750
Harrisburg Auth. Wtr. Rev. (Complimentary
Auction Rate B-3) 7.22% 7/15/15,
(FGIC Insured) INFL (e) Aaa 3,000,000 2,433,750
Jenks Township Muni. Auth. Rev.
(Abraxas Group, Inc.) 8% 4/1/18 - 6,605,000 6,018,806
Keystone Oaks School Dist. Series D,
7.21% 9/1/16 (AMBAC Insured) INFL (e) Aaa 2,950,000 2,337,875
Lancaster County Gen. Oblig.
(Cap. Appreciation) 0% 7/1/06,
(FGIC Insured) Aaa 2,645,000 1,299,356
Lancaster Ind. Dev. Auth. 1st Mtg. Rev.
(Lancaster Nursing Ctr.) Series A,
8.75% 12/1/12 - 1,405,000 1,394,462
Lehigh County Gen. Purp. Auth. Rev.
(Hosp. Healtheast, Inc.) Series B, 9% 7/1/15
(Pre-Refunded to 7/1/97 @102) (c) A1 1,000,000 1,101,250
(Wiley House):
8.75% 11/1/14 - 4,000,000 3,850,000
9.50% 11/1/16 - 3,000,000 3,056,250
McCandless Kroger Ind. Dev. Auth. Ind. Dev.
Rev. (Kroger Co.) 7.375% 10/15/07 Ba2 2,135,000 2,121,656
McKeesport Area School Dist. Rfdg.
Series C, 5% 4/1/13 A 1,000,000 820,000
Montgomery County Higher Ed. & Health
Auth. Hosp. Rev. (United Hosp. Proj.):
(St. Christopher) 8.50% 11/1/17 Ba1 1,000,000 1,010,000
Series A:
10% 11/1/05 Ba1 675,000 702,000
8.375% 11/1/11 Ba1 3,140,000 3,175,325
Montgomery County Ind. Dev. Auth. Health
Facs. Rev. Bonds, Series 1993, 6.85%
6/1/13 - 2,165,000 1,970,150
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Northumberland County Auth. Commonwealth
Lease Rev. 0% 10/15/10 (MBIA Insured) Aaa $ 1,000,000 $ 355,000
Pennsylvania Convention Ctr. Auth. Rev., Series A:
Rfdg.:
6.60% 9/1/09 Ba 4,150,000 3,859,500
6.70% 9/1/14 Ba 3,965,000 3,642,844
6.75% 9/1/19 Ba 2,950,000 2,691,875
6% 9/1/19 (FGIC Insured) (Escrowed to
Maturity) (c) Aaa 9,225,000 8,440,875
Pennsylvania Higher Ed. Assistant Agcy.
Student Loan Rev. INFL: (a) (e)
7.316% 3/1/22 (AMBAC Insured) Aaa 2,000,000 1,587,500
8.761% 9/3/26 (AMBAC Insured) Aaa 1,000,000 957,500
Pennsylvania Higher Edl. Facs. Auth.
College & Univ. Rev. (College Optometry)
9% 2/1/08 - 1,240,000 1,266,350
Pennsylvania Higher Edl. Facs. Auth. Rev.
(Pennsylvania Med. College Proj.)
Series A, 8.375% 3/1/11 Baa1 900,000 936,000
Pennsylvania Hsg. Fin. Agcy.
Single Family Mtg.:
Series V, 7.80% 4/1/16 Aa 500,000 513,750
Series 1990-27, 8.15% 10/1/21 (a) Aa 990,000 1,017,225
Pennsylvania Ind. Dev. Auth. Rev. Econ. Dev.:
7% 1/1/07 (AMBAC Insured) Aaa 5,150,000 5,504,062
5.80% 1/1/08 (AMBAC Insured) Aaa 3,000,000 2,816,250
5.80% 7/1/09 (AMBAC Insured) Aaa 1,000,000 936,250
Pennsylvania Intergovernmental Coop. Auth.
Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/13 Baa1 7,500,000 5,990,625
(Philadelphia Funding Prog.)
5.75% 6/15/15 Baa1 14,500,000 12,615,000
Philadelphia Auth. Ind. Dev. Rev.:
(Long Term Care - Maplewood) 8%
1/1/24 - 4,835,000 4,436,112
(Refrigerated Enterprises Proj.)
9.05% 12/1/19 (a) (d) - 7,000,000 7,105,000
Philadelphia Auth. Ind. Impt. Rev.
Rfdg. (Encore Nursing Ctr. Stenton Proj.)
7.50% 11/1/02 - 1,100,000 1,100,000
Philadelphia Hosp. & Higher Ed. Facs. Auth
Hosp. Rev. (Graduate Health Sys.):
Series A, 6.25% 7/1/18 Baa1 4,400,000 3,597,000
Series B, 6.25% 7/1/13 Baa1 1,000,000 837,500
Philadelphia Muni. Auth. Rev.:
Rfdg. Lease Rev. Series D, 6.25%
7/15/13 Ba 3,000,000 2,576,250
(Muni. Svcs. Bldg. Lease):
0% 3/15/11 (CGIC Insured) Aaa 1,000,000 343,750
0% 3/15/14 (CGIC Insured) Aaa 7,360,000 2,042,400
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia Redev. Auth. Hsg. Rev.
Sub-Series 3, 8.125% 8/1/26,
(GNMA Coll.) AAA $ 45,000 $ 49,219
Philadelphia Wtr. & Swr. Rev.
(Cap. Appreciation) 14th Series, 0%
10/1/08 (MBIA Insured) Aaa 5,300,000 2,179,625
Philadelphia Wtr. & Wastewtr. Rev.:
Rfdg.:
Series 1993, 5.50% 6/15/07 Baa 7,000,000 6,195,000
5% 6/15/12 (FGIC Insured) Aaa 1,845,000 1,505,981
5.75% 6/15/13 Baa 2,000,000 1,702,500
6.06% 6/15/12 (FGIC Insured) INFL (e) Aaa 3,000,000 2,340,000
Pittsburgh Gen. Oblig. Series A, 5.50%
9/1/14 (AMBAC Insured) Aaa 5,310,000 4,632,975
Pittsburgh School Dist. Series B:
0% 8/1/07 (AMBAC Insured) Aaa 2,610,000 1,194,075
0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 852,500
Pittsburgh Urban Redev. Auth. Mtg. Rev.
Series A, 7.625% 10/1/17 A1 995,000 1,004,950
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rfdg. Series 1993, 6.50% 9/1/13,
(FGIC Insured) Aaa 15,705,000 15,606,844
Pottstown Borough Auth. Swr. Rev.:
0% 11/1/10 (FGIC Insured) Aaa 1,600,000 568,000
0% 11/1/14 (FGIC Insured) Aaa 1,760,000 468,600
Schuylkill County Ind. Dev. Auth. 1st Mtg. Rev.
(Valley Health Concerns) Series A,
8.75% 3/1/12 - 1,500,000 1,501,875
Scranton Parking Auth. Parking Rev. 8.125%
9/15/14, LOC Northeastern Bank A+ 500,000 535,625
Somerset County Hosp. Auth. 1st Mtg. Rev.
(Health Care-GF):
8.40% 6/1/09 - 1,000,000 958,750
8.50% 6/1/24 - 2,005,000 1,904,750
Stroud Township Swr. Auth. Swr. Rev.:
0% 11/15/06 (CGIC Insured) Aaa 510,000 243,525
0% 11/15/07 (CGIC Insured) Aaa 510,000 225,675
Upper Gwynedd Towamencin Muni. Auth.
Swr. Rev.:
0% 4/15/11 (MBIA Insured) Aaa 500,000 171,250
0% 10/15/11 (MBIA Insured) Aaa 490,000 162,312
Warren County Ind. Dev. Auth. Specialized
Dev. Rev. Rfdg. (Beverly Enterprises, Inc.):
8.75% 11/1/06 - 125,000 131,250
9%, 11/1/12 - 535,000 571,112
Washington County Ind. Dev. Auth.
Ind. Dev. Rev. Rfdg. (Kroger Co.)
7.50% 5/1/99 Ba2 1,000,000 1,027,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Westmoreland County Gen. Oblig. Rfdg.
Series G, 0% 12/1/09 (FGIC Insured) Aaa $ 2,490,000 $ 946,200
Westmoreland County Ind. Dev. Auth. Rev.
Rfdg. (Kroger Co.) 7.25% 9/1/99 Ba2 1,000,000 1,020,000
Westmoreland County Muni. Auth. Muni. Svc.
Rev. Series K, 0% 7/1/13 (FGIC Insured)
(Escrowed to Maturity) (c) Aaa 3,500,000 975,625
Wilkins Area Ind. Dev. Auth. 1st Mtg. Rev.
(Fairview Extended Care) Series A,
10.25% 1/1/21 - 2,500,000 2,696,875
Wilson Area School Dist.
(Cap. Appreciation):
0% 5/15/09 (AMBAC Insured) Aaa 3,275,000 1,293,625
0% 5/15/10 (AMBAC Insured) Aaa 3,280,000 1,205,400
0% 5/15/11 (AMBAC Insured) Aaa 3,500,000 1,203,125
Wyoming Ind. Dev. Auth. Poll. Cont. Rev.
Rfdg. (Proctor & Gamble Paper Proj.)
5.55% 5/1/10 Aa2 5,000,000 4,412,500
York City Unltd. Tax Gen. Oblig. Swr. Auth.
Swr. Rev. 0% 12/1/12 (MBIA Insured) Aaa 3,235,000 986,675
215,845,231
PUERTO RICO - 6.5%
Puerto Rico Commonwealth Unltd. Tax Gen.
Oblig. Rfdg. 5% 7/1/21 Baa1 5,000,000 3,843,750
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Hwy. Rev., Series W:
Rfdg. 5.50% 7/1/13 Baa1 9,000,000 7,762,500
5.50% 7/1/15 Baa1 2,500,000 2,137,500
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Rfdg.
7.875% 10/1/04 Baa1 1,000,000 1,082,500
Puerto Rico Elec. Pwr. Auth. Pwr. Rev.
7.125% 7/1/14 Baa1 370,000 379,250
15,205,500
GUAM - 0.3%
Guam Pwr. Auth. Rev. Series A,
5.25% 10/1/13 BBB 1,000,000 801,250
TOTAL MUNICIPAL BONDS
(Cost $245,781,800) 231,851,981
MUNICIPAL NOTES - 1.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 1.3%
Pennsylvania Intergovernmental Coop. Auth.
Spl. Tax Rev. (Philadelphia Funding Prog.)
9% 6/15/95 (Cost $3,061,051) MIG 1 $ 3,000,000 $ 3,048,750
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE VALUE
STRIKE PRICE AMOUNT AT VALUE (NOTE 1)
140 Put Options on Feb. U.S. Treasury
Bond Futures (Cost $38,468) Jan. 95/97 $ 3,062,500 $ 30,625
TOTAL INVESTMENTS - 100%
(Cost $248,881,319) $ 234,931,356
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
LEGEND
(d) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(e) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(f) Security collateralized by an amount sufficient to pay interest and
principal.
(g) Security exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of this security amounted to $7,105,000 or 2.9% of net
assets.
(h) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
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 35.7% AAA, AA, A 50.6%
Baa 22.1% BBB 13.5%
Ba 11.1% BB 5.44%
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 22.3%. FMR
has determined that unrated debt securities that are lower quality account
for 20.7% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 18.6%
General Obligation 16.1
Water & Sewer 15.9
Other 11.4
Others
(individually less than 10%) 38.0
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $248,881,319. Net unrealized depreciation
aggregated $13,949,963, of which $4,094,529 related to appreciated
investment securities and $18,044,492 related to depreciated investment
securities.
The fund hereby designates $838,211 as a capital gain dividend for the
purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending December 31,
1995, $963,729 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994 the fund was required to defer $685,365 of losses on
futures contracts.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $248,881,319) 9. $ 234,931,356
- -
See accompanying schedule
10.Receivable for investments sold 11. 5,244,601
12.Interest receivable 13. 3,986,574
14.Redemption fees receivable 15. 94
16. 17.TOTAL ASSETS 18. 244,162,625
19.LIABILITIES 20. 21.
22.Payable to custodian bank $ 26,292 23.
24.Payable for fund shares redeemed 916,378 25.
26.Dividends payable 1,376,073 27.
28.Accrued management fee 114,537 29.
30. 31.TOTAL LIABILITIES 32. 2,433,280
33.34.NET ASSETS 35. $ 241,729,345
36.Net Assets consist of: 37. 38.
39.Paid in capital 40. $ 256,955,532
41.Accumulated undistributed net realized gain (loss) on 42. (1,276,224)
investments
43.Net unrealized appreciation (depreciation) 44. (13,949,963)
on investments
45.46.NET ASSETS, for 25,131,029 shares outstanding 47. $ 241,729,345
48.49.NET ASSET VALUE, offering price and redemption 50. $9.62
price per share ($241,729,345 (divided by) 25,131,029 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
51.52.INTEREST INCOME 53. $ 18,887,787
54.EXPENSES 55. 56.
57.Management fee $ 1,507,849 58.
59.Non-interested trustees' compensation 1,612 60.
61. 62.TOTAL EXPENSES 63. 1,509,461
64.65.NET INTEREST INCOME 66. 17,378,326
67.REALIZED AND UNREALIZED GAIN (LOSS) 69. 70.
68.Net realized gain (loss) on:
71. Investment securities 5,128,247 72.
73. Futures contracts 820,530 5,948,777
74.Change in net unrealized appreciation (depreciation) 75. (38,756,490)
on investment securities
76.77.NET GAIN (LOSS) 78. (32,807,713)
79.80.NET INCREASE (DECREASE) IN NET ASSETS 81. $ (15,429,387)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
82.INCREASE (DECREASE) IN NET ASSETS
83.Operations $ 17,378,326 $ 17,372,893
Net interest income
84. Net realized gain (loss) 5,948,777 8,063,006
85. Change in net unrealized appreciation (depreciation) (38,756,490) 8,951,844
86. 87.NET INCREASE (DECREASE) IN NET ASSETS (15,429,387) 34,387,743
RESULTING FROM OPERATIONS
88.Distributions to shareholders: (17,378,326) (17,372,893)
From net interest income
89. From net realized gain (8,056,094) (3,786,608)
90. 91.TOTAL DISTRIBUTIONS (25,434,420) (21,159,501)
92.Share transactions 46,579,000 84,285,725
Net proceeds from sales of shares
93. Reinvestment of distributions 19,565,956 16,674,835
94. Cost of shares redeemed (89,828,981) (50,344,647)
95. Redemption fees 31,413 26,131
96. Net increase (decrease) in net assets resulting (23,652,612) 50,642,044
from
share transactions
97. 98.TOTAL INCREASE (DECREASE) IN NET ASSETS (64,516,419) 63,870,286
99.NET ASSETS 100. 101.
102. Beginning of period 306,245,764 242,375,478
103. End of period $ 241,729,345 $ 306,245,764
104.OTHER INFORMATION 106. 107.
105.Shares
108. Sold 4,493,816 7,686,940
109. Issued in reinvestment of distributions 1,920,098 1,511,871
110. Redeemed (8,802,430) (4,571,521)
111. Net increase (decrease) (2,388,516) 4,627,290
</TABLE>
FINANCIAL HIGHLIGHTS
112. YEARS ENDED DECEMBER 31,
113. 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
114.SELECTED
PER-SHARE DATA
115.Net asset value, $ 11.130 $ 10.590 $ 10.370 $ 9.880 $ 9.900
beginning of period
116.Income from .652 .679 .693 .701 .701
Investment Operations
Net interest income
117. Net realized and (1.201) .679 .219 .489 (.020)
unrealized gain (loss)
118. Total from (.549) 1.358 .912 1.190 .681
investment operations
119.Less Distributions (.652) (.679) (.693) (.701) (.701)
From net interest
income
120. From net realized (.310) (.140) - - -
gain on investments
121. Total distributions (.962) (.819) (.693) (.701) (.701)
122.Redemption fees .001 .001 .001 .001 -
added to paid in capital
123.Net asset value, $ 9.620 $ 11.130 $ 10.590 $ 10.370 $ 9.880
end of period
124.TOTAL RETURN A -5.04% 13.18 9.11 12.49 7.20
% % % %
125.RATIOS AND SUPPLEMENTAL DATA
126.Net assets, end of $ 241,729 $ 306,246 $ 242,375 $ 199,499 $ 142,906
period (000 omitted)
127.Ratio of expenses .55% .55 .55 .55 .60
to average net assets % % % %
128.Ratio of expenses .55% .55 .55 .55 .66
to average net assets % % % %
before expense
reductions
129.Ratio of net interest 6.33% 6.13 6.65 6.96 7.22
income to average % % % %
net assets
130.Portfolio turnover 26% 38 8 6 8
rate % % % %
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period, reinvestment of its dividends (or income), and the
effect of the fund's $5 account closeout fee. Yield measures the income
paid by a fund. Since a money market fund tries to maintain a $1 share
price, yield is an important measure of performance. If Fidelity had not
reimbursed certain fund expenses during the periods shown, the total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal Money Market 2.61% 19.66% 41.50%
Consumer Price Index 2.67% 18.72% 36.71%
Average All Tax-Free
Money Market Fund 2.38% 17.61% 37.93%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period
- - in this case, one year, five years or since the fund started on August 6,
1986. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, you would have $1,050. Comparing the fund's performance
to the consumer price index (CPI) helps show how your investment did
compared to inflation. To measure how the fund stacked up against its
peers, you can compare its return to the average all tax-free money market
fund's total return. This average currently reflects the performance of 373
tax-free money market funds tracked by IBC/Donoghue. (The periods covered
by the CPI and IBC/Donoghue numbers are the closest available match to
those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal Money Market 2.61% 3.66% 4.21%
Consumer Price Index 2.67% 3.49% 3.78%
Average All Tax-Free
Money Market Fund 2.38% 3.29% 3.95%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
YIELDS
12/31/93 3/31/94 6/30/94 9/30/94 12/31/94
Spartan Pennsylvania 2.49% 2.00% 2.39% 3.14% 4.34%
Municipal Money Market
Average All Tax-Free 2.16% 1.77% 2.27% 2.81% 3.78%
Money Market Fund
Spartan Pennsylvania 4.00% 3.21% 3.84% 5.05% 6.98%
Municipal Money Market -
Tax-equivalent
Average All Taxable 2.72% 2.93% 3.64% 4.20% 5.12%
Money Market Fund
Row: 1, Col: 1, Value: 2.49
Row: 1, Col: 2, Value: 2.16
Row: 2, Col: 1, Value: 2.0
Row: 2, Col: 2, Value: 1.77
Row: 3, Col: 1, Value: 2.39
Row: 3, Col: 2, Value: 2.27
Row: 4, Col: 1, Value: 3.14
Row: 4, Col: 2, Value: 2.81
Row: 5, Col: 1, Value: 4.34
Row: 5, Col: 2, Value: 3.78
5% -
4% -
3% -
2% -
1% -
0%
Spartan
Pennsylvania
Municipal Money
Market
Average All Tax-Fre
e
Money Market Fund
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the average all tax-free money market fund. Or you
can look at the fund's tax-equivalent yield, which is based on a combined
effective 1994 federal and state income tax rate of 37.79%. The
tax-equivalent figures are useful in seeing how the fund stacked up against
the average taxable money market fund as tracked by IBC/Donoghue.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more meaningful.
Keep in mind that the U.S.
government neither insures nor
guarantees a money market
fund. In fact, there is no
assurance that a money fund
will maintain a $1 share price.
(checkmark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Deborah Watson,
Portfolio Manager of Spartan
Pennsylvania Municipal Money
Market Portfolio
Q. DEBORAH, INTEREST RATES HAVE BEEN RISING ALL YEAR. CAN YOU BRING US UP
TO DATE?
A. Sure. A year ago, the benchmark federal funds rates - the rate which
banks charge each other for overnight loans - stood at 3%. Then on February
4, 1994, the Federal Reserve took the first step in a new policy designed
to slow the pace of economic growth and choke off any threat of inflation
when it raised the federal funds rate one-quarter point. There were two
subsequent quarter-point increases in March and April, followed by two
half-point increases in May and August, and finally a three-quarter-point
increase in November. That brought the federal funds rate to 5.5%, where it
ended the year. Most economists are predicting still more increases in the
months ahead.
Q. WHAT WAS YOUR STRATEGY WHILE INTEREST RATES WERE RISING?
A. While the timing of the first Fed increase took me somewhat by surprise,
the fund's average maturity was fairly neutral at 52 days a year ago. I let
it roll down throughout the late winter and early spring until it reached
17 days last May. Then I took advantage of the abundant supply of new
issues during the annual borrowing season to lock in higher rates, and
briefly extended the fund's average maturity. By July, at the height of the
borrowing season, it was up to 60 days. Toward the end of summer, I let it
roll down again, so that by the end of December 1994, it was 46 days.
That's well within the defensive range, and that's probably where I'll want
to keep it, at least until I see more evidence that we've hit the peak in
rates.
Q. HOW DID THE FUND PERFORM?
A. On December 31, 1994, the fund's seven-day yield was 4.34%, compared to
2.49% a year ago, reflecting the sharp increase in rates. The yield at the
end of the period was equivalent to a 6.98% yield for Pennsylvania
investors in the 37.79% combined federal and state income-tax bracket. The
fund's total return for the year ended December 31, 1994 was 2.61%. That
beat the 2.38% average total return during the same period for all tax-free
money market funds, according to IBC/Donoghue.
Q. ARE YOU EXPECTING RATES TO CONTINUE RISING IN 1995?
A. I believe that they will, especially in the next few months. What seems
to be more uncertain is how much they'll go up. The whole point of the
strategy of rate increases is to put the brakes on the economy. The Fed has
indicated that its goal is a 2.5% annual growth rate, and it now appears
that the growth rate for 1994 will be at least 4%. The good news is that so
far inflation has remained tame. Still, it looks like the Fed's not taking
any chances, so I wouldn't be surprised to see the federal funds rate rise
to 7% this year.
Q. WHAT ARE THE STRATEGIC IMPLICATIONS OF THAT VIEW?
A. It means in all likelihood that I'll keep the Fund's average maturity
defensive for the time being. By that I mean down around 40 days. One way
I'll do that is by continuing to buy variable rate demand notes, or VRDNs.
Those are securities whose yields adjust at daily, weekly or monthly
intervals and help the fund keep pace with rising rates.
FUND FACTS
GOAL: tax-free income and
stability by investing in
high-quality,
short-term Pennsylvania
municipal securities
START DATE: August 6, 1986
SIZE: as of December 31,
1994, more than $257 million
MANAGER: Deborah Watson,
since 1989; manager, Spartan
Florida Municipal Money
Market Portfolio, since 1992;
Spartan California Municipal
Money Market Portfolio, since
1989;
Fidelity California Tax-Free
Money Market Fund, since
1988; joined Fidelity in 1982
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
TENDER BOND: A variable-rate,
long-term security that gives
the bond holder the option to
redeem the bond at face
value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
12/31/94 6/30/94 12/31/93
0 - 30 70 88 66
31 - 90 11 7 9
91 - 180 13 3 14
181 - 397 6 2 11
WEIGHTED AVERAGE MATURITY
12/31/94 6/30/94 12/31/93
Spartan Pennsylvania
Municipal Money Market 46 days 24 days 52 days
Average All Tax-Free
Money Market Fund* 47 days 46 days 62 days
ASSET ALLOCATION
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Row: 1, Col: 1, Value: 65.0
Row: 1, Col: 2, Value: 11.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 27.0
Row: 1, Col: 3, Value: 13.0
Row: 1, Col: 4, Value: 3.0
Row: 1, Col: 5, Value: 7.0
Row: 1, Col: 6, Value: 2.0
Variable rate
demand notes
(VRDNs) 65%
Commercial
paper 11%
Tender bonds 4%
Municipal
notes 19%
Other 1%
Variable rate
demand notes
(VRDNs) 77%
Commercial
paper 13%
Tender bonds 2%
Municipal
notes 7%
Other 1%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - 100.0%
Allegheny County Hosp. Dev. Auth. Health Ctr. Rev.
(Presbyterian Univ. Health Sys.), VRDN:
Series 1990 C, 5.35% (MBIA Insured) BPA Credit Suisse $ 800,000 $
800,000
Series 1990 D, 5.35% (MBIA Insured) BPA Credit Suisse 900,000 900,000
Allegheny County Hosp. Dev. Auth. Hosp. Rev.
(St. Margaret Mem. Hosp.) Series 1992 A, 5.65%,
LOC Mellon Bank, VRDN 9,465,000 9,465,000
Allegheny County Ind. Dev. Auth. Commercial Dev. Rev.
Rfdg. (Parkway Ctr. Mall Proj.) Series 1994 A, 5.65%,
LOC Mellon Bank, VRDN 1,900,000 1,900,000
Allegheny County Ind. Dev. Auth. Rev. Rfdg.
(Chelsea Industries, Inc.), Series 1994, 5.75%,
LOC First Nat'l. Bank of Boston, VRDN 2,100,000 2,100,000
Berks County Ind. Dev. Auth. Mfg. Facs. Rev.
(The Bachman Co. Proj.) Series 1994, 6%,
LOC Meridian Bank, VRDN (b) 1,225,000 1,225,000
Bucks County Ind. Dev. Auth. (Associates Proj.)
Series 1993, 6%, LOC Meridian Bank, VRDN (b) 1,615,000 1,615,000
Carbon County Ind. Dev. Auth. Resource Recovery
Rev. Bonds (Panther Creek Partners Proj.): (b)
Series 1990 A, 3.75% tender 1/12/95,
LOC Nat'l. Westminster 2,800,000 2,800,000
Series 1991 A:
3.65% tender 1/17/95, LOC Nat'l. Westminster 2,000,000 2,000,000
3.95% tender 2/22/95, LOC Nat'l. Westminster 3,200,000 3,200,000
Carbon County Ind. Dev. Auth. Solid Waste Disp. Rev.
(Horsehead Resource Dev. Co.) RAN 4.60% 6/1/95,
LOC Chemical Bank (b) (d) 10,700,000 10,700,000
Coatesville School Dist. TRAN 3.85% 6/30/95 5,000,000 5,001,879
Cumberland County Ind. Dev. Auth. (Lane Enterprises, Inc.
Proj.), 6%, LOC Meridian Bank, VRDN (b) 1,600,000 1,600,000
Dauphin County Gen. Auth. Hosp. Rev. (Reading
Hosp. & Med. Ctr.) Series 1994 A, 5.50%, VRDN 7,000,000 7,000,000
Delaware County Ind. Dev. Auth. Bonds
(Philadelphia Elec.) Series C:
4.50% tender 1/26/95 (FGIC Insured) 3,000,000 3,000,000
3.90% tender 2/24/95 (FGIC Insured) 2,000,000 2,000,000
Delaware Valley Regional Fin. Auth. Local Gov't. Rev.,
VRDN:
Series 1985 A, 5.15%,
LOC Hong Kong & Shanghai Banking Corp. 5,000,000 5,000,000
Series 1986, 5.15%,
LOC Hong Kong & Shanghai Banking Corp. 9,100,000 9,100,000
Doylestown Hosp. Auth. Rev. Bonds (Doylestown Hosp.)
Participating VRDN, Series BTP-63, 4.469%,
(AMBAC Insured) (Liquidity Facility
ADP/Bankers Trust) (c) 10,098,000 10,098,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Emmaus Gen. Auth. Local Gov't. Rev. (Altoona School Dist.)
Series 1989 B-6, 5.70%,
LOC Hong Kong & Shanghai Banking Corp., VRDN $ 8,900,000 $ 8,900,000
Erie County Ind. Dev. Auth. Rev. (Carlisle Corp. Proj.)
Series 1993, 5.75%, LOC Trust Co. Bank,
VRDN (b) 1,000,000 1,000,000
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev.
(Allegheny Elec. Co-op., Inc. Proj.), VRDN:
Series 1984 A, 3.75%, LOC Rabobank Nederland 600,000 600,000
Series 1984 B, 3.75%, LOC Rabobank Nederland 1,000,000 1,000,000
Lehigh County Swr. Rev. Series 1985 B, 4.90%,
(FGIC Insured) BPA Algemene Bank, VRDN 2,150,000 2,150,000
Mercer County Ind. Dev. Auth. Ind. Dev. Rev.
(Penntecq Inc. Proj.) Series 1990, 5.55%,
LOC Dai-Ichi Kangyo Bank, VRDN (b) 4,000,000 4,000,000
Montgomery County Ind. Dev. Auth. Ind. Dev. Rev.
(Sirius Dev. Assoc. Proj.) 5.65%,
LOC Provident Nat'l. Bank, VRDN (b) 1,500,000 1,500,000
Montgomery County Ind. Dev. Auth. Rev. (RJI Ltd. Partnership
Proj.) Series 1992, 6%, LOC Meridian Bank, VRDN (b) 1,970,000 1,970,000
North Lebanon Township Muni. Auth. Rev. (Grace Commty. Inc.)
Series 1992 B, 5.625%, LOC Meridian Bank, VRDN 3,755,000 3,755,000
Northampton County Ind. Dev. Auth. Rev. Bonds: (b)
(Citizens Utilities Company Proj.) Series 1991,
4% tender 3/10/95 2,950,000 2,950,000
(Victoria Vogue Proj.), 6%, LOC Meridian Bank, VRDN 1,455,000 1,455,000
Northumberland County Ind. Dev. Board
(Foster Wheeler Mt. Carmel Inc. Proj.), VRDN: (b)
Series 1987 A, 5.65%, LOC Union Bank of
Switzerland 15,050,000 15,050,000
Series 1987 B, 5.65%, LOC Union Bank of
Switzerland 3,140,000 3,140,000
Pennsylvania Econ. Dev. Fin. Auth., VRDN:
(Henry Molded Prod. Inc.) Series 1992 A-4, 5.65%,
LOC Pittsburgh Nat'l. Bank (b) 1,000,000 1,000,000
(Lutheran Youth & Family Svc.) Series 1993 A, 5.50%,
LOC PNC Bank 700,000 700,000
(Payne Printery Proj.) Series 1989 B-8, 5.65%,
LOC Pittsburgh Nat'l. Bank (b) 325,000 325,000
(Port Erie Plastics Proj.) Series 1989-D9, 5.65%,
LOC Pittsburgh Nat'l. Bank (b) 970,000 970,000
(Respironics Inc. Proj.), 5.65%,
LOC Pittsburgh Nat'l. Bank (b) 900,000 900,000
(Suntory Wtr. Group Inc., Proj.) Series 1992 D, 5.75%,
LOC Wachovia Bank & Trust (b) 4,900,000 4,900,000
(The Babcock & Wilcox Co. Proj.) Series 1989 A-2,
5.65%, LOC Pittsburgh Nat'l. Bank (b) 4,900,000 4,900,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Gen. Oblig. Participating VRDN,
Series A-38, 5.75% (AMBAC Insured)
(Liquidity Facility Sakura Bank Ltd.) (c) $ 4,330,000 $ 4,330,000
Pennsylvania Gen. Oblig. TAN 4.75% 6/30/95 10,820,000 10,859,956
Pennsylvania Higher Ed. Assistance Agcy. Student Loan Rev.,
VRDN: (b)
Series 1988 A, 5.50%, LOC SLMA 16,200,000 16,200,000
Series 1988 B, 5.50%, LOC Union Bank of
Switzerland 2,000,000 2,000,000
Series 1994 A, 5.50%, LOC SLMA 3,000,000 3,000,000
Pennsylvania Higher Ed. Auth. Rev. (Univ. of Pennsylvania
Proj.) 5.50%, BPA Univ. of Penn., VRDN 2,200,000 2,200,000
Pennsylvania Higher Ed. Facs. Auth. Participating
VRDN, Series 4-A, 5.75% (Liquidity Facility
Morgan Guaranty) (c) 4,750,000 4,750,000
Pennsylvania Infrastructure Investment Auth. Rev. Bonds
(Pennvest Pooled Loan Prog.) Series 1994, 3.50%
tender 2/1/95 (Liquidity Facility PNC Bank) 10,000,000 10,000,380
Pennsylvania Intergovernmental Co-op. Auth. Spl. Tax Rev.
(Philadelphia Funding Program) Series 1994,
5% 6/15/95 (FGIC Insured) 1,740,000 1,746,168
Pennsylvania Tender Option Ctfs., Series BTP-84, 5.65%,
(AMBAC Insured) (Liquidity Facility Bankers Trust),
VRDN (c) 4,125,000 4,125,000
Philadelphia Hosp. & Higher Ed. Auth.
(Frankford Hospital) Series 1993 B, 5.50%,
LOC Mellon Bank, VRDN 4,400,000 4,400,000
Philadelphia Ind. Dev. Auth. Commercial Dev. Rev.
(Philadelphia Airport Hotel Proj.) Series 1990, 5.70%
LOC Citibank, VRDN (b) 3,100,000 3,100,000
Philadelphia TRAN:
Series A, 4.75% 6/15/95, LOC Canadian Imperial
Bank of Commerce 7,000,000 7,025,929
Series C, 4.75% 6/15/95, LOC Dresdner Bank 3,000,000 3,011,776
Series 1994-95 B, 4.75% 6/15/95
LOC Corestates Bank 6,000,000 6,022,224
Series 1994-95 D, 4.75% 6/15/95,
LOC Morgan Guaranty Co. 5,500,000 5,520,206
Quakertown Hosp. Auth. Rev. (HPS Group Pooled
Fing. Prog.) Series 1985 A, 5.50%, LOC First Nat'l.
Bank of Chicago, VRDN 7,600,000 7,600,000
Schuylkill County Ind. Dev. Auth. Rev., VRDN:
(Interlock Realty Co.) 5.80%, LOC Star Bank (b) 800,000 800,000
(Westwood Energy Prop.) Series 1985, 6.05%,
LOC Fuji Bank 2,100,000 2,100,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Venango Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Scrubgrass Proj.): (b)
Series 1990 A:
3.65% tender 1/26/95, LOC Nat'l. Westminster $ 4,700,000 $ 4,700,000
3.85% tender 2/21/95, LOC Nat'l. Westminster 3,000,000 3,000,000
4.40% tender 2/22/95, LOC Nat'l. Westminster 3,050,000 3,050,000
Series 1990 B, 3.65% tender 2/17/95,
LOC Nat'l. Westminster 2,550,000 2,550,000
Washington County Ind. Dev. Auth. Rev.
(Mac Plastics, Inc. Proj.) Series 1990, 5.65%,
LOC Nat'l. City Bank, VRDN (b) 690,000 690,000
TOTAL INVESTMENTS - 100% $ 253,451,518
Total Cost for Income Tax Purposes $ 253,451,518
SECURITY TYPE ABBREVIATIONS
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
(d) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on the holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Carbon County Ind. Dev.
Auth. Solid Waste Disp.
(Horsehead Res.
Dev. Co.)
RAN 4.60%
6/1/95 12/1/94 $ 10,700,000
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $28,200 of which $4,600, $4,900, and $18,700 will expire on
December 31, 1997, 1998, and 2002 respectively.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
131.ASSETS 132. 133.
134.Investment in securities, at value - See 135. $ 253,451,518
accompanying schedule
136.Cash 137. 2,337,214
138.Interest receivable 139. 1,946,722
140. 141.TOTAL ASSETS 142. 257,735,454
143.LIABILITIES 144. 145.
146.Dividends payable $ 28,036 147.
148.Accrued management fee 99,195 149.
150. 151.TOTAL LIABILITIES 152. 127,231
153.154.NET ASSETS 155. $ 257,608,223
156.Net Assets consist of: 157. 158.
159.Paid in capital 160. $ 257,636,458
161.Accumulated net realized gain (loss) on 162. (28,235)
investments
163.164.NET ASSETS, for 257,634,507 shares 165. $ 257,608,223
outstanding
166.167.NET ASSET VALUE, offering price and 168. $1.00
redemption price per share ($257,608,223 (divided by)
257,634,507 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
169.170.INTEREST INCOME 171. $ 7,044,396
172.EXPENSES 173. 174.
175.Management fee $ 1,140,476 176.
177.Non-interested trustees' compensation 1,318 178.
179. 180.TOTAL EXPENSES 181. 1,141,794
182.183.NET INTEREST INCOME 184. 5,902,602
185.186.NET REALIZED GAIN (LOSS) ON INVESTMENTS 187. (18,683)
188.189.NET INCREASE IN NET ASSETS RESULTING FROM 190. $ 5,883,919
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
191.INCREASE (DECREASE) IN NET ASSETS
192.Operations $ 5,902,602 $ 4,800,169
Net interest income
193. Net realized gain (loss) (18,683) 2,251
194. Increase (decrease) in net unrealized gain from - (4,269)
accretion of market discount
195. 5,883,919 4,798,151
196.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
197.Dividends to shareholders from net interest income (5,902,602) (4,800,169)
198.Share transactions at net asset value of $1.00 per 212,681,193 176,936,625
share
Proceeds from sales of shares
199. Reinvestment of dividends from net interest 5,582,855 4,536,853
income
200. Cost of shares redeemed (201,620,498) (183,823,236)
201. 16,643,550 (2,349,758)
Net increase (decrease) in net assets and shares
resulting from share transactions
202. 16,624,867 (2,351,776)
203.TOTAL INCREASE (DECREASE) IN NET ASSETS
204.NET ASSETS 205. 206.
207. Beginning of period 240,983,356 243,335,132
208. End of period $ 257,608,223 $ 240,983,356
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
209. YEARS ENDED DECEMBER 31,
210. 1994 1993 1992 1991 1990
211.SELECTED PER-SHARE
DATA
212.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
213.Income from .026 .022 .029 .045 .059
Investment Operations
Net interest income
214. Dividends from net (.026) (.022) (.029) (.045) (.059)
interest income
215.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
216.TOTAL RETURN A 2.61 2.21 2.90 4.55 6.05
% % % % %
217.RATIOS AND SUPPLEMENTAL DATA
218.Net assets, end of $ 257,608 $ 240,983 $ 243,335 $ 289,826 $ 319,982
period (000 omitted)
219.Ratio of expenses to .50 .50 .47 .34 .13
average net assets % % % % %
220.Ratio of expenses to .50 .50 .50 .50 .57
average net assets % % % % %
before expense
reductions
221.Ratio of net interest 2.58 2.19 2.88 4.47 5.92
income to average % % % % %
net assets
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE. THE TOTAL RETURNS
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Pennsylvania Municipal High Yield Portfolio (the high yield fund)
is a fund of Fidelity Municipal Trust. Spartan Pennsylvania Municipal Money
Market Portfolio (the money market fund) is a fund of Fidelity Municipal
Trust II. Each trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company. Fidelity Municipal Trust and Fidelity Municipal Trust II (the
trusts) are organized as a Massachusetts business trust and a Delaware
business trust, respectively. Each fund is authorized to issue an unlimited
number of shares. The following summarizes the significant accounting
policies of the high yield fund and the money market fund:
SECURITY VALUATION.
HIGH YIELD FUND. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures and options transactions, losses deferred due to wash sales, and
excise tax
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
regulations. The high yield fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
REDEMPTION FEES. Shares held in the high yield fund less than 180 days are
subject to a redemption fee equal to .50% of the proceeds of the redeemed
shares. The fee, which is retained by the fund, is accounted for as an
addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The high yield fund may use futures and
options contracts to manage its exposure to the bond market and to
fluctuations in interest rates. Buying futures, writing puts, and buying
calls tend to increase the fund's exposure to the underlying instrument.
Selling futures, buying puts, and writing calls tend to decrease the fund's
exposure to the underlying instrument, or hedge other fund investments.
Futures contracts and written options involve, to varying degrees, risk of
loss in excess of the futures variation margin or the option value
reflected in the Statement of Assets and Liabilities. The underlying face
amount at value is shown in the schedule of investments under the caption
"Purchased Options." This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparties do not perform under the
contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
RESTRICTED SECURITIES. Each fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $10,700,000 or 4.2% of net assets for the money market fund.
3. PURCHASES AND SALES OF
INVESTMENTS.
HIGH YIELD FUND. Purchases and sales of securities, other than short-term
securities, aggregated $68,063,966 and $93,901,978, respectively.
The market value of futures contracts opened and closed during the period
amounted to $132,106,419 and $131,285,889, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses, except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .55% and .50% of average net assets
for the high yield and money market funds, respectively.
FMR also bears the cost of providing shareholder services to each fund. To
offset the cost of providing these services, FMR or its affiliates
collected certain transaction fees from shareholders which amounted to $
6,084 and $10,320 for the high yield and money market funds, respectively.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and Fidelity Municipal Trust II
and the Shareholders of Spartan Pennsylvania Municipal High Yield Portfolio
and Spartan Pennsylvania Municipal Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of
Spartan Pennsylvania Municipal High Yield Portfolio, a portfolio of
Fidelity Municipal Trust, and Spartan Pennsylvania Municipal Money Market
Portfolio, a portfolio of Fidelity Municipal Trust II, including the
schedules of portfolio investments, as of December 31, 1994, and the
related statements of operations for the year then ended, the statements 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 funds' 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, 1994 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 Spartan Pennsylvania Municipal High Yield Portfolio and Spartan
Pennsylvania Municipal Money Market Portfolio as of December 31, 1994, the
results of their operations for the year then ended, the changes in their
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 L.L.P.
Boston, Massachusetts
January 27, 1995
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning Jr., Vice President -
MONEY MARKET FUND
Deborah F. Watson, Vice President -
MONEY MARKET FUND
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, 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 AGENTS
United Missouri Bank, N.A.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
MUNICIPAL BOND
PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 34 The auditors' opinion.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO IN-
VESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND
NOR FIDELITY
DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY
FUND, INCLUDING
CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE
YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February continued into
the fourth quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
negative returns for many bond investments and below-average returns for
many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, 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 to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Municipal Bond -8.49% 34.97% 134.68%
Lehman Brothers Municipal Bond Index -5.17% 39.04% 147.33%
Average General Municipal Bond Fund -6.53% 35.96% 136.11%
Consumer Price Index 2.67% 18.72% 42.17%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a specific period - in this case, one, five, or 10 years. 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. To measure how the fund stacked up against its
peers, you can look at the average general municipal bond fund, which
currently reflects the performance of 184 general 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 (CPI) helps show how your fund did compared to
inflation. (The periods covered by the CPI are the closest available match
to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Municipal Bond -8.49% 6.18% 8.90%
Lehman Brothers Municipal Bond Index -5.17% 6.81% 9.48%
Average General Municipal Bond Fund -6.53% 6.33% 8.95%
Consumer Price Index 2.67% 3.49% 3.58%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Municipal Bond (035)Municipal Bond Index
12/31/84 10000.00 10000.00
01/31/85 10447.49 10577.30
02/28/85 10356.85 10313.40
03/31/85 10416.17 10402.40
04/30/85 10715.60 10783.13
05/31/85 11108.57 11157.52
06/30/85 11243.41 11274.56
07/31/85 11287.50 11296.66
08/31/85 11208.08 11217.81
09/30/85 11049.64 11105.29
10/31/85 11378.24 11485.87
11/30/85 11754.31 11897.87
12/31/85 12008.68 12002.45
01/31/86 12670.72 12709.40
02/28/86 13120.08 13213.45
03/31/86 13194.14 13217.68
04/30/86 13153.85 13227.73
05/31/86 12916.95 13012.38
06/30/86 13095.44 13136.52
07/31/86 13224.46 13216.26
08/31/86 13875.77 13807.95
09/30/86 13784.56 13842.61
10/31/86 14099.43 14081.67
11/30/86 14345.43 14360.62
12/31/86 14354.93 14320.99
01/31/87 14641.16 14752.19
02/28/87 14769.58 14824.78
03/31/87 14706.50 14667.63
04/30/87 13803.23 13931.61
05/31/87 13691.19 13862.51
06/30/87 13931.80 14269.51
07/31/87 14101.92 14415.06
08/31/87 14167.22 14447.50
09/30/87 13436.20 13914.82
10/31/87 13558.83 13964.08
11/30/87 13861.11 14328.68
12/31/87 14131.05 14536.59
01/31/88 14848.55 15054.38
02/29/88 14989.91 15213.50
03/31/88 14627.19 15036.27
04/30/88 14677.14 15150.54
05/31/88 14727.66 15106.76
06/30/88 15006.62 15327.77
07/31/88 15114.93 15427.71
08/31/88 15148.24 15441.28
09/30/88 15453.00 15720.77
10/31/88 15799.78 15998.24
11/30/88 15617.03 15851.70
12/31/88 15869.63 16013.86
01/31/89 16102.02 16345.03
02/28/89 15935.54 16158.53
03/31/89 15929.99 16119.91
04/30/89 16389.70 16502.60
05/31/89 16709.95 16845.36
06/30/89 16948.40 17074.12
07/31/89 17106.32 17306.50
08/31/89 16953.73 17137.07
09/30/89 16887.71 17085.65
10/31/89 17087.01 17294.10
11/30/89 17309.53 17596.75
12/31/89 17387.38 17741.04
01/31/90 17288.65 17657.66
02/28/90 17448.67 17814.81
03/31/90 17464.00 17820.15
04/30/90 17234.24 17691.85
05/31/90 17705.22 18077.53
06/30/90 17891.80 18236.61
07/31/90 18167.55 18504.69
08/31/90 17822.95 18236.37
09/30/90 17924.94 18247.32
10/31/90 18138.66 18577.59
11/30/90 18485.60 18951.00
12/31/90 18588.92 19034.39
01/31/91 18805.44 19289.45
02/28/91 18903.57 19457.27
03/31/91 18936.88 19465.05
04/30/91 19201.44 19723.93
05/31/91 19349.11 19899.48
06/30/91 19357.26 19879.58
07/31/91 19625.95 20122.11
08/31/91 19873.63 20387.72
09/30/91 20098.73 20652.76
10/31/91 20299.51 20838.63
11/30/91 20354.63 20896.98
12/31/91 20803.16 21346.27
01/31/92 20812.57 21395.36
02/29/92 20843.52 21401.78
03/31/92 20833.41 21410.34
04/30/92 21041.67 21600.90
05/31/92 21303.47 21855.79
06/30/92 21686.05 22222.96
07/31/92 22352.33 22889.65
08/31/92 22030.29 22665.33
09/30/92 22163.49 22812.66
10/31/92 21710.27 22589.09
11/30/92 22360.89 22993.44
12/31/92 22660.63 23227.97
01/31/93 22961.02 23497.42
02/28/93 23895.81 24348.02
03/31/93 23575.08 24089.93
04/30/93 23846.81 24333.24
05/31/93 23988.21 24469.51
06/30/93 24425.81 24878.15
07/31/93 24375.23 24910.49
08/31/93 25015.71 25428.63
09/30/93 25322.03 25718.52
10/31/93 25323.68 25767.38
11/30/93 25013.69 25540.63
12/31/93 25645.29 26079.54
01/31/94 25965.96 26376.84
02/28/94 25181.44 25693.68
03/31/94 23898.34 24647.95
04/30/94 24010.42 24857.46
05/31/94 24247.89 25073.72
06/30/94 24057.49 24928.29
07/31/94 24568.42 25384.48
08/31/94 24623.92 25473.32
09/30/94 24094.27 25098.86
10/31/94 23475.01 24652.10
11/30/94 22816.10 24205.90
12/30/94 23468.08 24733.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Municipal Bond Portfolio on December 31, 1984. As the chart shows, by
December 31, 1994, the value of your investment would have grown to $23,468
- - a 134.68% 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 $24,733 - a
147.33% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend returns 5.01% 5.83% 6.31% 6.81% 6.91%
Capital appreciation returns -13.50% 7.34% 2.62% 5.10% 0.00%
Total returns -8.49% 13.17% 8.93% 11.91% 6.91%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.77(cents) 22.76(cents) 45.47(cents)
Annualized dividend rate 6.01% 5.86% 5.70%
30-day annualized yield 6.14% - -
30-day annualized tax-equivalent yield 9.59% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $7.39 over
the past month, $7.71 over the past six months and $7.98 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Gary Swayze, Portfolio Manager of Fidelity
Municipal Bond Portfolio
Q. GARY, HOW DID THE FUND DO IN 1994?
A. Last year was a difficult period for municipal bond funds, including
this one. For the year ended December 31, 1994, the fund had a total return
of -8.49%. That lagged the average municipal bond fund, which returned
- -6.53% for the same period, according to Lipper Analytical Services.
Q. WHY DID THE FUND FALL MORE THAN THE AVERAGE MUNICIPAL BOND FUND?
A. Let's start with the assumptions I made in early 1994. I expected
continued low inflation and a low supply of newly issued municipal bonds.
So I kept the fund's duration, which is a measure of how sensitive its
share price is when interest rates rise or fall, longer than average. The
longer the fund's duration, the more sensitive its share price. A longer
duration might have helped the fund if my expected scenario had taken
place. However, what actually happened was that strong economic growth
caused the Federal Reserve Board to raise short-term interest rates. That
drove municipal bond prices down sharply throughout the year. Because it
had a longer duration, the fund suffered more than many other funds. Most
of the damage of having a longer duration came in the first six months of
the year, when interest rates rose the most.
Q. WHAT STEPS DID YOU TAKE TO TRY TO OFFSET SOME OF THE FUND'S INTEREST
RATE SENSITIVITY?
A. It's important to remember that, generally, when interest rates rise, a
bond's price declines and its duration lengthens. Conversely, when interest
rates fall a bond's price rises and its duration shortens. As interest
rates rose, bonds in the fund declined and its duration naturally
lengthened. As a result, I did take steps in the fall to shorten the fund's
lengthening duration. One way was that I sold bonds with longer-term
maturities and bought bonds with intermediate maturities. I also used
futures contracts to hedge against rising rates as I thought market
conditions warranted.
Q. WHAT OTHER CHANGES DID YOU MAKE?
A. I reduced the fund's stake in health care bonds from 18.5% six months
ago to 17.1% at the end of the period. These bonds outperformed many other
types of bonds and they started to look somewhat expensive to me. When I
sold them, I did so to lock in that relative outperformance and find more
attractive opportunities elsewhere. However, now that I believe the threat
of nationally mandated health care has diminished, I'm comfortable sticking
with the fund's remaining health care holdings.
Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY IN PART DUE
TO LOSSES IN ITS INVESTMENT POOL. DOES THE FUND HOLD ANY BONDS ISSUED BY
ORANGE COUNTY?
A. Yes, at the end of the period about 2% of the fund's investments were in
Orange County and other issuers which were participants in Orange County's
investment pool. Most of these bonds are insured, and their principal and
interest payments are guaranteed. The remainder of these bonds do not carry
insurance. The short-term financial condition of these latter bonds has
been negatively impacted and uncertainty about their long-term prospects
increased. However, I believe the issuers will ultimately be able to
recover the majority of their investments and meet their financial
obligations. An example is a small holding in Orange County Development
Agency Santa Ana Heights, which was less than 0.2% of the fund's
investments. The bond is rated Caa by Moody's and BBB, but under review by
Standard and Poor's. The difference in ratings is due to the nature of the
relationship between Orange County and the Redevelopment Agency. We believe
the Redevelopment Agency is an entity separate from the County with a
distinct revenue flow for debt service. In any case, uninsured bonds
represent only about 0.5% of the fund's investments and should not have a
significant impact on the fund's share price. Our research department will
continue to monitor these situations carefully to determine the impact of
further developments.
Q. WHAT'S YOUR OUTLOOK FOR 1995?
A. Looking out over the next 12 months, I believe the economy should
continue to grow at about 3.5%. While the United States is approaching the
latter stages of economic expansion, one big state - California - is only
now beginning to gain momentum. Also, I believe many foreign economies are
in economic recovery, which should help U.S. export growth. For that
reason, I think short-term interest rates could rise even farther from
here. The Federal Reserve Board moved from a stimulative monetary policy in
1993 by keeping short-term interest rates low, to a more neutral position
in 1994. Depending on its inflation outlook, the Federal Reserve may have
to become restrictive by further increasing short-term interest rates to a
high level relative to inflation. If inflation moves to 3.5% in 1995, and
the Fed decides to become more restrictive, short-term interest rates might
have to rise as well. So I expect some further pressure on short-term
interest rates. However, as the market becomes convinced that the Fed is
committed to fighting inflation, long-term interest rates could stabilize
or even fall.
FUND FACTS
GOAL: to provide high current
income free from federal
income taxes while preserving
capital
START DATE: August 19, 1976
SIZE: as of December 31,
1994, more than $1 billion
MANAGER: Gary L. Swayze,
since August 1985; manager,
Fidelity Insured Tax-Free
Portfolio, 1986-1989; Fidelity
New York Insured Tax-Free
Portfolio,
1989-1992; Spartan New
York Municipal High Yield
Portfolio, 1990-1993; joined
Fidelity
in 1980
(checkmark)
GARY SWAYZE ON SUPPLY AND
DEMAND FACTORS AFFECTING THE
MUNICIPAL BOND MARKET IN
1995:
"The supply of municipal
bonds outstanding is
expected to be low in 1995 as
it was in 1994. That's primarily
because a fair number of
bonds will be called, or
redeemed by their issuers
before scheduled maturity
dates. In fact, we're likely to
see more bonds called than
issued this year. So supply
conditions for the municipal
market should be quite
favorable. Demand, on the
other hand, could remain flat
until various proposals to cut
taxes are sorted through. If
supply diminishes and
demand just remains
constant, there is the potential
for positive returns for
municipal bonds in 1995."
(medium solid bullet) Inverse floaters, one of the
financial arrangements known
as derivatives, made up about
2.5% of the fund's
investments at the end of the
period. The yield on inverse
floaters rises as short-term
rates fall and vice versa. By
using various derivatives, the
manager hopes to achieve
higher levels of tax-exempt
income and increased
flexibility in managing the
fund's overall sensitivity to
changes in interest rates.
However, these strategies
can involve additional risk to
the fund and don't always
work as intended.
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 12.6 15.3
New York 11.3 11.7
Massachusetts 8.6 7.4
Texas 8.4 5.9
Illinois 5.6 4.8
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Electric Revenue 18.4 16.1
Health Care 17.1 18.5
General Obligation 13.0 11.8
Transportation 10.0 9.9
Special Tax 9.2 8.7
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 17.0 20.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 8.8 9.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 33.8%
Aa, A 46.7%
Baa 13.3%
Ba -
Non-rated 1.4%
Short-term investments 4.8%
Aaa 33.9%
Aa, A 49.8%
Baa 13.1%%
Ba -
Non-rated 0.6%
Short-term investments 2.6%
Row: 1, Col: 1, Value: 33.8
Row: 1, Col: 2, Value: 46.7
Row: 1, Col: 3, Value: 13.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 1.4
Row: 1, Col: 6, Value: 4.7
Row: 1, Col: 1, Value: 33.9
Row: 1, Col: 2, Value: 49.8
Row: 1, Col: 3, Value: 13.1
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 6, Value: 3.0
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 95.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ALABAMA - 0.3%
Cullman Med. Park South Med. Clinic Board Rev.
(Cullman Reg. Med. Ctr.) Series A, 6.50% 2/15/13 $ 4,000 $ 3,420
ALASKA - 0.1%
Valdez Marine Term. Rev. Rfdg.
(Amerada Hess Pipeline Corp.) 6.10% 2/1/24 1,500 1,279
ARIZONA - 0.7%
Phoenix Gen. Oblig. Unltd. Tax 6.75% 7/1/08
(Escrowed to Maturity) (d) 5,825 6,160
Pima County Ind. Dev. Auth. Health Care Corp. Rev.
(Carondelet Health Svc., Inc.) 8% 7/1/13 (MBIA Insured)
(Pre-Refunded to 7/1/98 @102) (d) 1,000 1,084
7,244
CALIFORNIA - 12.6%
Anaheim Pub. Fing. Auth. Rev. Wtr. Util.
(Lenain Filtration Proj.) 5.25% 10/1/16 4,480 3,192
California Dept. Wtr. Resources Rev.
(Central Valley Wtr. Sys. Proj.) 5% 12/1/14 5,415 4,285
California Health Facs. Finance Auth. Rev.:
(Henry Mayo Newhall Hosp.) (Health Facs. Construction
Loan Prog.) Series A, 8% 10/1/18 2,000 2,075
(Pomona Valley Med. Ctr.) Series A, 7.375% 1/1/14 2,000 1,970
California Gen. Oblig. 4.75%, 9/1/23 7,000 5,049
California Pub. Works Board Lease Rev. Rfdg.:
Rfdg. (Dept. Corrections St. Prisons) Series A, 5% 12/1/19,
(AMBAC Insured) 5,000 3,863
(California University Proj.) Series A:
5.50% 6/1/10 2,250 1,929
5% 6/1/23 6,000 4,403
California Statewide Commty. Dev. Rev.
(Sisters of Charity Leavenworth Sys.) 5% 12/1/14 2,750 2,135
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.)
7% 8/1/11 (MBIA Insured) 1,475 1,547
Chino Basin Reg. Fing. Auth. Rev. Rfdg. (Muni Wtr. Dist. Swr.
Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 1,890 1,994
Los Angeles Convention & Exhibition Ctr. Auth. Ctfs. of Prtn.
Rfdg. (Proposition A) Series A, 7.375% 8/15/18
(Pre-Refunded to 8/15/99 @101.50) 15,000 16,312
Los Angeles County Metropolitan Trans. Auth. Sales Tax Rev.
Rfdg. (Proposition A) Series A, 5% 7/1/21 (FGIC Insured) 5,955 4,570
Los Angeles County Trans. Commission Sales Tax Rev.
(Proposition C) Series A, 6.75% 7/1/19,
(Escrowed to Maturity) (d) 5,000 5,350
Los Angeles Wastewtr. Sys. Rev. 6.8% 8/1/19 (MBIA Insured)
(Pre-Refunded to 8/1/98 @ 102) 1,895 2,013
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Northern California Pwr. Agcy. Pub. Pwr. Rev. Rfdg.
(Geothermal Proj. #3) Series A, 5.85% 7/1/10 $ 1,875 $ 1,699
Orange County Dev. Agcy. Tax Allocation
(Santa Ana Heights Proj.) 6% 9/1/15 2,000 1,565
Orange County Wtr. Dist. Ctfs. of Prtn. Series A,
5.50% 8/15/14 (AMBAC Insured) 3,000 2,535
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 5,894
3.75% 1/1/13 1,500 1,076
Pleasanton Joint Powers Fing. Auth. Series A, 6.20%
9/2/17 3,195 2,812
Sacramento Fing. Auth. Lease Rev. Rfdg. Series A,
5.40% 11/1/20 (AMBAC Insured) 7,000 5,731
San Bernadino County Ctfs. Partn. (Med. Ctr. Fing. Proj.)
5.50% 8/1/17 5,000 3,875
San Francisco Bldg. Auth. Lease Rev. (Dept. Gen. Svcs. Lease)
Series A, 5% 10/1/13 2,715 2,087
San Jose Redev. Agcy. Tax Allocation (Merged Area
Redev. Proj.) 4.75% 8/1/22 (MBIA Insured) 3,645 2,551
Santa Clara Redev. Agcy. Tax Allocation Rfdg. (Bayshore
North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,210
Santa Clara County Fin. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A, 7.50% 11/15/04,
(AMBAC Insured) 4,560 5,044
Southern California Metropolitan Wtr. Dist. Wtrwks. Rev. Rfdg.
Series A, 5.75% 7/1/21 2,000 1,738
Southern California Metropolitan Wtr. Dist. Wtrwks. Rev.
6.557% 10/30/20 INFL (c) 4,200 2,825
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,005
7.50% 8/15/07 (FGIC Insured) 3,500 3,859
Univ. of California Rev. Rfdg.:
(Multiple Purp. Projs.) Series C:
5.125% 9/1/13 (AMBAC Insured) 1,200 979
5.125% 9/1/18 (AMBAC Insured) 6,330 5,017
5% 9/1/23 (AMBAC Insured) 8,540 6,501
129,690
COLORADO - 1.6%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 11,600 10,150
(PSL Health Sys. Proj.) Series A, 6.875% 2/15/23 4,000 3,610
Pueblo Single Family Mtg. Rev. Series A, 7% 8/1/10 2,135 2,135
15,895
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CONNECTICUT - 0.2%
Connecticut Hsg. Fin. Auth. (Hsg. Mtg. Fin. Prog.)
Sub-Series B1, 7.55% 11/15/08 $ 1,455 $ 1,511
DELAWARE - 0.2%
Delaware River & Bay Auth. Rev. Rfdg. 5% 1/1/17
(MBIA Insured) 2,250 1,803
DISTRICT OF COLUMBIA - 1.6%
District of Columbia Hosp. Rev. Rfdg.:
(Medlantic Healthcare Group - Washington Hosp. Ctr.)
Series A, 7% 8/15/05 2,500 2,431
(Medlantic Healthcare) Series A, 5.25% 8/15/12,
(MBIA Insured) 2,000 1,695
District of Columbia Rev.:
(Howard Univ.) Series 1990 A, 7.25% 10/1/20 9,815 9,926
Rfdg. Series A-3, 5.6% 6/1/07 (MBIA Insured) 2,300 2,041
16,093
FLORIDA - 5.3%
Broward County Wtr. & Swr. Util. Rev. Rfdg.:
5.125% 10/1/15 (AMBAC Insured) 2,050 1,694
5% 10/1/18 (AMBAC Insured) 3,685 2,980
Florida Board of Ed. Cap. Outlay Rfdg. Unltd. Tax (Pub. Ed.):
Series B, 5.20% 6/1/13 4,215 3,551
Series D:
5% 6/1/13 3,000 2,468
5% 6/1/15 7,165 5,822
5.125% 6/1/18 4,500 3,651
Florida Tpk. Auth. Tpk. Rev. Rfdg. Series A:
5% 7/1/15 (FGIC Insured) 6,000 4,867
5% 7/1/16 (FGIC Insured) 3,500 2,857
Gainesville Util. Sys. Rev. Rfdg. Series B, 5.50% 10/1/13 3,500 3,093
Kissimmee Util. Auth. Elec. Sys. Rev. Rfdg. & Impt.
5.25% 10/1/18 (FGIC Insured) 4,965 4,152
Orlando & Orange County Expressway Auth. Rev. Rfdg.
Jr. Lien Series A:
5% 7/1/17 (FGIC Insured) 6,050 4,878
5.125% 7/1/20 (FGIC Insured) 5,000 4,050
Orlando Util. Commission Wtr. & Elec. Rev. Rfdg.
Sub-Series D, 5% 10/1/23 4,250 3,331
Reedy Creek Impt. Dist. Util. Rev. Rfdg. Series 1, 5% 10/1/14
(MBIA Insured) 5,300 4,372
St. Petersburg Excise Tax Rev. Rfdg. 5% 10/1/16
(FGIC Insured) 3,550 2,871
54,637
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
GEORGIA - 2.5%
Fulton County School Dist. 5.60% 1/1/11 $ 4,000 $ 3,605
Fulton County Wtr. & Sewage Rev.
6.375% 1/1/14 (FGIC Insured) 4,500 4,438
Georgia Gen. Oblig.:
Series 1989 A, 8.25% 4/1/95 1,000 1,008
Series E, 6.75% 12/1/99 1,005 1,069
6% 12/1/00 12,500 12,828
6.50% 12/1/05 1,335 1,393
Metro Atlanta Rapid Transit Auth. Sales Tax Rev.
6.25% 7/1/18 1,315 1,249
25,590
HAWAII - 1.1%
Honolulu City & County Gen. Oblig.:
Rfdg. & Impt. Series B, 5% 10/1/13 5,000 4,100
Unltd. Tax 7.35% 7/1/08 3,500 3,767
Series A, 5.75% 4/1//10 4,000 3,675
11,542
ILLINOIS - 4.6%
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.:
2nd Lien:
Series A, 6.375% 1/1/12 (MBIA Insured) 3,500 3,386
Series C-1, 5% 1/1/10 (MBIA Insured) 6,000 5,078
Senior Lien Series A:
5% 1/1/12 8,000 6,520
5% 1/1/16 5,000 3,906
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A, 7% 12/15/13
(AMBAC Insured) 2,500 2,538
Illinois Edl. Facs. Auth. Rev. Unrefunded Balance (Loyola Univ.)
Series A, 7.125% 7/1/21 3,645 3,677
Illinois Health Facs. Auth. Rev.:
Rfdg. (OSF Healthcare Sys.) 6% 11/15/23 3,200 2,708
Rfdg. (Rush Presbyterian for St. Luke's Med. Ctr.)
7.40% 10/1/20 5,215 5,254
(Mercy Hosp. & Med. Ctr.) 9.50% 1/1/15 2,000 2,090
Illinois Reg'l. Transit Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,435
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,242
7.75% 6/1/05 (FGIC Insured) 2,405 2,678
Metropolitan Pier & Exposition Auth. Dedicated State Tax Rev.
(McCormick Place Expansion Proj.) Series A:
0% 6/15/07 (FGIC Insured) 3,000 2,520
0% 6/15/08 (FGIC Insured) 3,890 1,609
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ILLINOIS - CONTINUED
Zion Wtrwks. & Swr. Rev.:
6.40% 5/1/04 $ 150 $ 151
6.50% 5/1/05 205 206
46,998
INDIANA - 1.1%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg. (Methodist
Hosp.) Series A, 5.75% 9/1/15 3,750 3,188
Indiana Trans. Fin. Auth. Hwy. Rev. Series A, 7.25%
6/1/15 1,000 1,040
Marion County Convention & Recreational Facs. Auth.
Excise Tax Rev. Rfdg. (Lease Rental ) Series A, 5.375%
6/1/13 (AMBAC Insured) 2,750 2,375
Mount Vernon Poll. Cont. Rev. (Gas Works)
Series A, 7.25% 3/1/14 4,500 4,691
11,294
KANSAS - 0.3%
Kansas Dept. Trans. Hwy. Rev. Series A, 5.375% 3/1/12 4,000 3,485
KENTUCKY - 1.1%
Jefferson County Poll. Cont. Rev. Rfdg.
(Louisville Gas & Elec. Co.)
Series A, 5.90% 4/15/23 (b) 5,000 4,181
Kentucky Tpk. Auth. Econ. Dev. Road Rev. Rfdg.:
(Cap. Appreciation) 0% 1/1/10 (FGIC Insured) (e) 10,055 3,708
(Revitalization Proj.) 5.50% 7/1/11 (AMBAC Insured) 3,650 3,249
11,138
MARYLAND - 2.1%
Maryland Health & Higher Ed. Facs. Auth. Rev.:
Rfdg.:
(Doctors Commty. Hosp.) 5.50% 7/1/24 5,700 4,182
(Greater Baltimore Med. Ctr.) 5% 7/1/19
(FGIC Insured) 3,000 2,392
(John Hopkins Health Sys.) Series 1988, 7.50% 7/1/20 6,000 6,240
(Frederick Mem. Hosp.) 5.25% 7/1/13 (FGIC Insured) 2,250 1,935
(Good Samaritan Hosp.), 5.75% 7/1/13 2,600 2,262
(Howard County Gen. Hosp.) 5.50% 7/1/21 3,000 2,250
Prince Georges County Hosp. Rev. (Greater Southeast
Healthcare Sys.), 6.375% 1/1/23 2,800 2,300
21,561
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MASSACHUSETTS - 8.6%
Massachusetts Gen. Oblig.:
Rfdg.:
Series A:
5.25% 2/1/08 $ 6,870 $ 5,891
5.50% 2/1/11 5,000 4,419
Series B, 6.50% 8/1/11 6,200 6,115
5.30% 11/1/05 4,000 3,670
5% 8/1/06 5,000 4,381
5.75% 5/1/12 6,500 5,883
Massachusetts Gen. Oblig. Ltd. Tax Cons. Loan
Series A, 5% 1/1/09 8,950 7,585
Massachusetts Health & Ed. Facs. Auth. Rev.:
(Blood Institute) Series A, 6.50% 2/1/22 5,000 4,544
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,622
Massachusetts Hsg. Fin. Agcy. (Hsg. Projs.) Series A:
6.30% 10/1/13 2,000 1,870
9.125% 12/1/20 (GNMA Coll.) 975 1,021
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg.(Harvard Commty. Health Plan)
Series B, 8.125% 10/1/17 5,000 5,225
(Massachusetts Biomedical) Series A-2, 0% 8/1/08 10,000 3,662
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,186
Series A:
5% 7/1/05 (AMBAC Insured) 4,100 3,664
6.75% 7/1/08 2,500 2,550
5% 7/1/14 (AMBAC Insured) 7,000 5,556
Series B, 6.75% 7/1/08 4,995 5,095
Massachusetts Port. Auth. Rev. 12.25% 7/1/97,
(Escrowed to Maturity) (d) 330 368
Massachusetts Spl. Oblig. Rev. Series A, 5.80% 6/1/14 5,000 4,387
Massachusetts Wtr. Resources Auth. Gen. Rfdg.
Series C, 5.25% 12/1/15 7,735 6,343
88,037
MICHIGAN - 3.6%
Michigan Comprehensive Trans. Rev. Rfdg. Series B,
5.75% 5/15/11 3,200 2,884
Michigan Hosp. Fin. Auth. Rev.:
Rfdg. (Detroit Med. Ctr. Oblig. Group) Series A,
6.50% 8/15/18 5,000 4,519
Rfdg. (Sisters of Mercy Health Corp.)
5.375% 8/15/14 (MBIA Insured) 3,000 2,565
(Detroit Med. Ctr.) Series A, 6.25% 8/15/13 1,750 1,562
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
7.50% 4/1/10 6,000 6,240
5.70% 4/1/12 3,750 3,258
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Muni. Bond Auth. Rev.:
7% 5/1/02 (AMBAC Insured) $ 2,425 $ 2,579
7% 10/1/02 (b) 2,860 3,060
7% 11/1/02 (AMBAC Insured) 1,465 1,564
7% 5/1/03 (AMBAC Insured) 2,700 2,872
7% 10/1/03 (b) 1,000 1,070
7% 11/1/03 (AMBAC Insured) 1,570 1,676
Michigan Trunk Line Rev. Series A, 0% 10/1/09
(AMBAC Insured) 8,010 3,064
36,913
MINNESOTA - 2.8%
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) 6,000 4,530
Minnesota Hsg. Fin. Agcy. Hsg. Dev.
(Multi-Family) Series B, 9.375% 2/1/18 580 602
(Single Family Mtg.):
Series I, 6.25% 1/1/15 2,000 1,865
Series K, 6.4% 1/1/15 3,500 3,307
Rochester Health Care Facs. Rev. (Mayo Foundation Med. Ctr.)
Series H, 8.99% 11/15/15 INFL (c) 5,000 4,287
St. Paul Hsg. & Redev. Auth. Hosp. Rev. (Healtheast)
Series A, 6.625% 11/1/17 4,000 3,450
Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev.:
Series A, 4.75% 1/1/16 7,500 5,719
Series B, 6% 1/1/13 5,000 4,619
28,379
MISSISSIPPI - 0.5%
Mississippi Gen. Oblig. Series B, 7.50% 12/1/04 3,485 3,890
Mississippi Home Corp. Single Family Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) 865 920
4,810
MISSOURI - 0.2%
Kirkwood Ind. Dev. Auth. Health Care Corp. Rev.
(St. Joseph Hosp.) 7% 7/1/22 2,000 2,157
MONTANA - 0.3%
Montana State Health Facs. Auth. Rev. (Sisters of Charity
Leavenworth Sys.) 5% 12/1/23 4,500 3,398
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEBRASKA - 2.0%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.):
Series B, 5.25% 1/1/13 $ 3,950 $ 3,343
Series C:
5% 1/1/10 5,000 4,206
5% 1/1/17 8,100 6,450
Omaha Pub. Pwr. Dist. Elec. Sys. Rev. Series 1992 B,
6.20% 2/1/17 7,200 6,831
20,830
NEVADA - 0.7%
Clark County Ind. Dev. Rev. Rfdg.
(Nevada Pwr. Co. Proj. C) 7.20% 10/1/22
(AMBAC Insured) 7,000,000 7,131
NEW HAMPSHIRE - 0.1%
New Hampshire Tpk. Sys. Rev. Rfdg. 5.75% 4/1/20 1,500 1,297
NEW JERSEY - 1.6%
Bergen County Util. Auth. Wtr. Poll. Cont. Rev. Series B, 5.75%
12/15/05 (FGIC Insured) 1,870 1,821
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,089
New Jersey Health Care Facs. Fing. Auth. Rev.
(Cathedral Health) Series A, 7.25% 2/15/21,
(FHA Guaranteed) 1,000 1,023
New Jersey Hwy. Auth. Garden State Parkway Gen. Rev.:
(Senior Parkway) 5.75% 1/1/19 1,500 1,335
10.25% 1/1/05 (Pre-Refunded to 1/1/95 @ 102) 400 408
10% 1/1/09 (Pre-Refunded to 1/1/95 @ 102) 750 765
New Jersey Hsg. Fin. Agcy. Spl. Pledge Rev.:
Series 1, 8.25% 11/1/20 600 601
6.75% 11/1/20 705 695
New Jersey Tpk. Auth. Tpk. Rev. Rfdg.
10.375% 1/1/03 (Escrowed to Maturity) (d) 1,585 1,868
16,605
NEW YORK - 10.4%
Metropolitan Trans. Auth. Svc. Contract:
(Trans. Facs.) Series 4:
7.75% 7/1/01 735 798
7.75% 7/1/02 1,420 1,537
Series O, 5.75% 7/1/13 8,400 7,193
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York City:
Rfdg. Series A, 6.25% 8/1/09 $ 7,500 $ 6,900
Series A-1, 5.75% 8/1/10 1,050 900
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.:
Series 1992 A, 7% 6/15/09 2,500 2,566
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,584
New York State Dorm. Auth. Rev.:
Rfdg. (State Univ. Edl. Facs.) Series A:
5.50% 5/15/07 4,660 4,142
5.50% 5/15/13 7,500 6,356
Rfdg. Series B, 5.25% 5/15/09 4,000 3,355
(City Univ. Sys.):
Series C, 7.50% 7/1/10 1,000 1,055
Series U, 6.375% 7/1/08 2,000 1,915
(City Univ. Sys. Consolidated)
Series D, 7% 7/1/09 2,000 2,015
Series A, 5.75% 7/1/13 1,100 950
Series A, 5.75% 7/1/13 10,080 8,707
New York State Environ. Facs. Corp. Poll. Cont. Rev. Rfdg.
(State Wtr./Municipal Wtr.) 5.75% 6/15/11 2,500 2,269
New York State Local Gov't. Assistance Corp. Rfdg.:
(Cap. Appreciation) Series C, 0% 4/1/13 12,000 3,540
Series B, 5.375% 4/1/16 4,955 4,162
Series C:
5% 4/1/21 7,500 5,831
5.50% 4/1/17 2,500 2,134
Series D, 5.375% 4/1/14 4,900 4,177
Series E:
6% 4/1/14 6,200 5,766
5.25% 4/1/16 8,425 7,003
New York State Med. Care Facs. Fin. Agcy. Rev.
(North Shore Univ. Hosp. Mtg. Proj.) Series A,
7.20% 11/1/20 (MBIA Insured) 2,000 2,058
New York State Tollway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge) 7.25% 1/1/10 5,000 5,119
Triborough Bridge & Tunnel Auth. Rev.:
Rfdg. (Gen. Purp.) Series Y, 5.50% 1/1/17 10,000 8,550
(Convention Ctr. Proj.) Series E, 7.25% 1/1/10 5,000 5,131
106,713
NEW YORK & NEW JERSEY - 0.2%
New York & New Jersey Port Auth. 81st Series,
5.625% 8/1/14 2,700 2,447
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NORTH CAROLINA - 0.8%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) $ 2,640 $ 2,874
7.50% 12/1/04 (AMBAC Insured) 2,865 3,130
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.
Series D, 5.875% 1/1/13 3,000 2,603
8,607
NORTH DAKOTA - 0.3%
Mercer County Poll. Cont. Rev. (Basin Elec. Pwr.)
10.50% 6/30/13 (AMBAC Insured) (b) 500 510
North Dakota Univ. Rev. Rfdg. (Hsg. & Auxiliary Facs.)
Series A, 9.25% 4/1/14 2,000 2,080
2,590
OHIO - 2.0%
Ohio Muni. Elec. Gen. Agcy. (Joint Venture 5)
5.375% 2/15/24 (AMBAC Insured) 2,000 1,653
Ohio State Bldg. Auth. (Workers Comp.) 4.75% 4/1/14 6,000 4,627
Ohio State Bldg. Auth. Facs. (Juvenile Correctional Projs.)
Series A, 5.90% 10/1/03 (AMBAC Insured) 2,000 1,950
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev. Rfdg.
(Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14 (e) 10,000 10,925
Ohio Wtr. Dev. Auth. Rev. Safe Wtr. Rfdg. & Impt.
9.25% 12/1/12 (AMBAC Insured)
(Pre-Refunded to 6/1/95 @ 103) 150 157
(Unrefunded Balance) 9.25% 12/1/12 (AMBAC Insured) 60 63
Warren Hosp. Rev. Rfdg. (Warren General Hosp. Proj.)
Series B, 7.20% 11/15/09 1,250 1,181
20,556
OKLAHOMA - 1.2%
Grand River Dam Auth. Rev. Rfdg. 5.50% 6/1/10 8,900 8,044
Oklahoma Muni. Pwr. Auth. Pwr. Supply Sys. Rev.
(Independent Electrical Auth.) Series A:
4.75% 1/1/22 (FGIC Insured) 5,250 3,990
4.50% 1/1/28 (FGIC Insured) 1,000 706
12,740
PENNSYLVANIA - 4.5%
Delaware County Auth. Hosp. Rev. 6% 12/15/20 3,000 2,419
Harrisburg Auth. Wtr. Rev. (Complimentary Auction Rate B-3)
8.42% 7/15/15 (FGIC Insured) INFL (c) 3,000 2,434
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Intergovernmental Coop. Auth. Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/15 $ 4,000 $ 3,195
(City of Philadelphia Funding Prog.) 5.75% 6/15/15 6,000 5,220
Pennsylvania State Univ. Rfdg. Series A, 5.1% 3/1/18 2,375 1,850
Pennsylvania Ultd. Tax Rfdg. & Projs. 1st Series, 5% 4/15/08 5,000
4,238
Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.:
(Children's Hosp.) 5% 2/15/21 4,350 3,273
(Graduate Health Sys. Oblig.) Series A&B, 7% 7/1/05 10,670 10,243
Philadelphia Parking Auth. Parking Rev. (Arpt. Proj.)
7.375% 9/1/18 (AMBAC Insured) 1,750 1,848
Philadelphia Wtr. & Wastewtr. Rev.:
Rfdg. Series 1993:
5.50% 6/15/06 5,000 4,487
5.50% 6/15/07 4,000 3,540
8.12% 6/15/12 (FGIC Insured) INFL (c) 5,000 3,900
46,647
PUERTO RICO - 0.2%
Puerto Rico Infrastructure Fing. Auth. Spl. Tax
Series 1988 A, 7.75% 7/1/08 2,000 2,122
SOUTH CAROLINA - 1.2%
South Carolina Jobs Ed. Dev. Auth. Hosp. Rev.
5.45% 8/1/15 (AMBAC Insured) 12,000 10,305
South Carolina Hsg. Fin. & Dev. Auth.
(Homeownership Mtg. Purchase) Series B, 7.875%
7/1/15 1,750 1,781
12,086
TENNESSEE - 1.0%
Knox County Health, Edl. & Hsg. Facs. Auth. Hosp. Facs. Rev.
Rfdg. (Sanders Alliance) Series C,
7.25% 1/1/10 (MBIA Insured) 2,660 2,836
Metropolitan Nashville Arpt. Auth. Arpt. Rev. Series C,
6.60% 7/1/15 (FGIC Insured) 2,600 2,581
Shelby County Pub. Impt. Ultd. Tax Series A, 5.125% 3/1/18 2,770 2,226
Tennessee Hsg. Dev. Auth. Mtg. Fin. 5.70% 1/1/08 2,800 2,555
10,198
TEXAS - 8.4%
Austin Util. Sys. Rev. Rfdg. (Comb. Prior Lien):
Series A, 5.75% 11/15/14 (MBIA Insured) 5,000 4,469
5.75% 11/15/16 (AMBAC Insured) 7,000 6,186
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 60 61
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Joint Series A,
7.375% 5/1/12 (FGIC Insured) $ 1,000 $ 1,071
Dallas Rev. 6% 2/15/12 4,925 4,069
Harris County Cap. Appreciation Rev. Rfdg.
(Toll Road Subordinated Lien) 0% 8/1/06 4,245 2,048
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,225
Harris County Toll Road Sr. Lien Rfdg. 5% 8/15/16
(FGIC Insured) 9,375 7,453
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Jr. Lien) Series C, 0%
12/1/09 (AMBAC Insured) 4,600 1,714
Lower Colorado River Auth. Rev. 5.25% 1/1/15
(Escrowed to Maturity) (d) 6,000 5,070
North Texas Muni. Wtr. Dist. Upper Fork Waste Wtr. Interest
Receipt Contract Rev. 5.50% 6/1/12 (FGIC Insured) 2,300 2,038
Round Rock Ind. School Dist. Gen. Oblig. Rfdg. 0% 2/15/08 9,800 4,202
San Antonio Elec. & Gas Rev.:
Rfdg.:
(Cap. Appreciation) Series B, 0% 2/1/07 (FGIC Insured) 10,000 4,625
Series B:
0% 2/1/09 (FGIC Insured) 16,500 6,456
0% 2/1/10 (FGIC Insured) 10,000 3,625
5% 2/1/14 (e) 10,865 8,814
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation) 0%
9/1/13 (MBIA Insured) 12,500 3,547
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. Series B, 5.75%
2/1/12 (AMBAC Insured) 2,300 2,093
Texas Pub. Fin. Auth. Gen. Oblig. Series A:
6% 10/1/98 1,185 1,204
6.50% 10/1/04 4,000 4,155
Texas Wtr. Dev. Board Rev. (Revolving Fund Sr. Lien) 5.25%
7/15/15 5,565 4,640
Tyler Health Facs. Dev. Corp. Hosp. Rev.
(East Texas Med. Ctr. Reg'l. Health Sys.)
Series B, 6.75% 11/1/25 6,240 5,273
86,038
UTAH - 1.2%
Intermountain Pwr. Agcy. Pwr. Supply Rev.:
Unltd. Tax Pwr. Rfdg. Series H, 9% 7/1/95 2,500 2,593
7.834% 7/1/21 INFL (c) 3,500 2,397
Jordan County School Dist. 7.625% 6/15/05 (b) 2,000 2,228
Salt Lake City Hosp. Rev. (Intermountain Health Care Hosp., Inc.):
Series A, 8.125% 5/15/15 2,975 3,261
6.30% 2/15/15 2,375 2,173
12,652
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
VERMONT - 0.4%
Vermont Hsg. Fin. Agcy. (Single Family) Series 4,
6.40% 11/1/25 (FHA Insured) $ 4,315 $ 3,927
VIRGINIA - 2.1%
Fairfax County Pub. Impt. Series A, 6.20% 4/1/06 4,000 4,150
Hampton Museum Rev.:
5.25% 1/1/09 2,325 2,023
5.25% 1/1/14 2,000 1,670
Henrico County Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj):
7.50% 8/1/04 2,455 2,734
7.50% 8/1/05 2,590 2,884
Lynchburg Ind. Dev. Auth. Facs. 1st Mtg. Rev. Rfdg.
(Central Health, Inc.) 8.125% 1/1/16 1,250 1,330
Virginia Beach Wtr. & Swr. Rev. Rfdg.
5.125% 2/1/19 (MBIA Insured) 4,880 3,922
Virginia Pub. Bldg. Auth. Bldg. Rev. Rfdg. Series A,
5.4% 8/1/09 2,790 2,525
21,238
WASHINGTON - 3.9%
Washington Pub. Pwr. Supply Sys. Rev.:
Nuclear Proj. #1:
Series A, 14.375% 7/1/01 3,405 4,580
Series D, 14.375% 7/1/01 (Escrowed to Maturity) (d) 250 336
5.40% 7/1/95 5,600 5,600
5.375% 7/1/11 7,400 6,207
6.87% 7/1/12, INFL (c) 5,600 3,619
Nuclear Proj. #3:
Rfdg. Series B:
0% 7/1/06 (MBIA Insured) 5,000 2,363
0% 7/1/07 (MBIA Insured) 3,000 1,312
2.95% 7/1/94 10,000 10,000
6.87% 7/1/12, INFL (c) 10,000 6,375
40,392
WEST VIRGINIA - 0.3%
West Virginia School Bldg. Auth. Rev. (Cap. Impt.)
Series A, 6.75% 7/1/15 3,000 3,015
WISCONSIN - 0.6%
Wisconsin Health & Ed. Facs. Auth. Rev.:
(Felician Care, Inc.) Series A, 7% 1/1/15 (AMBAC Insured) 2,000 2,028
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,115
6,143
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
WYOMING - 0.2%
Wyoming Farm Loan Board Cap. Facs. Rev. Rfdg.
5.75% 10/1/20 $ 2,500 $ 2,162
MULTIPLE STATES- 0.5%
Washington Metropolitan Area Trans. Auth. Gross Rev. Rfdg.
6% 7/1/09 (FGIC Insured) 5,500 5,301
TOTAL MUNICIPAL BONDS
(Cost $1,037,326) $ 978,311
MUNICIPAL NOTES (A) - 4.8%
ARIZONA - 0.0%
Maricopa County Poll. Cont. Rev. (Pub. Svc. Co. New Mexico)
Series 1992 A, 5.40%,
LOC Canadian Imperial Bank, VRDN 300 300
FLORIDA - 0.0%
Dade County Health Facs. Auth. Hosp. Rev.
(Miami Childrens Hosp. Proj.) Series 1990,
3.30%, LOC Barnett Bank, VRDN 500 500
GEORGIA - 0.5%
Burke County Dev. Auth. Poll. Cont. Rev. (Georgia Pwr. Co.)
Series 1994, 5.90%, VRDN 4,500 4,500
ILLINOIS - 1.0%
Illinois Health Facs. Auth. Rev. (Central Dupage Hosp.
Assoc. Proj.) Series 1990, 3.10%,
LOC Industrial Bank of Japan, VRDN 10,100 10,100
INDIANA - 1.6%
Indiana Hosp. Equip. Fing. Auth. Rev. Series 1985 A, 3.10%,
(MBIA Insured) BPA Bank of New York, VRDN 16,400 16,400
KANSAS - 0.2%
Olathe Edl. Facs. Rev. (College Assoc. Pooled Ed. Loan Prog.)
Series 1989 A, 3.20%, LOC Marine Midland Bank, VRDN 1,400 1,400
MARYLAND - 0.1%
Baltimore County Econ. Dev. Rev. Rfdg. (Blue Circle, Inc. Proj.)
Series 1992, 2.50%, LOC Den Danske Bank Group, VRDN 1,000 1,000
Maryland Health & Higher Edl. Facs. Rev. (Pooled Loan Prog.)
Series A, 3.25% LOC Dai-Ichi Kangyo Bank Ltd., VRDN 100 100
1,100
MUNICIPAL NOTES (A) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 0.2%
Duluth Tax Increment Rev. (Lake Superior Paper Co.) Series 1985,
3.15%, LOC Nat'l Australia Bank, VRDN $ 2,300 $ 2,300
NEW YORK - 0.9%
Chautauqua County Indl. Dev. Auth. Rev.
(Bush Industries, Inc. Proj.) Series 84, 3.65%
LOC Marine Midland Bank, VRDN 1,500 1,500
New York City Hsg. Dev. Corp. Spl. (Carnegie Park Proj.)
Series 1984 A, 3.55% LOC Sumitomo Trust & Banking
Ltd., VRDN 6,000 6,000
New York State Energy Research & Dev. Auth. Poll. Cont. Rev.
(Niagra Mohawk Proj.) Series 1985 A, 2.80%,
LOC Long-Term Cr. Bank of Japan, VRDN 2,000 2,000
9,500
PENNSYLVANIA - 0.3%
Schuylkill County Ind. Dev. Auth. Resources Recovery Rev.
(Westwood Energy Prop.) Series 1985,3%,
LOC Fuji Bank, VRDN 2,775 2,775
TOTAL MUNICIPAL NOTES
(Cost $48,875) 48,875
TOTAL INVESTMENTS - 100%
(Cost $1,086,201) $ 1,027,186
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
500 U. S. Treasury Bond Contracts March 1995 $ 50,002 $ 424
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.9%
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
VRDN - Variable Rate Demand Notes
LEGEND
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(g) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
(h) Security collateralized by an amount sufficient to pay interest and
principal.
(i) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $21,988,000.
INCOME TAX INFORMATION
At December 31, 1994 the aggregate cost of investment securities for income
tax purposes was $1,086,536,000. Net unrealized depreciation aggregated
$59,350,000, of which $10,820,000 related to appreciated investment
securities and $70,170,000 related to depreciated investment securities.
The fund intends to elect to defer to its fiscal year ending December 31,
1995 $29,805,572 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994, the fund was required to defer $739,511 of losses on
futures contracts and options.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 76.2% AAA, AA, A 80.9%
Baa 13.3% BBB 10.5%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 1.4%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Electric Revenue 18.4%
Health Care 17.1
General Obligation 13.0
Transportation 10.0
Others
(individually less than 10%) 41.5
TOTAL 100.0%
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT FOR PER-SHARE AMOUNT) DECEMBER 31, 1994
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $1,086,201) - 9. $ 1,027,186
See accompanying schedule
10.Receivable for investments sold 11. 2,913
Delayed delivery
12.Interest receivable 13. 19,805
14.Receivable for daily variation on futures contracts 15. 156
16. 17.TOTAL ASSETS 18. 1,050,060
19.LIABILITIES 20. 21.
22.Payable to custodian bank $ 689 23.
24.Payable for investments purchased 26,526 25.
Regular delivery
26. Delayed delivery 7,495 27.
28.Payable for fund shares redeemed 4,280 29.
30.Dividends payable 5,261 31.
32.Accrued management fee 342 33.
34.Other payables and accrued expenses 158 35.
36. 37.TOTAL LIABILITIES 38. 44,751
39.40.NET ASSETS 41. $ 1,005,309
42.Net Assets consist of: 43. 44.
45.Paid in capital 46. $ 1,095,658
47.Accumulated undistributed net realized gain (loss) on 48. (31,758)
investments
49.Net unrealized appreciation (depreciation) 50. (58,591)
on investments
51.52.NET ASSETS, for 136,498 shares outstanding 53. $ 1,005,309
54.55.NET ASSET VALUE, offering price and redemption 56. $7.37
price per share ($1,005,309 (divided by) 136,498 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1994
57.58.INTEREST INCOME 59. $ 69,949
60.EXPENSES 61. 62.
63.Management fee $ 4,605 64.
65.Transfer agent, accounting and custodian fees 1,242 66.
and expenses
67.Non-interested trustees' compensation 27 68.
69.Registration fees 31 70.
71.Audit 46 72.
73.Legal 9 74.
75.Interest 1 76.
77.Reports to shareholders 32 78.
79.Miscellaneous 12 80.
81. 82.TOTAL EXPENSES 83. 6,005
84.85.NET INTEREST INCOME 86. 63,944
87.REALIZED AND UNREALIZED GAIN (LOSS) 89. 90.
88.Net realized gain (loss) on:
91. Investment securities (20,373) 92.
93. Futures contracts 4,341 (16,032)
94.Change in net unrealized appreciation (depreciation) 95. 96.
on:
97. Investment securities (150,523) 98.
99. Futures contracts 427 (150,096)
100.101.NET GAIN (LOSS) 102. (166,128)
103.104.NET INCREASE (DECREASE) IN NET ASSETS 105. $ (102,184)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEARS ENDED DECEMBER 31,
1994 1993
106.INCREASE (DECREASE) IN NET ASSETS
107.Operations $ 63,944 $ 70,575
Net interest income
108. Net realized gain (loss) (16,032) 66,696
109. Change in net unrealized appreciation (150,096) 22,347
(depreciation)
110. (102,184) 159,618
111.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
112.Distributions to shareholders: (63,944) (70,575)
From net interest income
113. From net realized gain (19,362) (58,286)
114. 115.TOTAL DISTRIBUTIONS (83,306) (128,861)
116.Share transactions 792,026 581,372
Net proceeds from sales of shares
117. Reinvestment of distributions 55,051 88,248
118. Cost of shares redeemed (917,928) (630,380)
119. (70,851) 39,240
Net increase (decrease) in net assets resulting from
share transactions
120. (256,341) 69,997
121.TOTAL INCREASE (DECREASE) IN NET ASSETS
122.NET ASSETS 123. 124.
125. Beginning of period 1,261,650 1,191,653
126. End of period $ 1,005,309 $ 1,261,650
127.OTHER INFORMATION 129. 130.
128.Shares
131. Sold 99,644 66,164
132. Issued in reinvestment of distributions 7,067 10,106
133. Redeemed (115,326) (71,390)
134. Net increase (decrease) (8,615) 4,880
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
135. YEARS ENDED DECEMBER 31,
136. 1994 1993 1992 1991 1990
137.SELECTED PER-SHARE
DATA
138.Net asset value, $ 8.690 $ 8.500 $ 8.470 $ 8.130 $ 8.130
beginning of period
139.Income from .455 .487 .519 .526 .541
Investment Operations
Net interest income
140. Net realized and (1.180) .600 .210 .410 -
unrealized gain (loss)
141. Total from (.725) 1.087 .729 .936 .541
investment operations
142.Less Distributions (.455) (.487) (.519) (.526) (.541)
From net interest
income
143. From net realized (.410) (.180) (.070) -
gain (.010)
on investments
144. In excess of net (.130) - - - -
realized
gain on investments
145. Total distributions (.595) (.897) (.699) (.596) (.541)
146.Net asset value, $ 7.370 $ 8.690 $ 8.500 $ 8.470 $ 8.130
end of period
147.TOTAL RETURN -8.49 13.17 8.93 11.91 6.91
% % % % %
148.RATIOS AND SUPPLEMENTAL DATA
149.Net assets, end of $ 1,005 $ 1,262 $ 1,192 $ 1,163 $ 1,070
period (in millions)
150.Ratio of expenses to .53 .49 .49 .50 .50
average net assets % % % % %
151.Ratio of net interest 5.68 5.51 6.11 6.35 6.71
income to average % % % % %
net assets
152.Portfolio turnover 95 74 53 33 49
rate % % % % %
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Municipal Bond 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 of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures and options transactions excise tax regulations and losses deferred
due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital. Any
taxable gain remaining at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts, and may also write options. These investments involve, to
varying degrees, elements of market risk and
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
FUTURES CONTRACTS AND OPTIONS -
CONTINUED
risks in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts, as reflected in the schedule of
investments under the caption "Futures Contracts" 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.
2. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,026,850,000 and $1,136,674,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $2,466,105,000 and $2,433,861,000, respectively.
3. 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 on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1325% to
..3700% for the period January 1, 1994 to July 31, 1994 and .1200% to .3700%
for the period August 1, 1994 to December 31, 1994. In the event that these
rates were lower than the contractual rates in effect during those periods,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .25%. For
the period, the management fee was equivalent to an annual rate of .41% of
average net assets.
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
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN -
CONTINUED
informed the fund that payments made to third parties under the Plan
amounted to $4,000 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
$855,000 and $362,000, respectively.
4. BANK BORROWINGS.
BANK BORROWINGS. The fund is permitted to have bank borrowings for
temporary or emergency purposes to fund shareholder redemptions. The fund
has established borrowing arrangements with certain banks. Under the most
restrictive arrangement, the fund must pledge to the bank securities having
a market value in excess of 220% of the total bank borrowings. The interest
rate on the borrowings is the bank's base rate, as revised from time to
time. The maximum loan and the average daily loan balances during the
periods for which loans were outstanding amounted to $5,900,000 and
$5,900,000 respectively. The weighted average interest rate was 3.75%.
Interest expense includes $1,000 paid under the bank borrowing program.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Municipal Bond Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Municipal Bond Portfolio, including the
schedule of portfolio investments, as of December 31, 1994, 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 audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audits 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, 1994 by correspondence with the
custodian and brokers. An audits 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 Municipal Bond Portfolio as of
December 31, 1994, 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 L.L.P.
Boston, Massachusetts
January 27, 1995
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
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
4611 Sharon Road
Charlotte, 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
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1775 K Street, N.W.
Washington, DC
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222 East Wisconsin Avenue
Milwaukee, WI
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Page 39 = BLANK
Do NOT strip-in this type
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. Swayze, Vice President
Arthur S. Loring, Secretary
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY TAX-FREE BOND FUNDS
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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
(registered trademark)
Spartan Arizona Municipal Income
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
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* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
INSURED TAX-FREE
PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 29 The auditors' opinion.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO IN-
VESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND
NOR FIDELITY
DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY
FUND, INCLUDING
CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE
YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February continued into
the fourth quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
negative returns for many bond investments and below-average returns for
many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
Insured Tax Free (01Municipal 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 11105.73
03/31/86 11410.97 11109.28
04/30/86 11321.24 11117.73
05/31/86 11127.05 10936.73
06/30/86 11220.70 11041.07
07/31/86 11219.99 11108.08
08/31/86 11777.10 11605.39
09/30/86 11745.09 11634.52
10/31/86 12006.08 11835.45
11/30/86 12205.07 12069.91
12/31/86 12182.75 12036.60
01/31/87 12482.28 12399.02
02/28/87 12577.71 12460.02
03/31/87 12446.26 12327.95
04/30/87 11631.11 11709.33
05/31/87 11511.52 11651.25
06/30/87 11686.57 11993.33
07/31/87 11795.85 12115.67
08/31/87 11863.24 12142.93
09/30/87 11201.36 11695.22
10/31/87 11429.84 11736.62
11/30/87 11710.99 12043.06
12/31/87 11927.47 12217.81
01/31/88 12503.15 12653.00
02/29/88 12606.82 12786.75
03/31/88 12236.22 12637.78
04/30/88 12306.70 12733.83
05/31/88 12340.72 12697.03
06/30/88 12550.66 12882.78
07/31/88 12620.07 12966.78
08/31/88 12666.36 12978.19
09/30/88 12903.74 13213.10
10/31/88 13239.60 13446.31
11/30/88 13030.50 13323.14
12/31/88 13261.98 13459.43
01/31/89 13470.40 13737.78
02/28/89 13321.11 13581.03
03/31/89 13321.24 13548.57
04/30/89 13683.55 13870.21
05/31/89 13947.50 14158.30
06/30/89 14136.33 14350.57
07/31/89 14251.73 14545.88
08/31/89 14110.93 14403.47
09/30/89 14061.96 14360.26
10/31/89 14214.19 14535.46
11/30/89 14447.03 14789.83
12/31/89 14515.15 14911.10
01/31/90 14420.23 14841.02
02/28/90 14564.00 14973.11
03/31/90 14579.17 14977.60
04/30/90 14388.74 14869.76
05/31/90 14749.81 15193.92
06/30/90 14870.12 15327.63
07/31/90 15099.44 15552.94
08/31/90 14853.20 15327.43
09/30/90 14922.26 15336.62
10/31/90 15142.32 15614.22
11/30/90 15501.27 15928.06
12/31/90 15542.75 15998.14
01/31/91 15764.85 16212.52
02/28/91 15874.01 16353.57
03/31/91 15829.02 16360.11
04/30/91 16009.80 16577.70
05/31/91 16177.76 16725.24
06/30/91 16134.70 16708.52
07/31/91 16364.83 16912.36
08/31/91 16552.61 17135.60
09/30/91 16771.33 17358.37
10/31/91 16918.67 17514.59
11/30/91 16943.74 17563.63
12/31/91 17341.78 17941.25
01/31/92 17353.04 17982.52
02/29/92 17361.26 17987.91
03/31/92 17316.35 17995.11
04/30/92 17463.85 18155.26
05/31/92 17691.94 18369.49
06/30/92 17976.24 18678.10
07/31/92 18539.98 19238.44
08/31/92 18290.38 19049.91
09/30/92 18393.37 19173.73
10/31/92 17969.70 18985.83
11/30/92 18495.19 19325.68
12/31/92 18713.82 19522.80
01/31/93 18949.87 19749.26
02/28/93 19866.98 20464.19
03/31/93 19603.79 20247.26
04/30/93 19820.07 20451.76
05/31/93 19897.60 20566.29
06/30/93 20263.73 20909.75
07/31/93 20256.30 20936.93
08/31/93 20760.06 21372.42
09/30/93 21012.79 21616.07
10/31/93 20986.46 21657.14
11/30/93 20738.53 21466.55
12/31/93 21304.80 21919.50
01/31/94 21550.70 22169.38
02/28/94 20900.09 21595.19
03/31/94 19767.47 20716.27
04/30/94 19820.08 20892.36
05/31/94 20072.77 21074.12
06/30/94 19862.82 20951.89
07/31/94 20315.13 21335.31
08/31/94 20358.56 21409.98
09/30/94 20000.75 21095.26
10/31/94 19572.15 20719.76
11/30/94 19103.07 20344.73
12/30/94 19658.58 20792.32There 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 to measure
performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Insured Tax-Free -7.73% 35.44% 96.71%
Lehman Brothers Municipal Bond Index -5.17% 39.04% n/a
Average Insured Municipal Bond Fund -6.47% 34.97% n/a
Consumer Price Index 2.67% 18.72% 37.72%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a specific 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 currently reflects the performance of 41 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 (CPI) 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, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Insured Tax-Free -7.73% 6.25% 7.68%
Lehman Brothers Municipal Bond Index -5.17% 6.81% n/a
Average Insured Municipal Bond Fund -6.47% 6.17% n/a
Consumer Price Index 2.67% 3.49% 3.55%
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
$20,792
$19,659
$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, 1994, the value of your
investment would have grown to $19,659 - a 96.59% 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 $20,792 - a 107.92% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend returns 5.01% 5.77% 6.13% 6.70% 6.72%
Capital appreciation returns -12.74% 8.08% 1.78% 4.87% 0.36%
Total returns -7.73% 13.85% 7.91% 11.57% 7.08%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.36(cents) 31.84(cents) 62.67(cents)
Annualized dividend rate 5.94% 5.78% 5.56%
30-day annualized yield 6.00% - -
30-day annualized tax-equivalent yield 9.38% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.62 over
the past month, $10.92 over the past six months and $11.28 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Guy Wickwire, Portfolio Manager of Fidelity
Insured Tax-Free Portfolio
Q. GUY, HOW HAS THE FUND PERFORMED?
A. Rising interest rates, heightened inflationary expectations and the
falling dollar made for a rough year for municipal bond funds, including
this one. For the year ended December 31, 1994, the fund's total return was
- -7.73%. That lagged the average insured municipal bond fund, which returned
- -6.47% for the same period, according to Lipper Analytical Services.
Q. WHY DID THE FUND LAG THE AVERAGE INSURED FUND?
A. Primarily, due to its longer-than-average duration during the first half
of the year. Duration is a measure of how sensitive the fund's share price
is to changes in interest rates. The longer the fund's duration, the more
its share price will fall as interest rates rise, and vice versa. As a
result, the majority of the fund's underperformance occurred in the first
six months of the year, when interest rates rose the most. In the summer,
I brought the duration back to a more neutral stance, meaning duration was
more in line with its competitors. To accomplish that, I used futures
contracts to temper the fund's duration. While I had used futures in the
first half, they were more effective in the second half.
Q. HOWEVER, THE FUND'S DURATION WAS HIGHER AT THE END OF DECEMBER THAN IT
WAS AT THE END OF JUNE. WHAT EXPLAINS THAT?
A. Generally when interest rates rise, a bond's price declines and its
duration lengthens. When interest rates fall, a bond's price rises and its
duration shortens. As interest rates continued to rise, prices of bonds in
the fund declined and the fund's duration naturally lengthened. What's
more, by the end of December, I had removed some of the futures positions,
which also lengthened the fund's duration.
Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF
LOSSES IN ITS INVESTMENT POOL. DID THAT EVENT HURT THE FUND'S CALIFORNIA
HOLDINGS?
A. It's important to point out that the fund held no bonds issued by Orange
County or any of the other municipalities that were participants in the
investment pool in question. However, because of the situation and the slow
nature of the state's economic recovery, the fund's California bonds did
not do better than other areas of the country. While I'm disappointed that
California bonds didn't do well in 1994, I'm confident that eventually they
will perform well as the economy improves. If you were to look at the
percentage of the fund's California bonds at the end of the period compared
to six months earlier, it appears that I raised the stake here. But I
haven't really added any California bonds during that period. What accounts
for the rising percentage is that the fund had some shareholder
redemptions, and, as I sold other bonds, California increasingly became a
larger percentage of the fund.
Q. APART FROM DURATION, DID YOU MAKE ANY OTHER SIGNIFICANT CHANGES IN THE
FUND'S INVESTMENTS?
A. Not really. In terms of state concentrations, the top five switched rank
over the past six months, but stayed relatively the same. After California,
the fund's largest state holdings by size are Massachusetts, Colorado,
Illinois and New York. Industry concentrations remained the same with
health care bonds making up 23.7% of the fund at the end of December.
They're attractive in part, because they can offer relatively high yields.
Throughout the year, I reduced the fund's stake in electric utility bonds
to 14.9% because this sector is facing increasingly competitive pressures.
Water, sewer and gas utilities came third at 14.5% at the end of the
period.
Q. WHAT IS YOUR STRATEGY FOR THE NEXT SIX MONTHS?
A. I'll most likely keep the fund's duration neutral, which essentially
means that I'm not trying to predict if interest rates will rise or fall. I
do think that much of the worst is behind us, but it would be premature to
think that more volatility is out of the question. There still may be
pockets of weakness in bond prices until investors are convinced that the
economy is slowing down. That conviction would take the pressure off the
Federal Reserve Board to continue raising interest rates. That said, I
think that there could be some signs that the economy is slowing down in
the first half of 1995, a lot sooner than many people believe. But before
I'd be willing to extend duration, I would have to see growth at about
2.5%. Until then, I'll most likely remain cautious.
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,
more than $319 million
MANAGER: Guy Wickwire,
since October 1993;
manager,
Fidelity Massachusetts
Tax-Free High Yield Portfolio,
since 1983; Fidelity High
Yield Tax-Free Portfolio, 1981
to 1993; joined Fidelity in
1981
(checkmark)
GUY WICKWIRE ON UNINSURED
BONDS:
"About 9.3% of the fund's
investments were in
uninsured bonds on
December 31, 1994. While
I'm willing to buy uninsured
bonds to help generate a
higher yield for the fund, I
want to make sure that I get
rewarded with more than just
a little added yield for taking
on some additional risk.
Recently, there haven't been
many opportunities to do so.
As a result, I haven't really
added to this stake. Until the
spread, or difference in yield
between the AAA-rated
insured bonds and A-rated
uninsured bonds, widens
enough to make
lower-yielding bonds more
attractive, I'll most likely keep
the fund's stake in uninsured
bonds about where it was at
the end of 1994."
(medium solid bullet) Inverse floaters, one of the
financial arrangements known
as derivatives, made up less
than 4% of the fund's
investments at the end of the
period. The yield on inverse
floaters rises as short-term
rates fall and vice versa. By
using various derivatives, the
manager hopes to achieve
higher levels of tax-exempt
income and increased
flexibility in managing the
fund's overall sensitivity to
changes in interest rates,
However, these strategies
can involve additional risk and
don't always work as
intended.
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 17.0 14.9
Massachusetts 11.8 7.3
Colorado 5.9 7.1
Illinois 5.9 7.1
New York 5.6 4.4
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Health Care 23.7 24.9
Electric Revenue 14.9 18.0
Water & Sewer 14.5 12.1
General Obligation 14.4 12.9
Housing 8.3 8.4
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 18.5 19.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 9.9 11.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 87.5%
Aa, A 9.9%
Baa 0.4%
Short-term
investments 2.2%
Aaa 86.6%
Aa, A 12.0%
Baa 0.4%%
Short-term
investments 1.0%
Row: 1, Col: 1, Value: 40.0
Row: 1, Col: 2, Value: 47.5
Row: 1, Col: 3, Value: 9.9
Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 2.2
Row: 1, Col: 1, Value: 40.0
Row: 1, Col: 2, Value: 46.6
Row: 1, Col: 3, Value: 12.0
Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 2.0
SHOWN AN A PERCENTAGE OF THE FUND'S INVESTMENTS.WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 97.8%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ALASKA - 0.6%
Matanuska-Susitna Boro Series A,
6% 5/1/14 (MBIA Insured) $ 2,000,000 $ 1,837,500
ARKANSAS - 0.1%
North Little Rock Elec. Rev. Rfdg. Series A,
6.50% 7/1/15 (MBIA Insured) 400,000 398,500
CALIFORNIA - 16.5%
Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.)
5.375% 6/1/09 (MBIA Insured) 1,000,000 883,750
California Gen. Oblig. 4.75% 9/1/18 (FSA Insured) 15,000,000 11,212,500
California Pub. Wrks. Board Lease Rev.
(Dept. Corrections State Prisons) Series A:
Rfdg. 5% 12/1/19 (AMBAC Insured) 2,500,000 1,931,250
5.25% 12/1/05 (AMBAC Insured) 2,000,000 1,812,500
California Pub. Wrks. Board Lease Rev. Unltd. Tax
(Secretary of State) Series A,
6.50% 12/1/08 (AMBAC Insured) 1,000,000 997,500
Desert Hosp. Dist. Hosp. Rev. Ctfs. of Prtn.
7.259% 7/28/20 (CGIC Insured) INFL (c) 1,500,000 1,353,750
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
5% 6/1/14 (MBIA Insured) 1,200,000 961,500
Oakland Redev. Agcy. Central Dist. Redev.
Sub. Tax Allocation 5% 9/1/21 (AMBAC Insured) 1,000,000 766,250
Palm Desert Fing. Auth. Tax Allocation Rev.
6.367% 4/1/22 (MBIA Insured) 3,000,000 2,906,250
Pleasant Hill Joint Pwrs. Fing. Auth. Lease Rev. (Cap. Impt.
Prog.) Series A, 5% 12/1/12 (MBIA Insured) 1,490,000 1,210,625
Rancho Wtr. Dist. Fing. Auth. Rev. (Floats Pa. 62)
4.875% 8/1/15 (AMBAC Insured) 7,145,000 5,537,375
Sacramento City Fing. Auth. (Cap. Appreciation)
(Tax Allocation Proj.) Series B,
0% 11/1/07 (MBIA Insured) 1,810,000 782,825
Sacramento City Fing. Auth. Lease Rev. Rfdg. Series A,
5.375% 11/1/14 (AMBAC Insured) 4,000,000 3,360,000
Sacramento Muni. Util. Dist. Elec. Rev.
5.25% 11/15/12 (FGIC Insured) 500,000 421,250
San Jose Redev. Agcy. Tax 5.25% 8/1/16
(MBIA Insured) 3,395,000 2,775,413
San Mateo County Joint Pwrs. Fing. Auth. Lease Rev. Rfdg
(Cap. Proj. Pgm.) 5.125% 7/1/18 (MBIA Insured) 1,000,000 791,250
Santa Barbara Wtr. Rev. Rfdg. Series A,
4.80% 9/1/14 (AMBAC Insured) 1,400,000 1,081,500
Santa Monica Wastewtr. Enterprise Rev. Rfdg. (Hyperion Proj.)
4.75% 1/1/12 (AMBAC Insured) 3,000,000 2,358,750
Southern California Pub. Pwr. Auth. Transmission Proj. Rev.
Rfdg. Series A, 5% 7/1/22 (MBIA Insured) 1,375,000 1,050,156
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Suisun City, Series H 12, 5.20% 2/1/19 (MBIA Insured) $ 1,410,000 $
1,140,338
Sulphur Springs Unified School Dist. Series A,
0% 9/1/11 (MBIA Insured) 3,000,000 963,750
Univ. of California Rev.:
Rfdg. (Multi-Purpose Projs.) Series C,
4.75% 9/1/15 (AMBAC Insured) 2,000,000 1,520,000
5% 9/1/13 (AMBAC Insured) 1,250,000 1,001,563
West & Central Basin Fing. Auth. Rev. Rfdg.
(West Basin Proj.) Series A:
5% 8/1/13 (AMBAC Insured) 4,000,000 3,215,000
5% 8/1/16 (AMBAC Insured) 3,250,000 2,551,250
52,586,295
COLORADO - 5.9%
Adams County School Dist. #12 Unltd. Tax Rfdg. (Thornton)
6.20% 12/15/10 (FGIC Insured) 1,000,000 970,000
Adams County Single Family Mtg. Rev. Rfdg. Series A-2,
8.70% 6/1/12 (FSA Insured) 5,000,000 5,350,000
Colorado Health Facs. Auth. Rev.
(Presbyterian St. Luke Health Sys. Proj.) Series A:
7.25% 2/15/16 (FSA Insured) 2,000,000 2,077,500
6.25% 2/15/21 (FSA Insured) 4,000,000 3,745,000
Denver City & County School Dist. #1 Rfdg.
Series A, 0% 12/1/08 10,400,000 4,082,000
Jefferson County Single Family Mtg. Rev. Series 1991 A,
8.875% 10/1/13 (MBIA Insured) 140,000 147,700
Thornton Wtr. Rfdg. (Cap. Appreciation)
Series 1991, 0% 12/1/12 (FGIC Insured) 4,770,000 1,460,813
Univ. of Colorado Hosp. Auth. Hosp. Rev. Series A,
6.25% 11/15/12 (AMBAC Insured) 1,000,000 958,750
18,791,763
CONNECTICUT - 1.0%
Bridgeport Gen. Oblig. 8.75% 8/15/04 (FGIC Insured) 510,000 599,888
Connecticut Health & Edl. Facs. Auth. Rev. (St. Raphael Hosp.)
Series H, 5.25% 7/1/12 (AMBAC Insured) 3,035,000 2,644,244
3,244,132
DISTRICT OF COLUMBIA - 0.3%
District of Columbia Hosp. Rev. Rfdg. (Medlantic Healthcare)
Series A, 5.25% 8/15/12 (MBIA Insured) 1,000,000 847,500
FLORIDA - 0.7%
Brevard County Util. Rev. Rfdg.
5.25% 3/1/14 (AMBAC Insured) 2,500,000 2,115,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
GEORGIA - 1.4%
Albany-Dougherty County Hosp. Auth. Rev. Rfdg.
(Phoebe Putney Mem. Hosp.) 5% 9/1/20
(AMBAC Insured) $ 2,000,000 $ 1,557,500
Georgia Medical Ctr. Hosp. Auth. Rev. Antic Ctfs. (Columbus
Regional Healthcare Sys.) 5% 8/1/18 (MBIA Insured) 1,500,000 1,218,750
Georgia Muni. Elec. Auth. Spl. Oblig. Rfdg. Second
Crossover Series, 7.80% 1/1/20 (AMBAC Insured) 1,500,000 1,590,000
4,366,250
HAWAII - 0.5%
Hawaii County Rfdg. & Impt. Series A,
5.60% 5/1/12 (FGIC Insured) 1,000,000 892,500
Honolulu City & County Multi-Family Rev. (Hale Pauahi)
Series A, 8.70% 12/1/28
(FHA Guaranteed) (MBIA Insured) 725,000 757,625
1,650,125
IDAHO - 1.2%
Canyon County Independent School Dist.
#131, 5.50% 7/30/12 (MBIA Insured) 2,000,000 1,757,500
Canyon County School Dist. Unltd. Tax #139
Class A, 5% 8/1/13 1,290,000 1,056,188
Idaho Health Facs. Auth. Health Care Corp. Rev.
(St. Joe's Regional Med. Ctr.) 5.25% 7/1/13
(MBIA Insured) 1,000,000 860,000
3,673,688
ILLINOIS - 5.9%
Chicago Motor Fuel Tax Rev. Rfdg. Series A,
5.375% 1/1/14 (AMBAC Insured) 2,000,000 1,680,000
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. 2nd Lien Series A,
6.375% 1/1/12 (MBIA Insured) 1,000,000 967,500
Chicago Residential Mtg. Rev. Rfdg. (Cap. Appreciation)
Series B, 0% 10/1/09 (MBIA Insured) 9,000,000 3,082,500
Chicago Single Family Mtg. Rev. (Cap. Appreciation)
Series A, 0% 12/1/16 (FGIC Insured) (e) 33,655,000 4,122,738
Illinois Health Facs. Auth. Rev. (Swedish American Hosp.)
5.375% 11/15/13 (AMBAC Insured) 3,000,000 2,538,750
Illinois Metropolitan Pier & Exposition Auth. Dedicated
Tax Rev. (McCormick Place Expansion Proj.)
Series A, 0% 6/15/09 (FGIC Insured) 6,000,000 2,295,000
Illinois Regional Trans. Auth. Series C:
7.75% 6/1/11 (FGIC Insured) 1,750,000 1,942,500
7.75% 6/1/13 (FGIC Insured) 2,045,000 2,272,506
18,901,494
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
INDIANA - 1.8%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg. (Columbus
Regional Hosp.) 7% 8/15/15 (CGIC Insured) $ 2,000,000 $ 2,035,000
Indiana Muni. Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.
Series B, 5.50% 1/1/16 (MBIA Insured) 2,000,000 1,710,000
Jasper County Poll. Cont. Rev. Rfdg.
7.10% 7/1/17 (MBIA Insured) 2,000,000 2,037,500
5,782,500
KANSAS - 1.7%
Labette County Mtg. Loan Rev. Series A,
6.25% 5/1/12 (GNMA Coll.) 1,605,000 1,699,294
Reno County Mtg. Rev. Rfdg. (Single Family)
Series B, 8.70% 9/1/11 775,000 811,813
Wichita Hosp. Rev. Series II-A,
7.982% 10/1/17 (MBIA Insured) INFL (c) 3,000,000 2,778,750
5,289,857
KENTUCKY - 1.5%
Jefferson County Hosp. Rev.
7.381% 10/1/08 (MBIA Insured) INFL (c) 2,000,000 2,007,500
Kentucky Tpk. Auth. Econ. Dev. Rev. Rfdg. (Revitalization Proj.)
5.50% 7/1/07 (AMBAC Insured) 3,000,000 2,741,250
4,748,750
LOUISIANA - 1.6%
Calcasieu Parish Pub. Trust Auth. Mtg. Rev. Rfdg.
Series A, 7.75% 6/1/12 1,395,000 1,405,463
East Baton Rouge Parish Sales & Use Tax
Series ST-A, 4.80% 2/1/12 (FGIC Insured) 1,000,000 786,250
New Orleans Gen. Oblig. Ltd. Tax Rfdg.
0% 9/1/10 (AMBAC Insured) 1,775,000 614,594
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/09 (AMBAC Insured) 3,000,000 1,121,250
New Orleans Pub. Impt. Unltd. Tax
7% 9/1/19 (FGIC Insured) 1,000,000 1,020,000
4,947,557
MAINE - 0.4%
Maine Tpk. Auth. Tpk. Rev. 6% 7/1/18 (MBIA Insured) 1,500,000 1,370,625
MARYLAND - 1.8%
Baltimore Cons. Pub. Impt. Rfdg. Series D,
5.40% 10/15/12 (AMBAC Insured) 2,000,000 1,757,500
Baltimore County Mtg. Rev. Rfdg. (Silver Springs Apt.) Series A,
6.70% 11/1/19 (FHA Guaranteed) 500,000 484,375
Charles County Hsg. Mtg. Rev. Rfdg. (Holly Station III
Townhouse) Series A, 5.80% 7/1/19 (FHA Guaranteed)
(MBIA Insured) 1,000,000 871,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - CONTINUED
Maryland Health & Higher Edl. Facs. Auth. Rev.
(Frederick Mem. Hosp.) 5.25% 7/1/13 (FGIC Insured) $ 2,000,000 $ 1,720,000
Montgomery County Rev. Auth. Lease Rev. Rfdg.
(Olney Indoor Swim Center) Project C, 5.25% 10/1/12 1,000,000 852,500
5,685,625
MASSACHUSETTS - 11.8%
Haverhill Rfdg. Series A, 6.70% 9/1/10 (AMBAC Insured) 5,000,000
5,056,250
Holyoke Gen. Oblig. Ltd. Tax
8.15% 6/15/06 (MBIA Insured) 2,205,000 2,530,238
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Massachusetts Gen. Hosp.) Series F,
6.25% 7/1/12 (AMBAC Insured) 2,000,000 1,917,500
(Bentley College) Series H, 6.90% 7/1/21 (MBIA Insured) 6,720,000
6,745,200
(Cape Cod Hosp.) 5.40% 11/15/09 (Connie Lee Insured) 2,900,000
2,479,500
(Northeastern Univ.) Series B,
7.60% 10/1/10 (AMBAC Insured) 1,000,000 1,051,250
(Suffolk Univ.) Series B, 6.25% 7/1/12
(Connie Lee Insured) 2,590,000 2,382,800
Massachusetts Hsg. Fin. Agcy. Multi-Family Hsg. Rev.
Series A, 8.875% 7/1/18 (MBIA Insured)
(Pre-Refunded to 7/1/95 @102) (d) (e) 1,985,000 2,047,031
Massachusetts Muni. Wholesale Elec. Co.
Pwr. Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/17 (MBIA Insured) 6,000,000 4,612,500
Series A, 6.92% 7/1/18 (AMBAC Insured) INFL (c) 2,000,000 1,345,000
5% 7/1/10 (AMBAC Insured) 1,930,000 1,604,313
Series A:
5% 7/1/14 (AMBAC Insured) 1,000,000 793,750
5% 7/1/17 (AMBAC Insured) 1,450,000 1,123,750
Palmer Rfdg. 5.50% 10/1/10 (MBIA Insured) 4,445,000 3,961,606
37,650,688
MICHIGAN - 3.2%
Detroit Gen. Oblig. Rfdg. (Distributable State Aid)
5.20% 5/1/07 (AMBAC Insured) 2,000,000 1,750,000
Detroit Wtr. Supply Sys. Rev. Rfdg.
6.50% 7/1/15 (FGIC Insured) 1,000,000 993,750
Jackson County Hosp. Fin. Auth. Hosp. Rev. Rfdg. (WA Foote
Mem. Hosp.) Series A, 4.75% 6/1/15 (FGIC Insured) 2,000,000 1,552,500
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of Mercy Health
Corp.) 5.375% 8/15/14 (MBIA Insured) 3,000,000 2,565,000
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.
Series B, 5.70% 4/1/12 3,000,000 2,606,250
Wayne Charter County Arpt. Rev. Rfdg.
(Subordinated Lien Detroit Metropolitan) Series C,
5.25% 12/1/13 (MBIA Insured) (e) 1,000,000 836,250
10,303,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 3.7%
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) $ 10,000,000 $ 7,550,000
Minneapolis Health Care Fac. Rev. Rfdg.
(Fairview Hosp. & Healthcare Proj.) Series A,
5.30% 11/15/08 (MBIA Insured) 1,000,000 882,500
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 0% 1/1/11 (AMBAC Insured) 3,140,000 1,118,625
St. Cloud Hosp. Facs. Auth. Rev. Rfdg. (St. Cloud Hosp. Proj.)
Series C, 5.25% 10/1/13 (AMBAC Insured) 2,700,000 2,305,125
11,856,250
MISSOURI - 0.9%
Missouri Health & Edl. Facs. Auth. Health Facs. Rev.
(Barnes Jewish/Christian):
Rfdg. 5.15% 5/15/10 500,000 424,375
5.20% 5/15/11 500,000 423,125
5.25% 5/15/12 2,390,000 2,016,563
2,864,063
MONTANA - 2.4%
Montana Health Fac. Auth. Hosp. Fac. Rev. (Billings
Deaconess Clinic) 5.25% 2/15/20 (AMBAC Insured) 1,750,000 1,445,938
Montana Univ. Higher Ed. Rev. Rfdg., Series A,
5.05% 11/15/16 (MBIA Insured) 1,500,000 1,226,250
Silver Bow Wtr. Inc. Wtr. Sys. Rev. (Butte Silver Bow Proj.)
5.25% 11/1/14 (FGIC Insured) 1,500,000 1,286,250
Univ. of Montana Higher Ed. Rev. Rfdg. Series A,
4.50% 11/15/15 (MBIA Insured) 5,000,000 3,756,250
7,714,688
NEW JERSEY - 0.3%
Warren County Poll. Cont. Fing. Auth. Rev. (Resource Recovery)
6.55% 12/1/06 (MBIA Insured) 1,000,000 1,038,750
NEW MEXICO - 1.0%
Farmington Util. Sys. Rev. Rfdg.
5.75% 5/15/13 (FGIC Insured) 500,000 448,125
Los Alamos County Inc. Util. Sys. Rev. Rfdg. Series A,
6% 7/1/15 (FSA Insured) 2,775,000 2,546,063
New Mexico Mtg. Fin. Auth. Single Family Mtg. Purchase
Rfdg. Series A2, 6.85% 7/1/12 115,000 113,419
3,107,607
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW YORK - 5.6%
New York State Dorm. Auth. State Univ. Edl. Facs. Rev. Rfdg.
Series A, 5.25% 5/15/15 (AMBAC Insured) $ 2,500,000 $ 2,093,750
New York State Local Govt. Assistance Corp.:
Rfdg. Series C, 5.50% 4/1/17 1,000,000 853,750
Series D, 5.375% 4/1/14 2,000,000 1,705,000
New York State Med. Care Facs. Fin. Agcy. Rev.:
(Hosp. & Nursing Home) Series D,
5.20% 8/15/15 (FHA Guaranteed) 1,550,000 1,257,438
(St. Lukes Roosevelt Hosp.)
5.60% 8/15/13 (FHA Guaranteed) 3,630,000 3,194,400
New York State Tollway Auth. Gen. Rev.
Series B, 5% 1/1/20 (MBIA Insured) 3,000,000 2,362,500
New York State Urban Dev. Corp. Rev. Rfdg. Series A:
5.10% 1/1/09 (AMBAC Insured) 1,000,000 870,000
5% 1/1/17 (AMBAC Insured) 1,000,000 793,750
Suffolk County Wtr. Auth. Wtrwks. Rev.
5% 6/1/17 (MBIA Insured) 6,000,000 4,807,500
17,938,088
NORTH CAROLINA - 0.4%
North Carolina Med. Care Commty. Hosp. Rev. Rfdg. (Wesley
Long Commty. Hosp.) 5.25% 11/1/17 (AMBAC Insured) 1,500,000 1,241,250
NORTH DAKOTA - 1.3%
Mercer County Poll. Cont. Rev.
Rfdg. (Basin Electric Pwr.) (Antelope Valley Station)
7.20% 6/30/13 (AMBAC Insured) (b) 3,500,000 3,718,750
North Dakota Hsg. Fin. Agcy. Single Family Mtg. Rev.
Series C, 8.75% 1/1/19 495,000 514,800
4,233,550
OHIO - 0.5%
Ohio Hsg. Fin. Agcy. Single Family Mtg. Rev.:
Series 1985 B, 9% 1/15/09 (FGIC Insured) 60,000 59,775
Series C, 9.40% 9/15/08 (FGIC Insured) 10,000 10,400
Ohio State Tpk. Commission Tpk. Rev. Series A,
5.75% 2/15/24 1,750,000 1,522,500
1,592,675
OKLAHOMA - 1.3%
Grand River Dam Auth. Rev. Rfdg.
5.75% 6/1/08 (FSA Insured) 4,250,000 4,000,313
OREGON - 0.2%
Mc Minnville Swr. Sys. Rev. Series A,
5% 2/1/14 (FGIC Insured) 750,000 619,688
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 4.3%
Cambria County Hosp. Dev. Auth. Hosp. Rev. Rfdg. & Impt.
(Conemaugh Valley Hosp.) Series 1992 B,
6.375% 7/1/18 (Connie Lee Insured) $ 1,500,000 $ 1,408,125
Harrisburg Auth. Wtr. Rev.
5.875% 6/18/15 (FGIC Insured) 6,300,000 5,725,125
Pennsylvania Convention Ctr. Auth. Rev. Series A,
6.70% 9/1/16 (FGIC Insured) 2,000,000 2,007,500
Pennsylvania Hsg. Fin. Agcy. Muni. Forwards Rfdg.
(Multi-Family Section 8) Series C,
8.10% 7/1/13 (FHA Guaranteed) 2,000,000 2,170,000
Philadelphia Wtr. & Wastewtr. Rev. Rfdg.
5% 6/15/12 (FGIC Insured) 2,000,000 1,632,500
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys. Rev. Rfdg.,
Series A, 5% 9/1/09 (FGIC Insured) 1,000,000 850,000
13,793,250
RHODE ISLAND - 0.6%
Rhode Island Health & Edl. Bldg. Corp. Higher Ed. Rev.
(Roger Williams Univ.) 7.25% 11/15/24 2,000,000 2,032,500
SOUTH CAROLINA - 1.5%
Lexington County Health Svcs. Dist. Inc. Hosp. Rev.
7% 10/1/08 (FSA Insured) 3,000,000 3,161,250
Richland County Hosp. Facs. Rev. (Commty. Provider
Pooled Loan) Series A, 7.125% 7/1/17
(CGIC Insured) 1,500,000 1,563,750
4,725,000
SOUTH DAKOTA - 0.3%
South Dakota Lease Rev. (Trust Cfts.) Series A,
6.625% 9/1/12 (CGIC Insured) 1,000,000 981,250
TENNESSEE - 2.1%
Knox County Health Edl. & Hsg. Facs. Board Hosp. Facs. Rev.
Rfdg. (Sanders Alliance Hosp. Facs.) Series C,
5.75% 1/1/14 (MBIA Insured) 2,000,000 1,765,000
Nashville & Davidson County Metropolitan Govt's. Health &
Edl. Facs. Board Rev. (Adventist Health Sunbelt)
5% 11/15/13 (CGIC Insured) 500,000 402,500
Nashville & Davidson County Metropolitan Wtr. & Swr.
Rev. Rfdg. 0% 1/1/12 (FGIC Insured) (f) 5,600,000 4,627,000
6,794,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
TEXAS - 5.4%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
0% 11/15/10 (AMBAC Insured) $ 13,500,000 $ 4,725,000
Conroe Independent School Dist. Unltd. Tax Rfdg.
0% 2/1/08 3,500,000 1,495,000
Harris County Flood Cont. Dist. Ltd. Tax Rfdg.
Series B, 0% 10/1/06 2,000,000 895,000
Harris County Health Facs. Dev. Corp. Hosp. Rev.
(St. Lukes Episcopal Hosp. Proj.) 6.75% 2/15/21 2,000,000 1,935,000
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Sr. Lien) Series C,
0% 12/1/06 (AMBAC Insured) 6,735,000 3,148,613
Matagorda County Navigation Dist.# 1 Rev. Rfdg.
(Houston Lt. & Pwr. Proj.) Series C,
7.125% 7/1/19 (FGIC Insured) 1,700,000 1,772,250
North Central Health Facs. Dev. Corp. Hosp. Rev. Rfdg.
(Methodist Hosp. Dallas) Series A,
9.50% 10/1/15 (MBIA Insured) (BIG Insured) 250,000 263,125
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap. Appreciation)
Series 1990, 0% 2/1/10 (MBIA Insured) 1,250,000 460,938
Texas Pub. Prop. Fin. Corp. Rev. Rfdg.
(Mental Health & Retardation)
5.50% 9/1/13 (CGIC Insured) 3,000,000 2,580,000
17,274,926
VIRGINIA - 3.5%
Chesapeake Gen. Oblig. Rfdg. 5.50% 12/1/09 1,225,000 1,105,563
Prince William County Svc. Auth. Wtr. & Swr. Sys. Rev. Rfdg.
5% 7/1/13 (FGIC Insured) 2,000,000 1,635,000
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr. Series A,
5.15% 7/1/09 (MBIA Insured) 2,000,000 1,742,500
Stafford County Wtr. & Swr. Rev. Rfdg.
5.25% 6/1/12 (FGIC Insured) 3,875,000 3,303,438
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) 2,150,000 1,999,500
6% 2/15/13 (AMBAC Insured) 1,460,000 1,354,150
Virginia Hsg. Dev. Auth. Residential Mtg.
Series 1983 B, 0% 9/1/14 1,215,000 160,988
11,301,139
WASHINGTON - 4.3%
Washington Health Care Facs. Auth. Rev. Rfdg.
(Highline Commty Hosp.) 5.50% 8/15/14 1,000,000 848,750
Washington Pub. Pwr. Supply Sys.:
Rfdg. (Nuclear Proj. #1) Series B, 7.25% 7/1/12
(FGIC Insured) 1,500,000 1,563,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply Sys. - continued
Rfdg. (Nuclear Proj. #2):
Series A, 6% 7/1/07 $ 2,500,000 $ 2,353,114
Series A, 0% 7/1/09 (FGIC Insured) 3,000,000 1,117,500
0% 7/1/10 (FGIC Insured) INFL (c) 4,000,000 3,165,000
(Nuclear Proj. #3) Series B, 7% 7/1/05 (FGIC Insured) 750,000 786,563
Series 93-B, 5.35% 6/28/95 (FGIC Insured) 4,000,000 4,000,000
13,834,677
MULTIPLE STATE - 0.3%
Washington D.C. Metro Area Trans. Auth. Gross Rev. Rfdg.
5.25% 7/1/14 (FGIC Insured) 1,300,000 1,096,875
TOTAL MUNICIPAL BONDS
(Cost $337,119,840) 312,233,263
MUNICIPAL NOTES (A) - 2.2%
CALIFORNIA - 0.5%
Southern California Pub. Pwr. Auth. Rev. (Transmission Proj.)
Series 1991, 4.80% (AMBAC Insured)
LOC Swiss Bank, VRDN 1,700,000 1,700,000
FLORIDA - 0.5%
Dade County Health Facs. Auth. Hosp. Rev. (Miami Childrens
Hosp. Proj.) Series 1990, 6.05%, LOC Barnett Bank, VRDN 1,600,000
1,600,000
INDIANA - 1.2%
Indiana Hosp. Equip. Fing. Auth. Rev. Series 1985 A,
5.40% (MBIA Insured) BPA Bank of New York, VRDN 3,800,000 3,800,000
TOTAL MUNICIPAL NOTES
(Cost $7,100,000) 7,100,000
TOTAL INVESTMENTS
(Cost $344,219,840) $ 319,333,263
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
250 U.S. Treasury Bond Contracts March 1995 $ 24,877,418 $ 88,355
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 7.8%
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
VRDN - Variable Rate Demand Notes
LEGEND
(j) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(k) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(l) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
(m) Security collateralized by an amount sufficient to pay interest and
principal.
(n) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,990,000.
(o) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investments for the period ended is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 93.2% AAA, AA, A 96.8%
Baa 0.4% 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 0.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investments, is as follows:
Health Care 23.7%
Electric Revenue 14.9
Water & Sewer 14.5
General Obligation 14.4
Others
(individually less than 10%) 32.5
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1994 the aggregate cost of investment securities for income
tax purposes was $344,220,061. Net unrealized depreciation aggregated
$24,886,798, of which $2,065,762 related to appreciated investment
securities and $26,952,560 related to depreciated investment securities.
The fund hereby designates $1,748,234 as a capital gain dividend for the
purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending December 31,
1995, $2,148,245 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994, the fund was required to defer $148,654 of losses on
futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $344,219,840) 9. $ 319,333,263
- -
See accompanying schedule
10.Receivable for investments sold 11. 3,379,249
12.Interest receivable 13. 5,350,284
14.Receivable for daily variation on futures contracts 15. 78,125
16. 17.TOTAL ASSETS 18. 328,140,921
19.LIABILITIES 20. 21.
22.Payable to custodian bank $ 68,180 23.
24.Payable for investments purchased 4,000,000 25.
Regular delivery
26. Delayed delivery 3,542,280 27.
28.Payable for fund shares redeemed 334,712 29.
30.Dividends payable 452,400 31.
32.Accrued management fee 113,223 33.
34.Other payables and accrued expenses 79,260 35.
36. 37.TOTAL LIABILITIES 38. 8,590,055
39.40.NET ASSETS 41. $ 319,550,866
42.Net Assets consist of: 43. 44.
45.Paid in capital 46. $ 346,244,472
47.Accumulated undistributed net realized gain (loss) on 48. (1,895,384)
investments
49.Net unrealized appreciation (depreciation) 50. (24,798,222)
on investments
51.52.NET ASSETS, for 29,904,633 shares outstanding 53. $ 319,550,866
54.55.NET ASSET VALUE, offering price and redemption 56. $10.69
price per share ($319,550,866 (divided by) 29,904,633 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
57.INTEREST INCOME 58. $ 23,709,050
59.EXPENSES 60. 61.
62.Management fee $ 1,589,774 63.
64.Transfer agent, accounting and custodian fees 592,347 65.
and expenses
66.Non-interested trustees' compensation 7,125 67.
68.Registration fees 35,536 69.
70.Audit 25,855 71.
72.Legal 2,733 73.
74. 75.TOTAL EXPENSES 76. 2,253,370
77.78.NET INVESTMENT INCOME 79. 21,455,680
80.REALIZED AND UNREALIZED GAIN (LOSS) 82. 83.
81.Net realized gain (loss) on:
84. Investment securities (5,423,277) 85.
86. Futures contracts 4,521,634 (901,643)
87.Change in net unrealized appreciation (depreciation) 88. 89.
on:
90. Investment securities (53,773,653) 91.
92. Futures contracts 88,355 (53,685,298)
93.94.NET GAIN (LOSS) 95. (54,586,941)
96.97.NET INCREASE (DECREASE) IN NET ASSETS 98. $ (33,131,261)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
99.INCREASE (DECREASE) IN NET ASSETS
100.Operations $ 21,455,680 $ 22,650,012
Net investment income
101. Net realized gain (loss) (901,643) 17,345,055
102. Change in net unrealized appreciation (53,685,298) 14,397,510
(depreciation)
103. (33,131,261) 54,392,577
104.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
105.Distributions to shareholders: (21,455,680) (22,650,012)
From net investment income
106. From net realized gain (4,403,924) (9,941,439)
107. 108.TOTAL DISTRIBUTIONS (25,859,604) (32,591,451)
109.Share transactions 303,188,813 322,573,485
Net proceeds from sales of shares
110. Reinvestment of distributions 18,098,372 23,487,536
111. Cost of shares redeemed (391,141,887) (290,587,864)
112. (69,854,702) 55,473,157
Net increase (decrease) in net assets resulting from
share transactions
113. (128,845,567) 77,274,283
114.TOTAL INCREASE (DECREASE) IN NET ASSETS
115.NET ASSETS 116. 117.
118. Beginning of period 448,396,433 371,122,150
119. End of period $ 319,550,866 $ 448,396,433
120.OTHER INFORMATION 122. 123.
121.Shares
124. Sold 26,952,836 26,281,608
125. Issued in reinvestment of distributions 1,586,507 1,910,337
126. Redeemed (34,883,162) (23,612,917)
127. Net increase (decrease) (6,343,819) 4,579,028
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
128. YEARS ENDED DECEMBER 31,
129. 1994 1993 1992 1991 1990
130.SELECTED PER-SHARE
DATA
131.Net asset value, $ 12.370 $ 11.720 $ 11.630 $ 11.090 $ 11.050
beginning of period
132.Income from .627 .655 .689 .702 .713
Investment Operations
Net investment income
133. Net realized and (1.560) .930 .200 .540 .040
unrealized gain (loss)
134. Total from (.933) 1.585 .889 1.242 .753
investment operations
135.Less Distributions (.627) (.655) (.689) (.702) (.713)
From net investment
income
136. From net realized (.120) (.280) (.110) - -
gain on investments
137. Total distributions (.747) (.935) (.799) (.702) (.713)
138.Net asset value, $ 10.690 $ 12.370 $ 11.720 $ 11.630 $ 11.090
end of period
139.TOTAL RETURN -7.73 13.85 7.91 11.57 7.08
% % % % %
140.RATIOS AND SUPPLEMENTAL DATA
141.Net assets, end of $ 319,551 $ 448,396 $ 371,122 $ 303,351 $ 198,585
period (000 omitted)
142.Ratio of expenses to .58 .61 .63 .65 .67
average net assets % % % % %
143.Ratio of net 5.52 5.31 5.91 6.23 6.52
investment income to % % % % %
average
net assets
144.Portfolio turnover 56 78 69 62 66
rate % % % % %
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
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 of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures and options transactions and losses deferred due to wash sales and
excise tax regulations. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net interest income per share. Any taxable gain remaining at fiscal
year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the purchase commitment.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
and written options involve, to varying degrees, risk of loss in excess of
the futures variation margin or the option value reflected in the Statement
of Assets and Liabilities. The underlying face amount at value is shown in
the schedule of investments under the caption "Futures Contracts". This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $212,431,196 and $301,427,555, respectively.
The market value of futures contracts opened and closed during the period
amounted to $695,604,870 and $666,253,091, 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 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1325% to .3700% for the period January 1, 1994 to July
31, 1994 and .1200% to .3700% for the period August 1, 1994 to December 31,
1994. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .25%. For the period, the management fee was
equivalent to an annual rate of .41% of average net assets.
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 $23,805 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
$418,470 and $170,087, 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, 1994, 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 audits 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, 1994 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 Tax-Free Portfolio as of
December 31, 1994, 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 L.L.P.
Boston, Massachusetts
January 27, 1995
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
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
4611 Sharon Road
Charlotte, 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
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY TAX-FREE BOND FUNDS
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Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(registered trademark) Aggressive Municipal
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
Spartan California Municipal High Yield
Spartan Connecticut Municipal High Yield
Spartan Florida Municipal Income
Spartan Intermediate Municipal
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal High Yield
Spartan New York Intermediate Municipal
Spartan New York Municipal High Yield
Spartan Pennsylvania Municipal High Yield
Spartan Short-Intermediate Municipal
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
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Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
AGGRESSIVE TAX-FREE
PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT
ACCOUNTANTS 34 The auditors' opinion.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO IN-
VESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND
NOR FIDELITY
DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY
FUND, INCLUDING
CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE
YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February continued into
the fourth quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
negative returns for many bond investments and below-average returns for
many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. The longer your investing
time frame, the more likely it is that you will retain your principal
investment through both up and down markets. For example, a 10-year time
frame, such as saving for a college education, enables you to weather these
ups and downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically, as we have discussed here. A periodic investment
plan will not, of course, assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, 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 to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Aggressive Tax-Free -5.82% 40.36% 128.62%
Lehman Brothers Municipal Bond Index -5.17% 39.04% n/a
Average High Yield Municipal Bond Fund -4.99% 35.19% n/a
Consumer Price Index 2.67% 18.72% 38.61%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a specific period - in this case, one year, five years, or since the
fund began on September 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. To
measure how the fund stacked up against its peers, you can look at the
average high yield municipal bond fund, which currently reflects the
performance of 36 high yield 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 (CPI) helps show how your fund did compared to inflation. (The
CPI returns begin on the month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Aggressive Tax-Free -5.82% 7.02% 9.29%
Lehman Brothers Municipal Bond Index -5.17% 6.81% n/a
Average High Yield Municipal Bond Fund -4.99% 6.17% n/a
Consumer Price Index 2.67% 3.49% 3.56%
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
Aggressive Tax Free Municipal Bond Index
09/30/85 10000.00 10000.00
10/31/85 10293.24 10342.70
11/30/85 10750.22 10713.69
12/31/85 11054.53 10807.87
01/31/86 11517.60 11444.45
02/28/86 11936.31 11898.34
03/31/86 12113.78 11902.14
04/30/86 12110.96 11911.19
05/31/86 11948.51 11717.28
06/30/86 12044.82 11829.06
07/31/86 12106.70 11900.86
08/31/86 12429.80 12433.66
09/30/86 12502.07 12464.87
10/31/86 12772.58 12680.14
11/30/86 13032.26 12931.33
12/31/86 13015.25 12895.64
01/31/87 13394.05 13283.93
02/28/87 13615.37 13349.29
03/31/87 13585.36 13207.78
04/30/87 12941.95 12545.02
05/31/87 12855.34 12482.79
06/30/87 13140.00 12849.29
07/31/87 13284.90 12980.35
08/31/87 13359.92 13009.56
09/30/87 12987.83 12529.90
10/31/87 12804.91 12574.25
11/30/87 13002.23 12902.56
12/31/87 13199.87 13089.78
01/31/88 13715.33 13556.04
02/29/88 13905.03 13699.33
03/31/88 13788.93 13539.73
04/30/88 13820.88 13642.63
05/31/88 13903.10 13603.20
06/30/88 14135.88 13802.22
07/31/88 14256.62 13892.21
08/31/88 14340.43 13904.43
09/30/88 14563.27 14156.10
10/31/88 14814.21 14405.96
11/30/88 14766.30 14274.00
12/31/88 14969.26 14420.02
01/31/89 15147.47 14718.23
02/28/89 15126.54 14550.30
03/31/89 15160.52 14515.52
04/30/89 15475.75 14860.12
05/31/89 15753.20 15168.76
06/30/89 15962.93 15374.75
07/31/89 16104.61 15584.01
08/31/89 16080.58 15431.44
09/30/89 16088.10 15385.14
10/31/89 16102.56 15572.84
11/30/89 16300.96 15845.37
12/31/89 16392.05 15975.30
01/31/90 16376.49 15900.22
02/28/90 16506.45 16041.73
03/31/90 16568.48 16046.54
04/30/90 16464.00 15931.00
05/31/90 16715.18 16278.30
06/30/90 16852.49 16421.55
07/31/90 17141.08 16662.95
08/31/90 16972.14 16421.33
09/30/90 17131.96 16431.19
10/31/90 17247.70 16728.59
11/30/90 17530.51 17064.84
12/31/90 17618.80 17139.92
01/31/91 17702.31 17369.60
02/28/91 17875.98 17520.71
03/31/91 17925.82 17527.72
04/30/91 18161.71 17760.84
05/31/91 18287.19 17918.91
06/30/91 18354.95 17900.99
07/31/91 18646.35 18119.38
08/31/91 18908.46 18358.56
09/30/91 19124.94 18597.22
10/31/91 19274.10 18764.59
11/30/91 19341.31 18817.14
12/31/91 19692.96 19221.70
01/31/92 19762.64 19265.91
02/29/92 19809.61 19271.69
03/31/92 19865.72 19279.40
04/30/92 20052.53 19450.99
05/31/92 20310.89 19680.51
06/30/92 20580.68 20011.14
07/31/92 21201.95 20611.48
08/31/92 20991.65 20409.49
09/30/92 21109.61 20542.15
10/31/92 20863.43 20340.83
11/30/92 21266.33 20704.93
12/31/92 21498.82 20916.13
01/31/93 21822.09 21158.75
02/28/93 22587.62 21924.70
03/31/93 22397.93 21692.30
04/30/93 22629.02 21911.39
05/31/93 22808.39 22034.09
06/30/93 23186.83 22402.06
07/31/93 23254.76 22431.19
08/31/93 23756.21 22897.75
09/30/93 24046.79 23158.79
10/31/93 24095.41 23202.79
11/30/93 23930.39 22998.61
12/31/93 24429.77 23483.88
01/31/94 24698.17 23751.59
02/28/94 24137.16 23136.43
03/31/94 23105.04 22194.77
04/30/94 23214.82 22383.43
05/31/94 23388.85 22578.16
06/30/94 23313.13 22447.21
07/31/94 23711.87 22858.00
08/31/94 23780.68 22938.00
09/30/94 23473.92 22600.81
10/31/94 23087.72 22198.52
11/30/94 22506.95 21796.72
12/30/94 23008.37 22276.25
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Aggressive Tax-Free Portfolio on September 30, 1985, shortly after the fund
started. As the chart shows, by December 31, 1994, the value of your
investment would have grown to $23,008- a 130.08% 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 $22,276 - a 122.76% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
Dividend return 6.15% 6.80% 7.31% 7.97% 8.00%
Capital appreciation return -11.97% 6.83% 1.86% 3.80% -0.52%
Total return -5.82% 13.63% 9.17% 11.77% 7.48%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED DECEMBER 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 6.70(cents) 38.58(cents) 76.98(cents)
Annualized dividend rate 7.33% 6.89% 6.73%
30-day annualized yield 7.15% - -
30-day annualized tax-equivalent yield 11.17% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.77 over
the past month, $11.11 over the past six months and $11.43 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
taxable and tax-free bonds alike.
For the 12 months ended
December 31, 1994, the Lehman
Brothers Municipal Bond Index -
a broad measure of the tax-free
market - had a total return of
- -5.17%. By comparison, the
Lehman Brothers Aggregate Bond
Index - a proxy of
investment-grade taxable bonds
- - returned -2.92%. Beginning in
January 1994, the interest rate
environment started to change
dramatically. The Federal Reserve
Board raised the federal funds
rate - the rate banks charge
each other for overnight loans -
from 3.00% to 5.50% from
February through November. The
Fed was hoping to head off future
inflation that might be triggered by
an improving U.S. economy.
However, investors heavily sold
bonds at the very threat of
inflation because inflation
diminishes the value of their
fixed-rate income payments. Two
influences affected the
performance of tax-free bonds,
specifically. First, investor demand
fell due to inflation worries, which
dampened prices. Second,
although it didn't outweigh the
negative effects of lower demand,
the supply of tax-free bonds fell as
well. The ability of states, cities
and public agencies to refinance
outstanding debt at attractive
rates was limited amid a rising
rate environment.
An interview with Anne Punzak, Portfolio Manager of Fidelity Aggressive
Tax-Free Portfolio
Q. ANNE, HOW DID THE FUND PERFORM IN 1994?
A. Rising interest rates made for a very volatile year for the municipal
bond market. In fact, 1994 was one of the worst years for municipal bonds
since the late 1920s. Against that backdrop, the fund's total return for
the year ended December 31, 1994, was -5.82%. That lagged the performance
of the average high-yield municipal bond fund, which returned -4.99% for
the same period, according to Lipper Analytical Services.
Q. WHY WASN'T THE FUND ABLE TO KEEP PACE WITH THE AVERAGE HIGH-YIELD FUND?
A. Mainly because it had a smaller stake in below-investment grade bonds
than many of its competitors. Their relatively high yields helped cushion
these bonds when interest rates were rising. The fund's stake in
below-investment grade bonds as rated by Moody's Investor Services,
Standard & Poor's or Fidelity's own internal research staff was about 40%
of investments at the end of the period. However, I did build up the fund's
stake in these bonds over the year, primarily by adding industrial
development bonds, which are used to fund pollution control programs and
other programs for private industry, and resource recovery bonds, which
fund garbage and waste disposal systems.
Q. WHAT CHANGES DID YOU MAKE TO THE FUND'S DURATION, WHICH MEASURES THE
FUND'S SENSITIVITY TO CHANGES IN INTEREST RATES?
A. In general, when interest rates rise, a bond's price declines and its
duration lengthens. When interest rates fall, a bond's price rises and its
duration shortens. So as interest rates continued to rise over the past
year, the fund's bond prices declined and its duration naturally
lengthened. Therefore, I wanted to temper the fund's lengthening duration.
One of the ways I did this was by using futures contracts. As the market
fell, the value of the futures positions rose and helped the fund's
performance. I did remove most of the fund's futures position at the end of
the period, since I expected the bond market to improve, which it did.
Therefore, removing the futures position contributed to the fund's
lengthening duration at the end of the period. Until I'm confident that the
Fed's interest rate hikes have slowed and the market has stabilized, I may
use futures contracts as I think market conditions warrant.
Q. HAVE YOU CHANGED THE FUND'S ALLOCATION BY STATES?
A. New York bonds were the fund's largest state concentration at 10.7% at
the end of the period. After the period ended, however, I began to sell
some New York bonds because I was worried the proposed state tax cuts might
hurt the fund's fiscal outlook. California was the fund's second largest
state concentration, at 9.4% of investments at the end of the period. In my
view, California municipal bonds are attractive because I believe the
state's economy is on the mend. Some economic indicators - such as housing
starts and new home sales - have shown recent strength, which to me signals
that the state's economic outlook may be brighter in 1995.
Q. IN DECEMBER, ORANGE COUNTY, CALIFORNIA, DECLARED BANKRUPTCY BECAUSE OF
LOSSES IN ITS INVESTMENTS. DOES THAT AFFECT ANY OF THE FUND'S CALIFORNIA
BONDS?
A. At the end of the period, the fund held bonds from two issuers which
were participants in the Orange County investment pool. Of those bonds, all
are insured and their principal and interest payments are guaranteed. Our
research department will continue to monitor carefully these situations to
determine the impact of further developments.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPAL BONDS IN 1995?
A. For the short term, there probably will be some continued volatility. I
believe it's likely that the Federal Reserve Board will raise interest
rates one or two more times in an effort to stave off inflation that can
accompany a quickly growing economy. However, I think that current
municipal bond prices reflect most of the effects of at least one further
interest rate hike.
Q. SO WHAT'S AHEAD FOR INVESTORS?
A. A 1% rise in long-term interest rates is not likely to be as negative
for bonds in 1995 as it was in 1994. For example, if the yield on a
high-quality, 30-year municipal bond rose from 7% to 8%, that bond's total
return for the year could be about -4%. On the other hand, a drop in yield
from 7% to 6% could mean a total return of about 15% for the year. Of
course, other factors also can influence a bond's performance. But in my
view, the downside risk is limited and the upside potential is good.
FUND FACTS
GOAL: to provide high current
income exempt from federal
income tax
START DATE: September 13, 1985
SIZE: as of December 31,
1994, more than $796 million
MANAGER: Anne Punzak,
since January 1986; manager,
Fidelity High-Yield Tax-Free
Portfolio, since October 1993;
Spartan Aggressive Municipal
bond Fund, from April 1993 to
October 1993; Spartan
Florida Municipal Income,
since March 1992; Fidelity
Insured Tax-Free Portfolio,
October 1989 to September
1993; joined Fidelity in 1985
(checkmark)
ANNE PUNZAK'S OUTLOOK FOR
MUNICIPAL BONDS:
"In my view, interest rates
probably will be more stable in
1995 than they were in 1994.
If I am correct, it's likely that
bond prices will be more
stable as well. In that type of
environment, the fund's total
return will be less dependent
on bond prices rising and
more dependent on the level
of income the bonds pay. So
to help boost the fund's total
return, I'll concentrate on
generating a higher income
for the fund. I'll do that
primarily by identifying
opportunities in
higher-yielding, lower-rated
bonds. Fidelity's research
staff is one of the largest in
the industry and helps me
identify attractive high-yield
bonds."
(solid bullet) Inverse floaters, one type
of financial arrangement
known as derivatives, made
up 2.87% of the fund's
investments at the end of the
period. The yield on inverse
floaters rises as short-term
interest rates fall and vice
versa. By using various
derivatives, the manager
hopes to achieve higher
levels of tax-exempt income
and increased flexibility in
managing the fund's overall
sensitivity to changes in
interest rates. However, these
strategies can involve
additional risk to the fund and
don't always work as
intended.
INVESTMENT CHANGES
TOP FIVE STATES AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
New York 10.7 10.9
California 9.4 10.5
Michigan 8.0 8.4
Massachusetts 7.8 7.3
Texas 6.3 5.2
TOP FIVE SECTORS AS OF DECEMBER 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Health Care 32.7 30.8
Industrial Development 20.7 18.0
Electric Revenue 11.9 13.2
Transportation 6.3 6.3
General Obligation 6.2 7.8
AVERAGE YEARS TO MATURITY AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 20.0 20.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF DECEMBER 31, 1994
6 MONTHS AGO
Years 8.0 8.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
WILL ALSO INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. THE ACTUAL
PERFORMANCE OF THE FUND MAY DIFFER FROM THE ABOVE EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF DECEMBER 31, 1994 AS OF JUNE 30, 1994
Aaa 12.7%
Aa, A 19.0%
Baa 20.3%
Ba or B 10.7%
Caa, CCC 0.4%
Non-rated 33.1%
Short-term investments 3.8%
Aaa 13.9%
Aa, A 19.5%
Baa 21.9%%
Ba 12.0%%
Caa, CCC 0.3%
Non-rated 27.6%
Short-term investments 4.8%
Row: 1, Col: 1, Value: 12.7
Row: 1, Col: 2, Value: 19.0
Row: 1, Col: 3, Value: 20.3
Row: 1, Col: 4, Value: 10.7
Row: 1, Col: 5, Value: 1.4
Row: 1, Col: 6, Value: 33.1
Row: 1, Col: 7, Value: 3.8
Row: 1, Col: 1, Value: 13.9
Row: 1, Col: 2, Value: 19.5
Row: 1, Col: 3, Value: 21.9
Row: 1, Col: 4, Value: 12.0
Row: 1, Col: 5, Value: 1.3
Row: 1, Col: 6, Value: 27.6
Row: 1, Col: 7, Value: 4.8
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW ACCOUNT FOR 31.9% AND 25.5%, RESPECTIVELY OF THE
FUND'S INVESTMENTS AT DECEMBER 31, 1994 AND JUNE 30, 1994, RESPECTIVELY.
..
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 96.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ALABAMA - 1.1%
Cullman Med. Ctr. Rev. (Cullman Reg'l. Med. Ctr.)
Series A, 6.50% 2/15/23 Baa $ 5,575,000 $ 4,578,469
Selma Spl. Care Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Vaughan Reg'l. Med. Ctr. Proj.)
7.125%, 6/1/14 - 4,570,000 4,027,313
8,605,782
ARIZONA - 2.1%
Arizona Health Facs. Auth. Hosp. Sys. Rev.
(St. Lukes Hosp. Sys.) Series A,
10.125% 11/1/15 Ba 12,000,000 12,510,000
Sierra Vista Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.)
8.75% 12/1/16 - 4,000,000 4,185,000
16,695,000
ARKANSAS - 1.3%
Fayetteville Pub. Facs. Board Rev. Rfdg.
(Butterfield Trail Village Proj.) Series A,
9.50% 9/1/14 - 4,700,000 4,876,250
Pope County Poll. Cont. Rev. (Arkansas
Pwr. & Lt. Co. Proj.) 11% 12/1/15 Baa2 5,000,000 5,318,750
10,195,000
CALIFORNIA - 7.9%
California Health Facs. Fing. Auth. Rev. Rfdg.
(Catholic Healthcare West) 4.75%
7/1/19 (MBIA Insured) Aaa 4,000,000 2,960,000
California Pub. Wrks. Board Lease Rev.:
Rfdg. (Dept. Corrections St. Prisons)
Series A, 5% 12/1/19
(AMBAC Insured) Aaa 2,500,000 1,931,250
(California University Proj.) Series A:
5.25% 12/1/13 A 3,750,000 3,009,375
5.50% 6/1/14 A 2,665,000 2,201,956
5% 6/1/23 A 2,525,000 1,852,719
California Statewide Commty. Dev. Corp.
Rev. Ctfs. of Prtn.:
(Sisters of Charity Leavenworth)
5% 12/1/23 Aa 2,000,000 1,460,000
5.50% 10/1/23 A+ 5,000,000 3,918,750
Central California Jt. Pwrs. Health Fing. Auth.
Rev. (Commty. Hosp. of Central California
Proj.) 5% 2/1/23 A 3,000,000 2,103,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Central Valley Fin. Auth. Cogeneration Proj.
Rev. (Carson Ice Generation Proj.)
6.10% 7/1/13 BBB- $ 2,100,000 $ 1,832,250
Culver City Redev. Fing. Auth. Rev. Rfdg.
Tax Allocation 5.50% 11/1/14
(AMBAC Insured) Aaa 3,000,000 2,565,000
Los Angeles Bldg. Auth. Lease Rev. Rfdg.
(California St. Dept. Gen. Svcs.)
Series A, 5.625% 5/1/11 A 1,400,000 1,205,750
Los Angeles Dept. Wtr. & Pwr. Elec. Plant Rev.:
4.75% 8/15/16 Aa 3,385,000 2,521,825
5.20% 2/15/17 Aa 2,500,000 2,003,125
Los Angeles Regional Arpt. Impt. Corp.
Lease Rev. (Sub-Lease-Western Air
Lines-Delta) 11.25% 11/1/25 Ba1 6,000,000 6,390,000
Metropolitan Wtr. Dist. Southern California
Wtrwks. 6.557% 10/30/20 INFL (f) Aa 2,000,000 1,345,000
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Rfdg. (Geothermal Proj. #3) Series A,
5.85% 7/1/10 A 2,000,000 1,812,500
Port Oakland Port Rev. (Cap. Appreciation):
Series F:
Rfdg. 0% 11/1/08 (MBIA Insured) Aaa 3,045,000 1,218,000
0% 11/1/09 (MBIA Insured) Aaa 7,000,000 2,625,000
Riverside County Ctfs. of Prtn. Rfdg. Rev.
(Air Force Village West, Inc.)
Series A, 8.125% 6/15/20 - 4,000,000 3,975,000
San Bernardino County Ctfs. Prtn. Rev.
(Med. Ctr. Fing. Proj.) 5.50% 8/1/17 Baa1 3,500,000 2,712,500
San Francisco City & County Swr. Rev. Rfdg.
5.30% 10/1/13 (FGIC Insured) Aaa 2,000,000 1,677,500
Santa Ana Cmmty. Redev. Agcy. Tax Allocation
Rfdg. Rev. (South Main Str. Redev.) Series D,
5% 9/1/19 (MBIA Insured) Aaa 5,000,000 3,862,500
Southern California Pub. Pwr. Auth. Pwr. Proj.
Rev. Rfdg. (Mead Phoenix Proj.) Series A,
4.75% 7/1/16 (AMBAC Insured) Aaa 1,215,000 918,844
Southern Orange County Pub. Fin. Auth. Spl.
Tax Rev. (Foothill Area) Series C, 8%
8/15/08 (FGIC Insured) Aaa 1,000,000 1,143,750
Upland Ctfs. Prtn. Rev. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A 3,500,000 2,935,625
Walnut Creek Ctfs. of Prtn. Rev. Rfdg.
(John Muir Med. Ctr.) 5% 2/15/16
(MBIA Insured) Aaa 1,000,000 785,000
West & Ctrl. Basin Fin. Auth. Rev.
(West Basin Proj.), Series A, 5% 8/1/13
(AMBAC Insured) Aaa 3,000,000 2,411,250
63,378,219
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
COLORADO - 4.1%
Colorado Health Facs. Auth. Rev.:
(PSL Health Sys. Proj):
Series A, 6.875% 2/15/23 Baa1 $ 4,350,000 $ 3,925,875
Series B, 8.50% 2/15/21 Baa1 2,400,000 2,520,000
(Rocky Mountain Adventist)
6.625% 2/1/13 Baa 12,100,000 10,587,500
Denver City & County Arpt. Rev.:
Series A:
6.90% 11/15/98 Baa 2,600,000 2,564,250
7% 11/15/99 Baa 1,500,000 1,477,500
7.50% 11/15/23 Baa 2,000,000 1,842,500
Series C, 6.50% 11/15/06 (d) Baa 4,075,000 3,580,906
Series D, 7.40% 11/15/01 Baa 3,000,000 2,928,750
Hyland Hills Metropolitan Park & Recreational
Dist. Spl. Rev. Rfdg. 10% 7/1/06
(Pre-Refunded to 7/1/96 @101) (e) - 1,900,000 1,987,875
Mesa County Ind. Dev. Rev. (Joy Technologies,
Inc. Proj.) 8.50% 9/15/06 Ba3 1,250,000 1,268,750
32,683,906
CONNECTICUT - 0.2%
Connecticut Dev. Auth. Poll. Cont. Rev.
(United Illuminating Co. Proj.)
9.50% 6/1/16 BBB- 1,650,000 1,751,063
DISTRICT OF COLUMBIA - 0.7%
District of Columbia Hosp. Rev.:
Rfdg. (Medlantic Healthcare Group -
Washington Hosp. Ctr.) Series A,
7% 8/15/05 Baa1 2,500,000 2,431,250
(Hosp. for Sick Children) Series A,
8.875% 1/1/21 - 2,970,000 3,103,650
5,534,900
FLORIDA - 0.7%
Jacksonville Health Facs. Auth. Hosp. Rev. Rfdg.:
(Methodist Hosp. Proj.):
Series A, 8% 10/1/06 - 1,750,000 1,708,438
Series B, 8% 10/1/15 - 205,000 199,106
West Volusia Hosp. Auth. Hosp. Rev.
Series B:
9% 9/1/96 - 280,000 297,150
9.375% 9/1/16 - 3,200,000 3,500,000
5,704,694
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
GEORGIA - 0.4%
Georgia Muni. Elec. Auth. Spl. Oblig. Rev. (Fifth
Crossover Series Proj. 1) 6.50% 1/1/17
(MBIA Insured) Aaa $ 3,500,000 $ 3,421,250
ILLINOIS - 3.8%
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.:
Rfdg. Series A, 5% 1/1/12 A1 4,000,000 3,260,000
(American Airlines, Inc. Proj.) Series A,
7.875% 11/1/25 (d) Baa2 4,720,000 4,607,900
Cooke & Will Counties Township High School
Rev. Dist. #206 Series A, 0% 12/1/03
(AMBAC Insured) Aaa 2,100,000 1,231,125
Illinois Dev. Fin. Auth. Solid Wst. Disp. Rev.
(Ford Heights Wst. Tire Proj.) 7.875%
4/1/11 (d) - 12,000,000 11,490,000
Illinois Health Facs. Auth. Rev. (Glen Oaks
Med. Ctr.) Series D, 9.50% 11/15/15 Baa1 3,775,000 4,213,844
Loves Park First Mtg. Rev. (Hoosier Care Proj.)
Series A, 9.75% 8/1/19 - 1,575,000 1,632,094
Metropolitan Pier & Expo Auth. Dedicated
St. Tax Rev. (McCormick Place Expansion
Proj.) Series A, 0% 6/15/08
(FGIC Insured) Aaa 4,000,000 1,655,000
Metropolitan Pier & Expo Auth. Rfdg. Rev.
(Cap. Appreciation) (McCormick Place
Expansion Proj.) 0% 6/15/08
(MBIA Insured) Aaa 6,000,000 2,460,000
30,549,963
INDIANA - 1.1%
Burns Harbor Solid Waste Disp. Facs. Rev.
(Bethlehem Steel Proj.) 8% 4/1/24 (d) - 3,180,000 3,132,300
East Chicago Poll. Cont. Rev. (Inland Steel Co.
Proj. #8) Series B, 10.75% 12/1/12 Ba3 3,000,000 3,153,750
Indiana Univ. Rev. Series A, 5.80%
11/15/09 (MBIA Insured) Aaa 2,405,000 2,269,719
8,555,769
IOWA - 0.3%
Iowa Fin. Auth. Health Care Facs. Rev.
(Mercy Health Initiatives Proj.):
9.70% 7/1/99 - 735,000 720,300
9.85% 7/1/09 - 1,500,000 1,470,000
2,190,300
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
KENTUCKY - 2.2%
Kenton County Arpt. Board Arpt. Rev.:
(Spl. Facs. Delta Proj.):
Series A:
7.50% 2/1/20 (d) Ba1 $ 3,500,000 $ 3,276,875
6.125% 2/1/22 Ba1 1,000,000 781,250
7.125% 2/1/21 Ba1 12,000,000 10,770,000
Owensboro Elec. Lt. & Pwr. Rev.:
Series B:
0% 1/1/09 (AMBAC Insured) Aaa 2,000,000 802,500
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 1,653,900
17,284,525
LOUISIANA - 3.5%
Lake Charles Hbr. & Term. Dist. Port Facs.
Rev. Rfdg. (Trunkline LNG Co. Proj.)
Series 1992, 7.75% 8/15/22 Baa3 14,900,000 14,955,875
Louisiana Pub. Facs. Auth. Ind. Dev. Rev. Rfdg.
(Beverly Enterprises, Inc.) 8.25% 9/1/08 - 1,705,000 1,705,000
New Orleans Gen. Oblig. Rfdg.:
(Cap. Appreciation) 0% 9/1/12
(AMBAC Insured) Aaa 6,250,000 1,890,625
0% 9/1/08 (AMBAC Insured) Aaa 10,000,000 4,137,500
Port New Orleans Ind. Dev. Rev. Rfdg.
(Continental Grain Co. Proj.)
7.50% 7/1/13 BB- 3,000,000 2,808,750
West Feliciana Parish Poll. Cont. Rev.
(Energy Corp. Proj.) 9% 5/1/15 - 2,340,000 2,509,650
28,007,400
MARYLAND - 1.5%
Baltimore County Poll. Cont. Rev. Rfdg.
(Bethlehem Steel Proj. B) 7.50% 6/1/15 - 1,000,000 956,250
Maryland Energy Fing. Administration Ltd.
Oblig. Solid Waste Disp. Facs. Recycling
Rev. (Hagerstown Fiber Ltd.
Partners) Series 94, 9% 10/15/16 - 5,000,000 4,956,250
Maryland Health & Higher Ed. Facs. Auth. Rev.:
Rfdg. (Greater Baltimore Med. Ctr.)
5% 7/1/19 (FGIC Insured) Aaa 1,000,000 797,500
(Frederick Mem. Hosp.) 5.25% 7/1/13
(FGIC Insured) Aaa 2,300,000 1,978,000
(Howard County Gen. Hosp.)
5.50% 7/1/21 Baa1 3,000,000 2,250,000
Northeast Maryland Waste Disp. Auth. Solid
Waste Rev. (Montgomery County Resource
Recovery Proj.) Series A, 6.30% 7/1/16 A 1,000,000 886,250
11,824,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MASSACHUSETTS - 7.5%
Massachusetts Bay Trans. Auth. Rev.:
Rfdg. (Gen. Trans. Sys.) Series A,
5.50% 3/1/09 A1 $ 4,000,000 $ 3,580,000
Series B, 6.20% 3/1/16 A1 3,800,000 3,562,500
Massachusetts Gen. Oblig. Consolidated Loan
Unltd. Tax Rev. Series A, 5% 1/1/14 A1 2,900,000 2,312,750
Massachusetts Health & Edl. Facs. Auth. Rev.
(1st Mtg.) (Fairview Extended Care)
Series A, 10.25% 1/1/21 - 4,000,000 4,315,000
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Emerson College) 8.90%
1/1/18 - 10,000,000 10,800,000
(Atlanticare Med. Ctr.) Series A, 10.125%
11/1/14 - 3,500,000 3,430,000
(Cap. Appreciation):
(Massachusetts Biomedical):
Series A-1, 0% 8/1/03 A1 6,300,000 3,457,125
Series A-2:
0% 8/1/06 A1 4,000,000 1,720,000
0% 8/1/09 A1 6,000,000 2,040,000
(1st Mortgage Reeds Landing):
7.75% 10/1/20 - 1,000,000 967,500
8.625% 10/1/23 - 3,500,000 3,307,500
(Hsg. Rev. Rental) Series A, 6.60% 7/1/14
(AMBAC Insured) (d) Aaa 2,500,000 2,400,000
(Institute Dev. Disabilities) 9.25% 6/1/09 - 4,425,000 4,336,500
(Terra-Lt., Inc.) 13% 11/1/01 A3 3,500,000 3,928,750
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) (b) Aaa 3,985,000 4,532,938
Massachusetts Muni. Wholesale Elec. Co.
Pwr. Supply Sys. Rev.
Series A, 6.92% 7/1/18 INFL (f) Aaa 1,750,000 1,176,875
Massachusetts Wtr. Resource Auth. Gen.
Rfdg. Rev. Series C, 5.25% 12/1/15 A 5,000,000 4,100,000
59,967,438
MICHIGAN - 8.0%
Detroit Convention Facs. Rev. Rfdg. Ltd. Tax
(Cobo Hall Expansion Proj.):
5.25% 9/30/07 A 2,000,000 1,730,000
5.25% 9/30/12 A 4,000,000 3,270,000
Detroit Hosp. Fin. Auth. Facs. Rev.
(Michigan Healthcare Corp. Proj.)
10% 12/1/20 B1 5,960,000 5,066,000
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
7.80% 7/1/14 Baa1 4,750,000 4,744,063
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Highland Park Hosp. Fin. Auth. Hosp. Facs. Rev.:
(Lakeside Commty. Hosp. Proj.)
10% 3/1/20 B1 $ 9,365,000 $ 7,960,250
(Michigan Health Care Corp. Proj.)
Series A, 9.875% 12/1/19 B1 7,350,000 6,247,500
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Pontiac Osteopathic Hosp.):
Series A:
6% 2/1/14 Baa1 1,500,000 1,213,125
6% 2/1/24 Baa1 3,500,000 2,677,500
(Saratoga Commty. Hosp.) 8.75% 6/1/10 - 480,000 492,000
Michigan Muni. Bond Auth. Rev. (Local
Gov't. Loan) Series C-A, 0% 6/15/12
(FSA Insured) Aaa 2,125,000 658,750
Michigan Strategic Fund Ltd. Oblig. Rev.:
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 (h) - 9,000,000 9,011,250
(Mercy Svcs. for Aging Proj.)
9.40% 5/15/20 - 11,900,000 12,405,750
Midland County Econ. Dev. Corp. Poll. Cont.
Rev. Rfdg. (Subordinated Ltd. Oblig.)
Series B, 9.50% 7/23/09 (d) - 1,250,000 1,310,938
Waterford Township Econ. Dev. Corp. Rev.
(Canterbury Health Care):
8% 7/1/08 - 450,000 446,625
8.375% 7/1/23 - 1,300,000 1,314,625
Wayne Charter County Spl. Arpt. Facs. Rev.
(Republic Airlines, Inc. Proj.) Series C,
10.375% 12/1/15 - 4,960,000 5,208,000
63,756,376
MINNESOTA - 1.3%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Healthcare Sys. Rev. (Healthspan Health
Sys. Corp.) (Health One Sys.) Series A,
4.75% 11/15/18 (AMBAC Insured) Aaa 4,000,000 3,020,000
Minnesota Energy & Econ. Dev. Auth. Rev.
(Small Bus Dev. Lot 1) Series A,
9.25% 8/1/06 - 695,000 727,144
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A, 9.75% 11/1/17 Baa 2,490,000 2,717,213
Series B, 9.75% 11/1/17 Baa 1,000,000 1,086,250
St. Paul Port Auth. Ind. Dev. Rev.:
(Riverview II Proj.) Series 1983 A,
10% 1/1/13 CCC 1,280,000 1,278,400
Series 1981-M, 13.50% 11/1/11 CCC 935,000 935,000
Series 1982-G, 12.875% 5/1/12 CCC 875,000 875,000
10,639,007
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MISSISSIPPI - 0.9%
Claiborne County Poll. Cont. Rev. (Middle
South Energy, Inc. Proj.) Series C, 9.875%
12/1/14 - $ 6,195,000 $ 6,899,681
MISSOURI - 2.1%
Boone County Ind. Dev. Auth. Ind. Rev. (1st
Mtg. Fairview Extended Care) Series A,
10.125% 1/1/11 - 2,360,000 2,531,100
Kansas City Ind. Dev. Auth. Rev.:
(Bishop Spencer Place Inc. Proj.) 8% 9/1/24 - 7,720,000 7,073,450
(Kingswood United Methodist Manor Proj.)
Series 1993, 9% 11/15/13 - 2,800,000 2,873,500
St. Louis Land Clearance Redev. Auth. Hsg.
Dev. Rev. (Westminster Place Apts. Proj.)
11% 12/15/15 - 4,345,000 4,415,606
16,893,656
NEVADA - 1.4%
Clark County Ind. Dev. Rev. (Southwest Gas
Corp.) Series A, 6.50% 12/1/33 Baa3 13,350,000 11,197,313
NEW HAMPSHIRE - 2.0%
New Hampshire Higher Edl. & Health Facs. Auth. Rev.:
(1st Mtg. River Woods at Exeter):
8% 3/1/00 - 3,230,000 3,238,075
8% 3/1/01 - 1,200,000 1,204,500
9% 3/1/23 3,170,000 3,249,250
(Littleton Hosp. Assoc., Inc.):
Series A, 9.50% 5/1/20 - 3,735,000 3,940,425
Series B, 9% 5/1/95 - 500,000 501,875
(Valley Reg'l. Hosp.) 7.35% 4/1/23 - 3,960,000 3,504,600
15,638,725
NEW JERSEY - 3.6%
Camden County Impt. Auth. Lease Rev.
(Dockside Refrigerated)
8.40%, 4/1/24 (d) - 2,750,000 2,643,438
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.:
Rfdg.:
(Stolt Terminals)10.50% 1/15/18 - 3,500,000 3,933,125
(Holt Hauling & Warehouse Sys., Inc.):
Series D, 10.25% 9/15/14 - 6,000,000 6,472,500
Series E, 9.75% 12/15/16 (d) - 7,500,000 7,987,500
Series G, 8.40% 12/15/15 - 5,000,000 4,968,750
(Statewide Realty-Vista Hotel):
Series A, 11% 12/15/17 - 1,555,000 1,555,000
Series B, 11% 12/15/17 (g) - 1,010,000 1,263
Union County Utils. Auth. Solid Waste Rev.
7% 6/15/04 (d) A- 1,500,000 1,507,500
29,069,076
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW MEXICO - 1.6%
Albuquerque Retirement Facs. Rev. Rfdg.
(La Vida Liena Proj.) Series A, 8.85%
2/1/23 - $ 2,050,000 $ 2,052,563
Farmington Poll. Cont. Rev. (Pub. Svc. Co. of
New Mexico San Juan Proj.):
Series A:
Rfdg. 6.40% 8/15/23 Ba2 4,000,000 3,300,000
6.50%, 9/1/09 Ba2 1,000,000 907,500
Grant County Hosp. Facs. Rev. Rfdg.
(Gila Reg'l. Med. Ctr. Proj.) 10% 2/1/12 - 4,005,000 4,265,325
New Mexico Univ. Rev. Rfdg. Series A,
6% 6/1/21 A1 2,840,000 2,595,050
13,120,438
NEW YORK - 10.5%
Babylon Ind. Dev. Agcy. Resource Recovery
Rev. (Odgen Martin Sys. Babylon, Inc. Co.)
Series B, 8.50% 1/1/19 Baa1 995,000 1,063,406
Metropolitan Trans. Auth. Svc. Contract
Series O, 5.75% 7/1/13 Baa1 5,000,000 4,281,250
Metropolitan Trans. Auth. Trans. Facs. Rev.:
Rfdg. Series 7, 0% 7/1/08 Baa1 6,000,000 2,355,000
Series 7, 0% 7/1/12 Baa1 1,490,000 420,925
New York City Ind. Dev. Agcy. Spl. Facs. Rev.
(Terminal One Group Assoc. Proj.)
6% 1/1/19 A 8,500,000 7,405,625
New York State Dorm. Auth. Rev. Rfdg.:
(City Univ. Sys. Consolidated) Series A,
5.75% 7/1/13 Baa1 6,000,000 5,182,500
(State Univ. Edl. Facs.) Series A:
5.50% 5/15/09 Baa1 3,000,000 2,610,000
5.50% 5/15/13 Baa1 10,250,000 8,686,875
5.25% 5/15/15 Baa1 10,000,000 8,062,500
5.50% 5/15/19 Baa1 1,500,000 1,226,250
New York State Energy Research & Dev. Auth.
Elec. Facs. Rev. (Long Island Ltg. Co.):
Series A, 7.15% 2/1/22 (d) Ba1 2,000,000 1,802,500
Series B, 7.15% 9/1/19 (d) Ba1 2,500,000 2,262,500
New York State Envir. Facs. Corp. Resource
Recovery Rev. (Huntington Proj.) Series A,
7.50% 10/1/12 (d) Baa 5,000,000 4,993,750
New York State Local Govt. Assistance Corp.
Rev. Rfdg.:
(Cap. Appreciation) Series C, 0% 4/1/13 A 10,000,000 2,950,000
Series C:
5.50% 4/1/17 A 4,400,000 3,756,500
5% 4/1/21 A 10,000,000 7,775,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Pwr. Auth. Rev. & Gen.
Prtn. Series CC, 5.125% 1/1/11 Aa $ 8,000,000 $ 6,860,000
New York State Pwr. Series 1993 H, 4.15%
6/1/07 INFL (f) Aa 4,000,000 2,645,000
Niagara County Ind. Dev. Agcy. Rev.
(Wintergarden Inn Assoc. Proj.)
10% 6/1/11 (g) - 4,210,000 2,357,600
Triborough Bridge & Tunnel Auth. Rev. Rfdg.
(Gen. Purp.) Series Y, 5.50% 1/1/17 Aa 8,735,000 7,468,425
84,165,606
NEW YORK & NEW JERSEY - 0.4%
New York & New Jersey Port Auth. Spl. Oblig.
Rev. (Continental Airlines Corp./Eastern
Airlines, Inc. Proj.) 9.125% 12/1/15 (d) B2 3,000,000 3,198,750
NORTH CAROLINA - 0.3%
North Carolina Eastern Muni. Pwr. Agcy.
Pwr. Sys. Rev. Rfdg. 6% 1/1/18
(AMBAC Insured) Aaa 2,250,000 2,084,063
OHIO - 1.5%
Fairfield Econ. Dev. Rev. Rfdg. (Beverly
Enterprises Proj.) 8.50% 1/1/03 - 2,000,000 2,047,500
Ohio Solid Waste Rev. (Republic Engineered
Steels Proj.) 8.25% 10/1/14 (d) - 8,000,000 7,610,000
Ohio State Bldg. Auth. Rev. (Workers Comp.)
4.75% 4/1/14 A 3,000,000 2,313,750
11,971,250
OKLAHOMA - 0.8%
Oklahoma County Ind. Auth. Rev. (Epworth
Village Proj.) Series A, 10.25% 4/1/19 - 3,000,000 3,221,250
Tulsa Muni. Arpt. Trust Rev. (American
Airlines Proj.)7.35% 12/1/11 Baa1 3,600,000 3,501,000
6,722,250
PENNSYLVANIA - 5.7%
Beaver County Ind. Dev. Auth. Poll. Cont. Rev.
(Toledo Edison Co. Beaver Valley):
Series B, 12.25% 9/15/15 Ba3 1,180,000 1,234,575
Series C, 10.75% 11/15/15 Ba3 1,000,000 1,038,750
Cumberland County Muni. Auth. Rev.
(Carlisle Hosp.) 6.80% 11/15/23 Baa 3,800,000 3,239,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Delaware County Auth. Rev.
(First Mtg. Riddle Village Proj.):
8% 6/1/99 - $ 3,525,000 $ 3,525,000
7% 6/1/00 - 500,000 489,375
8.25% 6/1/22 - 3,500,000 3,338,125
9.25% 6/1/22 - 5,050,000 5,296,188
Keystone Oaks School Dist. Rev. Series D, 7.21%
9/1/16 (AMBAC Insured) INFL (f) Aaa 2,000,000 1,585,000
Northampton County Ind. Dev. Auth. Rev. Rfdg.
(Bethlehem Steel Poll. Cont. Proj. (1994)
7.55% 6/1/17 - 1,500,000 1,411,875
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 Ba 3,000,000 2,790,000
6.70% 9/1/14 Ba 4,500,000 4,134,375
6.75% 9/1/19 Ba 4,500,000 4,106,250
Philadelphia Ind. Dev. Auth. Dev. Rev.
(Long-Term Care, Maplewood) 8% 1/1/24 - 4,500,000 4,128,750
Philadelphia Wtr. & Swr. Rev. (Cap.
Appreciation) 14th Series, 0% 10/1/05
(MBIA Insured) Aaa 3,000,000 1,571,250
Philadelphia Wtr. & Wastewtr. Rfdg. Rev.
Series 1993, 5.50% 6/15/07 Baa 3,000,000 2,655,000
Pittsburgh Wtr. & Swr. Auth. Rev. Rfdg. Series
A, 0% 9/1/06 (FGIC Insured) (e) Aaa 3,000,000 1,443,750
Somerset County Hosp. Auth. Rev. (Health Care
1st Mortgage-GF):
8.40% 6/1/09 - 1,000,000 958,750
8.50% 6/1/24 - 2,300,000 2,185,000
45,131,513
SOUTH CAROLINA - 2.1%
Charleston County Health Facs. Rev. Rfdg.
(1st Mtg. Episcopal Proj.):
Series A, 9.75% 4/1/16 - 3,000,000 3,165,000
Series B, 9.75% 4/1/16 - 2,110,000 2,226,050
Charleston County Resource Recovery Rev.
(Foster Wheeler) Series A, 9.25%
1/1/10 (d) A 4,500,000 4,888,125
Richland County Hosp. Facs. Rev. Rfdg.
(Baptist Hosp.) Series B, 0% 8/1/09
(AMBAC Insured) Aaa 1,730,000 668,213
South Carolina Jobs Ed. Dev. Auth. Hosp. Rev.
5.45% 8/1/15 (AMBAC Insured) Aaa 6,500,000 5,581,875
16,529,263
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
TENNESSEE - 0.2%
Knox County Health, Edl. & Hsg. Hosp. Facs.
Rev. Rfdg. (Sanders Alliance) Series C,
5.25% 1/1/15 Aaa $ 2,250,000 $ 1,884,375
TEXAS - 6.3%
Alliance Arpt. Auth. Spl. Facs. Rev. (American
Airlines, Inc.) 7% 12/1/11 (d) Baa1 7,000,000 6,413,750
Austin Util. Sys. Rev. Rfdg. (Comb. Prior Lien)
Series A, 5.75% 11/15/14
(MBIA Insured) Aaa 3,520,000 3,146,000
Brazos River Auth. Poll. Cont. Rev.
(Texas Util. Elec. Co. Proj.) Series A,
8.25% 1/1/19 (d) Baa2 5,620,000 5,879,925
East Texas Health Facs. Dev. Corp. Hosp. Rev.
(Palestine) 7.80% 8/15/18 - 4,150,000 3,854,313
Harris County Cultural & Ed. Facs. Fin. Corp.
Rev. (Space Ctr. Houston Proj.):
9% 8/15/00 - 500,000 460,000
9.25% 8/15/15 - 4,765,000 4,288,500
Harris County Hsg. Fin. Corp. Single Family
Mtg. Rev. 11.25% 4/15/06 Aaa 65,000 65,488
Houston Hsg. Fin. Corp. Single Family Mtg.
Rev. (Verex Mtg. Assurance, Inc.)
Series 1984 A, 10.875% 2/15/16 A 1,305,000 1,319,681
Port Corpus Christi Ind. Dev. Corp. Rev.
(Valero Refining & Marketing Co.)
Series A, 10.25% 6/1/17 Baa3 2,000,000 2,195,000
Round Rock Independent School Dist. Rev.
Rfdg. & School Bldg. Unltd. Tax 0%
8/15/09 (MBIA Insured) Aaa 7,430,000 2,804,825
Sabine River Auth. Poll. Cont. Rev. (Util. Elec.
Proj.) Series B, 8.25% 10/1/20 (d) Baa2 1,250,000 1,329,688
San Antonio Elec. & Gas Rev. Rfdg. Series B:
0% 2/1/08 (FGIC Insured) Aaa 4,340,000 1,855,350
0% 2/1/10 (FGIC Insured) Aaa 6,000,000 2,175,000
Tarrant County Health Facs. Dev. Corp. Rev.
(3927 Foundation, Inc. Proj.) 10.25%
9/1/19 - 4,000,000 4,105,000
Tarrant County Hsg. Fin. Corp. Single Family
Mtg. Rev. Series A, 9.50% 5/15/03 B 795,000 768,169
Texas Nat'l. Research Lab Commission Fing.
Corp. Lease Rev. (Superconducting
Supercollider Proj.) 6.95% 12/1/12 A 5,400,000 5,386,500
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg.
(Cap. Appreciation) 0% 2/1/09
(MBIA Insured) Aaa 2,000,000 792,500
Texas Pub. Fin. Auth. Rev. Series B, 5.75%
10/1/14 Aa 3,595,000 3,222,019
50,061,708
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
UTAH - 0.7%
Intermountain Pwr. Agcy. Pwr. Supply Rev. 0%
7/1/21 INFL (f) Aa $ 2,500,000 $ 1,712,500
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 3,764,063
Utah Hsg. Fin. Agcy. Rev. (Residential Mtg.)
Series 1983 A, 0% 7/1/16 A+ 1,060,004 119,250
5,595,813
VERMONT - 0.2%
Vermont Ind. Dev. Auth. Ind. Dev. Rev.
(Radisson Hotel) Series B-1, 7.75%
11/15/15 - 2,000,000 1,937,500
VIRGINIA - 4.0%
Fairfax County Ind. Dev. Auth. Rev. Rfdg.
(Inova. Health Sys. Hosp. Rev.)
5.25% 8/15/19 Aa 5,000,000 3,906,250
Galax Ind. Dev. Auth. 1st Mtg. Med. Facs.
Rev. Rfdg. (Waddell Nursing Home Proj.)
9.50% 8/1/05 - 2,190,000 2,296,762
Loudoun County Ind. Dev. Auth. Residential
Care Facs. Rev. (Falcons Landing Proj.):
Series A:
9.25% 11/1/04 - 1,100,000 1,112,375
8.75% 11/1/24 - 13,900,000 13,326,624
Southeastern Pub. Svc. Auth. Rev. Rfdg.
Series A:
5.15% 7/1/09 (MBIA Insured) Aaa 4,000,000 3,485,000
5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 3,485,000
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(General Hosp. Proj.):
6% 2/15/09 (AMBAC Insured) Aaa 500,000 473,124
6% 2/15/10 (AMBAC Insured) Aaa 1,220,000 1,145,274
Virginia Hsg. Dev. Auth. Rev. (Residential Mtg.)
(Single Family Mtg.) Series 1983 B, 0%
9/1/14 Aa 1,210,000 160,324
Virginia State Transportation Contract Board
Rev. Rfdg. 5.25% 5/15/12 Aa 3,250,000 2,770,624
32,161,357
WASHINGTON - 3.9%
Douglas County Pub. Util. Dist. #1 Wells
Hydroelec. Rev. Rfdg. 8.75% 9/1/18 A 1,395,000 1,663,537
Washington Pub. Pwr. Supply Sys. Rev:
Nuclear Proj. #1 Rfdg. Series B:
5.60% 7/1/07 Aa 1,880,000 1,687,300
7% 7/1/08 Aa 1,000,000 1,036,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply Sys. Rev.: - continued
Nuclear Proj. #2:
Series A, 6.30% 7/1/12 Aa $ 1,000,000 $ 943,750
Series 93-B, 5.35% 6/28/95
(FGIC Insured) Aaa 2,650,000 2,650,000
5.60% 7/1/07 Aa 2,000,000 1,787,500
7.07% 7/1/10 (FGIC Insured) INFL (f) Aaa 2,650,000 2,096,811
6.87% 7/1/12 INFL (f) Aa 5,000,000 3,231,250
Nuclear Proj. #3:
Rfdg.:
(Cap. Appreciation) Series B, 0%
7/1/08 (MBIA Insured) Aaa 3,000,000 1,211,250
Series B, 0% 7/1/07 (MBIA Insured) Aaa 5,000,000 2,187,500
Series C, 0% 7/1/13 Aa 5,035,000 1,378,330
5.40% 7/1/95 Aa 5,000,000 5,000,000
6.87% 7/1/12 INFL (f) Aa 10,000,000 6,375,000
31,248,478
WEST VIRGINIA - 0.3%
West Pkwy. Econ. Dev. & Tourism Auth. Rev.
7.17% 5/16/19 (FGIC Insured) INFL (f) Aaa 3,600,000 2,794,500
TOTAL MUNICIPAL BONDS
(Cost $817,959,810) 769,050,157
MUNICIPAL NOTES - 3.8%
CALIFORNIA - 1.5%
San Diego County TRAN 4.50% 9/29/95 MIG 1 5,000,000 4,900,000
Ventura County TRAN 4.50% 8/1/95 MIG 1 7,000,000 6,969,550
11,869,550
FLORIDA - 0.1%
Dade County Ind. Dev. Auth. Ind. Dev. Rev.
(Dolphins Stadium Proj.) Series 1985 B,
5.50%, LOC Citibank, Marine Midland
Bank, VRDN (c) VMIG 1 600,000 600,000
ILLINOIS - 0.4%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev.
Rfdg. (Garden Glen Apts.) Series 93,
5.65%, VRDN (c) A-1+ 2,900,000 2,900,000
MUNICIPAL NOTES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - 0.0%
Montgomery County Hsg. Opportunity
Commission Hsg. Rev. (Draper Lane Apts.)
5.80% (FGIC Insured) BPA Sumitomo
Bank Ltd., VRDN (c) (d) VMIG 1 $ 500,000 $ 500,000
MASSACHUSETTS - 0.3%
Massachusetts Dedicated Income Tax Bonds
Updates First Recovery Loan Series 1990 B,
5.85%, LOC Nat'l. Westminster Bank
PLC, VRDN (c) VMIG 1 2,600,000 2,600,000
MINNESOTA - 0.3%
Duluth Tax Increment Rev. (Lake Superior
Paper Co.) Series 1985, 5.55%,
LOC Nat'l Australia Bank, VRDN (c) VMIG 1 2,200,000 2,200,000
NEW YORK - 0.2%
New York City Hsg. Dev. Corp. Spl. (Carnegie
Park Proj.) Series 1984 A, 6%, LOC Sumitomo
Trust & Banking Ltd., VRDN (c) VMIG 2 1,300,000 1,300,000
NORTH CAROLINA - 0.5%
Halifax County Ind. Facs. Poll. Cont. Facs. Auth.
(Westmoreland Hadson Proj.)
(Roanoke Valley Proj.) Series 1991, 5.90%,
LOC Cr. Suisse Bank, VRDN (c) (d) - 4,015,000 4,015,000
SOUTH CAROLINA - 0.4%
South Carolina Jobs Econ. Dev. Auth. (Wellman,
Inc. Proj.) Series 92, 5.95%, LOC Wachovia
Bank & Trust NA, VRDN (c) (d) - 3,300,000 3,300,000
VIRGINIA - 0.1%
Hopewell Ind. Dev. Auth. Rev. (Hadson Pwr.
13-Hopewell Proj.) Series 1990 A, 5.95%
LOC Cr. Suisse Bank, VRDN (c) (d) - 1,000,000 1,000,000
TOTAL MUNICIPAL NOTES
(Cost $30,284,550) 30,284,550
TOTAL INVESTMENTS - 100%
(Cost $848,244,360) $ 799,334,707
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
200 U.S. Treasury Bond Futures Contracts Mar. 1995 $ 19,831,250 $ 48,184
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.5%
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(p) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(q) A portion of the Security was pledged to cover for futures contracts.
At the period end, the value of securities pledged amounted to $2,843,750
(r) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(s) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(t) Security collateralized by an amount sufficient to pay interest and
principal.
(u) Coupon is inversely indexed to a floating interest rate. The price will
be more volatile than the price of a comparable fixed rate security. The
rate shown is the rate at period end.
(v) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(w) Security purchased on a delayed delivery basis.
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 29.7% AAA, AA, A 29.0%
Baa 20.0% BBB 12.9%
Ba 7.4% BB 8.3%
B 2.9% B 1.4%
Caa 0.0% CCC 0.4%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 33.1%. FMR
has determined that unrated debt securities that are lower quality account
for 31.9% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 32.7%
Industrial Development 20.7
Electric Revenue 11.9
Others
(individually less than 10%) 34.7
TOTAL 100.0%
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $848,371,350. Net unrealized (depreciation)
aggregated $49,036,643, of which $12,848,105 related to appreciated
investment securities and $61,884,748 related to depreciated investment
securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,443,700 which will expire on December 31, 2002.
The fund intends to elect to defer to its fiscal year ending December 31,
1995 $5,157,070 of losses recognized during the period November 1, 1994 to
December 31, 1994.
At December 31, 1994, the fund was required to defer $838,799 of losses on
futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $848,244,360) 9. $ 799,334,707
- -
See accompanying schedule
10.Cash 11. 86,643
12.Receivable for investments sold 13. 1,656,318
14.Interest receivable 15. 15,734,487
16.Redemption fees receivable 17. 376
18.Receivable for daily variation on futures contracts 19. 62,500
20. 21.TOTAL ASSETS 22. 816,875,031
23.LIABILITIES 24. 25.
Payable for investments purchased $ 7,652,250
Regular delivery
Delayed delivery 9,000,000
26.Payable for fund shares redeemed 2,211,278 27.
28.Dividends payable 1,396,878 29.
30.Accrued management fee 305,467 31.
32.Other payables and accrued expenses 155,687 33.
34. 35.TOTAL LIABILITIES 36. 20,721,560
37.38.NET ASSETS 39. $ 796,153,471
40.Net Assets consist of: 41. 42.
43.Paid in capital 44. $ 852,629,710
45.Accumulated undistributed net realized gain (loss) on 46. (7,614,770)
investments
47.Net unrealized appreciation (depreciation) 48. (48,861,469)
on investments
49.50.NET ASSETS, for 73,625,938 shares outstanding 51. $ 796,153,471
52.53.NET ASSET VALUE, offering price and redemption 54. $10.81
price per share ($796,153,471 (divided by) 73,625,938 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
55.56.INTEREST INCOME 57. $ 64,457,849
58.EXPENSES 59. 60.
61.Management fee $ 4,041,568 62.
63.Transfer agent, accounting and custodian fees 1,280,169 64.
and expenses
65.Non-interested trustees' compensation 16,701 66.
67.Registration fees 26,616 68.
69.Audit 46,933 70.
71.Legal 72,856 72.
73.Reports to shareholders 16,240 74.
75.Miscellaneous 15,653 76.
77. 78.TOTAL EXPENSES 79. 5,516,736
80.81.NET INTEREST INCOME 82. 58,941,113
83.REALIZED AND UNREALIZED GAIN (LOSS) 85. 86.
84.Net realized gain (loss) on:
87. Investment securities (8,182,307) 88.
89. Futures contracts 2,011,584 (6,170,723)
90.Change in net unrealized appreciation (depreciation) 91. 92.
on:
93. Investment securities (108,734,134) 94.
95. Futures contracts 43,315 (108,690,819)
96.97.NET GAIN (LOSS) 98. (114,861,542)
99.100.NET INCREASE (DECREASE) IN NET ASSETS 101. $ (55,920,429)
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1994 1993
102.INCREASE (DECREASE) IN NET ASSETS
103.Operations $ 58,941,113 $ 56,850,366
Net interest income
104. Net realized gain (loss) (6,170,723) 30,470,669
105. Change in net unrealized appreciation (108,690,819) 24,737,943
(depreciation)
106. (55,920,429) 112,058,978
107.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
108.Distributions to shareholders: (58,941,113) (56,850,366)
From net interest income
109. From net realized gain (3,920,968) (25,449,884)
110. 111.TOTAL DISTRIBUTIONS (62,862,081) (82,300,250)
112.Share transactions 241,631,086 269,831,566
Net proceeds from sales of shares
113. Reinvestment of distributions 45,254,134 60,432,051
114. Cost of shares redeemed (324,429,481) (169,641,184)
115. Redemption fees 255,161 161,376
116. (37,289,100) 160,783,809
Net increase (decrease) in net assets resulting from
share transactions
117. (156,071,610) 190,542,537
118.TOTAL INCREASE (DECREASE) IN NET ASSETS
119.NET ASSETS 120. 121.
122. Beginning of period 952,225,081 761,682,544
123. End of period $ 796,153,471 $ 952,225,081
124.OTHER INFORMATION 126. 127.
125.Shares
128. Sold 21,118,312 21,911,612
129. Issued in reinvestment of distributions 3,960,271 4,902,103
130. Redeemed (28,669,547) (13,691,472)
131. Net increase (decrease) (3,590,964) 13,122,243
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
132. YEARS ENDED DECEMBER 31,
133. 1994 1993 1992 1991 1990
134.SELECTED PER-SHARE
DATA
135.Net asset value, $ 12.330 $ 11.880 $ 11.800 $ 11.430 $ 11.490
beginning of period
136.Income from .770 .783 .834 .863 .886
Investment Operations
Net interest income
137. Net realized and (1.473) .788 .208 .429 (.060)
unrealized gain (loss)
138. Total from (.703) 1.571 1.042 1.292 .826
investment operations
139.Less Distributions (.770) (.783) (.834) (.863) (.886)
From net interest
income
140. From net realized (.050) (.340) (.130) (.060) -
gain on investments
141. Total distributions (.820) (1.123) (.964) (.923) (.886)
142.Redemption fees .003 .002 .002 .001 -
added to paid in capital
143.Net asset value, $ 10.810 $ 12.330 $ 11.880 $ 11.800 $ 11.430
end of period
144.TOTAL RETURN -5.82 13.63 9.17 11.77 7.48
% % % % %
145.RATIOS AND SUPPLEMENTAL DATA
146.Net assets, end of $ 796,153 $ 952,225 $ 761,683 $ 653,818 $ 550,848
period (000 omitted)
147.Ratio of expenses to .63 .64 .64 .69 .66
average net assets % % % % %
148.Ratio of net interest 6.69 6.37 7.01 7.46 7.79
income to average % % % % %
net assets
149.Portfolio turnover 40 54 43 30 46
rate % % % % %
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Aggressive 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 of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted 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
losses deferred due to wash sales and futures and options. The fund also
utilized earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to 1% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
may receive compensation for interest forgone in a delayed delivery
transaction. The fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the purchase
commitment.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
and written options involve, to varying degrees, risk of loss in excess of
the futures variation margin or the option value reflected in the Statement
of Assets and Liabilities. The underlying face amount at value is shown in
the schedule of investments under the caption "Futures Contracts". This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $335,497,660 and $365,801,826, respectively.
The market value of futures contracts opened and closed during the period
amounted to $771,194,847 and $774,052,050, 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 on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1325% to
..3700 for the period January 31, 1994 to July 31, 1994 and .1200% to .3700%
for the period August 1, 1994 to December 31, 1994. In
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
the event that these rates were lower than the contractual rates in effect
during those periods, FMR voluntarily implemented the above rates, as they
resulted in the same or a lower management fee. The annual individual fund
fee rate is .30%. For the period, the management fee was equivalent to an
annual rate of .46% of average net assets.
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 $5,060 for the
period. No payments were made to third parties under the Plan during 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
$948,907 and $305,727, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Municipal Trust and the Shareholders of
Fidelity Aggressive Tax-Free Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Municipal Trust: Fidelity Aggressive Tax-Free Portfolio, including
the schedule of portfolio investments, as of December 31, 1994, 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, 1994 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 Aggressive Tax-Free Portfolio as of
December 31, 1994, 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 L.L.P.
Boston, Massachusetts
January 27, 1995
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
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
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
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
4611 Sharon Road
Charlotte, 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
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
Page 39 = BLANK
Do NOT strip-in this type
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Anne Punzak, Vice President
Arthur S. Loring, Secretary
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
United Missouri Bank, N.A.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(registered trademark) Aggressive Municipal
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
Spartan California Municipal High Yield
Spartan Connecticut Municipal High Yield
Spartan Florida Municipal Income
Spartan Intermediate Municipal
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal High Yield
Spartan New York Intermediate Municipal
Spartan New York Municipal High Yield
Spartan Pennsylvania Municipal High Yield
Spartan Short-Intermediate Municipal
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
