(2_FIDELITY_LOGOS)FIDELITY
AGGRESSIVE TAX-FREE
PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value). You can also look at the fund's
income to measure performance. Fidelity had not reimbursed certain fund
expenses, the life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Aggressive Tax-Free 8.05% 6.64% 47.52% 147.03%
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% n/a
Average High Yield Municipal Bond Fund 8.73% 7.70% 44.59% n/a
Consumer Price Index 1.87% 3.04% 17.40% 41.20%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on September 13, 1985. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond Index - a broad gauge of
the municipal bond market. To measure how the fund's performance stacked up
against its peers, you can compare it to the average high yield municipal
bond fund, which reflects the performance of 39 high yield municipal bond
funds with similar objectives tracked by Lipper Analytical Services over
the past six months. 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 JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Aggressive Tax-Free 6.64% 8.09% 9.66%
Lehman Brothers Municipal Bond Index 8.82% 8.26% n/a
Average High Yield Municipal Bond Fund 7.70% 7.63% n/a
Consumer Price Index 3.04% 3.26% 3.57%
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 In
09/30/85 10000.00 10000.00
10/31/85 10293.24 10342.70
11/30/85 10750.21 10713.69
12/31/85 11054.52 10807.87
01/31/86 11517.59 11444.45
02/28/86 11936.31 11898.34
03/31/86 12113.77 11902.14
04/30/86 12110.95 11911.19
05/31/86 11948.50 11717.28
06/30/86 12044.81 11829.06
07/31/86 12106.69 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 13015.26 12895.64
01/31/87 13394.04 13283.93
02/28/87 13615.37 13349.29
03/31/87 13585.36 13207.78
04/30/87 12941.96 12545.02
05/31/87 12855.35 12482.79
06/30/87 13140.01 12849.29
07/31/87 13284.90 12980.35
08/31/87 13359.93 13009.56
09/30/87 12987.84 12529.90
10/31/87 12804.92 12574.25
11/30/87 13002.24 12902.56
12/31/87 13199.88 13089.78
01/31/88 13715.35 13556.04
02/29/88 13905.05 13699.33
03/31/88 13788.94 13539.73
04/30/88 13820.89 13642.63
05/31/88 13903.11 13603.20
06/30/88 14135.89 13802.22
07/31/88 14256.63 13892.21
08/31/88 14340.44 13904.43
09/30/88 14563.29 14156.10
10/31/88 14814.22 14405.96
11/30/88 14766.31 14274.00
12/31/88 14969.28 14420.02
01/31/89 15147.48 14718.23
02/28/89 15126.55 14550.30
03/31/89 15160.53 14515.52
04/30/89 15475.76 14860.12
05/31/89 15753.21 15168.76
06/30/89 15962.94 15374.75
07/31/89 16104.61 15584.01
08/31/89 16080.59 15431.44
09/30/89 16088.11 15385.14
10/31/89 16102.58 15572.84
11/30/89 16300.98 15845.37
12/31/89 16392.06 15975.30
01/31/90 16376.51 15900.22
02/28/90 16506.46 16041.73
03/31/90 16568.49 16046.54
04/30/90 16464.02 15931.00
05/31/90 16715.21 16278.30
06/30/90 16852.52 16421.55
07/31/90 17141.11 16662.95
08/31/90 16972.16 16421.33
09/30/90 17131.99 16431.19
10/31/90 17247.73 16728.59
11/30/90 17530.54 17064.84
12/31/90 17618.83 17139.92
01/31/91 17702.33 17369.60
02/28/91 17876.01 17520.71
03/31/91 17925.85 17527.72
04/30/91 18161.75 17760.84
05/31/91 18287.22 17918.91
06/30/91 18354.97 17900.99
07/31/91 18646.37 18119.38
08/31/91 18908.48 18358.56
09/30/91 19124.97 18597.22
10/31/91 19274.13 18764.59
11/30/91 19341.33 18817.14
12/31/91 19693.00 19221.70
01/31/92 19762.68 19265.91
02/29/92 19809.64 19271.69
03/31/92 19865.75 19279.40
04/30/92 20052.57 19450.99
05/31/92 20310.93 19680.51
06/30/92 20580.73 20011.14
07/31/92 21201.99 20611.48
08/31/92 20991.69 20409.49
09/30/92 21109.65 20542.15
10/31/92 20863.48 20340.83
11/30/92 21266.37 20704.93
12/31/92 21498.86 20916.13
01/31/93 21822.13 21158.75
02/28/93 22587.67 21924.70
03/31/93 22397.97 21692.30
04/30/93 22629.06 21911.39
05/31/93 22808.42 22034.09
06/30/93 23186.87 22402.06
07/31/93 23254.79 22431.19
08/31/93 23756.24 22897.75
09/30/93 24046.82 23158.79
10/31/93 24095.45 23202.79
11/30/93 23930.42 22998.61
12/31/93 24429.82 23483.88
01/31/94 24698.21 23751.59
02/28/94 24137.21 23136.43
03/31/94 23105.08 22194.77
04/30/94 23214.86 22383.43
05/31/94 23388.90 22578.16
06/30/94 23313.18 22447.21
07/31/94 23711.92 22858.00
08/31/94 23780.73 22938.00
09/30/94 23473.97 22600.81
10/31/94 23087.77 22198.52
11/30/94 22507.00 21796.72
12/31/94 23008.43 22276.25
01/31/95 23679.34 22913.35
02/28/95 24294.91 23580.13
03/31/95 24325.03 23851.30
04/30/95 24365.66 23879.92
05/31/95 25062.20 24641.69
06/30/95 24860.40 24427.31
$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 June 30, 1995, the value of your investment
would have grown to $24,860 - a 148.60% 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 $24,427 - a 144.27% 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
SIX MONT
HS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1995 1994 1993 1992 1991 1990
Dividend returns 3.42% 6.15% 6.80% 7.31% 7.97% 8.00%
Capital appreciation
returns 4.63% -11.97% 6.83% 1.86% 3.80% -0.52%
Total returns 8.05% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.77(cents) 36.34(cents) 74.92(cents)
Annualized dividend rate 6.13% 6.51% 6.70%
30-day annualized yield 5.90% - -
30-day annualized tax-equivalent yield 9.22% - -
</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 $11.45 over
the past month, $11.26 over the past six months and $11.18 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% 1995 federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Anne Punzak, Portfolio Manager of Fidelity Aggressive
Tax-Free Portfolio
Q. HOW HAS THE FUND PERFORMED, ANNE?
A. It slightly underperformed its peers. For the six months ended June 30,
1995, the fund had a total return of 8.05%. The total return for the
average high-yield municipal bond fund tracked by Lipper Analytical
Services was 8.73% for the same period. For the 12 months ended June 30,
the fund returned 6.64%, as compared to 7.70% for the average high-yield
municipal bond fund.
Q. WHY DID THE FUND TRAIL THE LIPPER AVERAGE?
A. Michigan Healthcare - a hospital located in Michigan that represents
approximately 2% of the fund's total investments - filed Chapter 11
bankruptcy during the period. As a result, the holding detracted from the
fund's performance. An independent pricing service, in determining the
current price of these bonds, already has taken into account this credit
development. Fidelity is dedicating significant resources in an effort to
maximize shareholder value.
Q. WHAT HAS THE MUNICIPAL BOND INVESTING ENVIRONMENT BEEN LIKE DURING THE
PAST SIX MONTHS?
A. Interest rates have come down considerably since the end of 1994. In the
first quarter of 1995, both Treasury bonds and municipal bonds had
substantial rallies. That was due to the perception in the marketplace that
the economy was slowing. Municipal bonds performed quite well,
outperforming Treasuries. However, in the second quarter of 1995,
Treasuries continued to rally, but munis - in particular long-term
municipal bonds - stalled because of concerns about tax reform. So,
municipals did not participate in the general bond market rally in the
second quarter.
Q. WHAT HAS BEEN YOUR STRATEGY OVER THE PAST SIX MONTHS?
A. I have been working to increase the overall credit quality of the fund's
investments. That's because credit spreads - the yield advantage offered by
bonds with lower credit quality - have been narrow, meaning that
lower-rated bonds were not offering enough additional yield to compensate
investors for the increased risk of a lower-credit bond. As a result, I've
reduced the fund's holdings in bonds rated Baa and below by Moody's
Investors Service from 30.3% as of December 31, 1994, to 25.9% at the end
of the period. To add to the fund's higher-quality position, I've purchased
more state and local general obligation bonds. There were a number of
attractive new issues in that area that came to market, particularly in
February and March. I also focused the fund's investments on the 15-year
range of the yield curve. Beyond that point, on the maturity spectrum,
bonds were not offering enough additional yield to make them attractive.
Q. YOU'VE REDUCED THE FUND'S INVESTMENTS IN THE HEALTH CARE SECTOR FROM
32.7% TO 25.6%. WHAT'S BEHIND THAT MOVE?
A. That was part of my desire to improve the fund's credit quality. Even
though I've reduced the fund's health care investments, it's still the top
sector in the fund. Although the industry is going through transition and
questions about health care reform remain, the fund probably will stay
focused on the sector. There will be winners and losers as the industry
changes. In most cases the winners will be hospitals that have strong ties
to health maintenance organizations and communities in suburban areas with
growing populations. Fidelity's strong research staff closely monitors the
industry, and will work to identify opportunities in the area.
Q. YOU'VE ALSO REDUCED THE FUND'S INVESTMENTS IN NEW YORK STATE FROM 10.7%
AT THE END OF THE YEAR TO 7.3% AS OF JUNE 30. WHAT'S THE STORY THERE?
A. I anticipate that the state will have significant fiscal problems this
year.
It took the government 68 days to come to a budget agreement, the longest
that process has ever taken. I feel the budget does not resolve the state's
long-term problems, leading me to believe New York will continue to feel
financial pressure.
Q. WHAT SECTORS HAVE PERFORMED WELL FOR THE FUND?
A. One sector that did quite well over the past six months was industrial
development bonds. These issues did well because there has been almost no
new issuance. Yield spreads have tightened significantly, and there have
been improvements in the credit quality and liquidity of these bonds. A
good example is Delta Airlines. Thus far, the company has been successful
in implementing its cost-cutting program, leading to hopes that the
airline's credit rating will be upgraded to investment grade next year.
Q. HOW CAN DELTA - A FOR-PROFIT CORPORATION - ISSUE TAX-EXEMPT BONDS?
A. Airlines and other for-profit corporations can issue tax-exempt bonds if
the money will be used for something that will benefit the public. Delta
issued these bonds to build a terminal at the Cincinnati airport. The
bonds, however, are guaranteed by Delta Airlines, that is, the company as a
whole; they are not just tied to the revenues generated by the terminal. At
the same time, Delta must use the assets generated by the bond issue only
for the terminal; it can't target the funds for other uses.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. As far as the economy is concerned, I don't believe we're headed for a
recession. It looks like we'll have a period of sub-par growth, but I think
that will be the "pause that refreshes." I'd expect to see economic growth
pick up in 1996. Over the next few months, I wouldn't be surprised to see
the market trade within a limited range, as participants try to determine
whether we're going into a recession or not, or whether the economy is
going to be invigorated due to recent declines in interest rates.
FUND FACTS
GOAL: high current income
free from federal income tax
START DATE: September 13, 1985
SIZE: as of June 30, 1995,
more than $892 million
MANAGER: Anne Punzak,
since 1986; manager, Spartan
Florida Municipal Income
Portfolio, since 1992; Fidelity
High-Yield Tax-Free Portfolio,
since 1993; Spartan
Aggressive Municipal Fund,
1993 to October 1994; Fidelity
Insured Tax-Free Portfolio,
1989 to 1993; joined
Fidelity in 1984
(checkmark)
ANNE PUNZAK ON THE
MUNICIPAL BOND MARKET
AND TAX REFORM:
"At the beginning of March,
municipal bonds were
relatively rich - or priced high
in light of historical levels -
relative to Treasury issues,
but have since decreased in
relative value. The recent
drop has been because of
political discussions
concerning the possibility of a
flat income tax. The flat tax
proposals being considered
would lead to a lower tax-rate
environment, one in which
municipal bonds would drop in
value. One of the factors
affecting the value of
municipal bonds is the level of
tax rates. Higher taxes tend to
increase demand - and thus
the value - of municipal
bonds, while lower tax rates
decrease demand and value.
So the market has taken the
effects of the flat tax into
account, leading to the
underperformance.
"For the moment, I believe the
possibility of a flat tax is not a
cause for concern, because,
as I've said, the market
already has factored in this
possibility. At the same time,
there might be some
short-term volatility in the
market. Even though hearings
were taking place toward the
end of the period, I don't
expect there to be any
significant changes in
personal income tax rates
until 1997. And I believe the
end result largely will depend
on whether the Republicans
are able to win the White
House in 1996."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 11.0 9.4
Massachusetts 7.3 7.8
New York 7.3 10.7
Michigan 7.2 8.0
Texas 5.7 6.3
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Health Care 25.6 32.7
Industrial Development 17.6 20.7
Electric Revenue 13.7 11.9
General Obligation 10.6 6.2
Transportation 5.1 6.3
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 18.2 20.0
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 JUNE 30, 1995
6 MONTHS AGO
Years 7.5 8.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 18.8%
Aa, A 19.3%
Baa 20.9%
Ba, B 6.3%
Caa 0.9%
Non-rated 30.1%
Short-term investments 3.7%
Aaa 12.7%
Aa, A 19.0%
Baa 20.3%
Ba, B 10.7%
Caa 0.4%
Non-rated 33.1%
Short-term investments 3.8%
Row: 1, Col: 1, Value: 18.8
Row: 1, Col: 2, Value: 19.3
Row: 1, Col: 3, Value: 20.9
Row: 1, Col: 4, Value: 6.9
Row: 1, Col: 5, Value: 1.7
Row: 1, Col: 6, Value: 29.7
Row: 1, Col: 7, Value: 3.7
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
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 27.5% AND 31.9% OF THE FUND'S
INVESTMENTS AT JUNE 30, 1995, AND DECEMBER 31, 1994, RESPECTIVELY.
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 96.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ALABAMA - 1.1%
Cullman Med. Ctr. Rev. (Cullman Regional Med.
Ctr.) Series A, 6.50% 2/15/23 Baa $ 5,575,000 $ 5,240,500
Selma Spl. Care Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Vaughan Regional Med. Ctr. Proj.)
7.125% 6/1/14 - 4,570,000 4,307,225
9,547,725
ARIZONA - 2.6%
Arizona Health Facs. Auth. Hosp. Sys. Rev.
(St. Lukes Hosp. Sys.) Series A,
10.125% 11/1/15
(Pre-Refunded to 11/1/95 @ 102) (d) Ba 12,000,000 12,465,000
Maricopa County Unified School Dist. #69
Rfdg. (Paradise Valley) Second Series, 5%
7/1/09 (AMBAC Insured) Aaa 2,400,000 2,223,000
Salt River Proj. Agric. & Pwr. Dist. Elec. Sys.
Rev. Rfdg. Series C, 5% 1/1/16 Aa 3,000,000 2,640,000
Sierra Vista Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.)
8.75% 12/1/16 - 4,000,000 4,345,000
Tucson Gen. Oblig. Rev. Rfdg. 6.75% 7/1/03
(FGIC Insured) Aaa 1,800,000 2,000,250
23,673,250
ARKANSAS - 1.1%
Fayetteville Pub. Facs. Board Rev. Rfdg.
(Butterfield Trail Village Proj.) Series A,
9.50% 9/1/14 - 4,700,000 4,976,125
Pope County Poll. Cont. Rev. (Arkansas
Pwr. & Lt. Co. Proj.) 11% 12/1/15 Baa2 5,000,000 5,200,000
10,176,125
CALIFORNIA - 8.7%
California Health Facs. Fing. Auth. Rev. Rfdg.
(Catholic Healthcare West) 4.75% 7/1/19
(MBIA Insured) Aaa 4,000,000 3,235,000
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Corrections St. Prisons)
Series A, 5% 12/1/19 (AMBAC Insured) Aaa 2,500,000 2,153,125
(Various Community College Projs.)
Series A, 5.50% 12/1/08 A 2,415,000 2,291,231
(Various University of California Projs.)
Series A:
Rfdg. 5.50% 6/1/21 A 1,600,000 1,436,000
6.50% 9/1/05 A 1,155,000 1,224,300
5.25% 12/1/13 A 3,750,000 3,318,750
5.50% 6/1/14 A 2,665,000 2,428,481
5% 6/1/23 A 1,525,000 1,263,844
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
California Statewide Commty. Dev. Corp.
Ctfs. of Prtn. 5.50% 10/1/23 A+ $ 5,000,000 $ 4,256,250
Central California Joint Pwrs. Health Fing.
Auth. Ctfs. of Prtn. Rfdg. (Commty. Hosp. of
Central California Proj.) 5% 2/1/23 A 3,000,000 2,381,250
Culver City Redev. Fing. Auth. Rev. Rfdg. Tax
Allocation, 5.50% 11/1/14
(AMBAC Insured) Aaa 3,000,000 2,812,500
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
5.75% 6/1/04 (MBIA Insured) Aaa 2,000,000 2,072,500
Foothill/Eastern Trans. Toll Rd. Rev. (Sr. Lien)
Series A:
0% 1/1/08 BBB- 2,500,000 1,321,875
6% 1/1/16 BBB- 8,500,000 8,000,625
Los Angeles Regional Arpt. Impt. Corp. Lease
Rev. (Sub-Lease Western Air Lines-Delta)
11.25% 11/1/25 Ba1 6,000,000 6,285,000
Los Angeles Wastewtr. Sys. Rev. Rfdg. Series D,
4.70% 11/1/17 (FGIC Insured) Aaa 1,385,000 1,135,700
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Rfdg. (Geothermal Proj. #3) Series A,
5.85% 7/1/10 A 2,000,000 1,932,500
Port Oakland Port Rev. (Cap. Appreciation)
Series F, 0% 11/1/09 (MBIA Insured) Aaa 7,000,000 3,010,000
Riverside County Ctfs. of Prtn. Rfdg.
(Air Force Village West, Inc.) Series A,
8.125% 6/15/20 - 4,000,000 4,135,000
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev. (Proctor & Gamble Proj.):
7% 7/1/04 BBB- 1,200,000 1,261,500
6.375% 7/1/10 BBB- 1,500,000 1,479,375
San Diego County Regional Trans. Commission
Sales Tax Rev. Second Series A, 6.25% 4/1/03
(FGIC Insured) Aaa 3,000,000 3,198,750
San Jose Redev. Agcy. Tax Alloc.. Rev.
(Merged Area Redev. Proj.) 5% 8/1/20
(MBIA Insured) Aaa 1,000,000 860,000
Santa Ana Cmmty. Redev. Agcy. Tax Allocation
Rfdg. (South Main St. Redev.) Series D,
5% 9/1/19 (MBIA Insured) Aaa 5,000,000 4,306,250
South Orange County Pub. Fin. Auth. Spl. Tax
Rev. (Foothill Area) Series C, 8% 8/15/08
(FGIC Insured) Aaa 1,000,000 1,212,500
Southern California Metropolitan Wtr. Dist.
Wtrwks. 5.408% 10/30/20 Aa 4,000,000 3,710,000
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 1,009,969
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Upland Ctfs. Prtn. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A $ 3,500,000 $ 3,189,375
Walnut Creek Ctfs. of Prtn. Rfdg. (John Muir
Med. Ctr.) 5% 2/15/16 (MBIA Insured) Aaa 1,000,000 866,250
West & Central Basin Fin. Auth. Rev. Rfdg.
(West Basin Proj.) Series A, 5%
8/1/13 (AMBAC Insured) Aaa 3,000,000 2,655,000
78,442,900
COLORADO - 4.1%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist)
6.625% 2/1/13 Baa 12,100,000 11,873,125
(PSL Health Sys. Proj.):
Series A, 6.875% 2/15/23 Baa1 4,350,000 4,328,250
Series B, 8.50% 2/15/21 Baa1 2,400,000 2,634,000
Denver City & County Arpt. Rev.:
Series A:
6.60% 11/15/97 (b) Baa 1,000,000 1,020,000
6.90% 11/15/98 Baa 3,850,000 3,984,750
7% 11/15/99 Baa 2,750,000 2,870,312
Series C, 6.50% 11/15/06 (b) Baa 4,075,000 4,085,187
Series D, 7.40% 11/15/01 Baa 3,000,000 3,213,750
Hyland Hills Metropolitan Park & Recreational
Dist. Spl. Rev. Rfdg., 10% 7/1/06
(Pre-Refunded to 7/1/96 @ 101) (d) - 1,900,000 1,983,125
Mesa County Ind. Dev. Rev. (Joy Technologies,
Inc. Proj.) 8.50% 9/15/06 Ba3 1,250,000 1,326,563
37,319,062
CONNECTICUT - 1.1%
Connecticut Dev. Auth. Poll. Cont. Rev. (United
Illuminating Co. Proj.) 9.50% 6/1/16 BBB- 1,650,000 1,746,937
Connecticut Hsg. Fin. Auth. (Hsg. Mtg. Fin. Prog.)
Series A-2, 6.45% 5/15/22 Aa 3,000,000 2,925,000
Eastern Connecticut Resource Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A: (b)
5.50% 1/1/14 A 5,000,000 4,468,750
5% 1/1/24 A 900,000 842,625
9,983,312
DISTRICT OF COLUMBIA - 0.4%
District of Columbia Hosp. Rev. (Hosp. for
Sick Children) Series A, 8.875% 1/1/21 - 2,940,000 3,167,850
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
FLORIDA - 0.4%
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A $ 2,390,000 $ 2,599,125
Palm Bay Util. Rev. Rfdg. (Palm Bay Util. Corp.
Proj.) 5% 10/1/22 (MBIA Insured) Aaa 1,150,000 1,000,500
3,599,625
GEORGIA - 0.7%
Fulton County Wtr. & Swr. Rev. Rfdg. 6.25%
1/1/09 (FGIC Insured) Aaa 2,460,000 2,632,200
Georgia Muni. Elec. Auth. Spl. Oblig. (Fifth
Crossover Series Proj. 1) 6.50% 1/1/17
(MBIA Insured) Aaa 3,500,000 3,736,250
6,368,450
ILLINOIS - 4.0%
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
Series A, 5% 1/1/12 A1 4,000,000 3,525,000
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.
(American Airlines, Inc. Proj.) Series A,
7.875% 11/1/25 (b) Baa2 4,720,000 5,050,400
Cooke & Will Counties Township High School
Rev. (Dist. #206) Series A, 0% 12/1/03
(AMBAC Insured) Aaa 2,100,000 1,365,000
Illinois Dev. Fin. Auth. Solid Waste Disp. Rev.
(Ford Heights Waste Tire Proj.) 7.875%
4/1/11 (b) - 15,000,000 14,906,250
Illinois Health Facs. Auth. Rev. (Glen Oaks
Med. Ctr.) Series D, 9.50% 11/15/15 Baa1 3,775,000 4,355,406
Loves Park First Mtg. Rev. (Hoosier Care Proj.)
Series A, 9.75% 8/1/19 - 1,575,000 1,683,281
Metropolitan Pier & Exposition Auth. Rev.:
Rfdg. (Cap. Appreciation) (McCormick Place
Expansion Proj.) Series A, 0% 6/15/08
(MBIA Insured) Aaa 6,000,000 2,835,000
Dedicated St. Tax Rev. (McCormick Place
Expansion Proj.) Series A,
0% 6/15/08 (FGIC Insured) Aaa 4,000,000 1,890,000
35,610,337
INDIANA - 1.5%
Burns Hbr. Solid Waste Disp. Facs. Rev.
(Bethlehem Steel Proj.) 8% 4/1/24 (b) - 3,180,000 3,335,025
East Chicago Poll. Cont. Rev. (Inland Steel Co.
Proj. #8) Series B, 10.75% 12/1/12 Ba3 3,000,000 3,108,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
INDIANA - CONTINUED
Indiana Univ. Rev. Series A, 5.80% 11/15/09
(MBIA Insured) Aaa $ 2,405,000 $ 2,444,081
Indianapolis Arpt. Auth. Spl. Facs. Rev.
(United Airlines Inc. Proj.) Series A, 6.50%
11/15/31 Baa2 4,500,000 4,331,250
13,219,106
IOWA - 0.2%
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
KENTUCKY - 2.2%
Kenton County Arpt. Board Arpt. Spl. Facs. Rev.
(Delta Airlines Proj.) Series A:
7.50% 2/1/20 (b) Ba1 3,600,000 3,735,000
7.125% 2/1/21 Ba1 12,000,000 12,120,000
6.125% 2/1/22 Ba1 1,000,000 917,500
Owensboro Elec. Lt. & Pwr. Rev. Series B:
0% 1/1/09 (AMBAC Insured) Aaa 2,000,000 915,000
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 1,903,650
19,591,150
LOUISIANA - 3.7%
Lake Charles Hbr. & Term. Dist. Port Facs.
Rev. Rfdg. (Trunkline LNG Co. Proj.)
Series 1992, 7.75% 8/15/22 Baa3 14,900,000 16,371,375
Louisiana Pub. Facs. Auth. Ind. Dev. Rev. Rfdg.
(Beverly Enterprises Inc.) 8.25%
9/1/08 - 1,705,000 1,811,562
Louisiana Gen. Oblig. Rev. Series A, 6.75%
5/15/03 (MBIA Insured) Aaa 4,000,000 4,430,000
New Orleans Gen. Oblig. Rev. Rfdg. 0%
9/1/08 (AMBAC Insured) Aaa 10,000,000 4,700,000
Port New Orleans Ind. Dev. Rev. Rfdg.
(Continental Grain Co. Proj.) 7.50%
7/1/13 BB- 3,000,000 3,112,500
West Feliciana Parish Poll. Cont. Rev.
(Various Gulf States Utils. Co. Projs.) 9%
5/1/15 Ba1 2,340,000 2,617,875
33,043,312
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MARYLAND - 1.6%
Baltimore Consolidated Pub. Impt. Rev. Rfdg.
Series A:
7.50% 10/15/00 (FGIC Insured) Aaa $ 2,225,000 $ 2,494,781
7.25% 10/15/04 (FGIC Insured) Aaa 1,545,000 1,770,956
Maryland Energy Fing. Administration Ltd.
Oblig. Solid Waste Disp. Facs. Recycling Rev.
(Hagerstown Fiber Ltd. Partners)
Series 1994, 9% 10/15/16 - 5,000,000 5,062,500
Maryland Health & Higher Edl. Facs. Auth.
Rev. (Frederick Mem. Hosp.) 5.25% 7/1/13
(FGIC Insured) Aaa 2,300,000 2,144,750
Northeast Maryland Waste Disp. Auth. Solid
Waste Rev. (Montgomery County Resources
Recovery Proj.) Series A, 6.30% 7/1/16 A 3,000,000 2,966,250
14,439,237
MASSACHUSETTS - 7.3%
Massachusetts Bay Trans. Auth. Rev.:
Rfdg. (Gen. Trans. Sys.) Series A,
5.50% 3/1/09 A1 4,000,000 3,910,000
Series B, 6.20% 3/1/16 A1 3,800,000 3,899,750
Massachusetts Gen. Oblig. Consolidated Loan
Unltd. Tax Rev., Series A, 5% 1/1/14 A1 2,900,000 2,570,125
Massachusetts Health & Edl. Facs. Auth. Rev.
(1st Mtg.) (Fairview Extended Care)
Series A, 10.25% 1/1/21 - 4,000,000 4,520,000
Massachusetts Hsg. Fin. Agcy. Hsg. Rental Rev.,
Series A, 6.60% 7/1/14
(AMBAC Insured) (b) Aaa 2,500,000 2,531,250
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
(Terra-Lt., Inc.) 13% 11/1/01 A3 3,500,000 3,854,375
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) Aaa 3,985,000 4,627,581
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Emerson College) Series A,
8.90% 1/1/18 - 10,000,000 11,150,000
(1st Mtg. - Reeds Landing):
7.75% 10/1/20 - 1,000,000 995,000
8.625% 10/1/23 - 3,500,000 3,508,750
(Atlanticare Med. Ctr.) Series A,
10.125% 11/1/14 - 3,500,000 3,220,000
(Institute Dev. Disabilities) 9.25% 6/1/09 - 4,275,000 4,189,500
(Massachusetts Biomedical) Series A-2:
(Cap Appreciation) 0% 8/1/09 A1 6,000,000 2,445,000
0% 8/1/03 A1 6,300,000 3,945,375
0% 8/1/06 A1 4,000,000 2,030,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Muni. Wholesale Elec. Pwr.
Supply Sys. Rev.:
Series D, 6% 7/1/06 A $ 800,000 $ 816,000
5.31% 7/1/18 (AMBAC Insured) Aaa 3,500,000 3,198,125
Massachusetts Wtr. Resources Auth. Gen. Rfdg.
Series C, 5.25% 12/1/15 A 5,000,000 4,531,250
65,942,081
MICHIGAN - 6.8%
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.):
5.25% 9/30/07 A 2,000,000 1,882,500
5.25% 9/30/12 A 4,000,000 3,580,000
Detroit Hosp. Fin. Auth. Facs. Rev. (Michigan
Healthcare Corp. Proj.) 0% 12/1/20 (g) Caa 5,960,000 2,188,644
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
7.80% 7/1/14 Baa1 4,750,000 4,969,687
Highland Park Hosp. Fin. Auth. Hosp.
Facs. Rev.: (g)
(Lakeside Commty. Hosp. Proj.) 0%
3/1/20 - 9,330,000 3,265,500
(Michigan Health Care Corp. Proj.)
Series A, 0% 12/1/19 Caa 7,350,000 2,702,095
Michigan Muni. Bond Auth. Rev.
(Local Gov't. Loan) Series C-A, 0% 6/15/12
(FSA Insured) Aaa 2,125,000 770,313
Michigan Bldg. Auth. Rev. Rfdg. Series I,
5% 10/1/06 (AMBAC Insured) Aaa 5,000,000 4,843,750
Michigan Hosp. Fin. Auth. Rev. Rfdg.
(Pontiac Osteopathic Hosp.) Series A:
6% 2/1/14 Baa1 1,500,000 1,312,500
6% 2/1/24 Baa1 3,500,000 2,944,375
(Saratoga Commty. Hosp.) 8.75%
6/1/10 - 480,000 511,800
Michigan Strategic Fund Ltd. Oblig. Rev.:
(Great Lakes Pulp & Fiber Proj.)
10.25% 12/1/16 - 12,150,000 12,681,563
(Mercy Svcs. for Aging Proj.) 9.40%
5/15/20 - 11,600,000 12,383,000
Waterford Township Econ. Dev. Corp. Ltd. Tax
Rev. (Canterbury Health Care):
8% 7/1/08 - 450,000 456,750
8.375% 7/1/23 - 1,300,000 1,352,000
Wayne Charter County Spl. Arpt. Facs. Rev.
(Republic Airlines Inc. Proj.) Series C,
10.375% 12/1/15 - 4,960,000 5,164,600
61,009,077
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
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 $ 3,350,000
Minnesota Energy & Econ. Dev. Auth. Rev.
(Small Business Dev. Lot 1)
Series A, 9.25% 8/1/06 - 695,000 728,013
Minnesota Gen. Oblig. Rev. Rfdg. Var. Purp.
6.90% 8/1/01 (Pre-Refunded to
8/1/98 @ 100) (d) Aaa 1,000,000 1,073,750
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A, 9.75% 11/1/17 Baa 2,490,000 2,745,225
Series B, 9.75% 11/1/17 Baa 1,000,000 1,090,000
St. Paul Port Auth. Ind. Dev. Rev.:
(Riverview II Proj.) Series 1983 A,
10% 1/1/13 CCC 1,250,000 1,240,625
(Viking Drill & Tool Proj.) Series 1982-G,
12.875% 5/1/12 CCC 875,000 875,000
Series 1981-M, 13.50% 11/1/11 CCC 935,000 935,000
12,037,613
MISSISSIPPI - 0.8%
Claiborne County Poll. Cont. Rev.
(Middle South Energy Inc. Proj.) Series C,
9.875% 12/1/14 - 6,195,000 7,139,737
MISSOURI - 1.9%
Boone County Ind. Dev. Auth. Ind.1st
Mtg. Rev. (Fairview Extended Care)
Series A, 10.125% 1/1/11 - 2,315,000 2,604,375
Kansas City Ind. Dev. Auth. Ind. Dev. Rev.
(Bishop Spencer Place Inc. Proj.) 8% 9/1/24 - 7,720,000 7,449,800
Kansas City Ind. Dev. Auth. Rev. (Kingswood
United Methodist Manor Proj.) Series 1993,
9% 11/15/13 - 2,800,000 2,985,500
St. Louis Land Clearance Redev. Auth. Hsg.
Dev. Rev. (Westminster Place Apts. Proj.)
11% 12/15/15 - 4,345,000 4,469,919
17,509,594
NEVADA - 1.4%
Clark County Ind. Dev. Rev. (Southwest Gas
Corp.) Series A, 6.50% 12/1/33 Baa3 12,100,000 11,449,625
Las Vegas-Clark County Library Dist. Rev. Rfdg.
5% 1/1/10 (FGIC Insured) Aaa 1,750,000 1,607,812
13,057,437
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW HAMPSHIRE - 1.7%
New Hampshire Higher Edl. & Health Facs.
Auth. 1st Mtg. Rev.:
(Littleton Hosp. Assoc. Inc.)
Series A, 9.50% 5/1/20 - $ 3,690,000 $ 3,985,200
(River Woods at Exeter):
8% 3/1/00 - 3,230,000 3,306,713
8% 3/1/01 - 1,200,000 1,234,500
9% 3/1/23 - 3,170,000 3,435,488
(Valley Regional Hosp.) 7.35% 4/1/23 - 3,885,000 3,705,319
15,667,220
NEW JERSEY - 3.3%
Camden County Impt. Auth. Lease Rev.
(Dockside Refrigerated) 8.40% 4/1/24 (b) - 2,750,000 2,866,875
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.:
Rfdg. (Stolt Term. Proj.) 10.50% 1/15/18 - 3,500,000 3,955,000
(Holt Hauling & Warehouse Sys. Inc.):
Rfdg. Series G, 8.40% 12/15/15 - 5,000,000 5,250,000
Series D, 10.25% 9/15/14 - 6,000,000 6,450,000
Series E, 9.75% 12/15/16 (b) - 7,500,000 7,987,500
(Statewide Realty-Vista Hotel):
11% 12/15/17 - 1,555,000 1,555,000
11% 12/15/17 (g) - 1,010,000 1,263
Union County Utils. Auth. Solid Waste Rev.
7% 6/15/04 (b) A- 1,500,000 1,569,375
29,635,013
NEW MEXICO - 1.5%
Albuquerque Retirement Facs. Rev. Rfdg.
(La Vida Liena Proj.) Series A, 8.85%
2/1/23 - 2,050,000 2,132,000
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 3,755,000
6.50% 9/1/09 Ba2 1,000,000 983,750
Grant County Hosp. Facs. Rev. Rfdg.
(Gila Regional Med. Ctr. Proj.) 10%
2/1/12 - 4,005,000 4,250,306
New Mexico Univ. Rev. Rfdg.
Series A, 6% 6/1/21 A1 2,840,000 2,776,100
13,897,156
NEW YORK - 7.3%
Babylon Ind. Dev. Agcy. Resource Recovery
Rev. (Odgen Martin Sys. Inc.) Series B,
8.50% 1/1/19 Baa1 995,000 1,083,306
New York City Gen. Oblig. Rev. 7.50%
2/1/03 Baa1 14,000,000 15,137,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.) Series A:
5.50% 5/15/09 Baa1 $ 3,000,000 $ 2,831,250
5.50% 5/15/13 Baa1 10,250,000 9,468,438
5.25% 5/15/15 (h) Baa1 10,000,000 8,862,500
5.50% 5/15/19 Baa1 1,500,000 1,359,375
New York State Local Govt. Assistance Corp. Rev.
Rdfg. Series C:
(Cap. Appreciation) 0% 4/1/13 A 10,000,000 3,462,500
5.50% 4/1/17 A 4,400,000 4,075,500
5% 4/1/21 A 10,000,000 8,500,000
New York State Mtg. Agcy. Rev. (Homeowner
Mtg.) Series 48, 6.05% 4/1/17 (b) Aa 5,000,000 4,831,250
New York State Pwr. Auth. Rev. & Gen. Purp.
Series CC, 5.125% 1/1/11 Aa 4,000,000 3,750,000
Niagara County Ind. Dev. Agcy. Rev.
(Wintergarden Inn Assoc. Proj.)
10% 6/1/11 (g) - 4,210,000 2,105,000
65,466,619
NEW YORK & NEW JERSEY - 0.4%
New York & New Jersey Port Auth. Spl.
Oblig. Rev. (U.S. Air Laguardia Proj.)
9.125% 12/1/15 (b) B2 3,000,000 3,345,000
NORTH CAROLINA - 0.3%
North Carolina Eastern Muni. Pwr. Agcy. Pwr.
Sys. Rev. Rfdg. 6% 1/1/18 (AMBAC Insured) Aaa 2,250,000 2,272,500
OHIO - 2.6%
Fairfield Econ. Dev. Rev. Rfdg. (Beverly
Enterprises Proj.) 8.50% 1/1/03 - 2,000,000 2,125,000
Ohio Bldg. Auth. Rev. (Workers Compensation
Bldg. A) 4.75% 4/1/14 A 3,000,000 2,572,500
Ohio Solid Waste Rev. (Republic Engineered
Steels Proj.) 8.25% 10/1/14 (b) - 8,000,000 8,170,000
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
6.50% 12/1/03 (MBIA Insured) Aaa 2,925,000 3,202,875
Student Loan Funding Corp. Rev. Student Loan
Series B-1, 4.17% 7/24/95 (AMBAC Insured) Aaa 7,000,000 7,000,000
23,070,375
OKLAHOMA - 0.8%
Oklahoma County Ind. Auth. Rev. (Epworth
Villa Proj.) Series A, 10.25% 4/1/19 - 2,970,000 3,229,875
Tulsa Muni. Arpt. Trust Rev. (American Airlines
Corp. Proj.) 7.35% 12/1/11 Baa1 3,600,000 3,771,000
7,000,875
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
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 $ 1,215,400
Series C, 10.75% 11/15/15 Ba3 1,000,000 1,032,500
Cumberland County Muni. Auth. Rev.
(Carlisle Hosp.) 6.80% 11/15/23 Baa 3,800,000 3,576,750
Delaware County Auth. Rev. 1st Mtg.
(Riddle Village Proj.):
7% 6/1/00 - 500,000 501,250
8.25% 6/1/22 - 3,500,000 3,521,875
9.25% 6/1/22 - 5,050,000 5,454,000
Keystone Oaks School Dist. Rev. 5.829% 9/1/16,
(AMBAC Insured) Aaa 4,000,000 3,895,000
Lehigh County Gen. Purp. Auth. Rev.
(Wiley House) 9.50% 11/1/16 - 5,930,000 6,219,087
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 Baa 3,000,000 3,026,250
6.70% 9/1/14 Baa 4,500,000 4,556,250
6.75% 9/1/19 Baa 4,500,000 4,556,250
Philadelphia Ind. Dev. Auth. Dev. Rev.
(Long Term Care, Maplewood) 8%
1/1/24 - 4,500,000 4,393,125
Philadelphia Wtr. & Swr. Rev. (Cap.
Appreciation) Series 14, 0% 10/1/05
(MBIA Insured) Aaa 3,000,000 1,732,500
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 1,000,000 1,115,000
6.75% 8/1/05 (MBIA Insured) Aaa 1,000,000 1,116,250
Pittsburgh Wtr. & Swr. Auth. Rev. Rfdg.
Series A, 0% 9/1/06 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 3,000,000 1,668,750
Somerset County Hosp. Auth. Rev.
(Health Care 1st Mtg.-GF):
8.40% 6/1/09 - 1,000,000 1,003,750
8.50% 6/1/24 - 2,300,000 2,317,250
50,901,237
SOUTH CAROLINA - 2.7%
Charleston County Health Facs. 1st Mtg. Rev.
Rfdg. (Episcopal Proj.):
Series A, 9.75% 4/1/16 - 3,000,000 3,787,500
Series B, 9.75% 4/1/16 - 2,110,000 2,663,875
Charleston County Resource Recovery Rev.
(Foster Wheeler) Series A, 9.25%
1/1/10 (b) A 4,500,000 4,950,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
SOUTH CAROLINA - CONTINUED
Richland County Hosp. Facs. Rev. Rfdg.
(Baptist Hosp.) Series B, 0% 8/1/09
(AMBAC Insured) Aaa $ 1,730,000 $ 765,525
South Carolina Jobs Ed. Dev. Auth. Hosp.
Rev. 5.45% 8/1/15 (AMBAC Insured) Aaa 6,500,000 5,996,250
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A: (e)
6.25% 1/1/04 (MBIA Insured) Aaa 2,565,000 2,622,713
6.50% 1/1/08 (MBIA Insured) Aaa 3,330,000 3,392,438
24,178,301
TENNESSEE - 0.2%
Knox County Health, Edl. & Hsg. Hosp. Facs.
Rev. Rfdg. (Sanders Alliance) Series C,
5.25% 1/1/15 (MBIA Insured) Aaa 2,250,000 2,070,000
TEXAS - 5.7%
Alliance Arpt. Auth. Spl. Facs. Rev. (American
Airlines Inc.) 7% 12/1/11 (b) (h) Baa1 7,000,000 7,253,750
Austin Util. Sys. Rev. Rfdg. (Comb. Prior Lien)
Series A, 5.75% 11/15/14 (MBIA Insured) Aaa 3,520,000 3,370,400
Brazos River Auth. Poll. Cont. Rev.
(Texas Util. Elec. Co. Proj.) Series A,
8.25% 1/1/19 (b) Baa2 5,620,000 5,992,325
East Texas Health Facs. Dev. Corp. Hosp.
Rev. (Mem. Foundation Palestine Inc.)
7.80% 8/15/18 - 4,150,000 4,067,000
Harris County Cultural & Ed. Facs. Fin. Corp.
Rev. (Space Ctr. Houston Proj.):
9% 8/15/00 - 500,000 225,000
9.25% 8/15/15 - 4,565,000 2,054,250
Harris County Hsg. Fin. Corp. Single Family
Mtg. Rev. 11.25% 4/15/06 Aaa 5,000 5,087
Houston Hsg. Fin. Corp. Single Family Mtg.
Rev. Series 1984 A, 10.875% 2/15/16 A 1,210,000 1,234,200
Port Corpus Christi Ind. Dev. Corp. Rev.
(Valero Refining & Marketing Co.)
Series A, 10.25% 6/1/17 Baa3 2,000,000 2,225,000
Round Rock Independent School Dist.
Rfdg. & School Bldg. Unltd. Tax 0%
8/15/09 (MBIA Insured) Aaa 7,430,000 3,204,188
Sabine River Auth. Poll. Cont. Rev. (Util. Elec.
Proj.) Series B, 8.25% 10/1/20 (b) Baa2 1,250,000 1,381,250
San Antonio Elec. & Gas Rev. Rfdg.
Series B:
0% 2/1/08 (FGIC Insured) Aaa 4,340,000 2,077,775
0% 2/1/10 (FGIC Insured) Aaa 6,000,000 2,505,000
5.80% 2/1/06 Aa1 3,000,000 3,105,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Tarrant County Health Facs. Dev. Corp. Rev.
(3927 Foundation Inc. Proj.) 10.25% 9/1/19 - $ 4,000,000 $ 4,335,000
Tarrant County Hsg. Fin. Corp. Single Family
Mtg. Rev. Series A, 9.50% 5/15/03 B 795,000 790,031
Texas Gen. Oblig. Rev. Series B, 5.25% 10/1/13 Aa 3,250,000 2,998,125
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap.
Appreciation) 0% 2/1/09 (MBIA Insured) Aaa 2,000,000 892,500
Texas Pub. Fin. Auth. Rfdg.
Series A, 6% 10/1/05 Aa 3,000,000 3,191,250
50,907,131
UTAH - 1.7%
Intermountain Pwr. Agcy. Rev. 5.60% 7/1/21 Aa 5,000,000 4,631,250
Intermountain Pwr. Agcy. Pwr. Supply Sys.
Rev. Rfdg. Series B, 6.25% 7/1/03
(MBIA Insured) (e) Aaa 6,000,000 6,292,500
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 4,101,688
Utah Hsg. Fin. Agcy. Residential Mtg. Rev.
Series 1983 A, 0% 7/1/16 A+ 775,004 92,032
15,117,470
VERMONT - 0.2%
Vermont Ind. Dev. Auth. Ind. Dev. Rev. (Radisson
Hotel) Series B-1, 7.75% 11/15/15 - 2,000,000 2,065,000
VIRGINIA - 4.2%
Fairfax County Ind. Dev. Auth. Rev. Rfdg. (Inova
Health Sys. Hosp. Rev.) 5.25% 8/15/19 Aa 2,500,000 2,228,125
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 1,155,000
8.75% 11/1/24 - 13,900,000 14,091,125
Richmond Gen. Oblig. Rev. 6.50% 1/15/02 A1 6,000,000 6,457,500
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr.
Series A:
5.15% 7/1/09 (MBIA Insured) Aaa 4,000,000 3,800,000
5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 3,810,000
Virginia Gen. Oblig. Pub. Facs. Rev. 6% 6/1/00 Aaa 3,540,000 3,752,400
Virginia Hsg. Dev. Auth. Residential Mtg. Rev.
(Single Family Mtg.) Series 1983 B,
0% 9/1/14 Aa 1,210,000 169,400
37,760,312
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
WASHINGTON - 4.3%
Douglas County Pub. Util Dist. #1 Wells
Hydroelec. Rev. Rfdg. (Pacific Pwr. & Lt. Co.)
8.75% 9/1/18 A $ 1,395,000 $ 1,745,494
Washington Pub. Pwr. Supply Sys. Rev.:
Rfdg. (Nuclear Proj. #1) Series B, 7%
7/1/08 Aa 1,000,000 1,113,750
(Nuclear Proj. #2):
5.41% 7/1/10 (FGIC Insured) Aaa 5,300,000 5,028,375
5.26% 7/1/12 Aa 10,000,000 9,075,000
(Nuclear Proj. #3):
Rfdg. (Cap. Appreciation) Series B,
0% 7/1/08 (MBIA Insured) Aaa 3,000,000 1,413,750
Rfdg. Series C, 0% 7/1/13 Aa 5,960,000 1,840,150
2.994% 1/1/96 Aa 5,000,000 5,000,000
5.12% 7/1/12 INFL (f) Aa 5,000,000 4,050,000
5.26% 7/1/12 Aa 10,000,000 9,025,000
38,291,519
WEST VIRGINIA - 0.8%
West Virginia Parkway Econ. Dev. Agcy.
5.831% 5/16/19 (FGIC Insured) Aaa 7,200,000 6,984,000
TOTAL MUNICIPAL BONDS
(Cost $871,584,178) 865,697,008
MUNICIPAL NOTES (A) - 3.7%
CALIFORNIA - 2.3%
California School Cash Reserve Program
TRAN Series 1995 A, 4.75%
7/3/96 (MBIA Insured) MIG 1 9,000,000 9,074,880
San Diego County TRAN Series 1994-95,
4.50% 9/29/95 MIG 1 5,000,000 5,005,350
Ventura County TRAN 4.50% 8/1/95 MIG 1 7,000,000 7,002,310
21,082,540
FLORIDA - 0.1%
Hillsborough County Ind. Dev. Auth. Poll. Cont.
Rev. Rfdg. (Tampa Elec. Co. Proj.)
Series 1990, 4.20%, VRDN - 1,000,000 1,000,000
MUNICIPAL NOTES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ILLINOIS - 0.9%
Chicago Gen. Oblig. Rev. Series 1994 B, 4%,
LOC Societe Generale, VRDN VMIG 1 $ 1,500,000 $ 1,500,000
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev.
Rfdg. (Garden Glen Apts.) Series 1993,
4.80%, VRDN A-1+ 6,800,000 6,800,000
8,300,000
MICHIGAN - 0.4%
Michigan Higher Ed. Student Loan Auth. Rev.,
Series XII-D, 4.30% (AMBAC Insured)
BPA Fuji Bank, VRDN (b) VMIG 1 3,200,000 3,200,000
TOTAL MUNICIPAL NOTES
(Cost $33,597,814) 33,582,540
TOTAL INVESTMENTS - 100%
(Cost $905,181,992) $899,279,548
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Security
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) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(f) 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.
(g) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(h) A portion of the security was pledged to cover margin requirements for
delayed delivery purchases. At the period end, the value of securities
pledged amounted to $13,900,625.
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 35.9% AAA, AA, A 37.5%
Baa 19.4% BBB 12.5%
Ba 5.5% BB 7.3%
B 0.5% B 0.0%
Caa 0.5% CCC 0.9%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 30.1%. FMR
has determined that unrated debt securities that are lower quality account
for 27.5% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 25.6%
Industrial Development 17.6
Electric Revenue 13.7
General Obligation 10.6
Others
(individually less than 10%) 32.5
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $905,308,983. Net unrealized depreciation aggregated
$6,029,435, of which $30,081,432 related to appreciated investment
securities and $36,110,867 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.
At December 31, 1994, the fund elected 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>
JUNE 30, 1995 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (cost $905,181,992) 5. $ 899,279,548
See accompanying schedule
6.Receivable for investments sold 7. 8,989,255
8.Interest receivable 9. 15,912,330
10.Redemption fees receivable 11. 101
12. 13.TOTAL ASSETS 14. 924,181,234
15.LIABILITIES 16. 17.
18.Payable to custodian bank $ 465,746 19.
20.Payable for investments purchased 16,752,171 21.
Regular delivery
22. Delayed delivery 12,395,855 23.
24.Payable for fund shares redeemed 800,581 25.
26.Distributions payable 1,227,000 27.
28.Accrued management fee 341,750 29.
30.Other payables and accrued expenses 156,829 31.
32. 33.TOTAL LIABILITIES 34. 32,139,932
35.36.NET ASSETS 37. $ 892,041,302
38.Net Assets consist of: 39. 40.
41.Paid in capital 42. $ 911,583,690
43.Accumulated undistributed net realized gain (loss) 44. (13,639,944)
on investments
45.Net unrealized appreciation (depreciation) 46. (5,902,444)
on investments
47.48.NET ASSETS, for 78,906,070 shares outstanding 49. $ 892,041,302
50.51.NET ASSET VALUE, offering price and redemption 52. $11.31
price per share ($892,041,302 (divided by) 78,906,070 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
53.54.INTEREST INCOME 55. $ 30,857,802
56.EXPENSES 57. 58.
59.Management fee $ 1,979,354 60.
61.Transfer agent, accounting and custodian fees 717,225 62.
and expenses
63.Non-interested trustees' compensation 2,012 64.
65.Registration fees 37,890 66.
67.Audit 22,048 68.
69.Legal 22,089 70.
71.Miscellaneous 3,990 72.
73. 74.TOTAL EXPENSES 75. 2,784,608
76.77.NET INTEREST INCOME 78. 28,073,194
79.REALIZED AND UNREALIZED GAIN (LOSS) 81. 82.
80.Net realized gain (loss) on:
83. Investment securities (2,872,935) 84.
85. Futures contracts (3,152,239) (6,025,174)
86.Change in net unrealized appreciation (depreciation) 87. 88.
on:
89. Investment securities 43,007,209 90.
91. Futures contracts (48,184) 42,959,025
92.93.NET GAIN (LOSS) 94. 36,933,851
95.96.NET INCREASE (DECREASE) IN NET ASSETS 97. $ 65,007,045
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
98.INCREASE (DECREASE) IN NET ASSETS
99.Operations $ 28,073,194 $ 58,941,113
Net interest income
100. Net realized gain (loss) (6,025,174) (6,170,723)
101. Change in net unrealized appreciation (depreciation) 42,959,025 (108,690,819)
102. 65,007,045 (55,920,429)
103.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
104.Distributions to shareholders (28,073,194) (58,941,113)
From net interest income
105. From net realized gain - (3,920,968)
106. 107.TOTAL DISTRIBUTIONS (28,073,194) (62,862,081)
108.Share transactions 112,091,627 241,631,086
Net proceeds from sales of shares
109. Reinvestment of distributions 20,020,443 45,254,134
110. Cost of shares redeemed (73,251,341) (324,429,481)
111. Redemption fees 93,251 255,161
112.113. 58,953,980 (37,289,100)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
114. 95,887,831 (156,071,610)
115.TOTAL INCREASE (DECREASE) IN NET ASSETS
116.NET ASSETS 117. 118.
119. Beginning of period 796,153,471 952,225,081
120. End of period $ 892,041,302 $ 796,153,471
121.OTHER INFORMATION 123. 124.
122.Shares
125. Sold 10,002,112 21,118,312
126. Issued in reinvestment of distributions 1,778,401 3,960,271
127. Redeemed (6,500,381) (28,669,547)
128. Net increase (decrease) 5,280,132 (3,590,964)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
129. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
130. (UNAUDITED) 1994 1993 C 1992 1991 1990
131.SELECTED PER-SHARE DATA
132.Net asset value, beginning of period $ 10.810 $ 12.330 $ 11.880 $ 11.800 $ 11.430 $ 11.490
133.Income from Investment Operations .363 .770 .783 .834 .863 .886
Net interest income
134. Net realized and unrealized gain
(loss) .499 (1.473) .788 .208 .429 (.060)
135. Total from investment operations .862 (.703) 1.571 1.042 1.292 .826
136.Less Distributions (.363) (.770) (.783) (.834) (.863) (.886)
From net interest income
137. From net realized gain on
investments - (.050) (.340) (.130) (.060) -
138. Total distributions (.363) (.820) (1.123) (.964) (.923) (.886)
139.Redemption fees added to paid in
capital .001 .003 .002 .002 .001 -
140.Net asset value, end of period $ 11.310 $ 10.810 $ 12.330 $ 11.880 $ 11.800 $ 11.430
141.TOTAL RETURN B 8.05% -5.82% 13.63% 9.17% 11.77% 7.48%
142.RATIOS AND SUPPLEMENTAL DATA
143.Net assets, end of period (000
omitted) $ 892,041 $ 796,153 $ 952,225 $ 761,683 $ 653,818 $ 550,848
144.Ratio of expenses to average net
assets .64% .63% .64% .64% .69% .66%
A
145.Ratio of net interest income to
average net assets 6.49% 6.69% 6.37% 7.01% 7.46% 7.79%
A
146.Portfolio turnover rate 41% 40% 54% 43% 30% 46%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT
COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
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 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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and losses deferred due to wash sales, futures and
options and excise tax regulations.
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
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS -
CONTINUED
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the commitment. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities,
other than short-term securities, aggregated $226,058,525 and $170,682,932,
respectively. The market value of futures contracts opened and closed
during the period amounted to $98,002,024 and $121,033,697, 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 .1200% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
rate is .30%. For the period, the management fee was equivalent to an
annualized 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 $2,467 for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB 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. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the fund pays account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the fund paid fees based on the type, size, number of
accounts and the 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 $560,019 and $148,979,
respectively.
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)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)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
Page 38 = BLANK
Do NOT strip-in this type
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
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(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
(2_FIDELITY_LOGOS)FIDELITY
INSURED TAX-FREE
PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, 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. If Fidelity had not reimbursed certain fund
expenses, the life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Insured Tax-Free 10.26% 9.13% 45.77% 116.89%
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% n/a
Average Insured Municipal Bond Fund 9.22% 7.94% 43.29% n/a
Consumer Price Index 1.87% 3.04% 17.40% 40.29%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 13, 1985. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond Index - a broad gauge of
the municipal bond market which includes both insured and uninsured bonds.
To measure how the fund's performance stacked up against its peers, you can
compare it to the average insured municipal bond fund, which reflects the
performance of 49 insured municipal bond funds with similar objectives
tracked by Lipper Analytical Services over the past six months. 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 JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Insured Tax-Free 9.13% 7.83% 8.37%
Lehman Brothers Municipal Bond Index 8.82% 8.26% n/a
Average Insured Municipal Bond Fund 7.94% 7.45% n/a
Consumer Price Index 3.04% 3.26% 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
Insured Tax Free (Municipal Bond Ind
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 11220.71 11041.07
07/31/86 11219.99 11108.08
08/31/86 11777.10 11605.39
09/30/86 11745.08 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 12577.70 12460.02
03/31/87 12446.25 12327.95
04/30/87 11631.10 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 11429.83 11736.62
11/30/87 11710.98 12043.06
12/31/87 11927.46 12217.81
01/31/88 12503.15 12653.00
02/29/88 12606.82 12786.75
03/31/88 12236.21 12637.78
04/30/88 12306.70 12733.83
05/31/88 12340.71 12697.03
06/30/88 12550.66 12882.78
07/31/88 12620.06 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 13683.54 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 14214.18 14535.46
11/30/89 14447.02 14789.83
12/31/89 14515.14 14911.10
01/31/90 14420.22 14841.02
02/28/90 14563.99 14973.11
03/31/90 14579.15 14977.60
04/30/90 14388.72 14869.76
05/31/90 14749.79 15193.92
06/30/90 14870.11 15327.63
07/31/90 15099.42 15552.94
08/31/90 14853.19 15327.43
09/30/90 14922.25 15336.62
10/31/90 15142.31 15614.22
11/30/90 15501.26 15928.06
12/31/90 15542.73 15998.14
01/31/91 15764.85 16212.52
02/28/91 15874.00 16353.57
03/31/91 15829.01 16360.11
04/30/91 16009.79 16577.70
05/31/91 16177.74 16725.24
06/30/91 16134.69 16708.52
07/31/91 16364.82 16912.36
08/31/91 16552.59 17135.60
09/30/91 16771.32 17358.37
10/31/91 16918.66 17514.59
11/30/91 16943.73 17563.63
12/31/91 17341.77 17941.25
01/31/92 17353.02 17982.52
02/29/92 17361.25 17987.91
03/31/92 17316.33 17995.11
04/30/92 17463.82 18155.26
05/31/92 17691.92 18369.49
06/30/92 17976.21 18678.10
07/31/92 18539.95 19238.44
08/31/92 18290.35 19049.91
09/30/92 18393.34 19173.73
10/31/92 17969.68 18985.83
11/30/92 18495.16 19325.68
12/31/92 18713.78 19522.80
01/31/93 18949.83 19749.26
02/28/93 19866.95 20464.19
03/31/93 19603.75 20247.26
04/30/93 19820.03 20451.76
05/31/93 19897.56 20566.29
06/30/93 20263.69 20909.75
07/31/93 20256.26 20936.93
08/31/93 20760.01 21372.42
09/30/93 21012.74 21616.07
10/31/93 20986.42 21657.14
11/30/93 20738.49 21466.55
12/31/93 21304.76 21919.50
01/31/94 21550.66 22169.38
02/28/94 20900.05 21595.19
03/31/94 19767.44 20716.27
04/30/94 19820.04 20892.36
05/31/94 20072.74 21074.12
06/30/94 19862.79 20951.89
07/31/94 20315.10 21335.31
08/31/94 20358.53 21409.98
09/30/94 20000.72 21095.26
10/31/94 19572.12 20719.76
11/30/94 19103.04 20344.73
12/31/94 19658.55 20792.32
01/31/95 20418.25 21386.98
02/28/95 21114.32 22009.34
03/31/95 21338.63 22262.45
04/30/95 21337.39 22289.16
05/31/95 22015.07 23000.19
06/30/95 21675.93 22800.08
$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 June 30, 1995, the value of your investment
would have grown to $21,676 - a 116.76% 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 $22,800 - a 128.00% 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
6 MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990
Dividend return 2.87% 5.01% 5.77% 6.13% 6.70% 6.72%
Capital appreciation
return 7.39% -12.74% 8.08% 1.78% 4.87% 0.36%
Total return 10.26% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.96(cents) 30.17(cents) 62.01(cents)
Annualized dividend rate 5.18% 5.35% 5.56%
30-day annualized yield 5.18% - -
30-day annualized tax-equivalent yield 8.09% - -
</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 $11.66 over
the past month, $11.38 over the past six months and $11.15 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% 1995 federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Guy Wickwire, Portfolio Manager of Fidelity
Insured Tax-Free Portfolio
Q. GUY, HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A. For the six months ended June 30, 1995, Fidelity Insured Tax-Free
Portfolio had a total return of 10.26%, compared to the average insured
municipal bond fund's return of 9.22% for the same period, as tracked by
Lipper Analytical Services. For the year ended June 30, 1995, the fund
returned 9.13%, while the average insured fund returned 7.94%, again as
tracked by Lipper.
Q. HASN'T THE MUNICIPAL BOND MARKET BEEN UNUSUALLY STRONG OVER THE PAST SIX
MONTHS?
A. Yes, in fact the municipal bond market enjoyed one of its strongest
rallies of the decade during the past six months. The market was
particularly strong during the first quarter of 1995 and municipals topped
the charts as the best performing fixed-income category during that period.
After hitting their lows last November, municipal bond prices steadily
improved as investors perceived that the threat of higher interest rates
was slowly fading. However, in April, the municipals began to lag Treasury
bonds. Investors were worried that some elements contained in tax reform
proposals might reduce the appeal of municipal bonds. The rally in
municipals was further stalled when Orange County, California, continued to
experience problems related to its bankruptcy.
Q. WHAT STRATEGIES WORKED WELL DURING THE PAST SIX MONTHS?
A. From November through the end of February, the fund's duration - which
is a measure of how sensitive its share price is to changes in interest
rates - was relatively long. Generally, the longer a fund's duration, the
more its share price will rise when interest rates fall, and fall when
interest rates rise. As
interest rates fell, having a longer duration helped the fund's
performance.
I had achieved that longer duration by investing a significant portion of
the fund in bonds with long maturities of
20 years or more.
Q. YET BY THE END OF JUNE, THE FUND'S DURATION WAS MUCH SHORTER THAN IT WAS
AT THE END OF 1994. DOES THAT MEAN YOU BECAME LESS OPTIMISTIC ABOUT THE
MARKET?
A. No, it's just that I took advantage of some opportunities in the market
and changed the way the fund is distributed among bonds with various
maturities. In February, the municipal yield curve became very flat. That
meant that longer-term bonds didn't offer as much additional yield,
compared to shorter-term bonds, as they normally do. Therefore, investors
weren't rewarded with much income for taking on the added interest rate
risk of longer-term bonds. So I sold some longer-maturity bonds and
replaced them with intermediate-maturity bonds of 10 to 15 years. The net
effect was a shorter duration. Since February, the yield curve has
steepened and intermediate-range bond yields have fallen further - and
prices have risen more - than longer-term bonds, a factor that also helped
the fund's performance. At the end of June, the fund's duration stood at
8.6 years, down from 9.9 years six months earlier.
Q. THERE HAVE BEEN SOME CHANGES
IN THE WAY YOU ALLOCATE THE FUND ACROSS DIFFERENT STATES...
A. Yes, as evidenced mainly by the decline in the fund's investments in
California bonds over the past six months. I want to point out that the
fund doesn't hold any bonds issued by Orange County. However, I'm concerned
that over the short term, investors may be skittish about owning California
bonds until Orange County's problems are resolved. But since the California
economy is improving and I own insured bonds with principal and interest
payments guaranteed, I've held onto some California issues. By the end of
the period, the fund's investments in California bonds had fallen to 11%,
from 17% six months earlier.
Q. WHAT OTHER CHANGES DID YOU MAKE?
A. Supply and demand within a given state can be an important consideration
in choosing the states in which to invest. For example, New York state was
formulating its budget and wasn't issuing any new bonds. As a result, there
was a limited supply of New York bonds available and I used that scarcity
to sell some at attractive levels. Meanwhile, the opposite was happening in
Massachusetts. In May, a healthy supply of Massachusetts bonds came on the
market and I bought some at relatively cheap prices. Going forward, that
supply may diminish and these bonds could appreciate as a result. I also
have emphasize bonds from states with high state income taxes. Demand for
these bonds tends to remain relatively strong. That's another reason why
the fund's top three states were New York, Massachusetts, and California at
the end of the period. But supply and demand aren't the only
considerations. I choose specific bonds based on how attractive they are
from the standpoint of price, maturity, credit quality, yield and other
factors.
Q. WHAT'S AHEAD FOR THE FUND?
A. It's important to note that after the period ended, the Federal Reserve
Board lowered short-term interest rates. Typically when the Fed is in an
easing mode, or lowering interest rates, it continues on that path for some
time. What historically happens during periods of easing is that the yield
curve continues to steepen. If that occurs, I think we can expect continued
good performance from intermediate-maturity bonds. As a result, I'll most
likely keep a large portion of the fund invested in intermediate
securities.
FUND FACTS
GOAL: high current income
free from federal income tax
with preservation of capital
START DATE: November 13,
1985
SIZE: as of June 30, 1995,
more than $337 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 THE
PROSPECTS FOR TAX REFORM:
"The threat of tax reform kept
the municipal market from
rising as fast as the Treasury
market in the last several
weeks of April, and the topic
of tax reform could continue
to cause some volatility in the
municipal market in the
months to come. However, in
my view, it's too early to be
worried about tax reform.
While it most certainly will be
a subject of much debate in
the presidential election of
1996, I believe it's unlikely
that any dramatic new tax
legislation will be enacted
before 1997."
(medium solid bullet) Health care bonds made
up 20.6% of the fund's
investments, comprising its
largest sector concentration
on June 30, 1995. Their
relatively high yields are one
reason why these bonds are
attractive.
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Massachusetts 11.5 11.8
California 11.0 17.0
New York 9.1 5.6
Illinois 7.0 5.9
Colorado 5.5 5.9
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Health Care 20.6 23.7
Electric Revenue 16.3 14.9
General Obligation 15.1 14.4
Water & Sewer 12.9 14.5
Housing 7.9 8.3
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 16.5 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 JUNE 30, 1995
6 MONTHS AGO
Years 8.6 9.9
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%,, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 80.3%
Aa, A 16.8%
Baa 0.4%
Short-term
investments 2.5%
Aaa 87.5%
Aa, A 9.9%
Baa 0.4%
Short-term
investments 2.2%
Row: 1, Col: 1, Value: 50.0
Row: 1, Col: 2, Value: 30.3
Row: 1, Col: 3, Value: 16.8
Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 2.5
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: 2.5
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 97.5%
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 $ 2,000,000
ARKANSAS - 0.1%
North Little Rock Elec. Rev. Rfdg. Series A, 6.50% 7/1/15
(MBIA Insured) 400,000 434,500
CALIFORNIA - 11.0%
Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.)
5.375% 6/1/09 (MBIA Insured) 1,000,000 956,250
California Dept. Wtr. Resource Center Valley Proj. Rev.
(Wtr. Sys.) Series M, 4.70% 12/1/06 3,795,000 3,515,119
California Pub. Wrks. Board Lease Rev.
(Dept. Corrections St. Prisons) Series A:
Rfdg. 5% 12/1/19 (AMBAC Insured) 2,500,000 2,153,125
5.25% 12/1/05 (AMBAC Insured) 2,000,000 1,970,000
California Pub. Wrks. Board Lease Rev. Unltd. Tax
(Secretary of State) Series A, 6.50% 12/1/08
(AMBAC Insured) 1,000,000 1,081,250
Culver City Redev. Fin. Auth. Rev. Rfdg. Tax Allocation
4.90% 11/1/08 (AMBAC Insured) 3,305,000 3,036,469
Desert Hosp. Dist. Hosp. Rev. Ctfs. of Prtn.
8.404% 7/28/20 (CGIC Insured) INFL (c) 1,500,000 1,541,250
Fresno Swr. Rev. Series A-1, 4.70% 9/1/05
(AMBAC Insured) 1,665,000 1,540,125
Oakland Redev. Agcy. Central Dist. Redev. (Sub. Tax
Allocation) 5% 9/1/21 (MBIA Insured) 1,000,000 857,500
Oceanside Ctfs. of Prtn. 6% 8/1/08 (MBIA Insured) 1,350,000 1,386,855
Palm Desert Fing. Auth. Tax Allocation Rev.
6.3675% 4/1/22 (MBIA Insured) 3,000,000 3,048,750
Pleasant Hill Joint Pwrs. Fing. Auth. Lease Rev. (Cap. Impt.
Prog.) Series A, 5% 12/1/12 (MBIA Insured) 1,490,000 1,329,825
Rancho Wtr. Dist. Fing. Auth. Rev.
4.875% 8/1/15 (AMBAC Insured) 5,000,000 4,243,750
Sacramento City Fing. Auth. (Cap. Appreciation)
(Tax Allocation Proj.) Series B, 0% 11/1/07
(MBIA Insured) 1,810,000 895,950
Sacramento City Fing. Auth. Lease Rev. Rfdg. Series A,
5.375% 11/1/14 (AMBAC Insured) 4,000,000 3,695,000
Sacramento Muni. Util. Dist. Elec. Rev. 5.25%
11/15/12 (FGIC Insured) 500,000 460,000
San Mateo County Joint Powrs Fing. Auth. Lease Rev. Rfdg.
(Cap. Proj. Prog.) 5.125% 7/1/18 (MBIA Insured) 1,000,000 880,000
Santa Barbara Wtr. Rev. Rfdg. Series A,
4.80% 9/1/14 (AMBAC Insured) 1,400,000 1,181,250
West & Central Basin Fing. Auth. Rev. Rfdg. (West Basin Proj.)
Series A, 5% 8/1/13 (AMBAC Insured) 4,000,000 3,540,000
37,312,468
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
COLORADO - 5.5%
Adams County School Dist. #12 Unltd. Tax Rfdg.
(Thornton) 6.20% 12/15/10 (FGIC Insured) $ 1,000,000 $ 1,026,250
Adams County Single Family Mtg. Rev. Rfdg.
Series A-2, 8.70% 6/1/12 (FSA Insured) 5,000,000 5,456,250
Colorado Health Facs. Auth. Rev.
(Presbyterian St. Luke Health Sys. Proj.) Series A:
7.25% 2/15/16 (FSA Insured) 2,000,000 2,165,000
6.25% 2/15/21 (FSA Insured) 4,000,000 4,055,000
Denver City & County School Dist. #1 Rfdg.
Series A, 0% 12/1/08 (f) 10,400,000 4,810,000
Jefferson County Single Family Mtg. Rev. Series 1991 A,
8.875% 10/1/13 (MBIA Insured) 125,000 135,000
Univ. of Colorado Hosp. Auth. Hosp. Rev.
Series A, 6.25% 11/15/12 (AMBAC Insured) 1,000,000 1,028,750
18,676,250
CONNECTICUT - 1.9%
Bridgeport Gen. Oblig. 8.75% 8/15/04 (FGIC Insured) 510,000 631,763
Connecticut Health & Edl. Facs. Auth. Rev. (St. Raphael
Hosp.) Series H, 5.25% 7/1/12 (AMBAC Insured) 3,035,000 2,860,488
Connecticut Hsg. Fin. Auth. (Mtg. Fin. Prog.)
Sub-Series B1, 6.125% 5/15/18 3,000,000 2,940,000
6,432,251
DELAWARE - 0.3%
Delaware Econ. Dev. Auth. Poll. Cont. Rev. (Delmarva
Pwr. & Lt. Co.) Series B, 7.30% 3/1/14 (MBIA Insured) 1,000,000
1,095,000
FLORIDA - 0.5%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien) 6.50%
10/1/09 (FGIC Insured)(b) 1,500,000 1,556,250
GEORGIA - 1.1%
Georgia Gen. Oblig. Series B, 8% 7/1/98 2,070,000 2,282,175
Georgia Muni. Elec. Auth. Pwr. Rev.
Series O, 7.80% 1/1/20 (AMBAC Insured) 1,500,000 1,606,875
3,889,050
HAWAII - 1.5%
Hawaii County Rfdg. & Impt. Series A,
5.60% 5/1/12 (FGIC Insured)(e) 1,000,000 986,250
Hawaii Gen. Oblig. Rfdg. Series BV, 7.25% 11/1/00 3,090,000 3,437,625
Honolulu City & County Multi-Family Rev. (Hale Pauahi)
Series A, 8.70% 12/1/28 (FHA Guaranteed)
(MBIA Insured) 725,000 756,719
5,180,594
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ILLINOIS - 7.0%
Chicago Adj. Tender Notes Series C,
6.25% 10/31/01 (MBIA Insured) $ 5,000,000 $ 5,312,500
Chicago Motor Fuel Tax Rev. Rfdg. Series A,
5.375% 1/1/14 (AMBAC Insured) 2,000,000 1,835,000
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. 2nd Lien
Series A, 6.375% 1/1/12 (MBIA Insured) 1,000,000 1,028,750
Chicago School Fin. Auth. Series A,
4.90% 6/1/05 (MBIA Insured) 3,630,000 3,484,800
Chicago Single Family Mtg. Rev. (Cap. Appreciation) :
Rfdg. Series B, 0% 10/1/09 (MBIA Insured) 9,000,000 3,330,000
Series A, 0% 12/1/16 (FGIC Insured)(e)(f) 27,960,000 3,599,850
Illinois Health Facs. Auth. Rev. (Swedish American Hosp.)
5.375% 11/15/13 (AMBAC Insured) 3,000,000 2,741,250
Illinois Reg. Trans. Auth. Series C,
7.75% 6/1/13 (FGIC Insured) 2,045,000 2,436,106
23,768,256
INDIANA - 1.8%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Gen'l. Hosp.) 7% 8/15/15 (CGIC Insured) 2,000,000 2,212,500
Indiana Muni. Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.
Series B, 5.50% 1/1/16 (MBIA Insured) 2,000,000 1,857,500
Jasper County Poll. Cont. Rev. Rfdg. (Northern Indiana
Pub. Svc.) 7.10% 7/1/17 (MBIA Insured) 2,000,000 2,132,500
6,202,500
KANSAS - 1.7%
Labette County Mtg. Loan Rev. Series A,
6.25% 5/1/12 (GNMA Coll.) 1,515,000 1,613,475
Reno County Mtg. Rev. Rfdg. (Single Family)
Series B, 8.70% 9/1/11 740,000 796,425
Wichita Hosp. Rev. Series II-A,
8.475% 10/20/17 (MBIA Insured) INFL (c) 3,000,000 3,206,250
5,616,150
KENTUCKY - 2.8%
Jefferson County Hosp. Rev.
8.65% 10/1/08 (MBIA Insured) INFL (c) 2,000,000 2,220,000
Kentucky Prop. & Bldgs. Commission Rev. Rfdg.
(Proj. #35) 5.75% 10/1/11 (MBIA Insured) 2,500,000 2,425,000
Kentucky Tpk. Auth. Econ. Dev. Rev. Rfdg.
(Revitalization Proj.):
5.50% 7/1/07 (AMBAC Insured) 3,000,000 3,007,500
5.625% 7/1/15 (AMBAC Insured) 2,000,000 1,927,500
9,580,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
LOUISIANA - 1.3%
Calcasieu Parish Pub. Trust Auth. Mtg. Rev. Rfdg.
Series A, 7.75% 6/1/12 $ 1,300,000 $ 1,376,375
East Baton Rouge Parish Sales & Use Tax Series ST-A,
4.80% 2/1/12 (FGIC Insured) 1,000,000 853,750
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/09 (AMBAC Insured) 3,000,000 1,278,750
New Orleans Pub. Impt. Unltd. Tax
7% 9/1/19 (FGIC Insured) 1,000,000 1,061,250
4,570,125
MARYLAND - 1.4%
Baltimore Cons. Pub. Impt. Rfdg. Series D,
5.40% 10/15/12 (AMBAC Insured) 1,000,000 952,500
Baltimore County Mtg. Rev. Rfdg. (Northbrooke Apts Proj.)
Series A, 6.35% 1/20/21 (GNMA Insured) 1,000,000 987,500
Maryland Health & Higher Edl. Facs. Auth. Rev.
(Frederick Mem. Hosp.) 5.25% 7/1/13 (FGIC Insured) 2,000,000 1,865,000
Prince Georges County Hsg. Auth. Mtg. Rev. Rfdg.
(Riverview Terrace) Series A, 6.70% 6/20/20 1,000,000 1,031,250
4,836,250
MASSACHUSETTS - 11.5%
Boston Metropolitan Dist. Gen. Oblig. Rfdg.
8% 12/1/03 (MBIA Insured) 1,260,000 1,483,650
Haverhill Gen. Oblig. Rfdg. Series A,
6.70% 9/1/10 (AMBAC Insured) 5,000,000 5,287,500
Holyoke Gen. Oblig. Ltd. Tax
8.15% 6/15/06 (MBIA Insured) 2,205,000 2,612,925
Massachusetts Cons. Loan Series C,
7.25% 12/1/00 (FGIC Insured) 1,000,000 1,092,500
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev.:
Rfdg. Series B, 5% 7/1/17 (MBIA Insured) 6,000,000 5,205,000
Series A, 5.47% 7/1/18 INFL (c) 2,000,000 1,675,000
5% 7/1/10 (AMBAC Insured) 1,930,000 1,765,950
Massachusetts Health & Edl. Facs. Auth. Rev.:
Rfdg. (Massachusetts Gen. Hosp.) Series F,
6.25% 7/1/12 (AMBAC Insured) 2,000,000 2,077,500
(Bentley College) Series H, 6.90% 7/1/21
(MBIA Insured) 6,720,000 7,215,600
(Cape Cod Hosp.) 5.40% 11/15/09
(Connie Lee Insured) 2,900,000 2,747,750
(Newton - Wellesley Hosp.) Issue C,
8% 7/1/18 (MBIA Insured) 710,000 780,113
(Northeastern Univ.) Series B, 7.60% 10/1/10
(AMBAC Insured) 1,000,000 1,090,000
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) 1,985,000 2,024,700
Palmer Gen. Oblig. Rfdg. 5.50% 10/1/10
(MBIA Insured)(f) 4,000,000 3,840,000
38,898,188
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - 2.6%
Detroit Gen. Oblig. (Distributable State Aid)
5.20% 5/1/07 (AMBAC Insured) $ 2,000,000 $ 1,927,500
Detroit Wtr. Supply Sys. Rev. Rfdg.
6.50% 7/1/15 (FGIC Insured) 1,000,000 1,085,000
Jackson County Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(W.A. Foote Mem. Hosp.) Series A, 4.75% 6/1/15
(FGIC Insured) 2,000,000 1,710,000
Michigan Bldg. Auth. Rev. Series II, 6.25% 10/1/20
(MBIA Insured) 1,100,000 1,113,750
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of Mercy
Health Corp.) 5.375% 8/15/14 (MBIA Insured) 3,000,000 2,808,750
8,645,000
MINNESOTA - 3.9%
Edina Hosp. Sys. Rev. (Fairview Hosp.)
Series A, 7.125% 7/1/19 (MBIA Insured) 2,780,000 2,985,025
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) 2,000,000 1,675,000
Minneapolis Health Care Fac. Rev. Rfdg.
(Fairview Hosp. & Healthcare Proj.) Series A,
5.30% 11/15/08 (MBIA Insured) 1,000,000 960,000
St. Cloud Hosp. Facs. Auth. Rev. Rfdg. (St. Cloud Hosp.
Proj.) Series C, 5.25% 10/1/13 (AMBAC Insured) 2,700,000 2,500,875
Univ. of Minnesota Rfdg. 4.80% 8/15/03 5,000,000 4,837,500
12,958,400
MISSOURI - 0.9%
Missouri Health & Edl. Fac. Auth. Health Facs. Rev.
(Barnes Jewish-Christian Health):
Rfdg. 5.15% 5/15/10 500,000 463,750
5.20% 5/15/11 500,000 464,375
5.25% 5/15/12 2,390,000 2,225,688
3,153,813
MONTANA - 1.9%
Montana Health Fac. Auth. Hosp. Fac. Rev. (Deaconess
Billings Clinic) 5.25% 2/15/20 (AMBAC Insured) 1,750,000 1,610,000
Montana Univ. Rev. Higher Ed. Rev. Rfdg.
Series A, 5.05% 11/15/16 (MBIA Insured) 1,500,000 1,359,375
Silver Bow Wtr. Inc.Wtr. Sys. Rev. (Butte Silver Bow Proj.)
5.25% 11/1/14 (FGIC Insured) 1,000,000 933,750
Univ. of Montana Higher Ed. Rev. Rfdg.
Series A, 4.50% 11/15/15 (MBIA Insured) 3,000,000 2,467,500
6,370,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEBRASKA - 1.4%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series B, 5.20% 1/1/07 (AMBAC Insured) $ 4,500,000 $ 4,421,250
NEW JERSEY - 2.1%
New Jersey Econ. Dev. Auth. Rev.
(Insured Edl. Testing Svc.) Series A:
6.50% 5/15/05 (MBIA Insured) 2,070,000 2,220,075
5.90% 5/15/15 (MBIA Insured) 2,000,000 1,980,000
New Jersey Health Care Facs. Fing. Auth. Rev.
(Christ Hosp. Group Issue) 7% 7/1/06 1,635,000 1,839,375
Warren County Poll. Cont. Fing. Auth. Rev. Resource
Recovery 6.55% 12/1/06 (MBIA Insured) 1,000,000 1,090,000
7,129,450
NEW MEXICO - 2.3%
Albuquerque Refuse Removal & Disp. Rev. Rfdg.
5.25% 7/1/09 (AMBAC Insured) 3,000,000 2,872,500
Farmington Util. Sys. Rev. Rfdg. 5.75% 5/15/13
(FGIC Insured) 500,000 488,125
Los Alamos County Inc. Util. Sys. Rev. Rfdg.
Series A, 6% 7/1/15 (FSA Insured) 2,275,000 2,297,750
Rio Rancho Wtr. & Wastewtr. Rev.
Series A, 5.90% 5/15/15 (FSA Insured)(b) 2,100,000 2,050,125
7,708,500
NEW YORK - 8.1%
New York State Dorm. Auth. State Univ. Edl. Facs. Rev. Rfdg.
Series A, 5.25% 5/15/15 (AMBAC Insured) 2,500,000 2,318,750
New York State Local Govt. Assistance Corp.:
Rfdg. Series C, 5.50% 4/1/17 1,000,000 926,250
Rfdg. Series E, 6% 4/1/14 2,000,000 2,005,000
Series A, 6% 4/1/16 5,000,000 4,900,000
Series D, 5.375% 4/1/14 2,150,000 1,972,625
New York State Med. Care Facs. Fin. Agcy. Rev.:
(Hosp. & Nursing Home) Series D, 5.20% 8/15/15
(FHA Guaranteed) 1,550,000 1,377,563
(Montefiore Med. Ctr.) (Insured Mtg.) Series A, 5.75%
2/15/15 (AMBAC Insured) 3,500,000 3,421,250
(St. Lukes Roosevelt Hosp.) 5.60% 8/15/13
(FHA Guaranteed) 3,630,000 3,512,025
New York State Urban Dev. Corp. Rev.
(Correctional Facs.) Series A:
5.10% 1/1/09 (AMBAC Insured) 1,000,000 937,500
5% 1/1/17 (AMBAC Insured) 1,000,000 872,500
Suffolk County Wtr. Auth. Wtrwks. Rev. 5% 6/1/17
(MBIA Insured) 6,000,000 5,302,500
27,545,963
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NORTH DAKOTA - 1.4%
Mercer County Poll. Cont. Rev. Rfdg.
(Basin Electric Pwr.) (Antelope Valley Station)
7.20% 6/30/13 (AMBAC Insured) $ 3,500,000 $ 4,029,375
North Dakota Hsg. Fin. Agcy. Single Family
Mtg. Rev. Series C, 8.75% 1/1/19 450,000 474,750
4,504,125
OKLAHOMA - 1.3%
Grand River Dam Auth. Rev. Rfdg.
5.75% 6/1/08 (FSA Insured) 4,250,000 4,372,188
OREGON - 0.9%
Josephine County Shcool Dist. #7
5.75% 6/1/06 (FGIC Insured) 1,000,000 1,028,750
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15 1,875,000 1,910,156
2,938,906
PENNSYLVANIA - 4.2%
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 1,522,500
Harrisburg Wtr. Auth. Rev. 5.875% 6/18/15
(FGIC Insured) 6,300,000 6,142,500
Pennsylvania Convention Ctr. Auth. Rev. Series A, 6.70%
9/1/16 (FGIC Insured) (Escowed to Maturity)(d) 2,000,000 2,242,500
Pennsylvania Hsg. Fin. Agcy. Muni. Forwards Rfdg.
(Multi-Family Section 8) Series C, 8.10% 7/1/13
(FHA Guaranteed) 2,000,000 2,212,500
Philadelphia Wtr. & Wastewtr. Rev. 6.25% 8/1/09
(MBIA Insured) 1,230,000 1,288,425
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys. Rev. Rfdg.,
Series A, 5% 9/1/09(FGIC Insured) 1,000,000 920,000
14,328,425
SOUTH CAROLINA - 2.2%
Lexington County Health Svcs. Dist. Inc. Hosp. Rev.
7% 10/1/08 (FSA Insured) 3,000,000 3,288,750
Richland County Hosp. Facs. Rev. (Commty. Provider
Pooled Loan) Series A, 7.125% 7/1/17
(CGIC Insured) 1,500,000 1,627,500
South Carolina Svc. Auth. Rev. (Forward Deal Settlement)
6.25% 1/1/03 (AMBAC Insured)(b) 2,500,000 2,656,250
7,572,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
SOUTH DAKOTA - 0.3%
South Dakota Lease Rev. (Trust Cfts.) Series A, 6.625%
9/1/12 (CGIC Insured) $ 1,000,000 $ 1,063,750
TENNESSEE - 2.3%
Knox County Health, Edl. & Hsg. Facs. Board Rev. Rfdg.
(Sanders Alliance Hosp. Facs.) Series C, 5.75% 1/1/14
(MBIA Insured) 2,000,000 1,967,500
Nashville & Davidson County Metropolitan
Health & Edl. Facs. Board Rev. (Adventist Health
Sunbelt) 5% 11/15/13 (CGIC Insured) 500,000 436,875
Nashville & Davidson County Metropolitan
Wtr. & Swr. Rev. Rfdg. 0% 1/1/12
(FGIC Insured)(g) 5,600,000 5,229,000
7,633,375
TEXAS - 3.3%
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Sr. Lien)
Series C, 0% 12/1/06 (AMBAC Insured) 6,735,000 3,535,875
Matagorda County Navigation Dist. #1 Rev. Rfdg.
(Houston Lt & Pwr. Proj.) Series C, 7.125% 7/1/19
(FGIC insured) 1,700,000 1,829,625
North Central Texas Health Facs. Dev. Corp. Hosp.
Rev. Rfdg. (Methodist Hosp. Dallas) Series A,
9.50% 10/1/15 (MBIA Insured) 250,000 258,125
Texas Pub. Fin. Auth. Rfdg. Series A, 6.50% 10/1/03 5,000,000 5,518,750
11,142,375
UTAH - 0.6%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.
Series B, 6.50% 7/1/05 (MBIA Insured)(b) 2,000,000 2,122,500
VIRGINIA - 2.4%
Chesapeake Gen. Oblig. Rfdg. 5.50% 12/1/09 1,225,000 1,203,563
Prince William County Svc. Auth. Wtr. & Swr. Sys. Rev.
Rfdg. 5% 7/1/13 (FGIC Insured) 1,500,000 1,340,625
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr. Series A,
5.15% 7/1/09 (MBIA Insured) 2,000,000 1,900,000
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) 2,150,000 2,187,625
6% 2/15/13 (AMBAC Insured) 1,460,000 1,487,371
Virginia Hsg. Dev. Auth. Residential Mtg.
Series 1983 B, 0% 9/1/14 1,215,000 170,100
8,289,284
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
WASHINGTON - 4.6%
Washington Pub. Pwr. Supply Sys. Rev. Rfdg.
(Nuclear Proj. #1) Series B:
(Bonneville Pwr. Admin) 5.40% 7/1/05 (e) $ 3,165,000 $ 3,117,525
7.25% 7/1/12 (FGIC Insured) 1,500,000 1,636,875
(Nuclear Proj. #2):
Series A, 6% 7/1/07 2,500,000 2,587,500
5.41% 7/1/10 (FGIC Insured) 8,000,000 7,590,000
(Nuclear Proj. #3) Series B, 7% 7/1/05
(FGIC Insured) 750,000 811,875
15,743,775
WYOMING - 0.4%
Wyoming Muni. Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.
Series A, 6.125% 1/1/16(MBIA Insured) 1,500,000 1,509,375
MULTIPLE STATE- 0.4%
Washington D.C. Metropolitan Area Trans. Auth. Gross Rev.
Rfdg. 5.25% 7/1/14 (FGIC Insured) 1,300,000 1,196,000
TOTAL MUNICIPAL BONDS
(Cost $328,147,573) 330,397,411
MUNICIPAL NOTES (A) - 2.5%
NEW YORK - 1.0%
Triborough Bridge & Tunnel Auth. Rev. Series 1994, 3.75%,
(FGIC Insured) (Liquidity Facility FGIC) VRDN 3,300,000 3,300,000
WISCONSIN - 1.5%
Wisconsin Gen. Oblig. TRAN 4.50% 6/17/96 5,000,000 5,038,400
TOTAL MUNICIPAL NOTES
(Cost $8,338,900) 8,338,400
TOTAL INVESTMENTS - 100%
(Cost $336,486,473) $ 338,735,811
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
100 U.S. Treasury Bond Contracts Sept. 1995 $ 11,353,125 $ (54,032)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.4%
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
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) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(c) 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.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $2,100,000.
(f) A portion of the security was pledged to cover margin requirements for
delayed delivery purchases. At the period end, the value of securities
pledged amounted to $10,631,541.
(g) 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 97.1% AAA, AA, A 96.9%
Baa 0.5% 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 20.6%
Electric Revenue 16.3
General Obligation 15.1
Water & Sewer 12.9
Others
(individually less than 10%) 35.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995 the aggregate cost of investment securities for income tax
purposes was $336,486,595. Net unrealized appreciation aggregated
$2,249,216, of which $8,744,779 related to appreciated investment
securities and $6,495,563 related to depreciated investment securities.
At December 31, 1994, the fund elected 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>
JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $336,486,473) 9. $ 338,735,811
See accompanying schedule
10.Cash 11. 328,588
12.Receivable for investments sold 13. 9,387,815
14.Interest receivable 15. 5,263,324
16. 17.TOTAL ASSETS 18. 353,715,538
19.LIABILITIES 20. 21.
22.Payable for investments purchased 23.
24. Regular delivery $ 7,231,137 25.
26. Delayed delivery 8,329,318 27.
28.Distributions payable 464,137 29.
30.Accrued management fee 116,836 31.
32.Payable for daily variation on futures contracts 46,875 33.
34.Other payables and accrued expenses 72,542 35.
36. 37.TOTAL LIABILITIES 38. 16,260,845
39.40.NET ASSETS 41. $ 337,454,693
42.Net Assets consist of: 43. 44.
45.Paid in capital 46. $ 339,629,143
47.Accumulated undistributed net realized gain (loss) 48. (4,369,756)
on investments
49.Net unrealized appreciation (depreciation) 50. 2,195,306
on investments
51.52.NET ASSETS, for 29,385,190 shares outstanding 53. $ 337,454,693
54.55.NET ASSET VALUE, offering price and redemption 56. $11.48
price per share ($337,454,693 (divided by) 29,385,190 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
57.INTEREST INCOME 58. $ 10,208,403
59.EXPENSES 60. 61.
62.Management fee $ 694,173 63.
64.Transfer agent, accounting and custodian fees and 289,266 65.
expenses
66.Non-interested trustees' compensation 814 67.
68.Registration fees 34,248 69.
70.Audit 16,622 71.
72.Legal 950 73.
74.Miscellaneous 2,180 75.
76. 77.TOTAL EXPENSES 78. 1,038,253
79.80.NET INTEREST INCOME 81. 9,170,150
82.REALIZED AND UNREALIZED GAIN (LOSS) 84. 85.
83.Net realized gain (loss) on:
86. Investment securities (292,010) 87.
88. Futures contracts (2,182,362) (2,474,372)
89.Change in net unrealized appreciation (depreciation) 90. 91.
on:
92. Investment securities 27,135,915 93.
94. Futures contracts (142,387) 26,993,528
95.96.NET GAIN (LOSS) 97. 24,519,156
98.99.NET INCREASE (DECREASE) IN NET ASSETS 100. $ 33,689,306
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
101.INCREASE (DECREASE) IN NET ASSETS
102.Operations $ 9,170,150 $ 21,455,680
Net interest income
103. Net realized gain (loss) (2,474,372) (901,643)
104. Change in net unrealized appreciation 26,993,528 (53,685,298)
(depreciation)
105. 33,689,306 (33,131,261)
106.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
107.Distributions to shareholders (9,170,150) (21,455,680)
From net interest income
108. From net realized gain - (4,403,924)
109. 110.TOTAL DISTRIBUTIONS (9,170,150) (25,859,604)
111.Share transactions 161,734,995 303,188,813
Net proceeds from sales of shares
112. Reinvestment of distributions 6,121,557 18,098,372
113. Cost of shares redeemed (174,471,881) (391,141,887)
114.115. (6,615,329) (69,854,702)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
116. 17,903,827 (128,845,567)
117.TOTAL INCREASE (DECREASE) IN NET ASSETS
118.NET ASSETS 119. 120.
121. Beginning of period 319,550,866 448,396,433
122. End of period $ 337,454,693 $ 319,550,866
123.OTHER INFORMATION 125. 126.
124.Shares
127. Sold 14,245,629 26,952,836
128. Issued in reinvestment of distributions 536,581 1,586,507
129. Redeemed (15,301,653) (34,883,162)
130. Net increase (decrease) (519,443) (6,343,819)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
131. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
132. (UNAUDITED) 1994 1993C 1992 1991 1990
133.SELECTED PER-SHARE DATA
134.Net asset value, beginning of period $ 10.690 $ 12.370 $ 11.720 $ 11.630 $ 11.090 $ 11.050
135.Income from Investment Operations .302 .627 .655 .689 .702 .713
Net interest income
136. Net realized and unrealized gain
(loss) .790 (1.560) .930 .200 .540 .040
137. Total from investment operations 1.092 (.933) 1.585 .889 1.242 .753
138.Less Distributions (.302) (.627) (.655) (.689) (.702) (.713)
From net interest income
139. From net realized gain on investments - (.120) (.280) (.110) - -
140. Total distributions (.302) (.747) (.935) (.799) (.702) (.713)
141.Net asset value, end of period $ 11.480 $ 10.690 $ 12.370 $ 11.720 $ 11.630 $ 11.090
142.TOTAL RETURN B 10.26% -7.73% 13.85% 7.91% 11.57% 7.08%
143.RATIOS AND SUPPLEMENTAL DATA
144.Net assets, end of period (000
omitted) $ 337,455 $ 319,551 $ 448,396 $ 371,122 $ 303,351 $ 198,585
145.Ratio of expenses to average net
assets .61% .58% .61% .63% .65% .67%
A
146.Ratio of net investment income to
average net assets 5.38% 5.52% 5.31% 5.91% 6.23% 6.52%
A
147.Portfolio turnover rate 68% 56% 78% 69% 62% 66%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and losses deferred due to wash sales, futures and
options and excise tax regulations.
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
market value of the securities purchased or sold on a
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS -
CONTINUED
when-issued or forward commitment basis are identified as such in the
fund's schedule of investments. The fund may receive compensation for
interest forgone in the purchase of a delayed delivery security. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. Losses may arise due to changes in the market
value of the underlying securities or if the counterparty does not perform
under the contract.
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 $110,048,208 and $248,705,837, respectively.
The market value of futures contracts opened and closed during the period
amounted to $192,355,650 and $208,116,336, 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 .1200% to
..3700% for the period. In the event that these rates were
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
lower than the contractual rates in effect during the period, FMR
voluntarily implemented the above rates, as they resulted in the same or a
lower management fee. The annual individual fund fee rate is .25%. For the
period, the management fee was equivalent to an annualized 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 $8,869 for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB 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. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the fund pays account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the fund paid fees based on the type, size, number of
accounts and the 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 $211,434 and $75,871,
respectively.
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)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)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)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
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(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
(2_FIDELITY_LOGOS)FIDELITY
MUNICIPAL BOND
PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 29 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Municipal Bond 10.36% 7.66% 44.76% 130.36%
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% 140.52%
Average General Municipal Bond Fund 9.01% 7.68% 45.42% 129.41%
Consumer Price Index 1.87% 3.04% 17.40% 41.73%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You can
compare the fund's returns to the performance of the Lehman Brothers
Municipal Bond Index - a broad gauge of the municipal bond market. To
measure how the fund's performance stacked up against its peers, you can
compare it to the average general municipal bond fund, which reflects the
performance of 230 general municipal bond funds with similar objectives
tracked by Lipper Analytical Services over the past six months. 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 JUNE 30, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Municipal Bond 7.66% 7.68% 8.70%
Lehman Brothers Municipal Bond Index 8.82% 8.26% 9.17%
Average General Municipal Bond Fund 7.68% 7.77% 8.64%
Consumer Price Index 3.04% 3.26% 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 10 YEARS
Municipal Bond (03Municipal Bond Ind
06/30/85 10000.00 10000.00
07/31/85 10039.21 10019.60
08/31/85 9968.58 9949.66
09/30/85 9827.66 9849.87
10/31/85 10119.92 10187.42
11/30/85 10454.41 10552.85
12/31/85 10680.65 10645.61
01/31/86 11269.47 11272.63
02/28/86 11669.13 11719.70
03/31/86 11735.00 11723.45
04/30/86 11699.17 11732.36
05/31/86 11488.47 11541.36
06/30/86 11647.22 11651.47
07/31/86 11761.98 11722.19
08/31/86 12341.26 12246.99
09/30/86 12260.13 12277.73
10/31/86 12540.18 12489.77
11/30/86 12758.98 12737.19
12/31/86 12767.43 12702.04
01/31/87 13022.00 13084.50
02/28/87 13136.22 13148.87
03/31/87 13080.12 13009.49
04/30/87 12276.74 12356.68
05/31/87 12177.09 12295.39
06/30/87 12391.10 12656.38
07/31/87 12542.40 12785.48
08/31/87 12600.48 12814.24
09/30/87 11950.30 12341.78
10/31/87 12059.37 12385.47
11/30/87 12328.22 12708.86
12/31/87 12568.31 12893.26
01/31/88 13206.46 13352.52
02/29/88 13332.19 13493.66
03/31/88 13009.57 13336.45
04/30/88 13054.00 13437.81
05/31/88 13098.94 13398.98
06/30/88 13347.04 13595.00
07/31/88 13443.37 13683.64
08/31/88 13473.00 13695.68
09/30/88 13744.05 13943.58
10/31/88 14052.48 14189.68
11/30/88 13889.95 14059.70
12/31/88 14114.61 14203.53
01/31/89 14321.30 14497.26
02/28/89 14173.23 14331.85
03/31/89 14168.30 14297.60
04/30/89 14577.17 14637.02
05/31/89 14862.01 14941.03
06/30/89 15074.08 15143.93
07/31/89 15214.54 15350.04
08/31/89 15078.82 15199.76
09/30/89 15020.11 15154.16
10/31/89 15197.37 15339.04
11/30/89 15395.28 15607.48
12/31/89 15464.52 15735.46
01/31/90 15376.70 15661.50
02/28/90 15519.03 15800.89
03/31/90 15532.66 15805.63
04/30/90 15328.31 15691.83
05/31/90 15747.21 16033.91
06/30/90 15913.15 16175.01
07/31/90 16158.40 16412.78
08/31/90 15851.92 16174.80
09/30/90 15942.63 16184.50
10/31/90 16132.71 16477.44
11/30/90 16441.28 16808.64
12/31/90 16533.18 16882.60
01/31/91 16725.76 17108.82
02/28/91 16813.03 17257.67
03/31/91 16842.66 17264.57
04/30/91 17077.96 17494.19
05/31/91 17209.30 17649.89
06/30/91 17216.55 17632.24
07/31/91 17455.53 17847.35
08/31/91 17675.82 18082.94
09/30/91 17876.02 18318.02
10/31/91 18054.59 18482.88
11/30/91 18103.62 18534.63
12/31/91 18502.55 18933.13
01/31/92 18510.92 18976.67
02/29/92 18538.44 18982.36
03/31/92 18529.45 18989.96
04/30/92 18714.67 19158.97
05/31/92 18947.53 19385.04
06/30/92 19287.80 19710.71
07/31/92 19880.39 20302.03
08/31/92 19593.97 20103.07
09/30/92 19712.45 20233.74
10/31/92 19309.34 20035.45
11/30/92 19888.02 20394.09
12/31/92 20154.61 20602.11
01/31/93 20421.78 20841.09
02/28/93 21253.19 21595.54
03/31/93 20967.93 21366.63
04/30/93 21209.61 21582.43
05/31/93 21335.38 21703.29
06/30/93 21724.58 22065.74
07/31/93 21679.59 22094.42
08/31/93 22249.24 22553.99
09/30/93 22521.68 22811.10
10/31/93 22523.15 22854.44
11/30/93 22247.45 22653.32
12/31/93 22809.20 23131.31
01/31/94 23094.41 23395.00
02/28/94 22396.64 22789.07
03/31/94 21255.44 21861.56
04/30/94 21355.13 22047.38
05/31/94 21566.34 22239.19
06/30/94 21397.00 22110.21
07/31/94 21851.43 22514.82
08/31/94 21900.79 22593.63
09/30/94 21429.71 22261.50
10/31/94 20878.93 21865.24
11/30/94 20292.89 21469.48
12/31/94 20872.77 21941.81
01/31/95 21572.13 22569.35
02/28/95 22291.08 23226.12
03/31/95 22537.80 23493.22
04/30/95 22522.76 23521.41
05/31/95 23257.95 24271.74
06/30/95 23035.52 24052.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Municipal Bond Portfolio on June 30, 1985. As the chart shows, by June 30,
1995, the value of your investment would have grown to $23,036 - a 130.36%
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 $24,052 - a 140.52%
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
6 MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990
Dividend return 2.90% 5.01% 5.83% 6.31% 6.81% 6.91%
Capital appreciation
return 7.46% -13.50% 7.34% 2.62% 5.10% 0.00%
Total return 10.36% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.32(cents) 20.88(cents) 43.64(cents)
Annualized dividend rate 5.04% 5.39% 5.62%
30-day annualized yield 4.94% - -
30-day annualized tax-equivalent yield 7.72% - -
</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 $8.02 over
the past month, $7.81 over the past six months and $7.76 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% 1995 federal tax bracket.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Tanya Roy,
Portfolio Manager of Fidelity
Municipal Bond Fund
Q. TANYA, HOW HAS THE FUND PERFORMED?
A. For the six- and 12- months periods ended June 30, 1995, Fidelity
Municipal Bond Fund had total returns of 10.36% and 7.66%, respectively.
For the same periods, the average municipal bond fund returned 9.01% and
7.68%, respectively, as tracked by Lipper Analytical Services.
Q. CAN YOU UPDATE US ON WHAT'S BEEN HAPPENING WITH THE MUNICIPAL BOND
MARKET OVER THE PAST SIX MONTHS?
A. Sure. The municipal bond market enjoyed a strong rally during the first
half of the year, buoyed by falling interest rates, slower but steady
economic growth and low inflation. During the first quarter, municipal
bonds were one of the best performing fixed-income investments, outpacing
U.S. Treasury securities. But in the second quarter, the municipal market
hit some bumps. As municipal bond prices rose in the first quarter, their
average yields fell to just below 6%, which made them less attractive
relative to other investments. Also, there was increased media attention on
various federal tax reform proposals, including a flat-tax proposal, which
would eliminate some of the benefits of investing in municipal securities.
Finally, Orange County, California, which had declared bankruptcy in late
1994, continued to experience problems. Those factors reduced relative
demand for municipals, and consequently, municipals underperformed
Treasuries in the second quarter.
Q. TURNING TO THE FUND, WHY DID IT OUTPERFORM THE AVERAGE MUNICIPAL FUND
DURING THE PAST SIX MONTHS?
PHOTO TO COME
A. Part of the fund's outperformance can be attributed to its duration,
which measures how sensitive its share price is to changes in interest
rates. In the first three months of 1994, the fund's duration was
relatively long, which meant its share price rose more than funds with
shorter durations as interest rates declined. However, when I began
managing the fund in March, I gradually reduced the fund's duration by
moving in on the yield curve - that is, selling some longer-maturity bonds
and replacing them with intermediate-term securities.
Q. WHY DID YOU BEGIN BUYING INTERMEDIATE BONDS, THOSE WITH MATURITIES
RANGING FROM FIVE TO 15 YEARS?
A. For two reasons. First, it was a part of my overall strategy to reduce
the interest rate volatility of the fund. Second, the yield curve -the
difference in yield among bonds with various maturities -was very flat on a
historical basis in the first quarter. That meant that investors weren't
rewarded with much additional yield by investing in longer-term bonds. I
believed that the curve would steepen once again, and that the difference
in yields would widen back out to a level more in line with historical
levels. That assumption proved to be correct and the yield curve did
steepen in the second quarter. That strategy benefited the fund's
performance.
Q. THERE HAS BEEN A SIGNIFICANT INCREASE IN THE FUND'S HOLDINGS IN GENERAL
OBLIGATION (GO) BONDS DURING THE MOST RECENT SIX-MONTH PERIOD. WHAT'S THE
THINKING BEHIND THAT
STRATEGY?
A. That's correct and in fact, the fund's stake in GOs doubled over the
past six months to 26.6% of the fund's investments at the end of the
period. The majority of the fund's GO holdings are state, rather than
local, GOs. The fiscal situations for many states has improved, with most
states reporting budget surpluses. That's one of the reasons why I've
increased the fund's state GO holdings. A second reason was that the GO
sector is predominant in the intermediate part of the yield curve. The
fund's increase in GOs is, in part, a result of my buying intermediate-term
bonds. It's also worth noting that I reduced the fund's stake in California
bonds during the period because I have had some concerns about the
implications of the Orange County bankruptcy on the state. As a result, the
fund's investments in California bonds declined to 7.9% of investments at
the end of the period, from 12.6% six months earlier.
Q. MEANWHILE, THE FUND'S STAKE IN ELECTRIC UTILITY BONDS HAS DECLINED OVER
THE PAST SIX MONTHS. WHY?
A. The competitive environment for electric utilities is undergoing
significant change. While it's true that there has been some decline in the
fund's holdings in this sector, I also reshuffled holdings within this
sector during the period. I selectively sold those bonds which I think will
be negatively impacted in a less regulated utility industry. However, I
continue to focus on those utilities that I believe will exhibit relative
outperformance due to their fundamentally strong competitive and financial
posture. At the end of the period, electric utility bonds made up 15.3% of
the fund's investments, down from 18.4% six months earlier.
Q. HEALTH CARE IS ANOTHER SECTOR CURRENTLY EXPERIENCING INCREASING
COMPETITION AND COST PRESSURES. WHAT DO YOU LOOK FOR WHEN YOU CHOOSE
SPECIFIC HEALTH CARE BONDS?
A. It's true that industry dynamics such as managed health care are rapidly
altering the health care landscape. Thorough credit research is an
important part of my management strategy, and this is particularly true in
the health care sector. Specifically, I look for hospitals that exhibit
sound operating performance and are market leaders in their service areas.
I also look for flexible, forward-thinking management teams.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. While it's likely that further public discussion about the flat tax will
continue to add some volatility to the municipal bond market, I don't think
we'll see a flat tax for several years, if at all. Given the municipal bond
market's strong performance year-to-date, I think that the total return on
municipal bonds will likely be derived more from income
than price change.
FUND FACTS
GOAL: high current income
free from federal income tax
with preservation of capital
START DATE: August 19, 1976
SIZE: as of June 30, 1995,
more than $1 billion
MANAGER: Tanya Roy, since
March 1995; municipal bond
analyst, 1989 to 1994; joined
Fidelity in 1989
(checkmark)
TANYA ROY ON HER
INVESTMENT STRATEGY:
"Going forward, I am aiming
for the fund to have less
performance volatility
resulting from interest rate
fluctuations. Rather than
trying to predict the direction
of interest rates, my
management style places
greater emphasis on finding
and exploiting relative value
opportunities. In practice, this
means buying or selling
securities that we judge to be
under or over valued in the
market. These opportunities
present themselves in many
different ways: through credit
(with significant input from
Fidelity's research analysts),
bond structure (such as
premium or discount
coupons), yield curve
changes, as well the
municipal versus treasury
yield relationship, and others.
These opportunities may be
short-term, but given the
nature of the municipal
market, will more likely play
out over a one-year or longer
time horizon."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
New York 11.8 11.3
California 7.9 12.6
Texas 7.6 8.4
Massachusetts 7.0 8.6
Illinois 5.8 5.6
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 26.6 13.0
Electric Revenue 15.3 18.4
Health Care 13.5 17.1
Water & Sewer 9.5 7.0
Special Tax 7.1 9.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 13.4 17.0
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 JUNE 30, 1995
6 MONTHS AGO
Years 7.7 8.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 37.9%
Aa, A 43.2%
Baa 11.3%
Caa 0.2%
Non-rated 1.4%
Short-term investments 6.0%
Aaa 33.8%
Aa, A 46.7%
Baa 13.3%
Caa 0.0%
Non-rated 1.4%
Short-term investments 4.8%
Row: 1, Col: 1, Value: 37.9
Row: 1, Col: 2, Value: 43.2
Row: 1, Col: 3, Value: 11.3
Row: 1, Col: 4, Value: 1.2
Row: 1, Col: 5, Value: 2.4
Row: 1, Col: 6, Value: 6.0
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: 2.4
Row: 1, Col: 6, Value: 4.7
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 94.0%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ALABAMA - 0.4%
Cullman Med. Park South Med. Clinic Board Rev.
(Cullman Regional Med. Ctr.) Series A, 6.50%
2/15/13 $ 4,000 $ 3,840
ALASKA - 0.1%
Valdez Marine Term. Rev. Rfdg. (Amerada Hess
Pipeline Corp.) 6.10% 2/1/24 1,500 1,421
ARIZONA - 1.6%
Arizona Trans. Brd. Hwy. Rev., Sub Series A:
Rfdg. 6% 7/1/08 3,000 3,131
6.25% 7/1/04 2,000 2,117
6.60% 7/1/08 (Pre-Refunded to 7/1/01 @ 101.5) (c) 2,250 2,498
Maricopa County Unified School Dist. #69, 0% 7/1/07
(AMBAC Insured) 3,050 1,571
Pima County Ind. Dev. Auth. Health Care Corp. Rev.
(Carondelet Health Svc., Inc.):
8% 7/1/13 (BIG Insured) (MBIA Insured)
(Pre-Refunded to 7/1/98 @ 102) (c) 890 996
8% 7/1/13 (BIG Insured) (MBIA Insured) 110 120
Salt River Proj. Agric. Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,142
17,575
ARKANSAS - 0.3%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,492
CALIFORNIA - 7.2%
California Gen. Oblig. 4.75% 9/1/23 (FGIC Insured) 3,000 2,426
California Health Facs. Fin. Auth. Rev. (Pomona Valley
Med. Ctr.) Series A, 7.375% 1/1/14 2,000 2,080
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Corrections St. Prisons) Series A, 5% 12/1/19
(AMBAC Insured) 8,750 7,536
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,095
California Statewide Commty. Dev. Ctfs. of Prtn.
(Sister of Charity Leavenworth Sys.) 5% 12/1/14 2,750 2,334
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. Rfdg.
(Wtr. Sys. Impt. Proj.) Series A:
7.50% 8/1/03 (MBIA Insured) 3,280 3,776
7% 8/1/11 (MBIA Insured) 1,475 1,650
Chino Basin Regional Fing. Auth. Rev. Rfdg. (Muni Wtr.
Dist. Swr. Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 1,890 2,119
Foothill/Eastern Trans. Toll Rd. Rev. Sr. Lien
Series A, 0% 1/1/08 2,500 1,322
Los Angeles Convention & Exhibition Ctr. Auth.
Ctfs. of Prtn. Rfdg. Series A, 7.375% 8/15/18
(Pre-Refunded to 8/15/99 @ 101.5) (c) 2,000 2,248
Orange County Dev. Agcy. Tax Allocation
(Santa Ana Heights Proj.) 6% 9/1/15 2,000 1,723
Orange County Wtr. Dist. Ctfs. of Prtn. Series A,
5.50% 8/15/14 (AMBAC Insured) 3,000 2,719
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 $ 7,820 $ 5,943
3.75% 1/1/13 1,500 1,078
Pleasanton Joint Pwr. Fin. Auth. Series A, 6.20% 9/2/17 3,190 3,094
San Francisco City & County Swr. Rev. 6.50% 10/1/21
(AMBAC Insured) 2,000 2,195
Santa Clara County Fing. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A, 7.50%
11/15/04 (AMBAC Insured) 4,560 5,318
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,455
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) (f) 8,140 9,453
7.50% 8/15/07 (FGIC Insured) 3,500 4,069
Southern California Metropolitan Wtr. Dist. Wtrwks.
5.408% 10/30/20 8,400 7,791
University of California Revs. Rfdg. (Multiple Purp. Projs.)
Series C, 5.125% 9/1/13 (AMBAC Insured) 1,200 1,084
76,508
COLORADO - 1.8%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist):
6.625% 2/1/13 11,600 11,383
6.625% 2/1/22 2,000 1,930
(PSL Health Sys. Proj.) Series A, 6.875% 2/15/23 4,000 3,980
Pueblo Single Family Mtg. Rev. Series A, 7% 8/1/10 1,990 1,990
19,283
CONNECTICUT - 0.9%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,588
Connecticut Hsg. Fin. Auth. (Hsg. Mtg. Fin. Prog.)
Sub-Series B1, 7.55% 11/15/08 1,455 1,557
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,125
9,270
DELAWARE - 0.3%
Delaware Trans. Auth. Trans. Sys. Rev.:
7% 7/1/00 1,500 1,641
7.50% 7/1/02 1,000 1,085
2,726
DISTRICT OF COLUMBIA - 0.2%
District of Columbia Gen. Oblig.:
Series A, 5.625% 6/1/02 (MBIA Insured) 1,500 1,524
Series E, 5% 6/1/04 (FGIC Insured) 1,000 963
2,487
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
FLORIDA - 3.4%
Broward County Wtr. & Swr. Util. Rev. Rfdg.
5.125% 10/1/15 (AMBAC Insured) $ 2,050 $ 1,863
Florida Board of Ed. Cap. Outlay Rfdg. Unltd. Tax (Pub. Ed.)
Series D:
5% 6/1/13 3,000 2,707
5% 6/1/15 (f) 7,165 6,386
Florida Tpk. Auth. Tpk. Rev. Rfdg. Series A:
5% 7/1/15 (FGIC Insured) 6,000 5,348
5% 7/1/16 (FGIC Insured) 5,000 4,437
Hollywood Wtr. & Swr. Rev. 6.875% 10/1/21 (FGIC Insured) 6,400 7,256
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien): (e)
6.50% 10/1/06 (FGIC Insured) 1,300 1,388
6.50% 10/1/07 (FGIC Insured) 3,200 3,400
Reedy Creek Impt. Dist. Util. Rev. Rfdg. Series 1, 5%
10/1/14 (MBIA Insured) 3,300 2,978
35,763
GEORGIA - 4.2%
Fulton County School Dist. Rev. Rfdg. 6.375% 5/1/14 2,500 2,669
Fulton County Wtr. & Swr. Rev. Rfdg. 6.375% 1/1/14
(FGIC Insured) 4,500 4,787
Georgia Gen. Oblig.:
Series B, 7.20% 3/1/04 5,870 6,772
Series C, 6.50% 4/1/06 5,000 5,562
Series D:
6.80% 8/1/03 4,400 4,950
5.90% 11/1/03 2,645 2,814
Series F:
6% 12/1/00 12,500 13,406
6.50% 12/1/05 2,335 2,592
Metro Atlanta Rapid Tran. Auth. 6.25% 7/1/18 1,315 1,381
44,933
HAWAII - 0.8%
Honolulu City & County Rev. Rfdg. & Impt.
Series B, 5% 10/1/13 5,000 4,569
Honolulu City & County Rev. Series A, 5.75% 4/1//10 4,000 4,030
8,599
ILLINOIS - 5.5%
Chicago Metropolitan Wtr. Reclamation Dist. of Greater
Chicago (Cap. Impt.), 7% 12/1/05 8,250 9,302
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(2nd Lien):
Series A, 6.375% 1/1/12 (MBIA Insured) 1,000 1,029
Series C-1, 5% 1/1/10 (MBIA Insured) 6,000 5,475
(Senior Lien) Series A, 5% 1/1/12 13,000 11,456
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A, 7%
12/15/13 (AMBAC Insured) 2,500 2,650
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ILLINOIS - CONTINUED
Illinois Edl. Facs. Auth. Rev. (Loyola Univ.)
Series A, 7.125% 7/1/21 $ 3,645 $ 3,904
Illinois Gen. Oblig. Rfdg., 6.10% 10/1/03 (MBIA Insured) 4,600 4,870
Illinois Health Facs. Auth. Rev. Rfdg.:
(Mercy Hosp. & Med. Ctr.) 9.50% 1/1/15 2,000 2,075
(Rush Presbyterian for St. Luke's Med. Ctr.) 7.40% 10/1/20 5,215 5,391
Illinois Regional Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,709
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,310
7.75% 6/1/05 (FGIC Insured) 2,405 2,832
Metropolitan Pier & Exposition Auth. Dedicated State Tax
Rev. (McCormick Place Expansion Proj.) Series A:
0% 6/15/07 (FGIC Insured) (b) 3,000 2,775
0% 6/15/08 (FGIC Insured) 3,890 1,838
Zion Wtrwks. & Swr. Rev.:
6.40% 5/1/04 150 151
6.50% 5/1/05 205 206
58,973
INDIANA - 1.0%
Indiana Bond Bank Rev. (State Revolving Fund Program)
Series A, 7% 2/1/05 1,500 1,628
Indiana Trans. Fin. Auth. Hwy. Rev. Series A, 7.25% 6/1/15 1,000 1,156
Marion County Convention & Recreational Facs. Auth. Excise
Tax Rev. Rfdg. (Lease Rental) Series A, 5.375% 6/1/13
(AMBAC Insured) 2,750 2,571
Mount Vernon Poll. Cont. Rev. (Gas Works)
Series A, 7.25% 3/1/14 4,500 4,894
10,249
LOUISIANA - 1.0%
Louisiana Gen. Oblig. Series A:
7% 5/1/02 (AMBAC Insured) 1,500 1,665
6.75% 5/15/02 (MBIA Insured) 7,780 8,548
10,213
MARYLAND - 2.5%
Baltimore Pub. Impt. Rev.:
Series A, 7% 10/15/00 (MBIA Insured) 3,730 4,094
7.25% 10/15/05 (FGIC Insured) 2,000 2,290
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Doctors Commty. Hosp.) 5.50% 7/1/24 5,700 4,524
Rfdg. (John Hopkins Health Sys.) Series 1988, 7.50%
7/1/20 6,000 6,420
(Frederick Mem. Hosp.) 5.25% 7/1/13 (FGIC Insured) 2,250 2,098
(Good Samaritan Hosp.) 5.75% 7/1/13 2,600 2,444
Montgomery County Construction Pub. Impt. Rev.
Series A, 6.30% 4/1/99 2,440 2,590
Prince Georges County Hosp. Rev. (Greater Southeast
Healthcare Sys.) 6.375% 1/1/23 2,050 1,755
26,215
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MASSACHUSETTS - 7.0%
Massachusetts Gen. Oblig. Rev.:
Rfdg. Series A, 6.25% 7/1/03 $ 13,200 $ 14,190
(Consolidated Loan) Series A, 7.50% 6/1/04 3,270 3,801
(Consolidated Loan Ltd. Tax) Series A, 5% 1/1/09 8,950 8,301
5% 8/1/06 5,000 4,875
Massachusetts Health & Ed. Facs. Auth. Rev.:
(Blood Institute) Series A, 6.50% 2/1/22 4,930 4,936
(Harvard Univ.) Series P:
6.50% 11/1/01 1,000 1,089
6.50% 11/1/02 1,000 1,091
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,837
Massachusetts Hsg. Fin. Agcy. Rev.:
(Hsg. Projs.) Series A, 6.30% 10/1/13 2,000 1,990
(Multi-Family Mtg.) Series A, 9.125% 12/1/20
(GNMA Coll.) 975 1,009
Massachusetts Ind. Fin. Agcy. Rev.:
(Harvard Commty. Health Plan) Series 1988 B,
8.125% 10/1/17 5,000 5,394
(Massachusetts Biomedical) Series A-2, 0% 8/1/08 10,000 4,400
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys. Rev.:
Rfdg. Series A, 5% 7/1/05 (AMBAC Insured) 4,100 3,972
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,440
Series A, 6.75% 7/1/08 2,500 2,666
Series B, 6.75% 7/1/08 4,995 5,326
Massachusetts Port. Auth. Rev. 12.25% 7/1/97
(Escrowed to Maturity) (c) 330 366
Massachusetts Wtr. Resources Auth. Rev. Rfdg.
Series C, 5.25% 12/1/15 5,000 4,531
74,214
MICHIGAN - 3.4%
Michigan Hosp. Fin. Auth. Rev.:
Rfdg. (Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,809
(Detroit Med. Ctr.) Series A:
Rfdg. 6.50% 8/15/18 5,000 4,925
6.25% 8/15/13 1,750 1,698
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
7.50% 4/1/10 6,000 6,330
5.70% 4/1/12 3,750 3,586
Michigan Muni. Bond Auth. Rev.:
7% 5/1/02 (AMBAC Insured) 2,425 2,698
7% 10/1/02 2,860 3,217
7% 11/1/02 (AMBAC Insured) 1,465 1,641
7% 5/1/03 (AMBAC Insured) 2,700 3,024
7% 10/1/03 1,000 1,131
7% 11/1/03 (AMBAC Insured) 1,570 1,768
Michigan Trunk Line Rev. Series A, 0% 10/1/09
(AMBAC Insured) 8,010 3,524
36,351
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 3.1%
Minnesota Gen. Oblig. Unltd. Tax Rev. 5.75%
8/1/05 $ 3,315 $ 3,448
Minnesota Hsg. Fin. Agcy. Hsg. Dev. Rev.
(Multi-Family Mtg.) Series B, 9.375% 2/1/18 580 601
Minnesota Hsg. Fin. Agcy. Rev. (Single Family Mtg.):
Series I, 6.25% 1/1/15 2,000 2,000
Series K, 6.40% 1/1/15 3,500 3,513
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,355
Rochester Health Care Facs. Rev. (Mayo Clinic)
6.026% 11/15/15 10,000 9,800
St. Paul Hsg. & Redev. Auth. Hosp. Rev. (Healtheast)
Series A, 6.625% 11/1/17 4,000 3,885
Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys.
Rev. Series B, 6% 1/1/13 5,000 5,012
32,614
MISSISSIPPI - 0.5%
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) 780 845
Mississippi Gen. Oblig. Rev. Series B, 7.50% 12/1/04 3,485 4,117
4,962
MISSOURI - 0.8%
Kirkwood Ind. Dev. Auth. Health Care Corp. Rev.
(St. Joseph Hosp.) 7% 7/1/22
(Pre-Refunded to 7/1/02 @ 102) (c) 2,000 2,288
Missouri Higher Ed. Loan Auth. (Student Loan Rev.)
Sr. Lien Series A, 5.625% 2/15/01 4,000 4,080
Missouri Gen. Oblig. Rev. (State Bldg.) Series A, 7% 4/1/05 2,360 2,687
9,055
NEBRASKA - 1.5%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.):
Series B, 5.25% 1/1/13 3,950 3,649
Series C, 5% 1/1/10 5,000 4,587
Omaha Pub. Pwr. Dist. Elec. Sys. Rev. Series 1992 B,
6.20% 2/1/17 7,200 7,515
15,751
NEVADA - 0.7%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,534
NEW JERSEY - 1.0%
Middlesex County Poll. Cont. Auth. Rev. Rfdg.
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,661
New Jersey Hsg. Fin. Agcy. Spl. Pledge Rev. Series 1,
6.75% 11/1/20 705 715
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (c) 1,470 1,773
11,149
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NEW YORK - 11.6%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4:
7.75% 7/1/01 $ 735 $ 820
7.75% 7/1/02 1,420 1,582
Nassau County Gen. Oblig. Impt. Rev. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,149
6.50% 5/1/05 (FGIC Insured) 4,490 4,917
6.50% 5/1/06 (FGIC Insured) 4,000 4,375
New York City Gen. Oblig. Rev.:
Rfdg. Series A, 7% 8/1/04 4,000 4,215
Series B, 6.75% 10/1/06 4,750 4,898
7.50% 2/1/03 10,000 10,813
8% 2/1/05 2,550 2,878
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.:
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,700
Series 1992 A, 7% 6/15/09 2,500 2,741
New York State Dorm. Auth. Rev.:
Rfdg. (State Univ. Edl. Facs.)
Series A, 5.50% 5/15/07 4,660 4,491
Series A, 5.50% 5/15/13 7,500 6,928
Series B, 5.25% 5/15/09 4,000 3,675
(City Univ. Sys.) Series C, 7.50% 7/1/10 1,000 1,141
(City Univ. Sys. Consolidated):
Series A:
5.75% 7/1/09 4,370 4,184
7.625% 7/1/20 (Pre-Refunded to 7/1/00 @ 102) (c) 2,500 2,884
Series D:
7% 7/1/09 2,000 2,185
7% 7/1/09 (FGIC Insured) 3,780 4,262
New York State Envir. Facs. Corp. Poll. Cont. Rev. Rfdg.
(State Wtr./Municipal Wtr.) 5.75% 6/15/11 2,500 2,506
New York State Local Gov't. Assistance Corp. Rfdg.:
Series B, 5.375% 4/1/16 4,955 4,521
Series C, 5.50% 4/1/17 2,500 2,316
Series D, 5.375% 4/1/14 4,900 4,496
Series E, 6% 4/1/14 6,200 6,216
Series E, 5.25% 4/1/16 8,425 7,614
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 2,198
New York State Tollway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge) 7.25% 1/1/10 5,000 5,350
Triborough Bridge & Tunnel Auth. Rev.:
Rfdg. (Gen. Purp.) Series A, 5% 1/1/12 5,000 4,531
(Convention Ctr. Proj.) Series E, 7.25% 1/1/10 5,000 5,581
123,167
NORTH CAROLINA - 0.6%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,063
7.50% 12/1/04 (AMBAC Insured) 2,865 3,341
6,404
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 2.3%
Ohio Bldg. Auth. Rev.:
(Juvenile Correctional Projs.)
Series A, 5.90% 10/1/03 (AMBAC Insured) $ 2,000 $ 2,118
(Workers Composition Bldg. A) 4.75% 4/1/14 6,000 5,145
Ohio Gen. Oblig. Rev. Rfdg. (Infrastructure Impt.)
Series R, 5.30% 9/1/02 3,120 3,206
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 3,000 3,510
(Wtr. Control Ln. Fund) 6.50% 6/1/03
(MBIA Insured) 2,940 3,208
Ohio Wtr. Dev. Auth. Rev. (Fresh Wtr. Series):
6.25% 6/1/02 (AMBAC Insured) 1,860 1,999
6.25% 6/1/03 (AMBAC Insured) 1,975 2,128
Ohio Wtr. Dev. Auth. Rev. Rfdg. & Impt. (Pure Wtr.)
5.80% 6/1/11 (AMBAC Insured) 2,510 2,497
Warren Hosp. Rev. Rfdg. (Warren Gen. Hosp. Proj.)
Series B, 7.20% 11/15/09 1,250 1,252
25,063
OKLAHOMA - 0.3%
Grand River Dam Auth. Rev. Rfdg. 6.30% 6/1/97 3,500 3,614
OREGON - 0.8%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,613
7% 12/1/04 (FGIC Insured) 2,540 2,873
Portland Gen. Oblig. Rev. Series B:
7% 6/1/98 1,210 1,289
7% 6/1/99 1,295 1,402
8,177
PENNSYLVANIA - 4.6%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 3,000 2,726
Harrisburg Auth. Wtr. Rev. 5.875% 6/18/15
(FGIC Insured) 6,000 5,850
Pennsylvania Intergovernmental Coop. Auth. Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/15 4,000 3,570
(City of Philadelphia Funding Prog.) 5.75% 6/15/15 6,000 5,805
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.
(Graduate Health Sys. Oblig.) Series A & B, 7% 7/1/05 10,670 11,190
Philadelphia Parking Auth. Parking Rev. (Arpt. Proj.)
7.375% 9/1/18 (AMBAC Insured) 1,750 1,890
Philadelphia Wtr. & Wastewtr. Rev.:
Rfdg. 5.50% 6/15/07 (MBIA Insured) 4,000 4,000
5.50% 6/15/06 (MBIA Insured) 5,000 5,044
6.25% 8/1/09 (MBIA Insured) 2,000 2,095
6.25% 8/1/10 (MBIA Insured) 2,000 2,090
7.22% 6/15/12 (FGIC Insured) INFL (d) 5,000 4,638
48,898
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PUERTO RICO - 0.2%
Puerto Rico Infrastructure Fing. Auth. Spl. Tax Rev.
Series 1988 A, 7.75% 7/1/08 $ 2,000 $ 2,163
SOUTH CAROLINA - 2.2%
South Carolina Gen. Oblig. Rev. Rfdg. (Cap. Impt.)
5.40% 3/1/99 3,665 3,775
South Carolina Hsg. Fin. & Dev. Auth. Rev.
(Homeownership Mtg. Purchase) Series B, 7.875% 7/1/15 1,750 1,840
South Carolina Jobs Ed. Dev. Auth. Hosp. Rev.
5.45% 8/1/15 (AMBAC Insured) 12,000 11,070
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A: (e)
6.25% 2/1/06 (MBIA Insured) 2,000 2,025
5.75% 1/1/10 (MBIA Insured) 4,705 4,587
23,297
TENNESSEE - 0.9%
Knox County Health, Edl. & Hsg. Facs. Auth. Rev. (Sanders
Alliance Hosp.) Series C, 7.25% 1/1/10
(MBIA Insured) 2,660 3,066
Shelby County Pub. Impt. Unltd. Tax Rev. Series A,
5.125% 3/1/18 2,770 2,445
Tennessee Gen. Oblig. Rev. Series A, 7% 3/1/04 3,500 3,972
9,483
TEXAS - 7.6%
Bexar County Gen. Oblig. Rev. Rfdg. 6.10% 6/15/99 1,325 1,360
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 40 42
Dallas - Fort Worth Reg. Arpt. Rev. Rfdg. Series A,
7.375% 5/1/12 (FGIC Insured) 1,000 1,129
Dallas Gen. Oblig. Rev.:
Rfdg. 5.375% 2/15/99 3,500 3,583
Ltd. Tax 6% 2/15/12 4,925 4,494
Harris County Cap. Appreciation Rev. Rfdg.
(Toll Road Subordinated Lien) 0% 8/1/06 4,245 2,308
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,435
Harris County Toll Road Tax & Sub Lien Rev. Series A:
7% 8/15/09 2,000 2,260
7% 8/15/10 4,200 4,751
Houston Wtr. & Swr. Sys. Rev. Rfdg. Series B, 6.375%
12/1/14 2,750 2,819
North Texas Muni. Wtr. Dist. Upper Fork Waste Wtr.
Interest Receipt Contract Rev. 5.50% 6/1/12
(FGIC Insured) 2,300 2,205
Round Rock Ind. School Dist.:
Gen. Oblig. Rfdg. 0% 2/15/08 9,800 4,741
Spl. Tax Rev. 7% 8/1/01 1,175 1,300
Spl. Tax Rev. 7% 8/1/02 1,250 1,394
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
TEXAS - CONTINUED
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation) Series B, 0% 2/1/07
(FGIC Insured) $ 10,000 $ 5,137
5% 2/1/14 7,185 6,368
Texas Gen. Oblig. Pub. Fin. Auth. Rev.:
Series A, 6.50% 10/1/04 6,000 6,615
Series C, 6.60% 10/1/97 1,660 1,739
Texas Gen. Oblig. Rev. Series B, 7.50% 10/1/98 6,000 6,548
Texas Gen. Oblig. Wtr. Dev. Rev. Series A & C, 6.50%
8/1/02 1,280 1,408
Texas Muni. Pwr. Agcy. Rev. Rfdg. 7% 9/1/02
(FGIC Insured) 2,800 3,104
Texas Pub. Fin. Auth. Rev. Rfdg. Series A, 6.50% 10/1/03 3,220 3,554
Texas Wtr. Dev. Board Rev. (Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,542
Tyler Health Facs. Dev. Corp. Hosp. Rev. (East Texas
Med. Ctr. Regional Health Sys.) Series B, 6.75%
11/1/25 4,240 4,107
80,943
UTAH - 3.5%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
5.60% 7/1/21 7,000 6,484
Rfdg. Series B:
6.50% 7/1/04 (MBIA Insured) (e) 3,000 3,191
6.50% 7/1/05 (MBIA Insured) (e) 5,000 5,306
5.55% 7/1/11 10,000 9,450
6% 7/1/16 (MBIA Insured) (e) 5,000 4,825
Jordan County School Dist. Rev. 7.625% 6/15/05 2,000 2,367
Salt Lake City Hosp. Rev. (Intermountain Health Care
Hosp., Inc.):
Rfdg. Series A, 8.125% 5/15/15
(Escrowed to Maturity) (c) 2,975 3,589
6.30% 2/15/15 2,375 2,396
37,608
VIRGINIA - 4.0%
Chesapeake Gen. Oblig. Unltd. Tax Rev.:
6.75% 5/1/04 3,000 3,337
6.75% 5/1/05 2,000 2,237
Fairfax County Pub. Impt. Rev. Series A:
7% 6/1/00 2,500 2,766
7% 6/1/01 5,000 5,594
6.20% 4/1/06 4,000 4,290
Fairfax County Wtr. Auth. Wtr. Rev. 6.125% 1/1/29
(Pre-Refunded to 1/1/00 @ 100) (c) 5,715 6,065
Hampton Museum Rev.:
5.25% 1/1/09 2,325 2,200
5.25% 1/1/14 2,000 1,825
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
VIRGINIA - CONTINUED
Henrico County Ind. Dev. Auth. Pub. Facs. Lease Rev.
(Henrico County Regional Jail Proj.):
7.50% 8/1/04 $ 2,455 $ 2,863
7.50% 8/1/05 2,590 3,037
Lynchburg Ind. Dev. Auth. Facs. 1st Mtg. Rev. Rfdg.
(Central Health, Inc.) 8.125% 1/1/16 1,250 1,355
Virginia Gen. Oblig. Pub. Facs. Rev. 6% 6/1/03 (f) 5,000 5,344
Virginia Trans. Brd. Trans. Contract Rev. (Northern Virginia
Trans. Dist. Prog.) 6% 5/15/08 2,030 2,088
43,001
WASHINGTON - 3.4%
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #1) Series D, 14.375% 7/1/01
(Escrowed to Maturity) (c) 250 338
(Nuclear Proj. #2):
Series A, 14.375% 7/1/01 3,405 4,707
5.26% 7/1/12 (f) 11,200 10,164
(Nuclear Proj. #3):
Rfdg. Series B, 0% 7/1/06 (MBIA Insured) 5,000 2,700
5.26% 7/1/12 20,000 18,050
35,959
WEST VIRGINIA - 0.3%
West Virginia School Bldg. Auth. Rev. (Cap. Impt.)
Series A, 6.75% 7/1/15 3,000 3,173
WISCONSIN - 2.0%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,533
Wisconsin Health & Edl. Facs. Auth. Rev.:
(Felician Care, Inc.) Series A, 7% 1/1/15
(AMBAC Insured) 2,000 2,125
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11
(MBIA Insured) 4,000 4,315
20,973
MULTIPLE STATES - 0.5%
Washington Metropolitan Area Trans. Auth. Gross Rev.
Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 5,665
TOTAL MUNICIPAL BONDS
(Cost $979,895) 1,000,765
MUNICIPAL NOTES (A) - 6.0%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
ARIZONA - 0.7%
Maricopa Poll. Cont. Rev. (Arizona Pub. Svcs.) Series 1994 B,
4.20%, LOC Morgan Guaranty Trust Co., VRDN $ 2,900 $ 2,900
Phoenix Gen. Oblig. Rev. Series 1995-1, 4.25%,
BPA Morgan Guaranty Trust Co., VRDN 4,200 4,200
7,100
CALIFORNIA - 0.7%
California Health Facs. Fin. Auth. Rev. Rfdg. (St. Joseph
Health Sys.) Series 1985 A, 4.10%, VRDN 1,000 1,000
Los Angeles County Metropolitan Trans. Auth. Rev.
Series 1993 A, 3.90% (MBIA Insured), VRDN 2,200 2,200
Southern California Pub. Pwr. Auth. Rev. (Transmission Proj.)
Series 1991, 3.90% (AMBAC Insured)
LOC Swiss Bank, VRDN 4,600 4,600
7,800
CONNECTICUT - 0.7%
Connecticut Dev. Auth. Poll. Cont. Rev. (Connecticut
Light & Pwr. Co. Proj.) Series 1993 A, 4.10%,
LOC Deutsche Bank, VRDN 6,800 6,800
ILLINOIS - 0.3%
Illinois Health Facs. Auth. Rev. (LaGrange Mem. Health Sys.)
Series 1990, 4.35%, LOC First Nat'l. Bank of Chicago,
VRDN 3,300 3,300
INDIANA - 0.3%
Indiana Hosp. Equip. Fing. Auth. Rev. Series 1985 A, 4.50%,
(MBIA Insured) BPA Bank of New York, VRDN 3,300 3,300
KANSAS - 0.2%
Olathe Edl. Facs. Rev. (College Assoc. Pooled Ed. Loan Prog.)
Series 1989 A, 4.05%, LOC Marine Midland Bank,
VRDN 1,500 1,500
MICHIGAN - 0.1%
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.) Series 1985,
4.50%, LOC Comerica Bank-Detroit, VRDN 1,350 1,350
MINNESOTA - 0.4%
Duluth Tax Increment Rev. (Lake Superior Paper Co.)
Series 1985, 4.05%, LOC Nat'l. Australia Bank, VRDN 1,000 1,000
Minneapolis Hsg. Dev. Rev. Rfdg. Series 1989, 3.90%,
LOC First Bank NA, VRDN 3,000 3,000
4,000
NEW YORK - 0.2%
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series 1994 C, 4.25% (FGIC Insured), VRDN 2,300 2,300
MUNICIPAL NOTES (A) - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 0.3%
Dayton Spl. Facs. Rev. Rfdg. (Emery Air Freight Corp. Proj.)
Series 1988 C, 4.50%, LOC Mellon Bank NA, VRDN $ 3,400 $ 3,400
PENNSYLVANIA - 0.5%
Schuylkill County Ind. Dev. Auth. Resource Recovery Rev.
(Westwood Energy Prop.) Series 1985, 4.45%,
LOC Fuji Bank, VRDN 5,700 5,700
WISCONSIN - 1.6%
Wisconsin Gen. Oblig. TRAN 4.50% 6/17/96 17,000 17,130
TOTAL MUNICIPAL NOTES
(Cost $63,682) 63,680
TOTAL INVESTMENTS - 100%
(Cost $1,043,577) $ 1,064,445
SECURITY TYPE ABBREVIATIONS
INFL - Inverse Floating Rate Security
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) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(c) Security collateralized by an amount sufficient to pay interest and
principal.
(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 purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(f) A portion of the security was pledged to cover margin requirements for
delayed delivery purchases. At the period end, the value of securities
pledged amounted to $27,241,000.
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 77.2% AAA, AA, A 81.6%
Baa 11.1% BBB 8.7%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.2% 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%. FMR has
determined that unrated debt securities that are lower quality account for
0.0% 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:
General Obligation 26.6%
Electric Revenue 15.3
Health Care 13.5
Others
(individually less than 10%) 44.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,043,739,000. Net unrealized appreciation aggregated
$20,706,000, of which $33,157,000 related to appreciated investment
securities and $12,451,000 related to depreciated investment securities.
At December 31, 1994, the fund elected 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.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $1,043,577) - 9. $ 1,064,445
See accompanying schedule
10.Receivable for investments sold 11. 15,212
12.Interest receivable 13. 18,521
14. 15.TOTAL ASSETS 16. 1,098,178
17.LIABILITIES 18. 19.
20.Payable to custodian bank $ 7 21.
22.Payable for investments purchased 25,327 23.
Regular delivery
24. Delayed delivery 24,524 25.
26.Payable for fund shares redeemed 1,948 27.
28.Distributions payable 1,339 29.
30.Accrued management fee 363 31.
32.Other payables and accrued expenses 178 33.
34. 35.TOTAL LIABILITIES 36. 53,686
37.38.NET ASSETS 39. $ 1,044,492
40.Net Assets consist of: 41. 42.
43.Paid in capital 44. $ 1,058,817
45.Accumulated undistributed net realized gain (loss) 46. (35,193)
on investments
47.Net unrealized appreciation (depreciation) 48. 20,868
on investments
49.50.NET ASSETS, for 131,938 shares outstanding 51. $ 1,044,492
52.53.NET ASSET VALUE, offering price and redemption 54. $7.92
price per share ($1,044,492 (divided by) 131,938 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
55.56.INTEREST INCOME 57. $ 31,526
58.EXPENSES 59. 60.
61.Management fee $ 2,158 62.
63.Transfer agent, accounting and custodian fees 797 64.
and expenses
65.Non-interested trustees' compensation 2 66.
67.Registration fees 32 68.
69.Audit 21 70.
71.Legal 3 72.
73. 74.TOTAL EXPENSES 75. 3,013
76.77.NET INTEREST INCOME 78. 28,513
79.REALIZED AND UNREALIZED GAIN (LOSS) 81. 82.
80.Net realized gain (loss) on:
83. Investment securities (1,570) 84.
85. Futures contracts (1,865) (3,435)
86.Change in net unrealized appreciation (depreciation) 87. 88.
on:
89. Investment securities 79,883 90.
91. Futures contracts (424) 79,459
92.93.NET GAIN (LOSS) 94. 76,024
95.96.NET INCREASE (DECREASE) IN NET ASSETS 97. $ 104,537
RESULTING FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
98.INCREASE (DECREASE) IN NET ASSETS
99.Operations $ 28,513 $ 63,944
Net interest income
100. Net realized gain (loss) (3,435) (16,032)
101. Change in net unrealized appreciation 79,459 (150,096)
(depreciation)
102. 104,537 (102,184)
103.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
104.Distributions to shareholders (28,513) (63,944)
From net interest income
105. From net realized gain - (835)
106. In excess of net realized gain - (18,527)
107. 108.TOTAL DISTRIBUTIONS (28,513) (83,306)
109.Share transactions 308,030 792,026
Net proceeds from sales of shares
110. Reinvestment of distributions 18,422 55,051
111. Cost of shares redeemed (363,293) (917,928)
112.113. (36,841) (70,851)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
114. 39,183 (256,341)
115.TOTAL INCREASE (DECREASE) IN NET ASSETS
116.NET ASSETS 117. 118.
119. Beginning of period 1,005,309 1,261,650
120. End of period $ 1,044,492 $ 1,005,309
121.OTHER INFORMATION 123. 124.
122.Shares
125. Sold 39,620 99,644
126. Issued in reinvestment of distributions 2,354 7,067
127. Redeemed (46,534) (115,326)
128. Net increase (decrease) (4,560) (8,615)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
129. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 199
5
130. (UNAUDITED) 1994 1993C 1992 1991 1990
131.SELECTED PER-SHARE DATA
132.Net asset value, $ 7.370 $ 8.690 $ 8.500 $ 8.470 $ 8.130 $ 8.130
beginning of
period
133.Income from .209 .455 .487 .519 .526 .541
Investment Operations
Net interest income
134. Net realized and .550 (1.180) .600 .210 .410 -
unrealized gain (loss)
135. Total from .759 (.725) 1.087 .729 .936 .541
investment operations
136.Less Distributions (.209) (.455) (.487) (.519) (.526) (.541)
From net interest
income
137. From net realized - (.010) (.410) (.180) (.070) -
gain on investments
138. In excess of net - (.130) - - - -
realized gain on
investments
139. Total distributions (.209) (.595) (.897) (.699) (.596) (.541)
140.Net asset value, $ 7.920 $ 7.370 $ 8.690 $ 8.500 $ 8.470 $ 8.130
end of period
141.TOTAL RETURN B 10.36% -8.49% 13.17% 8.93% 11.91% 6.91%
142.RATIOS AND SUPPLEMENTAL DATA
143.Net assets, end of $ 1,044 $ 1,005 $ 1,262 $ 1,192 $ 1,163 $ 1,070
period (in millions)
144.Ratio of expenses .57%A .53% .49% .49% .50% .50%
to average net assets
145.Ratio of net interest 5.38%A 5.68% 5.51% 6.11% 6.35% 6.71%
income to average
net assets
146.Portfolio turnover 101%A 95% 74% 53% 33% 49%
rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, losses deferred due to wash sales, futures and
options and excise tax regulations.
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
2. OPERATING POLICIES -
CONTINUED
DELAYED DELIVERY TRANSACTIONS -
CONTINUED
negotiated. The market value of the securities purchased or sold on a
when-issued or forward commitment basis are identified as such in the
fund's schedule of investments. The fund may receive compensation for
interest forgone in the purchase of a delayed delivery security. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. Losses may arise due to changes in the market
value of the underlying securities or if the counterparty does not perform
under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $500,747,000 and $554,492,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $175,592,000 and $227,459,000, 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 .1200% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fee was equivalent to an annualized rate of .41% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $3,000 for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB 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. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the fund pays account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the fund paid fees based on the type, size, number of
accounts and the 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 $619,000 and $173,000,
respectively.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
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
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
SEMIANNUAL REPORT
JUNE 30, 1995
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 17 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 21 How the fund has done over time.
FUND TALK 23 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 25 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 26 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 31 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 35 Notes to the financial statements.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
SPARTAN 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
securities 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, the past five years and life of fund
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Spartan Pennsylvania Municipal
High Yield Portfolio 9.80% 8.73% 51.85% 95.03%
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% n/a
Average Pennsylvania
Municipal Bond Fund 9.34% 7.74% 46.83% n/a
Consumer Price Index 1.87% 3.04% 17.40% 39.27%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on August 6, 1986. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond index - a broad gauge of
the municipal bond market. To measure how the fund's performance stacked up
against its peers, you can compare it to the average Pennsylvania municipal
bond fund, which reflects the performance of 58 Pennsylvania municipal bond
funds with similar objectives tracked by Lipper Analytical Services over
the past six months. 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 JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania Municipal
High Yield Portfolio 8.73% 8.71% 7.79%
Lehman Brothers Municipal Bond Index 8.82% 8.26% n/a
Average Pennsylvania
Municipal Bond Fund 7.74% 7.98% n/a
Consumer Price Index 3.04% 3.26% 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: HMunicipal Bond Ind
08/31/86 10000.00 10000.00
09/30/86 10054.66 10025.10
10/31/86 10247.93 10198.23
11/30/86 10389.97 10400.26
12/31/86 10329.57 10371.56
01/31/87 10619.05 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 9511.24 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 9312.08 10077.40
10/31/87 9290.88 10113.07
11/30/87 9561.05 10377.12
12/31/87 9737.58 10527.70
01/31/88 10226.61 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 10481.86 11173.06
08/31/88 10499.01 11182.90
09/30/88 10728.60 11385.31
10/31/88 11039.47 11586.26
11/30/88 10943.16 11480.13
12/31/88 11121.73 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 11973.30 12533.72
08/31/89 11860.42 12411.02
09/30/89 11821.58 12373.78
10/31/89 11984.65 12524.74
11/30/89 12126.32 12743.93
12/31/89 12212.13 12848.43
01/31/90 12144.68 12788.04
02/28/90 12252.26 12901.85
03/31/90 12254.26 12905.72
04/30/90 12074.27 12812.80
05/31/90 12375.68 13092.12
06/30/90 12488.22 13207.33
07/31/90 12651.31 13401.48
08/31/90 12468.05 13207.16
09/30/90 12531.05 13215.08
10/31/90 12711.91 13454.28
11/30/90 12984.68 13724.71
12/31/90 13091.25 13785.09
01/31/91 13261.54 13969.82
02/28/91 13338.09 14091.35
03/31/91 13367.32 14096.99
04/30/91 13577.22 14284.48
05/31/91 13739.14 14411.61
06/30/91 13670.82 14397.20
07/31/91 13874.87 14572.85
08/31/91 14065.40 14765.21
09/30/91 14228.90 14957.15
10/31/91 14351.82 15091.77
11/30/91 14390.41 15134.03
12/31/91 14726.74 15459.41
01/31/92 14766.47 15494.96
02/29/92 14774.42 15499.61
03/31/92 14773.31 15505.81
04/30/92 14928.20 15643.81
05/31/92 15114.57 15828.41
06/30/92 15358.33 16094.33
07/31/92 15841.49 16577.16
08/31/92 15676.41 16414.70
09/30/92 15760.34 16521.40
10/31/92 15518.10 16359.49
11/30/92 15887.98 16652.32
12/31/92 16068.91 16822.18
01/31/93 16280.61 17017.31
02/28/93 16918.95 17633.34
03/31/93 16726.18 17446.43
04/30/93 16889.06 17622.64
05/31/93 16992.36 17721.32
06/30/93 17280.07 18017.27
07/31/93 17258.90 18040.69
08/31/93 17692.01 18415.94
09/30/93 17952.11 18625.88
10/31/93 17961.11 18661.27
11/30/93 17807.71 18497.05
12/31/93 18186.82 18887.34
01/31/94 18423.87 19102.65
02/28/94 17976.51 18607.89
03/31/94 17185.54 17850.55
04/30/94 17275.00 18002.28
05/31/94 17469.46 18158.90
06/30/94 17440.66 18053.58
07/31/94 17721.82 18383.96
08/31/94 17782.40 18448.30
09/30/94 17530.24 18177.11
10/31/94 17228.57 17853.56
11/30/94 16818.79 17530.41
12/31/94 17270.98 17916.08
01/31/95 17800.09 18428.48
02/28/95 18338.60 18964.75
03/31/95 18597.75 19182.85
04/30/95 18653.00 19205.86
05/31/95 19151.33 19818.53
06/30/95 18964.06 19646.11
$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 June 30, 1995, the value of
your investment would have grown to $18,964 - a 89.64% increase on your
initial investment. This assumes you still own the fund on June 30, 1995,
and therefore does not include the effect of the $5 account closeout fee.
For comparison, look at how the Lehman Brothers Municipal Bond index did
over the same period. With dividends reinvested, the same $10,000 would
have grown to $19,646 - a 96.46% 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
SIX MONT
HS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1995 1994 1993 1992 1991 1990
Dividend returns 3.26% 5.73% 6.68% 7.00% 7.53% 7.40%
Capital appreciation
returns 6.54% -10.77% 6.49% 2.11% 4.95% -0.21%
Total returns 9.80% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.83(cents) 30.65(cents) 63.63(cents)
Annualized dividend rate 5.67% 6.09% 6.31%
30-day annualized yield 5.68% - -
30-day annualized tax-equivalent yield 9.13% - -
</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 $10.37 over
the past month, $10.14 over the past six months and $10.08 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 1995 federal and state tax bracket. A
portion of the fund's income may be subject to the alternative minimum tax.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Steven Harvey, Portfolio Manager of Spartan
Pennsylvania Municipal High Yield
Portfolio
Q. STEVE, HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A. For the six months ended June 30, 1995, the fund returned 9.80%,
compared to the average Pennsylvania municipal bond fund which returned
9.34%, as tracked by Lipper Analytical Services. For the year ended June
30, 1995, the fund returned 8.73%, while the average Pennsylvania municipal
bond fund returned 7.74%, again according to Lipper.
Q. MUNICIPAL BONDS GOT OFF TO A GOOD START IN 1995. WHAT WAS BEHIND THE
MARKET'S PERFORMANCE?
A. The primary fuel was that interest rates fell during the period and, as
a result, taxable and tax-free bond prices rose. For the first quarter of
1995, municipal bonds enjoyed an especially impressive rally, ending the
quarter as the best performing fixed-income category. Increased demand and
low supply were two of the factors helping municipals to outperform
Treasury bonds. But in the second quarter, the rally stalled. One reason
was because yields on long-term municipals fell below 6%, which was an
important barrier. That level of income became less attractive relative to
other investments, and demand for municipals declined. Then, in late April,
there were heightened concerns about how various tax-reform proposals -
including a flat-tax proposal - might impact the attractiveness of
municipal bonds. Finally, in late June, the residents of Orange County,
California, failed to pass a sales tax proposal designed to help dig the
county out of bankruptcy. While that event didn't directly impact the
fund's investments, it's important to understand that it cast a pall over
the entire municipal bond market by limiting demand for municipal bonds.
But despite some of those rough spots, municipals turned in strong
performance for the six-month period.
Q. WHAT HELPED THE FUND OUTPACE THE AVERAGE?
A. The fund's stake in bonds related to Philadelphia - including bonds
issued by the Pennsylvania Convention Center and the Philadelphia Municipal
Authority - were among its best performers during the period. They rose
after all three of the major rating agencies returned Philadelphia-related
bonds to investment-grade quality. The fund's duration was another factor
which helped performance. During most of the first quarter of 1995 - when
the rally was its strongest - the fund's duration was long relative to
other funds of its type. Generally speaking, the longer a fund's duration,
the more its share price will rise when interest rates fall, and,
conversely, fall when interest rates rise. As interest rates declined,
having a long duration helped performance.
Q. DID YOU CHANGE THE FUND'S DURATION IN THE SECOND QUARTER?
A. Yes, I shortened it, thereby making the fund's share price less
sensitive to interest rate changes. When municipal bonds hit some rough
spots in the spring, having a shorter duration was a plus. The primary
reason I shortened duration was because the yield curve, or the difference
in yields among bonds of various maturities, was relatively flat between
bonds with 10- and 30-year maturities. When the curve is flat, investors
may not be rewarded with much additional yield by investing in very
long-maturity bonds. So I sold some bonds that mature in more than 20
years, locked in profits, and used the proceeds to buy more bonds in the
six- to 12-year maturity range. By doing so, the fund's duration shortened.
Q. AT ABOUT THE SAME TIME, YOU REDUCED THE FUND'S STAKE IN LOWER-QUALITY
BONDS. ARE THE SHORTER DURATION AND YOUR MOVE TOWARD HIGHER-QUALITY BONDS
RELATED?
A. In a way. Many of the longer-term bonds I sold also happened to be
lower-quality bonds. Here's why: Recently there has been a very limited
supply of lower-quality bonds available. And, during the rally, these bonds
were in fairly high demand. Limited supply and heavy demand translated into
generally higher prices. So once again I was able to use the market's
strength to lock in profits by selling lower- quality bonds, and at the
same time, replacing them with higher-quality issues. The credit upgrade of
Philadelphia-related bonds, which I mentioned earlier, also helped to
account for the increased stake in higher-quality bonds.
Q. THE ENVIRONMENT FOR HEALTH CARE ORGANIZATIONS IS BECOMING INCREASINGLY
MORE DIFFICULT. WHAT FACTORS DO YOU CONSIDER WHEN CHOOSING HEALTH-CARE
BONDS - WHICH MADE UP 17.5% OF THE FUND'S INVESTMENTS AT THE END OF THE
PERIOD?
A. It's true that competitive pressures continue to build, and may
ultimately result in the closing of some hospitals. But because health care
bonds can offer relatively high yields, many are still attractive. What I
look for, with the help of Fidelity's research staff, are hospitals and
other health care organizations that have a strong market share, successful
alliances with health maintenance organizations (HMOs), and the ability to
provide a continuum of care at an attractive cost. In my view, one of the
best ways to identify the future winners is to ascertain the quality of
management. I look for management teams that are thinking now about what
the health care scene will be like in 10 years, and are making changes to
prepare for that environment. As always, we will continue to review and
update our opinions to reflect changes in the industry.
Q. AFTER HAVING SUCH A STRONG RUN IN THE FIRST HALF OF 1995, WHAT'S THE
OUTLOOK FOR MUNICIPAL BONDS?
A. There are a number of things to consider. First is the interest rate
environment. For the balance of the year, I don't think that interest rates
will fall as dramatically as they did in the first half. Rather, interest
rates will probably remain within a narrow band. Therefore, it's unlikely
that bond prices will rise as much either. With that in mind, the fund's
returns will probably derive largely from its level of income, rather than
bond price appreciation. Continued talk of tax reform could add some
volatility to municipal bond prices. But my view is that the chances that a
flat tax will be enacted are remote. On a more positive note, the supply of
municipal bonds should continue to remain low. Combined with flat or lower
interest rates, and at least constant demand, a limited supply could help
the municipal bond market for the remainder of the year.
FUND FACTS
GOAL: to seek high current
income exempt from federal
and Pennsylvania state
income taxes by investing
mainly in longer-term,
investment-grade municipal
securities
START DATE: August 6, 1986
SIZE: as of June 30, 1995,
more than $273 million
MANAGER: Steven Harvey,
since 1993; manager,
Fidelity Ohio Tax-Free High
Yield Portfolio since 1994;
Fidelity Minnesota Tax-Free
and Spartan Maryland
Municipal Income Portfolios
since 1993; joined Fidelity in
1986
(checkmark)
STEVE HARVEY ON
PENNSYLVANIA'S ECONOMY AND
FISCAL CONDITION:
"Pennsylvania's economy and
fiscal situation ultimately will
dictate the overall credit
quality of bonds issued in the
state. That said, both
elements were pretty strong
at the end of June. Over the
past 15 years, the
Pennsylvania economy has
gone through a period of
significant restructuring. In
1980, manufacturing jobs
accounted for roughly 30% of
the state's employment base.
Presently, manufacturing jobs
make up only about 18% of
the state's jobs, while the
number of health care and
technology jobs has risen.
The net result is that the
state's economy is much
more resilient than it was in
the 1980s, and will be less
sensitive to a recession.
Meanwhile, the state's fiscal
situation is quite positive. For
the past three years, the
budget has actually produced
a surplus."
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 19.0 16.1
Health Care 17.5 18.6
Water & Sewer 14.9 15.9
Industrial Development 8.0 8.8
Special Tax 7.4 9.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 16.2 18.7
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 JUNE 30, 1995
6 MONTHS AGO
Years 8.0 9.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 37.2%
Aa, A 14.3%
Baa 20.3%
Ba, B 4.2%
Non-rated 16.3%
Short-term investments 7.7%
Aaa 31.3%
Aa, A 5.3%
Baa 28.7%
Ba, B 11.1%
Non-rated 22.3%
Short-term investments 1.3%
Row: 1, Col: 1, Value: 37.2
Row: 1, Col: 2, Value: 14.3
Row: 1, Col: 3, Value: 20.3
Row: 1, Col: 4, Value: 4.2
Row: 1, Col: 5, Value: 16.6
Row: 1, Col: 6, Value: 7.7
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
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 15.3% AND 20.7% OF THE FUND'S
INVESTMENTS AT JUNE 30, 1995 AND DECEMBER 31, 1994, RESPECTIVELY.
SPARTAN PENNSYLVANIA MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 92.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 88.3%
Aliquippa Unltd. Tax Gen. Oblig. 8.25%
9/15/01 - $ 1,430,000 $ 1,471,113
Allegheny County Gen. Oblig. 0% 4/1/11
(MBIA Insured) Aaa 2,560,000 1,033,600
Allegheny County Hosp. Dev. Auth. Rev.:
Rfdg. (South Side Hosp.) Series A,
8.75% 6/1/10 BBB 3,750,000 3,918,750
(Allegheny Valley School) 8.50% 2/1/15 Ba1 3,000,000 3,078,750
Allegheny County Ind. Dev. Auth. Rev.
(YMCA Pittsburgh Proj.)
Series 1990, 8.75% 3/1/10 - 2,630,000 2,837,113
Allegheny County Residential Fin. Auth. Single
Family Mtg. Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 215,000 223,063
Series 1990, 7.95% 6/1/23
(GNMA Coll.) (b) Aaa 1,540,000 1,609,300
Allegheny County San. Auth. Swr. Rev.:
Series B, 7.50% 12/1/16 (FGIC Insured) Aaa 750,000 829,688
0% 12/1/12 (FGIC Insured) Aaa 2,260,000 791,000
Beaver County Ind. Dev. Auth. Rev. Rfdg.
(Washington Plaza Assoc. Proj.) 6% 2/15/07 Ba3 1,595,000 1,563,100
Butler County Ind. Dev. Auth. 1st Mtg. Rev. Rfdg.
(Sherwood Oaks Lifetime Care Commty. Proj.)
Series A, 8.75% 6/1/16 A- 675,000 716,344
Clarion County Hosp. Auth. Hosp. Rev.
(Clarion Hosp. Proj.):
Rfdg. 8.10% 7/1/12 BBB- 6,000,000 6,292,500
8.50% 7/1/13 BBB- 2,885,000 3,097,769
8.50% 7/1/21 BBB- 1,665,000 1,779,469
Clearfield County Ind. Dev. Auth. Ind. Dev. Rev.
Rfdg. (Washington Plaza Assoc. Proj.)
7% 12/1/06 Ba2 1,715,000 1,809,325
Dauphin County Ind. Dev. Auth. Wtr. Dev. Rev.
(Dauphin Consolidated Wtr. Supply)
Series A, 6.90% 6/01/24 A3 1,000,000 1,076,250
Delaware County Auth. Hosp. Rev. (Crozer-Chester):
6% 12/15/09 Baa1 1,000,000 965,000
6% 12/15/20 Baa1 1,000,000 908,750
Delaware County Auth. Rev.
(First Mtg. Riddle Village Proj.) :
Series 1992, 8.75% 6/1/10 - 2,870,000 3,038,613
7% 6/1/00 - 1,200,000 1,203,000
8.25% 6/1/22 - 2,800,000 2,817,500
9.25% 6/1/22 - 1,800,000 1,944,000
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resources Recovery Proj.) Series A, 8.10%
12/1/13, LOC Swiss Bank Aa3 1,400,000 1,473,500
Erie County Ind. Dev. Auth. Rev. Rfdg.
(Beverly Enterprises Proj.) 6.875% 10/1/02 - 550,000 542,438
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Harrisburg Auth. Wtr. Rev. 5.875% 6/18/15
(FGIC Insured) Aaa $ 6,000,000 $ 5,850,000
Jenks Township Muni. Auth. Rev.
(Abraxas Group, Inc.) 8% 4/1/18 - 6,605,000 6,530,694
Keystone Oaks School Dist. 5.829% 9/1/16
(AMBAC Insured) Aaa 5,900,000 5,745,125
Lehigh County Gen. Purp. Auth. Rev.
(Hosp. Healtheast, Inc.) Series B, 9% 7/1/15
(Pre-Refunded 7/1/97 @ 102) (d) A1 1,000,000 1,108,750
McCandless Ind. Dev. Auth. Ind. Dev. Rev.
(Kroger Co.) 7.375% 10/15/07 Ba2 2,100,000 2,260,125
McKeesport Area School Dist. Rfdg.
Series C, 5% 4/1/13 A 1,000,000 888,750
Montgomery County Higher Ed. & Health
Auth. Hosp. Rev. (United Hosp. Proj.)
Series A, 10% 11/1/05 Ba1 675,000 695,250
Montgomery County Ind. Dev. Auth.
Health Facs. Rev. Bonds (Ecri Proj.)
Series 1993, 6.85% 6/1/13 - 2,165,000 2,143,350
Northumberland County Auth. Commonwealth
Lease Rev. 0% 10/15/10 (MBIA Insured) Aaa 1,000,000 422,500
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 Baa 9,150,000 9,230,062
6.70% 9/1/14 Baa 3,965,000 4,014,562
6.75% 9/1/19 Baa 3,420,000 3,462,750
Pennsylvania Convention Ctr. Rev.
Series A, 6% 9/1/19 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 9,225,000 9,570,937
Pennsylvania Gen. Oblig. Rev.:
Rfdg., Series 1-A, 6.75%, 1/1/11 A1 1,100,000 1,164,625
Series A, 6.75% 5/1/98 A1 1,000,000 1,057,500
Series 1, 6% 9/15/98 A1 2,000,000 2,082,500
Series 2, 0% 7/1/07 (AMBAC Insured) Aaa 1,770,000 893,850
Series 3, 6.10% 11/15/04
(FGIC Insured) Aaa 1,000,000 1,061,250
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev.: (b)
6.173% 3/1/22 (AMBAC Insured) Aaa 4,000,000 3,885,000
6.854% 9/1/26 (AMBAC Insured) Aaa 2,000,000 2,055,000
Pennsylvania Higher Edl. Facs. Auth.
College & Univ. Rev.:
(Univ. of Pennsylvania):
Rfdg. Series A, 6.50% 9/1/02 Aa 1,000,000 1,080,000
Series A, 7% 9/1/01 Aa 2,000,000 2,202,500
Series B, 7% 9/1/05 Aa 2,000,000 2,262,500
(Pennsylvania College of Optometry)
9% 2/1/08 - 1,240,000 1,284,950
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Higher Edl. Facs. Auth. Rev.
(Pennsylvania Med. College Proj.)
Series A, 8.375% 3/1/11 Baa $ 900,000 $ 974,250
Pennsylvania Hsg. Fin. Agcy. Single Family Mtg.:
Series V, 7.80% 4/1/16 Aa 500,000 516,250
Series 1990-27, 8.15% 10/1/21 (b) Aa 990,000 1,039,500
Pennsylvania Ind. Dev. Auth. Rev. Econ. Dev.:
7% 1/1/07 (AMBAC Insured) Aaa 1,500,000 1,696,875
7% 7/1/07 (AMBAC Insured) Aaa 3,650,000 4,146,062
5.80% 1/1/08 (AMBAC Insured) Aaa 3,000,000 3,007,500
5.80% 7/1/09 (AMBAC Insured) Aaa 1,000,000 1,013,750
Pennsylvania Intergovernmental Coop. Auth.
Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/13 A 7,500,000 6,693,750
(City of Philadelphia Funding Prog.)
5.75% 6/15/15 A 9,500,000 9,191,250
Pennsylvania Tpk. Commission Tpk. Rev.
Series J, 7.15% 12/1/11 (FGIC Insured)
(Pre-Refunded to 12/1/01 @ 102) (d) Aaa 3,000,000 3,446,250
Philadelphia Auth. Ind. Dev. Rev.:
(Long Term Care - Maplewood) 8% 1/1/24 - 4,835,000 4,720,169
(Refrigerated Enterprises Proj.)
9.05% 12/1/19 (b) - 7,000,000 7,516,250
Philadelphia Auth. Ind. Impt. Rev. Rfdg.
(Encore Nursing Ctr. Stenton Proj.)
7.50% 11/1/02 - 1,100,000 1,123,375
Philadelphia Gas Wks. Rev. Rfdg.
Series 14-A, 6.375% 7/1/14 Baa1 1,900,000 1,895,250
Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.
(Graduate Health Sys.):
Series A, 6.25% 7/1/18 Baa1 4,400,000 4,009,500
Series B, 6.25% 7/1/13 Baa1 1,000,000 925,000
Philadelphia Muni. Auth. Rev.
(Muni. Svcs. Bldg. Lease):
Rfdg. Series D, 6.25% 7/15/13 Baa 3,000,000 2,925,000
0% 3/15/11 (CGIC Insured) Aaa 1,000,000 396,250
0% 3/15/14 (CGIC Insured) Aaa 7,360,000 2,401,200
Philadelphia Redev. Auth. Hsg. Rev.
Sub-Series 3, 8.125% 8/1/26 (GNMA Coll.) AAA 45,000 50,119
Philadelphia Wtr. & Swr. Rev. (Cap. Appreciation)
14th Series, 0% 10/1/08 (MBIA Insured) Aaa 5,300,000 2,510,875
Philadelphia Wtr. & Wastewtr. Rev.:
Rfdg. 5.50% 6/15/07 (AMBAC Insured) Aaa 7,000,000 7,000,000
Rfdg. 5% 6/15/12 (FGIC Insured) Aaa 1,845,000 1,648,969
6.75% 8/1/04 (MBIA Insured) Aaa 2,085,000 2,324,775
6.75% 8/1/05 (MBIA Insured) Aaa 1,610,000 1,797,162
Pittsburgh Gen. Oblig. Rfdg., Series A,
5.50% 9/1/14 (AMBAC Insured) Aaa 5,310,000 5,104,237
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pittsburgh School Dist. Series B:
0% 8/1/07 (AMBAC Insured) Aaa $ 2,610,000 $ 1,340,887
0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 965,000
Pittsburgh Urban Redev. Auth. Mtg. Rev.
Series A, 7.625% 10/1/17 A1 995,000 1,021,119
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr.
Sys. Rev., Series 1993, 6.50% 9/1/13
(FGIC Insured) Aaa 15,705,000 16,706,194
Schuylkill County Ind. Dev. Auth. 1st Mtg. Rev.
(Valley Health Concerns)
Series A, 8.75% 3/1/12 - 1,500,000 1,522,500
Scranton Parking Auth. Parking Rev. 8.125%
9/15/14, LOC Northeastern Bank A 500,000 543,750
Somerset County Hosp. Auth. 1st Mtg. Rev.
(Health Care GF):
8.40% 6/1/09 - 1,000,000 1,003,750
8.50% 6/1/24 - 2,005,000 2,020,037
Southeastern Pennsylvania Trans. Auth. Spl. Rev.
Series A:
6.50% 3/1/03 (FGIC Insured) Aaa 2,520,000 2,727,900
6.50% 3/1/04 (FGIC Insured) Aaa 1,485,000 1,614,937
Washington County Ind. Dev. Auth. Ind. Dev.
Rev. Rfdg. (Kroger Co.) 7.50%
5/1/99 Ba2 1,000,000 1,062,500
Westmoreland County Gen. Oblig. Rfdg.
Series G, 0% 12/1/09 (FGIC Insured) Aaa 2,490,000 1,080,037
Westmoreland County Ind. Dev. Auth. Rev.
Rfdg. (Kroger Co.) 7.25% 9/1/99 Ba2 1,000,000 1,058,750
Westmoreland County Muni. Auth. Muni.
Svc. Rev., Series K, 0% 7/1/13
(FGIC Insured) (Escrowed to Maturity) (d) Aaa 3,500,000 1,211,875
Wilkins Area Ind. Dev. Auth. 1st Mtg. Rev.
(Fairview Extended Care)
Series A, 10.25% 1/1/21 - 2,500,000 2,753,125
Wilson Area School Dist. (Cap. Appreciation):
0% 5/15/09 (AMBAC Insured) Aaa 3,275,000 1,469,656
0% 5/15/10 (AMBAC Insured) Aaa 3,280,000 1,381,700
0% 5/15/11 (AMBAC Insured) Aaa 3,500,000 1,391,250
Wyoming Ind. Dev. Auth. Poll. Cont. Rev.
Rfdg. (Proctor & Gamble Paper Proj.)
5.55% 5/1/10 Aa2 5,000,000 4,856,250
York City Unltd. Tax Gen. Oblig. Swr.
Auth. Swr. Rev., 0% 12/1/12
(MBIA Insured) Aaa 3,235,000 1,148,425
240,925,675
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
PUERTO RICO - 3.7%
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Rev. Rfdg. Series W, 5.50% 7/1/13 Baa1 $ 9,000,000 $ 8,493,750
Puerto Rico Commonwealth Urban
Renewal & Hsg. Corp. Rfdg. 7.875%
10/1/04 Baa1 1,000,000 1,115,000
Puerto Rico Elec. Pwr. Auth. Pwr. Rev.
7.125% 7/1/14 Baa1 370,000 399,600
10,008,350
GUAM - 0.3%
Guam Pwr. Auth. Rev. Series A, 5.25%
10/1/13 BBB 1,000,000 868,750
TOTAL MUNICIPAL BONDS
(Cost $247,185,918) 251,802,775
MUNICIPAL NOTES (A) - 7.7%
PENNSYLVANIA - 7.7%
Pennsylvania Energy Dev. Auth. Energy Dev. Rev.
(B&W Edensburg Proj.) Series 1986, 4.35%,
LOC Swiss Bank Corp., VRDN (b) VMIG 1 5,300,000 5,300,000
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev. Series 1988 A, 4.10%,
LOC SLMA, VRDN (b) VMIG 1 5,700,000 5,700,000
Philadelphia TRAN 4.50% 6/27/96 MIG 1 3,000,000 3,015,870
Sayre Health Care Facs. Auth. Hosp. Rev.
(VHA of Pennsylvania) Series 1985 A, 3.95%
(AMBAC Insured) BPA First Nat'l. Bank of
Chicago, VRDN A-1 1,300,000 1,300,000
Schuylkill County Ind. Dev. Auth. Resources
Recovery Rev. (Westwood Energy Properties)
Series 1985, 4.45%, LOC Fuji Bank, VRDN P-1 5,700,000 5,700,000
TOTAL MUNICIPAL NOTES
(Cost $21,015,480) 21,015,870
TOTAL INVESTMENTS - 100%
(Cost $268,201,398) $ 272,818,645
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(h) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(i) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(j) 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 50.7% AAA, AA, A 53.7%
Baa 14.4% BBB 17.0%
Ba 4.2% 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 16.3%. FMR
has determined that unrated debt securities that are lower quality account
for 15.3% 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 19.0%
Health Care 17.5
Water & Sewer 14.9
Others
(individually less than 10%) 48.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $268,201,398. Net unrealized appreciation aggregated
$4,617,247, of which $7,885,150 related to appreciated investment
securities and $3,267,903 related to depreciated investment securities.
At December 31, 1994, the fund elected 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>
JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $268,201,398) 9. $ 272,818,645
See accompanying schedule
10.Cash 11. 148,522
12.Interest receivable 13. 4,126,153
14. 15.TOTAL ASSETS 16. 277,093,320
17.LIABILITIES 18. 19.
20.Payable for investments purchased $ 3,015,480 21.
22.Distributions payable 324,604 23.
24.Accrued management fee 125,025 25.
26. 27.TOTAL LIABILITIES 28. 3,465,109
29.30.NET ASSETS 31. $ 273,628,211
32.Net Assets consist of: 33. 34.
35.Paid in capital 36. $ 272,803,054
37.Accumulated undistributed net realized gain (loss) 38. (3,792,090)
on investments
39.Net unrealized appreciation (depreciation) 40. 4,617,247
on investments
41.42.NET ASSETS, for 26,702,632 shares outstanding 43. $ 273,628,211
44.45.NET ASSET VALUE, offering price and redemption 46. $10.25
price per share ($273,628,211 (divided by) 26,702,632 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
47.48.INTEREST INCOME 49. $ 8,702,162
50.EXPENSES 51. 52.
53.Management fee $ 719,888 54.
55.Non-interested trustees' compensation 509 56.
57. 58.TOTAL EXPENSES 59. 720,397
60.61.NET INTEREST INCOME 62. 7,981,765
63.REALIZED AND UNREALIZED GAIN (LOSS) 65. 66.
64.Net realized gain (loss) on:
67. Investment securities (715,474) 68.
69. Futures contracts (1,800,392) (2,515,866)
70.Change in net unrealized appreciation (depreciation) 71. 18,567,210
on investment securities
72.73.NET GAIN (LOSS) 74. 16,051,344
75.76.NET INCREASE (DECREASE) IN NET ASSETS 77. $ 24,033,109
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
78.INCREASE (DECREASE) IN NET ASSETS
79.Operations $ 7,981,765 $ 17,378,326
Net interest income
80. Net realized gain (loss) (2,515,866) 5,948,777
81. Change in net unrealized appreciation (depreciation) 18,567,210 (38,756,490)
82. 83.NET INCREASE (DECREASE) IN NET ASSETS 24,033,109 (15,429,387)
RESULTING FROM OPERATIONS
84.Distributions to shareholders (7,981,765) (17,378,326)
From net interest income
85. From net realized gain - (8,056,094)
86. 87.TOTAL DISTRIBUTIONS (7,981,765) (25,434,420)
88.Share transactions 24,529,333 46,579,000
Net proceeds from sales of shares
89. Reinvestment of distributions 5,991,146 19,565,956
90. Cost of shares redeemed (14,680,413) (89,828,981)
91. Redemption fees 7,456 31,413
92.93. 15,847,522 (23,652,612)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
94. 95.TOTAL INCREASE (DECREASE) IN NET ASSETS 31,898,866 (64,516,419)
96.NET ASSETS 97. 98.
99. Beginning of period 241,729,345 306,245,764
100. End of period $ 273,628,211 $ 241,729,345
101.OTHER INFORMATION 103. 104.
102.Shares
105. Sold 2,430,749 4,493,816
106. Issued in reinvestment of distributions 589,473 1,920,098
107. Redeemed (1,448,619) (8,802,430)
108. Net increase (decrease) 1,571,603 (2,388,516)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
109. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
110. (UNAUDITED) 1994 1993C 1992 1991 1990
111.SELECTED PER-SHARE DATA
112.Net asset value, beginning of period $ 9.620 $ 11.130 $ 10.590 $ 10.370 $ 9.880 $ 9.900
113.Income from Investment Operations .306 .652 .679 .693 .701 .701
Net interest income
114. Net realized and unrealized gain
(loss) .630 (1.201) .679 .219 .489 (.020)
115. Total from investment operations .936 (.549) 1.358 .912 1.190 .681
116.Less Distributions (.306) (.652) (.679) (.693) (.701) (.701)
From net interest income
117. From net realized gain on
investments - (.310) (.140) - - -
118. Total distributions (.306) (.962) (.819) (.693) (.701) (.701)
119.Redemption fees added to paid in
capital - .001 .001 .001 .001 -
120.Net asset value, end of period $ 10.250 $ 9.620 $ 11.130 $ 10.590 $ 10.370 $ 9.880
121.TOTAL RETURN B 9.80% -5.04% 13.18% 9.11% 12.49% 7.20%
122.RATIOS AND SUPPLEMENTAL DATA
123.Net assets, end of period (000
omitted) $ 273,628 $ 241,729 $ 306,246 $ 242,375 $ 199,499 $ 142,906
124.Ratio of expenses to average net
assets .55% .55% .55% .55% .55% .60%
A
125.Ratio of expenses to average net
assets before .55% .55% .55% .55% .55% .66%
expense reductions A
126.Ratio of net interest income to
average net assets 6.09% 6.33% 6.13% 6.65% 6.96% 7.22%
A
127.Portfolio turnover rate 42% 26% 38% 8% 6% 8%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
C EFFECTIVE JANNUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS
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, the past five years and life of fund
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Spartan Pennsylvania
Municipal Money Market 1.77% 3.30% 18.28% 44.01%
Average All Tax-Free
Money Market Fund 1.70% 3.10% 16.51% 39.54%
Consumer Price Index 1.87% 3.04% 17.40% 39.27%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or since
the fund started on August 6, 1986. For example, if you invested $1,000 in
a fund that had a 5% return over the past year, the value of your
investment would be $1,050. To measure how the fund's performance stacked
up against its peers, you can compare it to the average all tax-free money
market fund, which reflects the performance of
389 all tax-free money market funds tracked by IBC/Donoghue over the past
six months. 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 and IBC/Donoghue numbers are the closest available match
to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania
Municipal Money Market 3.30% 3.42% 4.18%
Average All Tax-Free
Money Market Fund 3.10% 3.10% 3.86%
Consumer Price Index 3.04% 3.26% 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.
YIELDS
6/27/94 9/26/94 12/26/94 3/27/95 6/26/95
Spartan Pennsylvania 2.39% 3.06% 4.13% 3.58% 3.74%
Municipal Money Market
Average All Tax-Free 2.27% 2.81% 3.78% 3.45% 3.59%
Money Market Fund
Spartan Pennsylvania 3.84% 4.92% 6.64% 5.75% 6.01%
Municipal Money Market -
Tax-equivalent
Row: 1, Col: 1, Value: 2.39
Row: 1, Col: 2, Value: 2.27
Row: 2, Col: 1, Value: 3.06
Row: 2, Col: 2, Value: 2.81
Row: 3, Col: 1, Value: 4.13
Row: 3, Col: 2, Value: 3.78
Row: 4, Col: 1, Value: 3.58
Row: 4, Col: 2, Value: 3.45
Row: 5, Col: 1, Value: 3.74
Row: 5, Col: 2, Value: 3.59
Spartan
Pennsylvania
Municipal Money
Market
Average All Tax-Fre
e
Money Market Fund
5% -
4% -
3% -
2% -
1% -
0%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals 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 1995 federal and state income tax rate of 37.79%. Figures for the
average all tax-free money market fund are from 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. 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, HOW HAS THE RATE ENVIRONMENT CHANGED DURING THE PAST SIX
MONTHS?
A. Significantly. When the period began, the Fed was in a credit-tightening
cycle, periodically raising short-term interest rates to slow economic
growth and prevent an outbreak of inflation. In February 1995, the Fed
raised the federal funds rate - the rate banks charge each other for
overnight loans - one-half-percentage point; it was the seventh rate
increase in a little more than a year. Even at the time of that latest
increase, the economic indicators were beginning to suggest that the Fed
had already done its job, and the economy was slowing down. Those signs
were confirmed with the release of the first-quarter growth rate in the
gross domestic product, which came in at a relatively tame 2.8%, compared
to 5.1% in the fourth quarter of 1994. After the Fed's last move in
February, market participants foresaw a stable to declining rate
environment. And in fact, interest rates declined slowly but steadily
through the end of the period.
Q. HOW DID YOU RESPOND TO CHANGES IN THE INTEREST RATE ENVIRONMENT?
A. At the end of 1994, the fund's average maturity was neutral at around 45
days. Rates began to decline during the first quarter; at the same time,
supply was very thin. I allowed the fund's average maturity to roll down
gradually, reaching a low of 19 days in April. When the supply of new
issues increased by late Spring, I began locking in attractive rates by
adding longer-term securities with the expectation of rates continuing to
decline. By the end of June, the fund's average maturity was back around 45
days.
Q. HOW DID THE FUND PERFORM?
A. Better than its peers. On June 30, 1995, the fund's seven-day yield was
3.74%, compared to 4.34% six months ago. That latest yield was the
equivalent of a 6.01% taxable yield for Pennsylvania investors in the
37.79% combined federal and state income-tax bracket. The fund's total
return for the six months ended June 30, 1995 was 1.77%. That beat the
1.70% total return during the same period for the average all tax-free
money market funds, according to IBC/Donoghue.
Q. WHAT'S THE OUTLOOK FOR THE REST OF THE YEAR?
A. That was still unclear at the end of June. The only thing nearly
everyone agreed on was that the cycle of rate increases by the Fed was
over. Beyond that, economists were sharply divided in their opinions. Some
were predicting a continuing slowdown - even an eventual recession if the
Fed waited too long before lowering rates again. Others saw signs of
surprising economic strength in key indicators such as housing and
employment, and therefore assumed the Fed would be in no hurry to act. As
we all know by now, the Fed did act shortly after the period ended -
lowering the federal funds rate one-quarter-percentage point on July 6.
Q. HOW HAD YOU POSITIONED THE FUND AT THE END OF THE PERIOD?
A. At the time, I felt the Fed would lower rates sometime this summer -
probably sooner rather than later. Therefore, I began extending the fund's
average maturity. Moreover, an abundant supply of new issues in
Pennsylvania was creating an opportunity to extend even further. So the
Fed's rate cut, when it came, had little effect on my outlook, or on the
strategy I had chosen to pursue. Looking ahead, it's likely I'll continue
extending the fund's average maturity toward a target range of between 55
and 65 days.
FUND FACTS
GOAL: to seek high current
income exempt from Federal
and Pennsylvania state
income tax by investing in
high-quality, short-term
municipal money market
securities, while maintaining a
stable $1.00 share price
START DATE: August 6, 1986
SIZE: as of June 30, 1995,
more than $221 million
MANAGER: Deborah Watson,
since 1989; manager, Fidelity
Tax-Exempt Money Market
Portfolio, since 1995; Capital
Reserves Muni Money Market,
since 1995; 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
6/30/95 12/31/94 6/30/94
0 - 30 81 70 88
31 - 90 8 11 7
91 - 180 3 13 3
181 - 397 8 6 2
WEIGHTED AVERAGE MATURITY
6/30/95 12/31/94 6/30/94
Spartan Pennsylvania
Municipal Money Market 43 days 46 days 24 days
Average All Tax-Free
Money Market Fund* 45 days 47 days 46 days
ASSET ALLOCATION
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Row: 1, Col: 1, Value: 73.0
Row: 1, Col: 2, Value: 16.0
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 7.0
Row: 1, Col: 5, Value: 2.0
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
Variable rate
demand notes
(VRDNs) 73%
Commercial
paper 16%
Tender bonds 2%
Municipal
notes 7%
Other 2%
Variable rate
demand notes
(VRDNs) 65%
Commercial
paper 11%
Tender bonds 4%
Municipal
notes 19%
Other 1%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - 1.0%
New York City Ind. Dev. Auth. Ind. Dev. Rev.
(Japan Airlines Co. Ltd. Proj.) Series 1991, 4.15%,
LOC Morgan Guaranty, VRDN (b) $ 2,200,000 $ 2,200,000
NEW YORK & NEW JERSEY - 1.7%
New York & New Jersey Port Auth. Spl. Oblig. Rev., Versatile
Structure 3, 4.15%, LOC Morgan Guaranty, VRDN 3,700,000 3,700,000
PENNSYLVANIA - 97.3%
Allegheny County Hosp. Dev. Auth. Health Ctr. Rev.
(Presbyterian Univ. Health Sys.) VRDN:
Series 1990 A, 4.05% (MBIA Insured),
BPA Credit Suisse 1,100,000 1,100,000
Series 1990 B, 4.05% (MBIA Insured),
BPA Credit Suisse 2,690,000 2,690,000
Allegheny County Hosp. Dev. Auth. Hosp. Rev.
(St. Margaret Mem. Hosp.) Series 1992 A, 4.40%,
LOC Mellon Bank, VRDN 9,465,000 9,465,000
Allegheny County Ind. Dev. Auth. Commercial Dev. Rev. Rfdg.
(Parkway Center Mall Proj.) Series 1994 A, 4.40%,
LOC Mellon Bank, VRDN 1,900,000 1,900,000
Allegheny County Ind. Dev. Auth. Rev. Rfdg.
(Chelsea Industries, Inc.) Series 1994, 4.25%,
LOC First Nat'l. Bank of Boston, VRDN 2,100,000 2,100,000
Berks County Ind. Dev. Auth. Manufacturing
Facs. Rev., VRDN: (b)
(Grafika Commercial Printing Inc.)
4.65%, LOC Meridian Bank 1,750,000 1,750,000
(The Bachman Co. Proj.) Series 1994, 4.65%,
LOC Meridian Bank 2,475,000 2,475,000
Bucks County Ind. Dev. Auth. Rev. (Associates Proj.) Series 1993,
4.65%, LOC Meridian Bank, VRDN (b) 1,615,000 1,615,000
Carbon County Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Panther Creek Partners Proj.):
Series 1990 A, 4.25% tender 7/24/95,
LOC Nat'l. Westminster Bank PLC (b) 2,800,000 2,800,000
Series 1991 A:
4.20% tender 8/7/95,
LOC Nat'l. Westminster Bank PLC 3,200,000 3,200,000
4.25% tender 8/8/95,
LOC Nat'l. Westminster Bank PLC 2,000,000 2,000,000
Carbon County Ind. Dev. Auth. Solid Waste Disp. Rev.
(Horsehead Resource Dev. Co.) BAN 4% 12/1/95,
LOC Chemical Bank (b) (d) 5,700,000 5,700,000
Cumberland County Ind. Dev. Auth. Rev. (Lane Enterprises, Inc.
Proj.) 4.65%, LOC Meridian Bank, VRDN (b) 3,200,000 3,200,000
Dauphin County Gen. Auth. Hosp. Rev. (Reading
Hosp. & Med. Ctr.) Series 1994 A, 4%, VRDN 5,800,000 5,800,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Delaware County Ind. Dev. Auth. Bonds (Philadelphia
Electric) Series C, 3.95% tender 7/14/95 (FGIC Insured) $ 6,020,000 $
6,020,000
Delaware Valley Regional Fin. Auth. Local Gov't. Rev., VRDN:
Series 1985 A, 4.35%, LOC Hong Kong & Shanghai
Banking Corp. 6,000,000 6,000,000
Series 1986, 4.35%, LOC Hong Kong & Shanghai
Banking Corp. 4,500,000 4,500,000
Doylestown Hosp. Auth. Participating VRDN
Series BTP-63, 4.30% (AMBAC Insured)
(Liquidity Facility Automatic Data
Processing & Bankers Trust) (c) 10,098,000 10,098,000
Erie County Ind. Dev. Auth. Rev. (Carlisle Corp. Proj.)
Series 1993, 4.25%, LOC Trust Co. Bank,
VRDN (b) 1,000,000 1,000,000
Lancaster Higher Ed. Auth. College Rev.
(Franklin & Marshall College Proj.)
Series 1995, 4.45%, VRDN 1,000,000 1,000,000
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev.
(Allegheny Elec. Coop. Proj.) VRDN:
Series 1984 A, 4%, LOC Rabobank Nederland 500,000 500,000
Series 1984 B, 4%, LOC Rabobank Nederland 1,000,000 1,000,000
Lycoming County Ind. Dev. Auth. Rev. (Coastal Aluminum
Rolling Mills) Series 1995, 4.65%, LOC Meridian Bank,
VRDN (b) 1,910,000 1,910,000
Mercer County Ind. Dev. Auth. Ind. Dev. Rev.
(Penntecq Inc. Proj.) Series 1990, 4.10%,
LOC Dai-Ichi Kangyo Bank, VRDN (b) 4,000,000 4,000,000
Montgomery County Ind. Dev. Auth. Rev., VRDN: (b)
(H.P. Cadwallader Inc. Proj.) Series 1995, 4.65%,
LOC Meridian Bank 1,155,000 1,155,000
(RJI Ltd. Partnership Proj.) Series 1992, 4.65%,
LOC Meridian Bank 1,950,000 1,950,000
(Sirius Dev. Assoc. Proj.) 4.40%,
LOC Provident Nat'l. Bank 1,500,000 1,500,000
North Lebanon Township Muni. Auth. Rev. (Grace Commty. Inc.
Proj.) Series 1992 B, 4.625%, LOC Meridian Bank, VRDN 3,755,000
3,755,000
Northampton County Ind. Dev. Auth. Rev. Bonds
(Citizens Utilities Co. Proj.) Series 1991, 3.15%
tender 7/12/95 (b) 2,950,000 2,950,000
Northampton County Ind. Dev. Auth. Rev.
(Victoria Vogue Proj.) 4.65%, LOC Meridian Bank,
VRDN (b) 2,910,000 2,910,000
Northumberland County Ind. Dev. Board Rev.
(Foster Wheeler Mt. Carmel Inc.) VRDN: (b)
Series 1987 A, 4.40%,
LOC Union Bank of Switzerland 15,050,000 15,050,000
Series 1987 B, 4.40%,
LOC Union Bank of Switzerland 3,140,000 3,140,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Econ. Dev. Fin. Auth. Rev., VRDN:
(Henry Molded Prod. Inc.) Series 1992 A-4, 4.40%,
LOC Pittsburgh Nat'l. Bank (b) $ 900,000 $ 900,000
(Lutheran Youth & Family Svc.) Series 1993 A, 4.25%,
LOC PNC Bank 700,000 700,000
(Payne Printery Proj.) Series 1989 B-8, 4.40%,
LOC Pittsburgh Nat'l. Bank (b) 325,000 325,000
(Port Erie Plastics Proj.) Series 1989-D9, 4.40%,
LOC Pittsburgh Nat'l. Bank (b) 970,000 970,000
(Respironics Inc. Proj.) 4.40%,
LOC Pittsburgh Nat'l. Bank (b) 900,000 900,000
(Suntory Water Group Inc. Proj.) Series 1992 D, 4.25%,
LOC Wachovia Bank & Trust (b) 4,900,000 4,900,000
(The Babcock & Wilcox Co. Proj.) Series 1989 A-2,
4.40%, LOC Pittsburgh Nat'l. Bank (b) 4,875,000 4,875,000
Pennsylvania Energy Dev. Auth. Energy Dev. Rev.
(B & W Edensburg Proj.) Series 1986, 4.35%,
LOC Swiss Bank Corp., VRDN (b) 3,000,000 3,000,000
Pennsylvania Gen. Oblig. Bonds, Series 1995, 5% 5/1/96 4,910,000
4,941,605
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev., VRDN: (b)
Series 1988 A, 4.10%, LOC SLMA 9,200,000 9,200,000
Series 1994 A, 4.10%, LOC SLMA 8,000,000 8,000,000
Series B, 4.10%, LOC Union Bank of Switzerland 1,000,000 1,000,000
Pennsylvania Higher Ed. Facs. Auth.
Participating VRDN, Series MG 4-A, 4.40%
(Liquidity Facility Morgan Guaranty) (c) 4,750,000 4,750,000
Pennsylvania Higher Ed. Facs. Auth. Rev. Rfdg. Bonds
(Thomas Jefferson Univ.) Series 1992 C, 3.90%
tender 2/26/96, SBPA Credit Suisse 5,000,000 5,000,000
Pennsylvania Infrastructure Investment Auth. Rev.
(Pennvest Pooled Loan Prog.) Series 1994, 3.85%
(Liquidity Facility PNC Bank) VRDN 8,000,000 8,000,000
Pennsylvania System of Higher Education BAN
(Temple University) Series 1995, 5% 5/22/96 8,500,000 8,555,925
Pennsylvania Tender Option Ctfs., Series BTP-84, 4.15%
(AMBAC Insured) (Liquidity Facility Bankers Trust)
VRDN (c) 4,125,000 4,125,000
Philadelphia Gas Works Rev., Series B, 3.75% 9/20/95,
LOC Canadian Imperial Bank of Canada, CP 5,000,000 5,000,000
Philadelphia Ind. Dev. Auth. Commercial Dev. Rev.
(Philadelphia Airport Hotel Proj.) Series 1990, 4.15%,
LOC Citibank, VRDN (b) 3,100,000 3,100,000
Schuylkill County Ind. Dev. Auth. Resource
Recovery Rev., VRDN:
(Gilberton Pwr.) 4.30%, LOC Mellon Bank 2,800,000 2,800,000
(Westwood Energy Prop.) Series 1985, 4.45%,
LOC Fuji Bank 1,500,000 1,500,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Schuylkill County Ind. Dev. Auth. Rev., VRDN:
(Interlock Realty Co.) 4.40%, LOC Star Bank $ 550,000 $ 550,000
(Metal Sales Manufacturing Corp.) 4.40%,
LOC Star Bank (b) 1,500,000 1,500,000
Venango Ind. Dev. Auth. Resource Recovery Rev. Bonds
(Scrubgrass Proj.): (b)
Series 1990 A:
4.05% tender 7/25/95,
LOC Nat'l. Westminster Bank PLC 3,050,000 3,050,000
4.10% tender 8/15/95,
LOC Nat'l. Westminster Bank PLC 3,000,000 3,000,000
3.85% tender 9/21/95,
LOC Nat'l. Westminster Bank PLC 4,700,000 4,700,000
Series 1990 B, 4.25% tender 7/21/95,
LOC Nat'l. Westminster Bank PLC 3,000,000 3,000,000
Washington County Ind. Dev. Auth. Rev.
(Mac Plastics, Inc. Proj.) Series 1990, 4.25%,
LOC Nat'l. City Bank, VRDN (b) 575,000 575,000
West Cornwall Muni. Auth. Rev. (Lebanon Valley
Brethren Home) 4.625%, LOC Meridian Bank,
VRDN 1,000,000 1,000,000
214,150,530
TOTAL INVESTMENTS - 100% $ 220,050,530
Total Cost for Income Tax Purposes $ 220,050,530
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(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 each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Carbon County Ind. Dev.
Auth. Solid Waste Disp.
(Horsehead Res.
Dev. Co.)
BAN 4%
12/1/95 6/1/95 $ 5,700,000
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>
JUNE 30, 1995 (UNAUDITED)
128.ASSETS 129. 130.
131.Investment in securities, at value - See 132. $ 220,050,530
accompanying schedule
133.Cash 134. 485,227
135.Interest receivable 136. 1,034,581
137. 138.TOTAL ASSETS 139. 221,570,338
140.LIABILITIES 141. 142.
143.Distributions payable $ 21,196 144.
145.Accrued management fee 92,226 146.
147. 148.TOTAL LIABILITIES 149. 113,422
150.151.NET ASSETS 152. $ 221,456,916
153.Net Assets consist of: 154. 155.
156.Paid in capital 157. $ 221,494,506
158.Accumulated net realized gain (loss) on 159. (37,590)
investments
160.161.NET ASSETS, for 221,492,555 shares 162. $ 221,456,916
outstanding
163.164.NET ASSET VALUE, offering price and 165. $1.00
redemption price per share ($221,456,916 (divided by)
221,492,555 shares)
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
166.167.INTEREST INCOME 168. $ 4,614,123
169.EXPENSES 170. 171.
172.Management fee $ 570,181 173.
174.Non-interested trustees' compensation 676 175.
176. 177.TOTAL EXPENSES 178. 570,857
179.180.NET INTEREST INCOME 181. 4,043,266
182.183.NET REALIZED GAIN (LOSS) ON INVESTMENTS 184. (9,355)
185.186.NET INCREASE IN NET ASSETS RESULTING FROM 187. $ 4,033,911
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
188.INCREASE (DECREASE) IN NET ASSETS
189.Operations $ 4,043,266 $ 5,902,602
Net interest income
190. Net realized gain (loss) (9,355) (18,683)
191. 4,033,911 5,883,919
192.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
193.Distributions to shareholders from net interest income (4,043,266) (5,902,602)
194.Share transactions at net asset value of $1.00 per 74,631,151 212,681,193
share
Proceeds from sales of shares
195. Reinvestment of distributions from net interest 3,845,947 5,582,855
income
196. Cost of shares redeemed (114,619,050) (201,620,498)
197.198. (36,141,952) 16,643,550
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES
RESULTING FROM SHARE TRANSACTIONS
199. (36,151,307) 16,624,867
200.TOTAL INCREASE (DECREASE) IN NET ASSETS
201.NET ASSETS 202. 203.
204. Beginning of period 257,608,223 240,983,356
205. End of period $ 221,456,916 $ 257,608,223
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
206. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
207. (UNAUDITED) 1994 1993 1992 1991 1990
208.SELECTED PER-SHARE DATA
209.Net asset value, beginning of period$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
210.Income from Investment Operations .018 .026 .022 .029 .045 .059
Net interest income
211.Less Distributions (.018) (.026) (.022) (.029) (.045) (.059)
From net interest income
212.Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
213.TOTAL RETURN B 1.77% 2.61% 2.21% 2.90% 4.55% 6.05%
214.RATIOS AND SUPPLEMENTAL DATA
215.Net assets, end of period (000
omitted) $ 221,457 $ 257,608 $ 240,983 $ 243,335 $ 289,826 $ 319,982
216.Ratio of expenses to average net
assets .50% .50% .50% .47% .34% .13%
A
217.Ratio of expenses to average net
assets before .50% .50% .50% .50% .50% .57%
expense reductions A
218.Ratio of net interest income to
average net assets 3.54% 2.58% 2.19% 2.88% 4.47% 5.92%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD HAVE BEEN
LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
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 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 substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of 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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and losses deferred due to wash sales, futures and
options and excise tax regulations.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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. 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 $5,700,000 or 2.6% 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 $51,762,587 and $53,189,994, respectively. The
market value of futures contracts opened and closed during the period
amounted to $27,199,960 and $29,000,352, 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE. - CONTINUED
fees from shareholders which amounted to $1,450 and $4,458 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.
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
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER, MONEY MARKET FUND
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
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Michael D. Conway, Assistant
Treasurer - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB 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)
MICHIGAN
MUNICIPAL
PORTFOLIOS
SEMIANNUAL REPORT
JUNE 30, 1995
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 32 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 36 Notes to the financial statements.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
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
securities that have grown in value). You can also look at the fund's
income. If Fidelity had not reimbursed certain fund expenses, the life of
fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Michigan Tax-Free High Yield Portfoli 7.43% 4.98% 43.58% 118.01%
o
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% n/a
Average Michigan Municipal Bond Fund 8.85% 7.50% 45.23% n/a
Consumer Price Index 1.87% 3.04% 17.40% 40.29%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 12, 1985. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond index - a broad gauge of
the municipal bond market. To measure how the fund's performance stacked up
against its peers, you can compare it to the average Michigan municipal
bond fund, which reflects the performance of 40 Michigan municipal bond
funds with similar objectives tracked by Lipper Analytical Services over
the past six months. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Tax-Free High Yield Portfoli 4.98% 7.50% 8.42%
o
Lehman Brothers Municipal Bond Index 8.82% 8.26% n/a
Average Michigan Municipal Bond Fund 7.50% 7.74% n/a
Consumer Price Index 3.04% 3.26% 3.56%
</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
Michigan Tax FreMunicipal Bond Ind
11/30/85 10000.00 10000.00
12/31/85 10228.04 10087.90
01/31/86 10687.19 10682.08
02/28/86 11127.75 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 11980.11 11835.45
11/30/86 12202.92 12069.91
12/31/86 12174.63 12036.60
01/31/87 12524.18 12399.02
02/28/87 12647.80 12460.02
03/31/87 12511.96 12327.95
04/30/87 11594.90 11709.33
05/31/87 11456.20 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 11314.44 11695.22
10/31/87 11388.40 11736.62
11/30/87 11631.88 12043.06
12/31/87 11832.71 12217.81
01/31/88 12356.20 12653.00
02/29/88 12509.85 12786.75
03/31/88 12221.64 12637.78
04/30/88 12272.39 12733.83
05/31/88 12347.33 12697.03
06/30/88 12576.26 12882.78
07/31/88 12686.04 12966.78
08/31/88 12749.38 12978.19
09/30/88 12970.03 13213.10
10/31/88 13241.11 13446.31
11/30/88 13134.02 13323.14
12/31/88 13372.65 13459.43
01/31/89 13563.88 13737.78
02/28/89 13481.07 13581.03
03/31/89 13486.08 13548.57
04/30/89 13881.00 13870.21
05/31/89 14164.97 14158.30
06/30/89 14347.56 14350.57
07/31/89 14479.62 14545.88
08/31/89 14366.21 14403.47
09/30/89 14332.90 14360.26
10/31/89 14477.61 14535.46
11/30/89 14678.28 14789.83
12/31/89 14738.66 14911.10
01/31/90 14647.75 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 14983.10 15327.63
07/31/90 15193.41 15552.94
08/31/90 14963.53 15327.43
09/30/90 15038.10 15336.62
10/31/90 15180.58 15614.22
11/30/90 15477.83 15928.06
12/31/90 15497.49 15998.14
01/31/91 15644.75 16212.52
02/28/91 15761.71 16353.57
03/31/91 15792.94 16360.11
04/30/91 16055.17 16577.70
05/31/91 16128.95 16725.24
06/30/91 16105.13 16708.52
07/31/91 16359.21 16912.36
08/31/91 16555.79 17135.60
09/30/91 16737.52 17358.37
10/31/91 16919.67 17514.59
11/30/91 16981.95 17563.63
12/31/91 17362.94 17941.25
01/31/92 17425.81 17982.52
02/29/92 17454.91 17987.91
03/31/92 17474.71 17995.11
04/30/92 17629.59 18155.26
05/31/92 17820.61 18369.49
06/30/92 18133.46 18678.10
07/31/92 18795.52 19238.44
08/31/92 18530.14 19049.91
09/30/92 18655.95 19173.73
10/31/92 18340.70 18985.83
11/30/92 18789.33 19325.68
12/31/92 19018.72 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 20536.18 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 21649.23 21919.50
01/31/94 21943.26 22169.38
02/28/94 21309.60 21595.19
03/31/94 20346.30 20716.27
04/30/94 20447.36 20892.36
05/31/94 20552.02 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 20622.05 21095.26
10/31/94 20194.37 20719.76
11/30/94 19558.63 20344.73
12/31/94 20024.50 20792.32
01/31/95 20626.89 21386.98
02/28/95 21221.40 22009.34
03/31/95 21044.83 22262.45
04/30/95 21085.59 22289.16
05/31/95 21765.40 23000.19
06/30/95 21532.09 22800.08
$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 June 30, 1995, the value of your
investment would have grown to $21,513 - a 115.13% 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 $22,800 - a 128.00% 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
SIX MONT
HS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1995 1994 1993 1992 1991 1990
Dividend returns 3.08% 5.40% 6.28% 6.72% 7.26% 7.04%
Capital appreciation
returns 4.35% -12.90% 7.55% 2.82% 4.78% -1.89%
Total returns 7.43% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.97(cents) 32.14(cents) 66.86(cents)
Annualized dividend rate 5.41% 5.89% 6.07%
30-day annualized yield 5.36% - -
30-day annualized tax-equivalent yield 8.76% - -
</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 $11.19 over
the past month, $11.01 over the past six months and $11.02 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 38.82% combined effective 1995 federal and state tax bracket. A
portion of the fund's income may be subject to the alternative minimum tax.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Maureen Newman,
Portfolio Manager of Fidelity
Michigan Tax-Free High Yield
Q. MAUREEN, HOW HAS THE FUND PERFORMED?
A. For the six- and 12-month periods ended June 30, 1995, the fund returned
7.43% and 4.98%, respectively. For the same six- and 12-month periods, the
average Michigan municipal bond fund returned 8.85% and 7.50%,
respectively, as tracked by Lipper Analytical Services.
Q. WHAT FACTORS CONTRIBUTED TO THE MUNICIPAL BOND MARKET'S PERFORMANCE OVER
THE PAST SIX MONTHS?
A. First, let me set the stage by reviewing the months preceding the most
recent six month-period. Taxable and tax-free bond prices fell dramatically
during much of 1994, on the heels of rising interest rates and fears that
inflation would ignite. In the third quarter, tax-loss selling - which
occurs when investors try to offset gains in one investment by selling
another with losses, thereby reducing their tax liabilities - placed
additional downward pressure on the municipal bond market. However, the
bond market began to rebound in late November as investors worried less
that the Federal Reserve Board would further raise interest rates and
tax-loss selling abated. Bond prices have risen dramatically since
November, as evidence has mounted that the economy is growing at a slower
rate. When economic growth slows, the fear of inflation generally recedes
and bonds typically perform well, which they have during the past six
months.
Q. WHY WASN'T THE FUND ABLE TO KEEP PACE WITH THE AVERAGE FUND OF ITS TYPE?
A. Michigan Healthcare - which represented approximately 1.6% of the fund's
total investments at the end of the period - filed Chapter 11 bankruptcy
during the period. As a result, the holding detracted from the fund's
performance. An independent pricing service, in determining the current
price of these bonds, already has taken into account this credit
development. Fidelity is dedicating significant resources in an effort to
maximize shareholder value. Also, health care sector bonds, at 23.3% of the
fund's investments, generally tended to lag other types of municipal bonds
for reasons unrelated to Michigan Healthcare's problems. Investors were
worried, in part, that there could be reductions in government-sponsored
reimbursements. However, I will continue to hold a core stake in health
care bonds because they can offer relatively attractive yields.
Q. YOU'VE MADE SOME CHANGES IN THE WAY YOU DISTRIBUTE THE FUND'S
INVESTMENTS AMONG BONDS WITH VARIOUS MATURITIES. WHAT CAUSED YOU TO MAKE
THOSE CHANGES?
A. During the spring, the yield curve - which reflects the yields of
various maturities - flattened. When the yield curve is flat, there is
little difference between short-term and long-term interest rates. As a
result, municipal bond investors didn't have to give up much yield to own
bonds with relatively short maturities and didn't have to take on the added
interest rate risk of a longer-term bonds. As the flattening occurred, I
sold some longer-term bonds with maturities between 20 and 25 years, and
bought some intermediate bonds in the 10- to 15-year range. Going forward,
if the yield curve steepens, and longer-term bonds once again offer
substantially higher yields, I would most likely switch out of some
intermediate bonds and buy longer-term bonds in their place.
Q. LIKEWISE, YOU'VE IMPROVED THE OVERALL CREDIT QUALITY OF THE FUND...
A. That's true. There wasn't much of a difference in yield between lower-
and higher- quality bonds. So I used the market's strength as an
opportunity to sell some bonds rated Baa and Ba by Moody's Investors
Service and replaced them with the Aaa-rated bonds. As a result, I was able
to improve the fund's overall credit quality without sacrificing much
yield. By the end of the period, Aaa-rated bonds made up 39.1% of the
fund's investments, compared to 30.9% six months earlier.
Q. GENERAL OBLIGATION BONDS WERE THE FUND'S SECOND LARGEST SECTOR
CONCENTRATION AT THE END OF THE PERIOD AT 13.3% OF INVESTMENTS. WHAT MAKES
THESE BONDS ATTRACTIVE?
A. General obligation bonds, or GOs, are backed by the full faith and
credit - which includes the taxing and further borrowing power - of a state
or municipality. Many of the GOs in the fund are local school districts,
some of which are insured by a municipal bond insurance agency or are
backed by the general obligation of the State of Michigan. These bonds
performed well because high-quality bonds tended to be in high demand
during the market rally. What's more, the strength of Michigan's economy
also helped the overall creditworthiness of the state.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. In the spring there had been some discussion about how various federal
tax reform proposals - including a flat tax which would tax everyone at a
uniform rate and eliminate deductions - might affect the attractiveness of
municipal bonds. During that time, tax-exempt bonds underperformed taxable
bonds. In my view, it's unlikely that there will be any major tax reform
proposal passed until 1997 at the earliest. However, there could be some
volatility in municipal bond prices as discussions of tax reform heat up or
fade over the near term. The Michigan economy is, of course, somewhat
vulnerable to a slowdown in auto sales, although not nearly as much as it
was ten years ago. While I believe the national economy is beginning to
slow, I don't foresee a recession in the near future. Therefore, interest
rates could stay low while tax receipts and other revenues backing
municipal bonds should remain strong. Finally, the supply of municipal
bonds is expected to remain low. If demand for municipal bonds stays
constant or increases, a low supply would be a positive. I believe that
those factors combine to create an attractive outlook for the municipal
bond market.
FUND FACTS
GOAL: high current tax-free
income for Michigan residents
by investing in longer-term,
investment-grade municipal
securities whose interest is
free from federal income tax
and Michigan income tax
START DATE: November 12,
1985
SIZE: as of June 30, 1995,
more than $472 million
MANAGER: Maureen Newman,
since 1994; manager,
Connecticut Tax-Free High
Yield, Spartan Aggressive
Municipal, and Spartan
Arizona Municipal
Income portfolios since 1994;
joined Fidelity in 1985
(checkmark)
MAUREEN NEWMAN ON
ADDING VALUE TO THE
FUND:
"One way I try to add value in
managing the fund is to
identify sectors which I
believe have the potential to
outperform other sectors. I
start with a top down view,
and assess how broad
economic and other trends
might shape a particular
sector's prospects. I use
fundamental research -
checking investment options
issuer by issuer - to identify
individual bonds which I
believe present an adequate
reward to compensate for
potential risk. Once I
determine which sectors and
individual bonds within those
sectors look attractive, I
consider how I want the fund
to be distributed in terms of
maturity. "
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Health Care 23.3 28.1
General Obligation 13.3 12.5
Water & Sewer 9.8 6.2
Industrial Development 9.3 7.2
Escrowed/Prerefunded 8.6 8.5
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 16.5 17.3
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 JUNE 30, 1995
6 MONTHS AGO
Years 8.0 8.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 39.1%
Aa, A 28.7%
Baa 18.2%
Ba, B 4.3%
Caa 1.1%
Non-rated 7.3%
Short-term investments 1.3%
Aaa 30.9%
Aa, A 24.3%
Baa 22.7%
Ba, B 7.9%
Caa 0.0%
Non-rated 11.0%
Short-term investments 3.2%
Row: 1, Col: 1, Value: 39.1
Row: 1, Col: 2, Value: 28.7
Row: 1, Col: 3, Value: 18.2
Row: 1, Col: 4, Value: 4.3
Row: 1, Col: 5, Value: 1.1
Row: 1, Col: 6, Value: 7.3
Row: 1, Col: 7, Value: 1.3
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: 0.0
Row: 1, Col: 6, Value: 11.0
Row: 1, Col: 7, 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 5.2% AND 10.5% OF THE FUND'S
INVESTMENTS AT JUNE 30, 1995 AND DECEMBER 31, 1994, RESPECTIVELY.
FIDELITY MICHIGAN TAX-FREE HIGH YIELD PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 98.7%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - 92.5%
Brighton Area School Dist. Rfdg.
(Livingston County) Series II, 0% 5/1/15
(AMBAC Insured) Aaa $ 12,950,000 $ 3,901,188
Brighton, Livingston County Wtr. Supply Sys.
Ltd. Tax:
5.25% 11/1/08 A 200,000 190,500
5.25% 11/1/09 A 200,000 182,500
Clinton Township Bldg. Auth. 4.75%
11/1/10 (AMBAC Insured) Aaa 2,810,000 2,500,900
Comstock Pub. Schools (Cap. Appreciation)
0% 5/1/05 (CGIC Insured) Aaa 1,300,000 762,125
Dearborn School Dist. Unltd. Tax 5% 5/1/10
(MBIA Insured) Aaa 1,415,000 1,291,188
Dearborn Swr. Disp. Sys. Rev.:
6.50% 4/1/03 (MBIA Insured) Aaa 1,030,000 1,121,413
6.50% 4/1/04 (MBIA Insured) Aaa 1,095,000 1,193,550
Detroit City School Dist.:
Rfdg. 5.125% 5/1/07 A1 1,000,000 955,000
7.15% 5/1/11 (AMBAC Insured)
(Pre-Refunded to 5/1/01 @102) (e) Aaa 2,000,000 2,277,500
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.):
5.25% 9/30/07 A 6,500,000 6,118,125
5.25% 9/30/12 A 13,500,000 12,082,500
Detroit Econ. Dev. Corp. Ltd. Oblig. Rev.
(Michigan Health Care Corp. Proj.)
0% 12/1/09 (f) - 3,790,000 1,402,953
Detroit Gen. Oblig.:
Rfdg. (Distributable State Aid):
5.20% 5/1/07 (AMBAC Insured) Aaa 4,000,000 3,855,000
5.25% 5/1/08 (AMBAC Insured) Aaa 7,000,000 6,737,500
5.25% 5/1/09 (AMBAC Insured) Aaa 4,000,000 3,810,000
6.35% 4/1/14 Ba1 1,705,000 1,645,325
Detroit Hosp. Fin. Auth. Facs. Rev.
(Michigan Healthcare Corp. Proj.)
0% 12/1/20 (f) Caa 14,590,000 5,357,772
Detroit Self-Insurance Series A, 5.40%
5/1/00 BBB- 2,550,000 2,511,750
Detroit Swr. Disp. Rev.:
7.161% 7/1/23 (FGIC Insured) INFL (d) Aaa 9,000,000 8,122,500
3.90% 7/1/23 (FGIC Insured) Aaa 9,000,000 9,000,000
Detroit Wtr. Supply Sys. Rev. Rfdg.:
6.25% 7/1/12 (FGIC Insured) Aaa 1,000,000 1,027,500
6.50% 7/1/15 (FGIC Insured) Aaa 15,000,000 16,275,000
Flint Hosp. Bldg. Auth. Rev.:
Rfdg. (Hurley Med. Ctr.) 9.50% 7/1/06 Baa 5,670,000 5,889,713
(Hurley Med. Ctr.) 6.50% 7/1/20 Baa1 5,570,000 5,340,238
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
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 $ 2,247,500
Fraser Bldg. Auth. Ltd. Tax 5% 11/1/18 Baa1 1,000,000 833,750
Grand Haven Elec. Rev. Rfdg. 5.25% 7/1/16
(MBIA Insured) Aaa 5,500,000 5,025,625
Grand Rapids Wtr. Supply Sys. Rev. Rfdg.
6.625% 1/1/08 (FGIC Insured) Aaa 4,000,000 4,240,000
Grand Valley Univ. Gen. Oblig. Rev.:
Rfdg. 5.15% 10/1/09
(AMBAC Insured) Aaa 2,750,000 2,602,188
7.875% 10/1/08 A 1,000,000 1,121,250
Greater Detroit Resource Recovery Auth. Rev.:
Series C, 9.25% 12/13/08 BBB- 6,490,000 6,765,825
Series G, 9.25% 12/13/08 BBB- 3,000,000 3,127,500
Series H, 9.25% 12/13/08 BBB- 3,550,000 3,700,875
Gull Lake Commty. School Dist.
(Cap. Appreciation) 0% 5/1/13
(FGIC Insured) Aaa 3,000,000 1,038,750
Harbor Springs Pub. School Unltd. Tax:
0% 5/1/11 (AMBAC Insured) Aaa 1,280,000 496,000
0% 5/1/12 (AMBAC Insured) Aaa 1,390,000 502,138
0% 5/1/13 (AMBAC Insured) Aaa 1,455,000 494,700
Haslett Pub. School Dist. Unltd. Tax
7.50% 5/1/20 (Pre-Refunded to
5/1/00 @ 101) (e) A1 1,500,000 1,695,000
Howell Pub. Schools Unltd. Tax Rfdg.
(Cap Appreciation):
0% 5/1/10 (AMBAC Insured) Aaa 1,130,000 468,950
0% 5/1/11 (AMBAC Insured) Aaa 1,800,000 697,500
0% 5/1/12 (AMBAC Insured) Aaa 1,255,000 454,938
0% 5/1/13 (AMBAC Insured) Aaa 1,000,000 341,250
0% 5/1/14 (AMBAC Insured) Aaa 1,000,000 321,250
0% 5/1/15 (AMBAC Insured) Aaa 1,600,000 484,000
Huron Valley School Dist. Gen. Oblig. Unltd.
Tax:
Rfdg. (Cap. Appreciation)
0% 5/1/11 (FGIC Insured) Aaa 5,830,000 2,280,988
7.10% 5/1/08
(Pre-Refunded to 5/1/01 @ 102) (e) A1 2,500,000 2,834,375
Imlay City Commty. School Dist. Rfdg.
(Cap. Appreciation) 0% 5/1/06
(FGIC Insured) Aaa 1,375,000 759,688
Kalamazoo City School Dist. Unltd. Tax
(School Bldg. & Site) 0% 5/1/07 Aa 1,195,000 613,931
Kent County Refuse Disp. Sys. Ltd. Tax
Rfdg. 8.40% 11/1/10 A1 2,000,000 2,155,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Kent Hosp. Fin. Auth. Hosp. Facs. Rev. Rfdg.
(Butterworth Hospital) Series A, 7.25%
1/15/13 A1 $ 3,685,000 $ 4,214,719
Lansing Bldg. Auth. Rev. (Deferred Interest):
0% 6/1/10 (AMBAC Insured) Aaa 2,500,000 1,031,250
0% 6/1/12 (AMBAC Insured) Aaa 3,000,000 1,080,000
Lowell Area School Unltd. Tax
(Cap. Appreciation) 0% 5/1/15
(FGIC Insured)
(Pre-Refunded to 5/1/15 @ 49) (e) Aaa 11,375,000 3,384,063
Marquette City Hosp. Fin. Auth. Rev. Rfdg.
(Marquette Gen. Hosp.) Series C:
7.50% 4/1/07 A 1,000,000 1,072,500
7.50% 4/1/19 A 1,190,000 1,264,375
Michigan Bldg. Auth. Rev.:
Rfdg. Series I:
6% 10/1/00 A 1,375,000 1,454,063
6.25% 10/1/20 A 1,500,000 1,501,875
Rfdg. Series II, 6.75% 10/1/11 A 1,000,000 1,065,000
(Chippewa Correctional) Series I, 0%
10/1/00 (Escrowed to Maturity) (e) Aaa 2,275,000 1,757,438
(Detroit Regional) Series I: (e)
0% 10/1/99 (Escrowed to Maturity) Aaa 2,000,000 1,627,500
0% 10/1/01 (Escrowed to Maturity) Aaa 1,000,000 733,750
0% 10/1/02 (Escrowed to Maturity) Aaa 2,000,000 1,382,500
0% 10/1/04 (Escrowed to Maturity) A 8,120,000 5,024,250
Michigan Comprehensive Trans. Rev. Rfdg.:
Series II, 7.625% 5/1/11 A1 2,145,000 2,335,369
Series B, 5.75% 5/15/04 A1 1,275,000 1,314,844
Michigan Gen. Oblig. (Envir. Protection Prog.):
5.50% 11/1/05 A1 5,000,000 5,093,750
6.25% 11/1/08 A1 3,000,000 3,146,250
Michigan Hosp. Fin. Auth. Rev.:
Rfdg.:
(Bay Med. Ctr.) Series A, 8.25% 7/1/12 Baa1 3,000,000 3,251,250
(Brighton Hosp.) Series A, 8.625%
10/1/18 - 1,100,000 1,098,625
(Detroit-Macomb Hosp. Corp.) Series A:
7.30% 6/1/01 B 1,250,000 1,217,188
7.40% 6/1/13 (h) B 12,495,000 11,714,063
7% 6/1/15 B 1,345,000 1,203,775
(Detroit Med. Ctr.):
Series A, 6.50% 8/15/18 A 4,000,000 3,940,000
Series B, 5.50% 8/15/23 A 5,000,000 4,281,250
(Gratiot Commty. Hosp.) Series A,
8.75% 10/1/07 Ba 4,400,000 4,482,500
(McLaren Obligated Group) Series A,
5.375% 10/15/13 A1 4,280,000 3,809,200
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev.: - continued
Rfdg.: - continued
(Pontiac Osteopathic Hosp.) Series A:
6% 2/1/14 Baa1 $ 3,600,000 $ 3,150,000
6% 2/1/24 Baa1 3,500,000 2,944,375
(Port Huron Hosp.) Series A:
7.50% 7/1/05 Baa 1,000,000 1,030,000
7.625% 7/1/15 Baa 3,780,000 3,798,900
(Saratoga Commty. Hosp.) 8.75%
6/1/10 - 1,840,000 1,961,900
(Sinai Hosp. of Detroit) 7% 1/1/03
(FGIC Insured) Aaa 1,000,000 1,046,250
(Sisters of Mercy Health Corp.) 5.375%
8/15/14 (MBIA Insured) Aaa 9,950,000 9,315,688
(Crittenton Hosp.) 5.25% 3/1/14 A 4,620,000 4,019,400
(Daughters of Charity) (Providence Hosp.)
7% 11/1/21 Aa 1,000,000 1,056,250
(Harper Grace & Huron Valley Hosp.)
Series A, 10% 10/1/16 A 10,000 10,313
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.
Series B:
5.80% 4/1/19 A+ 4,650,000 4,382,625
7.55% 4/1/23 A+ 4,750,000 5,011,250
Michigan Hsg. Dev. Auth. Single Family Mtg.
Rev. Series A:
7.70% 12/1/16 AA+ 2,490,000 2,605,163
6.80% 12/1/16 AA+ 8,000,000 8,270,000
Michigan Muni. Bond Auth. Rev.
Rfdg. (Local Gov't. Loan Prog.) Series A:
(Cap. Appreciation)
0% 12/1/07 (FGIC Insured) Aaa 1,000,000 496,250
0% 12/1/04 (FGIC Insured) Aaa 2,000,000 1,215,000
0% 12/1/05 (FGIC Insured) Aaa 1,855,000 1,057,350
0% 12/1/06 (FGIC Insured) Aaa 5,000,000 2,675,000
4.75% 12/1/09 (FGIC Insured) Aaa 6,000,000 5,415,000
(Local Gov't. Loan Prog.):
Group 9, 8.75% 11/1/17 A 500,000 540,000
Group 19, 7.50% 11/1/09
(AMBAC Insured) Aaa 1,000,000 1,091,250
Series G, 6.20% 5/1/04
(AMBAC Insured) Aaa 1,000,000 1,068,750
(Wayne County Proj.) Series A,
7% 12/1/09 (FGIC Insured)
(Pre-Refunded to 6/1/00
@102) (e) Aaa 5,750,000 6,440,000
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.):
Series A, 5.25% 1/1/18 A1 7,500,000 6,693,750
Series B, 5% 1/1/19 A1 15,500,000 13,310,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan South Central Pwr. Agcy. Pwr. Supply
Sys. Rev. Rfdg.:
5.90% 11/1/06 (MBIA Insured) Aaa $ 3,000,000 $ 3,131,250
5% 11/1/09 (AMBAC Insured) Aaa 1,675,000 1,555,656
6.75% 11/1/10 Baa1 2,000,000 2,070,000
Michigan Strategic Fund Ltd. Oblig. Rev. Rfdg.:
Rfdg. (Detroit Edison Co. Proj.):
Series AA:
6.50% 2/15/16 (FGIC Insured) Aaa 1,250,000 1,310,938
6.40% 9/1/25 (MBIA Insured) (g) Aaa 5,000,000 5,106,250
Series BB:
7% 7/15/08 (MBIA Insured) Aaa 2,000,000 2,265,000
7% 5/1/21 (AMBAC Insured) Aaa 8,500,000 9,679,375
Rfdg. (Environmental Research Institute):
6.25% 8/15/06 A- 2,660,000 2,733,150
6.375% 8/15/12 A- 2,000,000 2,042,500
Rfdg. (Environmental Research Michigan Proj.)
8.125% 10/1/14 - 9,000,000 9,731,250
Rfdg. (Ford Co. Proj.) Series A, 7.10%
2/1/06 A1 4,000,000 4,510,000
Rfdg. (Kmart Corp. Proj.):
(Eaton Township) 6.25% 9/1/06 BBB 1,200,000 1,189,500
(Roseville) 6.25% 10/1/06 BBB+ 2,100,000 2,081,625
Rfdg. (Mercy Svcs. for Aging Proj.)
9.40% 5/15/20 - 8,900,000 9,500,750
Rfdg. (Michigan Health Care Corp. Proj.)
0% 12/1/14 (f) - 1,830,000 677,415
(Gladwin Pines Nursing Home Proj.)
(Midland Hosp. Ctr.) 8.75% 1/1/08 A- 1,640,000 1,771,200
Michigan Trunk Line Series A, 5.75% 10/1/04 A1 2,245,000 2,303,931
Mona Shores School Dist. School Bldg. & Site
Rev. 6.75% 5/1/10 (FGIC Insured) Aaa 2,220,000 2,400,375
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 1,125,000
Monroe County Poll. Cont. Rev. (Detroit Edison
Proj.) Series CC, 7.50% 12/1/19
(AMBAC Insured) Aaa 5,000,000 5,512,500
Okemos Pub. School Dist. Unltd. Tax Rfdg.:
(Cap. Appreciation) 0% 5/1/12
(MBIA Insured) Aaa 2,500,000 909,375
0% 5/1/13 (MBIA Insured) Aaa 1,700,000 575,875
0% 5/1/14 (MBIA Insured) Aaa 1,600,000 510,000
0% 5/1/15 (MBIA Insured) Aaa 2,600,000 780,000
0% 5/1/16 (MBIA Insured) Aaa 3,500,000 988,750
Pontiac Hosp. Fin. Auth. Rev. (North Oakland
Med. Ctr. Obligated Group) 6%
8/1/18 Baa 2,700,000 2,318,625
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Pontiac Stadium Bldg. Auth. Rev.
6.60% 3/1/03 Baa $ 1,145,000 $ 1,165,038
Port Huron Area School Dist. School Bldg. & Site
Unltd. Tax (Cap. Appreciation) 0%
5/1/08 A1 1,975,000 943,063
Rochester Community School Dist. Unltd. Tax
Rfdg. 5.625% 5/1/11 (FGIC Insured) Aaa 1,000,000 985,000
Romulus Commty. Schools (Cap. Appreciation)
Series I, 0% 5/1/06 (FSA Insured) Aaa 3,610,000 1,994,525
Romulus Township School Dist. (Cap.
Appreciation) 0% 5/1/20 (FGIC Insured) Aaa 1,390,000 302,325
Royal Oak City School Dist. School Bldg. & Site
Unltd. Tax 0% 5/1/05 (AMBAC Insured) Aaa 3,000,000 1,770,000
Royal Oak Hosp. Fin. Auth. Hosp. Rev.
(William Beaumont Hosp.) Series C,
7.375% 1/1/20
(Pre-Refunded to 1/1/99 @ 102) (e) Aaa 4,070,000 4,527,875
St. Clair Shores Econ. Dev. Corp. Ltd. Oblig.
Rev. (Bon Secours Health Sys.) Series B,
7.50% 9/1/15 A1 2,100,000 2,260,125
Tawas City Hosp. Fin. Auth. Hosp. Rev.
(St. Joseph Hosp. Proj.) Series A,
8.50% 3/15/12 - 2,400,000 2,523,000
Three Rivers Area Hosp. Auth. Series A:
11% 11/1/08 - 300,000 308,250
11% 11/1/09 - 300,000 308,250
Univ. of Michigan Hosp. Rev.
Series 1990, 7% 12/1/21
(Pre-Refunded to 12/1/00 @ 102) (e) Aa 1,000,000 1,126,250
Univ. of Michigan Rev. Rfdg. (Parking Sys.)
Series A, 5% 6/1/15 Aa1 2,125,000 1,885,938
Vicksburg Commty. Schools 7% 5/1/07
(MBIA Insured) (Pre-Refunded to 5/1/01
@ 102) (e) Aaa 2,250,000 2,545,313
Waterford Township Econ. Dev. Corp. Rev. Ltd.
Tax Oblig. (Canterbury Healthcare):
8% 7/1/08 - 550,000 558,250
8.375% 7/1/23 - 1,300,000 1,352,000
Wayne Charter County Arpt Rev.
(Subordinated Lien Detroit Metropolitan Arpt.):
Series B, 6.875% 12/1/11
(MBIA Insured) (b) Aaa 1,500,000 1,593,750
Series C, 5.25% 12/1/13
(MBIA Insured) Aaa 2,000,000 1,842,500
Wayne Charter County Spl. Arpt. Facs. Rev.
(Republic Airlines, Inc. Proj.) Series C,
10.375% 12/1/15 - 4,475,000 4,659,594
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Wayne County Bldg. Auth. Ltd. Tax Series A,
8% 3/1/17 (Pre-Refunded to 3/1/02
@ 102) (e) Baa $ 2,250,000 $ 2,683,125
West Ottawa Pub. School Dist. School Bldg. & Site
Unltd. Tax Gen. Oblig. (Cap. Appreciation)
0% 5/1/06 (MBIA Insured) Aaa 4,110,000 2,250,225
Western Michigan Univ. Rev.:
Rfdg. Series A, 5.50% 7/15/16
(FGIC Insured) Aaa 1,000,000 940,000
Series A, 5% 7/15/21 (FGIC Insured) Aaa 3,600,000 3,078,000
1.67% 7/15/17 (FGIC Insured) INFL (d) Aaa 2,500,000 2,106,250
Western Townships Util. Auth. Swr. Disp. Sys.
Ltd. Tax 8.20% 1/1/18 BBB+ 2,500,000 2,756,250
Williamston Gen. Oblig. Rfdg. 6.90% 11/1/17
(AMBAC Insured) Aaa 1,000,000 1,058,750
435,245,083
PUERTO RICO - 5.1%
Puerto Rico Commonwealth Aqueduct & Swr.
Auth. Rev. Series A, 7.875% 7/1/17 Baa 2,000,000 2,210,000
Puerto Rico Commonwealth Hsg. Banking & Fin.
Agcy. Single Family Rfdg.:
5.125% 12/1/04 Baa 2,450,000 2,339,750
5.125% 12/1/05 Baa 3,890,000 3,671,188
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Hwy. Rev. Rfdg. Series W, 5.50% 7/1/13 Baa1 11,000,000 10,381,250
Puerto Rico Commonwealth Urban Renewal & Hsg.
Corp. Rfdg. 7.875% 10/1/04 Baa1 2,800,000 3,122,000
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series S, 6.125% 7/1/09 Baa1 2,000,000 2,047,500
23,771,688
GUAM - 1.1%
Guam Arpt. Auth. Rev. Series A, 6.60%
10/1/10 (b) BBB 2,000,000 2,002,500
Guam Pwr. Auth. Rev. Series A, 5.25%
10/1/13 BBB 3,500,000 3,040,613
5,043,113
TOTAL MUNICIPAL BONDS
(Cost $466,660,394) 464,059,884
MUNICIPAL NOTES (A) - 1.3%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MICHIGAN - 1.3%
Cornell Township Econ. Dev. Corp. Envir. Impt.
Rev. Rfdg. (Mead Escanaba Paper Co.
Proj.) Series 1986, 4.25%,
LOC Swiss Bank, VRDN A-1+ $ 1,400,000 $ 1,400,000
Delta County Econ. Dev. Corp. Envir. Impt.
Rev. (Mead Escanaba Paper Co. Proj.)
Series 1992, 4.35%, LOC Union Bank of
Switzerland, VRDN (b) A-1+ 2,600,000 2,600,000
Grand Rapids Ind. Dev. Rev. (Rowe Int'l. Inc.)
4.30%, LOC Chemical Bank, VRDN A-1 2,300,000 2,300,000
TOTAL MUNICIPAL NOTES
(Cost $6,300,000) 6,300,000
TOTAL INVESTMENTS - 100%
(Cost $472,960,394) $ 470,359,884
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
INFL - Inverse Floating Rate Security
LEGEND
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(g) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(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.
(i) Security collateralized by an amount sufficient to pay interest and
principal.
(j) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(k) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(l) A portion of the security was pledged to cover margin requirements for
delayed delivery purchases. At the period end, the value of securities
pledged amounted to $5,842,500.
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 57.8% AAA, AA, A 68.7%
Baa 12.4% BBB 12.4%
Ba 1.3% BB 0.0%
B 0.0% B 3.0%
Caa 1.1% CCC 1.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 7.3%. FMR has
determined that unrated debt securities that are lower quality account for
5.2% 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 23.3%
General Obligation 13.3%
Others
(individually less than 10%) 63.4%
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $472,960,394. Net unrealized depreciation aggregated
$2,600,510, of which $20,502,765 related to appreciated investment
securities and $23,103,275 related to depreciated investment securities.
The fund elected to defer to its fiscal year ending December 31, 1995
$5,128,985 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>
JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $472,960,394) 9. $ 470,359,884
See accompanying schedule
10.Cash 11. 42,958
12.Receivable for investments sold 13. 943,279
14.Interest receivable 15. 7,549,154
16. 17.TOTAL ASSETS 18. 478,895,275
19.LIABILITIES 20. 21.
22.Payable for delayed delivery $ 5,005,333 23.
24.Payable for fund shares redeemed 195,173 25.
26.Distributions payable 645,860 27.
28.Accrued management fee 161,004 29.
30.Other payables and accrued expenses 11,305 31.
32. 33.TOTAL LIABILITIES 34. 6,018,675
35.36.NET ASSETS 37. $ 472,876,600
38.Net Assets consist of: 39. 40.
41.Paid in capital 42. $ 484,320,187
43.Accumulated undistributed net realized gain (loss) 44. (8,843,077)
on investments
45.Net unrealized appreciation (depreciation) 46. (2,600,510)
on investments
47.48.NET ASSETS, for 42,838,232 shares outstanding 49. $ 472,876,600
50.51.NET ASSET VALUE, offering price and redemption 52. $11.04
price per share ($472,876,600 (divided by) 42,838,232 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
53.54.INTEREST INCOME 55. $ 15,029,615
56.EXPENSES 57. 58.
59.Management fee $ 942,754 60.
61.Transfer agent, accounting and custodian fees 394,044 62.
and expenses
63.Non-interested trustees' compensation 1,091 64.
65.Registration fees 1,266 66.
67.Audit 15,442 68.
69.Legal 20,408 70.
71.Miscellaneous 2,640 72.
73. 74.TOTAL EXPENSES 75. 1,377,645
76.77.NET INTEREST INCOME 78. 13,651,970
79.REALIZED AND UNREALIZED GAIN (LOSS) 81. 82.
80.Net realized gain (loss) on:
83. Investment securities (876,624) 84.
85. Futures contracts (728,735) (1,605,359)
86.Change in net unrealized appreciation (depreciation) 87. 88.
on:
89. Investment securities 20,563,536 90.
91. Futures contracts 106,261 20,669,797
92.93.NET GAIN (LOSS) 94. 19,064,438
95.96.NET INCREASE (DECREASE) IN NET ASSETS 97. $ 32,716,408
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
98.INCREASE (DECREASE) IN NET ASSETS
99.Operations $ 13,651,970 $ 30,593,065
Net interest income
100. Net realized gain (loss) (1,605,359) 1,872,546
101. Change in net unrealized appreciation 20,669,797 (73,914,188)
(depreciation)
102. 32,716,408 (41,448,577)
103.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
104.Distributions to shareholders (13,651,970) (30,593,065)
From net interest income
105. From net realized gain - (3,640,536)
106. In excess of net realized gain - (3,743,750)
107. 108.TOTAL DISTRIBUTIONS (13,651,970) (37,977,351)
109.Share transactions 72,129,135 123,015,698
Net proceeds from sales of shares
110. Reinvestment of distributions 10,314,819 29,488,133
111. Cost of shares redeemed (62,326,048) (202,876,014)
112.113. 20,117,906 (50,372,183)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
114. 39,182,344 (129,798,111)
115.TOTAL INCREASE (DECREASE) IN NET ASSETS
116.NET ASSETS 117. 118.
119. Beginning of period 433,694,256 563,492,367
120. End of period $ 472,876,600 $ 433,694,256
121.OTHER INFORMATION 123. 124.
122.Shares
125. Sold 6,556,257 10,688,197
126. Issued in reinvestment of distributions 937,130 2,612,382
127. Redeemed (5,656,441) (17,972,179)
128. Net increase (decrease) 1,836,946 (4,671,600)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
129. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
130. (UNAUDITED) 1994 1993 C 1992 1991 1990
131.SELECTED PER-SHARE DATA
132.Net asset value, beginning of
period $ 10.580 $ 12.340 $ 11.710 $ 11.410 $ 10.890 $ 11.100
133.Income from Investment
Operations .321 .687 .709 .733 .745 .758
Net interest income
134. Net realized and unrealized
gain (loss) .460 (1.590) .870 .320 .520 (.210)
135. Total from investment
operations .781 (.903) 1.579 1.053 1.265 .548
136.Less Distributions (.321) (.687) (.709) (.733) (.745) (.758)
From net interest income
137. From net realized gain on
investments - (.080) (.240) (.020) - -
138. In excess of net realized gain
on investments - (.090) - - - -
139. Total distributions (.321) (.857) (.949) (.753) (.745) (.758)
140.Net asset value, end of period $ 11.040 $ 10.580 $ 12.340 $ 11.710 $ 11.410 $ 10.890
141.TOTAL RETURN B 7.43% -7.50% 13.83% 9.54% 12.04% 5.15%
142.RATIOS AND SUPPLEMENTAL DATA
143.Net assets, end of period (000
omitted) $ 472,877 $ 433,694 $ 563,492 $ 463,816 $ 379,175 $ 279,429
144.Ratio of expenses to average net
assets .60% .57% .59% .61% .62% .64%
A
145.Ratio of net interest income to
average net assets 5.90% 6.04% 5.79% 6.36% 6.73% 6.98%
A
146.Portfolio turnover rate 26% 18% 33% 15% 12% 18%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS
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, the past five years and
life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Michigan Municipal
Money Market Portfolio 1.69% 3.11% 17.25% 20.39%
Average All Tax-Free Money Market Fund 1.70% 3.10% 16.51% 18.91%
Consumer Price Index 1.87% 3.04% 17.40% 20.94%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 12, 1990. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. To measure how the fund's performance stacked
up against its peers, you can compare it to the average all tax-free money
market fund, which reflects performance of 389 all tax-free money market
funds tracked by IBC/Donoghue over the past six months. 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 and
IBC/Donoghue numbers are the closest available match to those covered by
the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Municipal
Money Market Portfolio 3.11% 3.23% 3.45%
Average All Tax-Free Money Market Fund 3.10% 3.10% 3.19%
Consumer Price Index 3.04% 3.26% 3.52%
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>
6/27/94 9/26/94 12/26/94 3/27/95 6/26/95
Fidelity Michigan Municipal 2.20% 2.77% 3.90% 3.38% 3.56%
Money Market Portfolio
Average All Tax-Free 2.27% 2.81% 3.78% 3.45% 3.59%
Money Market Fund
Fidelity Michigan Municipal 3.60% 4.53% 6.37% 5.52% 5.82%
Money Market Portfolio
Tax-equivalent
</TABLE>
Row: 1, Col: 1, Value: 2.18
Row: 1, Col: 2, Value: 2.27
Row: 2, Col: 1, Value: 2.77
Row: 2, Col: 2, Value: 2.81
Row: 3, Col: 1, Value: 3.9
Row: 3, Col: 2, Value: 3.78
Row: 4, Col: 1, Value: 3.38
Row: 4, Col: 2, Value: 3.45
Row: 5, Col: 1, Value: 3.56
Row: 5, Col: 2, Value: 3.59
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 1995 federal and state income tax rate of 38.82%. Figures for the
average all tax-free money market fund are from 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 MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Jeff Parker,
Portfolio Manager of Michigan
Municipal Money Market Portfolio
Q. JEFF, CAN YOU TELL US HOW THE INVESTMENT CLIMATE HAS CHANGED DURING THE
PAST SIX MONTHS?
A. Conditions have changed dramatically. When the period began, the Federal
Reserve was still in a credit-tightening mode. There had already been six
Fed rate increases in the cycle, and the seventh - a one-half percentage
point increase in the federal funds rate, the rate banks charge each other
for overnight loans - came in February. However, the February rate increase
was widely anticipated and the market absorbed it without a hitch.
Q. HAVE RATES PEAKED, THEN?
A. That's quite possible. The goal of Fed policy ever since it began
raising short-term interest rates in February 1994 has been to dampen the
economic growth rate and prevent an outbreak of inflation. Apparently, the
policy has worked. Early in 1995, we began seeing signs that the economy
was slowing down. Those signs were confirmed in April with the estimate of
the first-quarter growth rate, which came in at a surprisingly low 2.8%.
That marked a dramatic slowdown from the robust 5.1% growth rate during the
fourth quarter of 1994. The pattern of slower growth persisted throughout
the spring. By the end of the period, it seemed highly unlikely that the
Fed would see the need to raise rates again anytime soon. Instead,
speculation centered on when the Fed would lower interest rates.
Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD?
A. When the period began, the fund's average maturity was between 35 and 40
days. By the time of the February rate increase, it was closer to 30 days,
and by mid-March it was down in the mid-20s. In retrospect, that was
shorter than we might have liked to have been as rates were peaking. On the
other hand, market conditions were still uncertain; and more importantly, a
temporary shortage of appropriate issues in the Michigan market made
extending the fund problematic. As supplies increased later in the spring,
we were able to bring the fund back out around 40 days by mid-April, and 51
days by the end of June; still shorter than ideal, but appropriate given
the continued lack of adequate supply.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1995 was 3.57%, compared to 4.15%
six months ago. On an after-tax basis, that was the equivalent of a 5.84%
yield on a taxable investment for Michigan investors in the 38.82% combined
federal and state tax bracket. Through June 30, 1995, the fund's six-month
total return was 1.69%, compared to 1.70% for the average all tax-free
money market fund, according to IBC/Donoghue.
Q. WHAT'S THE OUTLOOK?
A. There's been a dramatic shift in market psychology in recent months.
Early this year, many economists were predicting that the Fed would go
right on raising interest rates through the summer. However, as the economy
slowed down, the consensus view shifted 180 degrees. By the end of June,
most market participants agreed it was only a matter of time before the Fed
would begin lowering rates. In fact, on July 6, 1995, days after the
reporting period ended, the Fed acted, shaving one-quarter percentage point
off the federal funds rate. Now the question becomes whether the rate cuts
will continue. I don't think it would be appropriate to extend the fund
aggressively. On the other hand, it seems reasonable to assume that lower
rates are coming - if not this summer, then perhaps later in the year. With
that in mind, I'll probably look for opportunities to gradually extend the
fund's average maturity in the months ahead.
FUND FACTS
GOAL: High current tax-free
income for Michigan residents
while maintaining a stable
$1.00 share price. Invests in
high-quality, short-term
municipal money market
securities whose interest is
free from federal income tax
and Michigan income tax.
START DATE: January 12, 1990
SIZE: as of June 30,1995,
more than $217 million
MANAGER: Jeff Parker, since
June 1995; manager, Fidelity
Connecticut Municipal Money
Market, Fidelity New Jersey
Municipal Money Market, and
Spartan New Jersey Municipal
Money Market portfolios, since
June 1995; joined Fidelity in
1991
(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.
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.
Jeff Parker became manager
of the fund effective June 1,
1995
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
6/30/95 12/31/94 6/30/94
0 - 30 71 71 62
31 - 90 16 7 8
91 - 180 6 20 21
181 - 397 7 2 9
WEIGHTED AVERAGE MATURITY
6/30/95 12/31/94 6/30/94
Michigan Municipal
Money Market Portfolio 51 days 40 days 58 days
Average All Tax-Free
Money Market Fund* 45 days 47 days 46 days
ASSET ALLOCATION
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Row: 1, Col: 1, Value: 60.0
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 7.0
Row: 1, Col: 4, Value: 18.0
Row: 1, Col: 5, Value: 0.0
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
Variable rate
demand notes
(VRDNs) 60%
Commercial
paper 15%
Tender bonds 7%
Municipal
notes 18%
Other 0%
Variable rate
demand notes
(VRDNs) 60%
Commercial
paper 16%
Tender bonds 6%
Municipal
notes 17%
Other 1%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 100.0%
Bruce Township Hosp. Fin. Auth. Sisters of Charity
Health Care Sys. Rev. Bonds (St. Joseph Hosp. Ctr. Proj.)
4.10%, tender 11/1/95 (MBIA Insured)
(BPA Morgan Guaranty) $ 5,500,000 $ 5,500,000
Comstock Park Pub. Schools Participating VRDN, Series 94-B1,
4.30% (FGIC Insured) (Liquidity Facility Norwest Bank) (c) 3,145,000
3,145,000
Detroit Downtown Dev. Auth. Rev. Rfdg. (Millender Ctr. Proj.)
Series 1988, 4.10%, LOC Sumitomo Bank, VRDN 3,000,000 3,000,000
Detroit Wtr. Supply Sys. Participating VRDN,
Series PA-28, 4.25% (FGIC Insured)
(Liquidity Facility Merrill Lynch & Co.) (c) 4,440,000 4,440,000
Flint Econ. Dev. Corp. Ltd. Oblig. Rev. (Genesee County
Real Estate Proj.) 4.05%, 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, 4.05%,
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, 4.35%,
LOC Societe Generale, VRDN (b) 1,000,000 1,000,000
Grand Rapids Econ. Dev. Auth. Rev. (Calder Plaza Proj.)
Series 1992 A, 4.10%, 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, 4.35%,
LOC Sakura Bank, VRDN 4,500,000 4,500,000
Grand Rapids Econ. Dev. Corp. Ltd. Oblig. Rev.
(Holland Home Proj.) Series 1994 B, 4%,
LOC Old Kent Bank & Trust Co., VRDN 2,250,000 2,250,000
Grand Rapids Ind. Rev. (Rowe Int'l.) 4.30%,
LOC Chemical Bank, VRDN 3,000,000 3,000,000
Kalamazoo Econ. Dev. Corp. Rev. Rfdg.
(La Quinta Motor Inns) Series 1991, 4.25%,
LOC NationsBank, VRDN 2,190,000 2,190,000
Kent County Hosp. Fin. Auth. Participating VRDN,
Series 94-C1, 4.30% (MBIA Insured)
(Liquidity Facility Norwest Bank) (c) 4,000,000 4,000,000
Kent County Hosp. Fin. Auth. Rev. (Butterworth Hosp.
Proj.) Series 1991 A, 4.35%, LOC Sanwa Bank, VRDN 1,900,000 1,900,000
Livonia Econ. Dev. Corp., VRDN (b):
(Ajluni Proj.) 4.05%, LOC Nat'l. Bank of Detroit 2,300,000 2,300,000
(Foodland Distributors Corp.) 4.30%, LOC Comerica Bank 2,100,000
2,100,000
Michigan Higher Ed. Facs. Auth. Ltd. Oblig. Rev. 4.05%,
(MBIA Insured) (BPA Comerica Bank) VRDN 900,000 900,000
Michigan Higher Ed. Student Loan Auth. Rev. Rfdg.
Series XII-B, 4.30% (AMBAC Insured)
(BPA Krediet Bank) VRDN (b) 9,700,000 9,700,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev., VRDN:
Rfdg. (Mt. Clemens Gen. Hosp.) Series 1994, 4.15%
LOC Comerica Bank $ 5,000,000 $ 5,000,000
(Equip. Loan Prog.):
Series 1991, 4.20%, LOC Comerica Bank 2,350,000 2,350,000
Series A, 4.10%, LOC First of America Bank 7,100,000 7,100,000
Michigan Hsg. Dev. Auth. Participating VRDN (b) (c):
Series PT-19, 4.30% (Liquidity Facility Credit Suisse) 11,580,000
11,580,000
Series PT-38, 4.30% (FSA Insured)
(Liquidity Facility Industrial Bank of Japan) 4,710,000 4,710,000
Series PT-58, 4.10% (Liquidity Facility Credit Suisse) 8,900,000
8,900,000
Michigan Hsg. Dev. Auth. Multi-Family Hsg. Rev. Bonds:
Series 1988 A: (b)
4.20%, tender 7/17/95, LOC Sanwa Bank 4,700,000 4,700,000
4.15%, tender 7/25/95, LOC Sanwa Bank 4,935,000 4,935,000
4.15%, tender 8/7/95, LOC Sanwa Bank 3,800,000 3,800,000
3.90%, tender 8/14/95, LOC Sanwa Bank 3,300,000 3,300,000
Michigan Muni. Bond Auth. RAN Series 1995 B, 4.50%
7/3/96 15,000,000 15,101,100
Michigan Muni. Bond Auth. RAN, Series 1994 B,
4.75% 7/20/95 5,000,000 5,001,876
Michigan School Loan BAN Series A, 4.50% 8/15/95 20,000,000 20,009,086
Michigan Strategic Fund Econ. Dev. Rev.
(Yamaha Musical Prod., Inc. Proj.) Series 1988, 4.30%,
LOC Dai-Ichi Kangyo Bank, VRDN (b) 6,800,000 6,800,000
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN:
(Alpha Tech Corp. Proj.) Series 1987, 4.30%,
LOC Bank of Tokyo (b) 6,000,000 6,000,000
(Donnelly Corp. Proj.) Series 1990 A,
4.35%, LOC Bank of Tokyo (b) 3,500,000 3,500,000
(Doss Ind. Dev. Co.) 4.05%,
LOC Nat'l. Bank of Detroit (b) 3,900,000 3,900,000
(Environmental Quality Co. Proj.) Series 1995, 4.25%,
LOC Comerica Bank 1,000,000 1,000,000
(Hi Tech Mold & Engineering) 4.05%,
LOC Nat'l. Bank of Detroit (b) 1,600,000 1,600,000
(The Spiratex Co. Proj.) Series 1994, 4.05%
LOC Natl. Bank of Detroit (b) 3,000,000 3,000,000
(Uni Boring Co. Inc. Proj.) Series 1992, 4.05%
LOC Nat'l. Bank of Detroit 2,100,000 2,100,000
Michigan Strategic Fund Poll. Cont. Rev.
(Gen. Motors Corp. Proj.) 4.10%, VRDN 5,790,000 5,790,000
Michigan Strategic Fund Rev. Bonds (Dow Chemical Proj.):
Series 1986, 3.60%, tender 9/11/95 1,000,000 1,000,000
Series 1987, 4.20%, tender 7/20/95 2,720,000 2,720,000
Series 1988: (b)
4.25%, tender 7/12/95 2,700,000 2,700,000
4.20%, tender 7/25/95 3,700,000 3,700,000
4.20%, tender 8/10/95 2,000,000 2,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Rev. Bonds (Dow Chemical Proj.): - continued
Series 1988: (b) - continued
3.75%, tender 8/21/95 $ 2,400,000 $ 2,400,000
3.75%, tender 9/11/95 2,000,000 2,000,000
Michigan Strategic Fund Solid Wst. Disp. Rev.
(Grayling Gen. Station Proj.) Series 1990, 4.25%,
LOC Barclays Bank, VRDN (b) 6,200,000 6,200,000
Midland County Econ. Dev. Corp. Rev. (Dow Chemical Co.
Proj.) Series 1993 A, 4.40%, VRDN 1,500,000 1,500,000
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cardell Corp.) 4.30%, LOC Comerica Bank, VRDN (b) 300,000 300,000
Saline Econ. Dev. Corp. Rev. (Associated Springs Proj.)
Series 1988, 4.55%, LOC Fuji Bank, VRDN (b) 5,000,000 5,000,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 4.25%,
LOC Comerica Bank, VRDN (b) 5,300,000 5,300,000
Western Gen. Oblig. School Dist. School Bldg. & Rfdg. Bonds
Series 1995, 3.70% 5/1/96 (MBIA Insured) 500,000 500,000
TOTAL INVESTMENTS - 100% $ 220,922,062
Total Cost for Income Tax Purposes $ 220,922,062
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
RAN - 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.
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>
JUNE 30, 1995 (UNAUDITED)
147.ASSETS 148. 149.
150.Investment in securities, at value - See 151. $ 220,922,062
accompanying schedule
152.Receivable for investments sold 153. 10,216,791
154.Interest receivable 155. 1,374,365
156. 157.TOTAL ASSETS 158. 232,513,218
159.LIABILITIES 160. 161.
162.Payable to custodian bank $ 222,653 163.
164.Payable for investments purchased 15,101,100 165.
166.Distributions payable 25,252 167.
168.Accrued management fee 72,601 169.
170.Other payables and accrued expenses 52,862 171.
172. 173.TOTAL LIABILITIES 174. 15,474,468
175.176.NET ASSETS 177. $ 217,038,750
178.Net Assets consist of: 179. 180.
181.Paid in capital 182. $ 217,098,056
183.Accumulated net realized gain (loss) on 184. (59,306)
investments
185.186.NET ASSETS, for 217,098,056 shares 187. $ 217,038,750
outstanding
188.189.NET ASSET VALUE, offering price and 190. $1.00
redemption price per share ($217,038,750 (divided by)
217,098,056 shares)
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
191.192.INTEREST INCOME 193. $ 4,324,642
194.EXPENSES 195. 196.
197.Management fee $ 439,375 198.
199.Transfer agent, accounting and custodian fees 225,575 200.
and expenses
201.Non-interested trustees' compensation 860 202.
203.Registration fees 11,465 204.
205.Audit 12,064 206.
207.Legal 43 208.
209.Miscellaneous 869 210.
211. 212.TOTAL EXPENSES 213. 690,251
214.215.NET INTEREST INCOME 216. 3,634,391
217.218.NET REALIZED GAIN (LOSS) ON INVESTMENTS 219. (6,578)
220.221.NET INCREASE IN NET ASSETS RESULTING FROM 222. $ 3,627,813
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
223.INCREASE (DECREASE) IN NET ASSETS
224.Operations $ 3,634,391 $ 4,816,413
Net interest income
225. Net realized gain (loss) (6,578) (39,157)
226. 3,627,813 4,777,256
227.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
228.Distributions to shareholders from net interest (3,634,391) (4,816,413)
income
229.Share transactions at net asset value of $1.00 per 164,499,567 440,390,901
share
Proceeds from sales of shares
230. Reinvestment of distributions from net interest 3,459,399 4,529,069
income
231. Cost of shares redeemed (172,648,502) (398,336,000)
232.233. (4,689,536) 46,583,970
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES
RESULTING FROM SHARE TRANSACTIONS
234. (4,696,114) 46,544,813
235.TOTAL INCREASE (DECREASE) IN NET ASSETS
236.NET ASSETS 237. 238.
239. Beginning of period 221,734,864 175,190,051
240. End of period $ 217,038,750 $ 221,734,864
</TABLE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C>
241.
SIX MONTHS YEARS ENDED DECEMBER 31, JANUARY 12, 1990
ENDED (COMMENCEMENT
JUNE 30, 1995 OF OPERATIONS) TO
DECEMBER 31,
242.
(UNAUDITED) 1994 1993 1992 1991 1990
243.SELECTED PER-SHARE DATA
244.Net asset value, beginning of period
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
245.Income from Investment Operations
..017 .024 .020 .026 .044 .055
Net interest income
246.Less Distributions
(.017) (.024) (.020) (.026) (.044) (.055)
From net interest income
247.Net asset value, end of period
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
248.TOTAL RETURN B
1.69% 2.44% 1.98% 2.66% 4.46% 5.66%
249.RATIOS AND SUPPLEMENTAL DATA
250.Net assets, end of period (000 omitted)
$ 217,039 $ 221,735 $ 175,190 $ 160,817 $ 175,150 $ 169,397
251.Ratio of expenses to average net assets
..64% .61% .62% .49% .21% .22%A
A
252.Ratio of expenses to average net assets before
..64% .61% .62% .61% .65% .77%A
expense reductions
A
253.Ratio of net interest income to average net assets
3.37% 2.45% 1.96% 2.64% 4.38% 5.78%A
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL
RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING
THE PERIODS SHOWN.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Michigan Tax-Free High Yield Portfolio (the high yield fund) is a
fund of Fidelity Municipal Trust. Fidelity Michigan 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 substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of 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 and losses
deferred due to wash sales, futures and options and excise tax regulations.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Each fund
may receive compensation for interest forgone in a delayed delivery
transaction. Each 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 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. 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 $75,362,461 and $56,755,543, respectively. The
market value of futures contracts opened and closed during the period
amounted to $11,098,377 and $18,519,289, 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 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 .1200% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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
annualized 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 $14,106 and
$12,396 for the high yield and money market funds, respectively, for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the funds. UMB 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. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the funds pay account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the funds paid fees based on the type, size, number of
accounts and the 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 $291,473 and $100,481 for
the high yield fund, and $195,738 and $22,834 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 $4,470.
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)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)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.
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER, MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Michael D. Conway, Assistant Treasurer - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB 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)
MINNESOTA
TAX-FREE
PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 23 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at the fund's
income. If Fidelity had not reimbursed certain fund expenses, the life of
fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Minnesota Tax-Free Portfolio 9.15% 7.88% 41.25% 103.23%
Lehman Brothers Municipal Bond 9.65% 8.82% 48.70% n/a
Index
Average Minnesota
Municipal Bond Fund 8.32% 6.91% 41.93% n/a
Consumer Price Index 1.87% 3.04% 17.40% 39.91%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 21, 1985. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond index - a broad gauge of
the municipal bond market. To measure how the fund's performance stacked up
against its peers, you can compare it to the average Minnesota municipal
bond fund which reflects the performance of 40 Minnesota municipal bond
funds with similar objectives tracked by Lipper Analytical Services for the
past six months. 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 JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Minnesota Tax-Free Portfolio 7.88% 7.15% 7.66%
Lehman Brothers Municipal Bond 8.82% 8.26% n/a
Index
Average Minnesota
Municipal Bond Fund 6.91% 7.25% n/a
Consumer Price Index 3.04% 3.26% 3.57%
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
Minnesota Tax FreeMunicipal Bond In
11/30/85 10000.00 10000.00
12/31/85 10135.32 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 10810.84 10936.73
06/30/86 10880.08 11041.07
07/31/86 10965.68 11108.08
08/31/86 11428.88 11605.39
09/30/86 11433.01 11634.52
10/31/86 11734.16 11835.45
11/30/86 11893.82 12069.91
12/31/86 11862.07 12036.60
01/31/87 12110.25 12399.02
02/28/87 12273.23 12460.02
03/31/87 12164.47 12327.95
04/30/87 11162.91 11709.33
05/31/87 11041.27 11651.25
06/30/87 11273.79 11993.33
07/31/87 11449.75 12115.67
08/31/87 11505.33 12142.93
09/30/87 10803.02 11695.22
10/31/87 10927.93 11736.62
11/30/87 11190.18 12043.06
12/31/87 11407.88 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 11934.91 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 13021.62 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 13744.64 14535.46
11/30/89 13939.71 14789.83
12/31/89 14033.00 14911.10
01/31/90 13936.00 14841.02
02/28/90 14094.11 14973.11
03/31/90 14108.43 14977.60
04/30/90 13927.53 14869.76
05/31/90 14211.06 15193.92
06/30/90 14345.58 15327.63
07/31/90 14591.06 15552.94
08/31/90 14352.94 15327.43
09/30/90 14477.03 15336.62
10/31/90 14656.21 15614.22
11/30/90 14977.44 15928.06
12/31/90 15046.11 15998.14
01/31/91 15172.90 16212.52
02/28/91 15272.18 16353.57
03/31/91 15298.14 16360.11
04/30/91 15483.12 16577.70
05/31/91 15638.50 16725.24
06/30/91 15575.94 16708.52
07/31/91 15778.28 16912.36
08/31/91 15936.66 17135.60
09/30/91 16051.29 17358.37
10/31/91 16106.23 17514.59
11/30/91 16071.55 17563.63
12/31/91 16324.82 17941.25
01/31/92 16396.20 17982.52
02/29/92 16464.69 17987.91
03/31/92 16490.81 17995.11
04/30/92 16607.38 18155.26
05/31/92 16789.81 18369.49
06/30/92 17016.34 18678.10
07/31/92 17435.01 19238.44
08/31/92 17256.53 19049.91
09/30/92 17297.37 19173.73
10/31/92 16974.34 18985.83
11/30/92 17366.87 19325.68
12/31/92 17569.92 19522.80
01/31/93 17837.88 19749.26
02/28/93 18388.49 20464.19
03/31/93 18216.89 20247.26
04/30/93 18387.70 20451.76
05/31/93 18512.94 20566.29
06/30/93 18815.77 20909.75
07/31/93 18839.45 20936.93
08/31/93 19233.55 21372.42
09/30/93 19508.64 21616.07
10/31/93 19533.43 21657.14
11/30/93 19369.51 21466.55
12/31/93 19752.45 21919.50
01/31/94 19981.79 22169.38
02/28/94 19459.69 21595.19
03/31/94 18614.96 20716.27
04/30/94 18722.23 20892.36
05/31/94 18851.50 21074.12
06/30/94 18783.66 20951.89
07/31/94 19127.79 21335.31
08/31/94 19169.90 21409.98
09/30/94 18921.49 21095.26
10/31/94 18511.28 20719.76
11/30/94 18100.54 20344.73
12/31/94 18565.44 20792.32
01/31/95 19106.00 21386.98
02/28/95 19654.59 22009.34
03/31/95 19864.76 22262.45
04/30/95 19883.89 22289.16
05/31/95 20430.91 23000.19
06/30/95 20263.74 22800.08
$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 June 30, 1995, the value of your investment
would have grown to $20,264 - an 102.64% 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 $22,800 - a 128.00% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONT
HS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1995 1994 1993 1992 1991 1990
Dividend returns 3.13% 5.42% 6.25% 6.51% 6.79% 6.93%
Capital appreciation
returns 6.02% -11.43% 6.17% 1.12% 1.71% 0.29%
Total returns 9.15% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.10(cents) 31.02(cents) 62.99(cents)
Annualized dividend rate 5.71% 5.88% 5.99%
30-day annualized yield 5.45% - -
30-day annualized tax-equivalent yield 9.31% - -
</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 $10.86 over
the past month, $10.64 over the past six months and $10.51 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 1995 federal and state tax bracket. A
portion of the fund's income may be subject to the alternative minimum tax.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Steven Harvey, Portfolio Manager of Fidelity
Minnesota Tax-Free Portfolio
Q. STEVE, HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A. For the six months ended June 30, 1995, the fund returned 9.15%,
compared to the average Minnesota municipal bond fund, which returned
8.32%, as tracked by Lipper Analytical Services. For the year ended June
30, 1995, the fund returned 7.88%, while the average Minnesota municipal
bond fund returned 6.91%, again according to Lipper.
Q. WHAT WAS BEHIND THE MARKET'S PERFORMANCE?
A. The primary fuel was that interest rates fell during the period and, as
a result, taxable and tax-free bond prices rose. For the first quarter of
the 1995, municipal bonds enjoyed an especially impressive rally, ending
the quarter as the best performing fixed-income category. Increased demand
and low supply were two of the factors helping municipals to outperform
Treasury bonds. But in the second quarter, the rally stalled. One reason
was because yields on long-term municipals fell below 6%, which was an
important barrier. That level of income became less attractive, relative to
other investments, and demand for municipals declined. Then, in late April,
there were heightened concerns about how various tax-reform proposals -
including a flat-tax proposal that would tax everyone at a uniform rate and
eliminate deductions - might impact the attractiveness of municipal bonds.
Finally, in late June, the residents of Orange County, California, failed
to pass a sales tax proposal designed to help dig the county out of
bankruptcy. While those events didn't directly impact the fund's
investments, it's important to understand that they it cast a pall over the
entire municipal bond market by limiting demand. But despite some of those
rough spots, municipals turned in strong performance for the six-month
period.
Q. WHAT HELPED THE FUND OUTPACE THE AVERAGE?
A. Duration - which measures how sensitive the fund's share price is to
changes in interest rates - was a primary factor. During most of the first
quarter of 1995 - when the rally was at its strongest - the fund's duration
was long relative to other funds of its type. Generally speaking, the
longer a fund's duration, the more its share price will rise when interest
rates fall, and, conversely, fall when interest rates rise. As interest
rates declined, having a long duration helped the fund's performance.
Q. DID YOU CHANGE THE FUND'S DURATION IN THE SECOND QUARTER?
A. Yes, I shortened it, thereby making the fund's share price less
sensitive to interest rate changes. When municipal bonds hit some rough
spots in the spring, having a shorter duration was a plus. The primary
reason I shortened duration was because the yield curve, or the difference
in yields among bonds of various maturities, was relatively flat between
bonds with 10- and 30-year maturities. When the curve is flat, investors
may not be rewarded with much additional yield by investing in very
long-maturity bonds. So I sold some bonds that mature in more than 20
years, locked in profits, and used the proceeds to buy more bonds in the
six- to 12-year maturity range. By doing so, the fund's duration shortened.
Q. ARE THE SHORTER DURATION AND YOUR MOVE TOWARD HIGHER-QUALITY BONDS
RELATED?
A. In a way. Many of the longer-term bonds I sold also happened to be
lower-quality bonds. Here's why: Recently there has been a very limited
supply of lower-quality bonds available. And, during the rally, these bonds
were in fairly high demand. Limited supply and heavy demand translated into
generally higher prices. I was able to use the market's strength to lock in
profits by selling lower- quality bonds, replacing them with higher-quality
issues.
Q. THE ENVIRONMENT FOR HEALTH CARE ORGANIZATIONS IS BECOMING INCREASINGLY
MORE DIFFICULT. WHAT FACTORS DO YOU CONSIDER WHEN CHOOSING HEALTH-CARE
BONDS?
A. It's true that competitive pressures continue to build, which may
ultimately result in the closing of some hospitals. But because health care
bonds can offer relatively high yields, many are still attractive. What I
look for, with the help of Fidelity's research staff, are hospitals and
other health care organizations that have a strong market share, and
successful alliances with health maintenance organizations (HMOs) and the
ability to provide a continuum of care at an attractive cost. In my view, a
good way to identify the potential winners is to ascertain the quality of
management. I look for management teams that are thinking now about what
the health care scene will be like in 10 years, and are making changes to
prepare for that environment. The St. Paul-based hospital chain Health
East, at about 8% of fund's investments at the end of the period, is a good
example of the type of health care bonds we find attractive.
Q. SIX MONTHS AGO, YOU SAID THAT RISING INTEREST RATES HAD HELPED THE
PROSPECTS FOR HOUSING BONDS. NOW THAT RATES HAVE RISEN, ARE THESE BONDS
LESS ATTRACTIVE?
A. Not necessarily. Housing bonds are subject to prepayment risk - the risk
that loans will be paid off early. Of course, when interest rates fall, the
risk of prepayment can rise. But I own bonds issued by the Minnesota
Housing Agency, which allocates any prepayments to bonds with the highest
coupon - which presently, we do not own. As a result, falling interest
rates haven't subjected our bonds to an increased level of prepayment risk.
Keep in mind that these bonds offer a relatively high yield, which helps to
make them attractive and offset some of the risks associated with
prepayment.
Q. AFTER HAVING SUCH A STRONG RUN IN THE FIRST HALF OF 1995, WHAT'S THE
OUTLOOK FOR MUNICIPAL BONDS?
A. For the balance of the year, I don't think that interest rates will fall
as dramatically as they did in the first half. Rather, interest rates will
probably remain within a narrow band. Therefore, it's unlikely that bond
prices will rise as much either. With that in mind, the fund's returns may
derive largely from the its level of income, rather than bond price
appreciation. Continued talk of tax reform could add some volatility to
municipal bond prices. But my view is the prospects that a flat tax will be
enacted are remote. On a more positive note, the supply of municipal bonds
should continue to remain low. Combined with flat or lower interest rates,
and at least constant demand, a limited supply could help the municipal
bond market for the remainder of the year.
FUND FACTS
GOAL: high current tax-free
income for Minnesota
residents, while investing
mainly in longer-term,
investment-grade municipal
securities whose interest is
free from federal income tax
and Minnesota personal
income tax
START DATE: November 21,
1985
SIZE: as of June 30, 1995,
more than $301 million
MANAGER: Steven Harvey,
since 1993; manager, Fidelity
Ohio Tax-Free High Yield
Portfolio since 1994; Spartan
Pennsylvania High Yield
Portfolio and Spartan
Maryland Municipal Income
Portfolios since 1993; joined
Fidelity in 1986
(checkmark)
STEVE HARVEY ON
MINNESOTA'S ECONOMY
AND FISCAL CONDITION:
"Minnesota's economy and
fiscal situation ultimately will
dictate the overall credit
quality of bonds issued in the
state. That said, both
elements were fairly strong at
the end of June. The state
was mostly insulated from the
economic weakness much of
the country experienced
during the past five years. Its
economy has been strong,
which has carried through to
the fiscal health of the state.
One of the most prominent
indicators of Minnesota's solid
budgetary position is the fact
that the legislature is now
considering tax cuts."
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
Health Care 27.1 32.3
General Obligation 13.9 9.7
Housing 13.9 15.7
Electric Revenue 12.7 13.2
Education 7.6 6.4
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 17.2 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 JUNE 30, 1995
6 MONTHS AGO
Years 7.9 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
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 28.4%
Aa, A 50.0%
Baa 10.5%
Caa 3.7%
Non-rated 4.9%
Short-term and other
investments 2.5%
Aaa 28.1%
Aa, A 46.6%
Baa 14.6%
Caa 4.1%
Non-rated 5.8%
Short-term and other
investments 0.8%
Row: 1, Col: 1, Value: 28.4
Row: 1, Col: 2, Value: 50.0
Row: 1, Col: 3, Value: 10.5
Row: 1, Col: 4, Value: 3.7
Row: 1, Col: 5, Value: 4.9
Row: 1, Col: 6, Value: 2.5
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: 1.8
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 3.1% AND 4.0% OF THE FUND'S
INVESTMENTS AT JUNE 30, 1995 AND DECEMBER 31, 1994, RESPECTIVELY.
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 97.5%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - 95.9%
Albany Health Care Facs. Rev. Rfdg.
(Mother Mercy Nursing Home)
8.75% 12/1/19 - $ 1,100,000 $ 1,128,875
Anoka County Solid Waste Disp. Rev.
(Nat'l. Rural Util.) Series A, 6.95%
12/1/08 (b) Aa3 1,000,000 1,067,500
Bagley Independent School Dist. Unltd. Tax
(School Dist. #162):
4.85% 2/1/13 AA 1,020,000 896,325
4.85% 2/1/14 AA 1,100,000 957,000
Bemidji Hosp. Facs. Rev. (1st Mtg. North
Country Health) Series A, 7% 9/1/21 A 1,000,000 1,048,750
Bloomington Gen. Oblig. Rfdg. 6.50%
12/1/00 Aa 5,200,000 5,622,500
Breckenridge Hosp. Facs. Rev.
(Franciscan Sisters Healthcare-B2) 9.375%
9/1/17 (Escrowed to Maturity) (d) A- 445,000 499,513
Chisago City Health Facs. Rev.
(Point Pleasant Heights Proj.) 9.25% 7/1/15
(Escrowed to Maturity) (d) - 3,700,000 3,991,375
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 380,000 401,375
(Burnsville & Inver.) 9.375% 5/1/18
(FGIC Insured) Aaa 10,000 10,625
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 820,000 909,175
East Grand Forks Poll. Cont. Rev. Rfdg.
(American Crystal Sugar Co.)
Series A, 7.75% 4/1/18 BBB+ 1,000,000 1,083,750
Eden Prairie Multi-Family Hsg. Rev.
(Preserve Place Apts.) 8% 7/1/28
(FHA Guaranteed) AAA 1,000,000 1,032,500
Hennepin County Lease Rev. Ctfs. of Prtn.
6.80% 5/15/17 Aa 5,000,000 5,243,750
Minneapolis Commty. Dev. Agcy. Supported
Dev. Rev. Ltd. Tax (Common Board Fund)
Series 1991-5A, 7.40% 12/1/21 BBB+ 1,250,000 1,304,688
Minneapolis Commty. Dev. Agcy. Tax Increment
Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) Aaa 2,860,000 1,469,325
0% 9/1/08 (MBIA Insured) Aaa 4,600,000 2,208,000
Minneapolis Convention Ctr. Sales Tax Rev.
(Chamber Bdlg.-Skyway Proj.)
0% 2/1/06 (e) - 713,000 356,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.15% 10/1/05 Aaa $ 2,000,000 $ 2,140,000
Rfdg. Series B:
5.10% 9/1/08 Aaa 2,000,000 1,950,000
5.20% 3/1/13 Aaa 1,000,000 940,000
(Cap. Appreciation) Series A:
0% 12/1/11 Aaa 2,830,000 1,100,163
0% 12/1/12 Aaa 2,000,000 727,500
(Various Purpose) 5.90% 12/1/95 Aaa 1,980,000 1,997,681
Minneapolis Health Care Facs. Rev.
(Baptist Residence Proj.) 8.70% 11/1/09 - 1,885,000 2,068,788
Minneapolis Hosp. Rev.:
Rfdg. (Fairview Hosp. & Healthcare)
6.50% 1/1/11 (MBIA Insured) Aaa 3,000,000 3,150,000
(Childrens Med. Ctr. Proj.)
Series C, 7% 12/1/20 A 2,500,000 2,712,500
(Lifespan, Inc.) Series B, 8.125%
8/1/17 A 3,000,000 3,270,000
Minneapolis Spl. School Dist. #1
Ctfs. of Prtn. 7.375% 2/1/15
(Pre-Refunded to 2/1/98 @ 100) (d) A1 1,000,000 1,073,750
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 2,997,500
8% 8/15/14 (Escrowed to Maturity) (d) Aaa 3,000,000 3,502,500
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Phase IX) 7.25%
8/1/21 (b) AAA 2,300,000 2,420,750
Minneapolis & St. Paul Metropolitan Arpt.
Commission Unltd. Tax Series 7,
7.80% 1/1/15 (b) Aaa 3,000,000 3,270,000
Minnesota Agric. & Econ. Dev. Board Rev.
(Small Bus. Dev. Prog. Lot 1)
Series B, 8.375% 8/1/10 (b) - 1,000,000 1,050,000
Minnesota Energy & Econ. Dev. Auth. Rev.
(Small Bus. Dev. Lot 1 2D) 10%
8/1/06 - 75,000 79,125
Minnesota Gen. Oblig.:
Rfdg. 5.25% 8/1/08 Aa1 5,000,000 4,862,500
Rfdg. Unltd. Tax. 5.40% 8/1/09 Aa1 1,400,000 1,352,750
(Infrastructure Dev.) 7% 8/1/96 Aa1 1,000,000 1,031,250
(Various Purpose): (d)
Rfdg. 6.90% 8/1/01 (Escrow to Maturity) Aaa 1,300,000 1,395,875
6.60% 8/1/00 (Escrow to Maturity) Aaa 1,000,000 1,077,500
Unltd. Tax 6.50% 8/1/03
(Escrowed to Maturity) AAA 1,000,000 1,093,750
4.90% 8/1/11 Aa1 1,290,000 1,156,163
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Higher Ed. Facs. Auth.:
Rfdg. (MacAlester College) Series 3-J,
6.40% 3/1/22 Aa $ 1,675,000 $ 1,704,313
Rfdg. (St. Thomas Univ.) Series 3-R1:
5% 10/1/01 A1 1,000,000 1,001,250
5.60% 10/1/15 A1 1,000,000 951,250
(Carleton College) Series 3-L1,
5.75% 11/1/12 Aa 2,000,000 1,990,000
(St. Thomas Univ.):
Series 3-R2, 5.60% 9/1/14 A1 3,275,000 3,123,531
5.45% 9/1/07 A1 650,000 642,688
Minnesota Higher Ed. Facs. Auth. Mtg. Rev.:
(Northwestern College) Series 2X:
8.25% 10/1/00 - 750,000 810,000
8.50% 10/1/05 - 1,750,000 1,872,500
(St. Thomas Univ.) Series 3C, 6.25%
9/1/16 - 2,310,000 2,330,212
Minnesota Hsg. Fin. Agcy.:
(Single Family Mortgage):
Series A:
7.95% 7/1/22 (b) Aa 2,570,000 2,701,713
7.45% 7/1/22 (b) Aa 2,855,000 3,040,575
8% 7/1/29 (b) Aa 455,000 468,650
6.95% 7/1/16 Aa 945,000 979,256
Series B:
7.25% 7/1/16 Aa 1,065,000 1,086,300
5.80% 7/1/25 (b) Aa 7,000,000 6,466,250
Series D:
8.80% 7/1/16 Aa 1,250,000 1,301,563
7.35% 7/1/16 Aa 2,770,000 2,887,725
Series E, 6.85% 1/1/24 (b) Aa 1,000,000 1,017,500
Series H, 6.50% 1/1/26 (b) Aa 1,800,000 1,793,250
(State Assisted Home Impt. Prog.)
Series E, 7.50% 8/1/07 (b) A1 1,070,000 1,108,788
Minnesota Hsg. Fin. Agcy. Hsg. Rev. Series A:
6.95% 2/1/14 A1 1,000,000 1,033,750
6.95% 8/1/17 A1 1,000,000 1,035,000
7.05% 8/1/27 A1 1,250,000 1,293,750
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.:
Series A:
6.50% 3/1/97 Aa 1,000,000 1,030,000
7% 3/1/04 Aa 1,495,000 1,691,219
7% 3/1/09 AAA 1,000,000 1,071,250
7.10% 3/1/12 AAA 3,100,000 3,344,125
6.95% 3/1/13 AAA 4,500,000 4,871,250
Series B, 6.70% 3/1/13 AAA 5,350,000 5,711,125
Minnetonka Multi-Family Hsg. Rev.
(Cedar Hills East Proj.) 7.50% 12/1/27
(FHA Guaranteed) AA 600,000 633,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Montevideo Independent School Dist. #129
Unltd. Tax 4.90% 2/1/15 Aa $ 1,000,000 $ 885,000
Northern Minnesota Muni. Pwr. Agcy. Elec.
Sys. Rev. Rfdg.:
Series A:
7.30% 1/1/01 A 4,235,000 4,610,856
7.25% 1/1/16 A 2,630,000 2,823,963
5% 1/1/21 A 1,000,000 842,500
Series B, 5.50% 1/1/18
(AMBAC Insured) Aaa 6,000,000 5,670,000
Northfield College Facs. Rev.
(St. Olaf College Proj.):
6.30% 10/1/12 A1 1,085,000 1,122,975
6.40% 10/1/21 A1 1,100,000 1,131,625
Redwood Falls Independent School Dist. Rfdg.
5.125% 4/1/15 (AMBAC Insured) Aaa 1,700,000 1,549,125
Rochester Health Care Facs. Rev.:
(Mayo Clinic) 6.026% 11/15/15 AA+ 22,000,000 21,560,000
(Mayo Foundation/Mayo Med. Ctr.):
Series I:
5.90% 11/15/09 AA+ 1,000,000 1,026,250
5.90% 11/15/10 AA+ 2,250,000 2,300,625
Rosemont Independent School Dist. #196
(Dist. #5 School Credit Enhancement Prog.)
Series B, 0% 6/1/13 (CGIC Insured) Aaa 2,000,000 702,500
St. Cloud Independent School Dist. #742 Rfdg.
Series A, 6.10% 2/1/10
(FGIC Insured) Aaa 1,000,000 1,021,250
St. Louis County Jail Rev. Series A, 4.75%
12/1/08 (AMBAC Insured) Aaa 1,420,000 1,283,325
St. Louis Park Health Care Facs. Auth. Rev.
(Healthsystem Obligated A) 5.20% 7/1/23
(AMBAC Insured) (f) Aaa 10,000,000 8,862,500
St. Louis Park Mtg. Rev. (Park Ridge Apt. Proj.)
9.375% 9/20/20 (GNMA Coll.) AAA 1,200,000 1,243,500
St. Paul Gen. Oblig. Unltd. Tax
(Cap. Impt.) Series A, 4% 4/1/96 Aa 1,300,000 1,298,375
St. Paul Hsg. & Redev. Auth. Health Care Facs.
Rev. (Childrens Hosp.) 7% 12/1/19 A 3,000,000 3,236,250
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A:
9.75% 11/1/17 Baa 2,380,000 2,623,950
6.625% 11/1/17 Baa 12,000,000 11,655,000
Series B:
9.625% 11/1/08 Baa 2,500,000 2,718,750
9.75% 11/1/17 Baa 3,000,000 3,270,000
6.625% 11/1/17 Baa 4,000,000 3,885,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
St. Paul Hsg. & Redev. Auth. Rev.:
(Downtown & 7th Place Redev. Proj.):
Series A, 0% 9/1/04 (AMBAC Insured) Aaa $ 1,000,000 $ 578,750
Series B, 0% 9/1/08 (AMBAC Insured) Aaa 2,500,000 1,087,500
(Rent Hsg.) 8% 2/1/21 (FNMA Coll.) (b) AAA 3,050,000 3,141,500
St. Paul Independent School Dist. #625
Series C:
6.125% 2/1/03 Aa 1,225,000 1,309,219
6.125% 2/1/04 Aa 1,300,000 1,389,375
6.125% 2/1/05 Aa 1,350,000 1,441,125
St. Paul Port Auth. Hsg. & Redev.
Multi-Family Hsg. Rev.:
Series 1985 J:
9.50% 12/1/11 CCC 500,000 480,000
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 1,531,250
(Riverview II Proj.) Series 1983 A,
10% 1/1/13 CCC 930,000 923,025
(Viking Drill & Tool) Series 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 2,765,625
Seaway Port Auth. Duluth Ind. Dev. Rev.
Dock & Wharf Rev. Rfdg. (Cargill, Inc.
Proj.) Series B, 6.80% 5/1/12 Aa3 2,750,000 2,911,563
Southern Minnesota Muni. Pub. Pwr.
Agcy. Rev. 5.75% 1/1/18
(Escrowed to Maturity) (d) Aaa 1,005,000 1,016,306
Southern Minnesota Muni. Pub. Pwr. Agcy.
Supply Sys. Rev.:
Rfdg. Series A:
5% 1/1/09 A 2,000,000 1,845,000
5% 1/1/12 A 10,000,000 9,037,500
Series A, 0% 1/1/20 (MBIA Insured) (f) Aaa 12,500,000 2,828,125
Series B:
0% 1/1/01 (MBIA Insured) Aaa 2,500,000 1,900,000
5% 1/1/09 A 2,000,000 1,845,000
5% 1/1/13 A 6,100,000 5,451,875
University of Minnesota Rfdg.
4.80% 8/15/03 Aa 6,000,000 5,805,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Virginia Independent School Dist. #706
Unltd. Tax Series A:
5% 4/1/11 (AMBAC Insured) Aaa $ 630,000 $ 578,813
5% 4/1/13 (AMBAC Insured) Aaa 1,180,000 1,070,850
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) (d) Aaa 1,000,000 1,126,250
Western Minnesota Muni. Pwr. Agcy.
Pwr. Supply Rev.:
Rfdg. Series A, 6.875% 1/1/07 A 800,000 834,000
Series A, 6.375% 1/1/16
(Escrowed to Maturity) (d) Aaa 2,000,000 2,112,500
West St. Paul Independent School Dist. #197
0% 2/1/03 (MBIA Insured) Aaa 1,180,000 792,069
White Bear Lake First Mtg. Nursing Home
Rev. Rfdg. 8.25% 11/1/12 - 3,000,000 3,090,000
285,257,919
PUERTO RICO - 1.6%
Puerto Rico Commonwealth Hwy. & Trans.
Auth. Rev. Rfdg. Series X, 5.50% 7/1/13 Baa1 5,000,000 4,718,750
TOTAL MUNICIPAL BONDS
(Cost $284,209,707) 289,976,669
MUNICIPAL NOTES (A) - 2.5%
MINNESOTA - 2.5%
Duluth Tax Increment Rev. (Lake Superior
Paper Co.) Series 1985, 4.05%,
LOC Nat'l. Australia Bank, VRDN VMIG 1 6,300,000 6,300,000
Minneapolis Hsg. Dev. Rev. Rfdg.
(One Ten Grant Proj.) Series 1989,
LOC First Bank NA, VRDN VMIG 1 1,000,000 1,000,000
TOTAL MUNICIPAL NOTES
(Cost $7,300,000) 7,300,000
TOTAL INVESTMENTS - 100%
(Cost $291,509,707) $ 297,276,669
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASE
80 U.S. Treasury Bond Futures September 1995 $ 9,082,500 $ 15,524
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.1%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(f) A portion of the Security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $2,017,500.
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 60.5% AAA, AA, A 73.9%
Baa 9.7% BBB 9.9%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 3.7%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 4.9%. FMR has
determined that unrated debt securities that are lower quality account for
3.1% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 27.1%
General Obligation 13.9%
Housing 13.9%
Electric Revenue 12.7%
Others
(individually less than 10%) 32.4%
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $291,517,542. Net unrealized appreciation aggregated
$5,759,127, of which $10,318,088 related to appreciated investment
securities and $4,558,961 related to depreciated investment securities.
The fund elected 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.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $291,509,707) 9. $ 297,276,669
See accompanying schedule
10.Receivable for investments sold 11. 4,193,605
12.Interest receivable 13. 5,563,078
14.Receivable for daily variation on futures contracts 15. 37,500
16. 17.TOTAL ASSETS 18. 307,070,852
19.LIABILITIES 20. 21.
22.Payable to custodian bank $ 396,195 23.
24.Payable for investments purchased 4,183,328 25.
26.Payable for fund shares redeemed 84,184 27.
28.Distributions payable 376,579 29.
30.Accrued management fee 102,869 31.
32.Other payables and accrued expenses 61,691 33.
34. 35.TOTAL LIABILITIES 36. 5,204,846
37.38.NET ASSETS 39. $ 301,866,006
40.Net Assets consist of: 41. 42.
43.Paid in capital 44. $ 305,145,341
45.Accumulated undistributed net realized gain (loss) 46. (9,061,821)
on investments
47.Net unrealized appreciation (depreciation) 48. 5,782,486
on investments
49.50.NET ASSETS, for 28,108,435 shares outstanding 51. $ 301,866,006
52.53.NET ASSET VALUE, offering price and redemption 54. $10.74
price per share ($301,866,006 (divided by) 28,108,435 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
55.56.INTEREST INCOME 57. $ 9,494,681
58.EXPENSES 59. 60.
61.Management fee $ 604,617 62.
63.Transfer agent, accounting and custodian fees 181,440 64.
and expenses
65.Non-interested trustees' compensation 696 66.
67.Registration fees 5,050 68.
69.Audit 14,359 70.
71.Legal 3,399 72.
73.Miscellaneous 1,622 74.
75. 76.TOTAL EXPENSES 77. 811,183
78.79.NET INTEREST INCOME 80. 8,683,498
81.REALIZED AND UNREALIZED GAIN (LOSS) 83. 84.
82.Net realized gain (loss) on:
85. Investment securities (6,204,826) 86.
87. Futures contracts (948,299) (7,153,125)
88.Change in net unrealized appreciation (depreciation) 89. 90.
on:
91. Investment securities 24,023,535 92.
93. Futures contracts 15,524 24,039,059
94.95.NET GAIN (LOSS) 96. 16,885,934
97.98.NET INCREASE (DECREASE) IN NET ASSETS 99. $ 25,569,432
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
100.INCREASE (DECREASE) IN NET ASSETS
101.Operations $ 8,683,498 $ 18,644,044
Net interest income
102. Net realized gain (loss) (7,153,125) (225,857)
103. Change in net unrealized appreciation 24,039,059 (39,051,604)
(depreciation)
104. 25,569,432 (20,633,417)
105.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
106.Distributions to shareholders (8,683,498) (18,644,044)
From net interest income
107. From net realized gain - (1,890,231)
108. In excess of net realized gain - (492,725)
109. 110.TOTAL DISTRIBUTIONS (8,683,498) (21,027,000)
111.Share transactions 45,289,202 97,124,422
Net proceeds from sales of shares
112. Reinvestment of distributions 6,760,454 16,525,742
113. Cost of shares redeemed (44,003,694) (137,252,013)
114.115. 8,045,962 (23,601,849)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
116. 24,931,896 (65,262,266)
117.TOTAL INCREASE (DECREASE) IN NET ASSETS
118.NET ASSETS 119. 120.
121. Beginning of period 276,934,110 342,196,376
122. End of period $ 301,866,006 $ 276,934,110
123.OTHER INFORMATION 125. 126.
124.Shares
127. Sold 4,274,085 9,067,760
128. Issued in reinvestment of distributions 634,628 1,544,855
129. Redeemed (4,130,417) (12,977,467)
130. Net increase (decrease) 778,296 (2,364,852)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
131. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
132. (UNAUDITED) 1994 1993 C 1992 1991 1990
133.SELECTED PER-SHARE DATA
134.Net asset value, beginning of period $ 10.130 $ 11.520 $ 10.850 $ 10.730 $ 10.550 $ 10.520
135.Income from Investment Operations .310 .633 .647 .674 .690 .699
Net interest income
136. Net realized and unrealized gain
(loss) .610 (1.310) .670 .120 .180 .030
137. Total from investment operations .920 (.677) 1.317 .794 .870 .729
138.Less Distributions (.310) (.633) (.647) (.674) (.690) (.699)
From net interest income
139. From net realized gain on
investments - (.060) - - - -
140. In excess of net realized gain on
investments - (.020) - - - -
141. Total distributions (.310) (.713) (.647) (.674) (.690) (.699)
142.Net asset value, end of period $ 10.740 $ 10.130 $ 11.520 $ 10.850 $ 10.730 $ 10.550
143.TOTAL RETURN B 9.15% -6.01% 12.42% 7.63% 8.50% 7.22%
144.RATIOS AND SUPPLEMENTAL DATA
145.Net assets, end of period (000
omitted) $ 301,866 $ 276,934 $ 342,196 $ 280,781 $ 221,788 $ 167,127
146.Ratio of expenses to average net
assets .55% .59% .61% .67% .72% .76%
A
147.Ratio of net interest income to
average net assets 5.85% 5.97% 5.73% 6.25% 6.47% 6.72%
A
148.Portfolio turnover rate 61% 26% 37% 12% 14% 29%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned 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 and losses deferred due to wash sales,
futures and options and excise tax regulations.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond market and to fluctuations in interest rates. Buying futures,
writing puts, and buying calls tend to increase
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS AND OPTIONS -
CONTINUED
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 $86,639,920 and $85,714,339, respectively. The market value of
futures contracts opened and closed during the period amounted to
$60,847,733 and $52,476,587, 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 .1200% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fee was equivalent to an annualized 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 $16,787 for the
period.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. UMB 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. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the fund pays account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the fund paid fees based on the type, size, number of
accounts and the 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 $115,914 and $64,580,
respectively.
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)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)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)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)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)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
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
Page 30 = BLANK
Do NOT strip-in this type
Page 31 = BLANK
Do NOT strip-in this type
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Marvin L. Mann*
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S TAX-FREE BOND FUNDS
Aggressive Tax-Free
California Tax-Free High Yield
California Tax-Free Insured
High Yield Tax-Free
Insured Tax-Free
Limited Term Municipals
Massachusetts Tax-Free High Yield
Michigan Tax-Free High Yield
Minnesota Tax-Free
Municipal Bond
New York Tax-Free High Yield
New York Tax-Free Insured
Ohio Tax-Free High Yield
Spartan(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)
OHIO
MUNICIPAL
PORTFOLIOS
SEMIANNUAL REPORT
JUNE 30, 1995
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 19 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
PERFORMANCE 23 How the fund has done over time.
FUND TALK 25 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 27 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 28 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.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
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 to
measure performance. If Fidelity had not reimbursed certain fund expenses
the life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Ohio Municipal High Yield Portfolio 9.37% 8.08% 47.86% 118.34%
Lehman Brothers Municipal Bond Index 9.65% 8.82% 48.70% n/a
Average Ohio Tax-Exempt
Municipal Bond Fund 8.94% 7.54% 45.53% n/a
Consumer Price Index 1.87% 3.04% 17.40% 40.29%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 15, 1985. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Municipal Bond Index - a broad gauge of
the municipal bond market. To measure how the fund's performance stacked up
against its peers, you can compare it to the average Ohio tax-exempt
municipal bond fund, which reflects the performance of 49 Ohio municipal
bond funds with similar objectives tracked by Lipper Analytical Services
over the past six months. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal High Yield Portfolio 8.08% 8.14% 8.45%
Lehman Brothers Municipal Bond Index 8.82% 8.26% n/a
Average Ohio Tax-Exempt
Municipal Bond Fund 7.54% 7.79% n/a
Consumer Price Index 3.04% 3.26% 3.56%
</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 In
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 11012.11 11041.07
07/31/86 11068.97 11108.08
08/31/86 11526.57 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 11905.21 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 11696.63 12115.67
08/31/87 11708.49 12142.93
09/30/87 11096.63 11695.22
10/31/87 11110.43 11736.62
11/30/87 11411.71 12043.06
12/31/87 11622.02 12217.81
01/31/88 12158.16 12653.00
02/29/88 12320.35 12786.75
03/31/88 12000.79 12637.78
04/30/88 12059.92 12733.83
05/31/88 12143.87 12697.03
06/30/88 12371.67 12882.78
07/31/88 12480.80 12966.78
08/31/88 12506.31 12978.19
09/30/88 12738.77 13213.10
10/31/88 13009.42 13446.31
11/30/88 12911.13 13323.14
12/31/88 13124.54 13459.43
01/31/89 13313.63 13737.78
02/28/89 13201.15 13581.03
03/31/89 13202.42 13548.57
04/30/89 13559.05 13870.21
05/31/89 13853.96 14158.30
06/30/89 14034.67 14350.57
07/31/89 14150.67 14545.88
08/31/89 14004.89 14403.47
09/30/89 13938.63 14360.26
10/31/89 14118.48 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 14477.86 14977.60
04/30/90 14257.78 14869.76
05/31/90 14627.15 15193.92
06/30/90 14778.13 15327.63
07/31/90 15000.30 15552.94
08/31/90 14764.37 15327.43
09/30/90 14877.15 15336.62
10/31/90 15089.28 15614.22
11/30/90 15443.66 15928.06
12/31/90 15517.62 15998.14
01/31/91 15689.69 16212.52
02/28/91 15788.56 16353.57
03/31/91 15817.50 16360.11
04/30/91 16064.24 16577.70
05/31/91 16195.71 16725.24
06/30/91 16137.42 16708.52
07/31/91 16359.68 16912.36
08/31/91 16523.30 17135.60
09/30/91 16718.78 17358.37
10/31/91 16869.39 17514.59
11/30/91 16898.73 17563.63
12/31/91 17293.76 17941.25
01/31/92 17324.51 17982.52
02/29/92 17335.72 17987.91
03/31/92 17322.93 17995.11
04/30/92 17462.32 18155.26
05/31/92 17698.77 18369.49
06/30/92 18010.97 18678.10
07/31/92 18531.10 19238.44
08/31/92 18324.36 19049.91
09/30/92 18433.20 19173.73
10/31/92 18097.72 18985.83
11/30/92 18579.95 19325.68
12/31/92 18791.99 19522.80
01/31/93 19037.52 19749.26
02/28/93 19715.68 20464.19
03/31/93 19485.39 20247.26
04/30/93 19664.16 20451.76
05/31/93 19763.15 20566.29
06/30/93 20091.86 20909.75
07/31/93 20121.68 20936.93
08/31/93 20590.06 21372.42
09/30/93 20836.40 21616.07
10/31/93 20850.10 21657.14
11/30/93 20672.79 21466.55
12/31/93 21152.03 21919.50
01/31/94 21409.13 22169.38
02/28/94 20840.77 21595.19
03/31/94 19958.97 20716.27
04/30/94 20111.13 20892.36
05/31/94 20247.72 21074.12
06/30/94 20216.80 20951.89
07/31/94 20536.37 21335.31
08/31/94 20601.50 21409.98
09/30/94 20350.54 21095.26
10/31/94 19954.70 20719.76
11/30/94 19516.45 20344.73
12/31/94 19978.79 20792.32
01/31/95 20578.30 21386.98
02/28/95 21149.54 22009.34
03/31/95 21368.17 22262.45
04/30/95 21412.51 22289.16
05/31/95 22041.79 23000.19
06/30/95 21850.99 22800.08
$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 June 30, 1995, the value of your investment
would have grown to $21,851 - a 118.51% 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 $22,800 - a 128.00% 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
6 MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990
Dividend return 3.10% 5.37% 6.19% 6.63% 7.02% 7.04%
Capital appreciation
return 6.27% -10.92% 6.37% 2.03% 4.43% 0.46%
Total return 9.37% -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 JUNE 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.19(cents) 31.89(cents) 64.99(cents)
Annualized dividend rate 5.59% 5.82% 5.93%
30-day annualized yield 5.43% - -
30-day annualized tax-equivalent yield 9.17% - -
</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 $11.31 over
the past month, $11.05 over the past six months and $10.96 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 1995 federal and state tax bracket.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Steven Harvey,
Portfolio Manager of Fidelity Ohio
Tax-Free High Yield Portfolio
Q. STEVE, HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A. For the six months ended June 30, 1995, the fund returned 9.37%,
compared to the average Ohio tax-free fund, which returned 8.94%, as
tracked by Lipper Analytical Services. For the year ended June 30, 1995,
the fund returned 8.08%, while the average fund returned 7.54%, again
according to Lipper.
Q. MUNICIPAL BONDS GOT OFF TO A GOOD START IN 1995. WHAT WAS BEHIND THE
MARKET'S PERFORMANCE?
A. The primary fuel was that interest rates fell during the period and, as
a result, taxable and tax-free bond prices rose. For the first quarter of
1995, municipal bonds enjoyed an especially impressive rally, ending the
quarter as the best performing fixed-income category. Increased demand and
low supply were two of the factors helping municipals to outperform
Treasury bonds. But by the second quarter, the rally stalled. One reason
was that yields on long-term municipals fell below 6%, which was an
important barrier. That level of income became less attractive, relative to
other investments, and demand for municipals declined. Then, in late April,
there were heightened concerns about how various tax-reform proposals -
including the flat-tax proposal which would tax everyone at a uniform rate
and eliminate deductions - might impact the attractiveness of municipal
bonds. Finally, in late June, the residents of Orange County, California,
failed to pass a sales tax proposal designed to help dig the county out of
bankruptcy. While these events didn't directly impact the fund's
investments, it's important to understand that they cast a pall over the
entire municipal bond market by limiting demand. But despite some of those
rough spots, municipals turned in strong performance for the six-month
period.
Q. WHAT HELPED THE FUND OUTPACE THE AVERAGE?
A. Duration - which measures how sensitive the fund's share price is to
changes in interest rates - was a primary factor. During most of the first
quarter of 1995 - when the rally was at its strongest - the fund's duration
was long relative to other funds of its type. Generally speaking, the
longer a fund's duration, the more its share price will rise when interest
rates fall, and, conversely, fall when interest rates rise. As interest
rates declined, having a long duration helped the fund's performance.
Q. DID YOU CHANGE THE FUND'S DURATION IN THE SECOND QUARTER?
A. Yes, I shortened it, thereby making the fund's share price less
sensitive to interest rate changes. When municipal bonds hit some rough
spots in the spring, having a shorter duration was a plus. The primary
reason I shortened duration was because the yield curve, or the difference
in yields among bonds of various maturities, was relatively flat between
bonds with 10- and 30-year maturities. When the curve is flat, investors
may not be rewarded with much additional yield by investing in very
long-maturity bonds. So I sold some bonds that mature in more than 20
years, locked in profits, and used the proceeds to buy more bonds in the
six- to 12-year maturity range. By doing so, the fund's duration shortened.
Q. AT ABOUT THE SAME TIME, YOU SOMEWHAT REDUCED THE FUND'S STAKE IN
LOWER-QUALITY BONDS. ARE A SHORTER DURATION AND YOUR MOVE TOWARD
HIGHER-QUALITY BONDS RELATED?
A. In a way. Many of the longer-term bonds I sold also happened to be
lower-quality bonds. Here's why: Recently there has been a very limited
supply of lower-quality bonds available. And, during the rally, these bonds
were in fairly high demand. Limited supply and heavy demand translated into
generally higher prices. So once again I was able to use the market's
strength to lock in profits by selling lower- quality bonds, and at the
same time, improving the overall credit quality of the fund by replacing
them with higher-quality issues.
Q. THE ENVIRONMENT FOR HEALTH CARE ORGANIZATIONS IS BECOMING INCREASINGLY
MORE DIFFICULT. WHAT FACTORS DO YOU CONSIDER WHEN CHOOSING HEALTH-CARE
BONDS - WHICH MADE UP 16.9% OF THE FUND'S INVESTMENTS AT THE END OF THE
PERIOD?
A. It's true that competitive pressures continue to build, which may
ultimately result in the closing of some hospitals. But because health care
bonds can offer relatively high yields, many are still attractive. What I
look for, with the help of Fidelity's research staff, are hospitals and
other health care organizations that have a strong market share, and
successful alliances with health maintenance organizations (HMOs) and that
have the ability to provide a continuum of care at an attractive cost. In
my view, a good way to identify the future winners is to ascertain the
quality of management. I look for management teams that are thinking now
about what the health care scene will be like in 10 years, and are making
changes to prepare for that environment. As always, we will continue to
constantly review and update our opinions to reflect changes in the
industry.
Q. AFTER HAVING SUCH A STRONG RUN IN THE FIRST HALF OF 1995, WHAT'S THE
OUTLOOK FOR MUNICIPAL BONDS?
A. There are a number of things to consider. First is the interest rate
environment. For the balance of the year, I don't think that interest rates
will fall as dramatically as they did in the first half. Rather, interest
rates will probably remain within a narrow band. Therefore, I don't think
that bond prices will rise as much either. With that in mind, the fund's
returns will probably derive largely from its level of income, rather than
bond price appreciation. Continued talk of tax reform could add some
volatility to municipal bond prices. But in my view, the prospects that a
flat tax will be enacted are remote. On a more positive note, the supply of
municipal bonds should continue to remain low. Combined with flat or lower
interest rates, and at least constant demand, a limited supply could help
the municipal bond market for the remainder of the year.
FUND FACTS
GOAL: high current tax-free
income for Ohio residents by
investing mainly in
longer-term,
investment-grade municipal
securities whose interest is
free from federal income tax
and Ohio individual income
tax
START DATE: November 15,
1985
SIZE: as of June 30, 1995,
more than $387 million
MANAGER: Steven Harvey,
since 1994; manager, Fidelity
Minnesota Tax-Free Portfolio,
Spartan Pennsylvania High
Yield, and Spartan Maryland
Municipal Income portfolios
since 1993; joined Fidelity in
1986
(checkmark)
STEVE HARVEY ON OHIO'S
ECONOMY AND FISCAL
CONDITION:
"Ohio's economy and fiscal
situation ultimately will dictate
the overall credit quality of
bonds issued in the state.
That said, both elements are
fairly strong right now. The
state recently posted its
lowest unemployment rate in
20 years. But keep in mind
that while there has been
some economic restructuring
away from automobile and
durable goods manufacturing,
these two segments dominate
the Ohio economy. That could
make the state vulnerable if
we slip back into a recession.
On the fiscal front, Ohio has
built back up the budgetary
reserves it drew down during
the previous recession. The
state is seeing very strong tax
receipts and has been
successful in keeping
spending in check."
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1995
% OF FUND'S INVESTMENT % OF FUND'S INVESTMENT
S S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 21.6 23.3
Water & Sewer 21.1 18.4
Health Care 16.9 18.6
Industrial Development 10.3 9.7
Education 7.8 7.4
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1995
6 MONTHS AGO
Years 15.7 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 JUNE 30, 1995
6 MONTHS AGO
Years 8.4 8.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%,, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Aaa 36.7%
Aa, A 20.8%
Baa 14.4%
Ba, B 7.1%
Non-rated 15.9%
Short-term investments 5.1%
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%
Row: 1, Col: 1, Value: 36.7
Row: 1, Col: 2, Value: 20.8
Row: 1, Col: 3, Value: 14.4
Row: 1, Col: 4, Value: 7.1
Row: 1, Col: 5, Value: 15.9
Row: 1, Col: 6, Value: 5.1
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
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 12.9% OF THE FUND'S
INVESTMENTS AT JUNE 30, 1995, AND DECEMBER 31, 1994, RESPECTIVELY.
FIDELITY OHIO MUNICIPAL HIGH YIELD PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 94.9%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - 91.2%
Adams County Valley Local School Dist.:
Unltd. Tax 6.65% 12/1/03 (MBIA Insured) Aaa $ 1,000,000 $ 1,115,000
Unltd. Tax 6.65% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,118,750
6.65% 12/1/05 (MBIA Insured) Aaa 1,000,000 1,123,870
Akron Parking Facs. Ltd. Tax:
8.75% 11/1/03 A 160,000 197,200
8.75% 11/1/04 A 160,000 200,000
8.75% 11/1/05 A 160,000 201,800
Akron Str. Impt. Ltd. Tax Series 1985-1:
8.75% 11/1/03 A 200,000 246,500
8.75% 11/1/04 A 200,000 250,000
8.75% 11/1/05 A 200,000 252,250
Alliance Wtrwks. Rev. (Cap. Appreciation) 0%
10/15/06 (FGIC Insured) Aaa 765,000 416,925
Bedford Hosp. Impt. Rev. Rfdg. (Bedford
Commty. Hosp.) Series 1990, 8.50%
5/15/09 (Escrowed to Maturity) (d) - 800,000 944,000
Berea Gen. Oblig. Ltd. Tax Rfdg.:
0% 12/1/04 Aa 535,000 319,663
5.125% 12/1/13 Aa 1,215,000 1,119,319
Berea Wtrwks. Rfdg. 0% 12/1/06 Aa 510,000 267,750
Berlin & Milan Local School Dist. Gen. Oblig.
7.45% 12/1/11 A 675,000 734,063
Bexley City School Dist. Gen. Oblig:
0% 12/1/06 Aa 440,000 232,100
0% 12/1/07 Aa 540,000 266,625
0% 12/1/08 Aa 540,000 249,075
Buckeye Local School Dist. Rfdg.
(Jefferson County):
0% 12/1/07 (AMBAC Insured) Aaa 760,000 382,850
(Cap. Appreciation) 0% 12/1/06
(AMBAC Insured) Aaa 375,000 202,031
Buckeye Valley Local School Dist. (Delaware County)
Series A, 6.85% 12/1/15 (MBIA Insured) Aaa 2,000,000 2,265,000
Butler County Hosp. Facs. Rev. Impt. Rfdg.
(Fort Hamilton-Hughes) 7.50% 1/1/10 Baa 1,500,000 1,541,250
Cambridge Hosp. Impt. Rev. Rfdg.
(Guernsey Mem. Hosp.) 8% 12/1/11 BBB 1,500,000 1,597,500
Canton Gen. Oblig. Ltd. Tax 7.875% 12/1/08
(Pre-Refunded to 12/1/98 @103)(d) Baa 1,250,000 1,418,750
Clark County Hosp. Impt. Rev. Rfdg. (Commty.
Hosp.) Series A, 9.375% 4/1/2008 A 800,000 821,000
Cleveland Ltd. Tax 6.875% 7/1/09
(MBIA Insured) (Escrowed to Maturity) (d) Aaa 1,000,000 1,102,500
Cleveland Rfdg. Series A, 6.75% 10/1/11
(AMBAC Insured) (Escrowed to Maturity) (d) Aaa 1,850,000 2,081,250
Cleveland Gen. Oblig. Rfdg.:
5.30% 9/1/07 (AMBAC Insured) Aaa 2,000,000 1,965,000
5.375% 9/1/10 (AMBAC Insured) Aaa 1,025,000 985,281
Cleveland Pub. Pwr. Sys. Rev. (Capital
Appreciation) (First Mtg.) Series A, 0%
11/15/08 (MBIA Insured) Aaa 5,480,000 2,527,650
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cleveland Wtrwks. Rev. Rfdg. (First Mtg.)
Series G:
5.50% 1/1/08 (MBIA Insured) Aaa $ 3,700,000 $ 3,676,875
5.50% 1/1/13 (MBIA Insured) Aaa 11,475,000 11,102,063
5.50% 1/1/21 (MBIA Insured) Aaa 26,725,000 25,321,938
Columbus Gen. Oblig.:
Rfdg. Series B, 5.90% 1/1/01 Aaa 1,000,000 1,058,750
8.125% 5/1/01 Aaa 1,000,000 1,167,500
9.50% 4/15/04 Aaa 500,000 655,000
Ltd. Tax 9.375% 4/15/07 Aaa 590,000 794,288
Cuyahoga County (Cap. Appreciation) Unltd. Tax
Rdfg. Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 1,915,000
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 1,863,750
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 2,081,250
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 936,000
0% 1/1/12 (MBIA Insured) Aaa 1,505,000 549,325
0% 1/1/13 (MBIA Insured) Aaa 3,000,000 1,035,000
Cuyahoga County Ltd. Tax 5.65% 5/15/18 A1 1,295,000 1,215,681
Cuyahoga County Gen. Oblig.:
Rfdg. Series B, 5.25% 10/1/12 (MBIA Insured) Aaa 7,000,000 6,562,500
5.60% 5/15/13 (MBIA Insured) Aaa 3,435,000 3,327,656
Cuyahoga County Health Care Facs. Rev.
(Judson Retirement Commty.)
8.875% 11/15/19 - 2,500,000 2,690,625
Cuyahoga County Hosp. Rev. Rfdg.
(Cleveland Clinic Foundation) Series A:
8% 12/1/08 Aa 1,000,000 1,080,000
8% 12/1/15 Aa 2,250,000 2,415,938
Defiance County Econ. Dev. Rev.
(Kroger Co. Proj.) 8% 10/15/15 Ba2 2,325,000 2,563,313
Defiance Spl. Assessments 7% 12/1/11 A 365,000 387,813
Delaware County Swr. 6.50% 12/1/03 A1 1,750,000 1,914,063
Delaware School Dist. (Capital Appreciation)
Construction & Impt. Series B, 0% 12/1/08
(FGIC Insured) Aaa 1,100,000 518,375
Dublin School Dist. Unltd. Tax Rfdg. (Cap.
Appreciation) 0% 12/1/04 (AMBAC Insured) Aaa 1,930,000 1,186,950
Fairfield School Dist. 7.45% 12/1/14
(FGIC Insured) Aaa 1,000,000 1,172,500
Fairfield Econ. Dev. Rev. Rfdg.
(Beverly Enterprises Proj.) 8.50% 1/1/03 - 1,060,000 1,126,250
Franklin School Dist. Unltd. Tax
(Warren County Impt.) 7% 12/1/14 A 1,250,000 1,315,625
Franklin County Gen. Oblig. Rfdg. Ltd. Tax
5.375% 12/1/21 Aaa 4,000,000 3,705,000
Franklin County Rev.
(Online Computer Library Ctr. Prog.):
7.20% 7/15/06 _ 1,000,000 1,076,250
9.75% 7/15/09 - 5,000,000 5,106,250
6% 4/15/12 - 3,500,000 3,403,750
Gateway Econ. Dev. Corp. (Greater Cleveland
Stadiums) Series 1990, 6.50% 9/15/14 - 10,000,000 9,787,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Granville Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa $ 625,000 $ 336,719
0% 12/1/07 (AMBAC Insured) Aaa 665,000 334,994
0% 12/1/08 (AMBAC Insured) Aaa 650,000 306,313
0% 12/1/09 (AMBAC Insured) Aaa 645,000 280,575
Greene County 1st Mtg. Rev. (Fairview Extended
Care) Series A, 10.125% 1/1/11 - 5,790,000 6,405,188
Greene County Swr. Sys. Rev. (Cap.
Appreciation) 0% 12/1/09 (AMBAC Insured) Aaa 775,000 340,031
Hamilton County Hosp. Facs. Rev.:
Rfdg. (Children's Hosp. Med. Ctr.) Series E,
5.20% 5/15/09, (MBIA Insured) Aaa 2,465,000 2,366,400
(Children's Hosp. Med. Ctr.) Series D,
5% 5/15/13 (FGIC Insured) Aaa 1,195,000 1,078,488
Hamilton County Gen. Oblig. 5.10% 12/1/11 Aa 1,525,000 1,404,906
Hamilton County Health Sys. Rev.:
Rfdg. (Providence Hosp.-Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa1 5,000,000 5,025,000
Hamilton County Swr. Sys. Rev.:
(Rfdg. & Impt. ):
(Metropolitan Swr. Dist.) Series A,
5.45% 12/1/09 (FGIC Insured) Aaa 1,500,000 1,475,625
Series A, 6.70% 12/1/13 A1 1,100,000 1,229,250
Series A, 5.40% 12/1/08 (FGIC Insured) Aaa 3,715,000 3,677,850
Hamilton Elec. Sys. Mtg. Rev. Rfdg. Series 1992 A,
6% 10/15/08 (FGIC Insured) Aaa 2,000,000 2,030,000
Hamilton Gas Sys. Rev. Series A, 4.75%
10/15/23 (MBIA Insured) Aaa 1,000,000 837,500
Hamilton Ind. Dev. Rev. Rfdg. (Kroger Co. Proj.):
6.15% 6/1/01 Ba2 2,005,000 2,057,631
8.10% 7/1/12 Ba2 3,600,000 4,000,500
Lakewood Gen. Oblig. 6.60% 12/1/08 Aa 1,525,000 1,673,688
Lakota Local School Dist. Gen. Oblig. Rfdg.
(Cap. Appreciation):
Unltd. Tax 0% 12/1/99 A1 445,000 360,450
0% 12/1/00 A1 625,000 476,563
0% 12/1/01 A1 590,000 417,425
0% 12/1/02 A1 555,000 371,156
0% 12/1/03 A1 260,000 162,825
0% 12/1/04 A1 730,000 431,613
0% 12/1/05 A1 690,000 382,950
0% 12/1/06 A1 650,000 337,188
0% 12/1/07 A1 610,000 295,088
Logan Hocking Local School Dist. Rfdg.
Series B, 0% 12/1/08, (AMBAC Insured) Aaa 1,065,000 497,888
Lorain County Rev. (1st Mtg. Kendal at Oberlin
Proj.) Series A, 8.625% 2/1/22 - 4,250,000 4,558,125
Lorain Gen. Oblig. Ltd. Tax 7.875% 12/1/09 Baa 1,000,000 1,076,250
Lorain Swr. Sys. Mtg. Rev. Rfdg. 8.75%
4/1/11 BBB- 2,815,000 3,078,906
Lowellville San. Swr. Sys. Rev. (Browning-Ferris
Industries, Inc.) 7.25% 6/1/06 (b) A 1,400,000 1,443,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Lucas County Convention Ctr. Site Acquisition
Bonds Ltd. Tax:
6.50% 12/1/09 Baa1 $ 340,000 $ 351,900
6.50% 12/1/10 Baa1 340,000 351,050
6.50% 12/1/11 Baa1 340,000 349,350
6.50% 12/1/12 Baa1 340,000 349,775
Lucas County Hosp. Rev. Rfdg. (Riverside Hosp.
Proj.) 7.625% 6/1/15 (e) Baa1 7,485,000 7,681,481
Lucas County Ind. Dev. Rev. Rfdg. (Kroger Co.)
8.50% 7/1/11 Ba2 3,600,000 4,032,000
Mahoning County Hosp. Facs. Rev. (YHA, Inc. Proj.)
Series A, 7% 10/15/14, (MBIA Insured) Aaa 1,000,000 1,066,250
Mahoning County San. Swr. Sys. Rev. 7.50%
2/1/19 (BIG Insured) Aaa 1,000,000 1,076,250
Mahoning Valley San. Dist.
7.85% 12/15/12 - 1,200,000 1,264,500
7.85% 12/15/13 - 1,275,000 1,343,531
Mahoning Valley San. Dist. Wtr. Rev. 7.75%
5/15/14 - 3,250,000 3,408,438
Marion County Health Care Facs. Rev. Rfdg. & Impt.
(United Church Homes, Inc. Proj.) 6.30%
11/15/15 BBB- 1,800,000 1,707,750
Marysville Exempt Village School Dist. Gen.
Oblig. Rfdg. (Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa 795,000 454,144
0% 12/1/06 (AMBAC Insured) Aaa 750,000 401,250
0% 12/1/07 (AMBAC Insured) Aaa 690,000 345,863
Marysville Swr. Sys. Ltd. Tax 7.15%
12/1/11 A 500,000 533,750
Mentor Exempt Village School Dist. Gen.
Oblig. Rfdg. (Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa 755,000 579,463
0% 12/1/01 (MBIA Insured) Aaa 795,000 575,381
0% 12/1/02 (MBIA Insured) Aaa 845,000 579,881
0% 12/1/03 (MBIA Insured) Aaa 840,000 546,000
Mentor Gen. Oblig. Ltd. Tax Series 1991,
7.15% 12/1/11 A 500,000 534,375
Miami County Hosp. Facs. Rev. (Upper Valley
Med. Ctr. Proj.) Series B, 8.25% 5/1/04
(BIG Insured) Aaa 445,000 475,594
Middleburg Heights Hosp. Rev. Impt.
(Southwest Gen. Hosp.) 7.20% 8/15/19 A 2,000,000 2,120,000
Muskingum County Rev. (Franciscan Health
Advisory Svcs.) 7.50% 3/1/12 BBB+ 2,000,000 2,062,500
Newark Wtr. (Cap. Appreciation) 0% 12/1/07
(AMBAC Insured) Aaa 455,000 228,069
Ohio Air Quality Dev. Auth. Rev.:
Rfdg. (Ohio Pwr. Co. Proj.) Series B, 7.40%
8/1/09 Baa1 3,250,000 3,436,875
(Columbus & Southern Pwr. Co.) Series A,
6.375% 12/1/20 (FGIC Insured) Aaa 3,000,000 3,093,750
Ohio Bldg. Auth. Facs.:
Rfdg. (State Correctional Facs.) Series A:
6.50% 10/1/03 A1 2,750,000 2,983,750
5.75% 10/1/05 A1 2,080,000 2,147,600
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Bldg. Auth. Facs. - continued
(Administration Bldg. Fund Proj.)
Series A, 5.60% 10/1/07 A1 $ 3,330,000 $ 3,334,163
(Ohio Center for the Arts) Series A:
5.35% 10/1/06 A1 3,060,000 3,048,525
5.45% 10/1/07 A1 2,000,000 1,995,000
(Workers Compensation Bldg. A)
4.75% 4/1/14 A 6,620,000 5,676,650
Ohio Cap. Corp. For Hsg. Multi-Family Hsg. Rev. Rfdg.:
Series A, 7.50% 1/1/24 (FNMA Coll.) AAA 1,000,000 1,063,750
Series C, 7.375% 7/1/23 (FNMA Coll.) AAA 2,000,000 2,072,500
Ohio Econ. Dev. Rev. Rfdg. (Kroger Co. Proj.)
Series 1992, 7.50% 9/1/10 Ba2 2,000,000 2,155,000
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.)
8% 10/1/95 (Escrowed to Maturity)(d) - 105,000 105,394
8.25% 10/1/06
(Pre-Refunded to 4/1/00 @ 101)(d) - 1,150,000 1,236,250
Ohio Gen. Oblig. Infrastructure Impt.:
Rfdg. Series R:
0% 9/1/00 Aa 3,260,000 2,555,025
5.45% 9/1/03 Aa 1,350,000 1,388,813
(Cap. Appreciation) Series 1989, 0% 9/1/07 Aa 7,225,000 3,711,844
(College Savings Bonds):
0% 8/1/09 Aa 2,290,000 1,030,500
0% 8/1/10 Aa 2,000,000 845,000
Ohio Higher Edl. Facs. Commission Rev.:
(Case Western Reserve Proj.):
Series A, 7.70% 10/1/18,
(Pre-Refunded to 10/1/97 @ 102) Aa 1,930,000 2,103,700
7.70% 10/1/18 Aa 70,000 74,900
(Kenyon College Proj.) 5.30% 12/1/08 A 1,115,000 1,063,431
(Oberlin College Proj.) 5.375% 10/1/15 AA 1,000,000 920,000
Ohio Higher Edl. Fac. Rev:
(Case Western Reserve Univ. Proj.):
Rfdg.:
6% 10/1/14 Aa 1,500,000 1,539,375
6.125% 10/1/15 Aa 2,000,000 2,072,500
6.25% 10/1/16 Aa 2,500,000 2,631,250
Series B, 6.50% 10/1/20 Aa 2,250,000 2,446,875
Ohio Ind. Dev. Rev. Rfdg. (Kroger Co.)
8.65% 6/1/11 Ba2 2,300,000 2,584,625
Ohio Liquor Profits Rev. Rfdg. 6.80% 9/1/98,
(MBIA Insured) Aaa 2,000,000 2,137,500
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 A1 3,100,000 3,518,500
Ohio Solid Waste Rev. (Republic Engineered
Steels Proj.) 8.25% 10/1/14 (b) - 4,200,000 4,289,250
Ohio Wtr. Dev. Auth. Rev.:
Rfdg. & Impt. (Pure Wtr.):
5.50% 12/1/11 (AMBAC Insured) Aaa 1,500,000 1,456,875
5.50% 12/1/18 (AMBAC Insured) Aaa 2,500,000 2,365,625
(Fresh Wtr. Series):
6.25% 12/1/02 (AMBAC Insured) Aaa 1,915,000 2,068,200
6.25% 12/1/03 (AMBAC Insured) Aaa 2,025,000 2,189,531
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Rev. - continued
(Pure Wtr.)
Series I, 6% 12/1/16 (AMBAC Insured) Aaa $ 1,685,000 $ 1,733,444
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Cont. Fund) 6.50% 12/1/05
(MBIA Insured) Aaa 2,735,000 3,008,500
Olentangy Local School Dist. Unltd. Tax:
7.75% 12/1/07 (BIG Insured) Aaa 500,000 595,625
7.75% 12/1/09 (BIG Insured) Aaa 100,000 119,500
7.75% 12/1/11 (BIG Insured) Aaa 190,000 228,000
Ottawa County Gen. Oblig. Ltd. Tax
7.50% 10/1/14 A1 500,000 565,625
Ottawa County San. Swr. Sys. Rev. Rfdg.
(Cap. Appreciation) (Danbury Proj.)
0% 10/1/06 (AMBAC Insured) Aaa 1,445,000 787,525
Pickerington Local School Dist. (Constr. & Impt.)
5.8% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,005,000
Pickerington Local School Dist. (School Bldg.
Construction) 7% 12/1/13, (AMBAC Insured) Aaa 1,000,000 1,128,750
Rural Lorian County Wtr. Auth. Wtr. Resource Rev.
Rfdg. & Impt. 5.45% 10/1/18, (AMBAC Insured) Aaa 3,500,000 3,303,125
Sandusky County Hosp. Facs. Rev. Rfdg.
(Mem. Hosp. Proj.) 7.75% 12/1/09 BB 5,250,000 5,250,000
Solon Gen. Oblig. (City Hall Impt.) 5.45%
12/1/13 Aa 1,000,000 942,500
Southwest Local School Dist. (Hamilton County):
0% 12/1/04 (AMBAC Insured) Aaa 500,000 306,875
0% 12/1/05 (AMBAC Insured) Aaa 525,000 303,188
0% 12/1/06 (AMBAC Insured) Aaa 525,000 284,156
0% 12/1/07 (AMBAC Insured) Aaa 520,000 263,900
Stark County Gen. Oblig. 5.60% 11/15/08
(AMBAC Insured) Aaa 1,150,000 1,139,938
Stark County Health Care Facs. Rev.
(Rose Lane Hosp. Proj.) 9% 12/1/23 - 6,135,000 6,702,488
Stark County Hosp. Rev. (Doctors Hosp. of
Stark County) 6% 4/1/13 Baa 5,840,000 5,117,300
Stark County Ind. Dev. Rev. Rfdg. (Kroger Co.)
7.20% 9/1/12 Ba2 3,100,000 3,282,125
Stow School Dist. School Impt. Unltd. Tax
9.125% 12/1/06 A 590,000 755,200
Student Loan Fund Corp. Student Loan Rev.:
Rfdg. Series A, 7.25% 2/1/08 (b) A 2,000,000 2,087,500
Series B, 8.875% 8/1/08(b) - 4,410,000 4,591,913
Series B-1, 4.50% 7/10/95 (AMBAC Insured) Aaa 5,000,000 5,000,000
Summit County Ind. Dev. Rev. Rfdg.
(Kroger Co. Proj.) 7.65% 10/1/06 Ba3 1,025,000 1,119,813
Tiffin San. Swr. Impt. Gen. Oblig. Ltd. Tax
7.10% 12/1/11 A 1,000,000 1,067,500
Union County Gen. Oblig. (Mem. Hosp.)
7.40% 12/1/10 A1 680,000 731,850
Warren County Gen. Oblig. 6.10% 12/1/12 Aa 500,000 517,500
Warren County Gen. Oblig. Ltd. Tax
6.65% 12/1/11 Aa 500,000 548,750
Warren Hosp. Rev. Rfdg. (Warren Gen. Hosp.
Proj.) Series B, 7.30% 11/15/14 BBB 4,105,000 4,125,525
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Warren Hsg. Dev. Corp. Rev. (1st Mtg. Rev.) Section 8:
7.25% 6/1/04 - $ 200,000 $ 202,750
7.25% 6/1/05 - 200,000 202,750
7.25% 6/1/06 - 200,000 202,750
7.25% 6/1/07 - 200,000 202,750
7.25% 6/1/08 - 200,000 202,750
Willoughby Gen. Oblig. Road Impt. Ltd. Tax
7.40% 12/1/11 A 1,200,000 1,392,000
Wright Univ. Gen. Receipts 5.15% 5/1/11
(AMBAC Insured) Aaa 1,000,000 933,750
Xenia Hsg. Dev. Corp. Rev. 1st Lien (Xenia Tower
Proj.) Section 8, 7.75% 2/1/10 - 1,965,000 2,006,744
Youngstown Gen. Oblig. Ltd. Tax 7.55% 12/1/11 Baa 1,500,000 1,605,000
348,933,995
PUERTO RICO - 3.7%
Puerto Rico Commonwealth Hwy. & Trans. Auth.
Rev. Rfdg. Series W, 5.50% 7/1/13 Baa1 10,000,000 9,437,500
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Rfdg.
Series S, 6.125% 7/1/09 Baa1 2,000,000 2,047,500
Puerto Rico Infrastructure Fing. Auth. Spl. Tax
Series 1988 A, 7.75% 7/1/08 Baa1 2,500,000 2,703,125
14,188,125
TOTAL MUNICIPAL BONDS
(Cost $354,669,956) 363,122,120
MUNICIPAL NOTES (A) - 5.1%
OHIO - 5.1%
Columbus Swr. Sys. Rev. Rfdg. Series 1994,
3.90%, VRDN VMIG 1 1,800,000 1,800,000
Dayton Spl. Facs. Rev. Rfdg. (Emery Air Freight
Corp. Proj.) Series 1988 D, 4.70%,
LOC Bank of America, VRDN(b) - 5,500,000 5,500,000
Ohio State Univ. Rev. (Gen. Receipts):
Series 1985 B, 4.40%,
LOC Nat'l. Westminster Bank PLC, VRDN VMIG 1 3,700,000 3,700,000
Series 1986 B, 4.40%, BPA Fuji Bank, VRDN VMIG 1 2,900,000 2,900,000
Ohio Wtr. Dev. Auth. Envir. Impt. Rev. Rfdg.
(The Mead Corp.) Series 1986 B, 4.25%,
LOC Swiss Bank, VRDN A-1+ 2,200,000 2,200,000
Scioto County Hosp. Facs. Rev. (VHA Central, Inc.) :
Series 85-E, 3.95% (AMBAC Insured)
(BPA First Nat'l. Bank Chicago), VRDN A-1 2,000,000 2,000,000
Series 1985 G, 3.95%, (AMBAC Insured)
BPA First Nat'l. Bank Chicago, VRDN A-1 1,500,000 1,500,000
TOTAL MUNICIPAL NOTES
(Cost $19,600,000) 19,600,000
TOTAL INVESTMENTS - 100%
(Cost $374,269,956) $ 382,722,120
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
140 U.S. Treasury Bond Contracts Sept. 1995 $ 15,894,375 $ 27,168
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 4.2%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(h) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(i) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(j) Security collateralized by an amount sufficient to pay interest and
principal.
(k) 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 $1,539,375.
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 55.8% AAA, AA, A 54.7%
Baa 11.1% BBB 9.1%
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 16.0%. 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 investment in securities, is as follows:
General Obligation 21.6%
Water & Sewer 21.1
Health Care 16.9
Industrial Development 10.3
Others
(individually less than 10%) 30.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $374,269,956. Net unrealized appreciation aggregated
$8,452,164, of which $13,383,358 related to appreciated investment
securities and $4,931,194 related to depreciated investment securities.
At December 31, 1994, the fund elected 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>
JUNE 30, 1995 (UNAUDITED)
5.ASSETS 6. 7.
8.Investment in securities, at value (cost $374,269,956) 9. $ 382,722,120
See accompanying schedule
10.Cash 11. 51,687
12.Receivable for investments sold 13. 1,236,900
14.Interest receivable 15. 5,888,296
16.Receivable for daily variation on futures contracts 17. 65,625
18. 19.TOTAL ASSETS 20. 389,964,628
21.LIABILITIES 22. 23.
24.Payable for investments purchased $ 2,374,361 25.
26.Distributions payable 365,700 27.
28.Accrued management fee 131,637 29.
30.Other payables and accrued expenses 79,457 31.
32. 33.TOTAL LIABILITIES 34. 2,951,155
35.36.NET ASSETS 37. $ 387,013,473
38.Net Assets consist of: 39. 40.
41.Paid in capital 42. $ 382,694,915
43.Accumulated undistributed net realized gain (loss) 44. (4,160,774)
on investments
45.Net unrealized appreciation (depreciation) 46. 8,479,332
on investments
47.48.NET ASSETS, for 34,609,107 shares outstanding 49. $ 387,013,473
50.51.NET ASSET VALUE, offering price and redemption 52. $11.18
price per share ($387,013,473 (divided by) 34,609,107 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
53.54.INTEREST INCOME 55. $ 11,965,925
56.EXPENSES 57. 58.
59.Management fee $ 764,415 60.
61.Transfer agent, accounting and custodian fees 283,584 62.
and expenses
63.Non-interested trustees' compensation 6,043 64.
65.Registration fees 6,136 66.
67.Audit 15,982 68.
69.Legal 1,014 70.
71.Miscellaneous 1,949 72.
73. 74.TOTAL EXPENSES 75. 1,079,123
76.77.NET INTEREST INCOME 78. 10,886,802
79.REALIZED AND UNREALIZED GAIN (LOSS) 81. 82.
80.Net realized gain (loss) on:
83. Investment securities (654,891) 84.
85. Futures contracts (1,161,827) (1,816,718)
86.Change in net unrealized appreciation (depreciation) 87. 88.
on:
89. Investment securities 24,198,355 90.
91. Futures contracts 27,168 24,225,523
92.93.NET GAIN (LOSS) 94. 22,408,805
95.96.NET INCREASE (DECREASE) IN NET ASSETS 97. $ 33,295,607
RESULTING FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
98.INCREASE (DECREASE) IN NET ASSETS
99.Operations $ 10,886,802 $ 23,627,156
Net interest income
100. Net realized gain (loss) (1,816,718) 4,739,999
101. Change in net unrealized appreciation 24,225,523 (53,200,362)
(depreciation)
102. 33,295,607 (24,833,207)
103.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
104.Distributions to shareholders (10,886,802) (23,627,156)
From net interest income
105. From net realized gain - (6,768,869)
106. 107.TOTAL DISTRIBUTIONS (10,886,802) (30,396,025)
108.Share transactions 66,225,418 98,297,570
Net proceeds from sales of shares
109. Reinvestment of distributions 8,348,043 23,452,964
110. Cost of shares redeemed (60,235,309) (174,126,840)
111.112. 14,338,152 (52,376,306)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS
113. 36,746,957 (107,605,538)
114.TOTAL INCREASE (DECREASE) IN NET ASSETS
115.NET ASSETS 116. 117.
118. Beginning of period 350,266,516 457,872,054
119. End of period $ 387,013,473 $ 350,266,516
120.OTHER INFORMATION 122. 123.
121.Shares
124. Sold 6,001,291 8,731,920
125. Issued in reinvestment of distributions 753,624 2,111,339
126. Redeemed (5,440,079) (15,641,231)
127. Net increase (decrease) 1,314,836 (4,797,972)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
128. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
129. (UNAUDITED) 1994 1993C 1992 1991 1990
130.SELECTED PER-SHARE DATA
131.Net asset value, beginning of
period $ 10.520 $ 12.020 $ 11.550 $ 11.320 $ 10.840 $ 10.790
132.Income from Investment Operations .319 .657 .693 .718 .719 .726
Net interest income
133. Net realized and unrealized
gain (loss) .660 (1.310) .720 .230 .480 .050
134. Total from investment operations .979 (.653) 1.413 .948 1.199 .776
135.Less Distributions (.319) (.657) (.693) (.718) (.719) (.726)
From net interest income
136. From net realized gain on
investments - (.190) (.250) - - -
137. Total distributions (.319) (.847) (.943) (.718) (.719) (.726)
138.Net asset value, end of period $ 11.180 $ 10.520 $ 12.020 $ 11.550 $ 11.320 $ 10.840
139.TOTAL RETURN B 9.37% -5.55% 12.56% 8.66% 11.45% 7.50%
140.RATIOS AND SUPPLEMENTAL DATA
141.Net assets, end of period (000
omitted) $ 387,013 $ 350,267 $ 457,872 $ 384,861 $ 327,767 $ 241,616
142.Ratio of expenses to average
net assets .58% .57% .57% .61% .64% .66%
A
143.Ratio of net interest income to
average net assets 5.80% 5.88% 5.67% 6.31% 6.53% 6.82%
A
144.Portfolio turnover rate 28% 22% 41% 20% 11% 12%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS
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 past five years and life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Ohio Municipal
Money Market Portfolio 1.73% 3.18% 17.69% 23.72%
Average Ohio Tax-Free
Money Market Fund 1.74% 3.17% 16.98% n/a
Consumer Price Index 1.87% 3.04% 17.40% 22.39%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or since
the fund started on August 29, 1989. For example, if you invested $1,000 in
a fund that had a 5% return over the past year, the value of your
investment would be $1,050. To measure how the fund's performance stacked
up against its peers, you can compare it to the average Ohio tax-free money
market fund, which reflects the performance of 11 Ohio tax-free money
market funds with similar objectives tracked by IBC/Donoghue over the past
six months. Comparing the fund's performance to the consumer price index
(CPI) helps show how your investment did compared to inflation. (The
periods covered by the CPI and IBC/Donoghue numbers are those closest
available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal
Money Market Portfolio 3.18% 3.31% 3.71%
Average Ohio Tax-Free
Money Market Fund 3.17% 3.19% n/a
Consumer Price Index 3.04% 3.26% 3.52%
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
6/27/94 9/26/94 12/26/94 3/27/95 6/26/95
Fidelity Ohio Municipal 2.30% 2.82% 3.96% 3.53% 3.57%
Money Market Portfolio
Average Ohio Tax-Free 2.34% 2.84% 3.78% 3.51% 3.63%
Money Market Fund
Ohio Municipal Money 3.89% 4.76% 6.69% 5.94% 6.03%
Market Tax-equivalent
Portion of the fund's - 1.11% 0.74% 4.10% -
income subject to state
taxes
Row: 1, Col: 1, Value: 2.3
Row: 1, Col: 2, Value: 2.34
Row: 2, Col: 1, Value: 2.82
Row: 2, Col: 2, Value: 2.84
Row: 3, Col: 1, Value: 3.96
Row: 3, Col: 2, Value: 3.78
Row: 4, Col: 1, Value: 3.56
Row: 4, Col: 2, Value: 3.51
Row: 5, Col: 1, Value: 3.59
Row: 5, Col: 2, Value: 3.63
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 1995 federal and state income tax rate of 40.80% and reflects
that a portion of the fund's income was subject to state taxes. A portion
of the fund's income may be subject to the 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 Jan Bradburn,
Portfolio Manager of Fidelity Ohio Tax-Free Money Market Portfolio
Q. JAN, CAN YOU TELL US HOW THE INVESTMENT CLIMATE HAS CHANGED DURING THE
PAST SIX MONTHS?
A. Sure. Conditions on the whole were calmer and more predictable than they
were during most of 1994. The Federal Reserve raised the federal funds rate
the rate banks charge each other for overnight loans - one-half
percentage point in February. However, unlike most of the six other rate
increases that had come before, the February rate increase was widely
anticipated, and the market absorbed it without a hitch.
Q. HAVE RATES PEAKED, THEN?
A. It looks that way to me. The goal of Fed policy ever since it began
raising short-term interest rates in February 1994 has been to dampen the
economic growth rate and prevent an outbreak of inflation. Apparently, the
policy has worked. Early in 1995, we began seeing signs that the economy
was slowing down. Those signs were confirmed in April with the release of
the first-quarter growth rate, which came in at a surprisingly low 2.8%.
That marked a dramatic slowdown from the robust 5.1% growth rate during the
fourth quarter of 1994. The pattern of slower growth persisted throughout
the spring. By the end of the period, talk of further rate increases had
ceased, and speculation centered instead on when the Fed would see the need
to cut rates again.
Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD?
A. When the period began, the fund's average maturity was a neutral 55
days. I kept it within a range of between 50 and 60 days for much of the
spring. In May, when it became apparent that interest rates had stabilized,
I took the opportunity to make prudent purchases of longer-term securities,
extending the fund's average maturity to around 70 days. That's more
aggressive than the fund had been in quite some time, and reflected my view
that interest rates were likely to decline further before heading back up.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1995, was 3.55%, compared to
4.15% six months ago. On an after-tax basis, the fund's latest yield was
the equivalent of a 6.00% yield on a taxable investment for Ohio investors
in the 40.80% combined state and federal income tax bracket. Through June
30, 1995, the fund's six-month total return was 1.73%, compared to 1.74%
for the average Ohio tax-exempt money market fund, according to
IBC/Donoghue.
Q. WHAT'S THE OUTLOOK?
A. There's been a dramatic shift in market psychology in recent months.
Early this year, many economists were predicting that the Fed would go
right on raising interest rates through the summer. However, as the economy
slowed, the consensus view shifted 180 degrees. By the end of June, opinion
differed on when exactly the rate cut would come, but most market
participants were proceeding on the assumption that a rate cut was all but
inevitable. As it happened, the Fed did act on July 6, shortly after the
reporting period ended, lowering the federal funds rate one-quarter
percentage point. If the economy continues to show signs of weakness, a
further rate cut later this summer remains a possibility. However, that
doesn't mean that I'll be getting a lot more aggressive with the fund in
the months ahead. There's still enough uncertainty on the horizon that I
believe it makes sense to maintain some flexibility. I'll probably aim to
keep the fund's average maturity around 60 days.
FUND FACTS
GOAL: high current tax-free
income while maintaining a
stable $1.00 share price.
Invests in high-quality,
short-term municipal money
market securities whose interest
is free from federal income tax
and Ohio individual income tax
START DATE: August 29, 1989
SIZE: as of June 30,1995,
more than $280 million
MANAGER: Janice Bradburn,
since 1993; manager, Fidelity
Massachusetts Tax-Free
Money Market and Spartan
Massachusetts Municipal
Money Market Portfolio, since
1992; Fidelity New York
Tax-Free Money Market
Portfolio, since 1989; Spartan
New York Municipal Money
Market Portfolio, since 1990,
and Spartan Florida Money
Market Portfolio, since 1995;
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
6/30/95 12/31/94 6/30/94
0 - 30 60 61 61
31 - 90 10 16 17
91 - 180 13 15 15
181 - 397 17 8 7
WEIGHTED AVERAGE MATURITY
6/30/95 12/31/94 6/30/94
Ohio Municipal
Money Market 72 days 54 days 49 days
Average Ohio Tax-Free
Money Market Fund* 55 days 55 days 57 days
ASSET ALLOCATION
AS OF JUNE 30, 1995 AS OF DECEMBER 31, 1994
Row: 1, Col: 1, Value: 51.0
Row: 1, Col: 2, Value: 8.0
Row: 1, Col: 3, Value: 15.0
Row: 1, Col: 4, Value: 25.0
Row: 1, Col: 5, Value: 2.0
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
Variable rate
demand notes
(VRDNs) 51%
Commercial
paper 8%
Tender bonds 15%
Municipal
notes 25%
Other 1%
Variable rate
demand notes
(VRDNs) 57%
Commercial
paper 14%
Tender bonds 8%
Municipal
notes 21%
Other 0%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)
FIDELITY OHIO MUNICIPAL MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 99.6%
Bedford Heights Ind. Dev. Rev. (Olympic Steel) Series 1989,
4.25%, LOC Nat'l. City Bank Cleveland, VRDN (b) $ 1,550,000 $ 1,550,000
Brook Park BAN:
4.19% 7/6/95 840,000 840,027
4.25% 7/5/96 1,040,000 1,042,995
Brookville Ind. Dev. Rev. (Green Tokai Co. Ltd. Proj.)
Series 1988, 4.50%, LOC Tokai Bank,VRDN (b) 4,000,000 4,000,000
Butler County BAN:
Series B, 4.10% 4/19/96 1,200,000 1,203,726
Series C, 4.12% 3/15/96 900,000 902,592
4.73% 11/29/95 850,000 851,462
5.07% 3/15/96 2,250,000 2,257,121
4.74% 4/19/96 4,250,000 4,264,382
Centerville School Dist. BAN 4.40% 3/14/96 2,000,000 2,007,512
Chillicothe BAN 4.04% 7/5/96 1,000,000 1,001,340
Cleveland-Cuyahoga County Port Auth. Rev.
(Rock'n Roll Hall of Fame & Museum Proj.) 4.15%,
LOC Credit Local De France, VRDN 5,400,000 5,400,000
Cleveland Reg'l. Transit Auth. BAN 4.10% 4/10/96 4,000,000 4,010,516
Clinton County Arpt. Facs. Rev. (Wilmington Air Park Inc.)
Series 1991, 4.15%, LOC Wachovia Bank, VRDN 5,000,000 5,000,000
Columbus Elec. Sys. Rev. Series 1984, 3.65%,
LOC Dai-Ichi Kangyo Bank, VRDN 10,000,000 10,000,000
Columbus Sewerage Sys. Rev. Rfdg.
Series 1994, 3.90%, VRDN 5,000,000 5,000,000
Columbus Various Purp. Adj. Rate Unltd. Tax Rev. Series 1995-1,
3.80% SBPA Westdeutsche Landesbank, VRDN 7,500,000 7,500,000
Dayton Spl. Facs. Rev. Rfdg. (Emery Air Freight Corp. Proj.):
Series 1988 D, 4.70%, LOC Mellon Bank, VRDN (b) 3,600,000 3,600,000
Series 1993-E, 4.20%, LOC Mellon Bank, VRDN 6,000,000 6,000,000
Fairfax Ind. Dev. Rev. (Johnson & Hardin Co. Proj.)
Series 1990, 4.40%, LOC Central Co., VRDN (b) 3,000,000 3,000,000
Fairfield County Jail Impt. & San. Swr. Impt.
BAN 4.88% 10/26/95 3,085,000 3,089,542
Franklin County Ind. Dev. Rev.:
Rfdg. (Alco Standard Corp. Proj.) Series 1994, 4.40%,
LOC Nationsbank NC, VRDN 1,700,000 1,700,000
(Inland Products Inc.), 4.40%,
LOC PNC Bank, Ohio, VRDN (b) 1,000,000 1,000,000
Greene County BAN 4.32% 7/19/95 3,000,000 3,000,314
Hamilton County Health Care Facs. Rev.
(West Park Retirement Commty.) Series 1989, 3.90%,
LOC Fifth Third Bank, Cincinnati, VRDN 1,600,000 1,600,000
Hamilton County Ind. Dev. Rev. (Visual Management Group
Proj.) Series 1989, 4.40% LOC Nat'l. Bank of Detroit,
VRDN (b) 690,000 690,000
Hamilton County Swr. Participating VRDN, Series PA-15,
4.10% (Liquidity Facility Merrill Lynch & Co.) (c) 3,160,000 3,160,000
Holmes County Ind. Dev. Rev. (Poultry Processing, Inc.)
Series 1990, 4.30%, LOC Rabobank Nederland,
VRDN (b) 500,000 500,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Lake County BAN 4.75% 10/12/95 $ 2,890,000 $ 2,893,515
Lakewood BAN 4.75% 5/10/96 1,286,800 1,291,028
Mahoning County BAN 4.50% 7/14/95 4,660,000 4,661,118
Marion BAN 5% 4/25/96 3,200,000 3,209,989
Marion County Hosp. Rev. Bonds (Pooled Lease Prog.):
Series 1991, 4.25% tender 11/1/95,
LOC Bank One Columbus 3,500,000 3,500,000
Series 1992, 4.25% tender 10/1/95,
LOC Bank One Columbus 13,100,000 13,100,000
Medina County Ind. Dev. Rev. (North American Roto
Engravers, Inc. Proj.) Series 1988, 4.35%,
LOC Bank One Akron, VRDN (b) 830,000 830,000
Middletown Ind. Dev. Rev. (Pilot Chemical Proj.) 4.35%,
LOC Bank One Dayton, VRDN (b) 2,700,000 2,700,000
Montgomery County BAN:
5% 1/26/96 4,610,000 4,628,940
5% 4/26/96 1,595,000 1,603,673
Montgomery County Ctfs. of Indebtedness BAN 5%
4/26/96 5,615,000 5,645,588
Montgomery County Ind. Dev. Rev. (Modern Industrial
Plastics Inc.) Series 1988, 4.375%
LOC Industrial Bank of Japan, VRDN 2,000,000 2,000,000
Montgomery County - Miami Valley Hosp. Auth.
Series B, 3.50% tender 8/21/95, LOC Fuji Bank 4,750,000 4,750,000
Series C, 3.50% tender 8/17/95, LOC Fuji Bank 3,000,000 3,000,000
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), VRDN (b):
Series 1994-A, 4.05%, LOC Societe Generale 13,500,000 13,500,000
Series 1994-B, 4.25%, LOC Societe Generale 3,000,000 3,000,000
Ohio Air Quality Dev. Auth. Poll. Cont. Rev. Bonds
(Duquesne Light Co.) 3.70% tender 7/13/95,
LOC Toronto Dominion (b) 2,500,000 2,500,000
Ohio Cap. Facs. Bonds Series B, 4.20% 10/1/95 1,900,000 1,903,842
Ohio Hsg. Fin. Agcy. (Kenwood Congregate Retirement
Commty. Proj.) Series 1985, 3.90%,
LOC Morgan Guaranty Trust Co., VRDN 2,200,000 2,200,000
Ohio Hsg. Fin. Agcy. Participating VRDN, Series PA-93,
4.25% (Liquidity FacilityMerrill Lynch) (b)(c) 3,265,000 3,265,000
Ohio Hsg. Single Family Mtg. Rev. Bonds:
Series C-16, 4.60% tender 8/1/95
(Liquidity Facility Citibank)(c) 7,725,000 7,725,000
Series C-18, 4.50% tender 8/1/95
(Liquidity Facility Citibank)(b)(c) 4,810,000 4,809,583
Series C-19, 4.60% tender 8/1/95
(Liquidity Facility Citibank)(b)(c) 8,045,000 8,045,000
Ohio Ind. Dev. Rev., VRDN, (b):
(Aerolite Extrusion) Series 1991 IA, 4.30%,
LOC Nat'l. City Bank of Columbus 180,000 180,000
(Anomatic Corp.) Series 1989 I, 4.30%,
LOC Nat'l. City Bank of Columbus 240,000 240,000
(Arthur Corp.) Series 1989 IIIA, 4.30%,
LOC Nat'l. City Bank of Columbus 285,000 285,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev., VRDN, (b) - continued
(Burnham Corp. Proj.):
Series 1987 N, 4.30%, LOC Bank One Columbus $ 380,000 $ 380,000
Series 1988 II, 4.30%, LOC Central Trust Co. Cincinnati 355,000
355,000
(CCE Inc.) Series 1989I, 4.30%,
LOC Nat'l. City Bank Columbus 910,000 910,000
(Carpenter/Clapp & Haney Tool Co.) Series 1987 P,
4.30%, LOC Bank One Columbus 360,000 360,000
(Cole Tool & Die) Series 1988 H, 4.30%,
LOC Bank One Columbus 275,000 275,000
(Corpad Head Co.) Series 1988 II,4.30%,
LOC Central Trust Co. Cincinnati 555,000 555,000
(Die Matic Inc.) Series O, 4.30%,
LOC Bank One Columbus 335,000 335,000
(Dramex Int'l., Inc.):
Series 1988 I, 4.30%, LOC Bank One Columbus 1,000,000 1,000,000
Series 1988 II, 4.30%, LOC Central Trust Co. Cincinnati 200,000
200,000
(EF Realty) Series A, 4.30%,
LOC Nat'l. City Bank Cleveland 185,000 185,000
(EPIC Technologies Inc.) Series 1988 D, 4.30%,
LOC Bank One Columbus 280,000 280,000
(Economy Machine & Tool North Inc. Proj.) Series 1988 II,
4.30%, LOC Central Trust Co. 100,000 100,000
(Gary W. James) Series 1986 B, 4.30%,
LOC Nat'l City Bank Cleveland 290,000 290,000
(HGN Realty/Shalmet Ohio, Inc.) Series 1989 III A,
4.30%, LOC Nat'l. City Bank Columbus 1,780,000 1,780,000
(Hydro Tube Corp.) 4.30%,
LOC Nat'l. City Bank of Columbus 90,000 90,000
(K&S Realty) Series 1989 I, 4.30%,
LOC Nat'l. City Bank Columbus 300,000 300,000
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III,
4.30%, LOC Nat'l. City Bank Columbus 255,000 255,000
(Kaufmans Bakery) Series K, 4.30%,
LOC Bank One Columbus 795,000 795,000
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I, 4.30%,
LOC Nat'l. City Bank Columbus 535,000 535,000
(Morrow Macke Realty) Series 1988 C, 4.30%,
LOC Bank One Columbus 720,000 720,000
(Oak Printing) Series 1991 IA, 4.30%,
LOC Nat'l. City Bank Columbus 450,000 450,000
(Plasticos Co.) Series 1989 IIIA, 4.30%,
LOC Nat'l. City Bank of Columbus 695,000 695,000
(Prentke Romich) Series 1989 III, 4.30%,
LOC Nat'l. City Bank of Columbus 120,000 120,000
(SBD Properties Co.) Series 1986 L, 4.30%,
LOC Nat'l. City Bank Cleveland 205,000 205,000
(Samuel and Annie Sherman) Series 1989 III A, 4.30%,
LOC Nat'l City Bank of Columbus 300,000 300,000
(Sheffield Steel) Series 1988 B, 4.30%,
LOC Bank One Columbus 70,000 70,000
(Southwest Fin. Svcs.) Series 1986, 4.30%,
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, 4.30%,
LOC Nat'l City Bank of Columbus $ 745,000 $ 745,000
(Steubenville Area) Series 1988 II, 4.30%,
LOC Central Trust Co. Cincinnati 345,000 345,000
(Thomas K. Issacs) Series 1990 IB, 4.30%,
LOC Nat'l City Bank of Columbus 210,000 210,000
(United Steel Svc.) Series 1988 J, 4.30%,
LOC Bank One Columbus 715,000 715,000
(VRE Inc.) Series F, 4.30%, LOC Bank One Columbus 210,000 210,000
(Walker-Williams Lumber Co.) Series 1989 IIIA, 4.30%,
LOC Nat'l City Bank of Columbus 1,250,000 1,250,000
(Wooster Iron Metal Co.) Series 1988 R, 4.30%,
LOC Bank One LOC Bank One Columbus 525,000 525,000
Ohio Wtr. Dev. Auth. Participating VRDN, Series PA-1016B,
4.20%, (Liquidity Facility Merrill Lynch & Co.)(c) 3,080,000 3,080,000
Ohio Wtr. Dev. Auth. Poll Cont. Rev. Bonds:
Rfdg. (Cleveland Elec. Co. Proj.) Series 1988 A, 3.10%
tender 7/17/95 (FGIC Insured) 3,000,000 3,000,000
(Duquesne Light Co. Proj.):
4.20% tender 7/6/95, LOC Toronto Dominion (b) 3,500,000 3,500,000
3.70% tender 7/13/95, LOC Toronto Dominion (b) 1,500,000 1,500,000
Ross County Hosp. Facs. Rev. (Medical Center Hosp. Proj.)
Series 1995, 4.15% LOC Fifth Third Bank, VRDN 2,000,000 2,000,000
Scioto County Hosp. Facs. Rev. (VHA Capital Asset Fin. Prog.)
Series 1985 D, 3.95% (AMBAC Insured)
BPA First Chicago Corp., VRDN 500,000 500,000
Seven Hills BAN 5.50% 11/2/95 1,335,000 1,337,717
Sharonville Ind. Dev. Rev. (Xtec, Inc.) Series 1991, 4.35%,
LOC Fifth Third Bank, VRDN 1,600,000 1,600,000
Stark County Ind. Dev. Rev. (Liquid Control Corp. Proj.)
Series 1987, 4.35%, LOC Bank One Akron, VRDN (b) 370,000 370,000
Student Loan Funding Corp. Rev., VRDN:
Series 1983 A, 4.25%, LOC Fuji Bank 2,000,000 2,000,000
Series 1990-A1, 4.35%, LOC Nat'l. Westminster (b) 2,900,000 2,900,000
Series 1990-A2, 4.35%, LOC Nat'l. Westminster (b) 6,200,000 6,200,000
Series 1990-A3, 4.35%, LOC Nat'l. Westminster (b) 4,700,000 4,700,000
Summit County BAN:
5% 3/7/96 4,000,000 4,009,123
4.25% 6/6/96 4,000,000 4,008,944
Summit County Ind. Dev. Rev., VRDN (b):
(Keltec Inc. Proj.) Series 1987, 4.35%,
LOC Bank One Akron 380,000 380,000
(Kuchar Proj.) Series 1987, 4.35%,
LOC Bank One Akron 995,000 995,000
(Mannix Co. Proj.) Series 1987, 4.35%,
LOC Bank One Akron 1,750,000 1,750,000
Summit County Ind. Dev. Rev. Bonds (b):
(Kuchar Proj.) 4.55% tender 4/1/95,
LOC Bank One Akron 545,000 545,000
(SGS Tool Co. Proj.) 4.40% tender 4/1/95,
LOC Bank One Akron 2,800,000 2,800,000
(Spark Tec Int'l. Proj.) Series 1989, 4.50% tender 5/1/95,
LOC Bank One Akron 340,000 340,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Toledo City Services Spl. Assessment BAN 4.52% 12/1/95,
LOC Sumitomo Bank $ 1,800,000 $ 1,800,443
Toledo-Lucas County Convention & Visitors Bureau Rev.
Rfdg. (Toledo-Lucas County Convention Ctr. Proj.)
Series 1991, 4.35%, LOC Marine Midland Bank, VRDN 2,175,000 2,175,000
Toledo-Lucas County Port Auth. Rev. Bonds
(CSX Transportation Inc. Proj.) Series 1992, 3.10%
tender 7/17/95 LOC Nova Scotia 5,500,000 5,500,000
Trimble Township Wastewtr. Treatment Dist.
BAN 4.75% 10/2/95 1,000,000 1,000,000
Troy BAN 4.85% 11/21/95 3,500,000 3,503,277
Trumbull County Ind. Dev. Rev. (McDonald Steel Corp.)
Series 1990, 4.40%, LOC Pittsburgh Nat'l. Bank, VRDN (b) 2,200,000
2,200,000
Union County BAN 4.19% 6/28/96 1,000,000 1,002,765
University of Cincinnati BAN Series K-1, 5% 3/21/96 4,000,000 4,009,632
Van Wert County Ind. Dev. Auth. Rev. (Toledo Molding & Die Inc.)
Series 1994, 4.35% LOC Bank One Columbus VRDN (b) 3,665,000 3,665,000
Warren County Ind. Dev. Rev. (Johnson & Hardin Enterprise)
Series 1990 A, 4.40%, LOC Central Trust Co., VRDN (b) 3,000,000
3,000,000
Washington County Ind. Dev. Rev. (Forma Scientific, Inc. Proj.)
4.40%, LOC BankOne Akron, VRDN (b) 800,000 800,000
278,130,706
TEXAS - 0.4%
Gulf Coast Ind. Dev. Auth. Solid Waste Disp. Rev. (Citgo
Petroleum) 4.40%, LOC Wachovia Bank, VRDN (b) 1,000,000 1,000,000
TOTAL INVESTMENTS - 100% $ 279,130,706
Total Cost for Income Tax Purposes $ 279,128,718
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>
JUNE 30, 1995 (UNAUDITED)
145.ASSETS 146. 147.
148.Investment in securities, at value - See 149. $ 279,130,706
accompanying schedule
150.Cash 151. 3,031,233
152.Receivable for investments sold 153. 116,802
154.Interest receivable 155. 2,206,333
156. 157.TOTAL ASSETS 158. 284,485,074
159.LIABILITIES 160. 161.
162.Payable for investments purchased $ 4,044,335 163.
164.Distributions payable 25,372 165.
166.Accrued management fee 92,476 167.
168.Other payables and accrued expenses 76,298 169.
170. 171.TOTAL LIABILITIES 172. 4,238,481
173.174.NET ASSETS 175. $ 280,246,593
176.Net Assets consist of: 177. 178.
179.Paid in capital 180. $ 280,282,220
181.Accumulated net realized gain (loss) on 182. (37,616)
investments
183.Unrealized gain from accretion of market discount 184. 1,989
185.186.NET ASSETS, for 280,282,220 shares 187. $ 280,246,593
outstanding
188.189.NET ASSET VALUE, offering price and 190. $1.00
redemption price per share ($280,246,593 (divided by)
280,282,220 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
191.192.INTEREST INCOME 193. $ 5,796,855
194.EXPENSES 195. 196.
197.Management fee $ 578,708 198.
199.Transfer agent, accounting and custodian fees 274,172 200.
and expenses
201.Non-interested trustees' compensation 1,218 202.
203.Registration fees 8,000 204.
205.Audit 11,855 206.
207.Legal 2,401 208.
209.Miscellaneous 3,166 210.
211. 212.TOTAL EXPENSES 213. 879,520
214.215.NET INTEREST INCOME 216. 4,917,335
217.REALIZED AND UNREALIZED GAIN (LOSS) 219. (15,378)
218.Net realized gain (loss) on investment securities
220.Increase (decrease) in net unrealized gain from 221. 1,989
accretion of market discount
222.223.NET GAIN (LOSS) 224. (13,389)
225.226.NET INCREASE IN NET ASSETS RESULTING FROM 227. $ 4,903,946
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
228.INCREASE (DECREASE) IN NET ASSETS
229.Operations $ 4,917,335 $ 7,053,853
Net interest income
230. Net realized gain (loss) (15,378) (11,009)
231. Increase (decrease) in net unrealized gain from 1,989 -
accretion of market discount
232. 4,903,946 7,042,844
233.NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS
234.Distributions to shareholders from net interest (4,917,335) (7,053,853)
income
235.Share transactions at net asset value of $1.00 per 214,506,765 547,410,061
share
Proceeds from sales of shares
236. Reinvestment of distributions from net interest 4,694,987 6,760,085
income
237. Cost of shares redeemed (240,633,025) (514,839,223)
238.239. (21,431,273) 39,330,923
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES
RESULTING FROM SHARE TRANSACTIONS
240. (21,444,662) 39,319,914
241.TOTAL INCREASE (DECREASE) IN NET ASSETS
242.NET ASSETS 243. 244.
245. Beginning of period 301,691,255 262,371,341
246. End of period $ 280,246,593 $ 301,691,255
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
247. SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1995
248. (UNAUDITED) 1994 1993 1992 1991 1990
249.SELECTED PER-SHARE DATA
250.Net asset value, beginning of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
251.Income from Investment Operations .017 .025 .021 .028 .044 .058
Net interest income
252.Less Distributions (.017) (.025) (.021) (.028) (.044) (.058)
From net interest income
253.Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
254.TOTAL RETURN B 1.73% 2.50% 2.09% 2.81% 4.50% 5.90%
255.RATIOS AND SUPPLEMENTAL DATA
256.Net assets, end of period (000
omitted) $ 280,247 $ 301,691 $ 262,371 $ 270,248 $ 247,885 $ 213,658
257.Ratio of expenses to average net
assets .62% .57% .59% .58% .47% .23%
A
258.Ratio of expenses to average net
assets before .62% .57% .59% .59% .64% .69%
expense reductions A
259.Ratio of net interest income to
average net assets 3.46% 2.48% 2.07% 2.78% 4.41% 5.77%
A
</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.
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
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
money market fund and the high yield 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 substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of 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, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions and losses deferred due to wash sales, futures and
options, and excise tax regulations.
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
"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 $50,836,554 and $48,372,560, respectively.
The market value of futures contracts opened and closed during the period
amounted to $67,678,248 and $52,972,867 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 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.1200% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fees were equivalent to .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
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 $1,537 and
$37,352 for the high yield and money market funds, respectively, for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the funds. UMB 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. Effective January
1, 1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the funds pay account fees and asset-based fees that vary
according to account size and type of account. Under the prior transfer
agent contract, the funds paid fees based on the type, size, number of
accounts and the 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 $200,725 and $80,898 for
the high yield fund and $227,550 and $28,621 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 $4,265.
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER, MONEY MARKET FUND
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
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
Michael D. Conway, Assistant Treasurer
MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Marvin L. Mann*
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB 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
