FIDELITY MUNICIPAL TRUST, 485APOS, 1996-04-29

FIDELITY MUNICIPAL TRUST
485APOS, 1996-04-29

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No.2-55725)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 71 [X]
and
REGISTRATION STATEMENT (No. 811-2720)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 71 [X]
Fidelity Municipal Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
( ) on ( ) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
(X) on (June 30, 1996) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and filed the Notice required by such Rule
on February 20, 1996.
FIDELITY ADVISOR MUNICIPAL BOND FUND
CLASS A & CLASS B PROSPECTUS

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER PROSPECTUS SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page

2 a .............................. **

b,c .............................. *

3 a .............................. **

b .............................. *

c .............................. Performance

d .............................. Cover Page

4 a i............................. Charter

ii........................... Investment Principles and Risks; Securities and
Investment Practices

b .............................. Securities and Investment Practices

c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices

5 a .............................. Charter

b i............................. Cover Page; Charter

ii........................... Charter; Breakdown of Expenses

iii.......................... Expenses; Breakdown of Expenses

c .............................. Charter

d .............................. Charter; Breakdown of Expenses; Cover Page;

e .............................. Charter; Breakdown of Expenses

f .............................. Expenses

g .............................. Expenses; Charter

5A .............................. *

6 a i............................. Charter

ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers

iii.......................... *

b ............................. Charter

c .............................. Charter

d .............................. Cover Page; Who May Want to Invest

e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers

f, g .............................. Dividends, Capital Gains, and Taxes

7 a .............................. Cover Page; Charter

b .............................. How to Buy Shares; Transaction Details

c .............................. Sales Charge Reductions and Waivers

d .............................. How to Buy Shares

e .............................. Transaction Details; Breakdown of Expenses

f .............................. Breakdown of Expenses

8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions

9 .............................. *

</TABLE>

*Not Applicable

**To be filed by subsequent amendment

FIDELITY ADVISOR
MUNICIPAL BOND
FUND
CLASS A AND CLASS B
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated June 30, 1996. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, contact Fidelity Distributors
Corporation (FDC), 82 Devonshire Street, Boston, MA 02109, or your
investment professional.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED BY THE FDIC, FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.

LIKE ALL MUTUAL FUNDS, THESE
SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[_____]-pro-696

Municipal Bond seeks to provide as high a level of interest income exempt
from federal income tax as is consistent with
preservation of capital.
PROSPECTUS
JUNE 30, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS

KEY FACTS WHO MAY WANT TO INVEST

EXPENSES Each class's sales charge (load) and its
yearly operating expenses.

3 FINANCIAL HIGHLIGHTS A summary of the fund's
financial data.

PERFORMANCE How the fund has done over time.

THE FUND IN DETAIL CHARTER How the fund is organized.

INVESTMENT PRINCIPLES AND RISKS The fund's
overall approach to investing.

BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.

YOUR ACCOUNT TYPES OF ACCOUNTS Different ways to set up your
account.

15 HOW TO BUY SHARES Opening an account and
making additional investments.

HOW TO SELL SHARES Taking money out and closing
your account.

INVESTOR SERVICES Services to help you manage
your account.

SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES

TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.

EXCHANGE RESTRICTIONS

SALES CHARGE REDUCTIONS AND WAIVERS

KEY FACTS

WHO MAY WANT TO INVEST
Class A and Class B shares are offered to investors who engage an
investment professional for investment advice.
The fund may be appropriate for investors in higher tax brackets who seek
high current income that is free from federal income tax. The fund is
designed for investors who are interested in investment-grade quality
ratings, but who are willing to forego the highest yields in pursuit of
greater share price stability.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in interest rates, market
conditions, and other political and economic news.
The fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
The fund is composed of multiple classes of shares. Each class of the fund
has a common investment objective and investment portfolio. Class A shares
have a front-end sales charge, or may be subject to a contingent deferred
sales charge (CDSC), and pay a distribution fee. Class B shares do not have
a front-end sales charge, but do have a CDSC, and pay a distribution fee
and a shareholder service fee. Institutional Class shares have no sales
charge, and do not pay a distribution fee or a shareholder service fee, but
are available only to certain types of investors. See "Sales Charge
Reductions and Waivers," page , for Institutional Class eligibility
information. You may obtain more information about Institutional Class
shares, which are not offered through this prospectus, by calling
1-800-843-3001 or from your investment professional. Contact your
investment professional to discuss which class is appropriate for you.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
exchange, or hold shares of the fund. Lower front-end sales charges may be
available with purchases of $50,000 or more. See "Transaction Details,"
page , for an explanation of how and when these charges apply.
A CDSC is imposed on Class B shares only if you redeem Class B shares
within five years of purchase. See "Transaction Details," page , for
information about the CDSC.
Class B
Class
A

Maximum sales charge (as a % of 3.50%
offering price) None

Maximum CDSC (as a % of the 4.00%[A
lesser of None[ ]
original purchase price or B]
redemption proceeds)

Maximum sales charge on None
reinvested distributions None

Redemption fee None
None

Exchange fee None
None

Annual account maintenance fee $12.00
(for accounts under $2,500) $12.0
0

[A] DECLINES OVER 5 YEARS FROM 4.00% TO 0%.
[B] A CONTINGENT DEFERRED SALES CHARGE OF 0.25% IS ASSESSED ON CERTAIN
REDEMPTIONS OF CLASS A SHARES THAT WERE PURCHASED WITHOUT AN INITIAL SALES
CHARGE. SEE "TRANSACTION DETAILS."
ANNUAL OPERATING EXPENSES are paid out of the fund's assets. The fund pays
a management fee to Fidelity Management & Research Company (FMR). It also
incurs other expenses for services such as maintaining shareholder records
and furnishing shareholder statements and financial reports.
12b-1 fees for Class A and Class B include a distribution fee and, for
Class B, a shareholder service fee. Distribution fees are paid by each
class to Fidelity Distributors Corporation (FDC) for services and expenses
in connection with the distribution of the applicable class's shares.
Shareholder service fees are paid by Class B to investment professionals
for services and expenses incurred in connection with providing personal
service and/or maintenance of Class B shareholder accounts. Long-term
shareholders may pay more than the economic equivalent of the maximum sales
charges permitted by the National Association of Securities Dealers, Inc.,
due to 12b-1 fees.
Each class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The following are projections based on estimated expenses of Class A and
Class B, and are calculated as a percentage of average net assets of the
applicable class of the fund.
Clas Clas
s A s B

Management fee 0.40 0.40
% %

12b-1 fee (including 0.25%
Shareholder Service 0.25 0.90
Fee for Class B shares) % %

Other expenses [(after
reimbursement)] %[A] %[A]

TOTAL OPERATING EXPENSES [(after
reimbursement)] % %

[A] PROJECTIONS BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge or CDSC, as applicable, on a $1,000
investment, assuming a 5% annual return and either (1) full redemption or
(2) no redemption at the end of each time period:
1 Year 3 5 10
Years Years Years[B]

(1) (1) (2) (1)
(2) (2) (1) (2)

Clas $ $ $ $ $ $ $ $
s A

Clas $ [A] $ $ [A] $ $ [A] $ $ $
s B

[A] REFLECTS DEDUCTION OF APPLICABLE CDSC.
[B] REFLECTS CONVERSION TO CLASS A SHARES AFTER SIX YEARS.
THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
[FMR has voluntarily agreed to [reimburse/limit] (effective _______, 1996)
Class A and Class B to the extent that total operating expenses exceed ___%
(Class A) and __% (Class B) of the applicable class's average net assets.
If these agreements were not in effect, other expenses and total operating
expenses, as a percentage of the applicable class's average net assets,
would have been estimated to be ___% and __%, respectively (Class A), and
___% and ___%, respectively (Class B). Interest, taxes, brokerage
commissions, and extraordinary expenses are not included in the expense
limitations.]

FINANCIAL HIGHLIGHTS
[The financial highlights table that follows and the fund's financial
statements are included in the fund's Annual Report and have been audited
by: _________________, independent accountants. Their report on the
financial statements and financial highlights is included in the Annual
Report. The financial statements, the financial highlights, and the report
are incorporated by reference into the fund's SAI, which may be obtained
free of charge from FDC or your investment professional.]
[485(B) FILING: INSERT A TABLE FOR THE FUND/CLASSES HERE]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The tables
at right show each class's performance over past fiscal years. The charts
on page __ present calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS[A]
Fiscal years ended Past Past 5 Past
December 31, 1995 1 years 10
year years

Municipal Bond - Class A 18.15% 8.33% 8.73%

Municipal Bond - Class A ___% ___ %
(load adj.)[B] ___%

Municipal Bond - Class B 18.15% 8.33 8.73
% %

Municipal Bond - Class B ___% ___ %
(load adj.)[B] ___%

CUMULATIVE TOTAL RETURNS[A]
Fiscal years ended Past Past 5 Past
December 31, 1995 1 years 10
year years

Municipal Bond - Class A 18.15% 130.90
49.17% %

Municipal Bond - Class A ___% ___ %
(load adj.)[B] ___%

Municipal Bond - Class B 18.15% 49.17 130.90
% %

Municipal Bond - Class B ___% ___ %
(load adj.)[B] ___%

[A] INITIAL OFFERING OF CLASS A SHARES TOOK PLACE ON JULY __, 1996. CLASS
A SHARES BEAR A 12B-1 FEE, WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JULY __, 1996 ARE THOSE OF INITIAL CLASS, THE ORIGINAL
CLASS OF THE FUND, WHICH CLASS DOES NOT BEAR A 12B-1 FEE. CLASS A SHARE
RETURNS WOULD HAVE BEEN LOWER HAD ITS 12B-1 FEE BEEN REFLECTED IN PRIOR
DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES TOOK PLACE ON JULY __,1996. CLASS B
SHARES BEAR A 12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE), WHICH IS
NOT REFLECTED IN PRIOR DATE RETURNS. RETURNS PRIOR TO JULY __, 1996 ARE
THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH CLASS DOES
NOT BEAR A 12B-1 FEE. CLASS B SHARE RETURNS WOULD HAVE BEEN LOWER
HAD ITS 12B-1 FEE BEEN REFLECTED IN PRIOR DATE RETURNS.
[B] LOAD ADJUSTED RETURNS FOR CLASS A SHARES INCLUDE THE EFFECT OF PAYING
CLASS A'S MAXIMUM 3.50% FRONT-END SALES CHARGE.
LOAD ADJUSTED RETURNS FOR CLASS B SHARES REFLECT CDSCS FOR THE PERIODS
OF: LESS THAN ONE YEAR, 4%; ONE YEAR TO LESS THAN TWO YEARS, 3%; TWO
YEARS TO LESS THAN THREE YEARS, 3%; THREE YEARS TO LESS THAN FOUR YEARS,
2%; FOUR YEARS TO LESS THAN FIVE YEARS, 1%; AND FIVE YEARS AND GREATER,
0%.
MUNICIPAL BOND FUND - CLASS A

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

MUNICIPAL BOND FUND - CLASS A

LIPPER GEN. MUNI. DEBT FUNDS AVG.

CONSUMER PRICE INDEX

</TABLE>

MUNICIPAL BOND FUND - CLASS B

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

MUNICIPAL BOND FUND - CLASS B

LIPPER GEN. MUNI. DEBT FUNDS AVG.

CONSUMER PRICE INDEX

</TABLE>

Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 0.0
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 0.0
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 0.0
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 0.0
Row: 11, Col: 2, Value: 0.0
Row: 12, Col: 1, Value: 0.0
Row: 12, Col: 2, Value: 0.0
%
(large solid box) MUNICIPAL BOND FUND - CLASS
B
%
%
%
%
+ RETURNS DO NOT INCLUDE THE EFFECT OF PAYING CLASS A'S MAXIMUM FRONT-END
SALES CHARGE OR CLASS B'S APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
INITIAL OFFERING OF CLASS A SHARES TOOK PLACE ON JULY __, 1996. CLASS A
SHARES BEAR A 12B-1 FEE, WHICH IS NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JULY __, 1996
ARE THOSE OF INITIAL CLASS, THE ORIGINAL CLASS OF THE FUND, WHICH CLASS
DOES NOT BEAR A 12B-1 FEE. CLASS A SHARE RETURNS WOULD HAVE BEEN LOWER HAD
ITS 12B-1 FEE BEEN REFLECTED IN
PRIOR DATE RETURNS.
INITIAL OFFERING OF CLASS B SHARES TOOK PLACE ON JULY __, 1996. CLASS B
SHARES BEAR A 12B-1 FEE (INCLUDING A SHAREHOLDER SERVICING FEE), WHICH IS
NOT REFLECTED IN PRIOR DATE RETURNS.
RETURNS PRIOR TO JULY __, 1996 ARE THOSE OF INITIAL CLASS, THE ORIGINAL
CLASS OF THE FUND, WHICH CLASS DOES NOT BEAR A 12B-1 FEE. CLASS B SHARE
RETURNS WOULD HAVE BEEN LOWER
HAD ITS 12B-1 FEE BEEN REFLECTED IN PRIOR DATE RETURNS.
The exclusion of any applicable sales charge from a performance calculation
produces a higher return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
Average annual and cumulative total returns usually will include the effect
of paying the maximum applicable sales charge.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE COMPETITIVE FUNDS AVERAGE is the Lipper General Municipal Debt Funds
Average, which currently reflects the performance of over ___ mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, please contact your
investment professional.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL

CHARTER
MUNICIPAL BOND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. The fund is a diversified
fund of Fidelity Municipal Trust, an open-end management investment company
organized as a Massachusetts business trust on June 22, 1984.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of _______, 19_, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
George Fischer is manager of Municipal Bond, which he has managed since
October 1995. He also manages Spartan Bond Strategist, Insured Municipal
Income, and various trust accounts. Mr. Fischer joined Fidelity in 1989.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs certain
transfer agent servicing functions for Class A and Class B shares of the
fund.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward C.
Johnson 3d family are the predominant owners of a class of shares of common
stock representing approximately 49% of the voting power of FMR Corp.
Under the Investment Company Act of 1940 (the 1940 Act), control of a
company is presumed where one individual or group of individuals owns more
than 25% of the voting stock of that company; therefore, the Johnson family
may be deemed under the 1940 Act to form a controlling group with respect
to FMR Corp.
UMB Bank, n.a. (UMB) is the fund's transfer agent, although it employs
FIIOC to perform these functions for Class A and Class B of the fund. UMB
is located at 1010 Grand Avenue, Kansas City, Missouri 64106.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND'S INVESTMENT APPROACH
The fund seeks as high a level of federally tax-free income as is
consistent with preservation of capital by investing primarily in
investment grade municipal bonds. The fund normally invests at least 80% of
its assets in municipal securities whose interest is free from federal
income tax. The fund may, under normal conditions, invest up to 100% of its
assets in municipal securities subject to the federal alternative minimum
tax. Although the fund can invest in securities of any maturity, FMR seeks
to manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between 8 and 18 years. As of
the fiscal year ended December 31, 1995, the fund's dollar-weighted average
maturity was approximately 13 years.
The total return from a bond is a combination of income and price gains or
losses. While income is the most important component of bond returns over
time, the fund's emphasis on income does not mean that the fund invests
only in the highest-yielding bonds available, or that it can avoid risks to
principal. In selecting investments for the fund, FMR considers a bond's
income potential together with its potential for price gains or losses.
FMR focuses on assembling a portfolio of income-producing securities that
it believes will provide the best tradeoff between risk and return within
the range of securities that are eligible investments for the fund.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. FMR may use various investment
techniques to hedge a portion of the fund's risk, but there is no guarantee
that these strategies will work as intended. When you sell your shares,
they may be worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally taxable obligations. The fund
also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of the fund's limitations and more detailed information
about the fund's investments are contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objective and policies and that doing so will help the fund achieve its
goal. Current holdings and recent investment strategies are described in
the fund's financial reports, which are sent to shareholders twice a year.
For a free SAI or financial report, contact your investment professional.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: The fund invests in investment grade securities. The fund's
standards for investment grade securities are essentially the same as
Moody's and Standard & Poor's. A security is considered to be investment
grade if it is rated investment grade by Moody's Investor Services, Inc.,
Standard & Poor's, Duff & Phelps Credit Rating Co., or Fitch Investor
Services, LP, or is unrated but judged to be of equivalent quality by FMR.
However, the fund will limit its investments in medium-grade quality
securities as judged by FMR to one-third of its total assets; will not
purchase securities rated below Baa or BBB by Moody's or S&P, respectively;
and will not invest more than 20% of its total assets in securities not
rated by Moody's and S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. The value of some or all municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders. The fund may own a municipal security
directly or through a participation interest.
CREDIT SUPPORT. Issuers may employ various forms of credit enhancement,
including letters of credit, guarantees, or insurance from a bank,
insurance company, or other entity. These arrangements expose the fund to
the credit risk of the entity. In the case of foreign entities, extensive
public information about the entity may not be available and the entity may
be subject to unfavorable political, economic, or governmental developments
which might affect its ability to honor its commitment.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories and
possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may not
purchase a security if, as a result, more than 5% would be invested in the
securities of any one issuer. This limitation does not apply to U.S.
Government securities. The fund may invest more than 25% of its total
assets in tax-free securities that finance similar types of projects.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks to provide as high a level of interest income exempt from
federal income tax as is consistent with preservation of capital.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any one issuer.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of each class's assets are reflected in that class's
share price or dividends; they are neither billed directly to shareholders
nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained
below.
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.37%, and it drops as
total assets under management increase.
For the fiscal year ended December 31, 1995, the group fee rate was
0.1482%. The individual fund fee rate is 0.25%. The total management fee
rate for the fiscal year ended 1995 was 0.40%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
UMB has entered into a sub-arrangement with FIIOC. FIIOC performs transfer
agency, dividend disbursing and shareholder services for Class A and Class
B shares of the fund. UMB has also entered into a sub-arrangement with FSC.
FSC calculates the NAV and dividends for Class A and Class B shares of the
fund, and maintains the fund's general accounting records. All of the fees
are paid to FIIOC and FSC by UMB, which is reimbursed by the applicable
class or the fund, as appropriate, for such payments.
For the fiscal year ended December 31, 1995, UMB paid FSC fees equal to
0.__% of the fund's average net assets for pricing and bookkeeping
services.
Class A shares have adopted a DISTRIBUTION AND SERVICE PLAN. Under the
Class A Plan, Class A is authorized to pay FDC a monthly distribution fee
as compensation for its services and expenses in connection with the
distribution of Class A shares. Class A may pay FDC a distribution fee at
an annual rate of up to 0.40% of its average net assets, or such lesser
amount as the Trustees may determine from time to time. Class A currently
pays FDC monthly at an annual rate of 0.25% of its average net assets
throughout the month. The Class A distribution fee rate may be increased
only when the Trustees believe that it is in the best interest of Class A
shareholders to do so.
Up to the full amount of the Class A distribution fee may be reallowed to
investment professionals, as compensation for their services in connection
with the distribution of Class A shares and for providing support services
to Class A shareholders, based upon the level of such services provided.
These services may include, without limitation, answering investor
inquiries regarding the funds; providing assistance to investors in
changing dividend options, account designations, and addresses; performing
subaccounting and maintaining Class A shareholder accounts; processing
purchase and redemption transactions, including automatic investment and
redemption of investor account balances; providing periodic statements
showing an investor's account balance and integrating other transactions
into such statements; and performing other administrative services in
support of the shareholder.
Class B shares have also adopted a DISTRIBUTION AND SERVICE PLAN. Under the
Class B Plan, Class B is authorized to pay FDC a monthly distribution fee
as compensation for its services and expenses in connection with the
distribution of Class B shares. Class B may pay FDC a distribution fee at
an annual rate of up to 0.75% of its average net assets, or such lesser
amount as the Trustees may determine from time to time. Class B currently
pays FDC monthly at an annual rate of 0.65% of its average net assets
throughout the month. The Class B distribution fee rate may be increased
only when the Trustees believe that it is in the best interest of Class B
shareholders to do so.
In addition, pursuant to the Class B Plan, investment professionals are
compensated at an annual rate of 0.25% of Class B's average net assets
throughout the month for providing personal service to and/or maintenance
of Class B shareholder accounts.
The Plans specifically recognize that FMR may make payments from its
management fee revenue, past profits, or other resources to reimburse FDC
for expenses incurred in connection with the distribution of the applicable
class's shares including payments made to investment professionals that
provide shareholder support services or engage in the sale of the
applicable class's shares. The Board of Trustees of the fund has authorized
such payments.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate for the fiscal year ended 1995 was 72%.
This rate varies from year to year.
YOUR ACCOUNT

TYPES OF ACCOUNTS
When you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. Read your investment professional's program materials in
conjunction with this prospectus for additional service features or fees
that may apply. Certain features of the fund, such as minimum initial or
subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your investment professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for Class A shares
of the fund: the offering price and the NAV. If you qualify for a front-end
sales charge waiver as described on page __, your Class A share price will
be the NAV. If you pay a front-end sales charge as described on page __,
your Class A share price will be the offering price. When you buy Class A
shares at the offering price, the transfer agent deducts the appropriate
sales charge and invests the rest in Class A shares of the fund. Class B's
NAV is also calculated every business day. Class B shares of the fund are
sold without a front-end sales charge and may be subject to a CDSC upon
redemption. For information on how the CDSC is calculated, see "Transaction
Details," page __.
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your order is received and accepted by the transfer agent.
The offering price and NAV are normally calculated at 4:00 p.m. Eastern
time.
It is the responsibility of your investment professional to transmit your
order to buy shares to the appropriate transfer agent before 4:00 p.m.
Eastern time.
The transfer agent must receive payment within three business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
Share certificates are not available for Class A or Class B shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this prospectus, call your investment
professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500*
Through regular investment plans** $1,000*
TO ADD TO AN ACCOUNT $250*
Through regular investment plans $100*
MINIMUM BALANCE $1,000*
[*]Account minimums are waived for purchases with distributions from a
Fideltiy Defined Trust account.
[**]An account may be opened with a minimum of $1,000, provided that a
systematic payment plan periodically funds the account. For more
information, please refer to page __.
PURCHASE AMOUNTS OF MORE THAN $100,000 WILL NOT BE ACCEPTED FOR CLASS B
SHARES.
For further information on opening an account, please consult your
investment professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

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PHONE (small solid bullet) Contact your investment professional (small solid bullet) Contact your investment
YOUR INVESTMENT
PROFESSIONAL or, if you are investing through a professional or, if you are investing
broker-dealer, call 1-800-522-7297. If through a broker-dealer, call
you are investing through a bank 1-800-522-7297. If you are
representative, call 1-800-843-3001. investing through a bank
(small solid bullet) Exchange from the same class of representative, call
another Fidelity Advisor fund or from 1-800-843-3001.
another Fidelity fund account with the (small solid bullet) Exchange from the same class of
same registration, including name, another Fidelity Advisor fund or
address, and taxpayer ID number. from another Fidelity fund account
with the same registration,
including name, address, and
taxpayer ID number.

</TABLE>

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Mail (mail_graphic) (small solid bullet) Complete and sign the account (small solid bullet) Make your check payable to
application. Make your check "Fidelity Advisor Municipal Bond
payable to "Fidelity Advisor Fund" and note the applicable class.
Municipal Bond Fund" and note the Indicate your fund account number
applicable class. Mail to the address on your check and mail to the
indicated on the application. address printed on your account
statement.
(small solid bullet) Exchange by mail: call your
investment professional for
instructions.

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In Person
(hand_
graphic) (small solid bullet) Bring your account application and (small solid bullet) Bring your check to your investment
check to your investment professional.
professional.

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Wire (wire_graphic) (small solid bullet) Not available. (small solid bullet) If you are investing through a
broker-dealer, wire to:
State Street Bank & Trust
Co.
Routing # 011000028
ATTN: Custody &
Shareholder Services Division
CREDIT: Fund Name
DDA# 99029084
FBO: (Account name)
(Account number)
If you are investing through a bank
representative, wire to:
Banker's Trust Co.
Routing # 021001033
Fidelity DART Depository
Acct #00159759
FBO: (Account name)
(Account number)
Specify "Fidelity Advisor Municipal
Bond Fund," note the applicable
class, and include your account
number and your name.

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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent, less any applicable CDSC. NAV is normally calculated at
4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described on
these pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR ACCOUNT SHARES, leave at least
$1,000 worth of shares in the account to keep it open (account minimums do
not apply to Fidelity Defined Trust accounts).
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your investment professional, or mail it to the
following address:
(small solid bullet) If you purchased your shares through a broker-dealer:
Fidelity Advisor Funds
P.O. Box 8302
Boston, MA 02266-8302
(small solid bullet) If you purchased your shares through a bank
representative:
Fidelity Investments Institutional Operations Company
P.O. Box 1182
Boston, MA 02103-1182
Unless otherwise instructed, the transfer agent will send a check to the
record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS

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PHONE All account types (small solid bullet) Maximum check request: $100,000.
YOUR INVESTMENT
PROFESSIONAL

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(phone_graphic) All account types (small solid bullet) You may exchange to the same
class of other Fidelity Advisor funds
or to other Fidelity funds if both
accounts are registered with the
same name(s), address, and
taxpayer ID number.

Mail or in Person
(mail_graphic)(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of instruction must be
Sole Proprietorship, UGMA, UTMA signed by all persons required to
sign for transactions, exactly as
their names appear on the account
and sent to your investment
professional.

Trust (small solid bullet) The trustee must sign the letter
indicating capacity as trustee. If the
trustee's name is not in the account
registration, provide a copy of the
trust document certified within the
last 60 days.

Business or Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the
account must sign the letter.

Executor, Administrator, (small solid bullet) For instructions, contact your
Conservator/Guardian investment professional or, if you
purchased your shares through a
broker-dealer, call 1-800-522-7297.
If you purchased your shares
through a bank representative, call
1-800-843-3001.

Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To verify that
it is in place, contact your
investment professional or, if you
purchased your shares through a
broker-dealer, call 1-800-522-7297.
If you purchased your shares
through a bank representative, call
1-800-843-3001. Minimum wire:
$500.
(small solid bullet) Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.

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INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction that
affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more than
one account in the fund. Call your investment professional if you need
additional copies of financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of the same
class of other Fidelity Advisor funds or shares of other Fidelity funds by
telephone or in writing. The Class A shares you exchange will carry credit
for any front-end sales charge you previously paid in connection with their
purchase.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page ___.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Class A shares with an account value of
$10,000 or more are eligible for this program. Because of Class A's
front-end sales charge, you may not want to set up a systematic withdrawal
plan during a period when you are buying Class A shares on a regular basis.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for a home, educational expenses, and other long-term
financial goals.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND

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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate
$1,000 $100[A] quarterly, section on the application.
or semi-annually (small solid bullet) For existing accounts, call your investment
professional for an application.
(small solid bullet) To change the amount or frequency of your
investment, contact your investment professional
directly or, if you purchased your shares through a
broker-dealer, call 1-800-522-7297. If you purchased
your shares through a bank representative, call
1-800-843-3001. Call at least 10 business days prior
to your next scheduled investment date (20
business days if you purchased your shares through
a bank).

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TO DIRECT DISTRIBUTIONS FROM A FIDELITY DEFINED TRUST TO A FIDELITY ADVISOR
FUND

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MINIMUM MINIMUM SETTING UP OR CHANGING
INITIAL ADDITIONAL (small solid bullet) For a new or existing account, ask your investment
Not Not professional for the appropriate enrollment form.
Applicable Ap (small solid bullet) To change the fund to which your distributions are
plicable directed, contact your investment professional for
instructions.

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FIDELITY ADVISOR SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND OR A FIDELITY ADVISOR FUND
TO ANOTHER FIDELITY ADVISOR FUND

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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, (small solid bullet) To establish, call your investment professional after
semi-annually, or both accounts are opened.
annually (small solid bullet) To change the amount or frequency of your
investment, contact your investment professional
directly or, if you purchased your shares through a
broker-dealer, call 1-800-522-7297. If you purchased
your shares through a bank representative, call
1-800-843-3001.
(small solid bullet) The account from which the exchanges are to be
processed must have a minimum balance of
$10,000. The account into which the exchange is
being processed must have a minimum of $1,000.
(small solid bullet) Both accounts must have the same registrations
and taxpayer ID numbers.
(small solid bullet) Call at least 2 business days prior to your next
scheduled exchange date.

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[A] BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES

Investment
Profession
As an al
As a % Approximate
of % Concessio
Offering of Net n
Price Amount as a %
Invested of
Offering
Price

Up to $49,999 3.50% 3.63% 3.00%

$50,000 to 3.00% 3.09% 2.50%
$99,999

$100,000 to 2.50% 2.56% 2.00%
$249,999

$250,000 to 1.50% 1.52% 1.25%
$499,999

$500,000 to 1.00% 1.01% 0.75%
$999,999

$1,000,000 or None* None* *
more

* See Section entitled Finders Fee.
FINDERS FEE. On eligible purchases of Class A shares in amounts of $1
million or more, investment professionals will be compensated with a fee at
the rate of 0.25% of the amount purchased.
Any assets on which a finders fee has been paid will bear a contingent
deferred sales charge (Class A CDSC) if they do not remain in Class A
shares of the Fidelity Advisor funds, Initial Class shares of Daily Money
Fund: U.S. Treasury Portfolio or Daily Money Fund: Money Market Portfolio,
or shares of Daily Tax-Exempt Money Fund, for a period of at least one
uninterrupted year. The Class A CDSC will be 0.25% of the lesser of the
cost of the shares at the initial date of purchase or the value of the
shares at redemption, not including any reinvested dividends or capital
gains. Class A CDSC shares representing reinvested dividends and capital
gains, if any, will be redeemed first, followed by other Class A CDSC
shares that have been held for the longest period of time.
Shares held by an insurance company separate account will be aggregated at
the client (e.g., the contract holder or plan sponsor) level, not at the
separate account level. Upon request, anyone claiming eligibility for the
0.25% fee with respect to shares held by an insurance company separate
account must provide FDC access to records detailing purchases at the
client level.
With respect to employee benefit plans, the Class A CDSC does not apply to
the following types of redemptions: (i) plan loans or distributions or (ii)
exchanges to non-Advisor fund investment options. With respect to
Individual Retirement Accounts, the Class A CDSC does not apply to
redemptions made for disability, payment of death benefits, or required
partial distributions starting at age 70. Your investment professional
should advise the transfer agent at the time your redemption order is
placed if you qualify for a waiver of the Class A CDSC.
CONTINGENT DEFERRED SALES CHARGE. Class B shares may, upon redemption, be
assessed a CDSC based on the
following schedule:
Contingent Deferred
From Date of Purchase Sales Charge

Less than 1 year 4%

1 year to less than 2 years 3%

2 years to less than 3 3%
years

3 years to less than 4 2%
years

4 years to less than 5 1%
years

5 years to less than 6 0%
years[A]

[A] AFTER A MAXIMUM HOLDING PERIOD OF SIX YEARS, CLASS B SHARES WILL
CONVERT AUTOMATICALLY TO CLASS A SHARES OF THE FUND. SEE "CONVERSION
FEATURE" BELOW FOR MORE INFORMATION.

When exchanging Class B shares of the fund for Class B shares of another
Fidelity Advisor fund or Class B shares of Daily Money Fund: U.S. Treasury
Portfolio, your Class B shares retain the CDSC schedule in effect when they
were originally purchased.
Investment professionals with whom FDC has agreements receive as
compensation from FDC a concession equal to 3.00% of your purchase of Class
B shares.
The CDSC will be calculated based on the lesser of the cost of Class B
shares at the initial date of purchase or the value of Class B shares at
redemption, not including any reinvested dividends or capital gains. In
determining the applicability and rate of any CDSC at redemption, Class B
shares representing reinvested dividends and capital gains, if any, will be
redeemed first, followed by Class B shares that have been held for the
longest period of time. Class B shares acquired through distributions
(dividends or capital gains) will not be subject to a CDSC.
CONVERSION FEATURE. After a maximum holding period of six years from the
initial date of purchase, Class B shares and any capital appreciation
associated with those shares convert automatically to Class A shares of the
fund. Conversion to Class A shares will be made at NAV. At the time of
conversion, a portion of the Class B shares purchased through the
reinvestment of dividends or capital gains (Dividend Shares) will also
convert to Class A shares. The portion of Dividend Shares that will convert
is determined by the ratio of your converting Class B non-Dividend Shares
to your total Class B non-Dividend Shares.
For more information about the CDSC, including the conversion feature and
the permitted circumstances for CDSC waivers, contact your investment
professional.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your Class A or
Class B shares of the fund, you may reinvest an amount equal to all or a
portion of the redemption proceeds in the same class of the fund or any of
the other Fidelity Advisor funds, at the NAV next determined after receipt
of your investment order, provided that such reinvestment is made within 30
days of redemption. Under these circumstances, the dollar amount of the
CDSC, if any, you paid on Class A or Class B shares will be reimbursed to
you by reinvesting that amount in Class A or Class B shares, as applicable.
You must reinstate your shares into an account with the same registration.
This privilege may be exercised only once by a shareholder with respect to
the fund and certain restrictions may apply. For purposes of the CDSC
holding period schedule, the holding period of your Class A or Class B
shares will continue as if the shares had not been redeemed.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations, and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV or offering price calculated after your order is received and
accepted by the transfer agent. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or the
transfer agent has incurred.
(small solid bullet) Automated Purchase Orders: You begin to earn dividends
as of the day your funds are received.
(small solid bullet) Other Purchases: You begin to earn dividends as of the
first business day following the day your funds are received.
AUTOMATED PURCHASE ORDERS. Shares of the fund can be purchased or sold
through investment professionals utilizing an automated order placement and
settlement system that guarantees payment for orders on a specified date.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next business
day, the order will be canceled and the financial institution will be
liable for any losses.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV, minus any applicable CDSC, calculated after your order is
received and accepted by the transfer agent. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500 (including any
amount paid as a sales charge), subject to an annual maximum charge of
$60.00 per shareholder. Accounts opened after September 30 will not be
subject to the fee for that year. The fee, which is payable to the
transfer agent, is designed to offset in part the relatively higher costs
of servicing smaller accounts. The fee will not be deducted from
retirement accounts (except non-prototype retirement accounts), accounts
using a systematic investment program, certain (Network Level I and III)
accounts which are maintained through National Securities Clearing
Corporation (NSCC), or if total assets in Fidelity mutual funds exceed
$50,000. Eligibility for the $50,000 waiver is determined by aggregating
Fidelity mutual fund accounts (excluding contractual plans) maintained (i)
by FIIOC, (ii) by State Street Bank & Trust Company, and (iii) through
NSCC; provided those accounts are registered under the same primary social
security number.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the transfer agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV, minus
any applicable CDSC, on the day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of investment professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to investment professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging Class A or Class B
shares of the fund for the same class of shares of other Fidelity Advisor
funds; Class A shares for Initial Class shares of Daily Money Fund: U.S.
Treasury Portfolio or Daily Money Fund: Money Market Portfolio, or shares
of Daily Tax-Exempt Money Fund; and Class B shares for Class B shares of
Daily Money Fund: U.S. Treasury Portfolio. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Any exchanges of Class A or Class B shares are not
subject to a CDSC.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of Class A shares
according to the Sales Charge Schedule shown on page __ if your purchase
qualifies for one of the following reduction plans. Please refer to the
fund's SAI for more details about each plan or call your investment
professional.
If you purchased your shares through a broker-dealer, call 1-800-522-7297.
If you purchased your shares through a bank representative, call
1-800-843-3001.
Your purchases and existing balances of Class B shares may be included in
the following programs for purposes of qualifying for a Class A front-end
sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of Class A shares of a single
Fidelity Advisor fund or to combined purchases of Class A and Class B
shares of any Fidelity Advisor fund, and to purchases of Initial Class
shares and Class B shares of Daily Money Fund: U.S. Treasury Portfolio,
Initial Class shares of Daily Money Fund: Money Market Portfolio, and
shares of Daily Tax-Exempt Money Fund acquired by exchange from any
Fidelity Advisor fund. The minimum investment eligible for a quantity
discount is $50,000, except that the minimum investment for Fidelity
Advisor Short Fixed-Income Fund and Fidelity Advisor Short-Intermediate
Municipal Income Fund is $500,000.
To qualify for a quantity discount, investing in the fund's Class A shares
for several accounts at the same time will be considered a single
transaction (Combined Purchase), as long as shares are purchased through
one investment professional and the total is at least $50,000 (or at least
$500,000 for Fidelity Advisor Short Fixed-Income Fund and Fidelity Advisor
Short-Intermediate Municipal Income Fund).
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on
Class A shares by adding to your new purchase of Class A shares the value
of all of the Fidelity Advisor fund Class A and Class B shares held by you,
your spouse, and your children under age 21. You can also add the value of
Initial Class shares and Class B shares of Daily Money Fund: U.S. Treasury
Portfolio, Initial Class shares of Daily Money Fund: Money Market
Portfolio, and shares of Daily Tax-Exempt Money Fund acquired by exchange
from any Fidelity Advisor fund.
A LETTER OF INTENT (the Letter) lets you receive the same reduced
front-end sales charge on purchases of Class A shares made during a
13-month period as if the total amount invested during the period had been
invested in a single lump sum. (see Quantity Discounts above.) You must
file your non-binding Letter with the transfer agent within 90 days of the
start of your purchases. Your initial investment must be at least 5% of the
amount you plan to invest. Out of the initial investment, 5% of the dollar
amount specified in the Letter will be registered in your name and held in
escrow. You will earn income dividends and capital gain distributions on
escrowed Class A shares. Neither income dividends nor capital gain
distributions reinvested in additional Class A or Class B shares will apply
toward completion of the Letter. The escrow will be released when your
purchase of the total amount has been completed. You are not obligated to
complete the Letter, and in such a case, sufficient escrowed Class A shares
will be redeemed to pay any applicable front-end sales charges.
A FRONT-END SALES CHARGE WILL NOT APPLY TO THE FOLLOWING CLASS A SHARES:
1. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of investment
professionals having agreements with FDC;
2. Purchased by a current or former trustee or officer of a Fidelity fund
or a current or retired officer, director or regular employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of trust for the sole benefit of the minor child of a Fidelity
trustee or employee;
3. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
4. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
5. Purchased for a Fidelity or Fidelity Advisor IRA account with the
proceeds of a distribution (i) from an employee benefit plan that qualified
for waiver (11) or had a minimum of $3 million in plan assets invested in
Fidelity funds; or (ii) from an insurance company separate account
qualifying under (6) below, or used to fund annuity contracts purchased by
employee benefit plans having in the aggregate at least $3 million in plan
assets invested in Fidelity funds;
6. Purchased for an insurance company separate account used to fund
annuity contracts for employee benefit plans which, in the aggregate, have
more than 200 eligible employees or a minimum of $1 million in plan assets
invested in Fidelity Advisor funds;
7. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
8. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge or CDSC;
9. Purchased by a trust institution or bank trust department (excluding
assets described in (11) and (12) below) that has executed a participation
agreement with FDC specifying certain asset minimums and qualifications,
and marketing, program and trading restrictions. Assets managed by third
parties do not qualify for this waiver;
10. Purchased for use in a broker-dealer managed account program, provided
the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. Purchased as part of an employee benefit plan having more than (i) 200
eligible employees or a minimum of $1 million of plan assets invested in
Fidelity Advisor funds; or (ii) 25 eligible employees or $250,000 of plan
assets invested in Fidelity Advisor funds that subscribes to the [Fidelity]
Advisor Retirement Connection or similar FIIS-sponsored program;
12. Purchased as part of an employee benefit plan through an intermediary
that has executed a participation agreement with FDC specifying certain
asset minimums and qualifications, and marketing, program and trading
restrictions;
13. Purchased on a discretionary basis by a registered investment advisor
which is not part of an organization primarily engaged in the brokerage
business, that has executed a participation agreement with FDC specifying
certain asset minimums and qualifications, and marketing, program and
trading restrictions. Employee benefit plan assets do not qualify for this
waiver; or
14. Purchased with distributions of income, principal, and capital gains
from Fidelity Defined Trusts.
In order to continue to qualify for waivers (9), (10) and (13), eligible
investors with existing Class A accounts will be required to sign and
comply with a participation agreement. Investors prior to June 30, 1995
that have not signed a participation agreement will be allowed to continue
investing in Class A shares under the terms of their current relationship
until June 30, 1997, after which they will be prevented from making new or
subsequent purchases in Class A load waived, except that employee benefit
plans will be permitted to make additional purchases of Class A shares load
waived.
You must notify FDC in advance if you qualify for a front-end sales charge
waiver. Employee benefit plan investors must meet additional requirements
specified in the fund's SAI.
If you are investing through an account managed by a broker-dealer, if you
have authorized an investment adviser to make investment decisions for you,
or if you are investing through a trust department, you may qualify to
purchase either Class A shares without a sales charge (as described in (9),
(10) and (13), above) or Institutional Class shares. Because Institutional
Class shares have no sales charge, and do not pay a distribution fee or a
shareholder service fee, Institutional Class shares are expected to have a
higher total return than Class A or Class B shares. Contact your investment
professional to discuss if you qualify.
THE CDSC ON CLASS B SHARES MAY BE WAIVED:
1. In cases of disability or death, provided that Class B shares are
redeemed within one year following the death or the initial determination
of disability; or
2. In connection with a total or partial redemption related to certain
distributions from retirement plans or accounts.
Your investment professional should call Fidelity for more information.
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.

FIDELITY MUNICIPAL BOND FUND PROSPECTUS

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER PROSPECTUS SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page

2 a .............................. **

b,c .............................. *

3 a .............................. **

b .............................. *

c .............................. Performance

d .............................. Cover Page

4 a i............................. Charter

ii........................... Investment Principles and Risks; Securities and
Investment Practices

b .............................. Securities and Investment Practices

c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices

5 a .............................. Charter

b i............................. Cover Page; Charter

ii........................... Charter; Breakdown of Expenses

iii.......................... Expenses; Breakdown of Expenses

c .............................. Charter

d .............................. Charter; Breakdown of Expenses; Cover Page;

e .............................. Charter; Breakdown of Expenses

f .............................. Expenses

g .............................. Expenses; Charter

5A .............................. *

6 a i............................. Charter

ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers

iii.......................... *

b ............................. Charter

c .............................. Charter

d .............................. Cover Page; Who May Want to Invest

e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers

f, g .............................. Dividends, Capital Gains, and Taxes

7 a .............................. Cover Page; Charter

b .............................. How to Buy Shares; Transaction Details

c .............................. Sales Charge Reductions and Waivers

d .............................. How to Buy Shares

e .............................. Transaction Details; Breakdown of Expenses

f .............................. Breakdown of Expenses

8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions

9 .............................. *

</TABLE>

*Not Applicable

**To be filed by subsequent amendment

FIDELITY
MUNICIPAL BOND
FUND

Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated June 30, 1996. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.

Municipal Bond seeks to provide as high a level of interest income
exempt from federal income tax as is consistent with
preservation of capital.
PROSPECTUS
JUNE 30, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
KEY FACTS WHO MAY WANT TO INVEST

EXPENSES Initial Class's yearly operating
expenses.

FINANCIAL HIGHLIGHTS A summary of the fund's
financial data.

PERFORMANCE How the fund has done over time.

THE FUND IN DETAIL CHARTER How the fund is organized.

INVESTMENT PRINCIPLES AND RISKS The fund's
overall approach to investing.

BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.

YOUR ACCOUNT 15 DOING BUSINESS WITH FIDELITY

15 HOW TO BUY ADDITIONAL SHARES Making additional
investments.

18 HOW TO SELL SHARES Taking money out and closing
your account.

18 INVESTOR SERVICES Services to help you manage
your account.

SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES

TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.

EXCHANGE RESTRICTIONS

</TABLE>

KEY FACTS

WHO MAY WANT TO INVEST
Fidelity Municipal Bond Fund ("Initial Class") shares are offered
through this prospectus to current Initial Class shareholders.
The fund may be appropriate for investors in higher tax brackets who seek
high current income that is free from federal income tax. The fund is
designed for investors who are interested in investment-grade quality
ratings, but who are willing to forego the highest yields in pursuit of
greater share price stability.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in interest rates, market
conditions, and other political and economic news.
The fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
The fund is composed of multiple classes of shares. Each class of the fund
has a common investment objective and investment portfolio. Class A shares
have a front-end sales charge, or may be subject to a contingent deferred
sales charge (CDSC), and pay a distribution fee. Class B shares do not have
a front-end sales charge, but do have a CDSC, and pay a distribution fee
and a shareholder service fee. Institutional Class shares have no sales
charge, and do not pay a distribution fee or a shareholder service fee, but
are available only to certain types of investors. You may obtain more
information about shares of Institutional Class, Class A, and Class B,
which are not offered through this prospectus, by calling
1-800-843-3001.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you
buy, sell, exchange, or hold Initial Class shares of the fund.
Maximum sales charge on purchases and None
reinvested distributions

Maximum deferred sales
None
charge

Redemption fee None

Exchange fee None

Annual account maintenance fee $12.0
(for accounts under $2,500) 0

ANNUAL OPERATING EXPENSES are paid out of the fund's assets. The
fund pays a management fee to Fidelity Management & Research Company (FMR).
It also incurs other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and financial reports.
Initial Class's expenses are factored into its share price or dividends and
are not charged directly to shareholder accounts (see "Breakdown of
Expenses" on page ).
The following are projections based on historical expenses of the Initial
Class, and are calculated as a percentage of average net assets of the
Initial Class of the fund.
Management fee 0.40
%

12b-1 fee (Distribution Fee) None

Other expenses 0.17
%

Total operating expenses 0.57
%

EXPENSE TABLE EXAMPLE: You would pay the following expenses on a
$1,000 investment in Initial Class shares, assuming a 5% annual return and
full redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years

$6 $18 $32 $71

THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.

FINANCIAL HIGHLIGHTS
The financial highlights table that follows and the fund's financial
statements are included in the fund's Annual Report and have been audited
by: ________________,
independent accountants. Their report on the financial statements and
financial highlights is included in the Annual Report. The financial
statements, the financial highlights, and the report are incorporated by
reference into the fund's SAI.
[485(B) FILING: INSERT A TABLE FOR THE FUND/CLASS HERE]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The
tables at right show Initial Class's performance over past fiscal years.
The chart below presents calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal years ended Past Past 5 Past
December 31, 1995 1 years 10
year years

Municipal Bond Fund - 18.15% 8.33% 8.73%
Initial Class

CUMULATIVE TOTAL RETURNS
Fiscal years ended Past Past 5 Past
December 31, 1995 1 years 10
year years

Municipal Bond Fund - 18.15% 130.90
Initial Class 49.17% %

MUNICIPAL BOND FUND - INITIAL CLASS

<TABLE>
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

MUNICIPAL BOND FUND - INITIAL CLASS

LIPPER GEN. MUNI. DEBT FUNDS AVG.

CONSUMER PRICE INDEX

</TABLE>

EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE COMPETITIVE FUNDS AVERAGE is the Lipper General Municipal Debt Funds
Average, which currently reflects the performance of over ___ mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. Government.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, please call
1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL

CHARTER
MUNICIPAL BOND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. The fund is a
diversified fund of Fidelity Municipal Trust , an open-end management
investment company organized as a Massachusetts business trust on June
22, 1984 .
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of __, 19_, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
George Fischer is manager of Advisor Municipal Bond, which he has managed
since October 1995. He also manages Spartan Bond Strategist, Insured
Municipal Income, and various trust accounts. Mr. Fischer joined Fidelity
in 1989.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (FDC) distributes and markets
Fidelity's funds and services. Fidelity Service Co. (FSC) performs transfer
agent servicing functions for the Initial Class shares of the fund.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward C.
Johnson 3d family are the predominant owners of a class of shares of common
stock representing approximately 49% of the voting power of FMR Corp.
Under the Investment Company Act of 1940 (the 1940 Act), control of a
company is presumed where one individual or group of individuals owns more
than 25% of the voting stock of that company; therefore, the Johnson family
may be deemed under the 1940 Act to form a controlling group with respect
to FMR Corp.
UMB Bank, n.a. (UMB) is the fund's transfer agent, although it employs
FSC to perform these functions for the Initial Class of the fund. UMB is
located at 1010 Grand Avenue, Kansas City, Missouri 64106.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND'S INVESTMENT APPROACH
The fund seeks as high a level of federally tax-free income as is
consistent with preservation of capital by investing primarily in
investment grade municipal bonds. The fund normally invests at least 80% of
its assets in municipal securities whose interest is free from federal
income tax. The fund may, under normal conditions, invest up to 100% of its
assets in municipal securities subject to the federal alternative minimum
tax. Although the fund can invest in securities of any maturity, FMR seeks
to manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between 8 and 18 years. As of
the fiscal year ended December 31, 1995, the fund's dollar-weighted average
maturity was approximately 13 years.
The total return from a bond is a combination of income and price gains or
losses. While income is the most important component of bond returns over
time, the fund's emphasis on income does not mean that the fund invests
only in the highest-yielding bonds available, or that it can avoid risks to
principal. In selecting investments for the fund, FMR considers a bond's
income potential together with its potential for price gains or losses.
FMR focuses on assembling a portfolio of income-producing securities that
it believes will provide the best tradeoff between risk and return within
the range of securities that are eligible investments for the fund.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities . FMR may use various
investment techniques to hedge a portion of the fund's risk, but there is
no guarantee that these strategies will work as intended. When you sell
your shares, they may be worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should
note that the fund may invest all of its assets in municipal securities
issued to finance private activities. The interest from these investments
is a tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally taxable obligations. The fund
also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of the fund's limitations and more detailed information
about the fund's investments are contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objective and policies and that doing so will help the fund achieve its
goal. Current holdings and recent investment strategies are described in
the fund's financial reports, which are sent to shareholders twice a year.
For a free SAI or financial report, call 1-800-544-8888.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers .
RESTRICTIONS: The fund invests in investment grade securities. The
fund's standards for investment grade securities are essentially the same
as Moody's and Standard & Poor's. A security is considered to be investment
grade if it is rated investment grade by Moody's Investor Services, Inc.,
Standard & Poor's, Duff & Phelps Credit Rating Co., or Fitch Investor
Services, LP, or is unrated but judged to be of equivalent quality by FMR.
However, the fund will limit its investments in medium-grade quality
securities as judged by FMR to one-third of its total assets; will not
purchase securities rated below Baa or BBB by Moody's or S&P, respectively;
and will not invest more than 20% of its total assets in securities not
rated by Moody's and S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of
public purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They
may be issued in anticipation of future revenues, and may be backed by the
full taxing power of a municipality, the revenues from a specific project,
or the credit of a private organization. The value of some or all
municipal securities may be affected by uncertainties in the municipal
market related to legislation or litigation involving the taxation of
municipal securities or the rights of municipal securities holders. The
fund may own a municipal security directly or through a participation
interest.
CREDIT SUPPORT. Issuers may employ various forms of credit enhancement,
including letters of credit, guarantees, or insurance from a bank,
insurance company, or other entity. These arrangements expose the fund to
the credit risk of the entity. In the case of foreign entities, extensive
public information about the entity may not be available and the entity may
be subject to unfavorable political, economic, or governmental developments
which might affect its ability to honor its commitment.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories and
possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading
practices in which payment and delivery for the securities take place at a
future date. The market value of a security could change during this
period.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund
may not purchase a security if, as a result, more than 5% would be invested
in the securities of any one issuer. This limitation does not apply to U.S.
Government securities. The fund may invest more than 25% of its total
assets in tax-free securities that finance similar types of projects.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks to provide as high a level of interest income exempt from
federal income tax as is consistent with preservation of capital.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any one issuer.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily
operations. Expenses paid out of Initial Class's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained
below.
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.37%, and it drops as
total assets under management increase.
For the fiscal year ended December 31 , 1995, the group fee rate
was 0.1482%. The individual fund fee rate is 0.25%. The total management
fee rate for the fiscal year ended 1995 was 0.40%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
UMB has entered into a sub-arrangement with FSC. FSC performs transfer
agency, dividend disbursing and shareholder services for the Initial Class
shares of the fund. FSC also calculates the NAV and dividends for the
Initial Class shares of the fund, and maintains the fund's general
accounting records. All of the fees are paid to FSC by UMB, which is
reimbursed by the Initial Class or the fund, as appropriate, for such
payments.
For the fiscal year ended December 31, 1995, UMB paid FSC fees equal to
0.__% of the Initial Class's average net assets for transfer agency and
related services, and UMB paid FSC fees equal to 0.__% of the fund's
average net assets for pricing and bookkeeping services. [In fiscal 1995,
FSC received fees equal to 0.15% of the fund's average net assets.]
The Initial Class has adopted a DISTRIBUTION AND SERVICE PLAN . This
plan recognizes that FMR may use its resources, including management fees,
to pay expenses associated with the sale of Initial Class shares. This may
include reimbursing FDC for payments to third parties, such as banks or
broker-dealers, that provide shareholder support services or engage in the
sale of Initial Class shares. The Board of Trustees of the fund has not
authorized such payments.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate for the fiscal year ended 1995 was 72%.
This rate varies from year to year.
YOUR ACCOUNT

DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 80 walk-in Investor Centers across the country.
HOW TO BUY ADDITIONAL
SHARES
INITIAL CLASS'S share price, called net asset value (NAV), is calculated
every business day. Initial Class's shares are sold without a sales
charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 :00 p.m. Eastern time.
[Share certificates are not available for Initial Class shares.]
If you buy additional shares by check or Fidelity Money Line(registered
trademark), and then sell those shares by any method other than by exchange
to another Fidelity fund, the payment may be delayed for up to seven
business days to ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO ADD TO AN ACCOUNT $250
Through regular investment plans $100
MINIMUM BALANCE $1,000

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TO ADD TO AN ACCOUNT

Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another
Fidelity fund account
with the same
registration, including
name, address, and
taxpayer ID number.
(small solid bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.

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Mail (mail_graphic) (small solid bullet) Make your check
payable to "Fidelity
Municipal Bond Fund."
Indicate your fund
account number on
your check and mail to
the address printed on
your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.

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In Person (hand_graphic) (small solid bullet) Bring your check to a
Fidelity Investor Center.
Call 1-800-544-9797 for
the center nearest you.

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Wire (wire_graphic) (small solid bullet) Wire to:

Bankers Trust
Company,

Bank Routing
#021001033,

Account #00163053.

Specify "Fidelity
Municipal Bond Fund"
and include your
account number and
your name.

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Automatically (automatic_graphic) (small solid bullet) Use Fidelity Automatic
Account Builder. Call
1-800-544-6666 to
change the amount of
your investment, skip
an investment, or stop
Automatic Account
Builder.

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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118

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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 :00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described
on these two pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be
redeemed, [signed certificates (if applicable),] and
(small solid bullet) Any other applicable requirements listed in the table
that follows.
Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Unless otherwise instructed, Fidelity will send a check to the record
address.
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS

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Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
$100,000.
(small solid bullet) For Money Line transfers to
your bank account; minimum:
$10; maximum: $100,000.
(small solid bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.

Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (small solid bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Trust names appear on the
account.
(small solid bullet) The trustee must sign the
letter indicating capacity as
Business or trustee. If the trustee's name
Organization is not in the account
registration, provide a copy of
the trust document certified
within the last 60 days.
(small solid bullet) At least one person
Executor, authorized by corporate
Administrator, resolution to act on the
Conservator, account must sign the letter.
Guardian (small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.

Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(small solid bullet) Your wire redemption request
must be received by Fidelity
before 4 :00 p.m. Eastern
time for money to be wired
on the next business day.

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Check (check_graphic) All account types (small solid bullet) Minimum check: $500.
(small solid bullet) All account owners must sign
a signature card to receive a
checkbook.

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INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
e xcept a reinvestment, that affects your account balance or your
account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more than
one account in the fund. Call 1-800-544-6666 if you need copies of
financial reports , prospectuses, or historical account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Initial Class shares and
buy shares of other Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page __.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account.
FIDELITY MONEY LINE(registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for a
home, educational expenses, and other long-term financial goals.
REGULAR INVESTMENT PLANS

FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND

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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) Call 1-800-544-6666 for an application.
quarterly (small solid bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.

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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA

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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Call 1-800-544-6666 for an authorization
period form.
(small solid bullet) Changes require a new authorization
form.

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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND

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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.

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A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in February
and December.
DISTRIBUTION OPTIONS
Initial Class offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you did not indicate a choice on your application, you were
automatically assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(registered trademark) PROGRAM. Your dividend and
capital gain distributions will be automatically invested in shares of
another identically registered Fidelity fund.
Dividends will be reinvested at the Initial Class's NAV on the last day
of the month. Capital gain distributions will be reinvested at the NAV as
of the date the class deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days, or longer for a December
ex-dividend date.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
Fidelity will send you and the IRS a statement showing the tax status of
the distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
A portion of the fund's dividends may be free from state or local taxes.
Income from investments in your state are often tax-free to you. Each year,
Fidelity will send you a breakdown of your fund's income from each state to
help you calculate your taxes.
During the fiscal year ended 1995, 100% of the fund's income dividends
was free from federal income tax, and 0% of the fund's income dividends was
subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are
subject to capital gains tax. A capital gain or loss is the difference
between the cost of your shares and the price you receive when you sell
them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement every January.
However, it is up to you or your tax preparer to determine whether this
sale resulted in a capital gain and, if so, the amount of tax to be paid.
BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the information they
contain will be essential in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a clas s
deducts a capital gain distribution from its NAV, you will pay the full
price for the shares and then receive a portion of the price back in the
form of a taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock
Exchange (NYSE) is open. Fidelity normally calculates each class's NAV as
of the close of business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class
is computed by adding that class's pro rata share of the value of the
fund's investments, cash, and other assets, subtracting that class's pro
rata share of the value of the fund's liabilities, subtracting the
liabilities allocated to that class, and dividing the result by the number
of shares of that class that are outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are the Initial Class's NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow reasonable procedures designed to verify the identity of the caller.
Fidelity will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of the confirmation
statements immediately after receipt. If you do not want the ability to
redeem and exchange by telephone, call Fidelity for instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for
a period of time. The fund also reserves the right to reject any specific
purchase order, including certain purchases by exchange. See "Exchange
Restrictions" on page __. Purchase orders may be refused if, in FMR's
opinion, they would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY ADDITIONAL SHARES, your order will be
processed at the next offering price calculated after your order is
received and accepted. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or
t he transfer agent has incurred.
(small solid bullet) You begin to earn dividends as of the first business
day following the day of your purchase.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH AN INVESTMENT
PROFESSIONAL, INCLUDING A BROKER, who may charge you a transaction fee for
this service. If you invest through an investment professional, read your
investment professional's program materials for any additional service
features or fees that may apply. Certain features of the fund, such as the
minimum subsequent investment amounts, may be modified.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
FDC may enter confirmed purchase orders on behalf of customers by phone,
with payment to follow no later than the time when the class is
priced on the following business day. If payment is not received by that
time, the financial institution could be held liable for resulting fees or
losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order is received and accepted. Note the
following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check or Fidelity Money Line
have been collected, which can take up to seven business days.
(small solid bullet) Remember that if you redeem all of your Initial
Class shares, your account will be closed and you will not be able to
purchase new Initial Class shares of the fund.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
(small solid bullet) If you sell shares by writing a check and the amount
of the check is greater than the value of your account, your check will be
returned to you and you may be subject to additional charges.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts (except non-prototype retirement
accounts), accounts using regular investment plans, or if total assets in
Fidelity mutual funds exceed $50,000. Eligibility for the $50,000 waiver
is determined by aggregating Fidelity mutual fund accounts maintained by
FSC or FBSI which are registered under the same social security number or
which list the same social security number for the custodian of a Uniform
Gifts/Transfer to Minors Act account.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the fund without reimbursement
from the fund. Qualified recipients are securities dealers who have sold
fund shares or others, including banks and other financial institutions,
under special arrangements in connection with FDC's sales activities. In
some instances, these incentives may be offered only to certain
institutions whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging your Initial
Class shares for shares of other Fidelity funds. However, you should note
the following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the percentage difference between that fund's sales charge and any
sales charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
No dealer, sales representative, or any other person has been authorized
to give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.

FIDELITY ADVISOR MUNICIPAL BOND FUND
INSTITUTIONAL CLASS PROSPECTUS

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER PROSPECTUS SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page

2 a .............................. **

b,c .............................. *

3 a .............................. **

b .............................. *

c .............................. Performance

d .............................. Cover Page

4 a i............................. Charter

ii........................... Investment Principles and Risks; Securities and
Investment Practices

b .............................. Securities and Investment Practices

c .............................. Who May Want to Invest; Investment Principles
and Risks; Securities and Investment Practices

5 a .............................. Charter

b i............................. Cover Page; Charter

ii........................... Charter; Breakdown of Expenses

iii.......................... Expenses; Breakdown of Expenses

c .............................. Charter

d .............................. Charter; Breakdown of Expenses; Cover Page;

e .............................. Charter; Breakdown of Expenses

f .............................. Expenses

g .............................. Expenses; Charter

5A .............................. *

6 a i............................. Charter

ii........................... How to Buy Shares; How to Sell Shares; Investor
Services; Transaction Details; Exchange
Restrictions; Sales Charge Reductions and Waivers

iii.......................... *

b ............................. Charter

c .............................. Charter

d .............................. Cover Page; Who May Want to Invest

e .............................. Cover Page; How to Buy Shares; How to Sell
Shares; Investor Services; Exchange Restrictions;
Sales Charge Reductions and Waivers

f, g .............................. Dividends, Capital Gains, and Taxes

7 a .............................. Cover Page; Charter

b .............................. How to Buy Shares; Transaction Details

c .............................. Sales Charge Reductions and Waivers

d .............................. How to Buy Shares

e .............................. Transaction Details; Breakdown of Expenses

f .............................. Breakdown of Expenses

8 .............................. How to Sell Shares; Investor Services; Transaction
Details; Exchange Restrictions

9 .............................. *

</TABLE>

*Not Applicable

**To be filed by subsequent amendment

FIDELITY ADVISOR
MUNICIPAL BOND
FUND
INSTITUTIONAL CLASS
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing or a copy of
the Statement of Additional Information (SAI) dated June 30, 1996. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, contact Fidelity Distributors
Corporation (FDC), 82 Devonshire Street, Boston, MA 02109, or your
investment professional.

KEY FACTS WHO MAY WANT TO INVEST

EXPENSES Institutional Class's yearly operating
expenses.

3 FINANCIAL HIGHLIGHTS A summary of the fund's
financial data.

PERFORMANCE How the fund has done over time.

THE FUND IN DETAIL CHARTER How the fund is organized.

INVESTMENT PRINCIPLES AND RISKS The fund's
overall approach to investing.

BREAKDOWN OF EXPENSES How operating costs
are calculated and what they include.

YOUR ACCOUNT TYPES OF ACCOUNTS Different ways to set up your
account.

14 HOW TO BUY SHARES Opening an account and
making additional investments.

HOW TO SELL SHARES Taking money out and closing
your account.

INVESTOR SERVICES Services to help you manage
your account.

SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND TAXES
ACCOUNT POLICIES

TRANSACTION DETAILS Share price calculations and
the timing of purchases and redemptions.

EXCHANGE RESTRICTIONS

KEY FACTS

WHO MAY WANT TO INVEST
Institutional Class shares are offered to (i) accounts managed by a bank
trust department and other trust institutions, (ii) accounts managed by a
broker-dealer and (iii) accounts managed on a discretionary basis by a
registered investment advisor (RIA) (collectively, eligible investors).
Shares are available only to eligible investors that have signed a
participation agreement with FDC. The participation agreement specifies
certain aggregate asset minimums and asset qualifications, trading
guidelines, marketing restrictions and program requirements.
For the purpose of exchanging into the fund, eligible investors with
existing Institutional Class accounts will be required to sign and comply
with a participation agreement in order to purchase additional shares.
Investors prior to June 30, 1995 that have not signed a participation
agreement will be allowed to continue investing in Institutional Class
shares under the terms of this relationship until June 30, 1997, after
which they will be prevented from making new or subsequent purchases in
Institutional Class, except that employee benefit plans will be permitted
to make additional purchases of Institutional Class shares.
The fund may be appropriate for investors in higher tax brackets who seek
high current income that is free from federal income tax. The fund is
designed for investors who are interested in investment-grade quality
ratings, but who are willing to forego the highest yields in pursuit of
greater share price stability.
The value of the fund's investments and the income they generate vary from
day to day, and generally reflect changes in interest rates, market
conditions, and other political and economic news.
The fund is not in itself a balanced investment plan. You should consider
your investment objective and tolerance for risk when making an investment
decision. When you sell your fund shares, they may be worth more or less
than what you paid for them.
The fund is composed of multiple classes of shares. Each class of the fund
has a common investment objective and investment portfolio. Class A shares
have a front-end sales charge, or may be subject to a contingent deferred
sales charge (CDSC), and pay a distribution fee. Class B shares do not have
a front-end sales charge, but do have a CDSC, and pay a distribution fee
and a shareholder service fee. Because Institutional Class shares have no
sales charge, and do not pay a distribution fee or a shareholder service
fee, Institutional Class shares are expected to have a higher total return
than Class A or Class B shares. You may obtain more information about Class
A and Class B shares, which are not offered through this prospectus, by
calling 1-800-843-3001 or from your investment professional.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell,
exchange, or hold Institutional Class shares of the fund.
Maximum sales charge on purchases and None
reinvested distributions

Maximum deferred sales None
charge

Redemption fee None

Exchange fee None

Annual account maintenance fee $12.0
(for accounts under $2,500) 0

ANNUAL OPERATING EXPENSES are paid out of the fund's assets. The fund pays
a management fee to Fidelity Management & Research Company (FMR). It also
incurs other expenses for services such as maintaining shareholder records
and furnishing shareholder statements and financial reports.
Institutional Class's expenses are factored into its share price or
dividends and are not charged directly to shareholder accounts (see
"Breakdown of Expenses" on page ).
The following are projections based on estimated expenses of the
Institutional Class, and are calculated as a percentage of average net
assets of the Institutional Class of the fund.
Management fee
0.40
%

12b-1 fee (Distribution Fee)
None

Other expenses [(after reimbursement)]
%[A]

Total operating expenses[(after reimbursement)]
%

[A]PROJECTIONS BASED ON ESTIMATED EXPENSES FOR FIRST YEAR.

EXPENSE TABLE EXAMPLE: You would pay the following expenses on a $1,000
investment in Institutional Class shares, assuming a 5% annual return and
full redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years

$ $ $ $

THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, BUT ARE NOT MEANT TO
SUGGEST ACTUAL OR EXPECTED COSTS OR RETURNS, ALL OF WHICH MAY VARY.
[FMR has voluntarily agreed to [reimburse/limit] (effective ________, 1996)
the Institutional Class to the extent that total operating expenses exceed
___% of its average net assets. If this agreement were not in effect, other
expenses and total operating expenses, as a percentage of the Institutional
Class's average net assets, would have been estimated to be ___% and ___%,
respectively. Interest, taxes, brokerage commissions, and extraordinary
expenses are not included in the expense limitation.]

FINANCIAL HIGHLIGHTS
[The financial highlights table that follows and the fund's financial
statements are included in the fund's Annual Report and have been audited
by: _______________, independent accountants. Their report on the
financial statements and financial highlights is included in the Annual
Report. The financial statements, the financial highlights, and the report
are incorporated by reference into the fund's SAI, which may be obtained
free of charge from FDC or your investment professional.]
[485(B) FILING: INSERT A TABLE FOR THE FUND/CLASSES HERE]
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns that follow are based on historical fund results.
The fund's fiscal year runs from January 1 through December 31. The tables
at right show the Institutional Class's performance over past fiscal years.
The chart below presents calendar year performance.
AVERAGE ANNUAL TOTAL RETURNS[A]
Fiscal years ended Past Past 5 Past
December 31, 1995 1 years 10
year years

Municipal Bond Fund - 18.15% 8.33% 8.73%
Institutional Class

CUMULATIVE TOTAL RETURNS[A]
Fiscal years ended Past Past 5 Past
December 31, 1995 1 years 10
year years

Municipal Bond Fund - 18.15% 130.90
Institutional Class 49.17% %

[A] INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES TOOK PLACE ON JULY __,
1996. INSTITUTIONAL CLASS SHARES DO NOT BEAR A SALES LOAD OR A 12B-1
FEE. RETURNS PRIOR TO JULY _, 1996 ARE THOSE OF INITIAL CLASS, THE
ORIGINAL CLASS OF THE FUND, WHICH CLASS ALSO DOES NOT BEAR A SALES LOAD
OR A 12B-1 FEE.
MUNICIPAL BOND FUND - INSTITUTIONAL CLASS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar year total returns+ 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

MUNICIPAL BOND FUND - INSTITUTIONAL
CLASS

LIPPER GEN. MUNI. DEBT FUNDS AVG.

CONSUMER PRICE INDEX

</TABLE>

Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 0.0
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 0.0
Row: 3, Col: 2, Value: 0.0
Row: 4, Col: 1, Value: 0.0
Row: 4, Col: 2, Value: 0.0
Row: 5, Col: 1, Value: 0.0
Row: 5, Col: 2, Value: 0.0
Row: 6, Col: 1, Value: 0.0
Row: 6, Col: 2, Value: 0.0
Row: 7, Col: 1, Value: 0.0
Row: 7, Col: 2, Value: 0.0
Row: 8, Col: 1, Value: 0.0
Row: 8, Col: 2, Value: 0.0
Row: 9, Col: 1, Value: 0.0
Row: 9, Col: 2, Value: 0.0
Row: 10, Col: 1, Value: 0.0
Row: 10, Col: 2, Value: 0.0
Row: 11, Col: 1, Value: 0.0
Row: 11, Col: 2, Value: 0.0
Row: 12, Col: 1, Value: 0.0
Row: 12, Col: 2, Value: 0.0
%
(large solid box) MUNICIPAL BOND FUND -
INSTITUTIONAL CLASS
%
%
%
%
+ INITIAL OFFERING OF INSTITUTIONAL CLASS SHARES TOOK PLACE ON JULY __,
1996. INSTITUTIONAL CLASS SHARES DO NOT BEAR A SALES LOAD OR A 12B-1 FEE.
RETURNS PRIOR TO JULY __, 1996 ARE THOSE OF INITIAL CLASS, THE ORIGINAL
CLASS OF THE FUND, WHICH CLASS ALSO DOES NOT BEAR A SALES LOAD OR A 12B-1
FEE.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
Average annual total returns covering periods of less than one year assume
that performance will remain constant for the rest of the year.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
A TAX-EQUIVALENT YIELD shows what an investor would have to earn before
taxes to equal a tax-free yield.
THE COMPETITIVE FUNDS AVERAGE is the Lipper General Municipal Debt Funds
Average, which currently reflects the performance of over ___ mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders.
For current performance or a free annual report, please contact your
investment professional, or call 1-800-843-3001.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL

CHARTER
MUNICIPAL BOND IS A MUTUAL FUND: an investment that pools shareholders'
money and invests it toward a specified goal. The fund is a diversified
fund of Fidelity Municipal Trust, an open-end management investment company
organized as a Massachusetts business trust on June 22, 1984.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review the fund's performance. The majority of trustees are not
otherwise affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The transfer
agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you are
entitled to is based upon the dollar value of your investment.
Separate votes are taken by each class of shares, fund, or trust, if a
matter affects just that class of shares, fund, or trust, respectively.
FMR AND ITS AFFILIATES
Fidelity Investments is one of the largest investment management
organizations in the United States and has its principal business address
at 82 Devonshire Street, Boston, Massachusetts 02109. It includes a number
of different subsidiaries and divisions which provide a variety of
financial services and products. The fund employs various Fidelity
companies to perform activities required for its operation.
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
As of _______, 19_, FMR advised funds having approximately __million
shareholder accounts with a total value of more than $__ billion.
George Fischer is manager of Municipal Bond, which he has managed since
October 1995. He also manages Spartan Bond Strategist, Insured Municipal
Income, and various trust accounts. Mr. Fischer joined Fidelity in 1989.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
FDC distributes and markets Fidelity's funds and services. Fidelity
Investments Institutional Operations Company (FIIOC) performs certain
transfer agent servicing functions for the Institutional Class shares of
the fund.
FMR Corp. is the ultimate parent company of FMR. Members of the Edward C.
Johnson 3d family are the predominant owners of a class of shares of common
stock representing approximately 49% of the voting power of FMR Corp.
Under the Investment Company Act of 1940 (the 1940 Act), control of a
company is presumed where one individual or group of individuals owns more
than 25% of the voting stock of that company; therefore, the Johnson family
may be deemed under the 1940 Act to form a controlling group with respect
to FMR Corp.
UMB Bank, n.a. (UMB) is the fund's transfer agent, although it employs
FIIOC to perform these functions for the Institutional Class of the fund.
UMB is located at 1010 Grand Avenue, Kansas City, Missouri 64106.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND'S INVESTMENT APPROACH
The fund seeks as high a level of federally tax-free income as is
consistent with preservation of capital by investing primarily in
investment grade municipal bonds. The fund normally invests at least 80% of
its assets in municipal securities whose interest is free from federal
income tax. The fund may, under normal conditions, invest up to 100% of its
assets in municipal securities subject to the federal alternative minimum
tax. Although the fund can invest in securities of any maturity, FMR seeks
to manage the fund so that it generally reacts to changes in interest rates
similarly to municipal bonds with maturities between 8 and 18 years. As of
the fiscal year ended December 31, 1995, the fund's dollar-weighted average
maturity was approximately 13 years.
The total return from a bond is a combination of income and price gains or
losses. While income is the most important component of bond returns over
time, the fund's emphasis on income does not mean that the fund invests
only in the highest-yielding bonds available, or that it can avoid risks to
principal. In selecting investments for the fund, FMR considers a bond's
income potential together with its potential for price gains or losses.
FMR focuses on assembling a portfolio of income-producing securities that
it believes will provide the best tradeoff between risk and return within
the range of securities that are eligible investments for the fund.
The fund's yield and share price change daily and are based on changes in
interest rates, market conditions, other economic and political news, and
on the quality and maturity of its investments. In general, bond prices
rise when interest rates fall, and vice versa. This effect is usually more
pronounced for longer-term securities. FMR may use various investment
techniques to hedge a portion of the fund's risk, but there is no guarantee
that these strategies will work as intended. When you sell your shares,
they may be worth more or less than what you paid for them.
If you are subject to the federal alternative minimum tax, you should note
that the fund may invest all of its assets in municipal securities issued
to finance private activities. The interest from these investments is a
tax-preference item for purposes of the tax.
FMR normally invests the fund's assets according to its investment strategy
and does not expect to invest in federally taxable obligations. The fund
also reserves the right to invest without limitation in short-term
instruments, to hold a substantial amount of uninvested cash, or to invest
more than normally permitted in federally taxable obligations for
temporary, defensive purposes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, strategies FMR may employ in
pursuit of the fund's investment objective, and a summary of related risks.
Any restrictions listed supplement those discussed earlier in this section.
A complete listing of the fund's limitations and more detailed information
about the fund's investments are contained in the fund's SAI. Policies and
limitations are considered at the time of purchase; the sale of instruments
is not required in the event of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques
unless it believes that they are consistent with the fund's investment
objective and policies and that doing so will help the fund achieve its
goal. Current holdings and recent investment strategies are described in
the fund's financial reports, which are sent to shareholders twice a year.
For a free SAI or financial report, contact your investment professional.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Investment-grade debt securities are medium- and high-quality securities.
Some, however, may possess speculative characteristics and may be more
sensitive to economic changes and to changes in the financial condition of
issuers.
RESTRICTIONS: The fund invests in investment grade securities. The fund's
standards for investment grade securities are essentially the same as
Moody's and Standard & Poor's. A security is considered to be investment
grade if it is rated investment grade by Moody's Investor Services, Inc.,
Standard & Poor's, Duff & Phelps Credit Rating Co., or Fitch Investor
Services, LP, or is unrated but judged to be of equivalent quality by FMR.
However, the fund will limit its investments in medium-grade quality
securities as judged by FMR to one-third of its total assets; will not
purchase securities rated below Baa or BBB by Moody's or S&P, respectively;
and will not invest more than 20% of its total assets in securities not
rated by Moody's and S&P.
MUNICIPAL SECURITIES are issued to raise money for a variety of public
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power
of a municipality, the revenues from a specific project, or the credit of a
private organization. The value of some or all municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders. The fund may own a municipal security
directly or through a participation interest.
CREDIT SUPPORT. Issuers may employ various forms of credit enhancement,
including letters of credit, guarantees, or insurance from a bank,
insurance company, or other entity. These arrangements expose the fund to
the credit risk of the entity. In the case of foreign entities, extensive
public information about the entity may not be available and the entity may
be subject to unfavorable political, economic, or governmental developments
which might affect its ability to honor its commitment.
ASSET-BACKED SECURITIES include interests in pools of purchase contracts,
financing leases, or sales agreements entered into by municipalities. These
securities usually rely on continued payments by a municipality, and may
also be subject to prepayment risk.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that are
periodically adjusted either at specific intervals or whenever a benchmark
rate changes. Inverse floaters have interest rates that move in the
opposite direction from a benchmark, making the security's market value
more volatile.
MUNICIPAL LEASE OBLIGATIONS are used by municipalities to acquire land,
equipment, or facilities. If the municipality stops making payments or
transfers its obligations to a private entity, the obligation could lose
value or become taxable.
OTHER MUNICIPAL SECURITIES may include obligations of U.S. territories and
possessions such as Guam, the Virgin Islands, and Puerto Rico, and their
political subdivisions and public corporations.
PUT FEATURES entitle the holder to put (sell back) an instrument to the
issuer or a financial intermediary. In exchange for this benefit, the fund
may pay periodic fees or accept a lower interest rate. Demand features and
standby commitments are types of put features.
PRIVATE ENTITIES may be involved in some municipal securities. For example,
industrial revenue bonds are backed by private entities, and resource
recovery bonds often involve private corporations. The viability of a
project or tax incentives could affect the value and credit quality of
these securities.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options and
futures contracts, and purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of some illiquid securities, and some other securities, may be
subject to legal restrictions. Difficulty in selling securities may result
in a loss or may be costly to the fund.
RESTRICTIONS. The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry or type of
project. Economic, business, or political changes can affect all securities
of a similar type.
RESTRICTIONS: With respect to 75% of its total assets, the fund may not
purchase a security if, as a result, more than 5% would be invested in the
securities of any one issuer. This limitation does not apply to U.S.
Government securities. The fund may invest more than 25% of its total
assets in tax-free securities that finance similar types of projects.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 331/3% of its total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks to provide as high a level of interest income exempt from
federal income tax as is consistent with preservation of capital.
The fund invests in a diversified portfolio of municipal bonds. The fund
will invest primarily in municipal bonds judged by FMR to be of high-grade
or upper-medium-grade quality, although it may invest up to one-third of
its total assets in bonds judged to be of medium-grade quality if they are
suitable for achieving its investment objective. The fund's standards for
high-grade, upper-medium-grade, and medium-grade obligations are
essentially the same as Moody's and S&P's four highest categories of Baa or
BBB and above. The fund will not invest in any bond rated lower than Baa by
Moody's or BBB by S&P, but may invest up to 20% of its total assets in
bonds not rated by either of these rating services if FMR judges them to
meet the fund's quality standards. The fund will normally invest at least
80% of its assets in municipal securities whose interest is exempt from
federal income tax.
With respect to 75% of its total assets, the fund may not purchase a
security if, as a result, more than 5% would be invested in the securities
of any one issuer.
The fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 331/3% of its total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of each class's assets are reflected in that class's
share price or dividends; they are neither billed directly to shareholders
nor deducted from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. The fund also pays OTHER EXPENSES, which are explained
below.
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above 0.37%, and it drops as
total assets under management increase.
For the fiscal year ended December 31, 1995, the group fee rate was
0.1482%. The individual fund fee rate is 0.25%. The total management fee
rate for the fiscal year ended 1995 was 0.40%.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
UMB has entered into a sub-arrangement with FIIOC. FIIOC performs transfer
agency, dividend disbursing and shareholder services for the Institutional
Class shares of the fund. UMB has also entered into a sub-arrangement with
FSC. FSC calculates the NAV and dividends for the Institutional Class
shares of the fund, and maintains the fund's general accounting records.
All of the fees are paid to FIIOC and FSC by UMB, which is reimbursed by
the Institutional Class or the fund, as appropriate, for such payments.
For the fiscal year ended December 31, 1995, UMB paid FSC fees equal to
0.__% of the fund's average net assets for pricing and bookkeeping
services.
The Institutional Class has adopted a DISTRIBUTION AND SERVICE PLAN. This
plan recognizes that FMR may use its resources, including management fees,
to pay expenses associated with the sale of Institutional Class shares.
This may include reimbursing FDC for payments to third parties, such as
banks or broker-dealers, that provide shareholder support services or
engage in the sale of Institutional Class shares. The Board of Trustees of
the fund has authorized such payments.
The fund also pays other expenses, such as legal, audit, and custodian
fees; in some instances, proxy solicitation costs; and the compensation of
trustees who are not affiliated with Fidelity.
The fund's portfolio turnover rate for the fiscal year ended 1995 was 72%.
This rate varies from year to year.
YOUR ACCOUNT

TYPES OF ACCOUNTS
When you invest through an investment professional, your investment
professional, including a broker-dealer or financial institution, may
charge you a transaction fee with respect to the purchase and sale of fund
shares. Read your investment professional's program materials in
conjunction with this prospectus for additional service features or fees
that may apply. Certain features of the fund, such as minimum initial or
subsequent investment amounts, may be modified.
The different ways to set up (register) your account with Fidelity are
listed below.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA). Contact your investment
professional.
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Contact your investment professional.
HOW TO BUY SHARES
INSTITUTIONAL CLASS'S SHARE PRICE, called NAV, is calculated every business
day. Institutional Class shares are sold without a sales charge.
Shares are purchased at the next NAV calculated after your order is
received and accepted by the transfer agent. NAV is normally calculated at
4:00 p.m. Eastern time.
It is the responsibility of your investment professional to transmit your
order to buy shares to the appropriate transfer agent before 4:00 p.m.
Eastern time.
The transfer agent must receive payment within three business days after an
order for shares is placed; otherwise your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.
Share certificates are not available for Institutional Class shares.
IF YOU ARE NEW TO THE FIDELITY ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. You may also open your
account by wire as described on page __. If there is no account application
accompanying this prospectus, call your investment professional or
1-800-843-3001.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY ADVISOR FUND, you can:
(small solid bullet) Mail an account application with a check,
(small solid bullet) Place an order and wire money into your account,
(small solid bullet) Open your account by exchanging from the same class of
another Fidelity Advisor fund or from another Fidelity fund, or
(small solid bullet) Contact your investment professional.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
Through regular investment plans* $1,000
TO ADD TO AN ACCOUNT $250
Through regular investment plans $100
MINIMUM BALANCE $1,000
[*] An account may be opened with a minimum of $1,000, provided that a
systematic payment plan periodically funds the account. For more
information, please refer to page __.
For further information on opening an account, please consult your
investment professional or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

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<S> <C> <C>
PHONE (small solid bullet) Exchange from the same class of (small solid bullet) Exchange from the same class of
1-800-843-3001
OR YOUR another Fidelity Advisor fund or from another Fidelity Advisor fund or from
INVESTMENT
PROFESSIONAL another Fidelity fund account with another Fidelity fund account with
the same registration, including the same registration, including
name, address, and taxpayer ID name, address, and taxpayer ID
number. number.

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (small solid bullet) Complete and sign the account (small solid bullet) Make your check payable to
application. Make your check "Fidelity Advisor Municipal Bond
payable to "Fidelity Advisor Fund - Institutional Class." Indicate
Municipal Bond Fund - Institutional your fund account number on your
Class." Mail to the address indicated check and mail to the address
on the application. printed on your account statement.
(small solid bullet) Exchange by mail: call
1-800-843-3001 or your investment
professional for instructions.

</TABLE>

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<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (small solid bullet) Call 1-800-843-3001 to set up your
account and to arrange a wire (small solid bullet) Wire to:
transaction. Banker's Trust Co.
(small solid bullet) Wire to: Routing # 021001033
Banker's Trust Co. Fidelity DART Depository
Routing # 021001033 Account #00159759
Fidelity DART Depository FBO: (account name)
Account #00159759 (account number)
FBO: (account name)
(account number) Specify "Fidelity Advisor Municipal
Bond Fund - Institutional Class" and
Specify "Fidelity Advisor Municipal include your account number and
Bond Fund - Institutional Class" and your name.
include your new account number
and your name.

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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next NAV calculated after your order is received and accepted by the
transfer agent. NAV is normally calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN AN ACCOUNT, you may use any of the methods described on
these pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR ACCOUNT SHARES, leave at least
$1,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE, you will need to sign up for this service in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and the fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner,
(small solid bullet) The redemption proceeds are being transferred to a
Fidelity account with a different registration,
(small solid bullet) You wish to set up the bank wire feature, or
(small solid bullet) You wish to have redemption proceeds wired to a
non-predesignated bank account.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) The applicable class name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid bullet) Any other applicable requirements listed in the
following table.
Deliver your letter to your investment professional, or mail it to the
following address:
Fidelity Investments Institutional Operations Company
P.O. Box 1182
Boston, MA 02103-1182
Unless otherwise instructed, the transfer agent will send a check to the
record address.
ACCOUNT TYPE SPECIAL REQUIREMENTS

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PHONE All account types (small solid bullet) Maximum check request: $100,000.
1-800-843-3001 OR YOUR
INVESTMENT PROFESSIONAL

</TABLE>

Mail or in Person (mail_graphic)
(hand_graphic) Individual, Joint Tenant, (small solid bullet) The letter of instruction must be
Sole Proprietorship, UGMA, UTMA signed by all persons required to
sign for transactions, exactly as
their names appear on the account.

Business or Organization (small solid bullet) At least one person authorized by
corporate resolution to act on the
account must sign the letter.

Executor, Administrator, (small solid bullet) Call 1-800-843-3001 or your
Conservator/Guardian investment professional for
instructions.

Wire (wire_graphic) All account types (small solid bullet) You must sign up for the wire
feature before using it. To verify that
it is in place, call 1-800-843-3001.
Minimum wire: $1,000.
(small solid bullet) Your wire redemption request must
be received by the transfer agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.

</TABLE>

INVESTOR SERVICES
Fidelity Advisor funds provide a variety of services to help you manage
your account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that the transfer agent sends to you include the
following:
(small solid bullet) Confirmation statements (after every transaction that
affects your account balance or your account registration)
(small solid bullet) Account statements (quarterly)
(small solid bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you have more than
one account in the fund. Call your investment professional if you need
additional copies of financial reports and prospectuses.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Institutional Class shares and buy
Institutional Class shares of other Fidelity Advisor funds or shares of
other Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on policies
and restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "Exchange
Restrictions," page ___.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic
redemptions from your account. Institutional Class shares with an account
value of $10,000 or more are eligible for this program.
One easy way to pursue your financial goals is to invest money regularly.
Fidelity Advisor funds offer convenient services that let you transfer
money into your fund account, or between fund accounts, automatically.
While regular investment plans do not guarantee a profit and will not
protect you against loss in a declining market, they can be an excellent
way to invest for a home, educational expenses, and other long-term
financial goals.
REGULAR INVESTMENT PLANS
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY ADVISOR FUND

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MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL ADDITIONAL Monthly, bimonthly, (small solid bullet) For a new account, complete the appropriate
$1,000 $100[A] quarterly, section on the application.
or semi-annually (small solid bullet) For existing accounts, call your investment
professional for an application.
(small solid bullet) To change the amount or frequency of your
investment, contact your investment
professional directly or call 1-800-843-3001. Call at
least 10 business days
prior to your next scheduled investment date.

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[A] BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared
daily and paid monthly. Capital gains are normally distributed in February
and December.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want
to receive your distributions. The fund offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the same class of the
fund. If you do not indicate a choice on your application, you will be
assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional shares of the same class of the
fund, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(registered trademark) PROGRAM. Your dividend and
capital gain distributions will be automatically invested in the same class
of shares of another identically registered Fidelity Advisor fund.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months,
those checks will be reinvested in your account at the current NAV and your
election may be converted to the Reinvestment Option. You may change your
distribution option at any time by notifying the transfer agent in writing.
Dividends will be reinvested at the applicable class's NAV on the last day
of the month. Capital gain distributions will be reinvested at the NAV as
of the date the class deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days, or longer for a December
ex-dividend date.
TAXES
As with any investment, you should consider how an investment in a tax-free
fund could affect you. Below are some of the fund's tax implications.
TAXES ON DISTRIBUTIONS. Interest income that the fund earns is distributed
to shareholders as income dividends. Interest that is federally tax-free
remains tax-free when it is distributed.
However, gain on the sale of tax-free bonds results in taxable
distributions. Short-term capital gains and a portion of the gain on bonds
purchased at a discount are taxed as dividends. Long-term capital gain
distributions are taxed as long-term capital gains. These distributions are
taxable when they are paid, whether you take them in cash or reinvest them.
However, distributions declared in December and paid in January are taxable
as if they were paid on December 31.
The transfer agent will send you and the IRS a statement showing the tax
status of the distributions paid to you in the previous year.
The interest from some municipal securities is subject to the federal
alternative minimum tax. The fund may invest up to 100% of its assets in
these securities. Individuals who are subject to the tax must report this
interest on their tax returns.
A portion of the fund's dividends may be free from state or local taxes.
Income from investments in your state are often tax-free to you. Each year,
the transfer agent will send you a breakdown of your fund's income from
each state to help you calculate your taxes.
During the fiscal year ended 1995, 100% of the fund's income dividends was
free from federal income tax, and 0% of the fund's income dividends was
subject to the federal alternative minimum tax.
TAXES ON TRANSACTIONS. Your redemptions-including exchanges-are subject to
capital gains tax. A capital gain or loss is the difference between the
cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the fund, the transfer agent will send you a
confirmation statement showing how many shares you sold and at what price.
You will also receive a consolidated transaction statement at least
quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax
to be paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the
information they contain will be essential in calculating the amount of
your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a class deducts a
capital gain distribution from its NAV, you will pay the full price for the
shares and then receive a portion of the price back in the form of a
taxable distribution.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Each class's NAV is normally calculated as of the close of
business of the NYSE, normally 4:00 p.m. Eastern time.
A CLASS'S NAV is the value of a single share. The NAV of each class is
computed by adding that class's pro rata share of the value of the fund's
investments, cash, and other assets, subtracting that class's pro rata
share of the value of the fund's liabilities, subtracting the liabilities
allocated to that class, and dividing the result by the number of shares of
that class that are outstanding.
The fund's assets are valued primarily on the basis of market quotations,
if available. Since market quotations are often unavailable, assets are
usually valued by a method that the Board of Trustees believes accurately
reflects fair value.
THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price to
sell one share) are the Institutional Class's NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Fidelity and the transfer
agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify
the identity of the caller. Fidelity and the transfer agent will request
personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements
immediately after receipt. If you do not want the ability to redeem and
exchange by telephone, call the transfer agent for instructions. Additional
documentation may be required from corporations, associations, and certain
fiduciaries.
IF YOU ARE UNABLE TO REACH THE TRANSFER AGENT BY PHONE (for example, during
periods of unusual market activity), consider placing your order by mail.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page __. Purchase orders may be refused if, in FMR's opinion, they would
disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the
next NAV calculated after your order is received and accepted by the
transfer agent. Note the following:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) The fund does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid bullet) If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the fund or the
transfer agent has incurred.
(small solid bullet) Automated Purchase Orders: You begin to earn dividends
as of the day your funds are received.
(small solid bullet) Other Purchases: You begin to earn dividends as of the
first business day following the day your funds are received.
AUTOMATED PURCHASE ORDERS. Shares of the fund can be purchased or sold
through investment professionals utilizing an automated order placement and
settlement system that guarantees payment for orders on a specified date.
CONFIRMED PURCHASES. Certain financial institutions that meet FDC's
creditworthiness criteria may enter confirmed purchase orders on behalf of
customers by phone, with payment to follow no later than close of business
on the next business day. If payment is not received by the next business
day, the order will be canceled and the financial institution will be
liable for any losses.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider
buying shares by bank wire, U.S. Postal money order, U.S. Treasury check,
or Federal Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your order is received and accepted by the
transfer agent. Note the following:
(small solid bullet) Normally, redemption proceeds will be mailed to you on
the next business day, but if making immediate payment could adversely
affect the fund, it may take up to seven days to pay you.
(small solid bullet) Shares will earn dividends through the date of
redemption; however, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day.
(small solid bullet) The fund may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to seven business days.
(small solid bullet) Redemptions may be suspended or payment dates
postponed when the NYSE is closed (other than weekends or holidays), when
trading on the NYSE is restricted, or as permitted by the SEC.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE
of $12.00 from accounts with a value of less than $2,500, subject to an
annual maximum charge of $60.00 per shareholder. Accounts opened after
September 30 will not be subject to the fee for that year. The fee, which
is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts (except non-prototype retirement
accounts), accounts using a systematic investment program, certain (Network
Level I and III) accounts which are maintained through National Securities
Clearing Corporation (NSCC), or if total assets in Fidelity mutual funds
exceed $50,000. Eligibility for the $50,000 waiver is determined by
aggregating Fidelity mutual fund accounts (excluding contractual plans)
maintained (i) by FIIOC, (ii) by State Street Bank & Trust Company, and
(iii) through NSCC; provided those accounts are registered under the same
primary social security number.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, the transfer agent reserves the right to close your account and
send the proceeds to you. Your shares will be redeemed at the NAV on the
day your account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC will, at its expense, provide promotional incentives such as sales
contests and luxury trips to investment professionals who support the sale
of shares of the funds. In some instances, these incentives will be offered
only to certain types of investment professionals, such as bank-affiliated
or non-bank affiliated broker-dealers, or to investment professionals whose
representatives provide services in connection with the sale or expected
sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging your Institutional
Class shares for Institutional Class shares of other Fidelity Advisor funds
or for shares of other Fidelity funds. However, you should note the
following:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid bullet) If you exchange into a fund with a sales charge, you
pay the difference between that fund's sales charge and any sales charge
you may have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid bullet) Because excessive trading can hurt fund performance
and shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(small solid bullet) The fund reserves the right to refuse exchange
purchases by any person or group if, in FMR's judgment, the fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.
(small solid bullet) Your exchanges may be restricted or refused if the
fund receives or anticipates simultaneous orders affecting significant
portions of the fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus and in the related SAI, in connection with the
offer contained in this Prospectus. If given or made, such other
information or representations must not be relied upon as having been
authorized by the fund or FDC. This Prospectus and the related SAI do not
constitute an offer by the fund or by FDC to sell or to buy shares of the
fund to any person to whom it is unlawful to make such offer.

FIDELITY ADVISOR MUNICIPAL BOND FUND: CLASS A & CLASS B

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,11 ............................ Cover Page; Table of Contents

12 ............................ *

13 a - c ............................ Investment Policies and Limitations

d ............................ Portfolio Transactions

14 a - c ............................ Trustees and Officers

15 a ............................ Description of the Trust

b - c ............................ Trustees and Officers

16 a(i) ............................ FMR

(ii) ............................ Trustees and Officers

(iii),b ............................ Management Contract;

c ............................ Management Contract

d ............................ *

e ............................ *

f ............................ Distribution and Service Plans

g ............................ *

h ............................ Description of the Trust

i ............................ Contracts with FMR Affiliates

17 a,b,c,d ............................ Portfolio Transactions

e ............................ *

18 a ............................ Description of the Trust

b ............................ *

19 a ............................ Additional Purchase, Exchange and Redemption
Information

b ............................ Additional Purchase, Exchange and Redemption
Information; Valuation

c ............................ *

20 ............................ Distributions and Taxes

21 a, b ............................ Contracts with FMR Affiliates; Distribution and
Service Plans

c ............................ *

22 ............................ Performance; Appendix

23 ............................ Financial Statements

</TABLE>

* Not Applicable

FIDELITY ADVISOR MUNICIPAL BOND FUND
CLASS A AND CLASS B
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 1996
This Statement of Additional Information (SAI) is not a prospectus but
should be read in conjunction with the fund's current Prospectus (dated
June 30, 1996) for Class A and Class B shares. Please retain this document
for future reference. The fund's financial statements and financial
highlights, included in the Annual Report for the fiscal year ended
December 31, 1995, are incorporated herein by reference. To obtain an
additional copy of this SAI, the Prospectus, or the Annual Report, please
contact Fidelity Distributors Corporation, 82 Devonshire Street, Boston,
Massachusetts 02109 or your investment professional.
TABLE OF CONTENTS PAGE

Investment Policies and Limitations

Portfolio Transactions

Valuation

Performance

Additional Purchase, Exchange, and Redemption Information

Distributions and Taxes

FMR

Trustees and Officers

Management Contract

Contracts with FMR Affiliates

Distribution and Service Plans

Description of the Trust

Financial Statements

Appendix

INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)

[_____]-ptb-696
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (1940 Act))
of the fund. However, except for the fundamental investment limitations
listed below, the investment policies and limitations described in this SAI
are not fundamental and may be changed without shareholder approval. THE
FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN
THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser, or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vi) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(vii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(viii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(ix) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (1) and (5), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For purposes of limitation (vii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled "Futures and Options" beginning on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the 1940 Act. These transactions may include
repurchase agreements with custodian banks; short-term obligations of, and
repurchase agreements with, the 50 largest U.S. banks (measured by
deposits); municipal securities; U.S. Government securities with affiliated
financial institutions that are primary dealers in these securities;
short-term currency transactions; and short-term borrowings. In accordance
with exemptive orders issued by the Securities and Exchange Commission
(SEC), the Board of Trustees has established and periodically reviews
procedures applicable to transactions involving affiliated financial
institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. The fund
may receive fees for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If the fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the fund does not
intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, the fund may invest a
portion of its assets in fixed-income obligations whose interest is subject
to federal income tax.
Should the fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The fund's standards for high-quality, taxable obligations are
essentially the same as those described by Moody's Investors Service, Inc.
(Moody's) in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's Corporation
(S&P) in rating corporate obligations within its two highest ratings of A-1
and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the fund's distributions. If such
proposals were enacted, the availability of municipal obligations and the
value of the fund's holdings would be affected and the Trustees would
reevaluate the fund's investment objective and policies.
FUTURES AND OPTIONS. The following sections pertain to futures and options:
Asset Coverage for Futures and Options Positions, Combined Positions,
Correlation of Price Changes, Futures Contracts, Futures Margin Payments,
Limitations on Futures and Options Transactions, Liquidity of Options and
Futures Contracts, OTC Options, Purchasing Put and Call Options, and
Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will
set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information are not
fundamental policies and may be changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter (OTC) options (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows
the fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by the fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However, with
respect to over-the-counter options the fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, the fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon rates
or principal payments may change by several percentage points for every 1%
interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive order
issued by the SEC, the fund has received permission to lend money to, and
borrow money from, other funds advised by FMR or its affiliates, but it
currently intends to participate in this program only as a borrower.
Interfund borrowings normally extend overnight but can have a maximum
duration of seven days. A fund will borrow through the program only when
the costs are equal to or lower than the costs of bank loans. Loans may be
called on one day's notice, and a fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed.
INVERSE FLOATERS have variable interest rates that typically move in the
opposite direction from prevailing short-term interest rate levels - rising
when prevailing short-term interest rates fall, and vice versa. This
interest rate feature can make the prices of inverse floaters considerably
more volatile than bonds with comparable maturities.
MUNICIPAL LEASES and participation interests therein may take the form of a
lease, an installment purchase, or a conditional sale contract and are
issued by state and local governments and authorities to acquire land or a
wide variety of equipment and facilities. Generally, the fund will not hold
such obligations directly as a lessor of the property, but will purchase a
participation interest in a municipal obligation from a bank or other third
party. A participation interest gives the fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the
total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL SECTORS:
ELECTRIC UTILITIES INDUSTRY. The electric utilities industry has been
experiencing, and will continue to experience, increased competitive
pressures. Federal legislation in the last two years will open transmission
access to any electricity supplier, although it is not presently known to
what extent competition will evolve. Other risks include: (a) the
availability and cost of fuel, (b) the availability and cost of capital,
(c) the effects of conservation on energy demand, (d) the effects of
rapidly changing environmental, safety, and licensing requirements, and
other federal, state, and local regulations, (e) timely and sufficient rate
increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state, and local governmental agencies. A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs. Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency. They generally are
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue. It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages. Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
it fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place liquid
assets in a segregated custodial account equal in amount to its obligations
under refunding contracts.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect the fund
from risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to the fund in connection with
bankruptcy proceedings), it is the fund's current policy to engage in
repurchase agreement transactions with parties whose creditworthiness has
been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, the fund might obtain
a less favorable price than prevailed when it decided to seek registration
of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a third
party at any time. The fund may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such
commitments. In the latter case, the fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, the fund intends to purchase these
instruments based on opinions of bond counsel. A fund may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the funds by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; and the availability of
securities or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy,
and performance of accounts; effect securities transactions, and perform
functions incidental thereto (such as clearance and settlement). The
selection of such broker-dealers generally is made by FMR (to the extent
possible consistent with execution considerations) based upon the quality
of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended December 31, 1995 and 1994, the fund's portfolio
turnover rates were 72% and 95%, respectively.
For fiscal 1995, 1994, and 1993, the fund paid no brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as the fund is concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions and prices for the fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATION
Fidelity Service Company (FSC) normally determines each class's net asset
value per share (NAV) as of the close of the New York Stock Exchange (NYSE)
(normally 4:00 p.m. Eastern time). The valuation of portfolio securities is
determined as of this time for the purpose of computing each class's NAV
and, where applicable, offering price.
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities may also
be valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services are
available, and the Trustees, on the basis of an evaluation of these
services, may use various pricing services or discontinue the use of any
pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.
PERFORMANCE
Each class of shares may quote performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. Share price, yield, and total return
fluctuate in response to market conditions and other factors, and the value
of shares when redeemed may be more or less than their original cost.
YIELD CALCULATIONS. Yields for a class are computed by dividing the class's
pro rata share of the applicable interest income for a given 30-day or
one-month period, net of expenses, by the average number of shares of that
class entitled to receive distributions during the period, dividing this
figure by the class's net asset value (NAV) at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. In general, interest income is reduced with respect to
bonds trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of calculating a class's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a class's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
Yield information may be useful in reviewing a class's performance and in
providing a basis for comparison with other investment alternatives.
However, each class's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates, a
class's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, a class's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing a class's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
Tax-equivalent yield is the rate an investor would have to earn from a
fully taxable investment before taxes to equal a class's tax-free yield.
Tax-equivalent yields are calculated by dividing a class's yield by the
result of one minus a stated federal or combined federal and state tax
rate. If only a portion of a class's yield is tax-exempt, only that portion
is adjusted in the calculation.
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1996. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 4% to 7%. Of course, no assurance can
be given that a class will achieve any specific tax-exempt yield. While the
fund invests principally in obligations whose interest is exempt from
federal income tax, other income received by the fund may be taxable.
1996 TAX RATES AND TAX-EQUIVALENT YIELDS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:

Taxable Income* Income 4% 5% 6% 7% 8% 9% 10%
Tax

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket** Then taxable-equivalent yield is:

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-24,000 $0-40,100 15.0% 4.71% 5.88% 7.06% 8.24% 9.41% ___% ___%

$24,001-58,150 $40,101-96,900 28.0% 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%

$58,151-121,300 $96,901-147,700 31.0% 5.80% 7.25% 8.70% 10.14% 11.59% 13.04% 14.49%

$121,301-263,750 $147,701-263,750 36.0% 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%

$263,751-above $263,751-above 39.6% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%

</TABLE>

* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
The fund may invest a portion of its assets in obligations that are subject
to federal income tax. When the fund invests in these obligations, its
tax-equivalent yields will be lower. In the table above, tax-equivalent
yields are calculated assuming investments are 100% federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a class's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in a class's NAV over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment over
a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative total return of 100% over ten years would produce an average
annual total return of 7.18%, which is the steady annual rate of return
that would equal 100% growth on a compounded basis in ten years. While
average annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a class's performance is not
constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to the actual
year-to-year performance.
In addition to average annual total returns, a class may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using NAVs, adjusted NAVs, and benchmark
indices may be used to exhibit performance. An adjusted NAV includes any
distributions paid and reflects all elements of return. Unless otherwise
indicated, adjusted NAVs are not adjusted for sales charges, if any.
The following tables and charts show performance for each class of shares
of the fund. Class A shares have a maximum 3.50% front-end sales charge
and are also subject to a 0.25% 12b-1 fee. Class B shares have a maximum
4.00% contingent deferred sales charge (CDSC) upon redemption and are also
subject to a 0.65% 12b-1 fee, as well as a 0.25% shareholder services fee.
Institutional Class shares do not have a sales charge or a 12b-1 fee.
HISTORICAL FUND RESULTS. The following table shows yield, tax-equivalent
yield, and total returns for Class A, Class B, and Institutional Class for
the periods ended December 31, 1995. The tax-equivalent yield is based on
a 36% federal income tax rate. Note that the fund may invest in securities
whose income is subject to the federal alternative minimum tax.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns1 Cumulative Total Returns1

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thirty-Da Tax- One Five Ten One Five Ten
y Equivalent Year Years Years Year Years Years
Yield2 Yield2

Municipal Bond - % % % % % % % %
Class A

Municipal Bond - % % % % % % % %
Class B

Municipal Bond - % % % % % % % %
Institutional Class

</TABLE>

1 Average annual and cumulative total returns for Class A shares include
the effect of paying Class A's maximum front-end
sales charge of 3.50%. Average annual and cumulative total returns for
Class B shares include the effect of paying Class B's
applicable CDSC upon redemption based on the following schedule: less
than one year, 4%; one year to less than two years,
3%; two years to less than three years, 3%; three years to less than four
years, 2%; four years to less than five years, 1%; and
five years and greater, 0%. Class A, Class B and Institutional Class
returns prior to July __, 1996, reflect the performance of
the Initial Class, the original class of the fund, which class does not
have a sales charge or a 12b-1 fee.
2 Yields and tax-equivalent yields shown for Class A shares include the
effect of the Class A maximum front-end sales charge
and 12b-1 fee. Yields and tax-equivalent yields shown for Class B shares
include the effect of the applicable Class B 12b-1
fee, but not the CDSC.
The following tables show the income and capital elements of the cumulative
total return for Class A, Class B, and Institutional Class of the fund. The
tables compare each class's return to the record of the Standard & Poor's
Composite Index of 500 Stocks (S&P 500(registered trademark)), the Dow
Jones Industrial Average (DJIA), and the cost of living (measured by the
Consumer Price Index, or CPI) over the same period. The CPI information is
as of the month-end closest to the initial investment date for the fund.
The S&P 500 and DJIA comparisons are provided to show how each class's
total return compared to the record of a broad average of common stocks and
a narrower set of stocks of major industrial companies, respectively, over
the same period. Of course, since the fund invests in fixed-income
securities, common stocks represent a different type of investment from the
fund. Common stocks generally offer greater growth potential than the fund,
but generally experience greater price volatility, which means greater
potential for loss. In addition, common stocks generally provide lower
income than a fixed-income investment such as the fund. Figures for the S&P
500 and DJIA are based on the prices of unmanaged groups of stocks and,
unlike the classes' returns, do not include the effect of paying brokerage
commissions or other costs of investing.
The following charts show the growth of a hypothetical $10,000 investment
in each class of the fund, assuming all distributions were reinvested and
including the effect of the fund's Class A maximum front-end sales charge
or Class B applicable CDSC. This was a period of fluctuating interest rates
and bond prices and the figures below should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
MUNICIPAL BOND FUND - CLASS A INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended Value of Value of Value of Total S&P 500 DJIA Cost of
December 31 Initial Reinvested Reinvested Value Living *
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ 40,054 $ 43,315 $ 14,044

1994 29,114 33,338 13,696

1993 28,735 31,759 13,339

1992 26,104 27,146 12,983

1991 24,251 25,300 12,617

1990 18,585 20,347 12,242

1989 19,183 20,457 11,537

1988 14,567 15,526 11,025

1987 12,492 13,394 10,558

1986 11,868 12,703 10,110

</TABLE>

* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January 1,
1986, the net amount invested in Class A shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $________.
If distributions had not been reinvested, the amount of distributions
earned from Class A over time would have been smaller, and cash payments
for the period would have amounted to $_______ for dividends and $______
for capital gains distributions. Tax consequences of different investments
have not been factored into the above figures.

MUNICIPAL BOND FUND - CLASS B INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended Value of Value of Value of Total S&P 500 DJIA Cost of
December 31 Initial Reinvested Reinvested Value Living*
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ 40,054 $ 43,315 $ 14,044

1994 29,114 33,338 13,696

1993 28,735 31,759 13,339

1992 26,104 27,146 12,983

1991 24,251 25,300 12,617

1990 18,585 20,347 12,242

1989 19,183 20,457 11,537

1988 14,567 15,526 11,025

1987 12,492 13,394 10,558

1986 11,868 12,703 10,110

</TABLE>

* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January 1,
1986, the net amount invested in Class B shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to $_______.
If distributions had not been reinvested, the amount of distributions
earned from Class B over time would have been smaller, and cash payments
for the period would have amounted to $_______ for dividends and $________
for capital gains distributions. Tax consequences of different investments
have not been factored into the above figures.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL BOND FUND - INSTITUTIONAL CLASS INDICES

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended Value of Value of Value of Total S&P 500 DJIA Cost of
December 31 Initial Reinvested Reinvested Value Living*
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ 40,054 $ 43,315 $ 14,044

1994 29,114 33,338 13,696

1993 28,735 31,759 13,339

1992 26,104 27,146 12,983

1991 24,251 25,300 12,617

1990 18,585 20,347 12,242

1989 19,183 20,457 11,537

1988 14,567 15,526 11,025

1987 12,492 13,394 10,558

1986 11,868 12,703 10,110

</TABLE>

* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January 1,
1986, the net amount invested in Institutional Class shares was $10,000.
The cost of the initial investment ($10,000), together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested), amounted to
$_______. If distributions had not been reinvested, the amount of
distributions earned from Institutional Class over time would have been
smaller, and cash payments for the period would have amounted to $_______
for dividends and $________ for capital gains distributions. Tax
consequences of different investments have not been factored into the above
figures.

PERFORMANCE COMPARISONS. Performance may be compared to the performance of
other mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to the
mutual fund rankings, the fund's performance may be compared to stock,
bond, and money market mutual fund performance indices prepared by Lipper
or other organizations. Each class of the fund may be compared to the
Lehman Brothers Municipal Bond Index, a total return performance benchmark
for the investment-grade municipal bond market. Issues included in the
Index have a minimum credit rating of Baa and a maturity of at least one
year. To be included in the Index, an issue must have been issued after
December 31, 1990 and have a total amount outstanding of $50 million or
more. Subsequent to December 31, 1995, zero coupon bonds and issues subject
to the alternative minimum tax are included in the Index. When comparing
these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock mutual
funds may offer higher potential returns, they also carry the highest
degree of share price volatility. Likewise, money market funds may offer
greater stability of principal, but generally do not offer the higher
potential returns available from stock mutual funds.
From time to time, performance may also be compared to other mutual funds
tracked by financial or business publications and periodicals. For example,
the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, the
fund may offer greater liquidity or higher potential returns than CDs, the
fund does not guarantee your principal or your return, and fund shares are
not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 395 Tax-Free money market funds. The Bond Fund Report
AverageS(trademark)/Municipal, which is reported in the BOND FUND
REPORT(registered trademark), covers over 509 bond funds. When evaluating
comparisons to money market funds, investors should consider the relevant
differences in investment objectives and policies. Specifically, money
market funds invest in short-term, high-quality instruments and seek to
maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; model portfolios or allocations; and saving for college or other
goals. In addition, Fidelity may quote or reprint financial or business
publications or periodicals as they relate to current economic and
political conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a particular
mutual fund, and Fidelity services and products.
Each fund may be advertised as part of certain asset allocation programs
involving other Fidelity or non-Fidelity mutual funds. These asset
allocation programs may advertise a model portfolio and its performance
results.
Each fund may be advertised as part of a no transaction fee (NTF) program
in which Fidelity and non-Fidelity mutual funds are offered. An NTF
program may advertise performance results.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A class may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare a
class's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
MOMENTUM INDICATORS indicate a class's price movements over specific
periods of time. Each point on the momentum indicator represents a class's
percentage change in price movements over that period.
Examples of the effects of periodic investment plans, including the
principle of dollar cost averaging, may be advertised. In such a program,
an investor invests a fixed dollar amount in a class at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
As of December 31, 1995, FMR advised over $26.5 billion in tax-free fund
assets, $81 billion in money market fund assets, $240 billion in equity
fund assets, $49 billion in international fund assets, and $23 billion in
Spartan fund assets. The fund may reference the growth and variety of money
market mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the largest
amount of equity fund assets under management by a mutual fund investment
adviser in the United States, making FMR America's leading equity (stock)
fund manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, the fund may compare each class's
total expense ratio to the average total expense ratio of similar funds
tracked by Lipper. A class's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION
CLASS A SHARES ONLY
Pursuant to Rule 22d-1 under the 1940 Act, FDC exercises its right to waive
Class A's maximum 3.50% front-end sales charge in connection with the
fund's merger with or acquisition of any investment company or trust. In
addition, FDC has chosen to waive Class A's front-end sales charge in
certain instances because of efficiencies involved in those sales of
shares. The sales charge will not apply:
1. to shares purchased by a bank trust officer, registered representative,
or other employee (and their immediate families) of investment
professionals under special arrangements in connection with FDC's sales
activities;
2. to shares purchased by a current or former Trustee or officer of a
Fidelity fund or a current or retired officer, director, or regular
employee of FMR Corp. or its direct or indirect subsidiaries (a Fidelity
Trustee or employee), the spouse of a Fidelity Trustee or employee, a
Fidelity Trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Fidelity Trustee or employee;
3. to shares purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
4. to shares purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined by
Section 501(c)(3) of the Internal Revenue Code);
5. to shares in a Fidelity IRA or Fidelity Advisor IRA account purchased
(including purchases by exchange) with the proceeds of a distribution from
an employee benefit plan having more than 200 eligible employees or a
minimum of $3,000,000 in plan assets invested in Fidelity mutual funds or
$1,000,000 invested in Fidelity Advisor mutual funds;
6. to shares purchased by an insurance company separate account used to
fund annuity contracts purchased by employee benefit plans (including
403(b) programs, but otherwise as defined in ERISA)), which, in the
aggregate, have either more than 200 eligible employees or a minimum of
$1,000,000 in assets invested in Fidelity Advisor funds;
7. to shares purchased by any state, county, city, or government
instrumentality, department or authority or agency;
8. to shares purchased with redemption proceeds from other mutual fund
complexes on which the investor has paid a front-end or contingent deferred
sales charge;
9. to shares purchased by a trust institution or bank trust department,
excluding assets described in (11) and (12) below, that has executed a
Participation Agreement with FDC specifying certain asset minimums and
qualifications, and marketing program restrictions. Assets managed by third
parties do not qualify for this waiver;
10. to shares purchased for use in a broker-dealer managed account program,
provided the broker-dealer has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver;
11. to shares purchased as part of an employee benefit plan having more
than (i) 200 eligible employees or a minimum of $1,000,000 in plan assets
invested in the Fidelity Advisor funds, or (ii) 25 eligible employees or
$250,000 in plan assets invested in Fidelity Advisor funds that subscribes
to Fidelity Advisor Retirement Connection or similar program sponsored by
Fidelity Investments Institutional Services Company, Inc.;
12. to shares purchased as part of an employee benefit plan through an
intermediary that has executed a Participation Agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions;
13. to shares purchased on a discretionary basis by a registered investment
adviser which is not part of an organization primarily engaged in the
brokerage business, that has executed a participation agreement with FDC
specifying certain asset minimums and qualifications, and marketing,
program and trading restrictions. Employee benefit plan assets do not
qualify for this waiver; or
14. to shares purchased with distributions of income, principal, and
capital gains from Fidelity Defined Trusts.
In order to qualify for waivers (9), (10) and (13), eligible investors with
existing Class A accounts will be required to sign and comply with a
participation agreement. Eligible investors that do not meet revised asset
requirements specified in the participation agreement will be allowed to
continue investing in Class A shares under the terms of their current
relationship until June 30, 1997, after which they will be prevented from
making new or subsequent purchases in Class A load waived, except that
employee benefit plans will be permitted to make additional purchases of
Class A shares load waived.
A sales load waiver form must accompany these transactions.
FINDERS FEE. On eligible purchases of Class A shares in amounts of $1
million or more, investment professionals will be compensated with a fee of
0.25%. Eligible purchases are the following purchases made through
broker-dealers and banks (excluding trust departments): an individual trade
of $1 million or more; a trade which brings the value of the accumulated
account(s) of an investor (including an employee benefit plan) past $1
million; a trade for an investor with an accumulated account value of $1
million or more; and an incremental trade toward an investor's $1 million
"Letter of Intent."
Any assets in relation to which an investment professional has received
such compensation will bear a contingent deferred sales charge (Class A
CDSC) if they do not remain in Class A shares of the Fidelity Advisor
funds, Initial Class shares of Daily Money Fund: U.S. Treasury Portfolio or
Daily Money Fund: Money Market Portfolio, or shares of Daily Tax-Exempt
Money Fund, for a period of at least one uninterrupted year. The Class A
CDSC will be 0.25% of the lesser of the cost of the shares at the initial
date of purchase or the value of the shares at redemption, not including
any reinvested dividends or capital gains. Class A CDSC shares representing
reinvested dividends or capital gains, if any, will be redeemed first,
followed by other Class A CDSC shares that have been held for the longest
period of time.
With respect to employee benefit plans, the Class A CDSC does not apply to
the following types of redemptions: (i) plan loans or distributions or (ii)
exchanges to non-Advisor fund investment options. With respect to
Individual Retirement Accounts, the Class A CDSC does not apply to
redemptions made for disability, payment of death benefits, or required
partial distributions starting at age 70 1/2.
CLASS B SHARES ONLY
The contingent deferred sales charge (CDSC) on Class B shares may be waived
in the case of (1) disability or death, provided that the redemption is
made within one year following the death or initial determination of
disability; or (2) in connection with a total or partial redemption made in
connection with distributions from retirement plan accounts at age 70 1/2,
which are permitted without penalty pursuant to the Internal Revenue Code.
A sales load waiver form must accompany these transactions.
CLASS A AND CLASS B SHARES ONLY
QUANTITY DISCOUNTS. To obtain a reduction of the front-end sales charge on
Class A shares, you or your investment professional must notify the
transfer agent at the time of purchase whenever a quantity discount is
applicable to your purchase. Upon such notification, you will receive the
lowest applicable front-end sales charge.
For purposes of qualifying for a reduction in front-end sales charges under
the Combined Purchase, Rights of Accumulation, or Letter of Intent
programs, the following may qualify as an individual or a "company" as
defined in Section 2(a)(8) of the 1940 Act: an individual, spouse, and
their children under age 21 purchasing for his, her, or their own account;
a trustee, administrator or other fiduciary purchasing for a single trust
estate or a single fiduciary account or for a single or a parent-subsidiary
group of "employee benefits plans" (as defined in Section 3(3) of ERISA);
and tax-exempt organizations as defined under Section 501(c)(3) of the
Internal Revenue Code.
RIGHTS OF ACCUMULATION permit reduced front-end sales charges on any future
purchases of Class A shares after you have reached a new breakpoint in the
fund's sales charge schedule. The value of currently held Fidelity Advisor
fund Class A and Class B shares, Initial Class shares and Class B shares of
Daily Money Fund: U.S. Treasury Portfolio, Initial Class shares of Daily
Money Fund: Money Market Portfolio, and shares of Daily Tax-Exempt Money
Fund acquired by exchange from any Fidelity Advisor fund, is determined at
the current day's NAV at the close of business, and is added to the amount
of your new purchase valued at the current offering price to determine your
reduced front-end sales charge.
LETTER OF INTENT. You may obtain Class A shares at the same reduced
front-end sales charge by filing a non-binding Letter of Intent (the
Letter) within 90 days of the start of Class A purchases. Each Class A
investment you make after signing the Letter will be entitled to the
front-end sales charge applicable to the total investment indicated in the
Letter. For example, a $2,500 purchase of Class A shares toward a $50,000
Letter would receive the same reduced sales charge as if the $50,000
($500,000 for Fidelity Advisor Short Fixed-Income Fund and Fidelity Advisor
Short-Intermediate Municipal Income Fund) had been invested at one time. To
ensure that you receive a reduced front-end sales charge on future
purchases, you or your investment professional must inform the transfer
agent that the Letter is in effect each time Class A shares are purchased.
Reinvested income and capital gain distributions do not count toward the
completion of the Letter.
Your initial investment must be at least 5% of the total amount you plan to
invest. Out of the initial purchase, 5% of the dollar amount specified in
the Letter will be registered in your name and held in escrow. The Class A
shares held in escrow cannot be redeemed or exchanged until the Letter is
satisfied or the additional sales charges have been paid. You will earn
income dividends and capital gain distributions on escrowed Class A shares.
The escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter.
If you purchase more than the amount specified in the Letter and qualify
for a future front-end sales charge reduction, the front-end sales charge
will be adjusted to reflect your total purchase at the end of 13 months.
Surplus funds will be applied to the purchase of additional Class A shares
at the then-current offering price applicable to the total purchase.
If you do not complete your purchase under the Letter within the 13-month
period, 30 days' written notice will be provided for you to pay the
increased front-end sales charges due. Otherwise, sufficient escrowed Class
A shares will be redeemed to pay such charges.
FIDELITY ADVISOR SYSTEMATIC INVESTMENT PROGRAM. You can make regular
investments in Class A or Class B shares of the fund with the Systematic
Investment Program by completing the appropriate section of the account
application and attaching a voided personal check with your bank's magnetic
ink coding number across the front. If your bank account is jointly owned,
be sure that all owners sign.
Your account will be drafted on or about the first business day of every
month. You may cancel your participation in the Systematic Investment
Program at any time without payment of a cancellation fee. You will receive
a confirmation from the transfer agent for every transaction, and a debit
entry will appear on your bank statement.
FIDELITY ADVISOR SYSTEMATIC WITHDRAWAL PROGRAM. If you own Class A shares
worth $10,000 or more, you can have monthly, quarterly or semiannual checks
sent from your account to you, to a person named by you, or to your bank
checking account. Your Systematic Withdrawal Program payments are drawn
from Class A share redemptions. If Systematic Withdrawal Plan redemptions
exceed income dividends earned on your shares, your account eventually may
be exhausted.
CLASS A, CLASS B, AND INSTITUTIONAL CLASS SHARES
The fund is open for business and the NAV and, where applicable, the
offering price, for each class is calculated each day the NYSE is open for
trading. The NYSE has designated the following holiday closings for 1996:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. Although FMR expects
the same holiday schedule to be observed in the future, the NYSE may modify
its holiday schedule at any time. In addition, the fund will not process
wire purchases and redemptions on days when the Federal Reserve Wire System
is closed.
FSC normally determines each class's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, a class's NAV may be affected on days when investors do
not have access to the fund to purchase or redeem shares. In addition,
trading in some of the fund's portfolio securities may not occur on days
when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each class's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may
be waived if (i) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee, or deferred sales charge
ordinarily payable at the time of an exchange, or (ii) the fund suspends
the redemption of the shares to be exchanged as permitted under the 1940
Act or the rules and regulations thereunder, or the fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. The fund will send each shareholder
a notice in January describing the tax status of dividend and capital gain
distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases municipal securities that are free from federal income
tax based on opinions of counsel regarding their tax status. These opinions
generally will be based on covenants by the issuers or other parties
regarding continuing compliance with federal tax requirements. If at any
time the covenants are not complied with, distribution to shareholders of
interest on a security could become federally taxable retroactive to the
date the security was issued. For certain types of structure securities,
opinions of counsel may also be based on the effect of the structure on the
federal tax treatment of the income.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the fund's policies of investing so
that at least 80% of its assets are invested in municipal securities whose
interest is free from federal income tax. Interest from private activity
securities is a tax preference item for the purposes of determining whether
a taxpayer is subject to the AMT and the amount of AMT to be paid, if any.
Private activity securities issued after August 7, 1986 to benefit a
private or industrial user or to finance a private facility are affected by
this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by the fund are taxable
to shareholders as dividends, not as capital gains.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of the exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund, and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital gains.
As of December 31, 1995, the fund had a capital loss carryforward of
approximately $27,853,000. This loss carryforward will expire on December
31, 2003 and is available to offset future capital gains.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some futures contracts and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
The fund is treated as a separate entity from the other funds of Fidelity
Municipal Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company.
Therefore, through their ownership of voting common stock and the execution
of the shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect to FMR
Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. The
business address of each Trustee and officer who is an "interested person"
(as defined in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The business
address of all the other Trustees is Fidelity Investments, P.O. Box 9235,
Boston, Massachusetts 02205-9235. Those Trustees who are "interested
persons" by virtue of their affiliation with either the trust or FMR are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (66), Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD (55), Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc., Fidelity Management &
Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
RALPH F. COX (64), Trustee (1991), is a consultant to Western Mining
Corporation (1994). Prior to February 1994, he was President of Greenhill
Petroleum Corporation (petroleum exploration and production). Until March
1990, Mr. Cox was President and Chief Operating Officer of Union Pacific
Resources Company (exploration and production). He is a Director of
Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he serves on the Board of Directors of the
Texas State Chamber of Commerce, and he is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (64), Trustee (1992). Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of BellSouth
Corporation (telecommunications), Eaton Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail stores), and previously served as a
Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The
University of Vermont School of Business Administration.
RICHARD J. FLYNN (72), Trustee and Chairman of the non-interested Trustees,
is a financial consultant. Prior to September 1986, Mr. Flynn was Vice
Chairman and a Director of the Norton Company (manufacturer of industrial
devices). He is currently a Trustee of College of the Holy Cross and Old
Sturbridge Village, Inc., and he previously served as a Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES (68), Trustee. Prior to his retirement in 1984, Mr. Jones
was Chairman and Chief Executive Officer of LTV Steel Company. He is a
Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc. (mining), Consolidated Rail Corporation, Birmingham
Steel Corporation, and RPM, Inc. (manufacturer of chemical products), and
he previously served as a Director of NACCO Industries, Inc. (mining and
marketing, 1985-1995) and Hyster-Yale Materials Handling, Inc. (1985-1995).
In addition, he serves as a Trustee of First Union Real Estate Investments,
a Trustee and member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (63), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Vice Chairman of the Board of Trustees of the
Greenwich Hospital Association, a Member of the Public Oversight Board of
the American Institute of Certified Public Accountants' SEC Practice
Section (1995), and as a Public Governor of the National Association of
Securities Dealers, Inc. (1996).
*PETER S. LYNCH (53), Trustee, is Vice Chairman and Director of FMR (1992).
Prior to May 31, 1990, he was a Director of FMR and Executive Vice
President of FMR (a position he held until March 31, 1991); Vice President
of Fidelity Magellan Fund and FMR Growth Group Leader; and Managing
Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity
Investments Corporate Services (1991-1992). He is a Director of W.R. Grace
& Co. (chemicals) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
GERALD C. McDONOUGH (67), Trustee and Vice-Chairman of the non-interested
Trustees, is Chairman of G.M. Management Group (strategic advisory
services). Prior to his retirement in July 1988, he was Chairman and Chief
Executive Officer of Leaseway Transportation Corp. (physical distribution
services). Mr. McDonough is a Director of ACME-Cleveland Corp. (metal
working, telecommunications and electronic products), Brush-Wellman Inc.
(metal refining), York International Corp. (air conditioning and
refrigeration), Commercial Intertech Corp. (water treatment equipment,
1992), and Associated Estates Realty Corporation (a real estate investment
trust, 1993).
EDWARD H. MALONE (71), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of the Naples
Philharmonic Center for the Arts and Rensselaer Polytechnic Institute, and
he is a member of the Advisory Boards of Butler Capital Corporation Funds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (63), Trustee (1993), is Chairman of the Board, President,
and Chief Executive Officer of Lexmark International, Inc. (office
machines, 1991). Prior to 1991, he held the positions of Vice President of
International Business Machines Corporation ("IBM") and President and
General Manager of various IBM divisions and subsidiaries. Mr. Mann is a
Director of M.A. Hanna Company (chemicals, 1993) and Infomart (marketing
services, 1991), a Trammell Crow Co. In addition, he serves as the Campaign
Vice Chairman of the Tri-State United Way (1993) and is a member of the
University of Alabama President's Cabinet.
THOMAS R. WILLIAMS (67), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
FRED L. HENNING, JR. (57), Vice President, is Vice President of Fidelity's
money market (1994) and fixed-income (1995) funds and Senior Vice President
of FMR Texas Inc.
ARTHUR S. LORING (48), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (49), Treasurer (1995), is Treasurer of the Fidelity
funds and is an employee of FMR (1995). Before joining FMR, Mr. Rathgeber
was a Vice President of Goldman Sachs & Co. (1978-1995), where he served in
various positions, including Vice President of Proprietary Accounting
(1988-1992), Global Co-Controller (1992-1994), and Chief Operations Officer
of Goldman Sachs (Asia) LLC (1994-1995).
JOHN H. COSTELLO (49), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (50), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994) and Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993).
The following table sets forth information describing the compensation of
each current Trustee of the fund for his or her services as trustee for the
fiscal year ended December 31, 1995.
COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*

J. Gary Burkhead ** $ 0 $ 0 $ 0 $ 0

Ralph F. Cox 439 5,200 52,000 128,000

Phyllis Burke Davis 429 5,200 52,000 125,000

Richard J. Flynn 549 0 52,000 160,500

Edward C. Johnson 3d ** 0 0 0 0

E. Bradley Jones 439 5,200 49,400 128,000

Donald J. Kirk 451 5,200 52,000 129,500

Peter S. Lynch ** 0 0 0 0

Gerald C. McDonough 440 5,200 52,000 128,000

Edward H. Malone 439 5,200 44,200 128,000

Marvin L. Mann 439 5,200 52,000 128,000

Thomas R. Williams 429 5,200 52,000 125,000

</TABLE>

(dagger) For the fiscal year ended December 31, 1995, certain of the
non-interested trustees accrued deferred compensation as follows: [trustee
name, dollar amount of deferred compensation]; [trustee name, dollar amount
of deferred compensation]; and, [trustee name, dollar amount of deferred
compensation].
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the "Plan"). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on the fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
The fund may invest in such designated securities without shareholder
approval.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
On December 31, 1995 the Trustees and officers of the fund owned, in the
aggregate, less than 1% of the fund's total outstanding shares.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments,
compensates all officers of the fund and all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for the typesetting, printing, and
mailing of its proxy materials to shareholders, legal expenses, and the
fees of the custodian, auditor and non-interested Trustees. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund, has entered into a revised transfer agent agreement with UMB,
pursuant to which UMB bears the costs of providing these services to
existing shareholders. Other expenses paid by the fund include interest,
taxes, brokerage commissions, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. The fund is also
liable for such non-recurring expenses as may arise, including costs of any
litigation to which the fund may be a party, and any obligation it may have
to indemnify its officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated January
1, 1994, which was approved by shareholders on December 15, 1993.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and an
individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels, which is the
result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $366.9 billion of group net
assets - the approximate level for December 31, 1995 - was .1482%, which is
the weighted average of the respective fee rates for each level of group
net assets up to $366.9 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

0 - $3 billion .3700% $ 0.5 billion .3700%

3 - 6 .3400 25 .2664

6 - 9 .3100 50 .2188

9 - 12 .2800 75 .1986

12 - 15 .2500 100 .1869

15 - 18 .2200 125 .1793

18 - 21 .2000 150 .1736

21 - 24 .1900 175 .1695

24 - 30 .1800 200 .1658

30 - 36 .1750 225 .1629

36 - 42 .1700 250 .1604

42 - 48 .1650 275 .1583

48 - 66 .1600 300 .1565

66 - 84 .1550 325 .1548

84 - 120 .1500 350 .1533

120 - 174 .1450 400 .1507

174 - 228 .1400

228 - 282 .1375

282 - 336 .1350

Over 336 .1325

Prior to January 1, 1994, the group fee rate was based on a schedule with
breakpoints ending at .1400% for average group assets in excess of $174
billion. The group fee rate breakpoints shown above for average group
assets in excess of $120 billion and under $228 billion were voluntarily
adopted by FMR on January 1, 1992. The additional breakpoints shown above
for average group assets in excess of $228 billion were voluntarily adopted
by FMR on November 1, 1993. The fund's current management contract
reflects these extensions of the group fee rate schedule.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for average group assets
in excess of $156 billion and under $372 billion as shown in the schedule
below. The revised group fee rate schedule was identical to the above
schedule for average group assets under $156 billion.
On January 1, 1996, FMR voluntarily added new breakpoints to the revised
schedule for average group assets in excess of $372 billion, pending
shareholder approval of a new management contract reflecting the revised
schedule and additional breakpoints. The revised group fee rate schedule
and the extensions provide for lower management fee rates as FMR's assets
under management increase. For average group assets in excess of $156
billion, the revised group fee rate schedule with additional breakpoints
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

120 - $156 billion .1450% $ 150 billion .1736%

156 - 192 .1400 175 .1690

192 - 228 .1350 200 .1652

228 - 264 .1300 225 .1618

264 - 300 .1275 250 .1587

300 - 336 .1250 275 .1560

336 - 372 .1225 300 .1536

372 - 408 .1200 325 .1514

408 - 444 .1175 350 .1494

444 - 480 .1150 375 .1476

480 - 516 .1125 400 .1459

Over 516 .1100 425 .1443

450 .1427

475 .1413

500 .1399

525 .1385

550 .1372

The individual fund fee rate is .25%. Based on the average group net assets
of the funds advised by FMR for December 1995, the annual management fee
rate would be calculated as follows:
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.1482% + .25% = .3982%

On December 15, 1993, shareholders of the fund approved an increase in the
fund's individual fund fee rate from .20% to .25%.
One-twelfth of this annual management fee rate is applied to the fund's net
assets averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $4,282,000, $4,605,000, and $4,677,000, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.40%, .41%, and .37%, respectively, of the average net assets of the fund
for each of those years.
FMR may, from time to time, voluntarily reimburse all or a portion of a
class's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase a class's total returns and yield and repayment of the
reimbursement by a class will lower its total returns and yield.
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses.
CONTRACTS WITH FMR AFFILIATES
UMB is the transfer agent for Class A, Class B, and Institutional Class
shares of the fund. UMB has entered into a sub-contract with FIIOC, an
affiliate of FMR, under the terms of which FIIOC performs the processing
activities associated with providing transfer agent and shareholder
servicing functions for Class A, Class B, and Institutional Class shares of
the fund. Under this arrangement FIIOC receives an annual account fee and
an asset-based fee based on account size and fund type for each retail
account and certain institutional accounts. With respect to certain
institutional retirement accounts, FIIOC receives an annual account fee and
an asset-based fee based on account type or fund type. These annual account
fees are subject to increase based on postal rate changes. FIIOC also
collects small account fees from certain accounts with balances of less
than $2,500. For accounts that FIIOC maintains on behalf of UMB, FIIOC
receives all such fees.
FIIOC bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements. Also,
FIIOC pays out-of-pocket expenses associated with transfer agent services.
UMB has an additional sub-contract with FSC pursuant to which FSC performs
the calculations necessary to determine NAV and dividends for Class A,
Class B, and Institutional Class of the fund, and maintains the fund's
accounting records. The annual fee rates for these pricing and bookkeeping
services are based on the fund's average net assets, specifically, .0400%
of the first $500 million of average net assets and .0200% of average net
assets in excess of $500 million. The fee is limited to a minimum of
$60,000 and a maximum of $800,000 per year. Pricing and bookkeeping fees,
including reimbursement for out-of-pocket expenses, paid to FSC for the
fiscal years ended 1995, 1994, and 1993 were $346,000, $362,000, and
$358,000 respectively.
The transfer agent fees and charges, and pricing and bookkeeping fees
described above are paid to FIIOC and FSC, respectively, by UMB, which is
entitled to reimbursement from the appropriate class or the fund, as
applicable, for these expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FMR.
DISTRIBUTION AND SERVICE PLANS
The Trustees have approved Distribution and Service Plans on behalf of each
class of shares of the fund (the Plans) pursuant to Rule 12b-1 under the
1940 Act (the Rule). The Rule provides in substance that a mutual fund may
not engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The
Plans, as approved by the Trustees, allow Class A, Class B, and
Institutional Class shares of the fund and FMR to incur certain expenses
that might be considered to constitute indirect payment by the fund of
distribution expenses.
Pursuant to the Class A Plan, FDC is paid a distribution fee as a
percentage of Class A's average net assets at an annual rate of up to
0.40%. Pursuant to the Class B Plan, FDC is paid a distribution fee as a
percentage of Class B's average net assets at an annual rate of up to
0.75%. For the purpose of calculating the distribution fees, average net
assets are determined as of the close of business on each day throughout
the month. Currently, the Trustees have approved a distribution fee for
Class A at an annual rate of 0.25%, and a distribution fee for Class B at
an annual rate of 0.65%. These fees may be increased only when, in the
opinion of the Trustees, it is in the best interests of the shareholders of
the applicable class to do so. Class B also pays investment professionals
a service fee at an annual rate of 0.25% of its average daily net assets
determined as of the close of business on each day throughout the month for
personal service and/or the maintenance of shareholder accounts.
Under each Plan, if the payment of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plans. The Class A Plan and the
Class B Plan specifically recognize that FMR may use its management fee
revenue, as well as its past profits or its other resources, to reimburse
FDC for expenses incurred in connection with the distribution of the
applicable class, including payments made to third parties that assist in
selling shares of the applicable class of the fund or to third parties,
including banks, that render shareholder support services. The
Institutional Plan specifically recognizes that FMR may use its resources,
including management fees, to pay expenses associated with the sale of
Institutional Class shares. This may include reimbursing FDC for payments
to third parties, such as banks or broker-dealers, that provide shareholder
support services or engage in the sale of Institutional Class shares. The
Trustees have authorized such payments for all classes of the fund.
Prior to approving each Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
the applicable class of the fund and its shareholders. In particular, the
Trustees noted that the Institutional Class Plan does not authorize
payments by the Institutional Class other than those made to FMR under its
management contract with the fund. To the extent that a Plan gives FMR and
FDC greater flexibility in connection with the distribution of shares of
the applicable class of the fund, additional sales of fund shares may
result. Furthermore, certain shareholder support services may be provided
more effectively under the Plans by local entities with whom shareholders
have other relationships.
The Class A and Class B Plans do not provide for specific payments by the
applicable class of any of the expenses of FDC, or obligate FDC or FMR to
perform any specific type or level of distribution activities or incur any
specific level of expense in connection with distribution activities.
After payments by FDC for advertising, marketing and distribution, and
payments to third parties, the amounts remaining, if any, may be used as
FDC may elect.
Each class's Plan was approved by FMR as the then sole shareholder of the
class on June __, 1996.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plan. No
preference for the instruments of such depository institutions will be
shown in the selection of investments.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor Municipal Bond Fund is a fund of
Fidelity Municipal Trust (the trust), an open-end management investment
company originally organized as a Maryland corporation on November 22, 1976
(the trust) and reorganized as a Massachusetts business trust on June 22,
1984, at which time its name changed to Fidelity Municipal Bond Portfolio.
On February 20, 1996, the fund's name was changed to Fidelity Municipal
Bond Fund, and on June 30, 1996, the fund's name was changed to Fidelity
Advisor Municipal Bond Fund. On March 1, 1986, the trust's name was changed
to Fidelity Municipal Trust. Currently, there are seven funds of the trust:
Fidelity Advisor Municipal Bond Fund; Fidelity Aggressive Municipal Fund;
Fidelity Insured Municipal Income Fund; Fidelity Ohio Municipal Income
Fund; Fidelity Michigan Municipal Income Fund; Fidelity Minnesota Municipal
Income Fund; and Spartan Pennsylvania Municipal Income Fund. The
Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office. Claims asserted
against one class of shares may subject the holders of another class of
shares to certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value you own. The shares have no preemptive rights, and Class A
and Institutional Class shares have no conversion rights; the voting and
dividend rights, the conversion rights of Class B shares, the right of
redemption, and the privilege of exchange are described in the Prospectus.
Shares are fully paid and nonassessable, except as set forth under the
heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of the trust, a fund, or a class may, as set forth
in the Declaration of Trust, call meetings of the trust, fund, or class for
any purpose related to the trust, fund, or class, as the case may be,
including, in the case of a meeting of the entire trust, the purpose of
voting on removal of one or more Trustees. The trust or any fund may be
terminated upon the sale of its assets to another open-end management
investment company, or upon liquidation and distribution of its assets, if
approved by vote of the holders of a majority of the trust or the fund, as
determined by the current value of each shareholder's investment in the
fund or trust. If not so terminated, the trust and its funds will continue
indefinitely.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri, is
custodian of the assets of the fund. The custodian is responsible for the
safekeeping of a fund's assets and the appointment of the subcustodian
banks and clearing agencies. The custodian takes no part in determining the
investment policies of a fund or in deciding which securities are purchased
or sold by a fund. However, a fund may invest in obligations of the
custodian and may purchase securities from or sell securities to the
custodian. The Bank of New York and Chemical Bank, each headquartered in
New York, also may serve as a special purpose custodian of certain assets
in connection with pooled repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain funds advised by FMR.
Transactions that have occurred to date include mortgages and personal and
general business loans. In the judgment of FMR, the terms and conditions of
those transactions were not influenced by existing or potential custodial
or other fund relationships.
AUDITOR. [INSERT NAME/ADDRESS IN 485(B) FILING: ______] serves as the
trust's independent accountant. The auditor examines financial statements
for the fund and provides other audit, tax, and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the fiscal
year ended December 31, 1995, are included in the fund's Annual Report,
which is a separate report supplied with this SAI. The fund's financial
statements and financial highlights are incorporated herein by reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
FIDELITY MUNICIPAL BOND FUND

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,11 ............................ Cover Page; Table of Contents

12 ............................ *

13 a - c ............................ Investment Policies and Limitations

d ............................ Portfolio Transactions

14 a - c ............................ Trustees and Officers

15 a ............................ Description of the Trust

b - c ............................ Trustees and Officers

16 a(i) ............................ FMR

(ii) ............................ Trustees and Officers

(iii),b ............................ Management Contract;

c ............................ Management Contract

d ............................ *

e ............................ *

f ............................ Distribution and Service Plans

g ............................ *

h ............................ Description of the Trust

i ............................ Contracts with FMR Affiliates

17 a,b,c,d ............................ Portfolio Transactions

e ............................ *

18 a ............................ Description of the Trust

b ............................ *

19 a ............................ Additional Purchase, Exchange and Redemption
Information

b ............................ Additional Purchase, Exchange and Redemption
Information; Valuation

c ............................ *

20 ............................ Distributions and Taxes

21 a, b ............................ Contracts with FMR Affiliates; Distribution and
Service Plans

c ............................ *

22 ............................ Performance; Appendix

23 ............................ Financial Statements

</TABLE>

* Not Applicable

FIDELITY MUNICIPAL BOND FUND ("INITIAL CLASS")
A CLASS OF FIDELITY ADVISOR MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 1996
This Statement of Additional Information (SAI) is not a prospectus
but should be read in conjunction with the current Fidelity Municipal
Bond Fund Prospectus (dated June 30, 1996). Initial Class shares
are available only to current Initial Class shareholders. Please
retain this document for future reference. The fund's financial statements
and financial highlights, included in the Annual Report for the fiscal year
ended December 31, 1995, are incorporated herein by reference. To obtain an
additional copy of this SAI, the Prospectus , or the Annual
Report, please call Fidelity Distributors Corporation , 82 Devonshire
Street, Boston, Massachusetts 02109.
NATIONWIDE 1-800-544-8888
TABLE OF CONTENTS PAGE

Investment Policies and Limitations

Portfolio Transactions

Valuation

Performance

Additional Purchase , Exchange, and Redemption Information

Distributions and Taxes

FMR

Trustees and Officers

Management Contract

Contracts with FMR Affiliates

Distribution and Service Plan

Description of the Trust

Financial Statements

Appendix

INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)

[______]-ptb-696
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940 (1940
Act) ) of the fund. However, except for the fundamental investment
limitations listed below, the investment policies and limitations described
in this SAI are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3 %
limitation;
(4) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or tax-exempt obligations issued or guaranteed by a U.S.
territory or possession or a state or local government, or a political
subdivision of any of the foregoing) if, as a result, more than 25% of the
fund's total assets would be invested in securities of companies whose
principal business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser, or (b) by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to engage in repurchase agreements
or make loans, but this limitation does not apply to purchases of debt
securities.
(vi) The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(vii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(viii) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(ix) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For purposes of limitations (1) and (5), FMR identifies the issuer of a
security depending on its terms and conditions. In identifying the issuer,
FMR will consider the entity or entities responsible for payment of
interest and repayment of principal and the source of such payments; the
way in which assets and revenues of an issuing political subdivision are
separated from those of other political entities; and whether a
governmental body is guaranteeing the security.
For purposes of limitation (vii), pass-through entities and other special
purpose vehicles or pools of financial assets, such as issuers of
asset-backed securities or investment companies, are not considered
"business enterprises."
For the fund's limitations on futures and options transactions, see the
section entitled " F utures and Options" beginning on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considere d to be,
"affiliated persons" of the fund under the 1940 Act . These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S.
G overnment securities with affiliated financial institutions that
are primary dealers in these securities; short-term currency transactions;
and short-term borrowings. In accordance with exemptive orders issued by
the Securities and Exchange Commission (SEC), the Board of Trustees has
established and periodically reviews procedures applicable to transactions
involving affiliated financial institutions.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell securities on a
delayed-delivery or when-issued basis. These transactions involve a
commitment by the fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security. Typically, no
interest accrues to the purchaser until the security is delivered. The fund
may receive fees for entering into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because the fund is not required to pay for securities until
the delivery date, these risks are in addition to the risks associated with
the fund's other investments. If the fund remains substantially fully
invested at a time when delayed-delivery purchases are outstanding, the
delayed-delivery purchases may result in a form of leverage. When
delayed-delivery purchases are outstanding, the fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When the fund has sold a security on a
delayed-delivery basis, the fund does not participate in further gains or
losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities,
the fund could miss a favorable price or yield opportunity, or could suffer
a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
FEDERALLY TAXABLE OBLIGATIONS. Under normal conditions, the fund does not
intend to invest in securities whose interest is federally taxable.
However, from time to time on a temporary basis, the fund may invest a
portion of its assets in fixed-income obligations whose interest is subject
to federal income tax.
Should the fund invest in federally taxable obligations, it would purchase
securities that in FMR's judgment are of high quality. These would include
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities; obligations of domestic banks; and repurchase
agreements. The fund's standards for high-quality, taxable obligations are
essentially the same as those described by Moody's Investors Service, Inc.
(Moody's) in rating corporate obligations within its two highest ratings of
Prime-1 and Prime-2, and those described by Standard & Poor's Corporation
(S&P) in rating corporate obligations within its two highest ratings of A-1
and A-2.
Proposals to restrict or eliminate the federal income tax exemption for
interest on municipal obligations are introduced before Congress from time
to time. Proposals also may be introduced before state legislatures that
would affect the state tax treatment of the fund's distributions. If such
proposals were enacted, the availability of municipal obligations and the
value of the fund's holdings would be affected and the Trustees would
reevaluate the fund's investment objective and policies.
FUTURES AND OPTIONS. The following sections pertain to futures and options:
Asset Coverage for Futures and Options Positions, Combined Positions,
Correlation of Price Changes, Futures Contracts, Futures Margin Payments,
Limitations on Futures and Options Transactions, Liquidity of Options and
Futures Contracts, OTC Options, Purchasing Put and Call Options, and
Writing Put and Call Options.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account
cannot be sold while the futures or option strategy is outstanding, unless
they are replaced with other suitable assets. As a result, there is a
possibility that segregation of a large percentage of the fund's assets
could impede portfolio management or the fund's ability to meet redemption
requests or other current obligations.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures can
be held until their delivery dates, or can be closed out before then if a
liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Rule 4.5 under the
Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information are not
fundamental policies and may be changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter (OTC) options (options not
traded on exchanges) generally are established through negotiation with the
other party to the option contract. While this type of arrangement allows
the fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment).
Investments currently considered by the fund to be illiquid include
over-the-counter options. Also, FMR may determine some restricted
securities and municipal lease obligations to be illiquid. However, with
respect to over-the-counter options the fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the
assets held to cover the option and the nature and terms of any agreement
the fund may have to close out the option before expiration.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by a committee appointed by the
Board of Trustees. If through a change in values, net assets, or other
circumstances, the fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, or other
financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is
determined by reference to a specific instrument or statistic. Indexed
securities may have principal payments as well as coupon payments that
depend on the performance of one or more interest rates. Their coupon rates
or principal payments may change by several percentage points for every 1%
interest rate change. One example of indexed securities is inverse
floaters.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed,
and may also be influenced by interest rate changes. At the same time,
indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
INTERFUND BORROWING AND LENDING PROGRAM. Pursuant to an exemptive
order issued by the SEC, the fund has received permission to lend money to,
and borrow money from, other funds advised by FMR or its affiliates, but
it currently intends to participate in this program only as a
borrower. Interfund borrowings normally extend overnight but can
have a maximum duration of seven days. A fund will borrow through the
program only when the costs are equal to or lower than the costs of bank
loans. Loans may be called on one day's notice, and a fund may have to
borrow from a bank at a higher interest rate if an interfund loan is called
or not renewed.
INVERSE FLOATERS have variable interest rates that typically move in the
opposite direction from prevailing short-term interest rate levels - rising
when prevailing short-term interest rates fall, and vice versa. This
interest rate feature can make the prices of inverse floaters considerably
more volatile than bonds with comparable maturities.
MUNICIPAL LEASES and participation interests therein may take the form
of a lease, an installment purchase, or a conditional sale contract and are
issued by state and local governments and authorities to acquire land or a
wide variety of equipment and facilities. Generally, the fund will not hold
such obligations directly as a lessor of the property, but will purchase a
participation interest in a municipal obligation from a bank or other third
party. A participation interest gives the fund a specified, undivided
interest in the obligation in proportion to its purchased interest in the
total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt.
These may include voter referenda, interest rate limits, or public sale
requirements. Leases, installment purchases, or conditional sale contracts
(which normally provide for title to the leased asset to pass to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting their constitutional and
statutory requirements for the issuance of debt. Many leases and contracts
include "non-appropriation clauses" providing that the governmental issuer
has no obligation to make future payments under the lease or contract
unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Non-appropriation
clauses free the issuer from debt issuance limitations.
MUNICIPAL MARKET DISRUPTION RISK. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation or
litigation involving the taxation of municipal securities or the rights of
municipal securities holders in the event of a bankruptcy. Municipal
bankruptcies are relatively rare, and certain provisions of the U.S.
Bankruptcy Code governing such bankruptcies are unclear and remain
untested. Further, the application of state law to municipal issuers could
produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the
municipal securities market generally, certain specific segments of the
market, or the relative credit quality of particular securities. Any of
these effects could have a significant impact on the prices of some or all
of the municipal securities held by a fund.
MUNICIPAL SECTORS:
ELECTRIC UTILITIES INDUSTRY . The electric utilities industry
has been experiencing, and will continue to experience, increased
competitive pressures. Federal legislation in the last two years will open
transmission access to any electricity supplier, although it is not
presently known to what extent competition will evolve. Other risks
include: (a) the availability and cost of fuel, (b) the availability and
cost of capital, (c) the effects of conservation on energy demand, (d) the
effects of rapidly changing environmental, safety, and licensing
requirements, and other federal, state, and local regulations, (e) timely
and sufficient rate increases, and (f) opposition to nuclear power.
HEALTH CARE INDUSTRY . The health care industry is subject to
regulatory action by a number of private and governmental agencies,
including federal, state, and local governmental agencies. A major source
of revenues for the health care industry is payments from the Medicare and
Medicaid programs. As a result, the industry is sensitive to legislative
changes and reductions in governmental spending for such programs. Numerous
other factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and technological
advances which dramatically alter the need for health services or the way
in which such services are delivered; changes in medical coverage which
alter the traditional fee-for-service revenue stream; and efforts by
employers, insurers, and governmental agencies to reduce the costs of
health insurance and health care services.
HOUSING. H ousing revenue bonds are generally issued by a
state, county, city, local housing authority, or other public agency. They
generally are secured by the revenues derived from mortgages purchased with
the proceeds of the bond issue. It is extremely difficult to predict the
supply of available mortgages to be purchased with the proceeds of an issue
or the future cash flow from the underlying mortgages. Consequently, there
are risks that proceeds will exceed supply, resulting in early retirement
of bonds, or that homeowner repayments will create an irregular cash flow.
Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current laws
and regulations.
REFUNDING CONTRACTS. The fund may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding
indebtedness. Refunding contracts require the issuer to sell and the fund
to buy refunded municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future.
The fund generally will not be obligated to pay the full purchase price if
it fails to perform under a refunding contract. Instead, refunding
contracts generally provide for payment of liquidated damages to the issuer
(currently 15-20% of the purchase price). The fund may secure its
obligations under a refunding contract by depositing collateral or a letter
of credit equal to the liquidated damages provisions of the refunding
contract. When required by SEC guidelines, the fund will place liquid
assets in a segregated custodial account equal in amount to its obligations
under refunding contracts.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. The resale price reflects the
purchase price plus an agreed-upon incremental amount which is unrelated to
the coupon rate or maturity of the purchased security. To protect the fund
from risk that the original seller will not fulfill its obligation, the
securities are held in an account of the fund at a bank, marked-to-market
daily, and maintained at a value at least equal to the sale price plus the
accrued incremental amount. While it does not presently appear possible to
eliminate all risks from these transactions (particularly the possibility
that the value of the underlying security will be less than the resale
price, as well as delays and costs to the fund in connection with
bankruptcy proceedings), it is the fund's current policy to engage in
repurchase agreement transactions with parties whose creditworthiness has
been reviewed and found satisfactory by FMR.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it may be permitted to
sell a security under an effective registration statement. If, during such
a period, adverse market conditions were to develop, the fund might obtain
a less favorable price than prevailed when it decided to seek registration
of the security.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
STANDBY COMMITMENTS are puts that entitle holders to same-day settlement at
an exercise price equal to the amortized cost of the underlying security
plus accrued interest, if any, at the time of exercise. The fund may
acquire standby commitments to enhance the liquidity of portfolio
securities.
Ordinarily the fund will not transfer a standby commitment to a third
party, although it could sell the underlying municipal security to a third
party at any time. The fund may purchase standby commitments separate from
or in conjunction with the purchase of securities subject to such
commitments. In the latter case, the fund would pay a higher price for the
securities acquired, thus reducing their yield to maturity.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. FMR may
rely upon its evaluation of a bank's credit in determining whether to
support an instrument supported by a letter of credit. In evaluating a
foreign bank's credit, FMR will consider whether adequate public
information about the bank is available and whether the bank may be subject
to unfavorable political or economic developments, currency controls, or
other governmental restrictions that might affect the bank's ability to
honor its credit commitment.
Standby commitments are subject to certain risks, including the ability of
issuers of standby commitments to pay for securities at the time the
commitments are exercised; the fact that standby commitments are not
marketable by the fund; and the possibility that the maturities of the
underlying securities may be different from those of the commitments.
TENDER OPTION BONDS are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial
arrangement) with a tender agreement that gives the holder the option to
tender the bond at its face value. As consideration for providing the
tender option, the sponsor (usually a bank, broker-dealer, or other
financial institution) receives periodic fees equal to the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled with the
tender option, to trade at par on the date of such determination. After
payment of the tender option fee, the fund effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. In selecting tender option bonds for the fund, FMR will consider the
creditworthiness of the issuer of the underlying bond, the custodian, and
the third party provider of the tender option. In certain instances, a
sponsor may terminate a tender option if, for example, the issuer of the
underlying bond defaults on interest payments.
VARIABLE OR FLOATING RATE OBLIGATIONS, including certain participation
interests in municipal instruments, have interest rate adjustment formulas
that help stabilize their market values. Many variable and floating rate
instruments also carry demand features that permit the fund to sell them at
par value plus accrued interest on short notice.
In many instances bonds and participation interests have tender options or
demand features that permit the fund to tender (or put) the bonds to an
institution at periodic intervals and to receive the principal amount
thereof. The fund considers variable rate instruments structured in this
way (Participating VRDOs) to be essentially equivalent to other VRDOs it
purchases. The IRS has not ruled whether the interest on Participating
VRDOs is tax-exempt and, accordingly, the fund intends to purchase these
instruments based on opinions of bond counsel. A fund may also invest in
fixed-rate bonds that are subject to third party puts and in participation
interests in such bonds held by a bank in trust or otherwise.
ZERO COUPON BONDS do not make regular interest payments. Instead, they are
sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the funds by FMR pursuant to authority contained in the fund's
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR
considers various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; and the availability of
securities or the purchasers or sellers of securities. In addition, such
broker-dealers may furnish analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy,
and performance of accounts; effect securities transactions, and perform
functions incidental thereto (such as clearance and settlement). The
selection of such broker-dealers generally is made by FMR (to the extent
possible consistent with execution considerations) based upon the quality
of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund, or shares of other Fidelity
funds to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), a subsidiary of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute portfolio transactions on national securities
exchanges in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended December 31, 1995 and 1994, the fund's portfolio
turnover rates were 72% and 95%, respectively.
For fiscal 1995, 1994, and 1993, the fund paid no brokerage commissions.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with procedures believed to be appropriate and equitable for each fund. In
some cases this system could have a detrimental effect on the price or
value of the security as far as the fund is concerned. In other cases,
however, the ability of the fund to participate in volume transactions will
produce better executions and prices for the fund. It is the current
opinion of the Trustees that the desirability of retaining FMR as
investment adviser to the fund outweighs any disadvantages that may be said
to exist from exposure to simultaneous transactions.
VALUATIO N
Fidelity Service Company (FSC) normally determines each class's net asset
value per share (NAV) as of the close of the New York Stock Exchange (NYSE)
(normally 4:00 p.m. Eastern time). The valuation of portfolio securities is
determined as of this time for the purpose of computing each class's NAV
and, where applicable, offering price.
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Fixed-income securities may also
be valued on the basis of information furnished by a pricing service that
uses a valuation matrix which incorporates both dealer-supplied valuations
and electronic data processing techniques. Use of pricing services has
been approved by the Board of Trustees. A number of pricing services are
available, and the Trustees, on the basis of an evaluation of these
services, may use various pricing services or discontinue the use of any
pricing service.
Futures contracts and options are valued on the basis of market quotations,
if available.
Securities and other assets for which there is no readily available market
value are valued in good faith by a committee appointed by the Board of
Trustees. The procedures set forth above need not be used to determine the
value of the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method would more accurately
reflect the fair market value of such securities.

PERFORMANCE
Each class of shares m ay quote performance in various ways. All
performance information supplied by the fund in advertising is historical
and is not intended to indicate future returns. S hare price, yield,
and total return fluctuate in response to market conditions and other
factors, and the value of s hares when redeemed may be more or less
than their original cost.
YIELD CALCULATIONS. Yields for a class are computed by dividing the
class 's pro rata share of the applicable interest income for
a given 30-day or one-month period, net of expenses, by the average number
of shares of that class entitled to receive distributions during the
period, dividing this figure by the class 's net asset value (NAV) at
the end of the period, and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Income is
calculated for purposes of yield quotations in accordance with standardized
methods applicable to all stock and bond funds. In general, interest income
is reduced with respect to bonds trading at a premium over their par value
by subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses generally
are excluded from the calculation.
Income calculated for the purposes of calculating a class 's yield
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the compounding of
income assumed in yield calculations, a class 's yield may not equal
its distribution rate, the income paid to your account, or the income
reported in the fund's financial statements.
Yield information may be useful in reviewing a class 's performance
and in providing a basis for comparison with other investment alternatives.
However, each class 's yield fluctuates, unlike investments that pay
a fixed interest rate over a stated period of time. When comparing
investment alternatives, investors should also note the quality and
maturity of the portfolio securities of respective investment companies
they have chosen to consider.
Investors should recognize that in periods of declining interest rates ,
a class's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates , a class 's yield will
tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the fund from the continuous sale of its shares
will likely be invested in instruments producing lower yields than the
balance of the fund's holdings, thereby reducing a class's current
yield. In periods of rising interest rates, the opposite can be expected to
occur.
T ax-equivalent yield is the rate an investor would have to earn from
a fully taxable investment before taxes to equal a class 's tax-free
yield. Tax-equivalent yields are calculated by dividing a class 's
yield by the result of one minus a stated federal or combined federal and
state tax rate. If only a portion of a class 's yield is tax-exempt,
only that portion is adjusted in the calculation.
The following table shows the effect of a shareholder's tax status on
effective yield under federal income tax laws for 1996. It shows the
approximate yield a taxable security must provide at various income
brackets to produce after-tax yields equivalent to those of hypothetical
tax-exempt obligations yielding from 4% to 7%. Of course, no assurance can
be given that a class will achieve any specific tax-exempt yield.
While the fund invests principally in obligations whose interest is exempt
from federal income tax, other income received by the fund may be taxable.
1996 TAX RATES AND TAX-EQUIVALENT YIELDS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:

Taxable Income* Income 4% 5% 6% 7% 8% 9% 10%
Tax

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket** Then taxable-equivalent yield is :

$0-24,000 $0-40,100 15.0% 4.71% 5.88% 7.06% 8.24% 9.41% ___% ___%

$24,001-58,150 $40,101-96,900 28 .0 % 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%

$58,151-121,300 $96,901-147,700 31 .0 % 5.80% 7.25% 8.70% 10.14% 11.59% 13.04% 14.49%

$121,301-263,750 $147,701-263,750 36 .0 % 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%

$263,751-above $263,751-above 39.6% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%

</TABLE>

* Net amount subject to federal income tax after deductions and exemptions.
Assumes ordinary income only.
** Excludes the impact of the phaseout of personal exemptions, limitations
on itemized deductions, and other credits, exclusions, and adjustments
which may increase a taxpayer's marginal tax rate. An increase in a
shareholder's marginal tax rate would increase that shareholder's
tax-equivalent yield.
The fund may invest a portion of its assets in obligations that are subject
to federal income tax. When the fund invests in these obligations, its
tax-equivalent yields will be lower. In the table above, tax-equivalent
yields are calculated assuming investments are 100% federally tax-free.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of a class's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in a
class's NAV over a stated period. Average annual total returns are
calculated by determining the growth or decline in value of a hypothetical
historical investmen t over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same
result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative total return of 100% over ten years would
produce an average annual total return of 7.18%, which is the steady annual
rate of return that would equal 100% growth on a compounded basis in ten
years. While average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that
p erformance is not constant over time, but changes from year to
year, and that average annual total returns represent averaged figures as
opposed to the actual year-to-year performanc e .
In addition to average annual total returns, a class may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Average annual and cumulative
total returns may be quoted as a percentage or as a dollar amount, and may
be calculated for a single investment, a series of investments, or a series
of redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted on a
before-tax or after-tax basis. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using NAVs, adjusted NAVs, and
benchmark indices may be used to exhibit performance. An adjusted NAV
includes any distributions paid a nd reflects all elements o f
return. Unless otherwise indicated, a djusted NAVs are not adjusted
for sales charges, if any.
HISTORICAL FUND RESULTS. The following tabl e show s the
Initial Class' s yield, tax-equivalent yield, and total returns for
the periods ended December 31, 1995. The tax-equivalent yield is based
on a 36% federal income tax rate. Note that the fund may invest in
securities whose income is subject to the federal alternative minimum
tax.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thirty-Da Tax- One Five Ten One Five Ten
y Equivalent Year Years Years Year Years Years
Yield Yield

Municipal Bond :
4.58% 7.16% 18.15% 8.33% 8.73% 18.15% 49.17% 130.90%
Initial Class

</TABLE>

The following table shows the income and capital elements of the Initial
Class's cumulative total return. The table compares the Initial
Class 's return to the record of the Standard & Poor's Composite Index
of 500 Stocks (S&P 500(registered trademark)), the Dow Jones Industrial
Average (DJIA), and the cost of living (measured by the Consumer Price
Index, or CPI) over the same period. The CPI information is as of the
month - end closest to the initial investment date for the
fund. The S&P 500 and DJIA comparisons are provided to show how the
Initial Class 's total return compared to the record of a broad
average of common stocks and a narrower set of stocks of major industrial
companies, respectively, over the same period. Of course, since the fund
invests in fixed-income securities, common stocks represent a different
type of investment from the fund. Common stocks generally offer greater
growth potential than the fund, but generally experience greater price
volatility, which means greater potential for loss. In addition, common
stocks generally provide lower income than a fixed-income investment such
as the fund. Figures for the S&P 500 and DJIA are based on the prices of
unmanaged groups of stocks and, unlike the Initial Class's returns,
do not include the effect of paying brokerage commissions or other costs of
investing.
During the ten year period ended December 31, 1995, a hypothetical $10,000
investment in the Initial Class would have grown to $23,090,
assuming all distributions were reinvested. This was a period of
fluctuating interest rates and bond prices and the figures below should not
be considered representative of the dividend income or capital gain or loss
that could be realized from an investment in the Initial Class
today.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
M UNICIPAL BOND FUND - INITIAL CLASS INDICES

</TABLE>

1995 $ 11,146 $ 10,091 $ 1,853 $ 23,090 $ 40,054 $ 43,315 $ 14,044

1994 9,933 7,969 1,641 19,543 29,114 33,338 13,696

1993 11,712 8,134 1,510 21,356 28,735 31,759 13,339

1992 11,456 6,879 535 18,870 26,104 27,146 12,983

1991 11,415 5,766 142 17,323 24,251 25,300 12,617

1990 10,957 4,523 0 15,480 18,585 20,347 12,242

1989 10,957 3,522 0 14,479 19,183 20,457 11,537

1988 10,714 2,501 0 13,215 14,567 15,526 11,025

1987 10,243 1,524 0 11,767 12,492 13,394 10,558

1986 11,159 795 0 11,954 11,868 12,703 10,110

</TABLE>

* From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on January
1, 1986 , the net amount invested in Initial Class shares was
$10,000. The cost of the initial investment ($10,000), together with the
aggregate cost of reinvested dividends and capital gain distributions for
the period covered (their cash value at the time they were reinvested),
amounted to $21,786. If distributions had not been reinvested, the amount
of distributions earned from the Initial Class over time would have
been smaller, and cash payments for the period would have amounted to
$6,940 for dividends and $1,084 for capital gains distributions. Tax
consequences of different investments have not been factored into the above
figures.
PERFORMANCE COMPARISONS. P erformance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as
mutual fund rankings prepared by Lipper Analytical Services, Inc. (Lipper),
an independent service located in Summit, New Jersey that monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of
total return, assuming reinvestment of distributions, but does not take
sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. Lipper may also rank funds based on
yield. In addition to the mutual fund rankings, the fund's performance may
be compared to stock, bond, and money market mutual fund performance
indices prepared by Lipper or other organizations. Each class of the
fund may be compared to the Lehman Brothers Municipal Bond Index, a total
return performance benchmark for the investment-grade municipal bond
market. Issues included in the Index have a minimum credit rating of Baa
and a maturity of at least one year. To be included in the Index, an issue
must have been issued after December 31, 1990 and have a total amount
outstanding of $50 million or more. Subsequent to December 31, 1995, zero
coupon bonds and issues subject to the alternative minimum tax are included
in the Index. When comparing these indices, it is important to remember
the risk and return characteristics of each type of investment. For
example, while stock mutual funds may offer higher potential returns, they
also carry the highest degree of share price volatility. Likewise, money
market funds may offer greater stability of principal, but generally do not
offer the higher potential returns available from stock mutual funds.
From time to time, p erformance may also be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the
performance of Fidelity funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
A class may be compared in advertising to Certificates of Deposit
(CDs) or other investments issued by banks or other depository
institutions. Mutual funds differ from bank investments in several
respects. For example, the fund may offer greater liquidity or higher
potential returns than CDs, the fund does not guarantee your principal or
your return, and fund shares are not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's asset allocation funds and other Fidelity funds, products, and
services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
A fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The IBC/Donoghue's MONEY FUND AVERAGES(trademark)/All
Tax-Free, which is reported in the MONEY FUND REPORT(registered trademark),
covers over 395 Tax-Free money market funds. The Bond Fund Report
AverageS(trademark)/Municipal, which is reported in the BOND FUND
REPORT(registered trademark), covers over 509 bond funds. When evaluating
comparisons to money market funds, investors should consider the relevant
differences in investment objectives and policies. Specifically, money
market funds invest in short-term, high-quality instruments and seek to
maintain a stable $1.00 share price. The fund, however, invests in
longer-term instruments and its share price changes daily in response to a
variety of factors.
The fund may compare and contrast in advertising the relative advantages of
investing in a mutual fund versus an individual municipal bond. Unlike
tax-free mutual funds, individual municipal bonds offer a stated rate of
interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they do not offer
the reduced risk of a mutual fund that invests in many different
securities. The initial investment requirements and sales charges of many
tax-free mutual funds are lower than the purchase cost of individual
municipal bonds, which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include other Fidelity funds; retirement investing;
brokerage products and services; model portfolios or allocations; saving
for college or other goals; charitable giving; and the Fidelity credit
card. In addition, Fidelity may quote or reprint financial or business
publications and periodicals as they relate to current economic and
political conditions, fund management, portfolio composition, investment
philosophy, investment techniques, the desirability of owning a particular
mutual fund, and Fidelity services and products. Fidelity may also reprint,
and use as advertising and sales literature, articles from Fidelity Focus,
a quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. A class may quote various measures of volatility and
benchmark correlation in advertising. In addition, the fund may compare
these measures to those of other funds. Measures of volatility seek to
compare a class' s historical share price fluctuations or total
returns to those of a benchmark. Measures of benchmark correlation indicate
how valid a comparative benchmark may be. All measures of volatility and
correlation are calculated using averages of historical data. In
advertising, the fund may also discuss or illustrate examples of interest
rate sensitivity.
MOMENTUM INDICATORS indicate a class 's price movements over specific
periods of time. Each point on the momentum indicator represents a
class 's percentage change in price movements over that period.
E xamples of the effects of periodic investment plans, including the
principle of dollar cost averaging , may be advertised. In such a
program, an investor invests a fixed dollar amount in a class at
periodic intervals, thereby purchasing fewer shares when prices are high
and more shares when prices are low. While such a strategy does not assure
a profit or guard against loss in a declining market, the investor's
average cost per share can be lower than if fixed numbers of shares are
purchased at the same intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares during periods
of low price levels.
As of December 31, 1995, FMR advised over $26.5 billion in tax-free fund
assets, $81 billion in money market fund assets, $240 billion in equity
fund assets, $49 billion in international fund assets, and $23 billion in
Spartan fund assets. The fund may reference the growth and variety of money
market mutual funds and the adviser's innovation and participation in the
industry. The equity funds under management figure represents the largest
amount of equity fund assets under management by a mutual fund investment
adviser in the United States, making FMR America's leading equity (stock)
fund manager. FMR, its subsidiaries, and affiliates maintain a worldwide
information and communications network for the purpose of researching and
managing investments abroad.
In addition to performance rankings, the fund may compare each
class's total expense ratio to the average total expense ratio of
similar funds tracked by Lipper. A class 's total expense ratio is a
significant factor in comparing bond and money market investments because
of its effect on yield.
ADDITIONAL PURCHASE , EXCHANGE, AND REDEMPTION INFORMATION
The fund is open for business and the NAV of each class is
calculated each day the NYSE is open for trading. The NYSE has designated
the following holiday closings for 1996: New Year's Day, Presidents '
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day. Although FMR expects the same holiday schedule to
be observed in the future, the NYSE may modify its holiday schedule at any
time. In addition, the fund will not process wire purchases and redemptions
on days when the Federal Reserve Wire System is closed.
FSC normally determines each class's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To
the extent that portfolio securities are traded in other markets on days
when the NYSE is closed, a class 's NAV may be affected on days when
investors do not have access to the fund to purchase or redeem shares. In
addition, trading in some of the fund's portfolio securities may not occur
on days when the fund is open for business.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing each class's NAV. Shareholders receiving securities or
other property on redemption may realize a gain or loss for tax purposes,
and will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the fund is required to
give shareholders at least 60 days' notice prior to terminating or
modifying its exchange privilege. Under the Rule, the 60-day notification
requirement may be waived if (i) the only effect of a modification would be
to reduce or eliminate an administrative fee, redemption fee, or deferred
sales charge ordinarily payable at the time of an exchange, or (ii) the
fund suspends the redemption of the shares to be exchanged as permitted
under the 1940 Act or the rules and regulations thereunder, or the fund to
be acquired suspends the sale of its shares because it is unable to invest
amounts effectively in accordance with its investment objective and
policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. To the extent that the fund's income is designated as federally
tax-exempt interest, the daily dividends declared by the fund are also
federally tax-exempt. Short-term capital gains are distributed as dividend
income, but do not qualify for the dividends-received deduction. These
gains will be taxed as ordinary income. The fund will send each shareholder
a notice in January describing the tax status of dividend and capital gain
distributions (if any) for the prior year.
Shareholders are required to report tax-exempt income on their federal tax
returns. Shareholders who earn other income, such as Social Security
benefits, may be subject to federal income tax on up to 85% of such
benefits to the extent that their income, including tax-exempt income,
exceeds certain base amounts.
The fund purchases municipal securities that are free from federal income
tax based on opinions of counsel regarding their tax status. These opinions
generally will be based on covenants by the issuers or other parties
regarding continuing compliance with federal tax requirements. If at any
time the covenants are not complied with, distribution to shareholders of
interest on a security could become federally taxable retroactive to the
date the security was issued. For certain types of structure securities,
opinions of counsel may also be based on the effect of the structure on the
federal tax treatment of the income.
As a result of the Tax Reform Act of 1986, interest on certain "private
activity" securities is subject to the federal alternative minimum tax
(AMT), although the interest continues to be excludable from gross income
for other tax purposes. Interest from private activity securities will be
considered tax-exempt for purposes of the fund's policies of investing so
that at least 80% of its assets are invested in municipal securities whose
interest is free from federal income tax. Interest from private activity
securities is a tax preference item for the purposes of determining whether
a taxpayer is subject to the AMT and the amount of AMT to be paid, if any.
Private activity securities issued after August 7, 1986 to benefit a
private or industrial user or to finance a private facility are affected by
this rule.
A portion of the gain on bonds purchased with market discount after April
30, 1993 and short-term capital gains distributed by the fund are taxable
to shareholders as dividends, not as capital gains.
Corporate investors should note that a tax preference item for purposes of
the corporate AMT is 75% of the amount by which adjusted current earnings
(which includes tax-exempt interest) exceeds the alternative minimum
taxable income of the corporation. If a shareholder receives an
exempt-interest dividend and sells shares at a loss after holding them for
a period of six months or less, the loss will be disallowed to the extent
of the amount of the exempt-interest dividend.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund, and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes. Short-term capital gains distributed by
the fund are taxable to shareholders as dividends, not as capital gains.
As of December 31, 1995, the fund had a capital loss carryforward of
approximately $27,853,000. This loss carryforward will expire on December
31, 2003 and is available to offset future capital gains.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some futures contracts and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
The fund is treated as a separate entity from the other funds of Fidelity
Municipal Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent organized in
1972. The voting common stock of FMR Corp. is divided into two classes.
Class B is held predominantly by members of the Edward C. Johnson 3d family
and is entitled to 49% of the vote on any matter acted upon by the voting
common stock. Class A is held predominantly by non-Johnson family member
employees of FMR Corp. and its affiliates and is entitled to 51% of the
vote on any such matter. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Under the Investment Company Act of 1940 (the 1940 Act),
control of a company is presumed where one individual or group of
individuals owns more than 25% of the voting stock of that company.
Therefore, through their ownership of voting common stock and the execution
of the shareholders' voting agreement, members of the Johnson family may be
deemed, under the 1940 Act, to form a controlling group with respect to FMR
Corp.
At present, the principal operating activities of FMR Corp. are those
conducted by three of its divisions as follows: FSC, which is the transfer
and shareholder servicing agent for certain of the funds advised by FMR;
Fidelity Investments Institutional Operations Company, which performs
shareholder servicing functions for institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. The
business address of each Trustee and officer who is an "interested person"
(as defined in the Investment Company Act of 1940) is 82 Devonshire Street,
Boston, Massachusetts 02109, which is also the address of FMR. The business
address of all the other Trustees is Fidelity Investments, P.O. Box 9235,
Boston, Massachusetts 02205-9235. Those Trustees who are "interested
persons" by virtue of their affiliation with either the trust or FMR are
indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d (6 6 ), Trustee and President, is Chairman,
Chief Executive Officer and a Director of FMR Corp.; a Director and
Chairman of the Board and of the Executive Committee of FMR; Chairman and a
Director of FMR Texas Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD (5 5 ), Trustee and Senior Vice President, is
President of FMR; and President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX (6 4 ), Trustee (1991), is a consultant to Western Mining
Corporation (1994). Prior to February 1994, he was President of Greenhill
Petroleum Corporation (petroleum exploration and production). Until March
1990, Mr. Cox was President and Chief Operating Officer of Union Pacific
Resources Company (exploration and production). He is a Director of
Sanifill Corporation (non-hazardous waste, 1993) and CH2M Hill Companies
(engineering). In addition, he serves o n the Board of Directors of
the Texas State Chamber of Commerce, and he is a member of advisory
boards of Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS (64), Trustee (1992). Prior to her retirement in
September 1991, Mrs. Davis was the Senior Vice President of Corporate
Affairs of Avon Products, Inc. She is currently a Director of BellSouth
Corporation (telecommunications), Eaton Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail stores), and previously served as a
Director of Hallmark Cards, Inc. (1985-1991) and Nabisco Brands, Inc. In
addition, she is a member of the President's Advisory Council of The
University of Vermont School of Business Administration.
RICHARD J. FLYNN (72), Trustee and Chairman of the non-interested
Trustees , is a financial consultant. Prior to September 1986, Mr. Flynn
was Vice Chairman and a Director of the Norton Company (manufacturer of
industrial devices). He is currently a Trustee of College of the Holy Cross
and Old Sturbridge Village, Inc., and he previously served as a Director of
Mechanics Bank (1971-1995).
E. BRADLEY JONES (68), Trustee . Prior to his retirement in 1984, Mr.
Jones was Chairman and Chief Executive Officer of LTV Steel Company. He is
a Director of TRW Inc. (original equipment and replacement products),
Cleveland-Cliffs Inc . (mining), Consolidated Rail Corporation,
Birmingham Steel Corporation, and RPM, Inc. (manufacturer of chemical
products ) , and he previously served as a Director of NACCO
Industries, Inc. (mining and marketing, 1985-1995) and Hyster-Yale
Materials Handling, Inc. (1985-1995). In addition, he serves as a Trustee
of First Union Real Estate Investments, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK (63), Trustee, is Executive-in-Residence (1995) at Columbia
University Graduate School of Business and a financial consultant. From
1987 to January 1995, Mr. Kirk was a Professor at Columbia University
Graduate School of Business. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance), and he previously served as a Director of
Valuation Research Corp. (appraisals and valuations, 1993-1995). In
addition, he serves as Chairman of the Board of Directors of the National
Arts Stabilization Fund, Vice Chairman of the Board of Trustees of the
Greenwich Hospital Association, a Member of the Public Oversight Board of
the American Institute of Certified Public Accountants' SEC Practice
Section (1995) , and as a Public Governor of the National Association of
Securities Dealers, Inc. (1996) .
*PETER S. LYNCH (5 3 ), Trustee (1990) is Vice Chairman and Director
of FMR (1992). Prior to May 31, 1990, he was a Director of FMR and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals) and Morrison Knudsen Corporation (engineering
and construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield (1989) and Society
for the Preservation of New England Antiquities, and as an Overseer of the
Museum of Fine Arts of Boston.
GERALD C. McDONOUGH (6 7 ), Trustee and Vice-Chairman of the
non-interested Trustees , is Chairman of G.M. Management Group
(strategic advisory services). Prior to his retirement in July 1988, he was
Chairman and Chief Executive Officer of Leaseway Transportation Corp.
(physical distribution services). Mr. McDonough is a Director of
ACME-Cleveland Corp. (metal working, telecommunications and electronic
products), Brush-Wellman Inc. (metal refining), York International Corp.
(air conditioning and refrigeration), Commercial Intertech Corp. (water
treatment equipment, 1992), and Associated Estates Realty Corporation (a
real estate investment trust, 1993).
EDWARD H. MALONE (71), Trustee. Prior to his retirement in 1985, Mr. Malone
was Chairman, General Electric Investment Corporation and a Vice President
of General Electric Company. He is a Director of Allegheny Power Systems,
Inc. (electric utility), General Re Corporation (reinsurance) and Mattel
Inc. (toy manufacturer). In addition, he serves as a Trustee of the Naples
Philharmonic Center for the Arts and Rensselaer Polytechnic Institute, and
he is a member of the Advisory Boards of Butler Capital Corporation Funds
and Warburg, Pincus Partnership Funds.
MARVIN L. MANN (6 3 ), Trustee (1993) , is Chairman of the
Board, President, and Chief Executive Officer of Lexmark International,
Inc. (office machines, 1991). Prior to 1991, he held the positions of Vice
President of International Business Machines Corporation ("IBM") and
President and General Manager of various IBM divisions and subsidiaries.
Mr. Mann is a Director of M.A. Hanna Company (chemicals, 1993) and Infomart
(marketing services, 1991), a Trammell Crow Co. In addition, he serves as
the Campaign Vice Chairman of the Tri-State United Way (1993) and is a
member of the University of Alabama President's Cabinet .
THOMAS R. WILLIAMS (67), Trustee, is President of The Wales Group, Inc.
(management and financial advisory services). Prior to retiring in 1987,
Mr. Williams served as Chairman of the Board of First Wachovia Corporation
(bank holding company), and Chairman and Chief Executive Officer of The
First National Bank of Atlanta and First Atlanta Corporation (bank holding
company). He is currently a Director of BellSouth Corporation
(telecommunications), ConAgra, Inc. (agricultural products), Fisher
Business Systems, Inc. (computer software), Georgia Power Company (electric
utility), Gerber Alley & Associates, Inc. (computer software), National
Life Insurance Company of Vermont, American Software, Inc., and AppleSouth,
Inc. (restaurants, 1992).
FRED L. HENNING, JR. (5 7 ), Vice President, is Vice President of
Fidelity's money market (1994) and fixed-income (1995) funds and Senior
Vice President of FMR Texas Inc.
ARTHUR S. LORING (48), Secretary, is Senior Vice President (1993) and
General Counsel of FMR, Vice President-Legal of FMR Corp., and Vice
President and Clerk of FDC.
KENNETH A. RATHGEBER (4 9 ), Treasurer (1995), is Treasurer of the
Fidelity funds and is an employee of FMR (1995). Before joining FMR, Mr.
Rathgeber was a Vice President of Goldman Sachs & Co. (1978-1995), where he
served in various positions, including Vice President of Proprietary
Accounting (1988-1992), Global Co-Controller (1992-1994), and Chief
Operations Officer of Goldman Sachs (Asia) LLC (1994-1995).
JOHN H. COSTELLO (49), Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH (50), Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance Officer of FMR Corp. (1993-1994) and Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993) .
The following table sets forth information describing the compensation of
each current Trustee of the fund for his or her services as trustee for the
fiscal year ended December 31, 1995.
COMPENSATION TABLE

J. Gary Burkhead ** $ 0 $ 0 $ 0 $ 0

Ralph F. Cox 439 5,200 52,000 128,000

Phyllis Burke Davis 429 5,200 52,000 125,000

Richard J. Flynn 549 0 52,000 160,500

Edward C. Johnson 3d ** 0 0 0 0

E. Bradley Jones 439 5,200 49,400 128,000

Donald J. Kirk 451 5,200 52,000 129,500

Peter S. Lynch ** 0 0 0 0

Gerald C. McDonough 440 5,200 52,000 128,000

Edward H. Malone 439 5,200 44,200 128,000

Marvin L. Mann 439 5,200 52,000 128,000

Thomas R. Williams 429 5,200 52,000 125,000

</TABLE>

(dagger) For the fiscal year ended December 31, 1995, certain of the
non-interested trustees accrued deferred compensation as follows: [trustee
name, dollar amount of deferred compensation]; [trustee name, dollar amount
of deferred compensation]; [trustee name, dollar amount of deferred
compensation].
* Information is as of December 31, 1995 for 219 funds in the complex.
** Interested trustees of the fund are compensated by FMR.
The non-interested Trustees may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of a Deferred
Compensation Plan (the "Plan"). Under the Plan, compensation deferred by a
Trustee is periodically adjusted as though an equivalent amount had been
invested and reinvested in shares of one or more funds in the complex
designated by such Trustee (designated securities). The amount paid to the
Trustee under the Plan will be determined based upon the performance of
such investments. Deferral of Trustees' fees in accordance with the Plan
will have a negligible effect on the fund's assets, liabilities, and net
income per share, and will not obligate the fund to retain the services of
any Trustee or to pay any particular level of compensation to the Trustee.
The fund may invest in such designated securities without shareholder
approval.
Un der a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the
program .
On December 31, 1995 the Trustees and officers of the fund owned, in
the aggregate, less than 1% of the fund's total outstanding shares.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments,
compensates all officers of the fund and all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
laws; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Trustees.
In addition to the management fee payable to FMR and the fees payable to
UMB, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for the typesetting, printing, and
mailing of its proxy materials to shareholders, legal expenses, and the
fees of the custodian, auditor and non-interested Trustees. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund , has entered into a revised transfer agent agreement with
UMB, pursuant to which UMB bears the costs of providing these services to
existing shareholders. Other expenses paid by the fund include interest,
taxes, brokerage commissions, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. The fund is also
liable for such non-recurring expenses as may arise, including costs of any
litigation to which the fund may be a party, and any obligation it may have
to indemnify its officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated January
1, 1994 , which was approved by shareholders on December 15, 1993.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee composed of the sum of two elements: a group fee rate and an
individual fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown below on the left. The schedule below on the right shows the
effective annual group fee rate at various asset levels, which is the
result of cumulatively applying the annualized rates on the left. For
example, the effective annual fee rate at $366.9 billion of group net
assets - the approximate level for December 31, 1995 - was .1482%, which is
the weighted average of the respective fee rates for each level of group
net assets up to $366.9 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

0 - $3 billion .3700% $ 0.5 billion .3700%

3 - 6 .3400 25 .2664

6 - 9 .3100 50 .2188

9 - 12 .2800 75 .1986

12 - 15 .2500 100 .1869

15 - 18 .2200 125 .1793

18 - 21 .2000 150 .1736

21 - 24 .1900 175 .1695

24 - 30 .1800 200 .1658

30 - 36 .1750 225 .1629

36 - 42 .1700 250 .1604

42 - 48 .1650 275 .1583

48 - 66 .1600 300 .1565

66 - 84 .1550 325 .1548

84 - 120 .1500 350 .1533

120 - 174 .1450 400 .1507

174 - 228 .1400

228 - 282 .1375

282 - 336 .1350

Over 336 .1325

Prior to January 1, 1994, t he group fee rate was based on a
schedule with breakpoints ending at .1400% for average group assets in
excess of $174 billion. Th e group fee rate breakpoints shown above
for average group assets in excess of $120 billion and under $228 billion
were voluntarily adopted by FMR on January 1, 1992. The additional
breakpoints shown above for average group assets in excess of $228 billion
were voluntarily adopted by FMR on November 1, 1993. The fund's current
management contract reflects these extensions of the group fee rate
schedule.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints for average group assets
in excess of $156 billion and under $372 billion as shown in the
schedule below . The revised group fee rate schedule was identical to
the above schedule for average group assets under $156 billion.
On January 1, 1996 , FMR voluntarily added new breakpoints to the
revised schedule for average group assets in excess of $372 billion,
pending shareholder approval of a new management contract reflecting the
revised schedule and additional breakpoints. The revised group fee rate
schedule and the extensions provide for lower management fee rates as FMR's
assets under management increase. For average group assets in excess of
$156 billion, the revised group fee rate schedule with additional
breakpoints voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

120 - $156 billion .1450% $ 150 billion .1736%

156 - 192 .1400 175 .1690

192 - 228 .1350 200 .1652

228 - 264 .1300 225 .1618

264 - 300 .1275 250 .1587

300 - 336 .1250 275 .1560

336 - 372 .1225 300 .1536

372 - 408 .1200 325 .1514

408 - 444 .1175 350 .1494

444 - 480 .1150 375 .1476

480 - 516 .1125 400 .1459

Over 516 .1100 425 .1443

450 .1427

475 .1413

500 .1399

525 .1385

550 .1372

The individual fund fee rate is .25%. Based on the average group net assets
of the funds advised by FMR for December 1995, the annual management fee
rate would be calculated as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate

.1482% + .25% = .3982%

</TABLE>

On December 15, 1993 , shareholders of the fund approved an increase
in the fund's individual fund fee rate from .20% to .25%.
One-twelfth of this annual management fee rate is applied to the fund's net
assets averaged for the most recent month, giving a dollar amount, which is
the fee for that month.
During the fiscal years ended December 31, 1995, 1994, and 1993, FMR
received $4,282,000, $4,605,000, and $4,677,000, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.40%, .41%, and .37%, respectively, of the average net assets of the fund
for each of those years.
FMR may, from time to time, voluntarily reimburse all or a portion of a
class 's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase a class 's total returns and yield and repayment
of the reimbursement by a class will lower its total returns and
yield.
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its distribution plan expenses.
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on behalf of the
Initial Class (the Plan) pursuant to Rule 12b-1 under the 1940
Act (the Rule). The Rule provides in substance that a mutual fund may
not engage directly or indirectly in financing any activity that is
primarily intended to result in the sale of shares of a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The Plan,
as approved by the Trustees, allows the Initial Class and FMR to
incur certain expenses that might be considered to constitute indirect
payment by the fund of distribution expenses.
Under the Plan, if the payment of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of
Initial Class shares, such payment is authorized by the Plan. The
Plan also specifically recognizes that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of Initial Class shares of the
fund. In addition, the Plan provides that FMR may use its resources,
including its management fee revenues, to make payments to third parties
that assist in selling Initial Class shares of the fund, or to third
parties, including banks, that render shareholder support services.
Payments made by FMR to third parties during the fiscal year ended December
31, 1995 amounted to $5,000.
Prior to approving the Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan, and have
determined that there is a reasonable likelihood that the Plan will benefit
the Initial Class and its shareholders. In particular, the Trustees
noted that the Plan does not authorize payments by the Initial Class
other than those made to FMR under its management contract with the fund.
To the extent that the Plan gives FMR and FDC greater flexibility in
connection with the distribution of Initial Class shares of the
fund, additional sales of Initial Class shares may result.
Furthermore, certain shareholder support services may be provided more
effectively under the Plan by local entities with whom shareholders have
other relationships.
The Plan was approved by Initial Class shareholders on
December 31, 1986.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed
herein, and banks and financial institutions may be required to register as
dealers pursuant to state law.
The fund may execute portfolio transactions with, and purchase securities
issued by, depository institutions that receive payments under the Plan. No
preference for the instruments of such depository institutions will be
shown in the selection of investments.
CONTRACTS WITH FMR AFFILIATES
UMB is the transfer agent for the Initial Class. UMB has entered
into a sub-contract with FSC, an affiliate of FMR, under the terms of which
FSC performs the processing activities associated with providing transfer
agent and shareholder servicing functions for the Initial Class. Under
the sub-contract, FSC bears the expense of typesetting, printing, and
mailing prospectuses, statements of additional information, and all other
reports, notices, and statements to shareholders, with the exception of
proxy statements. FSC also pays all out-of-pocket expenses associated with
transfer agent services.
Under this arrangement, FSC receives annual account fees and asset-based
fees each based on account size and fund type for each retail account and
certain institutional accounts. With respect to certain institutional
retirement accounts, FSC receives annual account fees and asset-based fees
based on account type or fund type. These annual account fees are subject
to increase based on postal rate changes. FSC also collects small account
fees from certain accounts with balances of less than $2,500.
UMB has an additional sub-contract with FSC, pursuant to which FSC performs
the calculations necessary to determine each class's NAV and
dividends and maintains the fund's accounting records. The annual fee rates
for these pricing and bookkeeping services are based on the fund's average
net assets, specifically, .04 00 % for the first $500 million of
average net assets and .02 00 % for average net assets in excess of
$500 million. The fee is limited to a minimum of $60,000 and a maximum of
$800,000 per year.
Pricing and bookkeeping fees, including reimbursement for out-of-pocket
expenses, paid to FSC for fiscal 1995, 1994, and 1993 were $346,000,
$362,000, and $358,000, respectively. The transfer agent fee and charges
and pricing and bookkeeping fees described above are paid to FSC by UMB,
which is entitled to reimbursement from the appropriate class or the fund,
as applicable, for these expenses.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for s hares of the fund, which are continuously
offere d . Promotional and administrative expenses in connection with
the offer and sale of Initial Class shares are paid by FMR.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Advisor Municipal Bond Fund is a fund
of Fidelity Municipal Trust (the trust), an open-end management investment
company originally organized as a Maryland corporation on November
22, 1976 (the trust) and reorganized as a Massachusetts business
trust on June 22, 1984, at which time its name changed to Fidelity
Municipal Bond Portfolio. On February 20, 1996 , the fund ' s
name was changed to Fidelity Mun i cipal Bond Fund , and on June 30,
1996, the fund's name was changed to Fidelity Advisor Municipal Bond
Fund . On March 1, 1986, the trust's name was changed to Fidelity
Municipal Trust. Currently, there are seven funds of the trust: Fidelity
Advisor Municipal Bond Fund; Fidelity Aggressive Municipal Fund;
Fidelity Insured Municipal Income Fund; Fidelity Ohio Municipal Income
Fund; Fidelity Michigan Municipal Income Fund; Fidelity Minnesota Municipal
Income Fund; and Spartan Pennsylvania Municipal Income Fund. The
Declaration of Trust permits the Trustees to create additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of Trust
also provides that each fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the fund
and satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office. Claims asserted
against one class of shares may subject the holders of another class of
shares to certain liabilities.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar value of
net asset value you own. The Initial Class shares have no preemptive
or conversion rights; the voting and dividend rights, the right of
redemption, and the privilege of exchange are described in the Prospectus.
Shares are fully paid and nonassessable, except as set forth under the
heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of the trust , a fund, or a class
may, as set forth in the Declaration of Trust, call meetings of the
trust , fund , or class for any purpose related to the
trust , fund, or class, as the case may be, including, in the
case of a meeting of the entire trust, the purpose of voting on removal of
one or more Trustees. The trust or any fund may be terminated upon the sale
of its assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the
holders of a majority of the trust or the fund, as determined by the
current value of each shareholder's investment in the fund or trust. If not
so terminated, the trust and its funds will continue indefinitely.
CUSTODIAN. UMB Bank, n.a., 1010 Grand Avenue, Kansas City, Missouri, is
custodian of the assets of the fund. The custodian is responsible for the
safekeeping of a fund's assets and the appointment of the subcustodian
banks and clearing agencies. The custodian takes no part in determining the
investment policies of a fund or in deciding which securities are purchased
or sold by a fund. However, a fund may invest in obligations of the
custodian and may purchase securities from or sell securities to the
custodian. The Bank of New York and Chemical Bank , each
headquartered in New York, also may serve as a special purpose custodian of
certain assets in connection with pooled repurchase agreement transactions.
FMR, its officers and directors, its affiliated companies, and the Board of
Trustees may, from time to time, conduct transactions with various banks,
including banks serving as custodians for certain funds advised by FMR.
Transactions that have occurred to date include mortgages and personal and
general business loans. In the judgment of FMR, the terms and conditions of
those transactions were not influenced by existing or potential custodial
or other fund relationships.
AUDITOR. [INSERT NAME/ADDRESS IN 485(B) FILING: ___________________]
ser ves as the trust's independent accountant. The auditor examines
financial statements for the fund and provides other audit, tax, and
related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the fiscal
year ended December 31, 1995, are included in the fund's Annual Report,
which is a separate report supplied with this SAI. The fund's
financial statements and financial highlights are incorporated herein by
reference.
APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value of
each investment by the time remaining to its maturity, adding these
calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule.
For example, if it i s probable that the issuer of an instrument will
take advantage of a maturity-shortening device, such as a call, refunding,
or redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
When a municipal bond issuer has committed to call an issue of bonds and
has established an independent escrow account that is sufficient to, and is
pledged to, refund that issue, the number of days to maturity for the
prerefunded bond is considered to be the number of days to the announced
call date of the bonds.
FIDELITY ADVISOR MUNICIPAL BOND FUND: INSTITUTIONAL CLASS

CROSS REFERENCE SHEET
FORM N-1A

ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION

<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,11 ............................ Cover Page; Table of Contents

12 ............................ *

13 a - c ............................ Investment Policies and Limitations

d ............................ Portfolio Transactions

14 a - c ............................ Trustees and Officers

15 a ............................ Description of the Trust

b - c ............................ Trustees and Officers

16 a(i) ............................ FMR

(ii) ............................ Trustees and Officers

(iii),b ............................ Management Contract;

c ............................ Management Contract

d ............................ *

e ............................ *

f ............................ Distribution and Service Plans

g ............................ *

h ............................ Description of the Trust

i ............................ Contracts with FMR Affiliates

17 a,b,c,d ............................ Portfolio Transactions

e ............................ *

18 a ............................ Description of the Trust

b ............................ *

19 a ............................ Additional Purchase, Exchange and Redemption
Information

b ............................ Additional Purchase, Exchange and Redemption
Information; Valuation

c ............................ *

20 ............................ Distributions and Taxes

21 a, b ............................ Contracts with FMR Affiliates; Distribution and
Service Plans

c ............................ *

22 ............................ Performance; Appendix

23 ............................ Financial Statements

</TABLE>

* Not Applicable

FIDELITY ADVISOR MUNICIPAL BOND FUND
INSTITUTIONAL CLASS
A FUND OF FIDELITY MUNICIPAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
JUNE 30, 1996
This Statement of Additional Information (SAI) is not a prospectus
but should be read in conjunction with the fund's current Prospectus (dated
June 30, 1996) for Institutional Class shares. Please retain
this document for future reference. The fund's financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended December 31, 1995, are incorporated herein by reference. To obtain an
additional copy of this SAI , the Prospectus , or the
Annual Report, please contact Fidelity Distributors Corporation , 82
Devonshire Street, Boston, Massachusetts 02109 or your investment
professional.
TABLE OF CONTENTS PAGE

Investment Policies and Limitations

Portfolio Transactions

Valuation

Performance

Additional Purchase , Exchange, and Redemption Information

Distributions and Taxes

FMR

Trustees and Officers

Management Contract

Contracts with FMR Affiliates

Di stribution and Service Plans

Description of the Trust

Financial Statements

Appendix

INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
UMB Bank, n.a. (UMB)

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal If individual tax-exempt yield is:

Taxable Income* Income 4% 5% 6% 7% 8% 9% 10%
Tax

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return Joint Return Bracket** Then taxable-equivalent yield is:

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-24,000 $0-40,100 15.0% 4.71% 5.88% 7.06% 8.24% 9.41% ___% ___%

$24,001-58,150 $40,101-96,900 28.0% 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%

$58,151-121,300 $96,901-147,700 31.0% 5.80% 7.25% 8.70% 10.14% 11.59% 13.04% 14.49%

$121,301-263,750 $147,701-263,750 36.0% 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%

$263,751-above $263,751-above 39.6% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns1 Cumulative Total Returns1

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thirty-Da Tax- One Five Ten One Five Ten
y Equivalent Year Years Years Year Years Years
Yield2 Yield2

Municipal Bond - % % % % % % % %
Class A

Municipal Bond - % % % % % % % %
Class B

Municipal Bond - % % % % % % % %
Institutional Class

</TABLE>

1995 $ $ $ $ $ 40,054 $ 43,315 $ 14,044

1994 29,114 33,338 13,696

1993 28,735 31,759 13,339

1992 26,104 27,146 12,983

1991 24,251 25,300 12,617

1990 18,585 20,347 12,242

1989 19,183 20,457 11,537

1988 14,567 15,526 11,025

1987 12,492 13,394 10,558

1986 11,868 12,703 10,110

</TABLE>

MUNICIPAL BOND FUND - CLASS B INDICES

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended Value of Value of Value of Total S&P 500 DJIA Cost of
December 31 Initial Reinvested Reinvested Value Living*
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ 40,054 $ 43,315 $ 14,044

1994 29,114 33,338 13,696

1993 28,735 31,759 13,339

1992 26,104 27,146 12,983

1991 24,251 25,300 12,617

1990 18,585 20,347 12,242

1989 19,183 20,457 11,537

1988 14,567 15,526 11,025

1987 12,492 13,394 10,558

1986 11,868 12,703 10,110

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL BOND FUND - INSTITUTIONAL CLASS INDICES

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended Value of Value of Value of Total S&P 500 DJIA Cost of
December 31 Initial Reinvested Reinvested Value Living*
$10,000 Dividend Capital Gain
Investment Distributions Distributions

1995 $ $ $ $ $ 40,054 $ 43,315 $ 14,044

1994 29,114 33,338 13,696

1993 28,735 31,759 13,339

1992 26,104 27,146 12,983

1991 24,251 25,300 12,617

1990 18,585 20,347 12,242

1989 19,183 20,457 11,537

1988 14,567 15,526 11,025

1987 12,492 13,394 10,558

1986 11,868 12,703 10,110

</TABLE>

J. Gary Burkhead ** $ 0 $ 0 $ 0 $ 0

Ralph F. Cox 439 5,200 52,000 128,000

Phyllis Burke Davis 429 5,200 52,000 125,000

Richard J. Flynn 549 0 52,000 160,500

Edward C. Johnson 3d ** 0 0 0 0

E. Bradley Jones 439 5,200 49,400 128,000

Donald J. Kirk 451 5,200 52,000 129,500

Peter S. Lynch ** 0 0 0 0

Gerald C. McDonough 440 5,200 52,000 128,000

Edward H. Malone 439 5,200 44,200 128,000

Marvin L. Mann 439 5,200 52,000 128,000

Thomas R. Williams 429 5,200 52,000 125,000

</TABLE>

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

0 - $3 billion .3700% $ 0.5 billion .3700%

3 - 6 .3400 25 .2664

6 - 9 .3100 50 .2188

9 - 12 .2800 75 .1986

12 - 15 .2500 100 .1869

15 - 18 .2200 125 .1793

18 - 21 .2000 150 .1736

21 - 24 .1900 175 .1695

24 - 30 .1800 200 .1658

30 - 36 .1750 225 .1629

36 - 42 .1700 250 .1604

42 - 48 .1650 275 .1583

48 - 66 .1600 300 .1565

66 - 84 .1550 325 .1548

84 - 120 .1500 350 .1533

120 - 174 .1450 400 .1507

174 - 228 .1400

228 - 282 .1375

282 - 336 .1350

Over 336 .1325

Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate

120 - $156 billion .1450% $ 150 billion .1736%

156 - 192 .1400 175 .1690

192 - 228 .1350 200 .1652

228 - 264 .1300 225 .1618

264 - 300 .1275 250 .1587

300 - 336 .1250 275 .1560

336 - 372 .1225 300 .1536

372 - 408 .1200 325 .1514

408 - 444 .1175 350 .1494

444 - 480 .1150 375 .1476

480 - 516 .1125 400 .1459

Over 516 .1100 425 .1443

450 .1427

475 .1413

500 .1399

525 .1385

550 .1372

.1482% + .25% = .3982%

PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not applicable.
(b) Exhibits.
1. Declaration of Trust of Registrant, dated as of March 17, 1994, is
incorporated herein by reference to Exhibit 1 to Post-Effective Amendment
No. 67.
2. Bylaws of the Trust, as amended, are incorporated herein by reference
to Exhibit 2(a) to Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract, dated January 1, 1994, between Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(a) to Post-Effective Amendment No. 67.
(b) Management Contract, dated January 1, 1994, between Fidelity
Municipal Bond Portfolio (currently known as Fidelity Advisor Municipal
Bond Fund) and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(b) to Post-Effective Amendment No. 67.
(c) Management Contract, dated January 1, 1994, between Fidelity Insured
Tax-Free Portfolio (currently known as Fidelity Insured Municipal Income
Fund) and Fidelity Management & Research Company is incorporated herein by
reference to Exhibit 5(c) to Post-Effective Amendment No. 69.
(d) Management Contract, dated January 1, 1994, between Fidelity Michigan
Tax-Free High Yield Portfolio (currently known as Fidelity Michigan
Municipal Income Fund) and Fidelity Management & Research Company is
incorporated herein by reference as Exhibit 5(d) to Post-Effective
Amendment No. 64.
(e) Management Contract, dated January 1, 1994, between Fidelity
Minnesota Tax-Free Portfolio (currently known as Fidelity Minnesota
Municipal Income Fund) and Fidelity Management & Research Company is
incorporated herein by reference as Exhibit 5(e) to Post-Effective
Amendment No. 64.
(f) Management Contract, dated January 1, 1994, between Fidelity Ohio
Tax-Free High Yield Portfolio (currently known as Fidelity Ohio Municipal
Income Fund) and Fidelity Management & Research Company is incorporated
herein by reference as Exhibit 5(f) to Post-Effective Amendment No. 64.
(g) Management Contract, dated August 1, 1990, between Spartan
Pennsylvania Municipal High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) and Fidelity Management & Research
Company is incorporated herein by reference to Exhibit 5(g) to
Post-Effective Amendment No. 67.
6. (a) General Distribution Agreement between Fidelity Insured Tax-Free
Portfolio (currently known as Fidelity Insured Municipal Income Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(a) to Post-Effective Amendment No. 67.
(b) General Distribution Agreement between Fidelity Aggressive Tax-Free
Portfolio (currently known as Fidelity Aggressive Municipal Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(b) to Post-Effective Amendment No. 70.
(c) General Distribution Agreement between Fidelity Municipal Bond
Portfolio (currently known as Fidelity Advisor Municipal Bond Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 67.
(d) General Distribution Agreement between Fidelity Ohio Tax-Free High
Yield Portfolio (currently known as Fidelity Ohio Municipal Income Fund)
and Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(d) to Post-Effective Amendment No. 67.
(e) General Distribution Agreement between Fidelity Michigan Tax-Free
High Yield Portfolio (currently known as Fidelity Michigan Municipal Income
Fund) and Fidelity Distributors Corporation, dated April 1, 1987, is
incorporated herein by reference to Exhibit 6(e) to Post-Effective
Amendment No. 67.
(f) General Distribution Agreement between Fidelity Minnesota Tax-Free
Portfolio (currently known as Fidelity Minnesota Municipal Income Fund) and
Fidelity Distributors Corporation, dated April 1, 1987, is incorporated
herein by reference to Exhibit 6(f) to Post-Effective Amendment No. 67.
(g) General Distribution Agreement between Fidelity Pennsylvania
Municipal High Yield Portfolio (currently known as Spartan Pennsylvania
Municipal Income Fund) and Fidelity Distributors Corporation, dated April
1, 1987, is incorporated herein by reference to Exhibit 6(g) to
Post-Effective Amendment No. 67.
(h) Amendment to General Distribution Agreement, dated January 1, 1988,
between Fidelity Municipal Trust: Fidelity Insured Tax-Free Portfolio
(currently known as Fidelity Insured Municipal Income Fund); Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund); Fidelity Municipal Bond Portfolio (currently known as
Fidelity Advisor Municipal Bond Fund); Fidelity Ohio Tax-Free High Yield
Portfolio (currently known as Fidelity Ohio Municipal Income Fund);
Fidelity Michigan Tax-Free High Yield (currently known as Fidelity Michigan
Municipal Income Fund); Fidelity Minnesota Tax-Free Portfolio (currently
known as Fidelity Minnesota Municipal Income Fund); and Fidelity
Pennsylvania Municipal High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) and Fidelity Distributors Corporation
is incorporated herein by reference to Exhibit 6(h) to Post-Effective
Amendment No. 67.
(i) Form of Bank Agency Agreement (most recently revised May 1994) will
be filed by subsequent amendment.
(j) Form of Selling Dealer Agreement (most recently revised May 1994)
will be filed by subsequent amendment.
(k) Form of Selling Dealer Agreement for Bank Related Transactions (most
recently revised June 1994) will be filed by subsequent amendment.
7. (a) Retirement Plan for Non-Interested Person Trustees, Directors, or
General Partners, effective November 1, 1989, is incorporated herein by
reference to Exhibit 7 to Fidelity Union Street Trust's (File No. 2-50318)
Post-Effective Amendment No. 87.
(b) The Fee Deferral Plan for Non-Interested Person Directors and
Trustees of the Fidelity Funds, effective as of December 1, 1995 is
incorporated herein by reference to Exhibit 7(b) to Fidelity School Street
Trust's (File No. 2-57167) Post-Effective Amendment No. 47.
8. Custodian Agreement, Appendix A, Appendix B, and Appendix C, dated
December 1, 1994, between UMB Bank, n.a. and the Registrant is incorporated
herein by reference to Exhibit 8 to Fidelity California Municipal Trust's
(File No. 2-83367) Post-Effective Amendment No. 28.
9. None.
10. None.
11. Not applicable.
12. None.
13. None.
14. (a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(a) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(d) to Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(c) National Financial Services Corporation Individual Retirement
Account Custodial Agreement and Disclosure Statement, as currently in
effect, is incorporated herein by reference to Exhibit 14(h) to Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(d) Fidelity Portfolio Advisory Services Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(i) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in
effect, is incorporated herein by reference to Exhibit 14(e) to Fidelity
Union Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(f) National Financial Services Corporation Defined Contribution
Retirement Plan and Trust Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(k) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(g) The CORPORATEplan for Retirement Profit Sharing/401K Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(l)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(h) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(m)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(i) Fidelity Investments Section 403(b)(7) Individual Custodial
Account Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(f) to Fidelity Commonwealth
Trust's (File No. 2-52322) Post-Effective Amendment No. 57.
(j) Plymouth Investments Defined Contribution Retirement Plan and
Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(o) to Fidelity Commonwealth Trust's (File No.
2-52322) Post-Effective Amendment No. 57.
(k) The Fidelity Prototype Defined Benefit Pension Plan and Trust
Basic Plan Document and Adoption Agreement, as currently in effect, is
incorporated herein by reference to Exhibit 14(d) to Fidelity Securities
Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(l) The Institutional Prototype Plan Basic Plan Document, Standardized
Adoption Agreement, and Non-Standardized Adoption Agreement, as currently
in effect, is incorporated herein by reference to Exhibit 14(o) to Fidelity
Securities Fund's (File No. 2-93601) Post-Effective Amendment No. 33.
(m) The CORPORATEplan for Retirement 100SM Profit Sharing/401(k) Basic
Plan Document, Standardized Adoption Agreement, and Non-Standardized
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(f) to Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(n) The Fidelity Investments 401(a) Prototype Plan for Tax-Exempt
Employers Basic Plan Document, Standardized Profit Sharing Plan Adoption
Agreement, Non-Standardized Discretionary Contribution Plan No. 002
Adoption Agreement, and Non-Standardized Discretionary Contribution Plan
No. 003 Adoption Agreement, as currently in effect, is incorporated herein
by reference to Exhibit 14(g) to Fidelity Securities Fund's (File No.
2-93601) Post-Effective Amendment No. 33.
(o) Fidelity Investments 403(b) Sample Plan Basic Plan Document and
Adoption Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(p) to Fidelity Securities Fund's (File No. 2-93601)
Post-Effective Amendment No. 33.
(p) Fidelity Defined Contribution Retirement Plan and Trust Agreement,
as currently in effect, is incorporated herein by reference to Exhibit
14(c) to Fidelity Securities Fund's (File No. 2-93601) Post-Effective
Amendment No. 33.
(q) Form of Fidelity Advisor Funds Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(a) to Fidelity Advisor
Series II Trust's (File No. 33-6516) Post-Effective Amendment No. 20.
(r) Form of Plymouth Investments Fidelity Master Plan for Savings and
Investments: Plan and Trust Document, Adoption Agreement and Summary Plan
Description, as currently in effect, are incorporated herein by reference
to Exhibit 14(c) to Fidelity Advisor Series II Trust's (File No. 33-6516)
Post-Effective Amendment No. 13.
15. (a) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Insured Tax-Free Portfolio (currently known as Fidelity Insured Municipal
Income Fund) is incorporated herein by reference to Exhibit 15(a) to
Post-Effective Amendment No. 67.
(b) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Ohio Tax-Free High Yield Portfolio (currently known as Fidelity Ohio
Municipal Income Fund) is incorporated herein by reference to Exhibit 15(b)
to Post-Effective Amendment No. 67.
(c) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Michigan Tax-Free High Yield Portfolio (currently known as Fidelity
Michigan Municipal Income Fund) is incorporated herein by reference to
Exhibit 15(c) to Post-Effective Amendment No. 67.
(d) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Minnesota Tax-Free Portfolio (currently known as Fidelity Minnesota
Municipal Income Fund) is incorporated herein by reference to Exhibit 15(d)
to Post-Effective Amendment No. 67.
(e) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Pennsylvania Municipal High Yield Portfolio (currently known as Spartan
Pennsylvania Municipal Income Fund) is incorporated herein by reference to
Exhibit 15(e) to Post-Effective Amendment No. 67.
(f) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Municipal Bond Portfolio (currently known as Initial Class shares of
Fidelity Advisor Municipal Bond Fund) is incorporated herein by reference
to Exhibit 15(f) to Post-Effective Amendment No. 67.
(g) Distribution and Service Plan pursuant to Rule 12b-1 for Fidelity
Aggressive Tax-Free Portfolio (currently known as Fidelity Aggressive
Municipal Fund) is incorporated herein by reference to Exhibit 15(g) to
Post-Effective Amendment No. 43.
(h) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Class A shares of Fidelity Advisor Municipal Bond Fund will be
electronically filed by subsequent amendment.
(i) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Class B shares of Fidelity Advisor Municipal Bond Fund will be
electronically filed by subsequent amendment.
(j) Form of Distribution and Service Plan pursuant to Rule 12b-1 for
Institutional Class shares of Fidelity Advisor Municipal Bond Fund will be
electronically filed by subsequent amendment.
16. (a) Schedule for computation of performance calculations for Fidelity
Municipal bond fund was electronically filed and is incorporated by
reference to Exhibit 16(a) to Post-Effective Amendment No. 70.
(b) Schedule for computation of adjusted net asset values for Fidelity
Municipal bond fund was electronically filed and is incorporated by
reference to Exhibit 16(b) to Post-Effective Amendment No. 70.
17. A Financial Data Schedule for Fidelity Advisor Municipal Bond Fund
will be filed by subsequent amendment.
18. Form of Rule 18f-3 Plan will be electronically filed by subsequent
amendment.
Item 25. Persons Controlled by or under Common Control with Registrant
The Board of Trustees of the Registrant is substantially the same as the
boards of other funds advised by FMR, each of which has Fidelity Management
& Research Company as its investment adviser. In addition, the officers of
these funds are substantially identical. Nonetheless, Registrant takes the
position that it is not under common control with these other funds since
the power residing in the respective boards and officers arises as the
result of an official position with the respective funds.
Item 26. Number of Holders of Securities
March 31, 1996
Title of Class: Shares of Beneficial Interest
Title of Series: Number of Record Holders

Fidelity Municipal Bond Fund: (formerly Fidelity 850
Municipal Bond Portfolio)

Fidelity Advisor Municipal Bond Fund: Class A 0

Fidelity Advisor Municipal Bond Fund: Class B 0

Fidelity Advisor Municipal Bond Fund: Institutional 0
Class

Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit, or
proceeding in which he is involved by virtue of his service as a Trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Pursuant to Section 11 of the Distribution Agreement, the Registrant
agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the ground that the registration
statement, Prospectus, Statement of Additional Information, shareholder
reports or other information filed or made public by the Registrant
included a materially misleading statement or omission. However, the
Registrant does not agree to indemnify the Distributor or hold it harmless
to the extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Registrant by or on behalf
of the Distributor. The Registrant does not agree to indemnify the parties
against any liability to which they would be subject by reason of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the
obligations and duties under the Distribution Agreement.
Pursuant to the agreement by which Fidelity Service Company ("Service") is
appointed sub-transfer agent, the Transfer Agent agrees to indemnify
Service for its losses, claims, damages, liabilities and expenses to the
extent the Transfer Agent is entitled to and receives indemnification from
the Registrant for the same events. Under the Transfer Agency Agreement,
the Registrant agrees to indemnify and hold the Transfer Agent harmless
against any losses, claims, damages, liabilities, or expenses resulting
from:
(1) any claim, demand, action or suit brought by any person other than the
Registrant, which names the Transfer Agent and/or the Registrant as a party
and is not based on and does not result from the Transfer Agent's willful
misfeasance, bad faith, negligence or reckless disregard of its duties, and
arises out of or in connection with the Transfer Agent's performance under
the Transfer Agency Agreement; or
(2) any claim, demand, action or suit (except to the extent contributed to
by the Transfer Agent's willful misfeasance, bad faith, negligence or
reckless disregard of its duties) which results from the negligence of the
Registrant, or from the Transfer Agent's acting upon any instruction(s)
reasonably believed by it to have been executed or communicated by any
person duly authorized by the Registrant, or as a result of the Transfer
Agent's acting in reliance upon advice reasonably believed by the Transfer
Agent to have been given by counsel for the Registrant, or as a result of
the Transfer Agent's acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.

<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.; President
and Trustee of funds advised by FMR.

J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.

Peter S. Lynch Vice Chairman and Director of FMR.

Robert Beckwitt Vice President of FMR and of funds advised by FMR.

David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.

Stephan Campbell Vice President of FMR (1993).

Dwight Churchill Vice President of FMR (1993).

William Danoff Vice President of FMR (1993) and of a fund advised by
FMR.

Scott DeSano Vice President of FMR (1993).

Penelope Dobkin Vice President of FMR and of a fund advised by FMR.

Larry Domash Vice President of FMR (1993).

George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.

Robert K. Duby Vice President of FMR.

Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.

Kathryn L. Eklund Vice President of FMR.

Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.

Michael S. Gray Vice President of FMR and of funds advised by FMR.

Lawrence Greenberg Vice President of FMR (1993).

Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.

William J. Hayes Senior Vice President of FMR; Equity Division Leader.

Robert Haber Vice President of FMR and of funds advised by FMR.

Richard Haberman Senior Vice President of FMR (1993).

Daniel Harmetz Vice President of FMR and of a fund advised by FMR.

Ellen S. Heller Vice President of FMR.

</TABLE>

John Hickling Vice President of FMR (1993) and of funds advised by
FMR.

Robert F. Hill Vice President of FMR; Director of Technical Research.

Curtis Hollingsworth Vice President of FMR (1993).

Stephen P. Jonas Treasurer and Vice President of FMR (1993)); Treasurer of
FMR Texas Inc. (1993), Fidelity Management & Research
(U.K.) Inc. (1993), and Fidelity Management & Research
(Far East) Inc. (1993).

David B. Jones Vice President of FMR (1993).

Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.

Frank Knox Vice President of FMR (1993).

Robert A. Lawrence Senior Vice President of FMR (1993); High Income
Division Leader.

Alan Leifer Vice President of FMR and of a fund advised by FMR.

Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.

Bradford E. Lewis Vice President of FMR and of funds advised by FMR.

Malcolm W. MacNaught III Vice President of FMR (1993).

Robert H. Morrison Vice President of FMR; Director of Equity Trading.

David Murphy Vice President of FMR and of funds advised by FMR.

Andrew Offit Vice President of FMR (1993).

Judy Pagliuca Vice President of FMR (1993).

Jacques Perold Vice President of FMR.

Anne Punzak Vice President of FMR and of funds advised by FMR.

Lee Sandwen Vice President of FMR (1993).

Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.

Thomas T. Soviero Vice President of FMR (1993).

Richard Spillane Vice President of FMR; Senior Vice President and Director
of Operations and Compliance of FMR U.K. (1993).

Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.

Gary L. Swayze Vice President of FMR and of funds advised by FMR;
Tax-Free Fixed-Income Group Leader.

Thomas Sweeney Vice President of FMR (1993).

Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.

Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.

Robert Tucket Vice President of FMR (1993).

George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; Growth Group Leader.

Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.

Arthur S. Loring Senior Vice President (1993), Clerk, and General Counsel
of FMR; Vice President, Legal of FMR Corp.; Secretary of
funds advised by FMR.

</TABLE>

Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR.
(b)

Name and Principal Positions and Offices Positions and Offices

Business Address* With Underwriter With Registrant

Edward C. Johnson 3d Director Trustee and President

W. Humphrey Bogart Director None

Kurt A. Lange President and Treasurer None

Thomas W. Littauer Senior Vice President None

Arthur S. Loring Vice President and Clerk Secretary

* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity Service
Co., 82 Devonshire Street, Boston, MA 02109, or the funds' custodian UMB
Bank, n.a., 1010 Grand Avenue, Kansas City, MO 64106.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(1) The Registrant on behalf of Fidelity Aggressive Municipal Fund,
Fidelity Municipal Income Fund, Fidelity Insured Municipal Income Fund,
Fidelity Ohio Municipal Income Fund, Fidelity Michigan Municipal Income
Fund, Fidelity Minnesota Municipal Income Fund, and Spartan Pennsylvania
Municipal Income Fund, provided the information required by Item 5A is
contained in the annual report, undertakes to furnish each person to whom a
prospectus has been delivered, upon their request and without charge, a
copy of the Registrant's latest annual report to shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 71 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, and the Commonwealth of Massachusetts, on the 29th day of April
1996.

FIDELITY MUNICIPAL TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

(Signature) (Title) (Date)

<TABLE>
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<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee April 29, 1996

Edward C. Johnson 3d (Principal Executive Officer)

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/s/Kenneth A. Rathgeber Treasurer April 29, 1996

Kenneth A. Rathgeber

/s/J. Gary Burkhead Trustee April 29, 1996

J. Gary Burkhead

/s/Ralph F. Cox * Trustee April 29, 1996

Ralph F. Cox

/s/Phyllis Burke Davis * Trustee April 29, 1996

Phyllis Burke Davis

/s/Richard J. Flynn * Trustee April 29, 1996

Richard J. Flynn

/s/E. Bradley Jones * Trustee April 29, 1996

E. Bradley Jones

/s/Donald J. Kirk * Trustee April 29, 1996

Donald J. Kirk

/s/Peter S. Lynch * Trustee April 29, 1996

Peter S. Lynch

/s/Edward H. Malone * Trustee April 29, 1996

Edward H. Malone

/s/Marvin L. Mann * Trustee April 29, 1996

Marvin L. Mann

/s/Gerald C. McDonough* Trustee April 29, 1996

Gerald C. McDonough

/s/Thomas R. Williams * Trustee April 29, 1996

Thomas R. Williams

(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:

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Fidelity Advisor Annuity Fund Fidelity Income Fund
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust

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plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Djinis, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk

Edward C. Johnson 3d Donald J. Kirk

/s/J. Gary Burkhead /s/Peter S. Lynch

J. Gary Burkhead Peter S. Lynch

/s/Ralph F. Cox /s/Marvin L. Mann

Ralph F. Cox Marvin L. Mann

/s/Phyllis Burke Davis /s/Edward H. Malone

Phyllis Burke Davis Edward H. Malone

/s/Richard J. Flynn /s/Gerald C. McDonough

Richard J. Flynn Gerald C. McDonough

/s/E. Bradley Jones /s/Thomas R. Williams

E. Bradley Jones Thomas R. Williams

POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:

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<S> <C>
Fidelity Advisor Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Exchange Fund Fund
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund
Fidelity Hastings Street Trust
Fidelity Income Fund

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plus any other investment company for which Fidelity Management & Research
Company acts as investment adviser and for which the undersigned individual
serves as President and Board Member (collectively, the "Funds"), hereby
severally constitute and appoint J. Gary Burkhead, my true and lawful
attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorney-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission. I hereby ratify
and confirm all that said attorneys-in-fact or their substitutes may do or
cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d December 15, 1994

Edward C. Johnson 3d