(2_FIDELITY_LOGOS)FIDELITY
INSURED MUNICIPAL INCOME FUND
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses, the total returns for the past ten years would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Insured Municipal Income -1.16% 6.38% 42.91% 105.50%
Lehman Brothers Insured -0.77% 6.78% 46.94% n/a
Municipal
Bond Index
Insured Municipal Debt -1.79% 5.69% 41.49% 102.69%
Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You can
compare the fund's returns to the performance of the Lehman Brothers
Insured Municipal Bond Index - which includes bonds that are backed by
insurers with Aaa/AAA ratings and have maturities of at least one year. To
measure how the fund's performance stacked up against its peers, you can
compare it to the insured municipal debt funds average, which reflects the
performance of 52 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. over the last six months. Both benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Insured Municipal Income 6.38% 7.40% 7.47%
Lehman Brothers Insured Municipal 6.78% 8.00% n/a
Bond Index
Insured Municipal Debt 5.69% 7.17% 7.31%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960712 135145 S00000000000001
Insured Muni Income LB Municipal Bond
00013 LB015
1986/06/30 10000.00 10000.00
1986/07/31 9999.36 10060.70
1986/08/31 10495.86 10511.12
1986/09/30 10467.33 10537.50
1986/10/31 10699.93 10719.48
1986/11/30 10877.28 10931.84
1986/12/31 10857.38 10901.66
1987/01/31 11124.32 11229.91
1987/02/28 11209.37 11285.16
1987/03/31 11092.22 11165.54
1987/04/30 10365.75 10605.25
1987/05/31 10259.17 10552.65
1987/06/30 10415.18 10862.48
1987/07/31 10512.57 10973.28
1987/08/31 10572.63 10997.97
1987/09/30 9982.76 10592.47
1987/10/31 10186.37 10629.97
1987/11/30 10436.94 10907.52
1987/12/31 10629.87 11065.78
1988/01/31 11142.92 11459.95
1988/02/29 11235.32 11581.08
1988/03/31 10905.03 11446.74
1988/04/30 10967.85 11533.73
1988/05/31 10998.16 11500.40
1988/06/30 11185.26 11668.65
1988/07/31 11247.12 11744.73
1988/08/31 11288.38 11755.07
1988/09/30 11499.93 11967.83
1988/10/31 11799.26 12178.47
1988/11/30 11612.90 12066.91
1988/12/31 11819.20 12190.36
1989/01/31 12004.95 12442.45
1989/02/28 11871.90 12300.49
1989/03/31 11872.02 12271.09
1989/04/30 12194.91 12562.40
1989/05/31 12430.14 12823.32
1989/06/30 12598.44 12997.47
1989/07/31 12701.28 13174.36
1989/08/31 12575.79 13045.38
1989/09/30 12532.16 13006.51
1989/10/31 12667.82 13165.58
1989/11/30 12875.32 13395.98
1989/12/31 12936.03 13505.56
1990/01/31 12851.44 13441.67
1990/02/28 12979.57 13561.30
1990/03/31 12993.08 13565.37
1990/04/30 12823.36 13467.16
1990/05/31 13145.15 13761.15
1990/06/30 13252.38 13882.11
1990/07/31 13456.75 14086.18
1990/08/31 13237.31 13881.64
1990/09/30 13298.85 13889.56
1990/10/31 13494.97 14141.51
1990/11/30 13814.87 14425.90
1990/12/31 13851.83 14488.65
1991/01/31 14049.78 14683.09
1991/02/28 14147.06 14810.83
1991/03/31 14106.96 14816.16
1991/04/30 14268.08 15013.22
1991/05/31 14417.76 15146.69
1991/06/30 14379.39 15131.69
1991/07/31 14584.48 15316.00
1991/08/31 14751.83 15517.71
1991/09/30 14946.76 15719.75
1991/10/31 15078.07 15861.23
1991/11/30 15100.41 15905.48
1991/12/31 15455.15 16246.81
1992/01/31 15465.17 16283.85
1992/02/29 15472.51 16289.06
1992/03/31 15432.48 16295.09
1992/04/30 15563.93 16440.12
1992/05/31 15767.20 16633.62
1992/06/30 16020.57 16912.73
1992/07/31 16522.98 17419.77
1992/08/31 16300.54 17249.93
1992/09/30 16392.32 17362.74
1992/10/31 16014.75 17192.07
1992/11/30 16483.06 17499.98
1992/12/31 16677.90 17678.65
1993/01/31 16888.27 17884.26
1993/02/28 17705.61 18531.13
1993/03/31 17471.05 18335.26
1993/04/30 17663.80 18520.26
1993/05/31 17732.89 18624.34
1993/06/30 18059.19 18935.18
1993/07/31 18052.57 18959.99
1993/08/31 18501.52 19354.73
1993/09/30 18726.75 19575.18
1993/10/31 18703.29 19612.96
1993/11/30 18482.34 19440.17
1993/12/31 18987.01 19850.56
1994/01/31 19206.15 20077.25
1994/02/28 18626.32 19557.25
1994/03/31 17616.93 18760.88
1994/04/30 17663.81 18919.97
1994/05/31 17889.01 19084.01
1994/06/30 17701.91 18967.40
1994/07/31 18105.01 19315.08
1994/08/31 18143.72 19381.91
1994/09/30 17824.84 19097.38
1994/10/31 17442.86 18758.21
1994/11/30 17024.81 18419.06
1994/12/31 17519.89 18824.47
1995/01/31 18196.94 19362.47
1995/02/28 18817.29 19925.53
1995/03/31 19017.19 20154.47
1995/04/30 19016.09 20178.26
1995/05/31 19620.04 20822.14
1995/06/30 19317.79 20640.99
1995/07/31 19487.94 20836.67
1995/08/31 19742.51 21100.88
1995/09/30 19858.48 21234.45
1995/10/31 20181.90 21543.19
1995/11/30 20571.83 21900.60
1995/12/31 20791.62 22111.06
1996/01/31 20963.63 22278.00
1996/02/29 20800.07 22127.62
1996/03/31 20467.68 21844.83
1996/04/30 20377.14 21783.01
1996/05/31 20342.46 21774.30
1996/06/28 20550.06 22011.42
IMATRL PRASUN SHR__CHT 19960630 19960712 135150 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Insured Municipal Income Fund on June 30, 1986. As the chart
shows, by June 30, 1996, the value of the investment would have grown to
$20,550 - a 105.50% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index, which reflects the
performance of the investment-grade municipal bond market, did over the
same period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $22,015 - a 120.15% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER 31,
MONTHS
ENDED
JUNE 30,
1996 1995 1994 1993 1992 1991
Dividend return 2.41% 5.97% 5.01% 5.77% 6.13% 6.70%
Capital appreciation -3.57% 12.70% -12.74% 8.08% 1.78% 4.87%
return
Total return -1.16% 18.67% -7.73% 13.85% 7.91% 11.57%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.78(cents) 29.05(cents) 58.79(cents)
Annualized dividend rate 5.06% 4.96% 5.01%
30-day annualized yield 5.01% - -
30-day annualized tax-equivalent yield 7.83% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $11.49 over
the past month, $11.75 over the past six months and $11.73 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% 1996 federal tax bracket, but does not reflect payment of the
federal alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Insured Municipal
Income Fund
Q. HOW HAS THE FUND PERFORMED, GEORGE?
A. For the six- and 12-month periods ended June 30, 1996, the fund had
total returns of -1.16% and 6.38%, respectively. For the same six- and
12-month periods, the insured municipal debt funds average returned -1.79%
and 5.69%, respectively, as tracked by Lipper Analytical Services. The
Lehman Brothers Insured Municipal Bond Index, which measures insured
tax-free bond performance, returned -0.77% for the six-month period and
6.78% for the 12-month period.
Q. SO FAR IN 1996, THE BOND MARKETS HAVEN'T ENJOYED THE GAINS THEY DID IN
1995. WHAT FACTORS LED TO THE MARKETS' PERFORMANCE FOR THE FIRST HALF OF
THIS YEAR?
A. Basically, bond holders became increasingly more concerned that the
economy was strengthening. In February and March, investors reacted to
surprisingly good economic news, particularly on the employment front, by
sending yields higher and bond prices lower. The February employment
statistics revealed that more than 700,000 jobs were created, a level not
seen in more than a decade. A faster-growing economy tends to provoke fears
of inflation - which hadn't been much of a worry in 1995 - and rising
interest rates. Bond holders demanded higher yields because they worried
that inflation would eat away at the value of their fixed-income
investments. However, during the second quarter, the economic news was
mixed, and bonds prices ended the quarter roughly where they had begun.
Q. THE WORD "INSURED" OFTEN IMPLIES THAT YOU WON'T SUSTAIN ANY MONETARY
LOSSES. IS THAT THE CASE WITH INSURED MUNICIPAL BONDS AS WELL?
A. No, and it's important for shareholders to realize that insured bonds'
prices - like other bonds' prices - rise and fall with interest rate moves,
supply and demand, and other factors. When a municipal bond is insured, it
means that the bond's timely principal and interest payments are guaranteed
by a municipal bond insurer.
Q. THE FUND CONTINUED TO HAVE A BIAS TOWARD BONDS WITH MATURITIES RANGING
FROM 10 TO 20 YEARS. WHAT WAS THE ATTRACTION TO THESE BONDS?
A. I felt that securities in that maturity range offered a good combination
of yield relative to the risk involved. Bonds with shorter maturities
tended to offer much less incremental yield. On the other hand, bonds with
longer maturities carried more interest-rate risk; that is, the risk that
they will decline in value as a result of a rise in interest rates. That
said, I did take advantage of opportunities to buy a few longer-term bonds
when they appeared to be cheap late in the first quarter of the year.
Q. WHY DOES THE FUND HAVE AN OVERWEIGHTING - COMPARED TO THE INDEX - IN
BONDS ISSUED IN TEXAS?
A. In Texas, the fund owned securities issued by the Texas Permanent School
Fund (PSF). This program allows Texas school districts to borrow and the
bonds get a guarantee from this state entity, which serves as a type of
insurance that the bond's principal and interest payments will be paid. In
my view, these bonds are very high quality and generally traded cheaper
than other higher-rated bonds. In light of that, I believed that they
offered good value.
Q. WHAT OTHER ADDITIONS DID YOU MAKE TO THE FUND DURING THE PAST SIX
MONTHS?
A. I added some zero coupon bonds. These bonds make no periodic interest
payments, but instead are sold at a deep discount from their face value.
The buyer of a zero receives the rate of return by the gradual appreciation
of the security, which is redeemed at face value on a specified maturity
date. There's some confusion about these bonds among investors, and many
investors prefer bonds - known as coupon bonds - that pay periodic interest
payments. Those factors tend to make zero coupon bond prices attractive
relative to coupon bonds with similar maturities and credit qualities. For
example, I bought some Texas PSF zero coupon bonds.
Q. WHAT'S YOUR OUTLOOK?
A. Of course, the direction of interest rates - which is impossible to
predict - will have a significant bearing on the bond market's performance.
But factors influencing supply and demand could also play a role. The
municipal market recently has benefited from a favorable supply/demand
situation. The available supply of municipals is quite low, and there's not
a tremendous amount of new issuance. Additionally, the municipal market has
experienced rising demand. If those technical factors hold, they could
continue to help the muni market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks high current
income free from federal
income tax with preservation
of capital
START DATE: November 13, 1985
SIZE: as of June 30, 1996,
more than $333 million
MANAGER: George Fischer,
since 1995; manager, Fidelity
Municipal Bond Fund, since
October 1995; Spartan Bond
Strategist Fund, since 1993;
municipal bond analyst 1989
to 1993; joined Fidelity in 1989
(checkmark)
GEORGE FISCHER ON HIS
INVESTMENT STRATEGY:
"The supply of municipals has
been relatively tight
throughout the first six months
of 1996. That has diminished
somewhat the opportunities to
find the types of bonds I want to
own at attractive prices. So
I'm trying to avoid pressing,
and I'm resisting the
temptation to buy bonds at
any price. Instead, I've taken a
more patient approach by
waiting for opportunities to
develop.
"Generally speaking, I try to find
bonds that have asymmetric
performance characteristics.
By that I mean I target bonds
that theoretically won't do as
badly in a down market as
they will do well in an up
market. Sometimes this has to
do with a bond's call features
- - whether or not it can be
redeemed by its issuer prior to
maturity - its tax
consequences, or other
factors."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
California 13.1 10.4
Texas 9.6 8.0
Massachusetts 8.7 8.4
Illinois 7.7 7.6
New York 5.7 6.3
TOP FIVE SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 20.4 24.0
Electric Revenue 18.3 11.4
Health Care 14.8 17.4
Water & Sewer 9.6 8.8
Special Tax 8.1 7.1
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 14.0 14.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1996
6 MONTHS AGO
Years 8.1 8.1
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Row: 1, Col: 1, Value: 6.3
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 14.1
Row: 1, Col: 4, Value: 30.0
Row: 1, Col: 5, Value: 49.6
Row: 1, Col: 1, Value: 9.1
Row: 1, Col: 2, Value: 1.4
Row: 1, Col: 3, Value: 14.0
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 35.5
Aaa 79.6%
Aa, A 14.1%
Baa 0.0%
Short-term
investments 6.3%
Aaa 76.5%
Aa, A 14.0%
Baa 0.4%
Short-term
investments 9.1%
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 93.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALABAMA - 0.7%
Huntsville Gen. Oblig. Rfdg. Series D, 6% 8/1/08 $ 2,200,000 $ 2,288,000
ARIZONA - 0.8%
Arizona State Trans. Board Excise Tax Rev. Rfdg.
6% 7/1/05 (AMBAC Insured) 2,500,000 2,656,250
ARKANSAS - 0.4%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (e) 1,075,000 1,096,500
North Little Rock Elec. Rev. Rfdg. Series A,
6.50% 7/1/15 (MBIA Insured) 400,000 439,500
1,536,000
CALIFORNIA - 12.5%
Alameda County Ctfs. of Prtn. Rfdg. (Santa Rita Jail Proj.)
5.375% 6/1/09 (MBIA Insured) 1,000,000 986,250
California Dept. Wtr. Resource Center Valley Proj. Rev.
(Wtr. Sys.) Series M, 4.70% 12/1/06 3,795,000 3,609,994
California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series A,
5.30% 8/1/14 (MBIA Insured) 1,675,000 1,637,313
California Pub. Works Board Lease Gen. Oblig. Rev.:
Rfdg. (Dept. Corrections St. Prisons) Series A, 5%
12/1/19 (AMBAC Insured) 2,500,000 2,225,000
Unltd. Tax (Secretary of State) Series A, 6.50%
12/1/08 (AMBAC Insured) 1,000,000 1,096,250
California Rural Home Mtg. Fin. Auth. Lease Rev.
Series A, 4.45% 8/1/01 (MBIA Insured) 1,625,000 1,604,688
Compton Commty. Redev. Agcy. Gen. Oblig. Rfdg. Tax
Allocation Series A, 6.50% 8/1/13 (FSA Insured) 4,000,000 4,200,000
Culver City Redev. Fin. Auth. Rev. Rfdg. Tax Allocation
4.90% 11/1/08 (AMBAC Insured) 3,305,000 3,106,700
East Bay Muni. Util. Dist. Wastewtr. Treatment Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,500,000 2,948,750
M-S-R Pub. Pwr. Agcy. San Juan Proj. Rev. Series E,
6.50% 7/1/05 (MBIA Insured) 1,685,000 1,802,950
Oceanside Ctfs. of Prtn. 6% 8/1/08 (MBIA Insured) 1,350,000 1,417,500
Palm Desert Fing. Auth. Tax Allocation 6.3675%
4/1/22 (MBIA Insured) 3,000,000 3,056,250
Pleasant Hill Jt. Pwrs. Fin. Auth. Lease Rev. Cap. Impt. Prog.
Series A, 5% 12/1/12 (MBIA Insured) 1,490,000 1,368,938
Sacramento City Fing. Auth.:
(Cap. Appreciation) (Tax Allocation Proj.) Series B,
0% 11/1/07 (MBIA Insured) (d) 1,810,000 970,613
Lease Rev. Rfdg. Series A, 5.375% 11/1/14
(AMBAC Insured) 4,000,000 3,820,000
San Francisco City & County Swr. Rev. Rfdg. 5.90% 10/1/07
(AMBAC Insured) 4,000,000 4,135,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Santa Barbara Wtr. Rev. Rfdg. Series A, 4.80% 9/1/14
(AMBAC Insured) $ 1,400,000 $ 1,226,750
Univ. of California Rev. Rfdg. (Multiple Purpose Proj.)
Series D, 6.10% 9/1/10 (MBIA Insured) 1,000,000 1,030,000
West & Central Basin Fing. Auth. Rev. (West Basin Rfdg. Proj.)
Series A, 5% 8/1/13 (AMBAC Insured) 3,000,000 2,718,750
42,961,696
COLORADO - 3.1%
Adams County School Dist. No. 12 Unltd. Tax Gen.
Oblig. Rfdg. (Thornton) 6.20% 12/15/10
(FGIC Insured) 1,000,000 1,040,000
Colorado Health Facs. Auth. Rev. (PSL Health Sys. Proj.)
Series A, 7.25% 2/15/16 (FSA Insured)
(Pre-Refunded to 2/15/01 @ 102) (c) 2,000,000 2,237,500
Colorado Univ. Hosp. Auth. Hosp. Rev. Series A,
6.25% 11/15/12 (AMBAC Insured) 1,000,000 1,038,750
Denver City & County School Dist. #1 Rfdg. Series A,
0% 12/1/08 (MBIA Insured) (d) 10,400,000 5,161,000
Highlands Ranch Metropolitan Dist. #2 Rfdg. Cap.
Guaranty 6.50% 6/15/12 (FSA Insured) 1,000,000 1,075,000
Jefferson County Single Family Mtg. Rev. Series 1991 A,
8.875% 10/1/13 (MBIA Insured) 115,000 121,181
10,673,431
CONNECTICUT - 2.5%
Bridgeport Gen. Oblig. 8.75% 8/15/04 (FGIC Insured) 510,000 623,475
Connecticut Health & Edl. Facs. Auth. Rev. (St. Raphael Hosp.)
Series H, 5.25% 7/1/12 (AMBAC Insured) 3,035,000 2,932,569
Connecticut Hsg. Fin. Auth. (Mtg. Fin. Prog.) Sub-Series B1,
6.125% 5/15/18 3,000,000 3,011,250
Connecticut Resource Recovery Auth. Rev. 5.375% 11/15/10
(MBIA Insured) (a) 2,100,000 2,037,000
8,604,294
FLORIDA - 1.6%
Dade County Seaport Rev. Rfdg. Series 95,
6.20% 10/1/10 (MBIA Insured) 1,000,000 1,063,750
Florida State Division Bond Fin. Dept. Gen. Svcs. Rev. Dept.
(Enviromental Preservation 2000) Series A,
4.70% 7/1/07 (MBIA Insured) 3,000,000 2,853,750
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien)
6.50% 10/1/09 (FGIC Insured) (a) 1,500,000 1,635,000
5,552,500
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GEORGIA - 2.3%
Atlanta Downtown Dev. Auth. Rev. Rfdg
(Underground Atlanta Proj.) 6.25% 10/1/12 $ 1,250,000 $ 1,301,563
Georgia Gen. Oblig. Series C, 6.50% 7/1/07 4,360,000 4,845,050
Georgia Muni. Elec. Pwr. Rev. Series O,
7.80% 1/1/20 (AMBAC Insured) 1,500,000 1,578,750
7,725,363
HAWAII - 1.0%
Hawaii Gen. Oblig. Rfdg. Series BV, 7.25% 11/1/00 3,090,000 3,387,413
ILLINOIS - 7.6%
Chicago Gen. Oblig. Rfdg. Series A-2:
5.25% 1/1/01 (AMBAC Insured) 5,510,000 5,599,538
6.25% 1/1/15 (AMBAC Insured) 4,885,000 5,104,825
Chicago Motor Fuel Tax Rev. Rfdg. Series A,
5.375% 1/1/14 (AMBAC Insured) 2,000,000 1,910,000
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.)
(2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 1,000,000 1,050,000
6.375% 1/1/15 (MBIA Insured) 1,200,000 1,242,000
Chicago Residential Mtg. Rev. Rfdg. (Cap. Appreciation)
Series B, 0% 10/1/09 (MBIA Insured) (d) 7,470,000 2,969,325
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 2,500,000 2,959,375
Illinois Health Facs. Auth. Rev. (Swedish American Hosp.)
5.375% 11/15/13 (AMBAC Insured) 3,000,000 2,790,000
Illinois Reg'l. Trans. Auth. Series C, 7.75% 6/1/13
(FGIC Insured) 2,045,000 2,469,338
26,094,401
INDIANA - 2.1%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Gen'l. Hosp.) 7% 8/15/15 (FSA Insured) 2,000,000 2,230,000
Indiana Muni. Pwr. Agcy. (Pwr. Supply Sys. Rev.)
Series B, 5.50% 1/1/16 (MBIA Insured) 2,000,000 1,937,500
Indianapolis Arpt. Auth. Rev. Rfdg. Series A,
5.60% 7/1/15 (FGIC Insured) 1,000,000 963,750
Jasper County Poll. Cont. Rev. Rfdg. (Northern Indiana
Pub. Svc.) 7.10% 7/1/17 (MBIA Insured) 2,000,000 2,145,000
7,276,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
KANSAS - 2.4%
Labette County Mtg. Loan Rev. Series A,
6.25% 5/1/12 (GNMA Coll.) $ 1,300,000 $ 1,365,000
Reno County Mtg. Rev. Rfdg. (Single Family) Series B,
8.70% 9/1/11 595,000 635,906
Wichita Hosp. Rev. Series III-A, 6.465% 10/20/17
(MBIA Insured) 6,000,000 6,180,000
8,180,906
KENTUCKY - 1.2%
Jefferson County Hosp. Rev. (Alliant Health Sys. Proj.)
6.367% 10/1/08 (FGIC Insured) 4,000,000 4,220,000
LOUISIANA - 2.0%
Calcasieu Parish Pub. Trust Auth. Mtg. Rev. Rfdg.
Series A, 7.75% 6/1/12 1,110,000 1,166,888
East Baton Rouge Parish Sales & Use Tax Series ST-A,
4.80% 2/1/12 (FGIC Insured) 1,000,000 892,500
New Orleans Pub. Impt. Unltd. Tax 7% 9/1/19
(FGIC Insured) (Pre-Refunded to 9/1/02 @ 100) (c) 1,000,000 1,110,000
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/09 (AMBAC Insured) (d) 3,000,000 1,413,750
Orleans Parish School Board Rfdg. Series B,
5.20% 2/1/14 (FGIC Insured) 2,300,000 2,127,500
6,710,638
MARYLAND - 0.3%
Prince Georges County Hsg. Auth. Mtg. Rev. Rfdg.
(Riverview Terrace) Series A, 6.70% 6/20/20 1,000,000 1,041,250
MASSACHUSETTS - 8.7%
Boston Gen. Oblig. Series A:
4.875% 9/1/09 (FSA Insured) 1,000,000 921,250
4.875% 9/1/11 (FSA Insured) 1,925,000 1,737,313
Boston Metropolitan Dist. Gen. Oblig. Rfdg. 8% 12/1/03
(MBIA Insured) 1,260,000 1,485,225
Chelsea Gen. Oblig. (School Proj. Loan Account 1948)
7% 6/15/03 (AMBAC Insured) 1,160,000 1,299,200
Haverhill Gen. Oblig. Rfdg. Series A, 6.70% 9/1/10
(AMBAC Insured) 5,000,000 5,325,000
Holyoke Gen. Oblig. Ltd. Tax 8.15% 6/15/06
(MBIA Insured) (Pre-Refunded to 6/15/02 @ 103) (c) 2,205,000 2,593,631
Massachusetts Gen. Oblig. Consolidated Loan Series C,
7.25% 12/1/00 (FGIC Insured) 1,000,000 1,078,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Bentley College) Series H, 6.90% 7/1/21
(MBIA Insured) $ 6,720,000 $ 7,165,193
(Northeastern Univ.) Series B, 7.60% 10/1/10
(AMBAC Insured) 1,000,000 1,080,000
Rfdg. (Massachusetts Gen. Hosp.) Series F, 6.25% 7/1/12
(AMBAC Insured) 2,000,000 2,122,500
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev. 5% 7/1/10 (AMBAC Insured) 1,930,000 1,787,663
Palmer Gen. Oblig. Rfdg. 5.50% 10/1/10 (MBIA Insured) 3,500,000 3,416,875
30,012,600
MICHIGAN - 1.7%
Jackson County Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(WA Foote Mem. Hosp.) Series A, 4.75% 6/1/15
(FGIC Insured) 2,000,000 1,735,000
Michigan Bldg. Auth. Rev. Series II, 6.25% 10/1/20
(MBIA Insured) 1,100,000 1,124,750
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of Mercy
Health Corp.) 5.375% 8/15/14 (MBIA Insured) 3,000,000 2,880,000
5,739,750
MINNESOTA - 4.1%
Edina Hosp. Sys. Rev. (Fairview Hosp.) Series A,
7.125% 7/1/19 (MBIA Insured) 2,780,000 2,998,925
Minneapolis & St. Paul Hsg. & Redev. Auth. Healthcare
Sys. Rev. Rfdg. (Healthspan Health Sys. Corp.)
Series A, 4.75% 11/15/18 (AMBAC Insured) 1,000,000 850,000
Minneapolis Health Care Facs. Rev. Rfdg. (Fairview Hosp. &
Healthcare) Series A, 5.30% 11/15/08 (MBIA Insured) 1,000,000 975,000
Minnesota Univ. Rfdg. 4.80% 8/15/03 5,000,000 4,912,500
St. Cloud Hosp. Facs. Auth. Rev. Rfdg (St. Cloud Hosp. Proj.)
Series C, 5.25% 10/1/13 (AMBAC Insured) 2,700,000 2,514,375
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Rev. Series B, 6% 1/1/04 (AMBAC Insured) 1,890,000 1,984,500
14,235,300
MISSOURI - 0.7%
Missouri Health & Edl. Facs. Auth. Health Facs. Rev.
(Barnes Jewish-Christian Health) 5.25% 5/15/12 2,390,000 2,276,475
MONTANA - 0.3%
Montana Univ. Rev. Rfdg. Higher Ed. Series A,
5.05% 11/15/16 (MBIA Insured) 1,000,000 923,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MULTIPLE STATE - 0.4%
Washington D.C. Gen. Oblig. Metropolitan Area Trans.
Auth. Gross Rev. Rfdg. 5.25% 7/1/14 (FGIC Insured) $ 1,300,000 $ 1,231,750
NEW JERSEY - 2.6%
New Jersey Health Care Facs. Fin. Auth. Rev.
(Christ Hosp. Group Issue) 7% 7/1/06
(Connie Lee Insured) 1,635,000 1,843,463
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. Series C,
6.50% 1/1/09 (AMBAC Insured) 1,000,000 1,088,750
Passaic County Utils. Auth. Solid Waste Disp. Rev. Rfdg.
Resource Recovery 0% 3/1/00 (MBIA Insured) 5,880,000 4,917,150
Warren County Poll. Cont. Fing. Auth. Rev.
6.55% 12/1/06 (MBIA Insured) 1,000,000 1,092,500
8,941,863
NEW MEXICO - 2.8%
Albuquerque Arpt. Rev. Rfdg. (sub-lien) Series A,
6.70% 7/1/18 (AMBAC Insured) (a) 2,500,000 2,543,750
Albuquerque Refuse Removal & Disp. Rev. Rfdg. Resource
Recovery 5.25% 7/1/09 (AMBAC Insured) 2,600,000 2,551,250
Los Alamos County Inc. Util. Sys. Rev. Rfdg. Series A,
6% 7/1/15 (FSA Insured) 3,000,000 3,071,250
Rio Rancho Wtr. & Wastewtr. Rev. Series A,
5.90% 5/15/15 (FSA Insured) 1,600,000 1,602,000
9,768,250
NEW YORK - 5.7%
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series B, 5.875% 6/15/26 3,000,000 2,928,750
New York State Dorm. Auth. Lease Rev. Rfdg. (St. Univ.
Dorm. Facs.) Series A, 6% 7/1/03 (AMBAC Insured) 2,500,000 2,650,000
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.) Series A, 5.25% 5/15/15
(AMBAC Insured) 2,500,000 2,362,500
New York State Local Govt. Assistance Corp.:
Rfdg. Series C, 5.50% 4/1/17 1,000,000 963,750
Rfdg. Series E, 6% 4/1/14 2,000,000 2,065,000
Series A, 6% 4/1/16 5,000,000 5,018,750
New York State Med. Care Facs. Fing. Agcy. Rev.
(Mtg. Proj.):
Series A, 6.20% 2/15/15 (FHA Insured) 1,500,000 1,498,125
Series F, 6.20% 8/15/15 (FHA Insured) 1,000,000 1,003,750
New York State Urban Dev. Corp. Rev.
5.10% 1/1/09 (AMBAC Insured) 1,000,000 965,000
19,455,625
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NORTH CAROLINA - 0.9%
North Carolina Muni. Pwr. Agcy. #1 Rev. Rfdg.
(Catawba Elec.) 5% 1/1/18 (MBIA Insured) $ 3,300,000 $ 2,932,875
NORTH DAKOTA - 2.3%
Mercer County Poll. Cont. Rev. Rfdg. (Basin Elec. Pwr.)
(Antelope Valley Station Proj.) 7.20% 6/30/13
(AMBAC Insured) 6,500,000 7,515,625
North Dakota Hsg. Fin. Agcy. Single Family Mortgage Rev.
Series C, 8.75% 1/1/19 (Pre-Refunded to
7/1/96 @ 100) (c) 385,000 402,325
7,917,950
OREGON - 0.9%
Josephine County. School Dist. #7 5.75% 6/1/06
(FGIC Insured) 1,000,000 1,042,500
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15 1,875,000 1,938,281
2,980,781
PENNSYLVANIA - 2.8%
Cambria County Hosp. Dev. Auth. Hosp. Rev. Rfdg. & Impt.
(Conemaugh Valley Hosp.) Series 1992 B,
6.375% 7/1/18 (Connie Lee Insured) 1,500,000 1,533,750
Pennsylvania Convention Ctr. Auth. Rev. Series A, 6.70%
9/1/16 (FGIC Insured) (Escrowed to Maturity) (c) 2,000,000 2,222,500
Pennsylvania Hsg. Fin. Agcy. Rfdg.:
(Multi-Family Section 8) Series C,
8.10% 7/1/13 (FHA Insured) 2,000,000 2,172,500
(Single Family Mtg.) Series 51, 5.65% 4/1/20
(FHA Insured) (e) 1,500,000 1,492,500
Philadelphia Wtr. & Wastewtr. Rev. 6.25% 8/1/09
(MBIA Insured) 1,230,000 1,311,488
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys. Rev. Rfdg.
Series A, 5% 9/1/09 (FGIC Insured) 1,000,000 932,500
9,665,238
SOUTH CAROLINA - 2.8%
Lexington County Health Svcs. Dist. Inc. Hosp. Rev.
7% 10/1/08 (FSA Insured) 3,000,000 3,262,500
Richland County Hosp. Facs. Rev. (Commty. Provider
Pooled Loan) Series A, 7.125% 7/1/17
(FSA Insured) (Escrowed to Maturity) (c) 1,500,000 1,625,625
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
SOUTH CAROLINA - CONTINUED
South Carolina Ed. Assistance Auth. Insured Student Loan
Rev. 6.625% 9/1/06 (c)(e) $ 2,000,000 $ 2,090,000
South Carolina Svc. Auth. Rev. (Forward Deal
Settlement) 6.25% 1/1/03 (AMBAC Insured) 2,500,000 2,678,125
9,656,250
SOUTH DAKOTA - 0.3%
South Dakota Lease Rev. (Trust Ctfs.) Series A,
6.625% 9/1/12 (FSA Insured) 1,000,000 1,082,500
TENNESSEE - 2.3%
Knox County Health Edl. & Hsg. Facs. Rev. Rfdg.
(Sanders Alliance Hosp. Facs.) Series C,
5.75% 1/1/14 (MBIA Insured) 2,000,000 2,007,500
Metropolitan Gov't. Nashville & Davidson County
Wtr. & Swr. Rev. Rfdg. 0% 1/1/12
(FGIC Insured) (d) 5,600,000 5,747,000
7,754,500
TEXAS - 6.3%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
0% 11/15/10 (AMBAC Insured) (d) 2,400,000 1,053,000
Dallas Independent School Dist. Rfdg. (Cap. Appreciation)
0% 8/15/07 (PSF Insured) (d) 3,810,000 2,066,925
Fort Bend Independent School Dist. 7% 2/15/05
(PSF Insured) 2,500,000 2,821,875
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Sr. Lien) Series C,
0% 12/1/06 (AMBAC Insured) (d) 6,735,000 3,847,369
Matagorda County Navigation Dist. # 1 Rev. Rfdg.
(Houston Lt. & Pwr. Proj.) Series C, 7.125%
7/1/19 (FGIC insured) 1,700,000 1,842,375
San Antonio Elec. & Gas Rev. Rfdg. Series B,
0% 2/1/10 (FGIC Insured) 14,000,000 6,440,000
San Antonio Gen. Impt. Rfdg. Series C, 0% 8/1/06 1,920,000 1,108,800
Spring Independent School Dist. Gen. Oblig.
4.875% 8/15/10 (PSF Insured) 1,500,000 1,385,625
Texas A & M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 1,000,000 1,040,000
21,605,969
UTAH - 1.9%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.:
Series B:
6.50% 7/1/05 (MBIA Insured) 2,000,000 2,185,000
6.50% 7/1/10 (MBIA Insured) 1,000,000 1,091,250
Series C, 6% 7/1/02 (MBIA Insured) 3,000,000 3,168,750
6,445,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
VIRGINIA - 1.1%
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) $ 2,150,000 $ 2,219,875
6% 2/15/13 (AMBAC Insured) 1,460,000 1,501,975
Virginia Hsg. Dev. Auth. Residential Mtg. (Single Family Mtg.)
(Cap. Appreciation) Series 1983 B, 0% 9/1/14 1,215,000 185,288
3,907,138
WASHINGTON - 4.2%
Benton County Pub. Util. Dist. #1 Elec. Rev. Rfdg.
6% 11/1/04 (AMBAC Insured) (a) 1,740,000 1,792,200
Washington Pub. Pwr. Supply Sys. Rev. Rfdg.:
(Nuclear Proj. #1) Series B, 7.25% 7/1/12
(FGIC Insured) 1,500,000 1,629,375
(Nuclear Proj. #2):
Series A, 6% 7/1/07 2,500,000 2,550,000
5.55% 7/1/10 (FGIC Insured) 8,000,000 7,700,000
(Nuclear Proj. #3)
Series B, 7% 7/1/05 (FGIC Insured) 750,000 804,375
14,475,950
WYOMING - 0.4%
Wyoming Muni. Pwr. Agcy. Pwr. Supply Rev. Rfdg. Series A,
6.125% 1/1/16 (MBIA Insured) 1,500,000 1,528,125
TOTAL MUNICIPAL BONDS
(Cost $318,835,408) 321,446,031
MUNICIPAL NOTES (B) - 6.3%
ARIZONA - 0.3%
Coconino County Poll. Cont. Corp. Rev. (Arizona Pub. Svc.
Co. Navajo Proj.) Series A, 3.80%, LOC Bank of America
Nat'l. Trust & Savings, VRDN (e) 900,000 900,000
CALIFORNIA - 0.6%
Los Angeles Unified School Dist. Tax & Rev. Series B, TRAN
4.50% 9/30/97 2,000,000 2,013,220
ILLINOIS - 0.1%
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 3.80%, VRDN 500,000 500,000
MUNICIPAL NOTES (B) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
LOUISIANA - 0.1%
Calcasieu Parish, Inc. Ind. Dev. Board Envir. Rev. Rfdg.
(Citgo Petroleum Corp.) 3.80% LOC Banque Nat'l.
De Paris, VRDN (e) $ 200,000 $ 200,000
Plaquemines Parish Environmental Rev. (BP Exploration &
Oil, Inc. Proj.) Series 1994, 3.80%, VRDN (e) 100,000 100,000
300,000
NEW MEXICO - 1.3%
Alburquerque Arpt. Rev. Sub. Lien Series 1996-A,
3.40%, LOC Bayerische Landesbank Girozent, VRDN (e) 4,200,000 4,200,000
NORTH DAKOTA - 0.5%
North Dakota Hsg. Fin. Agcy. Rev. (Fing. Prog. - Home Mortgage
Fing. Proj.) Series C, 3.85% 4/3/97 (FGIC Insured) (d) 1,700,000
1,700,034
TEXAS - 3.3%
Brazos River Auth. Poll. Cont. Rev. Rfdg. (Texas Util. Elec. Co.)
Series 1995 C, 3.80%, LOC Swiss Bank, VRDN (e) 1,600,000 1,600,000
Brazos River Hbr. Navigation Dist. of Brazoria
(Dow Chemical Co. Proj.) Series 1996,
3.80% 4/1/26, VRDN (e) 2,700,000 2,700,000
Gulf Coast Ind. Dev. Auth. Solid Waste Disp. Rev.
(Citgo Petroleum Corp. Proj.) 3.80% 4/1/26 (e) 300,000 300,000
Gulf Coast Waste Disp. Auth. Poll. Cont. Rev.
(Amoco Oil Co. Proj.) 3.80%, VRDN (e) 5,000,000 5,000,000
Gulf Coast Waste Disp. Auth. Solid Waste Disp. Rev. Rfdg.
(Amoco Oil Co. Proj.) 3.80%, VRDN (e) 200,000 200,000
Trinity River Auth. Poll. Cont. Rev. Coll. (Texas Utils. Elec.
Co. Proj.) Series 96-A, 3.80% (BPA Bank of New York)
(AMBAC Insured), VRDN (e) 1,100,000 1,100,000
West Side Calhoun County Navigation Dist. Sewage & Solid
Waste Disp. Rev. (BP Chemicals Inc. Proj.)
Series 1996, 3.80% 4/1/31, VRDN (e) 500,000 500,000
11,400,000
VIRGINIA - 0.1%
Campbell County Ind. Dev. Auth. Facs. Rev. (Hadson Pwr.
#12-Altavista Proj.) Series 1990-A, 3.90%,
LOC Barclays Bank PLC, VRDN (e) 500,000 500,000
TOTAL MUNICIPAL NOTES
(Cost $19,500,000) 21,513,254
TOTAL INVESTMENTS - 100%
(Cost $338,335,408) $ 342,959,285
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
TRAN - Tax Revenue Anticipation Notes
LEGEND
1. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Security collateralized by an amount sufficient to pay interest and
principal.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 93.7% AAA, AA, A 93.2%
Baa 0.0% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 20.4%
Electric Revenue 18.3
Health Care 14.8
Water and Sewer 9.6
Special Tax 8.1
Housing 5.8
Education 5.8
Others (individually less than 5%) 17.2
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $338,335,623. Net unrealized appreciation aggregated
$4,623,662, of which $8,228,194 related to appreciated investment
securities and $3,604,532 related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $3,488,000 which will expire December 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $338,335,408) - $ 342,959,285
See accompanying schedule
Receivable for investments sold 3,361,642
Interest receivable 5,101,116
TOTAL ASSETS 351,422,043
LIABILITIES
Payable to custodian bank $ 148,904
Payable for investments purchased 8,351,748
Regular delivery
Delayed delivery 7,923,859
Payable for fund shares redeemed 439,334
Distributions payable 424,187
Accrued management fee 109,144
Other payables and accrued expenses 74,706
TOTAL LIABILITIES 17,471,882
NET ASSETS $ 333,950,161
Net Assets consist of:
Paid in capital $ 332,462,883
Accumulated undistributed net realized gain (loss) on (3,136,599)
investments
Net unrealized appreciation (depreciation) on 4,623,877
investments
NET ASSETS, for 28,751,956 shares outstanding $ 333,950,161
NET ASSET VALUE, offering price and redemption price $11.61
per share ($333,950,161 (divided by) 28,751,956 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 9,459,946
EXPENSES
Management fee $ 684,801
Transfer agent, accounting and custodian fees and 309,454
expenses
Non-interested trustees' compensation 680
Registration fees 29,419
Audit 18,201
Legal 1,138
Miscellaneous 2,625
Total expenses before reductions 1,046,318
Expense reductions (2,679) 1,043,639
NET INTEREST INCOME 8,416,307
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 531,808
Futures contracts (17,979) 513,829
Change in net unrealized appreciation (depreciation) on (13,051,189)
investment securities
NET GAIN (LOSS) (12,537,360)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (4,121,053)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 8,416,307 $ 18,106,515
Net interest income
Net realized gain (loss) 513,829 (1,009,852)
Change in net unrealized appreciation (depreciation) (13,051,189) 42,473,288
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (4,121,053) 59,569,951
FROM OPERATIONS
Distributions to shareholders (8,416,307) (18,106,515)
From net interest income
From net realized gain - (238,199)
TOTAL DISTRIBUTIONS (8,416,307) (18,344,714)
Share transactions 65,693,734 267,812,388
Net proceeds from sales of shares
Reinvestment of distributions 5,794,506 12,244,815
Cost of shares redeemed (82,017,816) (283,816,209)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (10,529,576) (3,759,006)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (23,066,936) 37,466,231
NET ASSETS
Beginning of period 357,017,097 319,550,866
End of period $ 333,950,161 $ 357,017,097
OTHER INFORMATION
Shares
Sold 5,550,233 23,337,005
Issued in reinvestment of distributions 493,192 1,056,828
Redeemed (6,949,407) (24,640,528)
Net increase (decrease) (905,982) (246,695)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1996
(UNAUDITED) 1995 1994 1993 C 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 12.040 $ 10.690 $ 12.370 $ 11.720 $ 11.630 $ 11.090
beginning of period
Income from .291 .599 .627 .655 .689 .702
Investment
Operations
Net interest income
Net realized and (.430) 1.358 (1.560) .930 .200 .540
unrealized
gain (loss)
Total from investment (.139) 1.957 (.933) 1.585 .889 1.242
operations
Less Distributions (.291) (.599) (.627) (.655) (.689) (.702)
From net interest
income
From net - (.008) (.120) (.280) (.110) -
realized gain
Total distributions (.291) (.607) (.747) (.935) (.799) (.702)
Net asset value, end $ 11.610 $ 12.040 $ 10.690 $ 12.370 $ 11.720 $ 11.630
of period
TOTAL RETURN B (1.16)% 18.67% (7.73) 13.85% 7.91% 11.57%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 333,950 $ 357,017 $ 319,551 $ 448,396 $ 371,122 $ 303,351
period (000 omitted)
Ratio of expenses to .61% .61% .58% .61% .63% .65%
average net assets A
Ratio of net interest 4.90% 5.24% 5.52% 5.31% 5.91% 6.23%
income to average A
net assets
Portfolio turnover rate 36% 61% 56% 78% 69% 62%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Insured Municipal Income Fund (the fund) is a fund of Fidelity
Municipal Trust (the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its
taxable income for its fiscal year. The schedule of investments includes
information regarding income taxes under the caption "Income Tax
Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net interest income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for market
discount and futures and options transactions.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net interest income and realized
and unrealized gain (loss). Any taxable gain remaining at fiscal year end
is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $60,339,501 and $67,711,332, respectively.
The market value of futures contracts opened and closed during the period
amounted to $9,921,127 and $9,894,748, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. In the event that these rates were lower
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
MANAGEMENT FEE - CONTINUED
than the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. The annual individual fund fee rate is .25%. For the
period, the management fee was equivalent to an annualized rate of .40% of
average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made to third parties under
the Plan during this period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. The Bank has
entered into a sub-contract with Fidelity Service Co. (FSC), an affiliate
of FMR, under which FSC performs the activities associated with the fund's
transfer and shareholder servicing agent and accounting functions. The fund
pays account fees and asset-based fees that vary according to account size
and type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $221,391 and $77,423, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .13% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $1,546 and $1,133,
respectively, under these arrangements.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Municipal Income
New York Municipal Income Insured
Ohio Municipal Income
Spartan(registered trademark) Aggressive Municipal
Spartan Arizona Municipal Income
Spartan California Intermediate
Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate
Municipal Income
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)FIDELITY
MUNICIPAL BOND
FUND
(A CLASS OF FIDELITY ADVISOR
MUNICIPAL BOND FUND)
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 26 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 30 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES AND
EXPENSES,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE
YOU INVEST OR
SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. A fund's return
includes changes in share price, reinvestment of any dividends (or income)
and capital gains (the profits the fund earns when it sells securities that
have grown in value). You can also look at the fund's income to measure
performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Municipal Bond -0.81% 6.19% 42.09% 110.03%
Lehman Brothers Municipal Bond -0.45% 6.64% 45.46% 120.15%
Index
General Municipal Debt Funds -1.38% 5.67% 42.53% 108.26%
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You can
compare the fund's returns to the performance of the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for municipal
bonds with minimum credit ratings of Baa and maturities of at least one
year. To measure how the fund's performance stacked up against its peers,
you can compare it to the general municipal debt funds average, which
reflects the performance of 239 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc., over the past six months. Both
benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Municipal Bond 6.19% 7.28% 7.70%
Lehman Brothers Municipal Bond Index 6.64% 7.78% 8.21%
General Municipal Debt Funds Average 5.67% 7.34% 7.59%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960712 113519 S00000000000001
Municipal Bond LB Municipal Bond
00035 LB015
1986/06/30 10000.00 10000.00
1986/07/31 10098.53 10060.70
1986/08/31 10595.89 10511.12
1986/09/30 10526.23 10537.50
1986/10/31 10766.67 10719.48
1986/11/30 10954.53 10931.84
1986/12/31 10961.78 10901.66
1987/01/31 11180.35 11229.91
1987/02/28 11278.42 11285.16
1987/03/31 11230.25 11165.54
1987/04/30 10540.49 10605.25
1987/05/31 10454.93 10552.65
1987/06/30 10638.67 10862.48
1987/07/31 10768.58 10973.28
1987/08/31 10818.44 10997.97
1987/09/30 10260.22 10592.47
1987/10/31 10353.86 10629.97
1987/11/30 10584.69 10907.52
1987/12/31 10790.82 11065.78
1988/01/31 11338.73 11459.95
1988/02/29 11446.67 11581.08
1988/03/31 11169.68 11446.74
1988/04/30 11207.83 11533.73
1988/05/31 11246.41 11500.40
1988/06/30 11459.43 11668.65
1988/07/31 11542.13 11744.73
1988/08/31 11567.57 11755.07
1988/09/30 11800.29 11967.83
1988/10/31 12065.10 12178.47
1988/11/30 11925.55 12066.91
1988/12/31 12118.44 12190.36
1989/01/31 12295.90 12442.45
1989/02/28 12168.76 12300.49
1989/03/31 12164.53 12271.09
1989/04/30 12515.58 12562.40
1989/05/31 12760.13 12823.32
1989/06/30 12942.22 12997.47
1989/07/31 13062.81 13174.36
1989/08/31 12946.29 13045.38
1989/09/30 12895.87 13006.51
1989/10/31 13048.07 13165.58
1989/11/30 13217.99 13395.98
1989/12/31 13277.44 13505.56
1990/01/31 13202.04 13441.67
1990/02/28 13324.24 13561.30
1990/03/31 13335.94 13565.37
1990/04/30 13160.49 13467.16
1990/05/31 13520.14 13761.15
1990/06/30 13662.62 13882.11
1990/07/31 13873.19 14086.18
1990/08/31 13610.04 13881.64
1990/09/30 13687.93 13889.56
1990/10/31 13851.13 14141.51
1990/11/30 14116.06 14425.90
1990/12/31 14194.96 14488.65
1991/01/31 14360.30 14683.09
1991/02/28 14435.23 14810.83
1991/03/31 14460.67 14816.16
1991/04/30 14662.69 15013.22
1991/05/31 14775.46 15146.69
1991/06/30 14781.68 15131.69
1991/07/31 14986.86 15316.00
1991/08/31 15176.00 15517.71
1991/09/30 15347.89 15719.75
1991/10/31 15501.20 15861.23
1991/11/30 15543.30 15905.48
1991/12/31 15885.81 16246.81
1992/01/31 15892.99 16283.85
1992/02/29 15916.62 16289.06
1992/03/31 15908.90 16295.09
1992/04/30 16067.93 16440.12
1992/05/31 16267.86 16633.62
1992/06/30 16560.00 16912.73
1992/07/31 17068.79 17419.77
1992/08/31 16822.87 17249.93
1992/09/30 16924.60 17362.74
1992/10/31 16578.50 17192.07
1992/11/30 17075.34 17499.98
1992/12/31 17304.23 17678.65
1993/01/31 17533.61 17884.26
1993/02/28 18247.44 18531.13
1993/03/31 18002.52 18335.26
1993/04/30 18210.02 18520.26
1993/05/31 18318.00 18624.34
1993/06/30 18652.16 18935.18
1993/07/31 18613.54 18959.99
1993/08/31 19102.62 19354.73
1993/09/30 19336.53 19575.18
1993/10/31 19337.79 19612.96
1993/11/30 19101.08 19440.17
1993/12/31 19583.39 19850.56
1994/01/31 19828.26 20077.25
1994/02/28 19229.18 19557.25
1994/03/31 18249.37 18760.88
1994/04/30 18334.96 18919.97
1994/05/31 18516.30 19084.01
1994/06/30 18370.91 18967.40
1994/07/31 18761.07 19315.08
1994/08/31 18803.45 19381.91
1994/09/30 18399.00 19097.38
1994/10/31 17926.11 18758.21
1994/11/30 17422.95 18419.06
1994/12/31 17920.82 18824.47
1995/01/31 18521.27 19362.47
1995/02/28 19138.54 19925.53
1995/03/31 19350.37 20154.47
1995/04/30 19337.45 20178.26
1995/05/31 19968.68 20822.14
1995/06/30 19777.70 20640.99
1995/07/31 19938.53 20836.67
1995/08/31 20199.33 21100.88
1995/09/30 20331.23 21234.45
1995/10/31 20617.05 21543.19
1995/11/30 20977.47 21900.60
1995/12/31 21173.93 22111.06
1996/01/31 21337.26 22278.00
1996/02/29 21189.64 22127.62
1996/03/31 20916.03 21844.83
1996/04/30 20822.31 21783.01
1996/05/31 20809.60 21774.30
1996/06/28 21002.62 22011.42
IMATRL PRASUN SHR__CHT 19960630 19960712 113523 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund on June 30, 1986. As the chart
shows, by June 30, 1996, the value of the investment would have grown to
$21,003 - a 110.03% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $22,015 - a 120.15% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED DECEMBER 31,
MONTHS
ENDED
JUNE 30,
1996 1995 1994 1993 1992 1991
Dividend return 2.44% 5.88% 5.01% 5.83% 6.31% 6.81%
Capital appreciation -3.25% 12.27% -13.50% 7.34% 2.62% 5.10%
return
Total return -0.81% 18.15% -8.49% 13.17% 8.93% 11.91%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by
the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.38(cents) 20.22(cents) 40.10(cents)
Annualized dividend rate 5.19% 5.01% 4.96%
30-day annualized yield 5.14% - -
30-day annualized tax-equivalent yield 8.03% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $7.93 over
the past month, $8.09 over the past six months and $8.08 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% 1996 federal tax bracket but does not reflect payment of the
federal alternative minimum tax, if applicable.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Municipal Bond Fund
Q. HOW HAS THE FUND PERFORMED, GEORGE?
A. For the six- and 12-month periods ended June 30, 1996, the fund had
total returns of -0.81% and 6.19%, respectively. For the same six- and
12-month periods, the general municipal debt funds average had total
returns of -1.38% and 5.67%, respectively, as tracked by Lipper Analytical
Services. The Lehman Brothers Municipal Bond Index returned -0.45% for the
six-month period and 6.64% for the 12-month period.
Q. SO FAR IN 1996, THE BOND MARKETS HAVEN'T ENJOYED THE GAINS THEY DID IN
1995. WHAT FACTORS DO YOU THINK LED TO THE MARKETS' PERFORMANCE FOR THE
FIRST HALF OF THIS YEAR?
A. Basically, bond holders became increasingly more concerned that the
economy was strengthening. In February and March, investors reacted to
surprisingly good economic news, particularly on the employment front, by
sending yields higher and bond prices lower. The February employment
statistics revealed that more than 700,000 jobs were created, a level not
seen in more than a decade. A faster-growing economy tends to provoke fears
of inflation - which hadn't been much of a worry in 1995 - and rising
interest rates. Bond holders demanded higher yields because they worried
that inflation would eat away at the value of their fixed-income
investment. However, during the second quarter, the economic news was
mixed, and bond prices ended the quarter roughly where they had begun.
Q. THE FUND CONTINUED TO HAVE A BIAS TOWARD BONDS WITH MATURITIES RANGING
FROM 10 TO 20 YEARS. WHAT WAS THE ATTRACTION TO THESE BONDS?
A. I felt that securities in that maturity range offered a good combination
of yield relative to the risk involved. Bonds with shorter maturities
tended to offer much less incremental yield. On the other hand, bonds with
longer maturities carried more interest-rate risk; that is, the risk that
they will decline in value as a result of a rise in interest rates. That
said, I did take advantage of opportunities to buy a few longer-term bonds
when they appeared to be cheap late in the first quarter of the year.
Q. DID YOU MAKE ANY CHANGES IN THE WAY THE FUND'S HOLDINGS ARE DISTRIBUTED
AMONG VARIOUS SECTORS OR VARIOUS STATES?
A. When you compare the fund's holdings at the end of the period, state by
state and sector by sector, to its holdings six months ago, little has
changed. There
was a very low supply of new municipal bonds issued during the period, and
many older bonds were called or matured. The ensuing lack of supply limited
the number of opportunities and made it difficult to radically alter the
way in which the fund's holdings were distributed among states or sectors.
However, I was able to make some additions to some of my top state
holdings.
Q. WHICH STATES DID YOU ADD TO DURING THE PERIOD?
A. I added several securities issued by the Texas Permanent School Fund
(PSF). This program allows Texas school districts to issue bonds and get
guarantees from this state entity, which serves as a type of insurance that
the bonds' principal and interest payments will be paid. In my view, these
bonds are very high quality, but generally traded at cheaper levels than
the other higher-rated bonds. In light of that, I believed that they
offered good value.
Q. WHY WERE ZERO COUPON BONDS ATTRACTIVE?
A. These bonds make no periodic interest payments, but, instead, are sold
at a deep discount from their face value. The buyer of a zero receives the
rate of return by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. There's some confusion
about these bonds among investors, and many investors prefer bonds that pay
periodic interest payments, known as
coupon bonds. Those factors tend to make zero coupon bond prices attractive
relative to coupon-bearing bonds with similar maturities and credit
qualities.
Q. GEORGE, WE UNDERSTAND THERE WERE SOME INVESTMENT POLICY CHANGES . . .
A. Yes, that's right. As of July 1, 1996, the fund is permitted to invest
up to 100% - up from 20% - in securities subject to the alternative minimum
tax, or AMT. This change may benefit the fund because it gives me greater
flexibility in pursuing all marketplace opportunities - including areas
dominated by AMT securities. These securities are issued by municipalities
to finance private activity, such as airports, multi-family housing and
industrial development. AMT securities typically offer higher yields than
other municipal securities of comparable maturity without necessarily
involving higher credit risk. While the investment policy change allows the
fund to invest up to 100% of its assets in AMT bonds, the possibility of
that occurring is unrealistic and highly unlikely.
Q. WHAT'S YOUR OUTLOOK?
A. Of course, the direction of interest rates - which is impossible to
predict - will have a significant bearing on the bond market's performance.
But factors influencing supply and demand could also play a role. The
municipal market recently has benefited from a favorable supply/demand
situation. The available supply of municipals is
quite low and there's not a tremendous amount of new issuance.
Additionally, the municipal market has experienced rising demand. If those
technical factors hold, they could continue to help the muni market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: 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
START DATE: August 19, 1976
SIZE: as of June 30, 1996,
more than $964 million
MANAGER: George Fischer,
since 1995; manager, Spartan
Bond Strategist Fund, since
1993; Fidelity Insured Municipal
Income Fund, since 1995;
municipal bond analyst 1989
to 1993; joined Fidelity in 1989
(checkmark)
GEORGE FISCHER ON HIS
INVESTMENT STRATEGY:
"The supply of municipals has
been relatively tight
throughout the first six
months of 1996. That has
diminished somewhat the
opportunities to find the types
of bonds I want to own at
attractive prices. So I'm trying
to avoid pressing, and I'm
resisting the temptation to buy
bonds at any price. Instead,
I've taken a more patient
approach by waiting for
opportunities to develop.
"Generally speaking, I try to
find bonds that have
asymmetric performance
characteristics. By that I
mean I target bonds that
theoretically won't do as
badly in a down market as
they will do well in an up
market. Sometimes this has
to do with a bond's call
features - whether or not it
can be redeemed by its issuer
prior to maturity - tax
consequences, or other
factors."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
New York 14.9 16.1
California 11.1 8.2
Texas 9.7 8.4
Illinois 9.5 7.8
Massachusetts 5.8 7.1
TOP FIVE SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
General Obligation 33.7 34.8
Electric Revenue 14.6 8.6
Water & Sewer 11.6 11.0
Health Care 10.1 10.3
Special Tax 6.5 7.6
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 12.9 12.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1996
6 MONTHS AGO
Years 7.5 7.5
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Aaa 44.0%
Aa, A 36.4%
Baa 15.7%
Caa 0.0%
Non-rated 2.0%
Short-term investments 1.9%
Aaa 40.3%
Aa, A 38.1%
Baa 13.5%
Caa 0.2%
Non-rated 2.0%
Short-term investments 5.9%
Row: 1, Col: 1, Value: 44.0
Row: 1, Col: 2, Value: 36.4
Row: 1, Col: 3, Value: 15.7
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 6, Value: 1.9
Row: 1, Col: 1, Value: 39.0
Row: 1, Col: 2, Value: 38.1
Row: 1, Col: 3, Value: 13.5
Row: 1, Col: 4, Value: 1.2
Row: 1, Col: 5, Value: 2.3
Row: 1, Col: 6, Value: 5.9
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 98.1%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ALABAMA - 0.4%
Cullman Med. Park South Med. Clinic Board Rev.
(Cullman Reg'l. Med. Ctr.) Series A, 6.50% 2/15/13 $ 4,000 $ 3,930
ARIZONA - 2.0%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg. (Salt River
Proj.) Series B, 6.50% 1/1/04 6,515 7,126
Arizona Trans. Board Hwy. Rev. Sub Series A:
Rfdg. 6% 7/1/08 3,000 3,217
6.25% 7/1/04 2,000 2,137
6.60% 7/1/08 (Pre-Refunded to 7/1/01 @ 101.50) (c) 2,250 2,464
Maricopa County School Dist. #1 Phoenix Elementary Rfdg.
Second Series, 0% 7/1/05 (MBIA Insured) 2,660 1,663
Maricopa County Unified School Dist. #69
0% 7/1/07 (AMBAC Insured) 3,050 1,670
Pima County Ind. Dev. Auth Health Care Corp. Rev.
(Carondelet Health Svc., Inc.):
8% 7/1/13 (BIGS Insured) (MBIA Insured)
(Pre-Refunded to 7/1/98 @ 102) (c) 890 972
8% 7/1/13 (BIGS Insured) (MBIA Insured) 110 119
19,368
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,505
CALIFORNIA - 11.1%
California Gen. Oblig. 6.25% 10/1/19 5,500 5,954
California Health Facs. Fing. Auth. Rev. (Pomona Valley
Med. Ctr.) Series A, 7.375% 1/1/14 2,000 2,080
California Hsg. Fin. Agcy. Rev. (Home Mtg.) Series A, 5.70%
8/1/16 (MBIA Insured) 3,875 3,725
California Pub. Works Board Lease Rev. Rfdg.:
Series A:
(California Univ. Proj.) 5.50% 6/1/10 2,250 2,197
Dept. Corrections State Prisons) 5% 12/1/19
(AMBAC Insured) 8,750 7,787
(Franchise Tax Board-PH II) 6.25% 9/1/11 1,150 1,173
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,124
5.50% 6/1/15 2,500 2,366
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,814
California Statewide Commty. Dev. Ctfs. of Prtn. (Sister of
Charity Leavenworth Sys.) 5% 12/1/14 2,750 2,441
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.)
Series A, 7% 8/1/11 (MBIA Insured) 1,475 1,689
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CALIFORNIA - CONTINUED
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg. (Muni. Wtr. Dist. Swr.
Sys. Proj.) 7% 8/1/09 (AMBAC Insured) $ 2,245 $ 2,551
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg. 4.75% 6/1/21
(FGIC Insured) 2,000 1,685
Foothill/Eastern Trans. Toll Rd. Rev. Sr. Lien Series A,
0% 1/1/08 2,500 1,472
Fresno Swr. Rev. Series A, 4.75% 9/1/26 (MBIA Insured) 7,305 6,062
Industry Urban Ind. Dev. Agcy. Rfdg. (Civic Recreational
Proj. #1) Series A, 7.375% 5/1/12 5,000 5,186
Modesto Irrigation Dist. Elec. Rev. 9.625% 1/1/11
(Escrowed to Maturity) (c) 4,390 5,712
Orange County Dev. Agcy. Tax Allocation
(Santa Ana Heights Proj.) 6% 9/1/15 2,000 1,865
Orange County Wtr. Dist. Ctfs. of Prtn. Series A,
5.50% 8/15/14 (AMBAC Insured) 3,000 2,846
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,147
3.75% 1/1/13 1,500 1,108
Santa Clara County Fing. Auth. Lease Rev.
(VMC Fac. Replacement Proj.) Series A, 7.50% 11/15/04
(AMBAC Insured) 4,560 5,324
Santa Clara Redev. Agcy. Tax Allocation Rfdg.
(Bayshore North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,550
South Orange County Pub. Fing. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,543
7.50% 8/15/07 (FGIC Insured) 3,500 4,117
Southern California Metropolitan Wtr. Dist. Wtrwks.
5.55% 10/30/20 8,400 7,760
Southern California Pub. Pwr. Auth. Pwr. Proj. Rev. Rfdg.
(Palo Verde Proj.) Series A, 5% 7/1/15 2,875 2,541
University of California Rev. Rfdg. (Multiple Purp. Projs.)
Series C, 5.125% 9/1/13 (AMBAC Insured) 1,200 1,110
106,929
COLORADO - 2.0%
Colorado Health Facs. Auth. Rev.:
(PSL Health Sys. Proj.) Series A, 6.875% 2/15/23
(Pre-Refunded to 2/15/03 @102) (c) 4,000 4,450
(Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,012
El Paso County School Dist. #20 Rfdg. Series A, 0% 6/15/08
(Cap. Appreciation) (AMBAC Insured) 2,600 1,323
Highlands Ranch Met. Dist. #2 5% 6/15/16 (FSA Insured) 2,265 2,024
Pueblo Single Family Mtg. Rev. Series A, 7% 8/1/10 1,810 1,811
19,620
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 $ 5,000 $ 5,587
Connecticut Hsg. Fin. Auth. (Hsg. Mtg. Fin. Prog.)
Sub-Series B1, 7.55% 11/15/08 445 454
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure) Series A,
6.50% 6/1/03 1,950 2,123
8,164
DELAWARE - 0.3%
Delaware Trans. Auth. Trans. Sys. Rev.:
7% 7/1/00 1,500 1,631
7.50% 7/1/02 1,000 1,067
2,698
DISTRICT OF COLUMBIA - 1.4%
District of Columbia Gen. Oblig.:
Series A, 5.625% 6/1/02 (MBIA Insured) 1,500 1,534
Series E, 5% 6/1/04 (FGIC Insured) 1,000 976
5.875% 6/1/05 (MBIA Insured) 3,000 3,071
6% 6/1/11 (MBIA Insured) 1,000 1,020
District of Columbia Redev. Land Agcy.
(Washington D.C. Sports Arena):
4.85% 11/01/97 850 848
Spl. Tax Rev. 5.625% 11/1/10 6,150 5,797
13,246
FLORIDA - 1.1%
Florida Tpk. Auth. Tpk. Rev. Rfdg. Series A, 5% 7/1/15
(FGIC Insured) 6,000 5,438
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien):
6.50% 10/1/06 (FGIC Insured) (d) 1,300 1,430
6.50% 10/1/07 (FGIC Insured) (d) 3,200 3,512
10,380
GEORGIA - 2.4%
Fulton County School Dist. Rfdg.
6.375% 5/1/14 2,500 2,694
Fulton County Wtr. & Swr. Rev.:
Rfdg. 6.125% 1/1/05 (FGIC Insured) 4,000 4,265
6.375% 1/1/14 (FGIC Insured) 4,500 4,888
Georgia Gen. Oblig.:
Series B, 7.20% 3/1/04 5,870 6,714
Series D, 6.80% 8/1/03 4,400 4,933
23,494
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
ILLINOIS - 8.8%
Chicago Gen. Oblig. Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) $ 10,000 $ 10,313
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.):
(2nd Lien):
Series A, 6.375% 1/1/12 (MBIA Insured) 1,000 1,050
Series A, 6.375% 1/1/15 (MBIA Insured) 3,200 3,312
Series C-1, 5% 1/1/10 (MBIA Insured) 8,000 7,420
(Senior Lien) Series A, 5% 1/1/12 13,000 11,911
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,454
Chicago Wastewtr. Transmission Rev. Rfdg. 5.375% 1/1/13
(FGIC Insured) 9,430 9,076
Cook County. Cmnty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,551
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A, 7% 12/15/13
(AMBAC Insured) 2,500 2,681
Illinois Edl. Facs. Auth. Rev. (Loyola Univ.)
Series A, 7.125% 7/1/21 1,555 1,674
Illinois Health Fac. Auth. Rev. Rfdg. (Rush Presbyterian for
St. Luke's Med. Ctr.) 7.40% 10/1/20 5,215 5,339
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,769
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,305
7.75% 6/1/05 (FGIC Insured) 2,405 2,826
Metropolitan Pier & Exposition Auth. Dedicated State Tax Rev.
(McCormick Place Expansion Proj.), Series A:
0% 6/15/07 (FGIC Insured) (b) 3,000 3,008
0% 6/15/08 (FGIC Insured) 3,890 1,964
0% 6/15/10 (FGIC Insured) 8,100 3,584
0% 6/15/15 (FGIC Insured) 3,100 988
Metropolitan Wtr. Reclamation Dist. of Greater Chicago
(Cap. Impt.), 7% 12/1/05 8,250 9,374
84,599
INDIANA - 1.1%
Indiana Bond Bank Rev. (State Revolving Fund Program)
Series A, 7% 2/1/05 1,500 1,635
Indiana Trans. Fin. Auth. Hwy. Rev. Series A, 7.25% 6/1/15 1,000 1,155
Indianapolis Resource Recovery Rev. (Ogden Martin Sys.,
Inc. Proj.):
Rfdg.:
6.75% 12/1/04 (AMBAC Insured) (d) 2,200 2,395
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
INDIANA - CONTINUED
Indianapolis Resource Recovery Rev. (Ogden Martin Sys.,
Inc. Proj.): - continued
Rfdg.: - continued
6.75% 12/1/06 (AMBAC Insured) (d) $ 3,000 $ 3,263
Series A, 7.90% 12/1/08 1,615 1,685
10,133
KANSAS - 0.4%
Kansas City Util. Sys. Rev. 0% 3/1/09 (Cap. Appreciation)
(Escrowed to Maturity) (AMBAC Insured) (c) 3,975 1,923
Kansas Dept. Trans. Hwy. Rev. Series A, 6.125% 9/1/09 2,000 2,112
4,035
LOUISIANA - 0.2%
New Orleans Gen. Oblig. Rfdg. 6.50% 10/1/03
(AMBAC Insured) 1,500 1,641
MARYLAND - 1.2%
Baltimore Gen. Oblig. (Consolidated Pub. Impt.)
Series A, 7.25% 10/15/05 (FGIC Insured) 2,000 2,310
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (John Hopkins Health Sys.) Series 1988, 7.50% 7/1/20 6,000 6,413
(Good Samaritan Hosp.) 5.75% 7/1/13 2,600 2,580
11,303
MASSACHUSETTS - 5.8%
Massachusetts Gen. Oblig. Consolidated Loan Series A,
7.50% 6/1/04 3,270 3,785
Massachusetts Gen. Oblig. Rfdg. Series A:
6.25% 7/1/03 13,200 14,190
6% 7/1/05 (AMBAC Insured) 2,750 2,929
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Institute) Series A, 6.50% 2/1/22 4,860 4,805
(Univ. Hosp.) Series C, 7.25% 7/1/19, (MBIA Insured) 3,500 3,780
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 5,000 5,331
(Massachusetts Biomedical) Series A-2, 0% 8/1/08 10,000 4,800
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev.:
Series A, 6.75% 7/1/08 2,500 2,656
Series B:
Rfdg. 5% 7/1/12 (MBIA Insured) 2,715 2,478
6.75% 7/1/08 5,995 6,370
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Port. Auth. Rev. 12.25% 7/1/97
(Escrowed to Maturity) (c) $ 235 $ 248
Massachusetts Wtr. Resources Auth. Gen. Rfdg. Series C,
5.25% 12/1/15 5,000 4,650
56,022
MICHIGAN - 4.8%
Lowell Area Schools 0% 5/1/20 (Cap. Appreciation)
(Pre-Refunded to 5/1/05 @ 33.65) (FGIC Insured) (c) 21,685 4,608
Michigan Hosp. Fin. Auth. Rev.:
Rfdg. (Detroit Med. Ctr. Oblig. Group) Series A,
6.50% 8/15/18 5,000 5,069
Rfdg. (Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,880
(Detroit Med. Ctr. Oblig. Group) Series A, 6.25% 8/15/13 1,750 1,756
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
7.50% 4/1/10 6,000 6,420
5.70% 4/1/12 3,750 3,731
Michigan Muni. Bond Auth. Rev.:
7% 5/1/02 (AMBAC Insured) 2,425 2,680
7% 10/1/02 2,860 3,218
7% 11/1/02 (AMBAC Insured) 1,465 1,632
7% 5/1/03 (AMBAC Insured) 2,700 3,010
7% 10/1/03 1,000 1,136
7% 11/1/03 (AMBAC Insured) 1,570 1,762
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.) Series B,
5% 1/1/19 5,750 4,974
Michigan Trunk Line Rev. Series A, 0% 10/1/09
(AMBAC Insured) 8,010 3,745
46,621
MINNESOTA - 2.9%
Minneapolis Gen. Oblig.:
Series B, (Cap. Appreciation):
0% 12/01/04 1,800 1,166
0% 12/01/05 1,800 1,098
5.75% 8/1/05 3,315 3,489
Minneapolis Rfdg. (Sales Tax) 6.25% 4/1/07 1,500 1,598
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series I, 6.25% 1/1/15 2,000 2,027
Series K, 6.40% 1/1/15 3,500 3,587
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,305
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
MINNESOTA - CONTINUED
Rochester Health Care Facs. Rev. (Mayo Clinic)
6.026% 11/15/15 $ 6,000 $ 5,985
Southern Minnesota Muni. Pwr. Agcy. Pwr. Supply Sys. Rev.
Series B, 6% 1/1/13 5,000 4,994
28,249
MISSISSIPPI - 0.5%
Mississippi Gen. Oblig. Series B, 7.50% 12/1/04 3,485 4,069
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) 655 703
4,772
MISSOURI - 0.7%
Kirkwood Ind. Dev. Auth. Health Care Corp. Rev.
(St. Joseph Hosp.) 7% 7/1/22 (Pre-Refunded to
7/1/02 @ 102) (c) 2,000 2,253
Missouri Higher Ed. Loan Auth. (Student Loan Rev.) Sr. Lien
Series A, 5.625% 2/15/01 4,000 4,080
6,333
MULTIPLE STATES - 0.6%
Washington Metro Area Trans. Auth. Gross Rev. Rfdg.
6% 7/1/09 (FGIC Insured) 5,500 5,748
NEBRASKA - 0.5%
Nebraska Pub. Pwr. Dist. Rev. Rfdg. (Pwr. Supply Sys.)
Series C, 5% 1/1/10 5,000 4,656
NEVADA - 0.8%
Clark County Ind. Dev. Rev. Rfdg. (Neveda Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,761
NEW JERSEY - 1.9%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,544
New Jersey Hsg. Fin. Agcy. Spl. Pledge Rev.
Series 1, 6.75% 11/1/20 685 692
New Jersey Trans. Trust Fund Auth. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 5,000 5,462
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,208
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity) (c) 1,345 1,602
18,508
NEW YORK - 14.9%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.) Series 4:
7.75% 7/1/01 735 816
7.75% 7/1/02 1,420 1,571
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
Nassau County Gen. Oblig. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) $ 7,425 $ 8,112
6.50% 5/1/05 (FGIC Insured) 4,490 4,917
6.50% 5/1/06 (FGIC Insured) 4,000 4,385
New York City Gen. Oblig.:
7.50% 2/1/03 (e) 10,000 10,850
8% 2/1/05 2,550 2,862
Rfdg.:
Series A, 7% 8/1/04 4,000 4,250
Series D, 6.30% 8/15/01 7,450 7,729
Series G:
5.40% 2/1/01 6,000 5,977
5.60% 2/1/02 14,120 14,032
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.:
Series A:
7% 6/15/01 (FGIC Insured) (Pre-Refunded to
6/15/01 @ 101) (c) 1,255 1,385
7% 6/15/09 (FGIC Insured) 2,500 2,756
Series 1992 A, 7% 6/15/09 1,245 1,362
New York State Dorm. Auth. Rev.:
(City Univ. Sys.):
Series C, 7.50% 7/1/10 3,000 3,435
Consolidated Series D:
7% 7/1/09 2,000 2,190
7% 7/1/09 (FGIC Insured) 3,780 4,352
Consolidated City Univ. Sys. 2nd Series A, 5.75% 7/1/09 4,370 4,283
(State Univ. Edl. Facs.) Rfdg.:
Series A:
5.50% 5/15/07 4,660 4,549
5.50% 5/15/13 7,500 7,012
Series B, 5.25% 5/15/09 4,000 3,745
New York State Environ. Facs. Corp. Poll. Cont. Rev. Rfdg.
(State Wtr./Municipal Wtr.) 5.75% 6/15/11 2,500 2,537
New York State Local Govt. Asst. Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,409
Series E:
6% 4/1/14 5,250 5,421
5.25% 4/1/16 8,425 7,877
New York State Med. Care Facs. Fin. Agcy. Rev. (North Shore
Univ. Hosp. Mtg. Proj.) Series A, 7.20% 11/1/20
(MBIA Insured) 2,000 2,187
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
NEW YORK - CONTINUED
New York State Tollway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102) (c) $ 5,000 $ 5,563
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,672
New York State Urban Dev. Corp. Rev. Rfdg.
(Correctional Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,248
Triborough Bridge & Tunnel Auth. Rev.
(Convention Ctr. Proj.) Series E, 7.25% 1/1/10 7,325 8,177
143,661
NEW YORK & NEW JERSEY - 0.4%
New York & New Jersey Port Auth.:
Consolidated 100th Series 5.75% 12/15/20 1,000 989
Series 104, 4.75% 1/15/26 (AMBAC Insured) 3,000 2,497
3,486
NORTH CAROLINA - 1.2%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) 2,640 3,006
7.50% 12/1/04 (AMBAC Insured) 2,865 3,284
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.
Series B:
7.25% 1/1/07 2,375 2,610
7% 1/1/08 2,650 2,865
11,765
OHIO - 2.1%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,741
Ohio Bldg. Auth.:
(Workers Compensation Bldg. A) 4.75% 4/1/14 6,500 5,704
Series A, 6% 10/1/06 1,750 1,842
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 3,000 3,502
(Wtr. Control Ln. Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,205
Ohio Wtr. Dev. Auth. Rev. (Fresh Wtr. Series):
6.25% 6/1/02 (AMBAC Insured) 1,860 1,993
6.25% 6/1/03 (AMBAC Insured) 1,975 2,123
20,110
OKLAHOMA - 0.3%
Grand River Dam Auth. Rev. Rfdg. 5.50% 6/1/10 3,000 3,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
OREGON - 0.7%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) $ 2,325 $ 2,648
7% 12/1/04 (FGIC Insured) 2,540 2,911
Portland Gen. Oblig. Series B, 7% 6/1/99 1,295 1,387
6,946
PENNSYLVANIA - 5.1%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 3,000 2,783
Philadelphia Gen. Oblig. Rev. Series A, 7.625% 8/1/16
(Pre-Refunded to 8/1/96 @ 102) (c) 16,000 16,368
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.:
(Graduate Health Sys. Oblig.) Series A & B, 7% 7/1/05 7,670 7,967
Rfdg.:
5.05% 7/1/98 1,200 1,205
5.35% 7/1/99 1,335 1,340
Philadelphia Parking Auth. Parking Rev. (Arpt. Proj.)
7.375% 9/1/18 (AMBAC Insured) 1,750 1,866
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) 2,000 2,132
6.25% 8/1/10 (MBIA Insured) 2,000 2,130
5.65% 6/15/12 (FGIC Insured) 10,000 9,625
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,105
48,521
PUERTO RICO - 0.2%
Puerto Rico Infrastructure Fing. Auth. Spl. Tax
Series 1988 A, 7.75% 7/1/08 2,000 2,133
SOUTH CAROLINA - 1.3%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,584
South Carolina Hsg. Fin. & Dev. Auth. (Homeownership
Mtg. Purchase) Series B, 7.875% 7/1/15 1,750 1,824
South Carolina Pub. Svc. Auth. Elec. Rev. & Elec. Sys.
Expansion Rev. Rfdg. (Santee Cooper) Series C,
7.20% 7/1/06 1,000 1,020
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,148
5.75% 1/1/10 (MBIA Insured) 4,705 4,764
12,340
TENNESSEE - 0.3%
Knox County Health Edl. & Hsg. Facs. Board Hosp. Facs.
Rev. Rfdg. (Fort Sanders Alliance) 7.25% 1/1/10
(MBIA Insured) 2,660 3,066
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - 9.3%
Austin Independent School Dist. Rfdg. (Cap. Appreciation):
0% 8/1/02 (PSF Guaranteed) $ 3,900 $ 2,871
7% 8/1/06 (PSF Guaranteed) 3,430 3,884
Bexar County Gen. Oblig. Rfdg. 6.10% 6/15/99 1,325 1,346
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 30 31
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12, (FGIC Insured) 1,000 1,133
Dallas Gen. Oblig.:
6% 2/15/12 4,925 4,617
4.50% 2/15/14 2,500 2,156
Fort Bend Independent School Dist. 6.50% 2/15/07
(PSF Guaranteed) 2,500 2,738
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,506
Harris County Toll Road Tax & Sub Lien Rev. Rfdg.
Series A:
7% 8/15/09 2,000 2,273
7% 8/15/10 4,200 4,778
Rfdg. (Cap. Appreciation) 0% 8/1/06 4,245 2,446
0% 8/1/08 8,005 4,043
Midlothian Independent School Dist. Rev. 0% 2/15/09 1,970 965
North Texas Muni. Wtr. Dist. Upper Fork Waste Wtr. Interest
Receipt Contract Rev. 5.50% 6/1/12 (FGIC Insured) 1,500 1,470
Round Rock Independent School Dist.:
Rfdg. 0% 2/15/08 9,800 5,145
Series B:
7% 8/1/01 1,175 1,295
7% 8/1/02 (PSF Guaranteed) 1,250 1,394
San Antonio Elec. & Gas Rev.:
6.375% 2/1/06 5,000 5,419
(Cap. Appreciation):
Rfdg. Series B, 0% 2/1/07 (FGIC Insured) 10,000 5,600
Series 1991 B, 0% 2/1/05 (FGIC Insured) 12,285 7,801
San Antonio Wtr. Rev. Rfdg. 6.50% 5/15/10
(MBIA Insured) 3,000 3,199
Texas A & M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,120
Texas Muni. Pwr. Agcy. Rev. Rfdg.:
7% 9/1/02 (FGIC Insured) (Pre-Refunded to 9/1/99 @ 102) 2,800 3,056
0% 9/1/04 (AMBAC Insured) 3,300 2,161
Texas Tpk. Auth. Dallas North Thruway Rev. (President George
Bush Tpk.) 5% 1/1/25 (FGIC Insured) 6,000 5,273
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
TEXAS - CONTINUED
Texas Wtr. Dev. Board Rev. (Revolving Fund Sr. Lien)
6% 7/15/03 $ 6,150 $ 6,557
Texas Wtr. Dev. Series A & C, 6.50% 8/1/02 1,280 1,395
89,672
UTAH - 3.5%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg. Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,270
6.50% 7/1/05 (MBIA Insured) 5,000 5,462
6.50% 7/1/10 (MBIA Insured) 2,800 3,056
5.55% 7/1/11 10,000 9,525
6% 7/1/16 (MBIA Insured) 4,500 4,523
Spl. Oblig. Sixth Series B, 6.50% 7/1/10
(AMBAC Insured) (d) 1,635 1,704
Jordan County School Dist. 7.625% 6/15/05 2,000 2,358
Salt Lake City Hosp. Rev. (Intermountain Health Care
Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity) 2,975 3,555
33,453
VIRGINIA - 2.5%
Hampton Museum Rev.:
5.25% 1/1/09 3,825 3,548
5.25% 1/1/14 4,500 4,072
Henrico County Ind. Dev. Auth. Pub. Facs. Lease Rev.
(Henrico County Reg'l. Jail Proj):
7.50% 8/1/04 2,455 2,848
7.50% 8/1/05 2,590 3,034
Lynchburg Ind. Dev. Auth. Facs. 1st Mtg. Rev. Rfdg. (Central
Health, Inc.) 8.125% 1/1/16 1,250 1,331
Upper Occoquan Swr. Auth. Rev. 4.75% 7/1/29
(MBIA Insured) 11,050 9,116
23,949
WASHINGTON - 1.7%
Washington Pub. Pwr. Supply Sys. Rev.:
Nuclear Proj. #1 Series D, 14.375% 7/1/01
(Escrowed to Maturity) (c) 250 316
Nuclear Proj. #2:
Series A, 14.375% 7/1/01 3,405 4,261
5.40% 7/1/12 10,000 9,225
Nuclear Proj. #3 Comp. Int. Rfdg. Series B,
0% 7/1/06 (MBIA Insured) 5,000 2,906
16,708
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
WEST VIRGINIA - 0.3%
West Virginia School Bldg. Auth. Rev. (Cap. Impt.) Series A,
6.75% 7/1/15 $ 3,000 $ 3,173
WISCONSIN - 2.2%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,566
Wisconsin Health & Edl. Facs. Auth. Rev.:
(Felician Care, Inc.) Series A, 7% 1/1/15 (AMBAC Insured) 2,000 2,130
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,335
21,031
TOTAL MUNICIPAL BONDS
(Cost $920,011) 944,729
MUNICIPAL NOTES (A) - 1.9%
ILLINOIS - 0.7%
Illinois Health Facs. Auth. Rev. (Highland Park Hosp.)
Series 1991-B, 3.40% (FGIC Insured), VRDN 6,600 6,600
LOUISIANA - 0.1%
Ascension Poll. Cont. Rev. Rfdg. (Borden, Inc. Proj.)
Series 92, 3.40%, LOC Credit Suisse, VRDN 1,400 1,400
PENNSYLVANIA - 0.2%
Pennsylvania Higher Edl. Facs. Auth. Rev. (Carnegie Mellon
Univ.) Series C, 3.70%, (BPA Morgan Guaranty Trust Co.)
(BPA Union Bank of Switzerland), VRDN 2,500 2,500
SOUTH CAROLINA - 0.4%
South Carolina Jobs (Economic Dev. Hosp. Facs. Rev. Tuomey
Reg'l. Medical Ctr.) Series B, 3.25%, (BPA South Carolina
Nat'l. Bank) (MBIA Insured), VRDN 3,400 3,400
TEXAS - 0.4%
Texas Gen. Oblig. TRAN Series 1995 A, 4.75% 8/30/96 3,400 3,406
VIRGINIA - 0.1%
Fairfax County Ind. Dev. Auth. Rev. Rfdg. (Fairfax Hosp. Assoc.
Hosp. Sys.) Series 1985-A, 3.50%,
(Inova Health Sys.), VRDN 1,400 1,400
TOTAL MUNICIPAL NOTES
(Cost $18,704) 18,706
TOTAL INVESTMENTS - 100%
(Cost $938,715) $ 963,435
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
29 Municipal Bond Index Contracts Sept. 96 $ 3,258 $ 108
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.3%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
3. Security collateralized by an amount sufficient to pay interest and
principal.
4. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
5. A portion of the Security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $977,425.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 75.6% AAA, AA, A 77.6%
Baa 15.7% BBB 15.9%
Ba 0.0% BB 0.0%
B 0.0% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 1.9%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 33.7%
Electric Revenue 14.6
Water and Sewer 11.6
Health Care 10.1
Special Tax 6.5
Transportation 6.2
Escrowed/Pre-Refunded 5.7
Others (individually less than 5%) 11.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $938,846,000. Net unrealized apprecia- tion aggregated
$24,589,000, of which $32,385,000 related to appreciated investment
securities and $7,796,000 related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $27,853,000 which will expire on December 31, 2003.
At December 31, 1995, the fund was required to defer approximately
$2,281,000 of losses on futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
(EXCEPT PER-SHARE AMOUNT) JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $938,715) - $ 963,435
See accompanying schedule
Receivable for investments sold 4,710
Interest receivable 17,466
Receivable for daily variation on futures contracts 24
TOTAL ASSETS 985,635
LIABILITIES
Payable to custodian bank $ 50
Payable for investments purchased 6,623
Regular delivery
Delayed delivery 11,937
Payable for fund shares redeemed 556
Distributions payable 1,336
Accrued management fee 316
Other payables and accrued expenses 180
TOTAL LIABILITIES 20,998
NET ASSETS $ 964,637
Net Assets consist of:
Paid in capital $ 966,836
Accumulated undistributed net realized gain (loss) (27,027)
on investments
Net unrealized appreciation (depreciation) on 24,828
investments
NET ASSETS, for 120,548 shares outstanding $ 964,637
NET ASSET VALUE, offering price and redemption price $8.00
per share ($964,637 (divided by) 120,548 shares)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 28,370
EXPENSES
Management fee $ 2,026
Transfer agent, accounting and custodian fees 791
and expenses
Non-interested trustees' compensation 2
Registration fees 25
Audit 24
Legal 4
Miscellaneous 10
Total expenses before reductions 2,882
Expense reductions (6) 2,876
NET INTEREST INCOME 25,494
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 3,690
Futures contracts (291) 3,399
Change in net unrealized appreciation (depreciation) on:
Investment securities (38,362)
Futures contracts 108 (38,254)
NET GAIN (LOSS) (34,855)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (9,361)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 25,494 $ 54,828
Net interest income
Net realized gain (loss) 3,399 1,658
Change in net unrealized appreciation (depreciation) (38,254) 121,673
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (9,361) 178,159
FROM OPERATIONS
Distributions to shareholders (25,494) (54,828)
From net interest income
In excess of net realized gain (130) (525)
TOTAL DISTRIBUTIONS (25,624) (55,353)
Share transactions 65,577 460,322
Net proceeds from sales of shares
Reinvestment of distributions 16,832 36,057
Cost of shares redeemed (164,702) (542,579)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (82,293) (46,200)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (117,278) 76,606
NET ASSETS
Beginning of period 1,081,915 1,005,309
End of period $ 964,637 $ 1,081,915
OTHER INFORMATION
Shares
Sold 8,089 58,603
Issued in reinvestment of distributions 2,080 4,530
Redeemed (20,436) (68,815)
Net increase (decrease) (10,267) (5,682)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1996
(UNAUDITED) 1995 1994 1993 C 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470 $ 8.130
beginning of period
Income from .202 .408 .455 .487 .519 .526
Investment
Operations
Net interest income
Net realized and (.269) .904 (1.180) .600 .210 .410
unrealized
gain (loss)
Total from investment (.067) 1.312 (.725) 1.087 .729 .936
operations
Less Distributions (.202) (.408) (.455) (.487) (.519) (.526)
From net interest
income
From net - - (.010) (.410) (.180) (.070)
realized gain
In excess of net (.001) (.004) (.130) - - -
realized gain
Total distributions (.203) (.412) (.595) (.897) (.699) (.596)
Net asset value, end $ 8.000 $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
of period
TOTAL RETURN B (0.81)% 18.15 (8.49) 13.17 8.93% 11.91
% % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 965 $ 1,082 $ 1,005 $ 1,262 $ 1,192 $ 1,163
period (in millions)
Ratio of expenses to .57% A, .57 .53% .49 .49% .50
average net assets D % % %
Ratio of net interest 5.01% A 5.14 5.68% 5.51 6.11% 6.35
income to average % % %
net assets
Portfolio turnover rate 41% A 72 95% 74 53% 33
% % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1,1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Municipal Bond Fund (the fund) is a fund of Fidelity Municipal
Trust (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. On March 14, 1996, the Board
of Trustees approved the creation of Class A, Class B and Institutional
Class of shares. Offering of the new classes commenced on July 1, 1996. The
financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, market discount, losses deferred due to wash
sales, futures and options and excise tax regulations.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary book and tax basis differences
that will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
involve, to varying degrees, risk of loss in excess of the futures
variation margin reflected in the Statement of Assets and Liabilities. The
underlying face amount at value of any open futures contracts at period
end, is shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the underlying
instrument at period end. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $204,963,000 and $274,466,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $68,420,000 and $44,944,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fee was equivalent to an annualized rate of .40% of average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the
fund's distributor, Fidelity Distributors Corporation (FDC), an affiliate
of FMR, may use their resources to pay administrative and promotional
expenses related to the sale of the fund's shares. Subject to the approval
of the Board of Trustees, the Plan also authorizes payments to third
parties that assist in the sale of the fund's shares or render shareholder
support services. No payments were made to third parties under the Plan
during the period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. is the custodian and
transfer and shareholder servicing agent for the fund. The Bank has entered
into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR,
under which FSC performs the activities associated with the fund's transfer
and shareholder servicing agent and accounting functions. The fund pays
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $586,000 and $174,000, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $4,000 and $2,000,
respectively, under these arrangements.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Ohio Municipal Income
SpartanAggressive Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal Income
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(registered trademark)
PENNSYLVANIA
MUNICIPAL
FUNDS
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS
CHECK PAGE NUMBERS !!!
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 17 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
PERFORMANCE 21 How the fund has done over time.
FUND TALK 23 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 25 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 26 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 30 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 34 Notes to the financial statements.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that can help investors in every type of market.
First, take a long-term approach when investing. If you can afford to leave
your money invested through the inevitable ups and downs of financial
markets, you will greatly reduce your vulnerability to any single decline.
Over time, for example, stock prices have gone up - and have significantly
outperformed other types of investments and stayed ahead of inflation.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.SM
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value), and the effect of the $5 account
closeout fee on an average sized account. You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses during the periods shown, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Spartan Pennsylvania Municipal Income Fu -0.75% 6.15% 47.25% 107.03%
nd
Lehman Brothers Pennsylvania -0.31% 6.27% n/a n/a
Municipal Bond Index
Pennsylvania Municipal Debt Funds -1.07% 6.01% 44.04% n/a
Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on August 6, 1986. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers Pennsylvania Municipal Bond Index,
which includes Pennsylvania investment-grade municipal bonds. To measure
how the fund's performance stacked up against its peers, you can compare it
to the Pennsylvania municipal debt funds average, which reflects the
performance of 67 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. over the past six months. Both benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Spartan Pennsylvania Municipal Income Fu 6.15% 8.05% 7.62%
nd
Lehman Brothers Pennsylvania 6.27% n/a n/a
Municipal Bond Index
Pennsylvania Municipal Debt Funds 6.01% 7.57% n/a
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19960630 19960717 113519 S00000000000001
Spart. PA Muni. Inc. LB Municipal Bond
00402 LB015
1986/08/31 10000.00 10000.00
1986/09/30 10054.66 10025.10
1986/10/31 10247.93 10198.23
1986/11/30 10389.97 10400.26
1986/12/31 10329.57 10371.56
1987/01/31 10619.05 10683.84
1987/02/28 10726.54 10736.41
1987/03/31 10633.81 10622.60
1987/04/30 9635.80 10089.56
1987/05/31 9511.24 10039.52
1987/06/30 9731.51 10334.28
1987/07/31 9912.36 10439.69
1987/08/31 9930.00 10463.17
1987/09/30 9312.08 10077.40
1987/10/31 9290.88 10113.07
1987/11/30 9561.05 10377.12
1987/12/31 9737.58 10527.70
1988/01/31 10226.61 10902.69
1988/02/29 10395.52 11017.93
1988/03/31 10077.29 10890.13
1988/04/30 10138.64 10972.89
1988/05/31 10210.17 10941.18
1988/06/30 10412.66 11101.25
1988/07/31 10481.86 11173.63
1988/08/31 10499.01 11183.46
1988/09/30 10728.60 11385.88
1988/10/31 11039.47 11586.27
1988/11/30 10943.16 11480.14
1988/12/31 11121.73 11597.59
1989/01/31 11278.34 11837.42
1989/02/28 11181.44 11702.36
1989/03/31 11178.65 11674.39
1989/04/30 11467.63 11951.54
1989/05/31 11675.62 12199.77
1989/06/30 11859.07 12365.45
1989/07/31 11973.30 12533.74
1989/08/31 11860.42 12411.03
1989/09/30 11821.58 12374.05
1989/10/31 11984.65 12525.38
1989/11/30 12126.32 12744.58
1989/12/31 12212.13 12848.83
1990/01/31 12144.68 12788.05
1990/02/28 12252.26 12901.87
1990/03/31 12254.26 12905.74
1990/04/30 12074.27 12812.30
1990/05/31 12375.68 13091.99
1990/06/30 12488.22 13207.07
1990/07/31 12651.31 13401.22
1990/08/31 12468.05 13206.63
1990/09/30 12531.05 13214.16
1990/10/31 12711.91 13453.86
1990/11/30 12984.68 13724.42
1990/12/31 13091.25 13784.12
1991/01/31 13261.54 13969.10
1991/02/28 13338.09 14090.64
1991/03/31 13367.32 14095.71
1991/04/30 13577.22 14283.18
1991/05/31 13739.14 14410.16
1991/06/30 13670.82 14395.89
1991/07/31 13874.87 14571.23
1991/08/31 14065.40 14763.14
1991/09/30 14228.90 14955.35
1991/10/31 14351.82 15089.95
1991/11/30 14390.41 15132.05
1991/12/31 14726.74 15456.79
1992/01/31 14766.47 15492.03
1992/02/29 14774.42 15496.99
1992/03/31 14773.31 15502.72
1992/04/30 14928.20 15640.69
1992/05/31 15114.57 15824.78
1992/06/30 15358.33 16090.32
1992/07/31 15841.49 16572.71
1992/08/31 15676.41 16411.13
1992/09/30 15760.34 16518.46
1992/10/31 15518.10 16356.08
1992/11/30 15887.98 16649.02
1992/12/31 16068.91 16819.00
1993/01/31 16280.61 17014.61
1993/02/28 16918.95 17630.03
1993/03/31 16726.18 17443.68
1993/04/30 16889.06 17619.69
1993/05/31 16992.36 17718.71
1993/06/30 17280.07 18014.43
1993/07/31 17258.90 18038.03
1993/08/31 17692.01 18413.58
1993/09/30 17952.11 18623.31
1993/10/31 17961.11 18659.26
1993/11/30 17807.71 18494.87
1993/12/31 18186.82 18885.30
1994/01/31 18423.87 19100.97
1994/02/28 17976.51 18606.25
1994/03/31 17185.54 17848.60
1994/04/30 17275.00 17999.96
1994/05/31 17469.46 18156.02
1994/06/30 17440.66 18045.09
1994/07/31 17721.82 18375.85
1994/08/31 17782.40 18439.43
1994/09/30 17530.24 18168.74
1994/10/31 17228.57 17846.07
1994/11/30 16818.79 17523.41
1994/12/31 17270.98 17909.10
1995/01/31 17800.09 18420.94
1995/02/28 18338.60 18956.62
1995/03/31 18597.75 19174.43
1995/04/30 18653.00 19197.06
1995/05/31 19151.33 19809.64
1995/06/30 18964.06 19637.29
1995/07/31 19130.12 19823.46
1995/08/31 19332.40 20074.82
1995/09/30 19549.88 20201.89
1995/10/31 19789.06 20495.63
1995/11/30 20099.85 20835.65
1995/12/31 20282.37 21035.88
1996/01/31 20482.38 21194.70
1996/02/29 20333.45 21051.64
1996/03/31 20054.05 20782.60
1996/04/30 19963.04 20723.78
1996/05/31 19932.30 20715.49
1996/06/30 20131.06 20941.08
IMATRL PRASUN SHR__CHT 19960630 19960717 113523 R00000000000123
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Spartan Pennsylvania Municipal Income Fund on August 31, 1986,
shortly after the fund started. As the chart shows, by June 30, 1996, the
value of the investment would have grown to $20,131 - a 101.31% increase on
the initial investment. This assumes the fund is still owned on June 30,
1996, and therefore does not include the effect of the $5 account closeout
fee. For comparison, look at how the Lehman Brothers Municipal Bond Index -
which reflects the performance of the investment-grade municipal bond
market - did over the same period. With dividends reinvested, the same
$10,000 would have grown to $20,941 - a 109.41% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1996 1995 1994 1993 1992 1991
Dividend returns 2.43% 6.52% 5.73% 6.68% 7.00% 7.53%
Capital appreciation
returns -3.18% 10.91% -10.77% 6.49% 2.11% 4.95%
Total returns -0.75% 17.43% -5.04% 13.17% 9.11% 12.48%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.24(cents) 25.96(cents) 54.34(cents)
Annualized dividend rate 5.04% 4.98% 5.20%
30-day annualized yield 5.05% - -
30-day annualized tax-equivalent yield 8.12% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.24 over
the past month, $10.45 over the past six months and $10.44 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 37.79% combined effective 1996 federal and state tax bracket. A
portion of the fund's income may be subject to the alternative minimum tax.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Steven Harvey, Portfolio Manager of Spartan Pennsylvania
Municipal Income Fund
Q. STEVE, HOW HAS THE FUND PERFORMED?
A. For the six- and 12-month periods ended June 30, 1996, the fund had
total returns of -0.75% and 6.15%, respectively. The Pennsylvania municipal
debt funds average returned -1.07% for the same six-month period and 6.01%
for the same 12-month period, according to Lipper Analytical Services.
Also, for the six- and 12-month periods, the Lehman Brothers Pennsylvania
Municipal Bond Index returned -0.31% and 6.27%, respectively.
Q. WHAT FACTORS SHAPED THE MUNICIPAL BOND MARKET'S PERFORMANCE OVER THE
PAST SIX MONTHS?
A. Signs of a strengthening U.S. economy hurt the returns of most types of
bonds during the first half of 1996. Throughout the past six months,
investors became increasingly more concerned that the strengthening U.S.
economy would translate into higher inflation, which, in turn, could force
interest rates higher. However, the news wasn't all bad for municipals.
Generally speaking, municipals outperformed Treasuries during the first
half of 1996. One reason was that the supply of municipal bonds diminished,
particularly in June when approximately $60 billion of outstanding
municipals was retired or matured, and the total amount of municipal supply
actually contracted. Another reason for munis' outperformance of Treasuries
was that fears of a flat tax faded. As the presidential campaign wore on,
it became clear no viable presidential candidate was likely to support the
notion of a flat tax, which could affect the tax-exempt status of
municipals.
Q. WHAT WERE SOME OF THE KEY MOVES YOU MADE DURING THE PAST SIX MONTHS?
A. I continued to upgrade the credit quality of the fund, primarily by
reducing the fund's investments in below-investment-grade bonds - those
with ratings below Baa as judged by Moody's Investors Service, for example.
Bonds that are rated below-investment-grade normally carry a fairly large
amount of additional yield over higher-rated bonds in order to compensate
investors for the additional credit risk they carry. But during the period,
there was little in the way of new bonds issued in the
below-investment-grade category, while demand for lower-quality bonds
remained strong. As a result, there was very little difference in yield
between bonds with lower and higher credit ratings, and credit spreads were
said to be "tight." Because spreads were tight, I was able to upgrade the
overall credit quality of the fund by selling many of the fund's
below-investment-grade holdings and buying higher-rated securities, without
sacrificing much in the way of additional yield.
Q. SO WHAT TYPES OF HIGHER-RATED BONDS DID YOU BUY?
A. I added a number of insured bonds. When a bond is insured, it means that
its interest and principal payments are guaranteed by a third-party
municipal insurer. However, I think it's important to point out that
insurance does not protect a bond's price from rising or falling along with
the rest of the municipal market. Insured bonds are quite plentiful in the
Pennsylvania municipal bond market, comprising nearly 60% of the market.
Because of that abundance, price inefficiencies can creep up. During the
period, I bought some bonds that I thought were priced less than what I
believed to be their full value. Also, Fidelity bought bond insurance for
the fund's holdings in the Pennsylvania Convention Center. These bonds are
obligations of the City of Philadelpia, and we insured the bonds because
our credit research indicated that most of the expected credit improvement
for Philadelphia obligations had already occurred. The insurance provided a
way to "lock in" that credit improvement. The process of insuring these
previously uninsured securities also added to the fund's insured holdings.
But it's important to point out that the fund itself is not insured.
Q. WHAT SECTORS OFFERED GOOD OPPORTUNITIES?
A. In my view, student loan bonds offered some of the best opportunities in
the market during the period. These generally high-quality bonds often
traded at yields higher than many other municipal bonds with similar
maturities and credit ratings because of their perceived prepayment risk.
Investors often fear the loans backing these bonds will be paid off early
and, therefore, force them to reinvest at lower interest rates. As a result
of some investors' discomfort with the prepayment risk, I was able to buy a
number of the bonds at what I believed were attractive prices.
Q. THERE WERE SOME RECENT CHANGES TO THE FUND'S INVESTMENT POLICIES. CAN
YOU TELL US ABOUT THEM?
A. Sure. As of June 24, 1996, the fund reserved the right to invest up to
5% of its assets - down from one-third - in below-investment-grade
securities. The fund does not intend to seek out the lower-quality,
below-investment-grade bonds. Instead, this change gives the fund
additional flexibility under unusual circumstances. Fidelity also will use
two additional agencies - Duff & Phelps Rating Co. and Fitch Investors
Service, L.P., as well as Moody's Investors Service and Standard & Poor's
which the fund already uses - to determine the credit quality of the fund's
bonds.
Q. WHAT DO YOU THINK IS AHEAD FOR THE MUNICIPAL MARKET OVER THE NEXT SIX
MONTHS?
A. Further mixed economic signals could cause some continued volatility in
the market. But in my view, volatility can translate into opportunities to
find individual securities or sectors I want to buy at attractive levels.
So with the help of Fidelity's research group, I'll focus on finding these
opportunities as they materialize, rather than trying to predict the
direction of interest rates.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: 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
START DATE: August 19, 1976
SIZE: as of June 30, 1996,
more than $964 million
MANAGER: George Fischer,
since 1995; manager, Spartan
Bond Strategist Fund, since
1993; Fidelity Insured Municipal
Income Fund, since 1995;
municipal bond analyst 1989
to 1993; joined Fidelity in 1989
(checkmark)
GEORGE FISCHER ON HIS
INVESTMENT STRATEGY:
"The supply of municipals has
been relatively tight
throughout the first six
months of 1996. That has
diminished somewhat the
opportunities to find the types
of bonds I want to own at
attractive prices. So I'm trying
to avoid pressing, and I'm
resisting the temptation to buy
bonds at any price. Instead,
I've taken a more patient
approach by waiting for
opportunities to develop.
"Generally speaking, I try to
find bonds that have
asymmetric performance
characteristics. By that I
mean I target bonds that
theoretically won't do as
badly in a down market as
they will do well in an up
market. Sometimes this has
to do with a bond's call
features - whether or not it
can be redeemed by its issuer
prior to maturity - tax
consequences, or other
factors."
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 30.9 31.2
Escrowed/Pre-Refunded 12.8 8.0
Water & Sewer 12.1 14.4
Education 8.8 9.2
Health Care 7.8 9.9
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 12.9 14.1
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1996
6 MONTHS AGO
Years 7.2 7.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE,1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Aaa 55.6%
Aa, A 23.6%
Baa 12.5%
Ba, B 0.2%
Non-rated 3.4%
Short-term investments 4.7%
Aaa 47.3%
Aa, A 23.1%
Baa 17.1%
Ba, B 2.1%
Non-rated 4.4%
Short-term investments 6.0%
Row: 1, Col: 1, Value: 55.6
Row: 1, Col: 2, Value: 23.6
Row: 1, Col: 3, Value: 12.5
Row: 1, Col: 4, Value: 0.2
Row: 1, Col: 5, Value: 3.4
Row: 1, Col: 6, Value: 4.7
Row: 1, Col: 1, Value: 47.3
Row: 1, Col: 2, Value: 23.1
Row: 1, Col: 3, Value: 17.1
Row: 1, Col: 4, Value: 2.1
Row: 1, Col: 5, Value: 4.4
Row: 1, Col: 6, Value: 6.0
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 95.3%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - 90.3%
Allegheny County Gen. Oblig. 0% 4/1/11
(MBIA Insured) Aaa $ 2,560,000 $ 1,113,600
Allegheny County Higher Ed. Bldg. Auth. Rev.
(Duquesne Univ. Proj.) 6.50% 3/1/10
(AMBAC Insured) Aaa 400,000 446,500
Allegheny County Hosp. Dev. Auth. Rev. Rfdg.
(South Side Hosp.) Series A, 8.75% 6/1/10 - 3,750,000 3,912,713
Allegheny County Ind. Dev. Auth. Rev. (YMCA
Pittsburgh Proj.) Series 1990, 8.75% 3/1/10 - 2,535,000 2,699,775
Allegheny County Residential Fin. Auth.
Single Family Mtg. Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 205,000 211,406
7.95% 6/1/23 (GNMA Coll.) (b) Aaa 1,455,000 1,509,563
Allegheny County San. Auth. Swr. Rev.:
Series B, 7.50% 12/1/16 (FGIC Insured)
(Pre-Refunded to 6/1/99 @100) (d) Aaa 750,000 811,875
0% 12/1/12 (FGIC Insured) Aaa 2,260,000 853,150
Bethlehem Wtr. Auth. Rev. 6.25% 11/15/21
(MBIA Insured) (Escrowed to Maturity) (d) Aaa 1,000,000 1,067,500
Dauphin County Ind. Dev. Auth. Wtr. Dev. Rev.
(Dauphin Consolidated Wtr. Supply) Series A,
6.90% 6/1/24 (b) A3 1,000,000 1,100,000
Delaware County Auth. Hosp. Rev. (Crozier-
Chester Med. Ctr., Keystone Healthcare):
6% 12/15/09 Baa1 1,000,000 973,750
6% 12/15/20 Baa1 5,000,000 4,637,500
Delaware County Gen. Oblig. Rfdg. Unltd. Tax
5.30% 11/15/01 Aa 2,200,000 2,260,500
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resources Recovery Proj.) Series A, 8.10%
12/1/13, LOC Swiss Bank Corp. Aa3 1,400,000 1,455,314
Erie County Series B, 6.75% 9/1/16 (FGIC
Insured) (Pre-Refunded to 9/1/01 @100) (d) Aaa 1,000,000 1,087,500
Jenks Township Muni. Auth. Rev. (Abraxas
Group, Inc.) 8% 4/1/18 - 6,605,000 6,357,313
Lehigh County Gen. Purpose Auth. Rev. (Hosp.
Healtheast, Inc.) Series B, 9% 7/1/15
(Pre-Refunded to 7/1/97 @102) (d) A1 1,000,000 1,068,000
McKeesport Area School Dist. Rfdg. Series C,
5% 4/1/13 A 1,000,000 910,000
Meadville Gen. Oblig. Rfdg. Series B, 6%
10/1/05 (AMBAC Insured) Aaa 3,210,000 3,406,613
Montgomery County Higher Ed. & Health
Auth. Hosp. Rev. (United Hosp. Proj.) Series A,
10% 11/1/05 Ba1 650,000 666,081
Northumberland County Auth. Commonwealth
Lease Rev. 0% 10/15/10 (MBIA Insured) Aaa 1,000,000 446,250
Pennsbury School Dist.:
Rfdg. 6% 8/15/05 (FGIC Insured) Aaa 1,605,000 1,723,369
6.80% 8/15/14 (FGIC Insured) (Pre-Refunded
to 8/14/04 @100) (d) Aaa 1,025,000 1,146,719
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - CONTINUED
Pennsylvania Convention Ctr. Rev.:
Rfdg. Series A:
6.60% 9/1/09 (MBIA Insured) Aaa $ 9,150,000 $ 9,996,375
6.70% 9/1/14 (MBIA Insured) Aaa 3,965,000 4,306,981
6.75% 9/1/19 (MBIA Insured) Aaa 3,420,000 3,714,975
Series A, 6% 9/1/19 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 4,225,000 4,325,344
Pennsylvania Gen. Oblig.:
Unltd. Tax Rfdg. Series 1, 5.30% 5/1/04 A1 3,500,000 3,535,000
Series 1:
6% 9/15/98 A1 2,000,000 2,067,500
6% 9/15/01 A1 1,100,000 1,157,750
5% 5/01/02 (FGIC Insured) Aaa 1,000,000 1,011,250
5.375% 5/15/16 (FGIC Insured) Aaa 4,000,000 3,755,000
Series 2:
5.50% 7/1/01 A1 4,135,000 4,253,881
5.60% 7/1/02 A1 1,000,000 1,033,750
0% 7/1/07 (AMBAC Insured) Aaa 1,770,000 980,138
Series 3:
5.10% 6/15/03 (MBIA Insured) Aaa 1,000,000 1,007,500
6.10% 11/15/04 (FGIC Insured) Aaa 1,000,000 1,065,000
5% 9/1/09 A1 1,245,000 1,162,519
Series A:
6.75% 5/1/98 A1 1,000,000 1,041,250
6.125% 9/15/03 A1 2,000,000 2,122,500
6.10% 11/15/03 (AMBAC Insured) Aaa 10,310,000 10,967,263
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev. (b):
6.173% 3/1/22 (AMBAC Insured) Aaa 4,000,000 3,915,000
6.854% 9/1/26 (AMBAC Insured) Aaa 2,000,000 2,050,000
Pennsylvania Higher Ed. Facs. Auth.
College & Univ. Rev.:
Rfdg. (Carnegie-Mellon Univ.) 6% 11/1/05 AA- 1,000,000 1,071,250
(Pennsylvania Med. College Proj.) Series A,
8.375% 3/1/11 Baa 900,000 1,002,375
(Univ. of Pennsylvania):
Rfdg. Series A:
6.50% 9/1/02 Aa 2,750,000 2,983,750
6.50% 9/1/04 Aa 2,650,000 2,898,438
Rfdg. Series B:
6.50% 9/1/02 Aa 1,950,000 2,115,750
6.50% 9/1/04 Aa 2,100,000 2,296,875
Series A, 7% 9/1/01 Aa 2,000,000 2,197,500
Series B, 7% 9/1/05 Aa 2,000,000 2,267,500
Pennsylvania Hsg. Fin. Agcy.:
6.10% 10/1/13 Aa 5,000,000 4,981,250
5.65% 4/1/20 Aa 2,875,000 2,860,625
Pennsylvania Hsg. Fin. Agcy. Single Family Mtg.
Series V, 7.80% 4/1/16 Aa 500,000 518,750
Pennsylvania Ind. Dev. Auth. Econ. Dev. Rev.:
7% 7/1/06 (AMBAC Insured) Aaa 1,000,000 1,127,500
7% 1/1/07 (AMBAC Insured) Aaa 1,500,000 1,685,625
7% 7/1/07 (AMBAC Insured) Aaa 2,650,000 2,991,188
5.80% 1/1/08 (AMBAC Insured) Aaa 2,000,000 2,052,500
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - CONTINUED
Pennsylvania Ind. Dev. Auth. Econ. Dev. Rev: - continued
5.80% 7/1/09 (AMBAC Insured) Aaa $ 1,295,000 $ 1,320,900
Pennsylvania Intergovernmental Coop. Auth.
Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/13 A 7,500,000 6,693,750
(City of Philadelphia Funding Prog.)
6% 6/15/00 (FGIC Insured) Aaa 2,000,000 2,092,500
6.75% 6/15/21 (FGIC Insured) (Pre-Refunded
to 6/15/05 @100) (d) Aaa 2,190,000 2,447,325
Pennsylvania Rfdg. & Proj. Series 1-A, 6.75%,
1/1/11 (Pre-Refunded to 1/1/01
@101.50) (d) A1 1,100,000 1,196,250
Pennsylvania Turnpike Commission Rev.:
Series J, 7.20% 12/1/17 (FGIC Insured)
(Pre-Refunded to 12/1/01 @102) (d) Aaa 1,000,000 1,128,750
Series N, 5.50% 12/1/17 A1 2,000,000 1,885,000
Philadelphia Gas Wks. Rev. Rfdg. Series 14-A:
6.375% 7/1/14 Baa1 3,550,000 3,603,250
6.375% 7/1/26 Baa1 5,905,000 5,956,669
Philadelphia Gen. Oblig. 6.25% 5/15/10
(MBIA Insured) Aaa 3,200,000 3,332,000
Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.:
(Graduate Health Sys.) Series B, 6.25% 7/1/13 Baa1 1,000,000 947,500
6.15% 7/1/05 Baa1 2,100,000 2,107,875
6.25% 7/1/06 Baa1 2,600,000 2,609,750
Philadelphia Muni. Auth. Rev.
(Muni. Svcs. Bldg. Lease):
(Justice Lease) Series B, 7.10% 11/15/11
(FGIC Insured) (Pre-Refunded to
11/15/01 @102) (d) Aaa 2,500,000 2,806,250
0% 3/15/11 (FSA Insured) Aaa 1,000,000 421,250
0% 3/15/14 (FSA Insured) Aaa 7,360,000 2,603,600
Philadelphia Redev. Auth. Hsg. Rev.
Sub-Series 3, 8.125% 8/1/26 (GNMA Coll.) AAA 45,000 48,994
Philadelphia Wtr. & Swr. Rev.:
(Cap. Appreciation) 14th Series, 0% 10/1/08
(MBIA Insured) Aaa 5,300,000 2,689,750
7.50% 8/1/10 (Pre-Refunded to
8/1/01 @102) (d) Baa 3,000,000 3,408,750
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 2,085,000 2,311,743
6.75% 8/1/05 (MBIA Insured) Aaa 3,110,000 3,459,875
6.25% 8/1/07 (MBIA Insured) Aaa 4,840,000 5,184,850
Pittsburgh Gen. Oblig. Series A:
Rfdg. 5.50% 9/1/14 (AMBAC Insured) Aaa 5,310,000 5,203,800
5.875% 9/1/00 (MBIA Insured) Aaa 1,315,000 1,382,394
Pittsburgh School Dist. Series B:
0% 8/1/07 (AMBAC Insured) Aaa 2,610,000 1,455,075
0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 1,052,500
Pittsburgh Urban Redev. Auth. Mtg. Rev.
Series A, 7.625% 10/1/17 A1 995,000 1,015,845
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - CONTINUED
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys. Rev.
Rfdg. Series A:
0% 9/1/04 (FGIC Insured) (Escrowed
to Maturity) (d) Aaa $ 5,000,000 $ 3,275,000
6.50% 9/1/13 (FGIC Insured) Aaa 15,705,000 17,059,556
Scranton Parking Auth. Rev. 8.125%
9/15/14, LOC Northeastern Bank
(Pre-Refunded to 9/15/98 @100) (d) A 500,000 539,375
Southeastern Pennsylvania Trans. Auth. Spl. Rev.
Series A:
6.50% 3/1/03 (FGIC Insured) Aaa 2,520,000 2,734,200
6.50% 3/1/04 (FGIC Insured) Aaa 1,485,000 1,616,794
Westmoreland County Gen. Oblig. Rfdg.
Series G, 0% 12/1/09 (FGIC Insured) Aaa 2,490,000 1,164,075
Westmoreland County Muni. Auth. Svc. Rev.
Series K, 0% 7/1/13 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 3,500,000 1,273,125
Wilson Area School Dist. (Cap. Appreciation):
0% 5/15/09 (AMBAC Insured) Aaa 3,275,000 1,580,187
0% 5/15/10 (AMBAC Insured) Aaa 3,280,000 1,488,300
0% 5/15/11 (AMBAC Insured) Aaa 3,500,000 1,496,250
Wyoming Ind. Dev. Auth. Poll. Cont. Rev.
Rfdg. (Proctor & Gamble Paper Proj.)
5.55% 5/1/10 Aa2 5,000,000 5,006,250
York City Swr. Auth. Swr. Rev. Unltd. Tax Gen.
Oblig. 0% 12/1/12 (MBIA Insured) Aaa 3,235,000 1,245,472
243,229,622
PUERTO RICO - 4.7%
Puerto Rico Commonwealth Pub. Impt. 6.80% 7/1/21
(Pre-Refunded to 7/1/02 @101.50) (d) AAA 4,000,000 4,470,000
Puerto Rico Commonwealth Urban Renewal &
Hsg. Corp. Rfdg. 7.875% 10/1/04 Baa 1,000,000 1,102,500
Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Series P,
7% 7/1/21 Aaa 4,000,000 4,480,000
Puerto Rico Port Auth. Spl. Facs. (American
Airlines) Series A, 6.25% 6/1/26 Baa3 2,500,000 2,459,375
12,511,875
GUAM - 0.3%
Guam Pwr. Auth. Rev. Series A, 5.25% 10/1/13 BBB 1,000,000 885,000
TOTAL MUNICIPAL BONDS
(Cost $254,369,054) 256,626,497
MUNICIPAL NOTES (A) - 4.7%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
PENNSYLVANIA - 4.7%
Allegheny County Hosp. Dev. Auth. Health Ctr. Rev.
(Presbyterian Univ. Health Sys.) VRDN:
3.55%, LOC PNC Bank, NA VMIG 1 $ 600,000 $ 600,000
Series 1988 B-3, 3.55%, LOC PNC Bank, NA VMIG 1 3,100,000 3,100,000
Series 1990 D, 3.55% (MBIA Insured)
(BPA PNC Bank, NA) VMIG 1 600,000 600,000
Allegheny County Ind. Dev. Auth. Rev. Rfdg.
(Chelsea Inds. Inc.) Series 1994, 3.55%, LOC
Bank of Boston, VRDN P-1 500,000 500,000
Harrisburg Wtr. Auth. Rev. Participating
VRDN, Series BT-193, 3.50% (Liquidity Facility
Bankers Trust Co.) (e) VMIG 1 1,000,000 1,000,000
Northumberland County Ind. Dev. Rev.
(Foster Wheeler Mt. Carmel Inc.)
Series 1987 B, 3.25%, LOC Union Bank of
Switzerland, VRDN (b) VMIG 1 1,450,000 1,450,000
Pennsylvania Econ. Dev. Fin. Auth., VRDN:
(Griffin, Schlaegle & Pirillia) Series 1992 A3,
3.70%, LOC PNC Bank, NA (b) - 650,000 650,000
(Lutheran Youth & Family Svc.) Series 1993 A,
3.55%, LOC PNC Bank, NA - 700,000 700,000
(Pappafava Proj.) Series 1989 D7, 3.70%, LOC
PNC Bank, NA (b) - 225,000 225,000
Pennsylvania Energy Dev. Auth. Rev. (B&W
Edensburg Proj.) Series 1986, 3.40%,
LOC Swiss Bank Corp., VRDN (b) VMIG 1 1,400,000 1,400,000
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev., VRDN (b):
Series 1988 C, 3.40%, LOC SLMA VMIG 1 300,000 300,000
Series 1994 A, 3.40%, LOC SLMA VMIG 1 200,000 200,000
Pittsburgh Wtr. & Swr. Auth. Participating VRDN,
Series BT-181, 3.45% (Liquidity Facility
Bankers Trust Co.) (e) VMIG 1 1,000,000 1,000,000
Sayre Health Care Facs. Auth. Hosp. Rev.
(VHA of Pennsylvania) Series 1985 K, 3.25%
(AMBAC Insured) (BPA Mellon Bank)
VRDN A-1+ 200,000 200,000
Schuylkill County Ind. Dev. Auth. (Pine Grove
Landfill, Inc.) Series 1995, 3.85%, LOC
Meridian Bank NA, VRDN (b) - 700,000 700,000
TOAL MUNICIPAL NOTES
(Cost $12,625,000) 12,625,000
TOTAL INVESTMENTS - 100%
(Cost $266,994,054) $ 269,251,497
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
2. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. Provides evidence of ownership in one or more underlying municipal
bonds.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 76.6% AAA, AA, A 79.4%
Baa 10.7% BBB 10.3%
Ba 0.3% BB 0.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 3.4%. FMR has
determined that unrated debt securities that are lower quality account for
2.4% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 30.9%
Escrowed/Pre-Refunded 12.8
Water and Sewer 12.1
Education 8.8
Health Care 7.8
Others (individually less than 5%) 27.6
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $266,994,054. Net unrealized appreciation aggregated
$2,257,443, of which $5,017,680 related to appreciated investment
securities and $2,760,237 related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $176,917 which will expire on December 31, 2003.
At December 31, 1995, the fund was required to defer $1,901,550 of losses
on futures and option contracts.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
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JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $266,994,054) - $ 269,251,497
See accompanying schedule
Cash 21,219
Receivable for investments sold 5,498,529
Interest receivable 3,955,828
Redemption fees receivable 12
TOTAL ASSETS 278,727,085
LIABILITIES
Payable for investments purchased $ 3,956,786
Payable for fund shares redeemed 103,185
Distributions payable 290,554
Accrued management fee 122,328
TOTAL LIABILITIES 4,472,853
NET ASSETS $ 274,254,232
Net Assets consist of:
Paid in capital $ 271,626,244
Accumulated undistributed net realized gain (loss) 370,545
on investments
Net unrealized appreciation (depreciation) on 2,257,443
investments
NET ASSETS, for 26,543,763 shares outstanding $ 274,254,232
NET ASSET VALUE, offering price and redemption price per $10.33
share ($274,254,232 (divided by) 26,543,763 shares)
</TABLE>
STATEMENT OF OPERATIONS
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SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 7,678,603
EXPENSES
Management fee $ 766,334
Non-interested trustees' compensation 572
Total expenses before reductions 766,906
Expense reductions (59,010) 707,896
NET INTEREST INCOME 6,970,707
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 2,475,736
Futures contracts 295 2,476,031
Change in net unrealized appreciation (depreciation) (11,726,302)
on investment securities
NET GAIN (LOSS) (9,250,271)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,279,564)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
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SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 6,970,707 $ 15,573,846
Net interest income
Net realized gain (loss) 2,476,031 (433,700)
Change in net unrealized appreciation (depreciation) (11,726,302) 27,933,708
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,279,564) 43,073,854
FROM OPERATIONS
Distributions to shareholders (6,970,707) (15,573,846)
From net interest income
From net realized gain (27,019) -
TOTAL DISTRIBUTIONS (6,997,726) (15,573,846)
Share transactions 13,942,798 39,446,593
Net proceeds from sales of shares
Reinvestment of distributions 5,197,178 11,652,492
Cost of shares redeemed (24,039,041) (31,916,917)
Redemption fees 5,266 13,800
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (4,893,799) 19,195,968
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (14,171,089) 46,695,976
NET ASSETS
Beginning of period 288,425,321 241,729,345
End of period $ 274,254,232 $ 288,425,321
OTHER INFORMATION
Shares
Sold 1,330,766 3,861,028
Issued in reinvestment of distributions 497,394 1,130,166
Redeemed (2,304,758) (3,101,862)
Net increase (decrease) (476,598) 1,889,332
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1996
(UNAUDITED) 1995 1994 1993D 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.670 $ 9.620 $ 11.130 $ 10.590 $ 10.370 $ 9.880
beginning of period
Income from .260 .590 .652 .679 .693 .701
Investment
Operations
Net interest income
Net realized (.339) 1.049 (1.201) .679 .219 .489
and unrealized
gain (loss)
Total from (.079) 1.639 (.549) 1.358 .912 1.190
investment
operations
Less Distributions (.260) (.590) (.652) (.679) (.693) (.701)
From net interest
income
From net realized (.001) - (.310) (.140) - -
gain
Total distributions (.261) (.590) (.962) (.819) (.693) (.701)
Redemption fees added .000 .001 .001 .001 .001 .001
to paid in capital
Net asset value, end $ 10.330 $ 10.670 $ 9.620 $ 11.130 $ 10.590 $ 10.370
of period
TOTAL RETURN B (.75)% 17.44% (5.04) 13.18% 9.11% 12.49%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 274,254 $ 288,425 $ 241,729 $ 306,246 $ 242,375 $ 199,499
period (000 omitted)
Ratio of expenses to .55%A .55% .55% .55% .55% .55%
average net assets
Ratio of expenses to .51%A .55% .55% .55% .55% .55%
average net assets ,C
after expense
reductions
Ratio of net interest 5.00% A 5.73% 6.33% 6.13% 6.65% 6.96%
income to average
net assets
Portfolio turnover rate 66% A 49% 26% 38% 8% 6%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER
HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Pennsylvania Municipal Income Fund (the income fund) is a fund of
Fidelity Municipal Trust. Spartan Pennsylvania Municipal Money Market Fund
(the money market fund) is a fund of Fidelity Municipal Trust II. Each
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company. Fidelity
Municipal Trust and Fidelity Municipal Trust II (the trusts) are organized
as a Massachusetts business trust and a Delaware business trust,
respectively. Each fund is authorized to issue an unlimited number of
shares. The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to make
certain estimates and assumptions at the date of the financial statements.
The following summarizes the significant accounting policies of the the
income fund and money market fund:
SECURITY VALUATION.
INCOME FUND. Securities are valued based upon a computerized matrix system
and/or appraisals by a pricing service, both of which consider market
transactions and dealer-supplied valuations. Short-term securities maturing
within sixty days of their purchase date are valued either at amortized
cost or original cost plus accrued interest, both of which approximate
current value. Securities for which quotations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for
gains/losses on futures and options transactions, capital loss
carryforwards and losses deferred due to futures and options and excise tax
regulations. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to paid in
capital and may affect the per-share allocation between net investment
income and realized and unrealized gain (loss). Any taxable gain remaining
at fiscal year end is distributed in the following year.
REDEMPTION FEES. Shares held in the income fund less than 180 days are
subject to a redemption fee equal to .50% of the proceeds of the redeemed
shares. The fee, which is retained by the fund, is accounted for as an
addition to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. Each fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The income fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS AND OPTIONS - CONTINUED
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $85,828,001 and $90,312,296, respectively. The
market value of futures contracts opened and closed during the period
amounted to $3,584,415 and $3,584,710, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses, except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions and extraordinary expenses. FMR receives a fee that
is computed daily at an annual rate of .55% and .50% of average net assets
for the income and money market funds, respectively.
FMR also bears the cost of providing shareholder services to each fund. To
offset the cost of providing these services, FMR or its affiliates
collected certain transaction fees from shareholders which amounted to
$1,775 and $4,175 for the income and money market funds, respectively.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with the funds'
custodian and transfer agent whereby interest earned on uninvested cash
balances was used to offset a portion of each fund's expenses. During the
period, each fund' s expenses were reduced by $59,010 and $50,859 for the
income and money market funds, respectively, under these arrangements.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER, MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning Jr., Vice President
Deborah F. Watson, Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer -
MONEY MARKET FUND
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
MICHIGAN
MUNICIPAL
FUNDS
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS
CHECK PAGE NUMBERS !!!
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PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
FIDELITY MICHIGAN MUNICIPAL INCOME FUND
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 20 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
PERFORMANCE 24 How the fund has done over time.
FUND TALK 26 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 28 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 29 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 33 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 37 Notes to the financial statements.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that can help investors in every type of market.
First, take a long-term approach when investing. If you can afford to leave
your money invested through the inevitable ups and downs of financial
markets, you will greatly reduce your vulnerability to any single decline.
Over time, for example, stock prices have gone up - and have significantly
outperformed other types of investments and stayed ahead of inflation.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.SM
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects the change in a fund's share price
over a given period, reinvestment of its dividends (or income). Yield
measures the income paid by a fund. Since a money market fund tries to
maintain a $1 share price, yield is an important measure of performance. If
Fidelity had not reimbursed the fund for certain expenses, the past five
years and life of fund total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Michigan Municipal
Money Market Fund 1.47% 3.15% 14.92% 24.18%
All Tax-Free Money Market Funds Average 1.47% 3.16% 14.54% 20.20%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on June 12, 1990. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. To measure how the fund's performance stacked
up against its peers, you can compare it to the all tax-free money market
funds average, which reflects the performance of 398 all tax-free money
market funds with similar objectives tracked by IBC Financial Data, Inc.
over the past six months. (The periods covered by the IBC Financial Data,
Inc. numbers are the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Municipal
Money Market Fund 3.15% 2.82% 3.40%
All Tax-Free Money Market Funds Average 3.16% 2.75% 3.11%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
YIELDS
6/26/95 10/2/95 1/1/96 4/1/96 7/2/96
Fidelity Michigan Municipal 3.56% 3.52% 4.00% 2.86% 2.49%
Money Market Fund
All Tax-Free Money Market 3.59% 3.55% 3.95% 2.87% 2.89%
Funds Average
Fidelity Michigan Municipal 5.82% 5.75% 6.54% 4.67% 4.07%
Money Market Fund
Tax-equivalent
Row: 1, Col: 1, Value: 3.56
Row: 1, Col: 2, Value: 3.59
Row: 2, Col: 1, Value: 3.52
Row: 2, Col: 2, Value: 3.55
Row: 3, Col: 1, Value: 4.0
Row: 3, Col: 2, Value: 3.95
Row: 4, Col: 1, Value: 2.86
Row: 4, Col: 2, Value: 2.87
Row: 5, Col: 1, Value: 2.49
Row: 5, Col: 2, Value: 2.89
5% -
4% -
3% -
2% -
1% -
0%
Fidelity Michigan
Municipal Money
Market Fund
All Tax-Free Money
Market Funds
Average
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the all tax-free money market funds average as
tracked by IBC Financial Data, Inc. Or you can look at the fund's
tax-equivalent yield, which is based on a combined effective 1996 federal
and state income tax rate of 38.82%. A portion of the fund's income may be
subject to the federal alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more meaningful.
Keep in mind that the U.S.
government neither insures nor
guarantees a money market
fund. And there is no
assurance that a money fund
will maintain a $1 share price.
(checkmark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Jeff Parker,
Portfolio Manager of Fidelity Michigan Municipal Money Market Fund
Q. JEFF, WHAT KIND OF INVESTMENT CLIMATE HAVE YOU BEEN OPERATING IN FOR THE
PAST SIX MONTHS?
A. There's been a dramatic turnaround in market sentiment since the
beginning of the calendar year. When the period began, the Federal Reserve
was in an easing mode, having just lowered the federal funds rate - the
rate banks charge each other for overnight loans - in December 1995. With
inflationary pressures mild, Congress and the White House making progress
toward a balanced budget agreement, and the economy apparently losing
steam, many market participants believed it was only a matter of time
before the Fed cut interest rates again. It therefore came as no surprise
when the Fed lowered the federal funds rate one-quarter percentage point on
the last day of January 1996, to 5.25%. Heading into spring, further rate
cuts seemed likely.
Q. WHEN DID THE CHANGE IN MARKET SENTIMENT OCCUR?
A. The first hint may have been Fed Chairman Alan Greenspan's testimony
before the Senate Banking Committee in February, when he seemed to suggest
that the economy was basically sound. Then came the infamous February
employment report, which was significantly stronger than most analysts had
predicted, prompting a dramatic sell-off in the bond market and sending
interest rates higher. By the end of June, a string of positive indicators
had left little doubt in most analysts' minds that, for the time being, the
economy was in no need of further stimulus.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund began the period with an average maturity of 47 days. As
evidence mounted that the economy was performing stronger than expected, I
sought greater flexibility by selling some of the fund's longer-term
securities. With the added flexibility, I began searching for buying
opportunities driven by technical factors. As those opportunities arose, I
purchased selectively, moving the fund's average maturity to 46 days at the
end of June.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1996 was 2.93%, compared to 3.98%
on December 31, 1995. The latest yield was the equivalent of a taxable
yield of 4.79% for Michigan investors in the 38.82% combined federal and
state tax bracket. The fund's total return during the six-month period was
1.47%. This mirrored the total return of 1.47% for the all tax-free money
market funds average, according to IBC Financial Data, Inc.
Q. WHAT'S THE OUTLOOK?
A. Given the recent strength in certain economic indicators, no one expects
the Fed to lower rates again anytime soon. Indeed, there have been some
ominous signs of growing inflationary pressures in recent months.
Historically, the Fed has been hesitant to raise interest rates in the
months leading up to a presidential election. However, if we continue to
see evidence of strong economic performance in key indicators such as
employment, housing and consumer spending, I think there's a good chance
the Fed may raise rates anyway, possibly by as much as one-half percentage
point before the summer is over. Given the uncertainty, I'll probably aim
to keep the fund's average maturity about where it is right now-between 40
and 50 days. That gives me maximum flexibility to adapt to changing
conditions and take advantage of buying opportunities as they arise.
FUND FACTS
GOAL: high current tax-free
income for Michigan residents
while maintaining a stable
$1.00 share price.
START DATE: January 12, 1990
SIZE: as of June 30, 1996,
over $239 million
MANAGER: Jeff Parker, since
June, 1995; also manager,
Fidelity Connecticut Municipal
Money Market Fund, Fidelity
New Jersey Municipal Money
Market Fund, Spartan
Connecticut Municipal Money
Market Fund and Spartan
New Jersey Municipal Money
Market Fund, since 1995;
joined Fidelity in 1991
(checkmark)
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall.
When the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future
tax or other revenues and
payable from those specific
sources.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
On August 1, 1996, Deborah
Watson will become manager
of the fund.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
6/30/96 12/31/95 6/30/95
0 - 30 69 68 71
31 - 90 14 10 16
91 - 180 11 13 6
181 - 397 6 9 7
WEIGHTED AVERAGE MATURITY
6/30/96 12/31/95 6/30/95
Michigan Municipal
Money Market Fund 46 days 47 days 51 days
All Tax-Free Money Market
Funds Average* 50 days 53 days 45 days
ASSET ALLOCATION
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Row: 1, Col: 1, Value: 65.0
Row: 1, Col: 2, Value: 10.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 62.0
Row: 1, Col: 2, Value: 16.0
Row: 1, Col: 3, Value: 4.0
Row: 1, Col: 4, Value: 16.0
Row: 1, Col: 5, Value: 2.0
Variable rate
demand notes
(VRDNs) 65%
Commercial
paper 10%
Tender bonds 4%
Municipal
notes 19%
Other 2%
Variable rate
demand notes
(VRDNs) 62%
Commercial
paper 16%
Tender bonds 4%
Municipal
notes 16%
Other 2%
* SOURCE: IBC'S MONEY FUND REPORT(registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 99.6 %
Allegan Intermediate School Dist. Spl. Ed. TAN
4.25% 4/1/97 $ 1,300,000 $ 1,304,173
Bay City School Dist. Bay City & Saginaw County RAN
4.10% 10/25/96 3,500,000 3,505,464
Bruce Township Hosp. Fin. Auth. Sisters of Charity
Health Care Sys. Rev. (St. Joseph Hosp. Ctr. Proj.):
Bonds 3.65%, tender 11/1/96
(MBIA Insured) (BPA Morgan Guaranty Trust Co.) 1,435,000 1,435,000
Series 1988 A, 3.20%
(MBIA Insured) VRDN 4,800,000 4,800,000
Clinton Econ. Dev. Corp. Rev. (Sisters of Charity Health Care Sys.
St. Joseph's Elder Care) Series 1988 A, 3.20%
(MBIA Insured) VRDN 1,800,000 1,800,000
Dearborn Econ. Dev. Corp. Ltd. Oblig. Rev.
(Oakbrook Common Proj.) Series 1991,
3.45%, LOC Mellon Bank, VRDN 2,800,000 2,800,000
Delta County Econ. Dev. Corp. Envir. Impt. Rev., VRDN:
(Mead Escanaba Paper Co. Proj.):
Series 1985 D, 3.60%, LOC Credit Suisse 1,000,000 1,000,000
Series 1985 F, 3.60%, LOC Bank of Nova Scotia 1,300,000 1,300,000
Series 1992, 3.65%, LOC Union Bank of Switzerland (b) 2,200,000
2,200,000
Detroit Swr. Disp. Rev. Bonds 6.75% 7/1/97 1,500,000 1,570,671
Detroit Wtr. Supply Rev. Bonds 5% 7/1/96 (FGIC Insured) 1,000,000
1,000,000
Flint Econ.Dev. Corp. Ltd. Oblig. Rev.
(Genessee County Real Estate Proj.) 3.55%,
LOC NBD Bank, VRDN (b) 1,200,000 1,200,000
Genesee County Econ. Dev. Corp. Ltd. Oblig. Econ. Dev.
Rev. (Creative Foam Corp. Proj.) Series 1994, 3.55%,
LOC NBD Bank, VRDN (b) 3,000,000 3,000,000
Georgetown Charter Township Ind. Dev. Rev.
(J&F Steel Corp. Proj.) Series 1989,
3.45%, LOC Societe Generale, VRDN (b) 1,000,000 1,000,000
Grand Rapids Econ. Dev. Auth. Rev.
(Calder Plaza Proj.) Series 1992 A,
3.30%, LOC Old Kent Bank, VRDN 2,680,000 2,680,000
Grand Rapids Econ. Dev. Corp. Ltd. Oblig. Rev.
(Holland Home Proj.) Series 1994 B, 3.35%,
LOC Old Kent Bank, VRDN 2,250,000 2,250,000
Grand Rapids Ind. Dev. Rev.
(Rowe Int'l.) 3.50%, LOC Chemical Bank, VRDN 5,300,000 5,300,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Grand Rapids Wtr. Supply Sys. Impt. Rev. Rfdg.
Series 1993, 3.25% (FGIC Insured) (Liquidity Facility
Societe Generale) VRDN $ 2,300,000 $ 2,300,000
Jackson County Econ. Dev. Corp. Rev. (SPX Corp. Proj.)
3.70%, LOC NBD Bank, VRDN 2,000,000 2,000,000
Kalamazoo Econ. Dev. Corp. Rev. Rfdg.
(La Quinta Motor Inns) Series 1991, 3.40%,
LOC NationsBank, VRDN 2,040,000 2,040,000
Kent County Hosp. Fin. Auth. Participating VRDN,
Series 94-C1, 3.65% (MBIA Insured)
(Liquidity Facility Norwest Bank) (c) 4,000,000 4,000,000
Livonia Econ. Dev. Corp. Rev., VRDN:
(Ajluni Proj.) 3.55%, LOC NBD Bank (b) 2,200,000 2,200,000
(Foodland Distributors Corp.) 3.50%, LOC Comerica 2,100,000 2,100,000
Michigan Bldg. Auth. Rev. 3.70% 8/28/96, LOC Canadian
Imperial Bank, CP 2,500,000 2,500,000
Michigan Bldg. Auth. Rev. Bonds Series I, 5.40% 10/1/96 1,000,000
1,004,277
Michigan Gen. Oblig. TAN 4% 9/30/96 21,000,000 21,023,118
Michigan Higher Ed. Student Loan Auth. Rev. Rfdg., VRDN (b):
Series XII-B, 3.40% (AMBAC Insured)
(BPA Mitsubishi Bank) 13,100,000 13,100,000
Series XII-D, 3.40% (AMBAC Insured) (BPA Fuji Bank) 3,400,000 3,400,000
Series XII-F, 3.40% (MBIA Insured) (BPA Krediet Bank) 5,200,000
5,200,000
Michigan Hosp. Fin. Auth. Hosp. Equip. Rev. Bonds 3.55%,
LOC First of America Bank, VRDN 4,500,000 4,500,000
Michigan Hosp. Fin. Auth. Rev., VRDN:
Rfdg. (Mt. Clemens Gen. Hosp.) Series 1994, 3.30%,
LOC Comerica Bank 10,000,000 10,000,000
(Hosp. Equip. Loan Prog.) Series A,
3.55% LOC First of America Bank 5,700,000 5,700,000
Michigan Hsg. Dev. Auth. Hsg. Rev. Bonds Series 1988 A,
3.55%, tender 7/25/96, LOC Credit Suisse (b) 2,000,000 2,000,000
Michigan Hsg. Dev. Auth. Ltd. Oblig. Rev. (Shoal Creek
Apt. Proj.) 3.40%, LOC Nat'l. Westminster Bank, VRDN 1,000,000 1,000,000
Michigan Hsg. Dev. Auth. Participating VRDN (b) (c):
Series PT-38, 3.60% (FSA Insured)
(Liquidity Facility Commerzbank) 4,710,000 4,710,000
Series PT-58, 3.70% (Liquidity Facility Credit Suisse (d) 8,780,000
8,780,000
3.60% (Liquidity Facility Credit Suisse) 10,570,000 10,570,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series 1994 C,
3.25%, LOC Credit Suisse, VRDN $ 350,000 $ 350,000
Michigan Muni. Bond Auth. RAN:
Series 1995 B, 4.50% 7/3/96 7,000,000 7,000,258
Series 1996 A, 4.50% 7/3/97 12,000,000 12,066,240
Series C, 4.50% 9/6/96 3,100,000 3,102,999
Michigan Strategic Fund Ltd. Oblig. Rev. VRDN:
(Doss Ind. Dev. Co.) 3.55%, LOC NBD Bank (b) 3,900,000 3,900,000
(Envir. Quality Co. Proj.) Series 1995, 3.60%, LOC Comerica
Bank 1,800,000 1,800,000
(General Motors Corp. Composite) 3.55% 5,790,000 5,790,000
(Hi Tech Mold & Engineering) 3.55%, LOC NBD Bank (b) 1,300,000 1,300,000
(Peachwood Center Assoc.) Series 1995, 3.45%,
LOC NBD Bank 1,500,000 1,500,000
(The Spiratex Co. Proj.) Series 1994, 3.55%,
LOC NBD Bank (b) 2,800,000 2,800,000
(Uni Boring Co. Inc. Proj.) Series 1992, 3.55%,
LOC NBD Bank 1,900,000 1,900,000
(Ultimate Hydroforming Inc. Proj.) 3.55%, LOC NBD Bank, (b) 1,000,000
1,000,000
Michigan Strategic Fund Poll. Cont. Rev. :
Bonds:
(Dow Chemical Proj.) Series 1988 (b):
3.80%, tender 8/5/96 6,000,000 6,000,000
3.85%, tender 8/6/96 4,700,000 4,700,000
3.70%, tender 8/15/96 3,700,000 3,700,000
3.65%, tender 9/12/96 2,000,000 2,000,000
3.65%, tender 9/11/96 3,000,000 3,000,000
3.65%, tender 9/12/96 1,000,000 1,000,000
Rfdg. (Consumers Pwr. Co. Proj.) Series 1988 A, 3.55%,
LOC Union Bank of Switzerland, VRDN 5,000,000 5,000,000
Michigan Strategic Fund Solid Waste Disp. Rev.
(Grayling Gen. Station Proj.) Series 1990, 3.55%, LOC
Barclays Bank, VRDN (b) 9,200,000 9,200,000
Michigan Trunk Line Participating VRDN, Series SG-44,
3.45% (Liquidity Facility Societe Generale) (c) 5,830,000 5,830,000
Mona Shores School Dist. Participating VRDN,
Series SG-26, 3.45% (Liquidity Facility Societe
Generale) (c) 8,175,000 8,175,000
Monroe County Econ. Dev. Corp. Rev. Rfdg. (Detroit Edison
Proj.) Series 92CC, 3.60%, LOC Barclays Bank, VRDN 600,000 600,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cardell Corp.) 3.45%, LOC Comerica Bank, VRDN (b) $ 250,000 $ 250,000
Royal Oak Gen. Oblig. Rfdg. 3.95% 10/1/96
(AMBAC Insured) 1,435,000 1,435,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 3.60%, LOC Comerica
Bank, VRDN (b) 5,000,000 5,000,000
University of Michigan Intercollegiate Athletic Rev. 3.60%,
VRDN 2,800,000 2,800,000
Villiage of Chelsea Ltd. Oblig. Rev. (Silver Maples of Chelsea Proj.)
Series 1996, 3.30%, LOC Comerica Bank, VRDN 3,000,000 3,000,000
250,472,200
TEXAS - 0.4 %
Brazos River Auth. Poll. Cont. Rev.
(Texas Util. Elec. Co.) Series 1995 A, 3.80%,
LOC Morgan Guaranty Trust Co., VRDN (b) 1,000,000 1,000,000
TOTAL INVESTMENTS - 100% $ 251,472,200
Total Cost for Income Tax Purposes $ 251,472,227
SECURITY TYPE ABBREVIATIONS
CP - Commercial Paper
RAN - Revenue Anticipation Notes
TAN - Tax Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Provides evidence of ownership in one or more underlying municipal
bonds.
(d) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Michigan Hsg. Dev.
Auth. Participating VRDN
Series PT-58, 3.70% 12/14/95 $8,780,000
INCOME TAX INFORMATION
At December 31, 1995, the fund had a capital loss carryforward of
approximately $57,500 of which $1,600, $1,700, $10,300, $39,100 and $4,800
will expire on December 31, 1998, 1999, 2001, 2002 and 2003, respectively.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value - See accompanying $ 251,472,200
schedule
Cash 144,785
Interest receivable 1,637,388
TOTAL ASSETS 253,254,373
LIABILITIES
Payable for investments purchased $ 13,371,794
Distributions payable 22,390
Accrued management fee 76,860
Other payables and accrued expenses 55,474
TOTAL LIABILITIES 13,526,518
NET ASSETS $ 239,727,855
Net Assets consist of:
Paid in capital $ 239,820,335
Accumulated net realized gain (loss) on investments (92,480)
NET ASSETS, for 239,820,335 shares outstanding $ 239,727,855
NET ASSET VALUE, offering price and redemption price per $1.00
share ($239,727,855 (divided by) 239,820,335 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 4,058,286
EXPENSES
Management fee $ 455,996
Transfer agent, accounting and custodian fees and 228,378
expenses
Non-interested trustees' compensation 765
Registration fees 22,351
Audit 5,856
Legal 1,620
Reports to shareholders 105
Total expenses before reductions 715,071
Expense reductions (21,069) 694,002
NET INTEREST INCOME 3,364,284
NET REALIZED GAIN (LOSS) ON INVESTMENTS (34,961)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,329,323
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 3,364,284 $ 7,277,883
Net interest income
Net realized gain (loss) (34,961) (4,791)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,329,323 7,273,092
FROM OPERATIONS
Distributions to shareholders from net interest income (3,364,284) (7,277,883)
Share transactions at net asset value of $1.00 per share 253,303,595 347,831,546
Proceeds from sales of shares
Reinvestment of distributions from net interest income 3,214,882 6,942,228
Cost of shares redeemed (248,014,616) (345,244,892)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 8,503,861 9,528,882
RESULTING FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,468,900 9,524,091
NET ASSETS
Beginning of period 231,258,955 221,734,864
End of period $ 239,727,855 $ 231,258,955
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1996
(UNAUDITED) 1995 1994 1993 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of
period
Income from .015 .033 .024 .020 .026 .044
Investment
Operations
Net interest
income
Less Distributions (.015) (.033) (.024) (.020) (.026) (.044)
From net interest
income
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
TOTAL RETURN B 1.47% 3.38% 2.44% 1.98% 2.66% 4.46%
RATIOS AND SUPPLEMENTAL DATA
Net assets, $ 239,728 $ 231,259 $ 221,735 $ 175,190 $ 160,817 $ 175,150
end of period
(000 omitted)
Ratio of expenses .62% A .63% .61% .62% .49% .21%
to average net D D
assets
Ratio of expenses .60% A, C .63% .61% .62% .49% .21%
to average net
assets after
expense
reductions
Ratio of net interest 2.92% A 3.32% 2.45% 1.96% 2.64% 4.38%
income to
average net
assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES. WITHOUT THIS
REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Michigan Municipal Income Fund (the income fund) is a fund of
Fidelity Municipal Trust. Fidelity Michigan Municipal Money Market Fund
(the money market fund) is a fund of Fidelity Municipal Trust II. Each
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company. Fidelity
Municipal Trust and Fidelity Municipal Trust II (the trusts) are organized
as a Massachusetts business trust and a Delaware business trust,
respectively. Each fund is authorized to issue an unlimited number of
shares. The financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to make
certain estimates and assumptions at the date of the financial statements.
The following summarizes the significant accounting policies of the income
fund and the money market fund:
SECURITY VALUATION.
INCOME FUND. Securities are valued based upon a computerized matrix system
and/or appraisals by a pricing service, both of which consider market
transactions and dealer-supplied valuations. Short-term securities maturing
within sixty days of their purchase date are valued either at amortized
cost or original cost plus accrued interest, both of which approximate
current value. Securities (including restricted securities) for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for expiring
capital loss carryforwards and losses deferred due to wash sales, futures
and options and excise tax regulations.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital. Any taxable gain
remaining at fiscal year end is distributed in the following year.
During the period, the income fund received payments from the trustees for
Michigan Health Care Corporation, a Detroit hospital system that filed for
bankruptcy in the spring of 1995. These amounts, which were recorded as
income for book purposes, remain undistributed to shareholders pending
determination by the bankruptcy courts as to their classification for
income tax purposes.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The income fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Losses may arise
from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts, or if the counterparties do
not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
RESTRICTED SECURITIES. The funds are permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $8,780,000 or
3.7% of net assets for the money market fund. The income fund had no
investments in restricted securities.
3. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $93,111,457 and $103,932,230, respectively.
The market value of futures contracts opened and closed during the period
amounted to $31,582,154 and $8,008,125, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of each fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE - CONTINUED
FMR. The rates ranged from .1100% to .3700% for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee.
The annual individual fund fee rate is .25%. For the period, the management
fees were equivalent to an annual rate of .40% for the income and money
market funds.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans), and in accordance with Rule 12b-1 of the 1940 Act, FMR
or the funds' distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of each fund's shares. Subject to
the approval of each Board of Trustees, the Plans also authorize payments
to third parties that assist in the sale of each fund's shares or render
shareholder support services. No payments were made to third parties under
the Plans during the period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the funds. UMB has entered
into a sub-contract with
Fidelity Service Co. (FSC), an affiliate of FMR, under which FSC performs
the activities associated with the funds' transfer and shareholder
servicing agent and accounting functions. The funds pay account fees and
asset-based fees that vary according to account size and type of account.
FSC pays for typesetting, printing and mailing of all shareholder reports,
except proxy statements.
The accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses. For the period, FSC received transfer
agent and accounting fees amounting to $297,298 and $104,950 for the income
fund and $197,609 and $23,535 for the money market fund, respectively; the
transfer agent fees were equivalent to annual rates of .13% and .17% of
average net assets for the income and money market funds, respectively.
Shareholders participating in the Fidelity Ultra Service Account(registered
trademark) Program (the Program) pay a $5.00 monthly fee to Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, for performing
services associated with the Program. For the period, fees paid to FBSI by
shareholders participating in the Program amounted to $4,280.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with it's
custodian and transfer agent whereby interest earned on uninvested cash
balances is used to offset a portion of each fund's expenses. During the
period, the custodian and transfer agent fees were reduced by $0 and
$2,567, and $219 and $20,850 for the income and money market funds,
respectively, under these arrangements.
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer- MONEY MARKET FUND
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
MINNESOTA
MUNICIPAL INCOME
FUND
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS
CHECK PAGE NUMBERS !!!
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 22 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that can help investors in every type of market.
First, take a long-term approach when investing. If you can afford to leave
your money invested through the inevitable ups and downs of financial
markets, you will greatly reduce your vulnerability to any single decline.
Over time, for example, stock prices have gone up - and have significantly
outperformed other types of investments and stayed ahead of inflation.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.SM
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain fund
expenses during the periods shown, the total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Minnesota -0.68% 5.56% 37.33% 96.60%
Municipal Income Fund
Lehman Brothers Minnesota Enhanced -0.32% 6.20% n/a n/a
Municipal Bond Index
Minnesota Municipal Debt Funds Average -1.12% 5.20% 39.48% 99.51%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You can
compare the fund's returns to the performance of the Lehman Brothers
Minnesota Enhanced Municipal Bond Index, which includes Minnesota
investment-grade municipal bonds. To measure how the fund's performance
stacked up against its peers, you can compare it to the Minnesota municipal
debt funds average, which reflects the performance of 47 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. for the past
six months. Both benchmarks include reinvested dividends and capital gains,
if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Minnesota Municipal Income Fun 5.56% 6.55% 6.99%
d
Lehman Brothers Minnesota Enhanced 6.20% n/a n/a
Municipal Bond Index
Minnesota Municipal Debt Funds Average 5.20% 6.88% 7.15%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960710 091307 S00000000000001
MN Muni Income LB Municipal Bond
00082 LB015
1986/06/30 10000.00 10000.00
1986/07/31 10078.67 10060.70
1986/08/31 10504.40 10511.12
1986/09/30 10508.20 10537.50
1986/10/31 10784.99 10719.48
1986/11/30 10931.74 10931.84
1986/12/31 10902.56 10901.66
1987/01/31 11130.65 11229.91
1987/02/28 11280.45 11285.16
1987/03/31 11180.49 11165.54
1987/04/30 10259.95 10605.25
1987/05/31 10148.15 10552.65
1987/06/30 10361.86 10862.48
1987/07/31 10523.59 10973.28
1987/08/31 10574.67 10997.97
1987/09/30 9929.17 10592.47
1987/10/31 10043.97 10629.97
1987/11/30 10285.01 10907.52
1987/12/31 10485.10 11065.78
1988/01/31 10931.85 11459.95
1988/02/29 11078.83 11581.08
1988/03/31 10807.42 11446.74
1988/04/30 10871.96 11533.73
1988/05/31 10969.50 11500.40
1988/06/30 11132.69 11668.65
1988/07/31 11186.59 11744.73
1988/08/31 11207.49 11755.07
1988/09/30 11408.07 11967.83
1988/10/31 11668.66 12178.47
1988/11/30 11590.13 12066.91
1988/12/31 11807.31 12190.36
1989/01/31 11968.30 12442.45
1989/02/28 11888.50 12300.49
1989/03/31 11901.34 12271.09
1989/04/30 12204.89 12562.40
1989/05/31 12368.81 12823.32
1989/06/30 12508.97 12997.47
1989/07/31 12602.57 13174.36
1989/08/31 12516.80 13045.38
1989/09/30 12456.94 13006.51
1989/10/31 12632.84 13165.58
1989/11/30 12812.13 13395.98
1989/12/31 12897.88 13505.56
1990/01/31 12808.73 13441.67
1990/02/28 12954.05 13561.30
1990/03/31 12967.21 13565.37
1990/04/30 12800.94 13467.16
1990/05/31 13061.53 13761.15
1990/06/30 13185.17 13882.11
1990/07/31 13410.80 14086.18
1990/08/31 13191.94 13881.64
1990/09/30 13305.99 13889.56
1990/10/31 13470.68 14141.51
1990/11/30 13765.92 14425.90
1990/12/31 13829.04 14488.65
1991/01/31 13945.57 14683.09
1991/02/28 14036.82 14810.83
1991/03/31 14060.68 14816.16
1991/04/30 14230.70 15013.22
1991/05/31 14373.51 15146.69
1991/06/30 14316.01 15131.69
1991/07/31 14501.98 15316.00
1991/08/31 14647.55 15517.71
1991/09/30 14752.91 15719.75
1991/10/31 14803.41 15861.23
1991/11/30 14771.53 15905.48
1991/12/31 15004.31 16246.81
1992/01/31 15069.92 16283.85
1992/02/29 15132.87 16289.06
1992/03/31 15156.88 16295.09
1992/04/30 15264.02 16440.12
1992/05/31 15431.70 16633.62
1992/06/30 15639.89 16912.73
1992/07/31 16024.70 17419.77
1992/08/31 15860.65 17249.93
1992/09/30 15898.19 17362.74
1992/10/31 15601.29 17192.07
1992/11/30 15962.07 17499.98
1992/12/31 16148.70 17678.65
1993/01/31 16394.98 17884.26
1993/02/28 16901.06 18531.13
1993/03/31 16743.33 18335.26
1993/04/30 16900.33 18520.26
1993/05/31 17015.44 18624.34
1993/06/30 17293.77 18935.18
1993/07/31 17315.53 18959.99
1993/08/31 17677.76 19354.73
1993/09/30 17930.59 19575.18
1993/10/31 17953.38 19612.96
1993/11/30 17802.72 19440.17
1993/12/31 18154.69 19850.56
1994/01/31 18365.47 20077.25
1994/02/28 17885.61 19557.25
1994/03/31 17109.20 18760.88
1994/04/30 17207.80 18919.97
1994/05/31 17326.62 19084.01
1994/06/30 17264.26 18967.40
1994/07/31 17580.55 19315.08
1994/08/31 17619.26 19381.91
1994/09/30 17390.94 19097.38
1994/10/31 17013.91 18758.21
1994/11/30 16636.40 18419.06
1994/12/31 17063.69 18824.47
1995/01/31 17560.52 19362.47
1995/02/28 18064.74 19925.53
1995/03/31 18257.91 20154.47
1995/04/30 18275.49 20178.26
1995/05/31 18778.27 20822.14
1995/06/30 18624.62 20640.99
1995/07/31 18697.68 20836.67
1995/08/31 18909.60 21100.88
1995/09/30 19049.51 21234.45
1995/10/31 19315.02 21543.19
1995/11/30 19612.84 21900.60
1995/12/31 19793.53 22111.06
1996/01/31 19917.93 22278.00
1996/02/29 19820.77 22127.62
1996/03/31 19566.68 21844.83
1996/04/30 19488.33 21783.01
1996/05/31 19484.57 21774.30
1996/06/28 19659.82 22011.42
IMATRL PRASUN SHR__CHT 19960630 19960710 091312 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Minnesota Municipal Income Fund on June 30, 1986. As the chart
shows, by June 30, 1996, the value of the investment would have grown to
$19,660 - a 96.60% increase on the initial investment. For comparison, look
at how the Lehman Brothers Municipal Bond Index, which reflects the
performance of the investment-grade municipal bond market, did over the
same period. With dividends reinvested, the same $10,000 would have grown
to $22,015 - a 120.15% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX
MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1996 1995 1994 1993 1992 1991
Dividend returns 2.56% 6.40% 5.42% 6.25% 6.51% 6.79%
Capital appreciation
returns -3.24% 9.60% -11.43% 6.17% 1.12% 1.71%
Total returns -0.68% 16.00% -6.01% 12.42% 7.63% 8.50%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.61(cents) 28.50(cents) 58.79(cents)
Annualized dividend rate 5.27% 5.26% 5.41%
30-day annualized yield 5.08% - -
30-day annualized tax-equivalent yield 8.67% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.65 over
the past month, $10.86 over the past six months and $10.86 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 41.44% combined effective 1996 federal and state tax bracket, but
does not reflect the payment of the federal alternative minimum tax, if
applicable
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Jonathan Short, Portfolio Manager of Fidelity Minnesota
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the six months ended June 30, 1996, the fund had a total return of
- -0.68%. For the past year, it returned 5.56%. The Minnesota municipal debt
funds average, as tracked by Lipper Analytical Services, was -1.12% for the
past six months and 5.20% for the past year. Additionally, the Lehman
Brothers Minnesota Enhanced Municipal Bond Index returned -0.32% for six
months and 6.20% for the year.
Q. JON, WE UNDERSTAND THERE ARE GOING TO BE SOME INVESTMENT POLICY CHANGES
.. . .
A. As of June 24, 1996, the fund reserved the right to invest up to 5% of
its assets - down from one-third - in below-investment-grade securities.
The fund does not intend to seek out lower-quality bonds. Instead, this
change gives the fund additional flexibility under unusual circumstances.
Fidelity will also use two additional agencies - Duff & Phelps Rating Co.
and Fitch Investors Service, L.P. as well as Moody's Investors Service and
Standard & Poor's which the fund already uses - to determine the credit
quality of the fund's bonds.
Q. WHAT'S THE MUNICIPAL BOND MARKET BEEN LIKE OVER THE PAST SIX MONTHS?
A. Bond prices have fallen and their yields have risen in response to
reports indicating surprising strength in the economy. Investors often
worry that a
strong economy will lead to inflation, which erodes the value of
fixed-income investments. For the municipal bond market, however,
performance relative to the U.S. Treasury market was favorable because of
fading fears of radical tax reform and healthy demand. To get a sense of
relative performance, it's worth examining the ratio of municipal yields to
Treasury yields - expressed in percentage terms. A move from a higher
percentage to a lower percentage shows that municipal bonds have
outperformed Treasuries. Six months ago, the ratio of 30-year AAA municipal
general obligation bonds to 30-year Treasuries stood at about 88%; today,
it stands at about 83%.
Q. WHY DO YOU THINK THE FUND PERFORMED RELATIVELY WELL AGAINST ITS PEERS?
A. I think it performed well because the majority of its holdings were
either priced well below par (face value), well above par or were
non-callable - that is, they cannot be called back by their issuer before
maturity. As bonds with call features fall from trading above par to below
par, then their sensitivity to changes in interest rates increases.
Q. WAS THERE ANYTHING ELSE?
A. Yes, there was. To the benefit of the fund, two important bond
positions were the subject of advanced refundings. In an advanced
refunding, an issuer with existing bonds in the market will issue a second
set of bonds with a lower interest rate than the existing bonds. Proceeds
from the sale are then invested in high-quality U.S. Treasury securities,
and these Treasuries then secure the original bonds until the call date or
maturity of the original bonds. The bond investor can gain two important
advantages in this situation: one, the bonds are backed by high-quality
Treasuries, and two, because an advanced refunding can lower the effective
maturity of the original bonds, there is the potential for price
appreciation. The issuer, on the other hand, gains a lower interest rate on
its debt.
Q. THE HEALTHCARE INDUSTRY IS A MAJOR PART OF THE MINNESOTA ECONOMY. WHAT
WAS THE FUND'S HEALTHCARE BOND POSITION LIKE?
A. The fund's primary healthcare position was in municipal bonds issued for
the Mayo Clinic, which is regarded as one of the premier hospitals in the
world. Shareholders may notice a slight decrease in the fund's health care
holdings from six months ago. This is not the result of my having a
negative view on Minnesota hospitals, but rather the result of one bond
undergoing an advanced refunding and another bond that I had an opportunity
to sell at an attractive level.
Q. IN THE FUND'S LAST SHAREHOLDER REPORT, YOU DISCUSSED HOW MINNESOTA
TRADITIONALLY HAS HAD A SMALL AMOUNT OF MUNICIPAL BOND ISSUANCE. DID
MINNESOTA MUNICIPAL ISSUANCE INCREASE IN THE FIRST SIX MONTHS OF 1996
COMPARED TO THE SAME PERIOD IN 1995 AND, IF SO, DID YOU TAKE ADVANTAGE OF
IT?
A. Minnesota's $2.1 billion in municipal issuance was a 34% jump from the
same time last year. I tried to take advantage of this increase in
issuance, and I relied on Fidelity's strong research department to help me
find the best issuers for the fund.
Q. HAVE YOU RAISED THE FUND'S ALTERNATIVE MINIMUM TAX (AMT) BOND POSITION
FOLLOWING THE CHANGE TO THE FUND'S AMT POLICY EARLIER THIS YEAR?
A. Not really. Basically, during the period, I did not find any AMT bonds
that were selling at prices I would consider attractive. That said, I
believe this policy change gives me an effective tool in managing the fund.
That's because AMT bonds typically offer higher yields than other municipal
securities of comparable maturity without necessarily involving higher
credit risk.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. In hindsight, I wish I bought more housing bonds. In rising interest
rate environments, housing bonds have historically outperformed other
municipal securities.
Q. WHAT'S YOUR OUTLOOK?
A. I'm cautiously optimistic. With the presidential election coming up,
however, there's the potential of tax reform becoming an issue again.
Should this occur, municipals may not be able to continue their good
performance relative to Treasuries.
FUND FACTS
GOAL: high current income
for Minnesota residents,
while normally investing in
investment-grade municipal
securities whose interest is
free from federal income tax
and Minnesota personal
income tax
START DATE: November 21,
1985
SIZE: as of June 30, 1996,
more than $299 million
MANAGER: Jonathan Short,
since October 1995; also
manager, Spartan Florida
Municipal Income, since May
1996; Fidelity Advisor
California Municipal Income,
since February 1996;
Spartan Arizona Municipal
Income, since October 1995;
Spartan California
Intermediate Municipal
Income, Fidelity California
Insured Municipal Income and
Fidelity California Municipal
Income funds, since March
1995; joined Fidelity in 1990
(checkmark)
JONATHAN SHORT ON
MINNESOTA'S CREDIT UPGRADE:
"On May 3, 1996, Moody's
Investors Service upgraded
Minnesota's general
obligation debt from AA1 to its
top rating of Aaa. This
development was regarded in
the municipal marketplace as
a reflection of the solid
economy and good fiscal
management the state has
enjoyed over the past few
years.
"A top credit rating is
somewhat unusual in
municipal finance. For a
variety of reasons, many
states have difficulties
meeting budget deadlines or
have cyclical economies that
hurt their tax revenues. In
Minnesota's case, however,
the state's economy has
grown steadily for some time
and, as a result, its revenues
have come in over budget.
Minnesota should be proud of
their Aaa Moody's rating
because it is one of only nine
states to have this
distinction."
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 27.2 25.1
Health Care 17.8 19.2
Electric Revenue 17.6 14.8
Housing 10.5 10.0
Escrowed/Prerefunded 9.5 8.4
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 14.5 15.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1996
6 MONTHS AGO
Years 7.0 7.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Aaa 41.7%
Aa, A 50.5%
Baa 5.5%
Caa 0%
Non-rated 1.8%
Short-term and other
investments 0.5%
Aaa 33.0%
Aa, A 59.7%
Baa 5.2%
Caa 0.0%
Non-rated 1.7%
Short-term and other
investments 0.4%
Row: 1, Col: 1, Value: 40.7
Row: 1, Col: 2, Value: 49.5
Row: 1, Col: 3, Value: 5.5
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.8
Row: 1, Col: 6, Value: 1.5
Row: 1, Col: 1, Value: 33.0
Row: 1, Col: 2, Value: 59.7
Row: 1, Col: 3, Value: 5.2
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 2.7
Row: 1, Col: 6, Value: 2.0
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 99.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MINNESOTA - 96.6%
Albany Independent School Dist. #745
(School Dist. Credit Enhance Prog.)
Series A, 6% 2/1/16 Aa1 $ 1,000,000 $ 1,011,250
Anoka County Solid Waste Disp. Rev.
(Nat'l. Rural Util.) Series A,
6.95% 12/1/08 (b) Aa3 1,000,000 1,070,000
Bagley Independent School Dist. #162
(School Dist. #156):
Unltd. Tax 4.85% 2/1/03 AA 1,020,000 918,000
4.85% 2/1/14 AA 1,100,000 974,875
Bemidji Hosp. Facs. Rev. (1st Mtg. North
Country Health) Series A, 7% 9/1/21 AAA 1,000,000 1,117,500
(Pre-Refunded to 9/1/01 @ 102) (d)
Bloomington Gen. Oblig. Rfdg.:
6.50% 12/1/00 Aa1 5,200,000 5,596,500
(Hwy. Crossover) 6% 12/1/99 Aa1 3,000,000 3,146,250
Breckenridge Hosp. Facs. Rev. (Franciscan Sisters
Healthcare) Series B-2, 9.375% 9/1/17
(Escrowed to Maturity) (d) A- 445,000 480,600
Chisago City Health Facs. Rev. (Point Pleasant
Height Proj.) 9.25% 7/1/15 (Pre-Refunded to
7/1/96 @103) (d) - 3,700,000 3,811,000
Dakota County Hsg. & Redev. Auth. Interest for
South St. Paul Rev. (Single Family Mtg.):
Rfdg. Series A, 8.10% 9/1/12
(GNMA Coll.) AAA 330,000 345,675
Eagan Wtr. Gen. Oblig. Unltd. Tax Series A,
7.30% 12/1/10 AA 820,000 891,750
Eden Prairie Multi-Family Hsg. Rev. (Preserve
Place Apts.) 8% 7/1/28 (FHA Guaranteed) AAA 1,000,000 1,026,250
Hennepin County Lease Rev. Ctfs. of Prtn.
6.80% 5/15/17 AA 5,000,000 5,231,242
Lakeville School Dist.:
0% 2/1/04 Aa1 3,040,000 2,040,600
0% 2/1/05 Aa1 2,810,000 1,777,325
Minneapolis Commty. Dev. Agcy. Tax
Increment Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) AAA 2,860,000 1,565,850
0% 9/1/08 (MBIA Insured) AAA 4,600,000 2,357,500
Minneapolis Convention Ctr. Sales Tax Rev.
(Chamber Bldg.-Skyway Proj.):
0% 2/1/06 (g) - 713,000 356,500
Minneapolis Gen. Oblig.:
Rfdg. Series B:
5.10% 9/1/08 AAA 2,000,000 1,937,500
5.20% 3/1/13 (e) AAA 1,000,000 958,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Gen. Oblig.: - continued
Rfdg. (Sales Tax):
5.60% 10/1/00 AAA $ 1,000,000 $ 1,040,000
6.15% 10/1/05 AAA 2,000,000 2,137,500
6.25% 4/1/07 AAA 2,000,000 2,130,000
Rfdg. (Sports Arena Proj.)
6% 10/1/06 AAA 1,000,000 1,075,000
(Cap. Appreciation) Series A:
0% 12/1/11 AAA 2,830,000 1,177,988
0% 12/1/12 AAA 2,000,000 792,500
0% 12/1/02 AAA 790,000 571,763
0% 12/1/03 AAA 1,000,000 687,500
0% 12/1/06 AAA 3,355,000 1,920,738
0% 12/1/07 AAA 1,000,000 540,000
0% 12/1/08 AAA 2,685,000 1,369,350
Minneapolis Hosp. Rev.:
Rfdg. (Fairview Hosp. & Healthcare)
6.50% 1/1/11 (MBIA Insured) AAA 3,000,000 3,191,250
Minneapolis Spl. School Dist. #1 Ctfs. Prtn.
Series A, 5.80% 2/1/10 (MBIA Insured) AAA 2,000,000 2,022,500
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Phase IX) 7.25% 8/1/21 (b) AAA 2,210,000 2,334,313
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev. (Health One Obligated
Group) Series A, 7.40% 8/15/11
(MBIA Insured) AAA 2,750,000 3,031,875
Minneapolis & St. Paul Metropolitan Arpts.
Commission Unltd. Tax Series 7, 7.80%
1/1/15 (b) AAA 3,000,000 3,247,500
Minnesota Agric. & Econ. Dev. Board Rev.
(Small Bus. Dev. Prog. Lot 1) Series B,
8.375% 8/1/10 (b) - 1,000,000 1,038,750
Minnesota Energy & Econ. Dev. Auth. Rev.
(Small Bus. Dev. Lot 1 2D) 10% 8/1/06 - 75,000 76,698
Minnesota Gen. Oblig.:
(Various Purpose) 6.10% 8/1/08 AAA 2,195,000 2,337,675
Unltd. Tax:
Rfdg. 5.40% 8/1/09 AAA 1,400,000 1,391,250
6.625% 8/1/07 AAA 1,000,000 1,083,750
5.60% 10/1/01 AAA 3,000,000 3,131,250
6% 5/1/06 AAA 2,000,000 2,135,000
5.20% 5/1/07 AAA 5,000,000 4,979,150
6% 8/1/05 AAA 10,255,000 10,972,850
5.30% 8/1/10 AAA 1,450,000 1,419,188
4.9% 8/1/11 AAA 1,290,000 1,190,025
6.25% 8/1/14 AAA 1,000,000 1,030,000
5.25% 8/1/15 AAA 3,315,000 3,165,825
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Higher Ed. Facs. Auth. Rev.:
Rfdg. (MacAlester College) Series 3-J,
6.40% 3/1/22 AA $ 2,175,000 $ 2,245,688
Rfdg.(St. Thomas Univ.) Series 3-R1,
5% 10/1/01 A1 1,000,000 1,010,000
5.60% 10/1/15 A1 1,000,000 973,750
(Carleton College) Series 3-L1,
5.75% 11/1/12 AA 2,000,000 2,001,380
(Macalester College):
Series 4C, 5.20% 3/1/08 AA 1,070,000 1,033,888
5.50% 3/1/12 AA 815,000 788,513
(St. Thomas Univ.):
5.45% 9/1/07 A1 650,000 652,438
Series 3-R2, 5.6-% 9/1/14 A1 3,275,000 3,209,500
Minnesota Higher Ed. Facs. Auth. Mtg. Rev.
(St. Thomas Univ.) Series 3 C, 6.25% 9/1/16 A1 2,310,000 2,327,325
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.):
Series A:
6.95% 7/1/16 AA 890,000 936,725
7.45% 7/1/22 (b) AA 2,855,000 3,015,594
7.95% 7/1/22 (b) AA 2,390,000 2,515,475
8% 7/1/29 (b) AA 420,000 441,000
Series B:
7.25% 7/1/16 AA 975,000 984,750
5.80% 7/1/25 (b) AA 7,000,000 6,597,500
Series D:
7.35% 7/1/16 AA 2,290,000 2,387,325
8.80% 7/1/16 AA 1,250,000 1,315,625
Series E, 6.85% 1/1/24 (b) AA 1,000,000 1,036,250
Series H, 6.50% 1/1/26 (b) AA 1,800,000 1,827,000
Minnesota Hsg. Fin. Agcy. Hsg. Rev. Series A:
6.95% 2/1/14 A1 1,000,000 1,050,000
6.95% 8/1/17 A1 1,000,000 1,041,250
7.05% 8/1/27 A1 1,250,000 1,301,563
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.:
Series A:
6.35% 3/1/01 Aa1 1,000,000 1,070,000
6.10% 3/1/02 Aa1 1,855,000 1,984,850
7% 3/1/04 Aa1 1,495,000 1,694,956
7.10% 3/1/12 (Pre-Refunded to
3/1/00 @ 102) (d) Aa1 3,100,000 3,406,125
6.95% 3/1/13 (Pre-Refunded to
3/1/01 @ 102) (d) Aa1 4,500,000 4,983,750
Series B:
6.70% 3/1/13 (Pre-Refunded to
3/1/01 @ 102) (d) Aa1 5,350,000 5,864,938
Minnesota Rev. Spl. Tax Series A, 5% 6/30/00
(AMBC Insured) AAA 3,000,000 3,033,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnetonka Multi-Family Hsg. Rev.
(Cedar Hills East Proj.) 7.50% 12/1/27
(FHA Guaranteed) AA $ 600,000 $ 606,000
Montevideo Independent Sch. Dist. #129
Unltd. Tax 4.90% 2/1/14 AA 1,000,000 903,750
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys.
Rev. Rfdg.:
Series A, 7.25% 1/1/16 A 5,020,000 5,296,100
Series B, 5.50% 1/1/18 (AMBAC Insured) AAA 6,000,000 5,707,500
Northfield College Facs. Rev.
(St. Olaf College Proj.):
6.30% 10/1/12 A 1,455,000 1,493,194
6.40% 10/1/21 A 1,690,000 1,721,688
Ramsey County Gen. Oblig. 5.50% 12/1/04 AAA 1,000,000 1,035,000
Redwood Falls Independent Sch. Dist. Rfdg.
5.125% 4/1/15 (AMBAC Insured) AAA 1,450,000 1,335,813
Rochester Health Care Facs. Rev.:
(Mayo Clinic) 6.026% 11/15/15 AA+ 17,000,000 16,957,500
(Mayo Foundation/Mayo Med. Ctr.) Series I:
5.90% 11/15/09 AA+ 1,000,000 1,033,750
5.90% 11/15/10 AA+ 2,250,000 2,320,313
Rosemont Independent School Dist. #196:
(Dist. #5 School Credit Enhance Prog.)
Series B, 0% 6/1/13 (FSA Insured) AAA 2,000,000 757,500
5.30% 2/1/01 (FGIC Insured) AAA 2,000,000 2,040,000
St. Cloud Hosp. Facs. Rev. Rfdg. (St. Cloud Hosp.)
Series A, 5.50% 7/1/05 (AMBAC Insured) AAA 995,000 1,019,875
St. Cloud Independent School Dist. #742 Rfdg.
Series A, 6.10% 2/1/10 (FGIC Insured) AAA 1,000,000 1,025,000
St. Louis County Jail Rev. Series A, 4.75%
12/1/08 (AMBAC Insured) AAA 1,420,000 1,308,175
St. Louis Park Hosp. Facs. Auth. Rev.
(Healthsystem Obligated A) 5.20% 7/1/23
(AMBAC Insured) AAA 10,000,000 8,987,500
St. Louis Park Mtg. Rev. (Park Ridge Apt. Proj.)
9.375% 9/20/20 (GNMA Coll.) AAA 1,200,000 1,236,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A:
6.625% 11/1/17 Baa 4,000,000 3,970,000
9.75% 11/1/17 Baa 2,345,000 2,512,081
Series B:
9.625% 11/1/08 Baa 2,500,000 2,665,625
6.625% 11/1/17 Baa 3,500,000 3,473,750
9.75% 11/1/17 Baa 3,000,000 3,202,500
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
St. Paul Hsg. & Redev. Auth. Tax Increment Rev.
(Downtown & 7th Place Redev. Proj.):
Series A, 0% 9/1/04 (AMBAC Insured)
(Pre-Refunded to 9/1/98 @ 66.5305) (d) AAA $ 1,000,000 $ 606,250
Series B, 0% 9/1/08 (AMBAC Insured)
(Pre-Refunded to 9/1/98 @ 50.038) (d) AAA 2,500,000 1,140,625
St. Paul Independent School Dist. #625 Series C:
6.125% 2/1/03 AA 1,225,000 1,303,094
6.125% 2/1/04 AA 1,300,000 1,384,500
6.125% 2/1/05 AA 1,350,000 1,437,750
St. Paul Swr. Rev. Series A, 8% 12/1/08 A 2,500,000 2,715,625
Seaway Port Auth. Duluth Ind. Dev. Rev. Dock &
Wharf Rev. Rfdg. (Cargill, Inc. Proj.) Series B,
6.80% 5/1/12 (f) Aa3 2,750,000 2,928,750
Southern Minnesota Muni. Pub. Pwr. Agcy.
Pwr. Supply Sys. Rev.:
Rfdg. Series A:
5% 1/1/09 A 4,000,000 3,715,000
5% 1/1/12 A 10,000,000 9,062,500
Series A, 0% 1/1/20 (MBIA Insured) AAA 12,500,000 3,078,125
Series B:
0% 1/1/01 (MBIA Insured) AAA 2,500,000 2,003,125
5% 1/1/09 A 2,000,000 1,857,500
5% 1/1/13 A 6,480,000 5,815,800
Univ. of Minnesota Rfdg. 4.80% 8/15/03 AA 6,000,000 5,895,000
Virginia Independent School Dist. #706 Unltd. Tax
Series A:
5% 4/1/11 (AMBAC Insured) AAA 630,000 581,963
5% 4/1/13 (AMBAC Insured) AAA 1,180,000 1,088,550
Washington County Hsg. & Redev. Jail Facs.
Rev. 7% 2/1/12 (MBIA Insured)
(Pre-Refunded to 2/1/02 @ 100) (d) AAA 1,000,000 1,103,750
West St. Paul Independent School Dist. #197
Dist. #2 (Minnesota School Dist.
Credit Enhancement Prog.):
0% 2/1/02 (MBIA Insured) AAA 1,550,000 1,174,125
0% 2/1/03 (MBIA Insured) AAA 1,180,000 842,225
Western Minnesota Muni. Pwr. Agcy. Pwr.
Supply Rev.:
Rfdg. Series A, 6.875% 1/1/07 A1 800,000 823,240
Series A, 6.375% 1/1/16,
(Escrowed to Maturity) (d) AAA 2,000,000 2,092,500
Series B:
6% 1/1/03 (AMBAC Insured) AAA 1,935,000 2,031,750
6% 1/1/04 (AMBAC Insured) AAA 4,000,000 4,200,000
286,057,374
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PUERTO RICO - 2.7%
Puerto Rico Elec. Pwr. Auth. Rev. Rfdg.:
Series W, 7% 7/1/07 (MBIA Insured) AAA $ 4,430,000 $ 5,066,813
Series Y, 6.50% 7/1/05 (MBIA Insured) AAA 1,570,000 1,730,925
Puerto Rico Ind. Med. & Environmental Poll.
Cont. Facs. Fing. Auth. Rev. (Motorola, Inc.)
Series A, 6.75% 1/1/14 Aa3 1,250,000 1,328,125
8,125,863
GUAM - 0.2%
Guam Pwr. Auth. Rev. Series A,
5.25% 10/1/23 BBB 665,000 562,756
TOTAL MUNICIPAL BONDS
(Cost $288,443,619) $ 294,745,993
MUNICIPAL NOTES (A) - 0.5.%
MINNESOTA - 0.5%
Minneapolis & St. Paul Children's Health Care
Rev. Series 1995 B, 3.75%
(FSA Insured) BPA Norwest Bank, VRDN VMIG 1 400,000 400,000
Minneapolis Hsg. Dev. Rfdg. Rev. Bd. Series1989
LOC First Bank NA (Minn.) 3.35%, VRDN VMIG 1 1,100,000 1,100,000
TOTAL MUNICIPAL NOTES
(Cost $1,500,000) 1,500,000
TOTAL INVESTMENTS - 100%
(Cost $289,943,619) $ 296,245,993
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
20 Municipal Bond Contracts Sept. 1996 $ 2,246,875 $ (75,181)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.8%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) A portion of the security was pledged to cover margin requirements for
futures contracts. At period end, the value of securities pledged amounted
to $287,625.
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $2,928,750 or 1.0% of net
assets.
(g) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.9% AAA, AA, A 83.1%
Baa 5.3% BBB 6.5%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 1.8%. FMR has
determined that unrated debt securities that are lower quality account for
0.1% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 27.2%
Health Care 17.8
Electric Revenue 17.6
Housing 10.5
Escrowed/Prerefunded 9.5
Education 7.9
Others
(individually less than 5%) 9.5
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $289,951,454. Net unrealized appreciation aggregated
$6,294,539, of which $9,166,440 related to appreciated investment
securities and $2,871,901 related to depreciated investment securities.
At December 31, 1995, the fund had a capital loss carryforward of
approximately $9,312,790 which will expire on December 31, 2003.
The fund elected to defer to its fiscal year ending December 31, 1996,
$663,577 of losses recognized during the period November 1, 1995 to
December 31, 1995.
At December 31, 1995, the fund was required to defer $764,365 of losses on
futures contracts.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $289,943,619) - $ 296,245,993
See accompanying schedule
Receivable for investments sold 5,040,333
Interest receivable 5,564,594
TOTAL ASSETS 306,850,920
LIABILITIES
Payable to custodian bank $ 226,383
Payable for investments purchased 6,127,047
Payable for fund shares redeemed 319,647
Distributions payable 275,894
Accrued management fee 98,228
Payable for daily variation on futures contracts 16,875
Other payables and accrued expenses 66,364
TOTAL LIABILITIES 7,130,438
NET ASSETS $ 299,720,482
Net Assets consist of:
Paid in capital $ 302,985,362
Accumulated undistributed net realized gain (loss) on (9,492,073)
investments
Net unrealized appreciation (depreciation) on 6,227,193
investments
NET ASSETS, for 27,901,639 shares outstanding $ 299,720,482
NET ASSET VALUE, offering price and redemption price per $10.74
share ($299,720,482 (divided by) 27,901,639 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 8,867,005
EXPENSES
Management fee $ 607,353
Transfer agent, accounting and custodian fees and 264,424
expenses
Non-interested trustees' compensation 560
Registration fees 24,725
Audit 16,960
Legal 1,004
Miscellaneous 2,328
Total expenses before reductions 917,354
Expense reductions (3,891) 913,463
NET INTEREST INCOME 7,953,542
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,437,310
Futures contracts (180,790) 1,256,520
Change in net unrealized appreciation (depreciation) on:
Investment securities (11,267,851)
Futures contracts (75,181) (11,343,032)
NET GAIN (LOSS) (10,086,512)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,132,970)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 7,953,542 $ 17,234,140
Net interest income
Net realized gain (loss) 1,256,520 (8,818,217)
Change in net unrealized appreciation (depreciation) (11,343,032) 35,826,798
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,132,970) 44,242,721
FROM OPERATIONS
Distributions to shareholders (7,953,542) (17,234,140)
From net interest income
In excess of net realized gain - (56,755)
TOTAL DISTRIBUTIONS (7,953,542) (17,290,895)
Share transactions 24,188,564 73,010,954
Net proceeds from sales of shares
Reinvestment of distributions 6,242,519 13,414,601
Cost of shares redeemed (35,791,160) (75,144,420)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (5,360,077) 11,281,135
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (15,446,589) 38,232,961
NET ASSETS
Beginning of period 315,167,071 276,934,110
End of period $ 299,720,482 $ 315,167,071
OTHER INFORMATION
Shares
Sold 2,223,563 6,825,793
Issued in reinvestment of distributions 575,025 1,244,865
Redeemed (3,301,015) (6,996,731)
Net increase (decrease) (502,427) 1,073,927
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1996
(UNAUDITED) 1995 1994 1993 A 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.100 $ 10.130 $ 11.520 $ 10.850 $ 10.730 $ 10.550
beginning of period
Income from Investment
Operations
Net interest income .285 .613 .633 .647 .674 .690
Net realized and (.360) .972 (1.310) .670 .120 .180
unrealized gain
(loss)
Total from investment (.075) 1.585 (.677) 1.317 .794 .870
operations
Less Distributions (.285) (.613) (.633) (.647) (.674) (.690)
From net interest
income
From net realized - - (.060) - - -
gain
In excess of net - (.002) (.020) - - -
realized gain
Total distributions (.285) (.615) (.713) (.647) (.674) (.690)
Net asset value, $ 10.740 $ 11.100 $ 10.130 $ 11.520 $ 10.850 $ 10.730
end of period
TOTAL RETURN (.68)% 16.00% (6.01) 12.42% 7.63% 8.50%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 299,720 $ 315,167 $ 276,934 $ 342,196 $ 280,781 $ 221,788
period (000 omitted)
Ratio of expenses to .60% .57% .59% .61% .67% .72%
average net assets
Ratio of net interest 5.21% 5.69% 5.97% 5.73% 6.25% 6.47%
income to average
net assets
Portfolio turnover rate 18% 49% 26% 37% 12% 14%
</TABLE>
A EFFECTIVE JANUARY 1, 1993 THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Minnesota Municipal Income Fund (the fund) is a fund of Fidelity
Municipal Trust(the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted securities) for
which quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net interest income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for
gains/losses on futures and options transactions, market discount, losses
deferred due to wash sales, futures and options and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net interest income and realized
and unrealized gain (loss). Any taxable gain remaining at fiscal year end
is distributed in the following year.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
may receive compensation for interest forgone in the purchase of a delayed
delivery security. Losses may arise due to changes in the market value of
the underlying securities or if the counterparty does not perform under the
contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
involve, to varying degrees, risk of loss in excess of the futures
variation margin reflected in the Statement of Assets and Liabilities. The
underlying face amount at value of any open futures contracts at period
end, is shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the underlying
instrument at period end. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $26,405,085 and $30,574,019, respectively. The market value of
futures contracts opened and closed during the period amounted to
$18,391,120 and $16,038,636, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
series of rates and is based on the monthly average net assets of all the
mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. In the event that these rates were lower than the contractual rates
in effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .25%. For the period, the management fee was
equivalent to an annualized rate of .40% of average net assets .
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $448 for the
period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the fund. The Bank has
entered into a sub-contract with Fidelity Service Co. (FSC), an affiliate
of FMR, under which FSC performs the activities associated with the fund's
transfer and shareholder servicing agent and accounting functions. The fund
pays account fees and asset-based fees that vary according to account size
and type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $188,758 and $69,609, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% of average net assets.
5. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the custodian
and transfer agent fees were reduced by $1,975 and $1,916, respectively,
under these arrangements.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
Edward H. Malone *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Michigan Municipal Income
Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Ohio Municipal Income
SpartanAggressive Municipal
(registered trademark)
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal
Spartan New York Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate Municipal
Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
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AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
OHIO
MUNICIPAL
FUNDS
SEMIANNUAL REPORT
JUNE 30, 1996
CHECK PAGE NUMBERS !!!
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
FIDELITY OHIO MUNICIPAL INCOME FUND
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
PERFORMANCE 25 How the fund has done over time.
FUND TALK 27 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 29 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 30 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 36 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 40 Notes to the financial statements.
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND
MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first six
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that can help investors in every type of market.
First, take a long-term approach when investing. If you can afford to leave
your money invested through the inevitable ups and downs of financial
markets, you will greatly reduce your vulnerability to any single decline.
Over time, for example, stock prices have gone up - and have significantly
outperformed other types of investments and stayed ahead of inflation.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.SM
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
FIDELITY OHIO MUNICIPAL INCOME FUND
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells bonds
that have grown in value). You can also look at the fund's income to
measure performance. If Fidelity had not reimbursed certain fund expenses,
the past 10 years total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Ohio Municipal Income Fund - 0.80% 5.57% 42.94% 109.47%
Lehman Brothers Ohio 4 Plus Year - 0.30% 6.56% n/a n/a
Municipal Bond Index
Ohio Municipal Debt Funds Average -1.27% 5.70% 42.34% 104.84%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You can
compare the fund's returns to the performance of the Lehman Brothers Ohio 4
Plus Year Municipal Bond Index, which includes Ohio investment-grade
municipal bonds with maturities of four years or greater. To measure how
the fund's performance stacked up against its peers, you can compare it to
the Ohio municipal debt funds average, which reflects the performance of
56 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. over the past six months. Both benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Ohio Municipal Income Fund 5.57% 7.41% 7.67%
Lehman Brothers Ohio 4 Plus Year 6.56% n/a n/a
Municipal Bond Index
Ohio Municipal Debt Funds Average 5.70% 7.31% 7.43%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960630 19960710 123922 S00000000000001
OH Muni Income LB Municipal Bond
00088 LB015
1986/06/30 10000.00 10000.00
1986/07/31 10051.64 10060.70
1986/08/31 10467.18 10511.12
1986/09/30 10460.54 10537.50
1986/10/31 10684.24 10719.48
1986/11/30 10877.71 10931.84
1986/12/31 10811.01 10901.66
1987/01/31 11178.78 11229.91
1987/02/28 11289.30 11285.16
1987/03/31 11220.20 11165.54
1987/04/30 10344.79 10605.25
1987/05/31 10245.80 10552.65
1987/06/30 10468.43 10862.48
1987/07/31 10621.60 10973.28
1987/08/31 10632.37 10997.97
1987/09/30 10076.75 10592.47
1987/10/31 10089.29 10629.97
1987/11/30 10362.87 10907.52
1987/12/31 10553.85 11065.78
1988/01/31 11040.72 11459.95
1988/02/29 11188.00 11581.08
1988/03/31 10897.81 11446.74
1988/04/30 10951.51 11533.73
1988/05/31 11027.74 11500.40
1988/06/30 11234.61 11668.65
1988/07/31 11333.70 11744.73
1988/08/31 11356.87 11755.07
1988/09/30 11567.96 11967.83
1988/10/31 11813.74 12178.47
1988/11/30 11724.49 12066.91
1988/12/31 11918.28 12190.36
1989/01/31 12089.99 12442.45
1989/02/28 11987.85 12300.49
1989/03/31 11989.00 12271.09
1989/04/30 12312.85 12562.40
1989/05/31 12580.66 12823.32
1989/06/30 12744.76 12997.47
1989/07/31 12850.10 13174.36
1989/08/31 12717.72 13045.38
1989/09/30 12657.55 13006.51
1989/10/31 12820.87 13165.58
1989/11/30 13005.83 13395.98
1989/12/31 13108.40 13505.56
1990/01/31 12985.40 13441.67
1990/02/28 13132.29 13561.30
1990/03/31 13147.22 13565.37
1990/04/30 12947.37 13467.16
1990/05/31 13282.79 13761.15
1990/06/30 13419.89 13882.11
1990/07/31 13621.64 14086.18
1990/08/31 13407.39 13881.64
1990/09/30 13509.80 13889.56
1990/10/31 13702.44 14141.51
1990/11/30 14024.25 14425.90
1990/12/31 14091.41 14488.65
1991/01/31 14247.66 14683.09
1991/02/28 14337.45 14810.83
1991/03/31 14363.73 14816.16
1991/04/30 14587.80 15013.22
1991/05/31 14707.18 15146.69
1991/06/30 14654.25 15131.69
1991/07/31 14856.08 15316.00
1991/08/31 15004.66 15517.71
1991/09/30 15182.18 15719.75
1991/10/31 15318.95 15861.23
1991/11/30 15345.58 15905.48
1991/12/31 15704.31 16246.81
1992/01/31 15732.23 16283.85
1992/02/29 15742.41 16289.06
1992/03/31 15730.80 16295.09
1992/04/30 15857.38 16440.12
1992/05/31 16072.10 16633.62
1992/06/30 16355.60 16912.73
1992/07/31 16827.93 17419.77
1992/08/31 16640.19 17249.93
1992/09/30 16739.03 17362.74
1992/10/31 16434.38 17192.07
1992/11/30 16872.29 17499.98
1992/12/31 17064.84 17678.65
1993/01/31 17287.81 17884.26
1993/02/28 17903.64 18531.13
1993/03/31 17694.51 18335.26
1993/04/30 17856.85 18520.26
1993/05/31 17946.74 18624.34
1993/06/30 18245.24 18935.18
1993/07/31 18272.32 18959.99
1993/08/31 18697.65 19354.73
1993/09/30 18921.35 19575.18
1993/10/31 18933.79 19612.96
1993/11/30 18772.78 19440.17
1993/12/31 19207.97 19850.56
1994/01/31 19441.44 20077.25
1994/02/28 18925.32 19557.25
1994/03/31 18124.56 18760.88
1994/04/30 18262.74 18919.97
1994/05/31 18386.77 19084.01
1994/06/30 18358.70 18967.40
1994/07/31 18648.89 19315.08
1994/08/31 18708.04 19381.91
1994/09/30 18480.14 19097.38
1994/10/31 18120.69 18758.21
1994/11/30 17722.72 18419.06
1994/12/31 18142.56 18824.47
1995/01/31 18686.97 19362.47
1995/02/28 19205.71 19925.53
1995/03/31 19404.25 20154.47
1995/04/30 19444.51 20178.26
1995/05/31 20015.96 20822.14
1995/06/30 19842.69 20640.99
1995/07/31 19952.23 20836.67
1995/08/31 20185.42 21100.88
1995/09/30 20344.59 21234.45
1995/10/31 20615.31 21543.19
1995/11/30 20936.21 21900.60
1995/12/31 21116.75 22111.06
1996/01/31 21277.69 22278.00
1996/02/29 21138.25 22127.62
1996/03/31 20838.31 21844.83
1996/04/30 20756.94 21783.01
1996/05/31 20733.04 21774.30
1996/06/28 20947.18 22011.42
IMATRL PRASUN SHR__CHT 19960630 19960710 123927 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Ohio Municipal Income Fund on June 30, 1986. As the chart
shows, by June 30, 1996, the value of the investment would have grown to
$20,947 - a 109.47% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index, which reflects the
performance of the investment-grade municipal bond market, did over the
same period. With dividends reinvested, the same $10,000 would have grown
to $22,015 - a 120.15% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONT
HS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30,
1996 1995 1994 1993 1992 1991
Dividend return 2.40% 6.22% 5.37% 6.19% 6.63% 7.02%
Capital appreciation
return -3.20% 10.17% -10.92% 6.37% 2.03% 4.43%
Total return -0.80% 16.39% -5.55% 12.56% 8.66% 11.45%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.51(cents) 27.71(cents) 57.61(cents)
Annualized dividend rate 4.94% 4.91% 5.08%
30-day annualized yield 4.98% - -
30-day annualized tax-equivalent yield 8.41% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $11.11 over
the past month, $11.33 over the past six months and $11.34 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 40.80% combined effective 1996 federal and state tax bracket, but
does not reflect payment of the federal alternative minimum tax, if
applicable.
FIDELITY OHIO MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Steven Harvey, Portfolio Manager of Fidelity Ohio
Municipal Income Fund
Q. STEVE, HOW HAS THE FUND PERFORMED?
A. For the six- and 12-month periods ended June 30, 1996, the fund had
total returns of -0.80% and 5.57%, respectively. The Ohio municipal debt
funds average returned -1.27% for the same six-month period and 5.70% for
the same 12-month period, according to Lipper Analytical Services. Also,
for the six- and 12-month periods, the Lehman Brothers Ohio 4 Plus Year
Municipal Bond Index returned -0.30% and 6.56%, respectively.
Q. WHAT FACTORS SHAPED THE MUNICIPAL BOND MARKET'S PERFORMANCE OVER THE
PAST SIX MONTHS?
A. Signs of a strengthening U.S. economy hurt the returns of most types of
bonds during the first half of 1996. Throughout the past six months,
investors became increasingly more concerned that the strengthening U.S.
economy would translate into higher inflation, which, in turn, could force
interest rates higher. Even though the Federal Reserve Board lowered
short-term interest rates, investors largely discounted the move. Bond
yields continued to climb, rising to levels not seen in more than a year as
investors reacted to surprisingly good economic news, particularly on the
employment front. Generally speaking, however, municipals outperformed
Treasuries during the first half of 1996. One reason was that the supply of
municipal bonds diminished, particularly in June when approximately $60
billion of outstanding municipals was retired or matured, and the total
amount of municipal supply actually contracted. Another reason for munis'
outperformance of Treasuries was that fears of a flat tax faded. As the
presidential campaign wore on, it became clear no viable presidential
candidate was likely to support the notion of a flat tax, which could
affect the tax-exempt status of municipals.
Q. WHAT WERE SOME OF THE KEY MOVES YOU MADE DURING THE PAST SIX MONTHS?
A. I continued to upgrade the credit quality of the fund, primarily by
eliminating the fund's investments in below-investment-grade bonds - those
with ratings below Baa as judged by Moody's Investors Service, for example.
Bonds that are rated below-investment-grade normally carry a fairly
significant amount of additional yield over higher-rated bonds in order to
compensate investors for the additional credit risk they carry. But during
the period, the diminished supply of municipal bonds was particularly
pronounced in the below-investment-grade category, while demand for
lower-quality bonds remained strong. As a result, there was very little
difference in yield between bonds with lower and higher credit ratings, and
credit spreads were said to be "tight." Because spreads were tight, I was
able to upgrade the overall credit quality of the fund by selling many of
the fund's below-investment-grade holdings and buying higher-rated
securities, without sacrificing much in the way of additional yield.
Q. SO WHAT TYPES OF HIGHER-RATED BONDS DID YOU BUY?
A. I added a number of insured bonds. When a bond is insured, it means that
its interest and principal payments are guaranteed by a third-party
municipal insurer. However, I think it's important to point out that
insurance does not protect a bond's price from rising or falling along with
the rest of the municipal market. Insured bonds are quite plentiful in the
Ohio municipal bond market, comprising a majority of the market there.
Because of that abundance, price inefficiencies can be found and an
investor can buy insured bonds at fairly attractive prices.
Q. WHAT SECTORS OFFERED GOOD OPPORTUNITIES?
A. In my view, student loan bonds offered some of the best opportunities in
the market during the period. These generally high-quality bonds often
traded at yields higher than many other municipal bonds with similar
maturities and credit ratings because of their prepayment risk. Investors
often fear the loans backing these bonds will be paid off early and,
therefore, force them to reinvest at lower interest rates. As a result of
the discomfort some investors have with student loan bonds because of this
prepayment risk, I was able to buy a number of bonds at what I believed
were quite attractive prices.
Q. YOU ALSO ADDED SOME BONDS ISSUED BY MUNICIPALITIES ON BEHALF OF PRIVATE
ENTERPRISES. WHAT'S THEIR ATTRACTION?
A. These municipal revenue bonds, known as industrial development bonds,
are issued to help finance private sector concerns. Two of the largest in
the fund were issued on behalf of British Petroleum, the large energy
company, and Cargill, the giant food and agriculture-related conglomerate.
Because these bonds are not as well known in the municipal market, they can
be bought at attractive prices.
Q. STEVE, WE UNDERSTAND THERE WERE SOME INVESTMENT POLICY CHANGES . . .
A. As of June 24, 1996, the fund reserves the right to invest up to 5% of
its assets - down from one-third - in below-investment-grade securities.
The fund does not intend to seek out the lower-quality,
below-investment-grade bonds. Instead, this change gives the fund
additional flexibility under unusual circumstances. Fidelity also will use
two additional agencies -Duff & Phelps Rating Co. and Fitch Investors
Service, L.P., as well as Moody's Investors Service and Standard & Poor's
which the fund already uses - to determine the credit quality of the fund's
bonds.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET OVER THE NEXT SIX MONTHS?
A. It's difficult to say, especially since the economy is sending off such
mixed signals and it's not clear where interest rates are headed. While
we've seen some strength in such economic indicators as housing sales,
retail sales and employment, inflation hasn't been much of a problem so
far. Further mixed signals could cause some continued volatility in the
market. But in my view, volatility can translate into opportunities to find
individual securities or sectors I want to buy at attractive levels. So
with the help of Fidelity's research group, I'll focus on finding these
opportunities as they materialize, rather than trying to predict the
direction of interest rates.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
for Ohio residents by
normally investing in
investment-grade municipal
securities whose interest is
free from federal income tax
and Ohio individual income
tax
START DATE: November 15, 1985
SIZE: as of June 30, 1996,
more than $379 million
MANAGER: Steven Harvey,
since 1994; manager, Spartan
Maryland Municipal Income
and Spartan Pennsylvania
Municipal Income funds, since
1993; Fidelity Massachusetts
Municipal Income Fund, since
1995; Spartan New Jersey
Municipal Income Fund, since
May 1996; joined Fidelity in
1986
(checkmark)
STEVE HARVEY ON OHIO'S
ECONOMY:
"The manufacturing sector in
Ohio continues to show its
strength. Many of the
counties surrounding Cincinnati,
Cleveland and Columbus
continue to have
unemployment rates of three
percent or lower. There are
even signs of labor shortages
developing in pockets across
the state. It is important to
remember that Ohio depends
quite heavily on durable
goods manufacturing,
particularly auto production.
Any softness in auto sales
could translate into a
downturn in Ohio's economic
fortunes."
FIDELITY OHIO MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1996
% OF FUND'S % OF FUND'S INVESTMENT
INVESTMENTS S
IN THESE SECTORS
6 MONTHS AGO
General Obligation 37.5 28.3
Water & Sewer 17.0 21.4
Health Care 11.6 11.3
Education 7.8 6.5
Electric Revenue 5.6 1.0
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1996
6 MONTHS AGO
Years 12.5 13.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1996
6 MONTHS AGO
Years 7.6 7.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE. BEGINNING
WITH THE REPORTING CYCLE OF JUNE, 1996, THE MODEL USED TO CALCULATE
DURATIONS MAY BE SLIGHTLY MODIFIED IN ORDER TO FURTHER REFINE THIS
INFORMATION. THESE CHANGES IN METHODOLOGY MAY PRODUCE ADJUSTMENTS IN
HISTORICAL DURATION FIGURES.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
Aaa 50.8%
Aa, A 33.0%
Baa 9.7%
Ba, B 0%
Non-rated 3.6%
Short-term investments 2.9%
Aaa 45.8%
Aa, A 29.5%
Baa 12.6%
Ba, B 1.6%
Non-rated 4.8%
Short-term investments 5.7%
Row: 1, Col: 1, Value: 50.8
Row: 1, Col: 2, Value: 33.0
Row: 1, Col: 3, Value: 9.699999999999999
Row: 1, Col: 4, Value: 1.0
Row: 1, Col: 5, Value: 3.6
Row: 1, Col: 6, Value: 2.9
Row: 1, Col: 1, Value: 45.8
Row: 1, Col: 2, Value: 29.5
Row: 1, Col: 3, Value: 12.6
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 4.8
Row: 1, Col: 6, Value: 5.7
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
FIDELITY OHIO MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investments
MUNICIPAL BONDS - 97.1%
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - 93.6%
Adams County Valley Local School Dist. Unltd. Tax:
6.65% 12/1/03 (MBIA Insured) Aaa $ 1,000,000 $ 1,113,750
6.65% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,118,750
6.65% 12/1/05 (MBIA Insured) Aaa 1,000,000 1,122,500
Akron Parking Facs. Ltd. Tax:
8.75% 11/1/03 A 160,000 194,000
8.75% 11/1/04 A 160,000 196,400
8.75% 11/1/05 A 160,000 198,600
Akron Str. Impt. Ltd. Tax Series 1985-1:
8.75% 11/1/03 A 200,000 242,500
8.75% 11/1/04 A 200,000 245,500
8.75% 11/1/05 A 200,000 248,250
Alliance Wtrwks. Rev. (Cap. Appreciation)
0% 10/15/06 (FGIC Insured) Aaa 765,000 442,743
Bedford Hosp. Impt. Rev. Rfdg. (Bedford
Commty. Hosp.) Series 1990,
8.50% 5/15/09 (Escrowed to Maturity) (d) - 765,000 859,668
Berea Gen. Oblig. Ltd. Tax Rfdg. 0% 12/1/04 Aa 535,000 343,068
Berea Wtrwks. Rfdg. 0% 12/1/06 Aa 510,000 290,062
Berlin & Milan Local School Dist. Gen. Oblig
7.45% 12/1/11 A 675,000 739,968
Bexley City School Dist. Gen. Oblig.:
0% 12/1/06 Aa 440,000 250,250
0% 12/1/07 Aa 540,000 289,574
0% 12/1/08 Aa 540,000 271,350
Buckeye Local School Dist. Rfdg. (Jefferson County):
(Cap. Appreciation) 0% 12/1/06
(AMBAC Insured) Aaa 375,000 217,500
0% 12/1/07 (AMBAC Insured) Aaa 760,000 413,250
Buckeye Valley Local School Dist.
(Delaware County) Series A, 6.85%
12/1/15 (MBIA Insured) Aaa 2,000,000 2,275,000
Butler County Hosp. Facs. Auth. Rev. Rfdg.
& Impt. (Fort Hamilton Hughes) 7.50% 1/1/10 Baa 1,500,000 1,550,624
Cambridge Hosp. Impt. Rev. Rfdg. (Guernsey
Mem. Hosp.) 8% 12/1/11 BBB 1,500,000 1,591,874
Clark County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp.) Series A,
9.375% 4/1/08 BBB+ 800,000 817,527
Cleveland Gen. Oblig. Rfdg.:
Series A, 6.75% 10/1/11 (AMBAC Insured)
(Pre-Refunded to 10/1/01 @ 102) (d) Aaa 1,850,000 2,053,500
5.375% 9/1/10 (AMBAC Insured) Aaa 1,025,000 1,004,500
Cleveland Pub. Pwr. Sys. Rev.:
0% 11/15/10 (MBIA Insured) Aaa 2,685,000 1,191,468
0% 11/15/11 (MBIA Insured) Aaa 2,685,000 1,110,918
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cleveland Pub. Pwr. Sys. Rev. (Capital
Appreciation) (First Mtg.) Series A,
0% 11/15/08 (MBIA Insured) Aaa $ 5,480,000 $ 2,774,250
Cleveland Wtrwks. Rev. Rfdg. (First Mtg.):
Series F-92 A:
6.25% 1/1/15 (AMBAC Insured) Aaa 3,000,000 3,093,750
6.50% 1/1/21 (AMBAC Insured)
(Pre-Refunded to 1/1/02 @ 102) (d) Aaa 3,000,000 3,288,750
Series F-92 B, 6.25% 1/1/05
(AMBAC Insured) Aaa 1,000,000 1,067,500
Series G, 5.50% 1/1/21 (MBIA Insured) Aaa 13,725,000 13,347,562
Columbus Gen. Oblig.:
Rfdg. Series B:
5.80% 1/1/00 Aaa 1,000,000 1,038,750
5.90% 1/1/01 Aaa 1,000,000 1,048,750
(Various Purpose):
Series 1, 6% 5/15/10 Aaa 1,000,000 1,033,750
9.50% 4/15/04 Aaa 500,000 643,750
8.125% 5/1/01 Aaa 1,000,000 1,143,750
6.50% 9/15/01 Aaa 2,000,000 2,170,000
Columbus Swr. Rev. 5.50% 6/1/01 A1 1,000,000 1,031,250
Columbus Swr. Syst. Impt. Ltd. Tax
9.375% 4/15/07 Aaa 590,000 790,600
Columbus Wtrwks. Enlargement #44
6% 5/1/12 Aaa 1,250,000 1,287,500
Cuyahoga County 5.50% 11/15/05 Aa 2,400,000 2,460,000
Cuyahoga County Cap. Appreciation Unltd.
Tax Rfdg. Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 2,080,000
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 2,042,250
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 2,287,500
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 1,032,000
0% 10/1/12 (MBIA Insured) Aaa 1,505,000 602,000
0% 10/1/13 (MBIA Insured) Aaa 3,000,000 1,121,250
Cuyahoga County Hosp. Rev. Rfdg.:
(Cleveland Clinic Foundation) Series A:
8% 12/1/08 Aa 1,000,000 1,060,000
8% 12/1/15 Aa 2,250,000 2,368,124
(Univ. Hosp. Health Sys.) 6% 1/15/04
(MBIA Insured) Aaa 2,175,000 2,283,750
Dayton Arpt. Rev. Rfdg. (James M. Cox
Dayton Intl. Arpt.):
5.15% 12/1/07 (AMBAC Insured) Aaa 1,300,000 1,269,125
5.25% 12/1/15 (AMBAC Insured) Aaa 1,000,000 947,500
Defiance Gen. Oblig. Spl. Assessments
7% 12/1/11 A 365,000 394,200
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Delaware City School Dist. (Capital Appreciation)
(Construction & Impt.) Series B:
0% 12/1/08 (FGIC Insured) Aaa $ 1,100,000 $ 559,625
5.50% 12/1/08 (FGIC Insured) Aaa 1,400,000 1,403,500
Unltd. Tax 0% 12/1/09 (FGIC Insured) Aaa 1,000,000 470,000
Delaware County Wtr. & Swr. 6.50% 12/1/03 A1 1,750,000 1,900,938
Dublin City School Dist.:
Unltd. Tax Rfdg. (Cap. Appreciation) 0%
12/1/04 (AMBAC Insured) Aaa 1,930,000 1,268,975
6.20% 12/1/19 (AMBAC Insured) Aaa 1,400,000 1,447,250
Fairfield City School Dist.:
7.10% 12/1/07 (FGIC Insured) Aaa 1,120,000 1,285,200
7.45% 12/1/14 (FGIC Insured) Aaa 1,000,000 1,188,750
Franklin City School Dist. Unltd. Tax
(Warren County Impt.) 7% 12/1/14 A 1,250,000 1,323,438
Franklin County Hosp. Rev. Rfdg.
(Children's Hosp. Proj.) 6% 11/1/06 Aa 1,035,000 1,098,394
Franklin County Ltd. Tax:
Rfdg. 5.375% 12/1/20 Aaa 4,000,000 3,750,000
(Courthouse) 6.375% 12/1/17
(Pre-Refunded to 12/1/01 @ 102) (d) Aaa 2,500,000 2,731,250
Franklin County Rev. (OCLC Online Computer
Library Ctr.):
7.20% 7/15/06 - 1,000,000 1,075,000
6% 4/15/13 - 3,500,000 3,443,125
Granville Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 625,000 362,500
0% 12/1/07 (AMBAC Insured) Aaa 665,000 361,594
0% 12/1/08 (AMBAC Insured) Aaa 650,000 330,688
0% 12/1/09 (AMBAC Insured) Aaa 645,000 307,181
Green County Swr. Sys. Rev. (Cap. Appreciation)
0% 12/1/09 (AMBAC Insured) Aaa 775,000 365,219
Green County Wtr. Sys. Rev. Series A,
6% 12/1/16 (FGIC Insured) Aaa 2,500,000 2,550,000
Hamilton County Health Care Sys. Rev.:
Rfdg. (Providence Hosp.-Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa1 5,000,000 5,050,000
(Sisters of Charity Health Care) Series A:
6.25% 5/15/08 (AMBAC Insured) Aaa 4,220,000 4,452,100
6.25% 5/15/14 (AMBAC Insured) Aaa 1,000,000 1,032,500
Hamilton County Swr. Sys. Rev.
Rfdg. & Impt. Series A:
6% 12/1/05 (FGIC Insured) Aaa 4,500,000 4,781,250
5.40% 12/1/08 (FGIC Insured) Aaa 3,715,000 3,705,713
5.45% 12/1/09 (FGIC Insured) Aaa 1,000,000 992,500
6.70% 12/1/13 (Pre-Refunded to
6/1/01 @ 102) (d) A1 3,100,000 3,417,750
Hamilton Elec. Sys. Mtg. Rev. Rfdg. Series 1992 A,
6% 10/15/12 (FGIC Insured) Aaa 2,000,000 2,070,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Hilliard School Dist. Series A:
6% 12/1/05 (FGIC Insured) Aaa $ 1,415,000 $ 1,505,206
0% 12/1/11 (FGIC Insured) Aaa 1,600,000 666,000
Lakewood Gen. Oblig.:
6.60% 12/1/08 Aa 1,525,000 1,681,313
Series A, 6.60% 12/1/11 Aa 1,630,000 1,805,225
Lakota Local School Dist. Gen. Oblig. Rfdg.
(Cap. Appreciation):
Unltd. Tax 0% 12/1/99 A1 445,000 380,475
0% 12/1/00 A1 625,000 506,250
0% 12/1/01 A1 590,000 451,350
0% 12/1/02 A1 555,000 400,988
0% 12/1/03 A1 260,000 175,500
0% 12/1/04 A1 730,000 463,550
0% 12/1/05 A1 690,000 411,413
0% 12/1/06 A1 650,000 363,188
0% 12/1/07 A1 610,000 322,538
Logan-Hocking Local School Dist. Rfdg. Series B,
0% 12/1/08 (AMBAC Insured) Aaa 1,065,000 548,475
Lorain Gen. Oblig. Ltd. Tax 7.875% 12/1/09 Baa 1,000,000 1,097,500
Lowellville San. Swr. Sys. Rev. (Browning-Ferris
Inds., Inc.) 7.25% 6/1/06 (b) A 1,200,000 1,221,000
Lucas County Convention Ctr. Site Acquisition
Bonds Ltd. Tax:
6.50% 12/1/09 A 340,000 369,750
6.50% 12/1/10 A 340,000 369,750
6.50% 12/1/11 A 340,000 369,750
6.50% 12/1/12 A 340,000 365,075
Lucas County Hosp. Rev.:
Rfdg. (Riverside Hosp. Proj.)
7.625% 6/1/15 (f) Baa1 7,485,000 7,700,418
(Promedica Healthcare Oblig. Group) 6%
11/15/04 (MBIA Insured) Aaa 4,000,000 4,220,000
Mahoning County Hosp. Facs. Rev.
(YHA, Inc. Proj.) Series A,
7% 10/15/14 (MBIA Insured) Aaa 1,000,000 1,075,000
Mahoning County San. Swr. Sys. Rev.
7.50% 2/1/19 (BIG Insured) (MBIA Insured) Aaa 1,000,000 1,071,250
Mahoning Valley San. Dist.:
7.85% 12/15/12 - 1,200,000 1,230,000
7.85% 12/15/13 - 1,275,000 1,306,875
7.75% 5/15/14 - 3,250,000 3,306,875
Marion County Health Care Facs. Rev.
Rfdg. & Impt. (United Church Homes, Inc. Proj.)
6.30% 11/15/15 BBB- 1,800,000 1,737,000
Marysville Swr. Sys. Ltd. Tax 7.15% 12/1/11 A 500,000 537,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Marysville Village School Dist. Gen. Oblig. Rfdg.
(Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa $ 795,000 $ 493,894
0% 12/1/06 (AMBAC Insured) Aaa 750,000 438,750
0% 12/1/07 (AMBAC Insured) Aaa 690,000 379,500
Mason City Sch. Dist.:
6.05% 12/1/09 (FGIC Insured) Aaa 1,225,000 1,295,438
6.15% 12/1/10 (FGIC Insured) Aaa 1,420,000 1,512,300
Mentor Gen. Oblig. Ltd. Tax Series 1991,
7.15% 12/1/11 A 500,000 541,875
Mentor Village School Dist. Rfdg.
(Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa 755,000 614,381
0% 12/1/01 (MBIA Insured) Aaa 795,000 611,156
0% 12/1/02 (MBIA Insured) Aaa 845,000 616,850
0% 12/1/03 (MBIA Insured) Aaa 840,000 581,700
Miami County Hosp. Facs. Rev. (Upper Valley
Med. Ctr. Proj.) Series B, 8.25% 5/1/04
(BIG Insured) (MBIA Insured) Aaa 410,000 427,405
Middleburg Heights Hosp. Impt. Rev.
(Southwest Gen. Hosp.) 7.20% 8/15/19
(Pre-Refunded to 8/15/01 @ 102) (d) A 2,000,000 2,257,500
Montgomery County Solid Waste Rev. Rfdg.
6% 11/1/05 (MBIA Insured) Aaa 1,940,000 2,063,675
Newark Wtr. Rev. (Cap. Appreciation) 0%
12/1/07 (AMBAC Insured) Aaa 455,000 250,250
North Canton School Dist. 5.90% 12/1/14
(AMBAC Insured) Aaa 2,000,000 2,002,500
Northeast Ohio Reg. Swr. Dist. Wastewtr. Rev.
Rfdg. 6.25% 11/15/04 (AMBAC Insured) Aaa 1,000,000 1,083,750
Ohio Air Quality Dev. Auth.:
Rfdg. (Ohio Pwr. Co. Proj.)
Series B, 7.40% 8/1/09 Baa1 3,250,000 3,436,875
(Columbus & Southern Pwr. Co.) Series A,
6.375% 12/1/20 (FGIC Insured) Aaa 3,000,000 3,097,500
Ohio Bldg. Auth.:
Rfdg. (State Correctional Facs.) Series A:
6.50% 10/1/03 A1 2,750,000 2,963,125
5.70% 10/1/04 A1 1,125,000 1,164,375
5.75% 10/1/05 A1 2,080,000 2,152,800
Rfdg. (State Facs.-Vern Riffe) Series A,
5.75% 10/1/04 (AMBAC Insured) Aaa 8,250,000 8,621,250
(Administration Bldg. Fund Proj.) Series A,
5.60% 10/1/07 A1 3,330,000 3,367,463
(Adult Correctional Facs.) 6% 4/1/06
(AMBAC Insured) Aaa 1,930,000 2,045,800
(Ohio Ctr. Arts) Series A, 5.45% 10/1/07 A1 2,000,000 2,010,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Bldg. Auth.: (continued)
(Spl. Redemption Provision) 7.30% 4/1/05
(MBIA Insured) (Pre-Refunded to 4/1/00
@ 102) (d) Aaa $ 1,200,000 $ 1,330,500
(Workers Compensation) 4.75% 4/1/14 A 1,620,000 1,421,550
Series A, 5% 10/1/08 (AMBAC Insured) Aaa 3,205,000 3,060,775
Ohio Cap. Corp. Multi-Family Hsg. Rev. Rfdg.:
Series A, 7.50% 1/1/24 (FNMA Coll.) Aaa 1,000,000 1,055,000
Series C, 7.375% 7/1/23 (FNMA Coll.) Aaa 2,000,000 2,057,500
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.) 8.25% 10/1/06
(Pre-Refunded to 4/4/00 @ 101) (d) - 1,120,000 1,264,200
Ohio Gen. Oblig.:
(Cap. Appreciation) (Infrastructure Impt.)
Series 1989, 0% 9/1/07 Aa 7,225,000 3,928,594
(College Savings Bonds):
0% 8/1/09 Aa 2,290,000 1,102,063
0% 8/1/10 Aa 2,000,000 900,000
0% 8/1/14 Aa 1,375,000 474,375
(Infrastructure Impt.):
Rfdg. Series R:
0% 9/1/00 Aa 3,260,000 2,681,350
5.45% 9/1/03 Aa 2,350,000 2,435,188
6% 8/1/00 Aa 5,000,000 5,256,250
5.75% 8/1/04 Aa 1,000,000 1,050,000
6.50% 8/1/04 Aa 5,670,000 6,237,000
4.80% 5/15/01 Aa 2,000,000 2,017,500
6.50% 9/1/01 Aa 1,000,000 1,085,000
6.65% 8/1/05 Aa 3,000,000 3,345,000
6.65% 9/1/09 Aa 1,000,000 1,098,750
Ohio Higher Edl. Facs. Commission Rev.:
(Case Western Reserve Univ. Proj.):
Rfdg.:
6% 10/1/14 Aa 1,500,000 1,524,375
6.125% 10/1/15 Aa 2,000,000 2,050,000
6.25% 10/1/16 Aa 2,500,000 2,603,125
Series B, 6.50% 10/1/20 Aa 2,250,000 2,435,625
7.70% 10/1/18 Aa 70,000 74,200
6% 10/1/22 Aa 650,000 649,188
(Kenyon College Proj.) 5.30% 12/1/08 A 1,115,000 1,088,519
(Oberlin Coll. Proj.) 5.375% 10/1/15 Aa 1,000,000 923,750
5.90% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,048,750
Ohio Liquor Profits Rev. Rfdg. 6.80% 9/1/98
(MBIA Insured) Aaa 2,000,000 2,105,000
Ohio Poll. Cont. Rev. (British Petroleum Co. PLC)
(Standard Oil Co.) 6.75% 12/1/15 Aa3 3,100,000 3,487,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Pub. Facs. Commission Higher Ed. Facs.:
Rfdg. Series II-A, 5.20% 5/1/05
(AMBAC Insured) Aaa $ 1,025,000 $ 1,030,125
Series II-B, 5% 11/1/00 (MBIA Insured) Aaa 4,000,000 4,065,000
6.25% 5/1/99 (AMBAC Insured) Aaa 4,000,000 4,195,000
Ohio Turnpike Commission Rev.:
6% 2/15/04 (FSA Insured) Aaa 5,140,000 5,461,250
6% 2/15/05 (FSA Insured) Aaa 2,000,000 2,125,000
Ohio Wtr. Dev. Auth. Pollution Cont. Facs. Rev.
(Wtr. Control Loan Fd.):
6.50% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,098,750
6.50% 12/1/05 (MBIA Insured) Aaa 2,735,000 3,008,500
Ohio Wtr. Dev. Auth. Rev.:
Rfdg. (Pure Wtr.) 5.50% 12/1/18
(AMBAC Insured) Aaa 2,500,000 2,396,875
(Fresh Wtr.):
6.25% 12/1/02 (AMBAC Insured) Aaa 1,915,000 2,061,019
6.25% 12/1/03 (AMBAC Insured) Aaa 2,025,000 2,187,000
(Pure Wtr.) Series I, 6% 12/1/16
(AMBAC Insured) (Escrowed to Maturity) (d) Aaa 1,685,000 1,712,381
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(North Star BHP Steel - Cargill) 6.30% 9/1/20 Aa3 6,350,000 6,437,313
Olentangy Local School Dist. Unltd. Tax:
7.75% 12/1/07 (BIG Insured) (MBIA Insured) Aaa 500,000 606,875
7.75% 12/1/09 (BIG Insured) (MBIA Insured) Aaa 100,000 121,875
7.75% 12/1/11 (BIG Insured) (MBIA Insured) Aaa 190,000 233,225
Ottawa County Gen. Oblig. Ltd. Tax
7.50% 10/1/14 A1 500,000 555,000
Ottawa County San. Swr. Sys. Rev. Rfdg. (Cap.
Appreciation) (Danbury Proj.) 0% 10/1/06
(AMBAC Insured) Aaa 1,445,000 836,294
Pickerington Local School Dist. Constr. & Impt. Rev.
5.80% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,038,750
Portage County Hosp. Rev. (Robinson Memorial
Hosp. Proj.) 6.50% 11/15/03 (MBIA Insured) Aaa 1,080,000 1,173,150
South Western City School Dist. Rfdg.
(Franklin & Pickway Counties) Series A,
6.20% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,061,250
Southwest Local School Dist. (Hamilton County):
0% 12/1/04 (AMBAC Insured) Aaa 500,000 328,125
0% 12/1/05 (AMBAC Insured) Aaa 525,000 324,844
0% 12/1/06 (AMBAC Insured) Aaa 525,000 305,813
0% 12/1/07 (AMBAC Insured) Aaa 520,000 284,050
Springboro Commty. School Dist. Rfdg.
0% 12/1/06 (AMBAC Insured) Aaa 915,000 520,406
Stark County Gen. Oblig. 5.60% 11/15/08
(AMBAC Insured) Aaa 1,150,000 1,154,313
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Stark County Hosp. Rev. (Doctors Hosp. of
Stark County) 6% 4/1/13 Baa $ 5,840,000 $ 5,204,900
Stow City School Dist. School Impt. Unltd. Tax
9.125% 12/1/06 A 590,000 747,088
Student Loan Fund Corp. Student Loan Rev.:
Rfdg. Series A, 7.25% 2/1/08 (b) A 4,000,000 4,190,000
Series A, 5.50% 12/1/01 (b) A1 5,500,000 5,575,625
Sr. Sub-Series A, 5.75% 8/1/03 A1 2,000,000 2,042,500
5.85% 8/1/04 A1 5,500,000 5,616,875
Tiffin San. Swr. Impt. Gen. Oblig. Ltd. Tax
7.10% 12/1/11 A 1,000,000 1,072,500
Toledo Gen. Oblig.:
6.10% 12/1/04 (AMBAC Insured) Aaa 1,750,000 1,800,313
7.625% 12/1/04 (AMBAC Insured) Aaa 1,000,000 1,178,750
Toledo Wtrwks. Rev. 6% 11/15/06
(FGIC Insured) Aaa 1,000,000 1,062,500
Union County Gen. Oblig. (Mem. Hosp.)
7.40% 12/1/10 A1 680,000 728,450
Warren County Gen. Oblig.:
Ltd. Tax 6.65% 12/1/11 Aa 500,000 554,375
6.10% 12/1/12 Aa 500,000 524,375
Warren County Swr. Impt. 5.50% 12/1/16 Aa 1,455,000 1,369,519
Warren Hsg. Dev. Corp. Rev.
(First Mtg. Rev.) Section 8:
7.25% 6/1/04 - 200,000 202,000
7.25% 6/1/05 - 200,000 202,000
7.25% 6/1/06 - 200,000 202,000
7.25% 6/1/07 - 200,000 202,000
7.25% 6/1/08 - 200,000 202,000
Willoughby Gen. Oblig. Road Impt. Ltd. Tax
7.40% 12/1/11 A 1,200,000 1,423,500
Youngstown Ltd. Tax 7.55% 12/1/11 Baa 1,500,000 1,640,625
346,369,176
PUERTO RICO - 3.5%
Puerto Rico Elec. Pwr. Auth. Rev. Rfdg. Series W,
7% 7/1/07 (MBIA Insured) Aaa 6,000,000 6,862,500
Puerto Rico Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 Baa1 2,500,000 2,665,625
Puerto Rico Port Auth. (American Airlines)
Series A, 6.25% 6/1/26 Baa3 3,300,000 3,246,375
12,774,500
TOTAL MUNICIPAL BONDS
(Cost $353,721,597) 359,143,676
MUNICIPAL NOTES (A)- 2.9%
MOODY'S PRINCIPAL VALUE RATINGS(C) AMOUNT (NOTE 1)
OHIO - 2.9%
Columbus Various Purpose Unltd. Tax
Series 1995-1, 3% (Liquidity Facility
Westdeutsche Landesbank) VRDN VMIG 1 $ 1,200,000 $ 1,200,000
Dayton Spl. Facs. Rev. Rfdg. (Emery Air
Freight Corp. Proj.) Series 1988 D, 3.85%,
LOC Mellon Bank, VRDN (b) - 700,000 700,000
Ohio Air Quality Dev. Auth. Rev.
(JMG Funding) VRDN (b):
Series 1994 A, 3.50%, LOC Societe Generale VMIG 1 2,000,000 2,000,000
Series 1994 B, 3.65%, LOC Societe Generale VMIG 1 1,400,000 1,400,000
Series 1995 B, 3.50%, LOC Societe Generale A-1+ 1,200,000 1,200,000
3.50%, LOC Societe Generale A-1+ 3,200,000 3,200,000
Ohio Hsg. Fin. Agcy. Participating VRDN,
3.40% (Liquidity Facility Bank of
New York) (b) (e) - 1,000,000 1,000,000
TOTAL MUNICIPAL NOTES
(Cost $10,700,000) 10,700,000
TOTAL INVESTMENTS - 100%
(Cost $364,421,597) $ 369,843,676
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
Purchased
125 Municipal Bond Contracts Sept. 1996 $ 14,042,969 $ 60,991
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.8%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(b) Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security collateralized by an amount sufficient to pay interest and
principal.
(e) Provides evidence of ownership in one or more underlying municipal
bonds.
(f) A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,543,170.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 81.6% AAA, AA, A 74.2%
Baa 8.5% BBB 7.1%
Ba 0.0% BB 0.1%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 3.6%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 37.5%
Water and Sewer 17.0
Health Care 11.6
Education 7.8
Electric Revenue 5.6
Industrial Development 5.3
Escrowed/Pre-Refunded 5.1
Others (individually less than 5%) 10.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $364,421,597. Net unrealized appreciation aggregated
$5,422,079, of which $8,479,403 related to appreciated investment
securities and $3,057,324 related to depreciated investment securities.
At December 31, 1995, the fund was required to defer $1,199,449 of losses
on futures contracts.
FIDELITY OHIO MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $364,421,597) - $ 369,843,676
See accompanying schedule
Cash 217,042
Receivable for investments sold 11,283,776
Interest receivable 4,716,291
Receivable for daily variation on futures contracts 40,479
TOTAL ASSETS 386,101,264
LIABILITIES
Payable for investments purchased $ 5,402,047
Payable for fund shares redeemed 252,062
Distributions payable 354,276
Accrued management fee 123,698
Other payables and accrued expenses 80,972
TOTAL LIABILITIES 6,213,055
NET ASSETS $ 379,888,209
Net Assets consist of:
Paid in capital $ 374,855,698
Accumulated undistributed net realized gain (loss) (450,559)
on investments
Net unrealized appreciation (depreciation) on 5,483,070
investments
NET ASSETS, for 33,885,138 shares outstanding $ 379,888,209
NET ASSET VALUE, offering price and redemption price per $11.21
share ($379,888,209 (divided by) 33,885,138 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 10,707,581
EXPENSES
Management fee $ 773,771
Transfer agent, accounting and custodian fees and 336,751
expenses
Non-interested trustees' compensation 714
Registration fees 26,019
Audit 17,212
Legal 1,285
Miscellaneous 4,452
Total expenses before reductions 1,160,204
Expense reductions (3,807) 1,156,397
NET INTEREST INCOME 9,551,184
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 924,879
Futures contracts (126,898) 797,981
Change in net unrealized appreciation (depreciation) on:
Investment securities (13,767,107)
Futures contracts 60,991 (13,706,116)
NET GAIN (LOSS) (12,908,135)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (3,356,951)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 9,551,184 $ 21,258,088
Net interest income
Net realized gain (loss) 797,981 1,492,811
Change in net unrealized appreciation (depreciation) (13,706,116) 34,935,377
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (3,356,951) 57,686,276
FROM OPERATIONS
Distributions to shareholders (9,551,184) (21,258,088)
From net interest income
From net realized gain (349,890) -
TOTAL DISTRIBUTIONS (9,901,074) (21,258,088)
Share transactions 32,033,069 98,716,714
Net proceeds from sales of shares
Reinvestment of distributions 7,574,068 16,250,656
Cost of shares redeemed (50,904,077) (97,218,900)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (11,296,940) 17,748,470
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (24,554,965) 54,176,658
NET ASSETS
Beginning of period 404,443,174 350,266,516
End of period $ 379,888,209 $ 404,443,174
OTHER INFORMATION
Shares
Sold 2,821,710 8,863,429
Issued in reinvestment of distributions 667,930 1,447,995
Redeemed (4,503,641) (8,706,556)
Net increase (decrease) (1,014,001) 1,604,868
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1996
(UNAUDITED) 1995 1994 1993C 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.590 $ 10.520 $ 12.020 $ 11.550 $ 11.320 $ 10.840
beginning of period
Income from .277 .618 .657 .693 .718 .719
Investment
Operations
Net interest
income
Net realized (.370) 1.070 (1.310) .720 .230 .480
and unrealized
gain (loss)
Total from (.093) 1.688 (.653) 1.413 .948 1.199
investment
operations
Less Distributions (.277) (.618) (.657) (.693) (.718) (.719)
From net interest
income
From net realized (.010) - (.190) (.250) - -
gain
Total distributions (.287) (.618) (.847) (.943) (.718) (.719)
Net asset value, $ 11.210 $ 11.590 $ 10.520 $ 12.020 $ 11.550 $ 11.320
end of period
TOTAL RETURN B (.80) 16.39% (5.55) 12.56% 8.66% 11.45%
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 379,888 $ 404,443 $ 350,267 $ 457,872 $ 384,861 $ 327,767
period (000 omitted)
Ratio of expenses to .60% .58% .57% .57% .61% .64%
average net assets A
Ratio of net interest 4.92% 5.52% 5.88% 5.67% 6.31% 6.53%
income to average A
net assets
Portfolio turnover rate 46% 48% 22% 41% 20% 11%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
B EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
6. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Ohio Municipal Income Fund (the income fund) is a fund of Fidelity
Municipal Trust. Fidelity Ohio Municipal Money Market Fund (the money
market fund) is a fund of Fidelity Municipal Trust II. Each trust is
registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company. Fidelity Municipal
Trust and Fidelity Municipal Trust II (the trusts) are organized as a
Massachusetts business trust and a Delaware business trust, respectively.
Each fund is authorized to issue an unlimited number of shares. The
financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the income fund
and the money market fund:
SECURITY VALUATION.
INCOME FUND. Securities are valued based upon a computerized matrix system
and/or appraisals by a pricing service, both of which consider market
transactions and dealer-supplied valuations. Short-term securities maturing
within sixty days of their purchase date are valued either at amortized
cost or original cost plus accrued interest, both of which approximate
current value. Securities for which quotations are not readily available
are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
municipal money market fund, accretion of market discount represents
unrealized gain until realized at the time of a security disposition or
maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
differing treatments for gains/losses on futures and options transactions,
capital loss carryforwards, and losses deferred due to futures and options
and excise tax regulations. Permanent book and tax differences relating to
shareholder distributions will result in reclassifications to paid in
capital and may affect the per-share allocation between net investment
income and realized and unrealized gain (loss). Any taxable gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
7. OPERATING POLICIES.
FUTURES CONTRACTS AND OPTIONS. The income fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend to decrease the fund's exposure to the
underlying instrument, or hedge other fund investments. Futures contracts
involve, to varying degrees, risk of loss in excess of the futures
variation margin reflected in the Statement of Assets and Liabilities. The
underlying face amount at value of any open futures contracts at period
end, is shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the underlying
instrument at period end. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
8. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $144,554,594 and $84,830,647, respectively.
The market value of futures contracts opened and closed during the period
amounted to $21,598,911 and $7,490,035, respectively.
9. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of each fund. The group fee rate is the weighted
average of
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
a series of rates and is based on the monthly average net assets of all the
mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. In the event that these rates were lower than the contractual rates
in effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .25%. For the period, the management fee was
equivalent to an annualized rate of .40% of average net assets for the
income and money market funds.
SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR
Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of
50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plans (the Plans), and in accordance with Rule 12b-1 of the 1940 Act, FMR
or the funds' distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of each fund's shares. Subject to
the approval of each Board of Trustees, the Plans also authorize payments
to third parties that assist in the sale of each fund's shares or render
shareholder support services. No payments were made to third parties under
the Plans during the period.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer and shareholder servicing agent for the funds. UMB has entered
into a sub-contract with Fidelity Service Co. (FSC), an affiliate of FMR,
under which FSC performs the activities associated with the funds' transfer
and shareholder servicing agent and accounting functions. The funds pay
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. The accounting fee is based
on the level of average net assets for the month plus out-of-pocket
expenses. For the period, FSC received transfer agent and accounting fees
amounting to $236,697 and $89,483 for the income fund and $236,930 and
$31,147 for the money market fund, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% and .15% of average net assets for the income fund and the
money market fund, respectively.
Shareholders participating in the Fidelity Ultra Service Account(registered
trademark) Program (the Program) pay a $5.00 monthly fee to Fidelity
Brokerage Services, Inc. (FBSI), an affiliate of FMR, for performing
services associated with the Program. For the period, fees paid to FBSI by
shareholders participating in the Program amounted to $4,240.
10. EXPENSE REDUCTIONS.
Each fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of each fund's expenses. During the period, the custodian
and transfer agent fees were reduced by $2,007 and $0, and $1,800 and
$21,394, for the income and money market funds, respectively, under these
arrangements.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND
ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Janice S. Bradburn, Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Thomas D. Maher, Assistant
Vice President - MONEY MARKET FUND
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant
Treasurer - MONEY MARKET FUND
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
Edward H. Malone *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
