(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1997
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 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 33 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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR MUNICIPAL BOND FUND - INSTITUTIONAL CLASS
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Institutional Class shares took place on July 1, 1996. Returns
prior to July 1, 1996 are those of Initial Class, the original class of the
fund. If Fidelity had not reimbursed certain class expenses, the total
returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Municipal Bond Fund - 2.88% 7.89% 36.83% 112.99%
Institutional Class
Lehman Brothers Municipal Bond 3.20% 8.26% 40.90% 119.37%
Index
General Municipal Debt Funds 2.95% 7.81% 37.10% 111.62%
Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one year,
five years or 10 years. For example, if you had 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 Institutional Class returns to the performance
of the Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at least
one year. To measure how Institutional Class performance stacked up against
its peers, you can compare it to the general municipal debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 238 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - 7.89% 6.47% 7.85%
Institutional Class
Lehman Brothers Municipal Bond Index 8.26% 7.10% 8.17%
General Municipal Debt Funds Average 7.81% 6.51% 7.76%
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative return
and show you what would have happened if Institutional Class had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10122.11 10102.00
1987/08/31 10168.98 10124.73
1987/09/30 9644.27 9751.43
1987/10/31 9732.29 9785.95
1987/11/30 9949.26 10041.46
1987/12/31 10143.01 10187.16
1988/01/31 10658.03 10550.03
1988/02/29 10759.49 10661.54
1988/03/31 10499.13 10537.87
1988/04/30 10534.99 10617.96
1988/05/31 10571.25 10587.27
1988/06/30 10771.48 10742.16
1988/07/31 10849.22 10812.20
1988/08/31 10873.13 10821.72
1988/09/30 11091.88 11017.59
1988/10/31 11340.79 11211.50
1988/11/30 11209.62 11108.80
1988/12/31 11390.93 11222.45
1989/01/31 11557.73 11454.53
1989/02/28 11438.23 11323.83
1989/03/31 11434.26 11296.77
1989/04/30 11764.23 11564.95
1989/05/31 11994.10 11805.16
1989/06/30 12165.25 11965.47
1989/07/31 12278.61 12128.32
1989/08/31 12169.08 12009.58
1989/09/30 12121.69 11973.79
1989/10/31 12264.75 12120.23
1989/11/30 12424.47 12332.34
1989/12/31 12480.35 12433.22
1990/01/31 12409.48 12374.41
1990/02/28 12524.34 12484.54
1990/03/31 12535.34 12488.29
1990/04/30 12370.42 12397.87
1990/05/31 12708.49 12668.52
1990/06/30 12842.41 12779.87
1990/07/31 13040.33 12967.74
1990/08/31 12792.99 12779.44
1990/09/30 12866.20 12786.73
1990/10/31 13019.60 13018.68
1990/11/30 13268.62 13280.49
1990/12/31 13342.79 13338.26
1991/01/31 13498.21 13517.26
1991/02/28 13568.64 13634.86
1991/03/31 13592.55 13639.76
1991/04/30 13782.44 13821.17
1991/05/31 13888.44 13944.04
1991/06/30 13894.29 13930.24
1991/07/31 14087.15 14099.91
1991/08/31 14264.94 14285.60
1991/09/30 14426.50 14471.60
1991/10/31 14570.62 14601.85
1991/11/30 14610.18 14642.59
1991/12/31 14932.13 14956.82
1992/01/31 14938.89 14990.92
1992/02/29 14961.09 14995.71
1992/03/31 14953.84 15001.26
1992/04/30 15103.32 15134.77
1992/05/31 15291.24 15312.91
1992/06/30 15565.85 15569.86
1992/07/31 16044.09 16036.65
1992/08/31 15812.94 15880.29
1992/09/30 15908.56 15984.15
1992/10/31 15583.24 15827.02
1992/11/30 16050.25 16110.48
1992/12/31 16265.40 16274.97
1993/01/31 16481.01 16464.25
1993/02/28 17151.99 17059.76
1993/03/31 16921.77 16879.44
1993/04/30 17116.81 17049.75
1993/05/31 17218.31 17145.57
1993/06/30 17532.41 17431.73
1993/07/31 17496.11 17454.57
1993/08/31 17955.83 17817.97
1993/09/30 18175.70 18020.92
1993/10/31 18176.88 18055.70
1993/11/30 17954.38 17896.63
1993/12/31 18407.74 18274.43
1994/01/31 18637.91 18483.12
1994/02/28 18074.79 18004.41
1994/03/31 17153.80 17271.27
1994/04/30 17234.26 17417.73
1994/05/31 17404.71 17568.74
1994/06/30 17268.04 17461.40
1994/07/31 17634.78 17781.46
1994/08/31 17674.62 17842.99
1994/09/30 17294.44 17581.05
1994/10/31 16849.95 17268.81
1994/11/30 16376.99 16956.59
1994/12/31 16844.98 17329.81
1995/01/31 17409.38 17825.09
1995/02/28 17989.59 18343.45
1995/03/31 18188.71 18554.21
1995/04/30 18176.56 18576.11
1995/05/31 18769.89 19168.87
1995/06/30 18590.38 19002.10
1995/07/31 18741.56 19182.24
1995/08/31 18986.70 19425.47
1995/09/30 19110.68 19548.43
1995/10/31 19379.34 19832.67
1995/11/30 19718.13 20161.69
1995/12/31 19902.79 20355.45
1996/01/31 20056.32 20509.13
1996/02/29 19917.56 20370.69
1996/03/31 19660.38 20110.36
1996/04/30 19572.28 20053.44
1996/05/31 19560.33 20045.42
1996/06/30 19741.76 20263.72
1996/07/31 19923.85 20448.12
1996/08/31 19905.76 20443.21
1996/09/30 20158.66 20729.41
1996/10/31 20390.51 20963.86
1996/11/30 20796.87 21347.50
1996/12/31 20703.81 21257.84
1997/01/31 20760.64 21298.02
1997/02/28 20937.25 21493.54
1997/03/31 20638.08 21207.03
1997/04/30 20797.17 21384.53
1997/05/31 21088.18 21706.15
1997/06/30 21299.48 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Institutional Class on June 30,
1987. As the chart shows, by June 30, 1997, the value of the investment
would have grown to $21,299 - a 112.99% 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 $21,937 - a 119.37% 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 YEARS ENDED DECEMBER 31,
MONTHS
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dividend return 2.39% 4.98% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return 0.49% -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 2.88% 4.02% 18.15% -8.49% 13.17% 8.93%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 3.20(cents) 19.21(cents) 38.81(cents)
Annualized dividend rate 4.72% 4.75% 4.79%
30-day annualized yield 4.42% - -
30-day annualized tax-equivalent yield 6.91% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $8.25 over
the past one month, $8.16 over the past six months and $8.13 over life of
class, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses during the periods shown, the yield would have been
- -0.10%.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Fidelity Advisor
Municipal Bond Fund
Q. GEORGE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS AND PAST YEAR?
A. For the six months that ended June 30, 1997, the fund's Institutional
Class shares had a total return of 2.88%. To get a sense of how the fund
did relative to its peers, the general municipal debt funds average
returned 2.95% for the same period, according to Lipper Analytical
Services. The Lehman Brothers Municipal Bond Index, which tracks the types
of securities in which the fund invests, had a six-month return of 3.20%.
For the year that ended June 30, 1997, the fund's Institutional Class
returned 7.89%. For the same 12-month period, the general municipal debt
funds average returned 7.81%, according to Lipper. For the same one-year
period, the Lehman Brothers index returned 8.26%.
Q. HOW WOULD YOU CHARACTERIZE THE MUNICIPAL BOND MARKET OVER THE PAST SIX
MONTHS?
A. I'd characterize it as a somewhat choppy environment. Evidence that the
economy was growing at a much-quicker-than-expected pace sent Treasury bond
yields higher and, correspondingly, their prices lower during much of the
period. On the other hand, yields on municipal securities didn't react as
negatively, and muni bond prices were more stable throughout the period.
The divergence between Treasuries and municipals was greatest in the
long-maturity end of the market. As an example, the yield on a 30-year
Treasury rose 0.15%, while the yield on a 30-year Aaa-rated muni fell
0.15%. In the short-maturity end of the market, the yield on a five-year
Treasury rose 0.20%, while the yield on a five-year Aaa-rated muni rose
only 0.10%. Municipal prices were supported by the fact that there was a
limited supply of municipals available while demand for them grew.
Q. WHICH OF THE FUND'S HOLDINGS HELPED PERFORMANCE? WHICH DETRACTED?
A. Bonds issued in New York and California were some of the fund's - and
the municipal market's - best performers during the period. Both states
enjoyed the benefits of having strengthening local economies, which
translated into higher revenue collections and better fiscal health. As far
as detractors go, I can't think of any specific bond that was a
disappointment. However, a higher stake in California bonds might have
helped the fund since they were among the market's best performers during
the period.
Q. HOW WAS THE FUND STRUCTURED DURING THE PAST SIX MONTHS?
A. In terms of maturity, I kept the fund heavily weighted in bonds with
maturities of between 10 and 15 years. There were a couple of reasons why I
emphasized these intermediate-maturity bonds. First, the yield these bonds
generate tends to be higher than the yield generated by owning a
combination of long- and short-maturity bonds. What's more, long-term bonds
tend to be callable, which means they can be redeemed by their issuer
before maturity. Callable bonds tend to rise less in up markets and fall
more in down markets. Intermediate-maturity bonds, on the other hand,
typically aren't susceptible to being called.
Q. AT THE END OF THE PERIOD, ABOUT 75% OF THE FUND'S HOLDINGS WERE IN BONDS
WITH CREDIT RATINGS OF A AND ABOVE AS JUDGED BY MOODY'S INVESTOR SERVICES.
WHY DID YOU FOCUS ON THESE BONDS WHEN BAA-RATED BONDS OFFERED HIGHER
YIELDS?
A. I didn't feel that Baa-rated bonds in general offered enough in the way
of additional yield to compensate for their added risk. Credit ratings
measure credit risk, meaning the risk that a municipal issuer will not
repay its debt as promised. Typically, the higher level of credit risk a
bond carries, the lower its credit rating and the higher its yield. But
during the past six months, there was very little difference between the
reward - or yield - offered by lower-quality bonds compared to
higher-quality securities.
Q. WERE THERE ANY SIGNIFICANT CHANGES IN THE WAY THE FUND'S HOLDINGS WERE
ALLOCATED AMONG SECTORS DURING THE PERIOD?
A. Not really. General obligation bonds (GOs) remained the fund's largest
sector concentration. A GO is backed by the full faith and credit - which
includes the taxing power - of a city, county, state or other issuer. A GO
is repaid with general revenue such as taxes. General revenues are
sensitive to both the economy and a municipality's fiscal health, both of
which have been strong during the period in many of the areas the fund
emphasized. In choosing GOs, I put an emphasis on staying diversified and
not taking on very large positions in any one security.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. Until investors feel like they have a good handle on where the economy,
interest rates and inflation are headed, the bond market is likely to
remain choppy. The past six months have been a relatively good period
compared to U.S. Treasuries and, by the end of the period, munis seemed
fairly valued in relation to their taxable counterparts. I think that the
municipal market will need to continue to experience strong demand and weak
supply in order to continue outperforming Treasuries.
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 current income
that is free from federal
income tax, consistent with
preservation of capital by
investing primarily in
investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of June 30, 1997,
more than $929 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
GEORGE FISCHER ON THE
RELATIONSHIP BETWEEN BOND
PRICES AND BOND YIELDS:
"When choosing investments
for the fund, I consider a
bond's price, its coupon - or
income - and its yield. While
a bond's coupon - which is the
interest rate the issuer
promises to pay the holder until
maturity - remains constant,
its price changes practically
every day. In fact, it's not
uncommon for a municipal
bond's price to fluctuate as
much as 1% any given day.
When a bond's price fluctuates
- - because of changes in
demand and supply, credit
quality or other factor - its
yield also changes.
"The relationship between a
bond's price and its yield can
be thought of as a seesaw:
yield up, price down; yield
down, price up. While a given
bond may look attractive
because it offers a high yield, I
also consider where future
yields will be since they
determine future prices and,
therefore, play into total
return."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1997
% OF % OF FUND'S
FUND'S INVESTMENTS
INVESTMEN IN THESE STATES
TS 6 MONTHS AGO
New York 17.2 16.4
Texas 11.2 9.7
California 9.3 10.0
Georgia 7.3 5.9
Illinois 6.3 6.8
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 40.2 38.0
Electric Revenue 16.7 17.7
Water and Sewer 8.4 9.4
Health Care 7.5 7.9
Special Tax 6.1 7.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 11.6 12.4
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, 1997
6 MONTHS AGO
Years 6.9 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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 52.9%
Aa, A 24.8%
Baa 17.4%
Ba, B 0.9%
Non-rated 1.5%
Short-term
investments 2.5%
Aaa 50.5%
Aa, A 27.9%
Baa 15.6%
Ba 0.8%
Non-rated 2.0%
Short-term
investments 3.2%
Row: 1, Col: 1, Value: 52.0
Row: 1, Col: 2, Value: 24.0
Row: 1, Col: 3, Value: 17.0
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 2.4
Row: 1, Col: 6, Value: 3.0
Row: 1, Col: 1, Value: 49.0
Row: 1, Col: 2, Value: 27.1
Row: 1, Col: 3, Value: 15.6
Row: 1, Col: 4, Value: 1.8
Row: 1, Col: 5, Value: 2.5
Row: 1, Col: 6, Value: 4.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.5%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(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 $ 4,075
ARIZONA - 1.9%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,175
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 2,000 2,133
Maricopa County School Dist. #1 Phoenix Elementary Rfdg.
(Cap. Appreciation) Second Series, 0% 7/1/05
(MBIA Insured) 2,660 1,802
Maricopa County Unified School Dist. #69 Rfdg.
(Cap. Appreciation) 0% 7/1/07 (AMBAC Insured) 3,050 1,845
Tucson Gen. Oblig. Rfdg. 6.40% 7/1/06 (FGIC Insured) 4,230 4,748
17,703
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,517
CALIFORNIA - 9.3%
California Gen. Oblig. 6.25% 10/1/19 10,500 11,314
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series A, 5.70% 8/1/16 (MBIA Insured) 3,125 3,148
Series B, 5.20% 8/1/26 (MBIA Insured)(d) 1,975 1,990
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Correction State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 5,050 4,722
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,309
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,191
5.50% 6/1/15 2,500 2,500
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,200
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,857
California Statewide Commty. Dev. Auth. Rev. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,575
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.)
7% 8/1/11 (MBIA Insured) 1,475 1,731
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg. (Muni. Wtr. Dist.
Swr. Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 2,245 2,638
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,000 2,644
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev.
(Sr. Lien) Series A, 0% 1/1/08 (h) 4,000 2,670
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
CALIFORNIA - CONTINUED
Fresno Swr. Rev. Series A, 4.75% 9/1/26 (MBIA Insured) $ 7,055 $ 6,147
Modesto Irrigation Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity)(e) 4,390 5,669
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,676
3.75% 1/1/13 1,500 1,254
Santa Clara Redev. Agcy. Tax Allocation Rfdg. (Bayshore
North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,700
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,788
7.50% 8/15/07 (FGIC Insured) 3,500 4,235
85,958
COLORADO - 1.8%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,375
(PSL Health Sys. Proj.) Series A, 6.875% 2/15/23
(Pre-Refunded to 2/15/03 @ 102)(e) 4,000 4,495
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,462
16,332
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,600
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,121
7,721
DISTRICT OF COLUMBIA - 1.8%
District of Columbia Gen. Oblig.:
Rfdg. Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,554
5.875% 6/1/05 (MBIA Insured) 3,000 3,142
6% 6/1/11 (MBIA Insured) 1,000 1,045
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,000
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena):
4.85% 11/1/97 850 850
5.625% 11/1/10 5,810 5,701
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured)(g) 3,300 3,325
16,617
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FLORIDA - 0.4%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien)
6.50% 10/1/04 (FGIC Insured) $ 3,000 $ 3,330
GEORGIA - 7.3%
Atlanta Arpt. Facs. Rev. 6.25% 1/1/05 (AMBAC Insured) 16,820 18,292
Dalton City Util. Rev. Rfdg. Series 1997, 4% 1/1/98
(MBIA Insured) 1,000 1,001
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,813
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125% 1/1/05 (FGIC Insured) 4,000 4,325
6.375% 1/1/14 (FGIC Insured) 4,500 5,029
Georgia Gen. Oblig.:
Series A, 6.25% 4/1/06 12,200 13,511
Series B Impt. 7.20% 3/1/04 7,625 8,759
Series D:
6.80% 8/1/03 4,400 4,923
7.25% 9/1/06 3,000 3,555
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,462
67,670
ILLINOIS - 5.8%
Chicago Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) 10,000 10,800
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.)
(2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,229
6.375% 1/1/15 (MBIA Insured) 3,200 3,424
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,511
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 9,430 9,394
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,690
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) 2,500 2,709
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,915
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,303
7.75% 6/1/05 (FGIC Insured) 2,405 2,841
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ILLINOIS - CONTINUED
Metropolitan Pier & Exposition Auth. Dedicated Tax Rev.
(McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) $ 3,890 $ 2,203
0% 6/15/10 (FGIC Insured) 8,100 4,030
0% 6/15/15 (FGIC Insured) 3,100 1,124
Series A:
6.50% 6/15/07 (FGIC Insured) (Pre-Refunded
to 6/15/03 @ 102)(e) 2,925 3,247
6.50% 6/15/07 (FGIC Insured) 75 82
53,502
INDIANA - 0.6%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,682
Indianapolis Resource Recovery Rev. Rfdg. (Ogden Martin
Sys. Inc. Proj.) 6.75% 12/1/06 (AMBAC Insured) 3,000 3,394
5,076
KANSAS - 0.2%
Kansas City Util. Sys. Rev. (Cap. Appreciation) 0% 3/1/09
(AMBAC Insured) (Escrowed to Maturity)(e) 3,975 2,136
LOUISIANA - 0.2%
New Orleans Rfdg. 6.50% 10/1/03 (AMBAC Insured) 1,500 1,650
MARYLAND - 1.2%
Baltimore Consolidated Pub. Impt. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,338
Maryland Health & Higher Edl. Facs. Auth. Rev. Rfdg.
(Good Samaritan Hosp.) 5.75% 7/1/13 2,600 2,668
Washington Metropolitan Area Trans. Auth. Gross Rev.
Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 5,940
10,946
MASSACHUSETTS - 4.4%
Massachusetts Bay Trans. Auth. Rfdg. (Gen. Trans. Sys.)
Series A, 6.25% 3/1/12 2,000 2,205
Massachusetts Gen. Oblig. Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,785
Series B, 4.875% 10/1/13 2,500 2,334
Massachusetts Gen. Oblig. Rfdg. Series A, 6% 7/1/05
(AMBAC Insured) 2,750 2,960
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Institute) Series A, 6.50% 2/1/22 4,790 4,862
(New England Med. Ctr.) Series G, 5.375% 7/1/24
(MBIA Insured) 800 774
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,811
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 $ 5,000 $ 5,312
(Massachusetts Biomedical) (Cap. Appreciation)
Series A-2, 0% 8/1/08 5,000 2,712
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,576
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,722
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,527
40,580
MICHIGAN - 4.5%
Lowell Area Schools (Cap. Appreciation) 0% 5/1/20
(FGIC Insured) (Pre-Refunded 5/1/05 @ 33.646)(e) 21,685 4,961
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A,
6.50% 8/15/18 5,000 5,206
(Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,981
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,778
Series B, 7.50% 4/1/10 6,000 6,428
Michigan Muni. Auth. Rev. Rfdg. (Local Gov't. Loan Prog.):
7% 5/1/02 (AMBAC Insured) 2,425 2,677
7% 11/1/02 (AMBAC Insured) 1,465 1,630
7% 5/1/03 (AMBAC Insured) 2,700 3,017
7% 11/1/03 (AMBAC Insured) 1,570 1,766
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.)
Series B, 5% 1/1/19 5,750 5,261
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 4,195
41,900
MINNESOTA - 1.7%
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.25% 4/1/07 1,500 1,612
(Cap. Appreciation) Series B, 0% 12/01/04 1,800 1,269
Minnesota Gen. Oblig. Unltd. Tax 5.75% 8/1/05 3,315 3,543
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,915 1,968
Series K, 6.40% 1/1/15 3,340 3,474
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,235
16,101
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) $ 525 $ 564
MISSOURI - 1.0%
Kirkwood Ind. Dev. Auth. Health Care Corp. Rev.
(St. Joseph Hosp.) 7% 7/1/22 (Pre-Refunded to
7/1/02 @ 102)(e) 2,000 2,253
Missouri Higher Ed. Loan Auth. Student Loan Rev. (Sr. Lien)
Series A, 5.625% 2/15/01 4,000 4,100
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,500 2,575
8,928
NEVADA - 0.9%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,822
NEW JERSEY - 2.1%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,845
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,215
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,268
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity)(e) 1,200 1,420
19,748
NEW MEXICO - 0.2%
Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. of New
Mexico San Juan Proj.) 5.70% 12/1/16
(AMBAC Insured) 2,250 2,253
NEW YORK - 17.2%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4, 7.75% 7/1/02 1,420 1,549
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,195
6.50% 5/1/05 (FGIC Insured) 4,490 4,984
6.50% 5/1/06 (FGIC Insured) 4,000 4,470
New York City Gen. Oblig.
Rfdg.:
Series A, 7% 8/1/04 4,375 4,823
Series D:
6.30% 8/15/01 7,450 7,832
8% 2/1/05 2,550 2,977
Series B, 7.50% 2/1/03 (f) 10,000 11,050
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig. - continued
Series G:
5.40% 2/1/01 $ 6,000 $ 6,090
5.60% 2/1/02 14,120 14,455
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,716
New York City Trust Cultural Resources Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,552
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.) Series B, 6% 2/15/03 8,035 8,427
Rfdg. (State Univ. Edl. Facs.):
Series A:
5.50% 5/15/07 4,660 4,747
5.50% 5/15/13 7,500 7,434
Series B, 5.25% 5/15/09 4,000 3,955
(City Univ. Sys. Consolidated):
Series C, 7.50% 7/1/10 3,000 3,578
Series D:
7% 7/1/09 2,000 2,285
7% 7/1/09 (FGIC Insured) 3,780 4,423
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,485
New York State Envir. Facs. Corp. Poll. Cont. Rev. Rfdg.
(State Wtr. Revolving Fund - New York City Muni. Wtr.)
5.75% 6/15/11 2,500 2,628
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,516
Series E:
6% 4/1/14 5,250 5,624
5.25% 4/1/16 8,425 8,225
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 2,180
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,688
6% 4/1/03 2,500 2,613
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102)(e) 5,000 5,525
New York State Urban Dev. Corp. Rev. Rfdg. (Correctional
Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,390
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr.
Proj.) Series E, 7.25% 1/1/10 7,325 8,405
158,821
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NORTH CAROLINA - 2.5%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) $ 2,640 $ 3,053
7.50% 12/1/04 (AMBAC Insured) 2,865 3,352
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,050
Series B:
7.25% 1/1/07 2,375 2,666
7% 1/1/08 3,650 4,033
23,154
OHIO - 2.2%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,785
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,883
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg. A) 4.75% 4/1/14 6,500 5,899
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,865 3,391
(Wtr. Cont. Loan Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,219
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,000
6.25% 6/1/03 (AMBAC Insured) 1,975 2,138
20,315
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,639
7% 12/1/04 (FGIC Insured) 2,540 2,911
5,550
PENNSYLVANIA - 2.8%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 3,000 2,962
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A, 6.10% 7/1/13 3,800 3,871
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg. (Single Family Mtg.)
Series 54A, 5.375% 10/1/28 (d) 1,000 1,009
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.:
Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 1,200 1,207
5.35% 7/1/99 1,335 1,350
(Graduate Health Sys. Oblig. Group) Series A&B,
7% 7/1/05 7,670 8,121
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) $ 2,000 $ 2,207
6.25% 8/1/10 (MBIA Insured) 2,000 2,200
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,173
26,100
SOUTH CAROLINA - 1.1%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,653
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,185
5.75% 1/1/10 (MBIA Insured) 4,705 4,893
9,731
TENNESSEE - 1.8%
Knox County Health Edl. & Hsg. Facs. Auth. Sanders Alliance
Hosp. Facs. Rev. Series C, 7.25% 1/1/10 (MBIA Insured) 2,660 3,149
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A (d)(g):
6% 2/15/05 (MBIA Insured) 1,000 1,059
6.25% 2/15/09 (MBIA Insured) 1,500 1,614
6.25% 2/15/10 (MBIA Insured) 1,000 1,076
Tennessee Gen. Oblig. Rfdg. Series A, 6% 5/1/03 8,640 9,288
16,186
TEXAS - 11.0%
Austin Independent School Dist. Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,066
7% 8/1/06 (PSF Guaranteed) 3,430 3,975
Birdville Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/11 (PSF Guaranteed) 8,665 4,192
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 15 16
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,150
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,275
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,521
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 4,245 2,690
0% 8/1/08 8,005 4,523
Series A, 7% 8/15/09 2,000 2,353
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Houston Gen. Oblig. Rfdg. Series C, 5.75% 4/1/12 $ 5,000 $ 5,131
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,706
0% 8/15/12 (PSF Guaranteed) 5,105 2,265
0% 8/15/13 (PSF Guaranteed) 3,610 1,498
Midlothian Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/09 (PSF Guaranteed) 1,970 1,074
Round Rock Independent School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 5,684
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series 1991 B 0% 2/1/05 (FGIC Insured) 12,285 8,415
Series B, 0% 2/1/07 (FGIC Insured) 10,000 6,138
Rfdg. 6% 2/1/04 6,000 6,413
Series 95, 6.375% 2/1/06 5,000 5,525
San Antonio Wtr. Rev. Rfdg. 6.5% 5/15/10 (MBIA Insured) 3,000 3,229
Spring Branch Independent School Dist. Rev. Rfdg.
6.50% 2/1/04 (PSF Guaranteed) 5,000 5,512
Texas A & M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,176
Texas College Student Loan Gen. Oblig. 5.80% 8/1/05 (d) 3,000 3,120
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,448
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 4,781
Texas Wtr. Dev. Board Rev. (State Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,604
101,480
UTAH - 4.1%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,831
6% 7/1/16 (AMBAC Insured) 10,345 10,733
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,303
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,296
6.50% 7/1/10 (MBIA Insured) 2,800 3,136
6% 7/1/16 (MBIA Insured) 10,000 10,363
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTAH - CONTINUED
Jordan County School Dist. 7.625% 6/15/05 $ 2,000 $ 2,367
Salt Lake City Hosp. Rev. (Intermountain Health Care
Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity)(e) 2,975 3,548
37,577
VIRGINIA - 3.0%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 3,825 3,744
5.25% 1/1/14 4,500 4,241
Henrico County Pub. Facs. Lease Rev. (Henrico County
Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,854
7.50% 8/1/05 2,590 3,046
Upper Occoquan Swr. Auth. Reg'l. Swr. Rev. Series A,
4.75% 7/1/29 (MBIA Insured) 10,050 8,756
Virginia Pub. School Auth. School Fing. Series A, 6% 8/1/05 4,255 4,617
27,258
WASHINGTON - 1.4%
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.
5.40% 7/1/12 10,000 9,725
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.
Compound Interest Rfdg. Series B, 0% 7/1/06
(MBIA Insured) 5,000 3,169
12,894
WISCONSIN - 2.6%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,727
Wisconsin Health & Edl. Facs. Auth. Rev.:
Rfdg. (Felician Care, Inc.) Series A, 7% 1/1/15
(AMBAC Insured) 2,000 2,125
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,400
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,503
23,755
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Infrastructure Fing. Auth.
Spl. Tax Series 1988 A, 7.75% 7/1/08 2,000 2,101
TOTAL MUNICIPAL BONDS
(Cost $856,897) 899,051
MUNICIPAL NOTES (C) - 0.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ILLINOIS - 0.5%
Chicago Gen. Oblig. Notes Series 1997, 3.65%, tender
2/5/98, LOC Morgan Guaranty Trust Co. $ 2,300 $ 2,298
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 4.50%, VRDN 2,300 2,300
4,598
TEXAS - 0.2%
Texas Gen. Oblig. TRAN Series 1996, 4.75% 8/29/97 2,000 2,003
TOTAL MUNICIPAL NOTES
(Cost $6,602) 6,601
CASH EQUIVALENTS - 1.8%
SHARES
Municipal Central Cash Fund (a)(b)
(Cost $16,797) 16,797,000 16,797
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $880,296) $ 922,449
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
53 U.S. Treasury Bond Futures Contracts Sept. 1997 $ 5,886 $ (54)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.6%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
1. At the period end, the seven-day yield of the Municipal Central Cash
Fund was 4.17% The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
2. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund. A
listing of the Municipal Central Cash Fund's holdings as of its most recent
fiscal period end is available upon request.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
5. Security collateralized by an amount sufficient to pay interest and
principal.
6. 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 $298,000.
7. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
8. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.9% AAA, AA, A 78.6%
Baa 17.8% BBB 16.8%
Ba 0.9% 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 both S&P and Moody's amounted to 1.5%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 40.2%
Electric Revenue 16.7
Water and Sewer 8.4
Health Care 7.5
Special Tax 6.1
Others (individually less than 5%) 21.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $880,456,000. Net unrealized appreciation aggregated
$41,993,000, of which $42,882,000 related to appreciated investment
securities and $889,000 related to depreciated investment securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,620,000 all of which will expire on December 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $880,296) - $ 922,449
See accompanying schedule
Interest receivable 16,270
Other receivables 11
Prepaid expenses 15
TOTAL ASSETS 938,745
LIABILITIES
Payable for investments purchased $ 6,940
Delayed delivery
Payable for fund shares redeemed 7
Distributions payable 1,318
Accrued management fee 291
Payable for daily variation on futures contracts 30
Other payables and accrued expenses 174
TOTAL LIABILITIES 8,760
NET ASSETS $ 929,985
Net Assets consist of:
Paid in capital $ 905,399
Accumulated undistributed net realized gain (loss) (17,513)
on investments
Net unrealized appreciation (depreciation) on 42,099
investments
NET ASSETS $ 929,985
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $8.24
CLASS A:
NET ASSET VALUE and redemption price per share
($509 (divided by) 61.80 shares)
Maximum offering price per share (100/95.75 of $8.24) $8.61
CLASS T: $8.23
NET ASSET VALUE and redemption price per share
($2,694 (divided by) 327.46 shares)
Maximum offering price per share (100/96.50 of $8.23) $8.53
CLASS B: $8.24
NET ASSET VALUE and offering price per share
($1,146 (divided by) 139 shares) A
INITIAL CLASS: $8.24
NET ASSET VALUE, offering price and redemption price
per share ($924,503 (divided by) 112,215 shares)
INSTITUTIONAL CLASS: $8.23
NET ASSET VALUE, offering price and redemption price
per share ($1,133 (divided by) 137.60 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 25,550
EXPENSES
Management fee $ 1,831
Transfer agent fees 498
Distribution fees 7
Accounting fees and expenses 176
Non-interested trustees' compensation 3
Custodian fees and expenses 24
Registration fees 115
Audit 24
Legal 6
Miscellaneous 4
Total expenses before reductions 2,688
Expense reductions (98) 2,590
NET INTEREST INCOME 22,960
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 4,470
Futures contracts 91 4,561
Change in net unrealized appreciation (depreciation) on:
Investment securities 430
Futures contracts (116) 314
NET GAIN (LOSS) 4,875
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 27,835
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 22,960 $ 49,537
Net interest income
Net realized gain (loss) 4,561 8,975
Change in net unrealized appreciation (depreciation) 314 (21,297)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 27,835 37,215
FROM OPERATIONS
Distributions to shareholders (22,960) (49,537)
From net interest income
In excess of net investment income - (130)
TOTAL DISTRIBUTIONS (22,960) (49,667)
Share transactions - net increase (decrease) (27,697) (116,656)
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,822) (129,108)
NET ASSETS
Beginning of period 952,807 1,081,915
End of period $ 929,985 $ 952,807
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
PERIOD ENDED
JUNE 30, 1997 E
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.200
Income from Investment Operations
Net interest income .123
Net realized and unrealized gain (loss) .040
Total from investment operations .163
Less Distributions
From net interest income (.123)
Net asset value, end of period $ 8.240
TOTAL RETURN B, C 1.76%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 509
Ratio of expenses to average net assets .90% A,
D
Ratio of net interest income to average net assets 4.57% A
Portfolio turnover rate 34% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A SHARES) TO
JUNE 30, 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .182 .185
Net realized and unrealized gain (loss) .040 .200 G
Total from investment operations .222 .385
Less Distributions
From net interest income (.182) (.185)
Net asset value, end of period $ 8.230 $ 8.190
TOTAL RETURN B, C 2.75% 4.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,694 $ 3,878
Ratio of expenses to average net assets 1.00% A, D 1.00% A
, D
Ratio of expenses to average net assets after expense .92% A, E 1.00% A
reductions
Ratio of net interest income to average net assets 4.48% A 4.40% A
Portfolio turnover rate 34% A 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES) TO
DECEMBER 31, 1996.
G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .158 .160
Net realized and unrealized gain (loss) .050 .200 F
Total from investment operations .208 .360
Less Distributions
From net interest income (.158) (.160)
Net asset value, end of period $ 8.240 $ 8.190
TOTAL RETURN B, C 2.57% 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,146 $ 259
Ratio of expenses to average net assets 1.65% A, D 1.65% A,
D
Ratio of net interest income to average net assets 3.91% A 3.91% A
Portfolio turnover rate 34% A 35%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - INITIAL CLASS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 C 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
beginning of period
Income from
Investment
Operations
Net interest income .200 .405 .408 .455 .487 .519
Net realized .050 (.079) .904 (1.180) .600 .210
and unrealized
gain (loss)
Total from .250 .326 1.312 (.725) 1.087 .729
investment
operations
Less Distributions
From net interest (.200) (.405) (.408) (.455) (.487) (.519)
income
In excess of net - (.001) - - - -
interest income
From net - - - (.010) (.410) (.180)
realized gain
In excess of net - - (.004) (.130) - -
realized gain
Total distributions (.200) (.406) (.412) (.595) (.897) (.699)
Net asset value, $ 8.240 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
end of period
TOTAL RETURN B 3.10% 4.12% 18.15% (8.49) 13.17% 8.93%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 924,503 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650 $ 1,191,653
period (000 omitted)
Ratio of expenses to .56% A .56% .57% .53% .49% .49%
average net assets
Ratio of net interest 4.95% A 5.00% 5.14% 5.68% 5.51% 6.11%
income to average
net assets
Portfolio turnover 34% A 35% 72% 95% 74% 53%
rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .192 .196
Net realized and unrealized gain (loss) .040 .200 F
Total from investment operations .232 .396
Less Distributions
From net interest income (.192) (.196)
Net asset value, end of period $ 8.230 $ 8.190
TOTAL RETURN B, C 2.88% 5.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,133 $ 846
Ratio of expenses to average net assets .75% A, D .75% A,
D
Ratio of net interest income to average net assets 4.77% A 4.88% A
Portfolio turnover rate 34% A 35%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITIONAL CLASS
SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor 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.
The fund offers Class A, Class T, Class B, Initial Class and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to its
distribution plan. The fund commenced sale of a new Class A of shares on
March 3, 1997. Interest income, realized and unrealized capital gains and
losses, the common expenses of the fund, and certain fund-level expense
reductions are allocated on a pro rata basis to each class based on the
relative net assets of each class to the total net assets of the fund. Each
class of shares differs in its respective distribution, transfer agent,
registration, and certain other class-specific fees, expenses, and expense
reductions.
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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
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 dividends and capital
gain distributions are declared separately for each class.
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 litigation
proceeds, futures and options transactions, market discount and losses
deferred due to wash sales, and futures and options. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
effect the per-share allocation between net interest 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 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Municipal
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
FMR. The Cash Fund is an open-end money market fund available only to
investment companies and other accounts managed by FMR and its affiliates.
The Cash Fund seeks preservation of capital, liquidity, and current income
by investing in high-quality, short-term municipal securities of various
states and municipalities. Income distributions from the Cash Fund are
declared daily and paid monthly from net interest income. Income
distributions received by the fund are recorded as interest income in the
accompanying financial statements.
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased 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 when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, if the counterparty does not
perform under the contract, or if the issuer does not issue the securities
due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains (losses) are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $156,185,000 and $192,900,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $52,766,000 and $66,703,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser 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. The annual individual
fund fee rate is .25%. 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.
For the period, the management fee was equivalent to an annualized rate of
..40% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $ $ $
135 135
CLASS T
4,000 4,000
CLASS B
3,000 1,000
$ $ $ $
7,135 5,135
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1% (4% to 1% prior to January 2, 1997) of the lesser of
the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
cost of shares at the initial date of purchase or the net asset value of
the redeemed shares, excluding any reinvested dividends and capital gains.
Effective August 1, 1997, Class A's maximum sales charge was increased to
4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities, dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $ $ $
7,000 0
CLASS T
8,000 3,000
CLASS B
0 0*
$ $ $ $
15,000 3,000
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian,
transfer agent, and shareholder servicing agent for the fund's Class A,
Class T, Class B, Initial Class, and Institutional Class shares. UMB has
entered into sub-arrangements with Fidelity Service Company, Inc. (FSC)
with respect to the Initial Class and Fidelity Investments Institutional
Operations Company, Inc. (FIIOC) with respect to Class A, Class T, Class B,
and Institutional Class to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC and FSC, affiliates of FMR,
receive account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
classes of the fund. All fees are paid to FIIOC and FSC by UMB, which is
reimbursed by each class for such payments. FIIOC and FSC pay for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ $ .39% *
351
CLASS T UMB .19% *
3,000
CLASS B UMB .35% *
1,000
INITIAL CLASS UMB .11% *
493,000
INSTITUTIONAL CLASS UMB .26% *
1,000
$ $
498,351
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
UMB also has a sub-contract with FSC, under which FSC maintains the fund's
accounting records. The fee is based on the level of average net assets for
the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A .90% $ $
7,000
CLASS T 1.00%
27,000
CLASS B 1.65%
29,000
INSTITUTIONAL CLASS .75%
32,000
$ $
95,000
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $1,000 under the
custodian arrangement, and each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST
CREDITS
CLASS T $ $
1,000
INITIAL CLASS $
1,000
$ $
2,000
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 B
1997 A
CLASS A
From net investment income $ $ $ $
4,000 -
CLASS T
From net investment income $ $ $ $
77,000 50,000
CLASS B
From net investment income $ $ $ $
12,000 4,000
INITIAL CLASS
From net investment income $ $ $ $
22,839,000 49,472,000
In excess of net investment income
- 130,000
Total $ $ $ $
22,839,000 49,602,000
INSTITUTIONAL CLASS
From net investment income $ $ $ $
28,000 11,000
$ $ $ $
22,960,000 49,667,000
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT
OF SALE OF SHARES) TO JUNE 30, 1997.
B DISTRIBUTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR THE
PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
AMOUNTS IN THOUSANDS 1997 A 1996 B 1997 A 1996 B
CLASS A $ $ $ $
Shares sold 62 - 503 -
Net increase (decrease) 62 - $ $ $ $
503 -
CLASS T $ $ $ $
Shares sold 204 489 1,671 3,951
Reinvestment of distributions
8 6 65 49
Shares redeemed
(358) (22) (2,908) (176)
Net increase (decrease) (146) 473 $ $ $ $
(1,172) 3,824
CLASS B $ $ $ $
Shares sold 106 31 868 250
Reinvestment of distributions
1 1 9 4
Net increase (decrease) 107 32 $ $ $ $
877 254
INITIAL CLASS $ $ $ $
Shares sold 2,919 10,284 23,846 83,373
Reinvestment of distributions
1,806 3,995 14,732 32,369
Shares redeemed
(8,195) (29,410) (66,766) (237,309)
Net increase (decrease) (3,470) (15,131) $ $ $ $
(28,188) (121,567)
INSTITUTIONAL CLASS $ $ $ $
Shares sold 110 109 903 882
Reinvestment of distributions
- 1 - 5
Shares redeemed
(76) (7) (620) (54)
Net increase (decrease) 34 103 $ $ $ $
283 833
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO JUNE 30, 1997.
B SHARE TRANSACTIONS FOR CLASS T, CLASS B, INSTITUTIONAL CLASS ARE FOR THE
PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO
DECEMBER 31, 1996.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ $
7,000
CLASS T
29,000
CLASS B
29,000
INITIAL CLASS
18,000
INSTITUTIONAL CLASS
32,000
$ $
115,000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Thomas D. Maher, Assistant Vice President
George A. Fischer, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 15 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 18 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 19 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 32 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 41 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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR MUNICIPAL BOND FUND - CLASS A
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Class A shares took place on March 3, 1997. Class A shares bear
a 0.15% 12b-1 fee. Returns between July 1, 1996 and March 3, 1997 are those
of Class T and reflect Class T's 0.25% 12b-1 fee. Returns prior to July 1,
1996 are those of Initial Class, the original class of the fund which does
not bear a 12b-1 fee. Had Class A's 12b-1 fee been reflected, returns prior
to July 1, 1996 would have been lower. Effective August 1, 1997, the
maximum 4.25% sales charge on Class A shares was increased to 4.75%. If
Fidelity had not reimbursed certain expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class 2.89% 7.76% 36.67% 112.73%
A
Advisor Municipal Bond Fund - Class -1.99% 2.64% 30.17% 102.63%
A (incl. max. 4.75% sales charge) 1
Lehman Brothers Municipal Bond Index 3.20% 8.26% 40.90% 119.37%
General Municipal Debt Funds Average 2.95% 7.81% 37.10% 111.62%
CUMULATIVE TOTAL RETURNS show Class A'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 had 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 Class A's returns to the performance of the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year. To
measure how Class A's performance stacked up against its peers, you can
compare it to the general municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 238 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class A 7.76% 6.45% 7.84%
Advisor Municipal Bond Fund - Class A 2.64% 5.42% 7.32%
(incl. max. 4.75% sales charge) 1
Lehman Brothers Municipal Bond Index 8.26% 7.10% 8.17%
General Municipal Debt Funds Average 7.81% 6.51% 7.76%
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show you
what would have happened if Class A had performed at a constant rate each
year.
1 HAD THE FORMER 4.25% SALES CHARGE BEEN REFLECTED, THE PAST SIX MONTHS
CUMULATIVE TOTAL RETURN WOULD HAVE BEEN -1.48%, THE CUMULATIVE AND AVERAGE
ANNUAL RETURNS WOULD HAVE BEEN 3.18% AND 3.18% FOR THE PAST ONE YEAR,
30.86% AND 5.53% FOR THE PAST FIVE YEARS, AND 103.69% AND 7.37% FOR THE
PAST 10 YEARS.
$10,000 OVER 10 YEARS
1987/06/30 9575.00 10000.00
1987/07/31 9691.92 10102.00
1987/08/31 9736.80 10124.73
1987/09/30 9234.39 9751.43
1987/10/31 9318.66 9785.95
1987/11/30 9526.41 10041.46
1987/12/31 9711.94 10187.16
1988/01/31 10205.06 10550.03
1988/02/29 10302.21 10661.54
1988/03/31 10052.92 10537.87
1988/04/30 10087.25 10617.96
1988/05/31 10121.97 10587.27
1988/06/30 10313.69 10742.16
1988/07/31 10388.12 10812.20
1988/08/31 10411.02 10821.72
1988/09/30 10620.47 11017.59
1988/10/31 10858.81 11211.50
1988/11/30 10733.21 11108.80
1988/12/31 10906.81 11222.45
1989/01/31 11066.53 11454.53
1989/02/28 10952.11 11323.83
1989/03/31 10948.30 11296.77
1989/04/30 11264.25 11564.95
1989/05/31 11484.35 11805.16
1989/06/30 11648.23 11965.47
1989/07/31 11756.77 12128.32
1989/08/31 11651.89 12009.58
1989/09/30 11606.52 11973.79
1989/10/31 11743.50 12120.23
1989/11/30 11896.43 12332.34
1989/12/31 11949.93 12433.22
1990/01/31 11882.08 12374.41
1990/02/28 11992.06 12484.54
1990/03/31 12002.59 12488.29
1990/04/30 11844.68 12397.87
1990/05/31 12168.37 12668.52
1990/06/30 12296.61 12779.87
1990/07/31 12486.12 12967.74
1990/08/31 12249.29 12779.44
1990/09/30 12319.39 12786.73
1990/10/31 12466.27 13018.68
1990/11/30 12704.71 13280.49
1990/12/31 12775.72 13338.26
1991/01/31 12924.54 13517.26
1991/02/28 12991.97 13634.86
1991/03/31 13014.87 13639.76
1991/04/30 13196.69 13821.17
1991/05/31 13298.19 13944.04
1991/06/30 13303.78 13930.24
1991/07/31 13488.45 14099.91
1991/08/31 13658.68 14285.60
1991/09/30 13813.38 14471.60
1991/10/31 13951.37 14601.85
1991/11/30 13989.25 14642.59
1991/12/31 14297.52 14956.82
1992/01/31 14303.98 14990.92
1992/02/29 14325.25 14995.71
1992/03/31 14318.30 15001.26
1992/04/30 14461.43 15134.77
1992/05/31 14641.37 15312.91
1992/06/30 14904.30 15569.86
1992/07/31 15362.22 16036.65
1992/08/31 15140.89 15880.29
1992/09/30 15232.44 15984.15
1992/10/31 14920.95 15827.02
1992/11/30 15368.11 16110.48
1992/12/31 15574.12 16274.97
1993/01/31 15780.57 16464.25
1993/02/28 16423.03 17059.76
1993/03/31 16202.60 16879.44
1993/04/30 16389.35 17049.75
1993/05/31 16486.53 17145.57
1993/06/30 16787.28 17431.73
1993/07/31 16752.52 17454.57
1993/08/31 17192.71 17817.97
1993/09/30 17403.23 18020.92
1993/10/31 17404.37 18055.70
1993/11/30 17191.32 17896.63
1993/12/31 17625.41 18274.43
1994/01/31 17845.79 18483.12
1994/02/28 17306.61 18004.41
1994/03/31 16424.77 17271.27
1994/04/30 16501.80 17417.73
1994/05/31 16665.01 17568.74
1994/06/30 16534.15 17461.40
1994/07/31 16885.30 17781.46
1994/08/31 16923.45 17842.99
1994/09/30 16559.43 17581.05
1994/10/31 16133.83 17268.81
1994/11/30 15680.97 16956.59
1994/12/31 16129.07 17329.81
1995/01/31 16669.48 17825.09
1995/02/28 17225.04 18343.45
1995/03/31 17415.69 18554.21
1995/04/30 17404.06 18576.11
1995/05/31 17972.17 19168.87
1995/06/30 17800.29 19002.10
1995/07/31 17945.04 19182.24
1995/08/31 18179.76 19425.47
1995/09/30 18298.48 19548.43
1995/10/31 18555.72 19832.67
1995/11/30 18880.11 20161.69
1995/12/31 19056.92 20355.45
1996/01/31 19203.93 20509.13
1996/02/29 19071.07 20370.69
1996/03/31 18824.81 20110.36
1996/04/30 18740.46 20053.44
1996/05/31 18729.02 20045.42
1996/06/30 18902.74 20263.72
1996/07/31 19076.32 20448.12
1996/08/31 19053.18 20443.21
1996/09/30 19288.22 20729.41
1996/10/31 19505.24 20963.86
1996/11/30 19889.81 21347.50
1996/12/31 19796.59 21257.84
1997/01/31 19847.12 21298.02
1997/02/28 20012.16 21493.54
1997/03/31 19721.03 21207.03
1997/04/30 19870.44 21384.53
1997/05/31 20145.14 21706.15
1997/06/30 20263.19 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Class A on June 30, 1987, and the
current maximum 4.75% sales charge was paid. As the chart shows, by June
30, 1997, the value of the investment would have grown to $20,263 - a
102.63% 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 $21,937 - a 119.37% 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dividend return 2.28% 4.84% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return 0.61% -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 2.89% 3.88% 18.15% -8.49% 13.17% 8.93%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED JUNE 30, 1997 PAST 1 LIFE OF
MONTH CLASS
Dividends per share 3.10(cents) 12.25(cents)
Annualized dividend rate 4.57% 4.57%
30-day annualized yield 4.08% -
30-day annualized tax-equivalent yield 6.38% -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $8.25 over
the past one month and $8.15 over the life of the class, you can compare
the fund's income over these two periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36% federal
tax bracket but does not reflect payment of the federal alternative minimum
tax, if applicable. If Fidelity had not reimbursed certain class expenses
during the period shown, the yield and the tax-equivalent yield would have
been 0.35% and 0.55%, respectively.
ADVISOR MUNICIPAL BOND FUND - CLASS T
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Class T shares took place on July 1, 1996. Class T shares bear
a 0.25% 12b-1 fee. Returns prior to July 1, 1996 are those of Initial
Class, the original class of the fund. Had Class T's 12b-1 fee been
reflected, returns prior to July 1, 1996 would have been lower. If Fidelity
had not reimbursed certain expenses, the total returns and dividends would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class 2.75% 7.61% 36.48% 112.44%
T
Advisor Municipal Bond Fund - Class -0.85% 3.84% 31.70% 105.00%
T (incl. max. 3.50% sales charge)
Lehman Brothers Municipal Bond Index 3.20% 8.26% 40.90% 119.37%
General Municipal Debt Funds Average 2.95% 7.81% 37.10% 111.62%
CUMULATIVE TOTAL RETURNS show Class T'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 had 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 Class T's returns to the performance of the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year. To
measure how Class T's performance stacked up against its peers, you can
compare it to the general municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 238 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class T 7.61% 6.42% 7.83%
Advisor Municipal Bond Fund - Class T 3.84% 5.66% 7.44%
(incl. max. 3.50% sales charge)
Lehman Brothers Municipal Bond Index 8.26% 7.10% 8.17%
General Municipal Debt Funds Average 7.81% 6.51% 7.76%
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show you
what would have happened if Class T had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/06/30 9650.00 10000.00
1987/07/31 9767.83 10102.00
1987/08/31 9813.06 10124.73
1987/09/30 9306.72 9751.43
1987/10/31 9391.66 9785.95
1987/11/30 9601.03 10041.46
1987/12/31 9788.01 10187.16
1988/01/31 10284.99 10550.03
1988/02/29 10382.91 10661.54
1988/03/31 10131.66 10537.87
1988/04/30 10166.26 10617.96
1988/05/31 10201.26 10587.27
1988/06/30 10394.48 10742.16
1988/07/31 10469.49 10812.20
1988/08/31 10492.57 10821.72
1988/09/30 10703.66 11017.59
1988/10/31 10943.86 11211.50
1988/11/30 10817.28 11108.80
1988/12/31 10992.25 11222.45
1989/01/31 11153.21 11454.53
1989/02/28 11037.90 11323.83
1989/03/31 11034.06 11296.77
1989/04/30 11352.48 11564.95
1989/05/31 11574.31 11805.16
1989/06/30 11739.47 11965.47
1989/07/31 11848.86 12128.32
1989/08/31 11743.16 12009.58
1989/09/30 11697.43 11973.79
1989/10/31 11835.48 12120.23
1989/11/30 11989.61 12332.34
1989/12/31 12043.54 12433.22
1990/01/31 11975.15 12374.41
1990/02/28 12085.99 12484.54
1990/03/31 12096.60 12488.29
1990/04/30 11937.46 12397.87
1990/05/31 12263.69 12668.52
1990/06/30 12392.92 12779.87
1990/07/31 12583.92 12967.74
1990/08/31 12345.24 12779.44
1990/09/30 12415.88 12786.73
1990/10/31 12563.91 13018.68
1990/11/30 12804.22 13280.49
1990/12/31 12875.79 13338.26
1991/01/31 13025.77 13517.26
1991/02/28 13093.74 13634.86
1991/03/31 13116.81 13639.76
1991/04/30 13300.06 13821.17
1991/05/31 13402.35 13944.04
1991/06/30 13407.99 13930.24
1991/07/31 13594.10 14099.91
1991/08/31 13765.66 14285.60
1991/09/30 13921.57 14471.60
1991/10/31 14060.65 14601.85
1991/11/30 14098.83 14642.59
1991/12/31 14409.51 14956.82
1992/01/31 14416.03 14990.92
1992/02/29 14437.46 14995.71
1992/03/31 14430.46 15001.26
1992/04/30 14574.71 15134.77
1992/05/31 14756.05 15312.91
1992/06/30 15021.05 15569.86
1992/07/31 15482.55 16036.65
1992/08/31 15259.49 15880.29
1992/09/30 15351.76 15984.15
1992/10/31 15037.83 15827.02
1992/11/30 15488.49 16110.48
1992/12/31 15696.11 16274.97
1993/01/31 15904.18 16464.25
1993/02/28 16551.67 17059.76
1993/03/31 16329.51 16879.44
1993/04/30 16517.72 17049.75
1993/05/31 16615.67 17145.57
1993/06/30 16918.78 17431.73
1993/07/31 16883.74 17454.57
1993/08/31 17327.38 17817.97
1993/09/30 17539.55 18020.92
1993/10/31 17540.69 18055.70
1993/11/30 17325.98 17896.63
1993/12/31 17763.47 18274.43
1994/01/31 17985.58 18483.12
1994/02/28 17442.17 18004.41
1994/03/31 16553.42 17271.27
1994/04/30 16631.06 17417.73
1994/05/31 16795.54 17568.74
1994/06/30 16663.66 17461.40
1994/07/31 17017.56 17781.46
1994/08/31 17056.00 17842.99
1994/09/30 16689.14 17581.05
1994/10/31 16260.20 17268.81
1994/11/30 15803.80 16956.59
1994/12/31 16255.40 17329.81
1995/01/31 16800.05 17825.09
1995/02/28 17359.96 18343.45
1995/03/31 17552.10 18554.21
1995/04/30 17540.38 18576.11
1995/05/31 18112.95 19168.87
1995/06/30 17939.72 19002.10
1995/07/31 18085.60 19182.24
1995/08/31 18322.16 19425.47
1995/09/30 18441.81 19548.43
1995/10/31 18701.06 19832.67
1995/11/30 19027.99 20161.69
1995/12/31 19206.19 20355.45
1996/01/31 19354.35 20509.13
1996/02/29 19220.45 20370.69
1996/03/31 18972.26 20110.36
1996/04/30 18887.25 20053.44
1996/05/31 18875.72 20045.42
1996/06/30 19050.80 20263.72
1996/07/31 19225.75 20448.12
1996/08/31 19202.42 20443.21
1996/09/30 19439.30 20729.41
1996/10/31 19658.02 20963.86
1996/11/30 20045.60 21347.50
1996/12/31 19951.65 21257.84
1997/01/31 20002.58 21298.02
1997/02/28 20168.91 21493.54
1997/03/31 19876.33 21207.03
1997/04/30 20025.48 21384.53
1997/05/31 20276.21 21706.15
1997/06/30 20500.21 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Class T on June 30, 1987, and the
current maximum 3.50% sales charge was paid. As the chart shows, by June
30, 1997, the value of the investment would have grown to $20,500 - a
105.00% 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 $21,937 - a 119.37% 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 MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dividend return 2.26% 4.84% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return 0.49% -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 2.75% 3.88% 18.15% -8.49% 13.17% 8.93%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 3.03(cents) 18.19(cents) 36.67(cents)
Annualized dividend rate 4.47% 4.50% 4.52%
30-day annualized yield 4.02% - -
30-day annualized tax-equivalent yield 6.28% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $8.25 over
the past one month $8.16 over the past six months, and $8.13 over the life
of the class, you can compare the fund's income over these three periods.
The 30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses during the period shown, the yield and the
tax-equivalent yield would have been 0.10% and 0.16%, respectively.
ADVISOR MUNICIPAL BOND FUND - CLASS B
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Class B shares took place on July 1, 1996. Class B shares bear
a 0.90% 12b-1 shareholder service fee. Returns prior to July 1, 1996 are
those of Initial Class, the original class of the fund which does not bear
a 12b-1 fee. Had Class B's 12b-1 fee been reflected, returns prior to July
1, 1996 would have been lower. Effective January 2, 1997, Class B's
contingent deferred sales charge is based on a declining scale that ranges
from 5% to 1% on Class B shares redeemed within six years of purchase. This
scale was revised from the previous scale of 4% to 1% on shares redeemed
within five years of purchase. Class B's contingent deferred sales charges
included in the past six months, past one year, past five years and past 10
years total return figures are 5%, 5%, 2% and 0%, respectively. If Fidelity
had not reimbursed certain class expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class 2.57% 7.10% 35.83% 111.43%
B
Advisor Municipal Bond Fund - Class -2.43% 2.10% 33.90% 111.43%
B (incl. contingent
deferred sales charge)
Lehman Brothers Municipal Bond Index 3.20% 8.26% 40.90% 119.37%
General Municipal Debt Funds Average 2.95% 7.81% 37.10% 111.62%
CUMULATIVE TOTAL RETURNS show Class B'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 had 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 Class B's returns to the performance of the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year. To
measure how Class B's performance stacked up against its peers, you can
compare it to the general municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 238 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - Class B 7.10% 6.32% 7.77%
Advisor Municipal Bond Fund - Class B 2.10% 6.01% 7.77%
(incl. contingent deferred sales charge)
Lehman Brothers Municipal Bond Index 8.26% 7.10% 8.17%
General Municipal Debt Funds Average 7.81% 6.51% 7.76%
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show you
what would have happened if Class B had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10122.11 10102.00
1987/08/31 10168.98 10124.73
1987/09/30 9644.27 9751.43
1987/10/31 9732.29 9785.95
1987/11/30 9949.26 10041.46
1987/12/31 10143.01 10187.16
1988/01/31 10658.03 10550.03
1988/02/29 10759.49 10661.54
1988/03/31 10499.13 10537.87
1988/04/30 10534.99 10617.96
1988/05/31 10571.25 10587.27
1988/06/30 10771.48 10742.16
1988/07/31 10849.22 10812.20
1988/08/31 10873.13 10821.72
1988/09/30 11091.88 11017.59
1988/10/31 11340.79 11211.50
1988/11/30 11209.62 11108.80
1988/12/31 11390.93 11222.45
1989/01/31 11557.73 11454.53
1989/02/28 11438.23 11323.83
1989/03/31 11434.26 11296.77
1989/04/30 11764.23 11564.95
1989/05/31 11994.10 11805.16
1989/06/30 12165.25 11965.47
1989/07/31 12278.61 12128.32
1989/08/31 12169.08 12009.58
1989/09/30 12121.69 11973.79
1989/10/31 12264.75 12120.23
1989/11/30 12424.47 12332.34
1989/12/31 12480.35 12433.22
1990/01/31 12409.48 12374.41
1990/02/28 12524.34 12484.54
1990/03/31 12535.34 12488.29
1990/04/30 12370.42 12397.87
1990/05/31 12708.49 12668.52
1990/06/30 12842.41 12779.87
1990/07/31 13040.33 12967.74
1990/08/31 12792.99 12779.44
1990/09/30 12866.20 12786.73
1990/10/31 13019.60 13018.68
1990/11/30 13268.62 13280.49
1990/12/31 13342.79 13338.26
1991/01/31 13498.21 13517.26
1991/02/28 13568.64 13634.86
1991/03/31 13592.55 13639.76
1991/04/30 13782.44 13821.17
1991/05/31 13888.44 13944.04
1991/06/30 13894.29 13930.24
1991/07/31 14087.15 14099.91
1991/08/31 14264.94 14285.60
1991/09/30 14426.50 14471.60
1991/10/31 14570.62 14601.85
1991/11/30 14610.18 14642.59
1991/12/31 14932.13 14956.82
1992/01/31 14938.89 14990.92
1992/02/29 14961.09 14995.71
1992/03/31 14953.84 15001.26
1992/04/30 15103.32 15134.77
1992/05/31 15291.24 15312.91
1992/06/30 15565.85 15569.86
1992/07/31 16044.09 16036.65
1992/08/31 15812.94 15880.29
1992/09/30 15908.56 15984.15
1992/10/31 15583.24 15827.02
1992/11/30 16050.25 16110.48
1992/12/31 16265.40 16274.97
1993/01/31 16481.01 16464.25
1993/02/28 17151.99 17059.76
1993/03/31 16921.77 16879.44
1993/04/30 17116.81 17049.75
1993/05/31 17218.31 17145.57
1993/06/30 17532.41 17431.73
1993/07/31 17496.11 17454.57
1993/08/31 17955.83 17817.97
1993/09/30 18175.70 18020.92
1993/10/31 18176.88 18055.70
1993/11/30 17954.38 17896.63
1993/12/31 18407.74 18274.43
1994/01/31 18637.91 18483.12
1994/02/28 18074.79 18004.41
1994/03/31 17153.80 17271.27
1994/04/30 17234.26 17417.73
1994/05/31 17404.71 17568.74
1994/06/30 17268.04 17461.40
1994/07/31 17634.78 17781.46
1994/08/31 17674.62 17842.99
1994/09/30 17294.44 17581.05
1994/10/31 16849.95 17268.81
1994/11/30 16376.99 16956.59
1994/12/31 16844.98 17329.81
1995/01/31 17409.38 17825.09
1995/02/28 17989.59 18343.45
1995/03/31 18188.71 18554.21
1995/04/30 18176.56 18576.11
1995/05/31 18769.89 19168.87
1995/06/30 18590.38 19002.10
1995/07/31 18741.56 19182.24
1995/08/31 18986.70 19425.47
1995/09/30 19110.68 19548.43
1995/10/31 19379.34 19832.67
1995/11/30 19718.13 20161.69
1995/12/31 19902.79 20355.45
1996/01/31 20056.32 20509.13
1996/02/29 19917.56 20370.69
1996/03/31 19660.38 20110.36
1996/04/30 19572.28 20053.44
1996/05/31 19560.33 20045.42
1996/06/30 19741.76 20263.72
1996/07/31 19909.98 20448.12
1996/08/31 19876.55 20443.21
1996/09/30 20112.52 20729.41
1996/10/31 20352.91 20963.86
1996/11/30 20744.25 21347.50
1996/12/31 20612.19 21257.84
1997/01/31 20655.08 21298.02
1997/02/28 20817.80 21493.54
1997/03/31 20505.71 21207.03
1997/04/30 20650.10 21384.53
1997/05/31 20923.05 21706.15
1997/06/30 21142.57 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Class B on June 30, 1987. As the
chart shows, by June 30, 1997, the value of the investment would have grown
to $21,143 - a 111.43% 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 $21,937 - a 119.37% 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dividend return 1.96% 4.52% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return 0.61% -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 2.57% 3.56% 18.15% -8.49% 13.17% 8.93%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 2.58(cents) 15.80(cents) 31.79(cents)
Annualized dividend rate 3.80% 3.90% 3.92%
30-day annualized yield 3.50% - -
30-day annualized tax-equivalent yield 5.47% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $8.25 over
the past month, $8.16 over the past six months and $8.13 over the life of
the class, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses during the periods shown, the yield would have been
- -2.61%.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Fidelity Advisor
Municipal Bond Fund
Q. GEORGE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS AND PAST YEAR?
A. For the six months that ended June 30, 1997, the fund's Class A, Class T
and Class B shares had total returns of 2.89%, 2.75% and 2.57%,
respectively. To get a sense of how the fund did relative to its peers, the
general municipal debt funds average returned 2.95% for the same period,
according to Lipper Analytical Services. The Lehman Brothers Municipal Bond
Index, which tracks the types of securities in which the fund invests, had
a six-month return of 3.20%. For the year that ended June 30, 1997, the
fund's Class A, Class T and Class B shares returned 7.76%, 7.61% and 7.10%,
respectively. For the same 12-month period, the general municipal debt
funds average returned 7.81%, again according to Lipper. For the same
one-year period, the Lehman Brothers index returned 8.26%.
Q. HOW WOULD YOU CHARACTERIZE THE MUNICIPAL BOND MARKET OVER THE PAST SIX
MONTHS?
A. I'd characterize it as a somewhat choppy environment. Evidence that the
economy was growing at a much-quicker-than-expected pace sent Treasury bond
yields higher and, correspondingly, their prices lower during much of the
period. On the other hand, yields on municipal securities didn't react as
negatively, and muni bond prices were more stable throughout the period.
The divergence between Treasuries and municipals was greatest in the
long-maturity end of the market. As an example, the yield on a 30-year
Treasury rose 0.15%, while the yield on a 30-year Aaa-rated muni fell
0.15%. In the short-maturity end of the market, the yield on a five-year
Treasury rose 0.20%, while the yield on a five-year Aaa-rated muni rose
only 0.10%. Municipal prices were supported by the fact that there was a
limited supply of municipals available while demand for them grew.
Q. WHICH OF THE FUND'S HOLDINGS HELPED PERFORMANCE? WHICH DETRACTED?
A. Bonds issued in New York and California were some of the fund's - and
the municipal market's - best performers during the period. Both states
enjoyed the benefits of having strengthening local economies, which
translated into higher revenue collections and better fiscal health. As far
as detractors go, I can't think of any specific bond that was a
disappointment. However, a higher stake in California bonds might have
helped the fund since they were among the market's best performers during
the period.
Q. HOW WAS THE FUND STRUCTURED DURING THE PAST SIX MONTHS?
A. In terms of maturity, I kept the fund heavily weighted in bonds with
maturities of between 10 and 15 years. There were a couple of reasons why I
emphasized these intermediate-maturity bonds. First, the yield these bonds
generate tends to be higher than the yield generated by owning a
combination of long- and short-maturity bonds. What's more, long-term bonds
tend to be callable, which means they can be redeemed by their issuer
before maturity. Callable bonds tend to rise less in up markets and fall
more in down markets. Intermediate-maturity bonds, on the other hand,
typically aren't susceptible to being called.
Q. AT THE END OF THE PERIOD, ABOUT 75% OF THE FUND'S HOLDINGS WERE IN BONDS
WITH CREDIT RATINGS OF A AND ABOVE AS JUDGED BY MOODY'S INVESTOR SERVICES.
WHY DID YOU FOCUS ON THESE BONDS WHEN BAA-RATED BONDS OFFERED HIGHER
YIELDS?
A. I didn't feel that Baa-rated bonds in general offered enough in the way
of additional yield to compensate for their added risk. Credit ratings
measure credit risk, meaning the risk that a municipal issuer will not
repay its debt as promised. Typically, the higher level of credit risk a
bond carries, the lower its credit rating and the higher its yield. But
during the past six months, there was very little difference between the
reward - or yield - offered by lower-quality bonds compared to
higher-quality securities.
Q. WERE THERE ANY SIGNIFICANT CHANGES IN THE WAY THE FUND'S HOLDINGS WERE
ALLOCATED AMONG SECTORS DURING THE PERIOD?
A. Not really. General obligation bonds (GOs) remained the fund's largest
sector concentration. A GO is backed by the full faith and credit - which
includes the taxing power - of a city, county, state or other issuer. A GO
is repaid with general revenue such as taxes. General revenues are
sensitive to both the economy and a municipality's fiscal health, both of
which have been strong during the period in many of the areas the fund
emphasized. In choosing GOs, I put an emphasis on staying diversified and
not taking on very large positions in any one security.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. Until investors feel like they have a good handle on where the economy,
interest rates and inflation are headed, the bond market is likely to
remain choppy. The past six months have been a relatively good period
compared to U.S. Treasuries and, by the end of the period, munis seemed
fairly valued in relation to their taxable counterparts. I think that the
municipal market will need to continue to experience strong demand and weak
supply in order to continue outperforming Treasuries.
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 current income
that is free from federal
income tax, consistent with
preservation of capital by
investing primarily in
investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of June 30, 1997,
more than $929 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
GEORGE FISCHER ON THE
RELATIONSHIP BETWEEN BOND
PRICES AND BOND YIELDS:
"When choosing investments
for the fund, I consider a
bond's price, its coupon - or
income - and its yield. While
a bond's coupon - which is the
interest rate the issuer
promises to pay the holder until
maturity - remains constant,
its price changes practically
every day. In fact, it's not
uncommon for a municipal
bond's price to fluctuate as
much as 1% any given day.
When a bond's price fluctuates
- - because of changes in
demand and supply, credit
quality or other factor - its
yield also changes.
"The relationship between a
bond's price and its yield can
be thought of as a seesaw:
yield up, price down; yield
down, price up. While a given
bond may look attractive
because it offers a high yield, I
also consider where future
yields will be since they
determine future prices and,
therefore, play into total
return."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1997
% OF % OF FUND'S
FUND'S INVESTMENTS
INVESTMEN IN THESE STATES
TS 6 MONTHS AGO
New York 17.2 16.4
Texas 11.2 9.7
California 9.3 10.0
Georgia 7.3 5.9
Illinois 6.3 6.8
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 40.2 38.0
Electric Revenue 16.7 17.7
Water and Sewer 8.4 9.4
Health Care 7.5 7.9
Special Tax 6.1 7.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 11.6 12.4
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, 1997
6 MONTHS AGO
Years 6.9 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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 52.9%
Aa, A 24.8%
Baa 17.4%
Ba, B 0.9%
Non-rated 1.5%
Short-term
investments 2.5%
Aaa 50.5%
Aa, A 27.9%
Baa 15.6%
Ba 0.8%
Non-rated 2.0%
Short-term
investments 3.2%
Row: 1, Col: 1, Value: 52.0
Row: 1, Col: 2, Value: 24.0
Row: 1, Col: 3, Value: 17.0
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 2.4
Row: 1, Col: 6, Value: 3.0
Row: 1, Col: 1, Value: 49.0
Row: 1, Col: 2, Value: 27.1
Row: 1, Col: 3, Value: 15.6
Row: 1, Col: 4, Value: 1.8
Row: 1, Col: 5, Value: 2.5
Row: 1, Col: 6, Value: 4.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.5%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(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 $ 4,075
ARIZONA - 1.9%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,175
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 2,000 2,133
Maricopa County School Dist. #1 Phoenix Elementary Rfdg.
(Cap. Appreciation) Second Series, 0% 7/1/05
(MBIA Insured) 2,660 1,802
Maricopa County Unified School Dist. #69 Rfdg.
(Cap. Appreciation) 0% 7/1/07 (AMBAC Insured) 3,050 1,845
Tucson Gen. Oblig. Rfdg. 6.40% 7/1/06 (FGIC Insured) 4,230 4,748
17,703
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,517
CALIFORNIA - 9.3%
California Gen. Oblig. 6.25% 10/1/19 10,500 11,314
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series A, 5.70% 8/1/16 (MBIA Insured) 3,125 3,148
Series B, 5.20% 8/1/26 (MBIA Insured)(d) 1,975 1,990
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Correction State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 5,050 4,722
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,309
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,191
5.50% 6/1/15 2,500 2,500
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,200
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,857
California Statewide Commty. Dev. Auth. Rev. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,575
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.)
7% 8/1/11 (MBIA Insured) 1,475 1,731
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg. (Muni. Wtr. Dist.
Swr. Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 2,245 2,638
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,000 2,644
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev.
(Sr. Lien) Series A, 0% 1/1/08 (h) 4,000 2,670
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
CALIFORNIA - CONTINUED
Fresno Swr. Rev. Series A, 4.75% 9/1/26 (MBIA Insured) $ 7,055 $ 6,147
Modesto Irrigation Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity)(e) 4,390 5,669
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,676
3.75% 1/1/13 1,500 1,254
Santa Clara Redev. Agcy. Tax Allocation Rfdg. (Bayshore
North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,700
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,788
7.50% 8/15/07 (FGIC Insured) 3,500 4,235
85,958
COLORADO - 1.8%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,375
(PSL Health Sys. Proj.) Series A, 6.875% 2/15/23
(Pre-Refunded to 2/15/03 @ 102)(e) 4,000 4,495
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,462
16,332
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,600
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,121
7,721
DISTRICT OF COLUMBIA - 1.8%
District of Columbia Gen. Oblig.:
Rfdg. Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,554
5.875% 6/1/05 (MBIA Insured) 3,000 3,142
6% 6/1/11 (MBIA Insured) 1,000 1,045
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,000
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena):
4.85% 11/1/97 850 850
5.625% 11/1/10 5,810 5,701
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured)(g) 3,300 3,325
16,617
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FLORIDA - 0.4%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien)
6.50% 10/1/04 (FGIC Insured) $ 3,000 $ 3,330
GEORGIA - 7.3%
Atlanta Arpt. Facs. Rev. 6.25% 1/1/05 (AMBAC Insured) 16,820 18,292
Dalton City Util. Rev. Rfdg. Series 1997, 4% 1/1/98
(MBIA Insured) 1,000 1,001
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,813
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125% 1/1/05 (FGIC Insured) 4,000 4,325
6.375% 1/1/14 (FGIC Insured) 4,500 5,029
Georgia Gen. Oblig.:
Series A, 6.25% 4/1/06 12,200 13,511
Series B Impt. 7.20% 3/1/04 7,625 8,759
Series D:
6.80% 8/1/03 4,400 4,923
7.25% 9/1/06 3,000 3,555
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,462
67,670
ILLINOIS - 5.8%
Chicago Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) 10,000 10,800
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.)
(2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,229
6.375% 1/1/15 (MBIA Insured) 3,200 3,424
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,511
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 9,430 9,394
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,690
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) 2,500 2,709
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,915
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,303
7.75% 6/1/05 (FGIC Insured) 2,405 2,841
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ILLINOIS - CONTINUED
Metropolitan Pier & Exposition Auth. Dedicated Tax Rev.
(McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) $ 3,890 $ 2,203
0% 6/15/10 (FGIC Insured) 8,100 4,030
0% 6/15/15 (FGIC Insured) 3,100 1,124
Series A:
6.50% 6/15/07 (FGIC Insured) (Pre-Refunded
to 6/15/03 @ 102)(e) 2,925 3,247
6.50% 6/15/07 (FGIC Insured) 75 82
53,502
INDIANA - 0.6%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,682
Indianapolis Resource Recovery Rev. Rfdg. (Ogden Martin
Sys. Inc. Proj.) 6.75% 12/1/06 (AMBAC Insured) 3,000 3,394
5,076
KANSAS - 0.2%
Kansas City Util. Sys. Rev. (Cap. Appreciation) 0% 3/1/09
(AMBAC Insured) (Escrowed to Maturity)(e) 3,975 2,136
LOUISIANA - 0.2%
New Orleans Rfdg. 6.50% 10/1/03 (AMBAC Insured) 1,500 1,650
MARYLAND - 1.2%
Baltimore Consolidated Pub. Impt. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,338
Maryland Health & Higher Edl. Facs. Auth. Rev. Rfdg.
(Good Samaritan Hosp.) 5.75% 7/1/13 2,600 2,668
Washington Metropolitan Area Trans. Auth. Gross Rev.
Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 5,940
10,946
MASSACHUSETTS - 4.4%
Massachusetts Bay Trans. Auth. Rfdg. (Gen. Trans. Sys.)
Series A, 6.25% 3/1/12 2,000 2,205
Massachusetts Gen. Oblig. Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,785
Series B, 4.875% 10/1/13 2,500 2,334
Massachusetts Gen. Oblig. Rfdg. Series A, 6% 7/1/05
(AMBAC Insured) 2,750 2,960
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Institute) Series A, 6.50% 2/1/22 4,790 4,862
(New England Med. Ctr.) Series G, 5.375% 7/1/24
(MBIA Insured) 800 774
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,811
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 $ 5,000 $ 5,312
(Massachusetts Biomedical) (Cap. Appreciation)
Series A-2, 0% 8/1/08 5,000 2,712
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,576
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,722
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,527
40,580
MICHIGAN - 4.5%
Lowell Area Schools (Cap. Appreciation) 0% 5/1/20
(FGIC Insured) (Pre-Refunded 5/1/05 @ 33.646)(e) 21,685 4,961
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A,
6.50% 8/15/18 5,000 5,206
(Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,981
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,778
Series B, 7.50% 4/1/10 6,000 6,428
Michigan Muni. Auth. Rev. Rfdg. (Local Gov't. Loan Prog.):
7% 5/1/02 (AMBAC Insured) 2,425 2,677
7% 11/1/02 (AMBAC Insured) 1,465 1,630
7% 5/1/03 (AMBAC Insured) 2,700 3,017
7% 11/1/03 (AMBAC Insured) 1,570 1,766
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.)
Series B, 5% 1/1/19 5,750 5,261
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 4,195
41,900
MINNESOTA - 1.7%
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.25% 4/1/07 1,500 1,612
(Cap. Appreciation) Series B, 0% 12/01/04 1,800 1,269
Minnesota Gen. Oblig. Unltd. Tax 5.75% 8/1/05 3,315 3,543
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,915 1,968
Series K, 6.40% 1/1/15 3,340 3,474
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,235
16,101
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) $ 525 $ 564
MISSOURI - 1.0%
Kirkwood Ind. Dev. Auth. Health Care Corp. Rev.
(St. Joseph Hosp.) 7% 7/1/22 (Pre-Refunded to
7/1/02 @ 102)(e) 2,000 2,253
Missouri Higher Ed. Loan Auth. Student Loan Rev. (Sr. Lien)
Series A, 5.625% 2/15/01 4,000 4,100
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,500 2,575
8,928
NEVADA - 0.9%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,822
NEW JERSEY - 2.1%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,845
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,215
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,268
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity)(e) 1,200 1,420
19,748
NEW MEXICO - 0.2%
Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. of New
Mexico San Juan Proj.) 5.70% 12/1/16
(AMBAC Insured) 2,250 2,253
NEW YORK - 17.2%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4, 7.75% 7/1/02 1,420 1,549
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,195
6.50% 5/1/05 (FGIC Insured) 4,490 4,984
6.50% 5/1/06 (FGIC Insured) 4,000 4,470
New York City Gen. Oblig.
Rfdg.:
Series A, 7% 8/1/04 4,375 4,823
Series D:
6.30% 8/15/01 7,450 7,832
8% 2/1/05 2,550 2,977
Series B, 7.50% 2/1/03 (f) 10,000 11,050
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig. - continued
Series G:
5.40% 2/1/01 $ 6,000 $ 6,090
5.60% 2/1/02 14,120 14,455
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,716
New York City Trust Cultural Resources Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,552
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.) Series B, 6% 2/15/03 8,035 8,427
Rfdg. (State Univ. Edl. Facs.):
Series A:
5.50% 5/15/07 4,660 4,747
5.50% 5/15/13 7,500 7,434
Series B, 5.25% 5/15/09 4,000 3,955
(City Univ. Sys. Consolidated):
Series C, 7.50% 7/1/10 3,000 3,578
Series D:
7% 7/1/09 2,000 2,285
7% 7/1/09 (FGIC Insured) 3,780 4,423
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,485
New York State Envir. Facs. Corp. Poll. Cont. Rev. Rfdg.
(State Wtr. Revolving Fund - New York City Muni. Wtr.)
5.75% 6/15/11 2,500 2,628
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,516
Series E:
6% 4/1/14 5,250 5,624
5.25% 4/1/16 8,425 8,225
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 2,180
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,688
6% 4/1/03 2,500 2,613
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102)(e) 5,000 5,525
New York State Urban Dev. Corp. Rev. Rfdg. (Correctional
Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,390
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr.
Proj.) Series E, 7.25% 1/1/10 7,325 8,405
158,821
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NORTH CAROLINA - 2.5%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) $ 2,640 $ 3,053
7.50% 12/1/04 (AMBAC Insured) 2,865 3,352
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,050
Series B:
7.25% 1/1/07 2,375 2,666
7% 1/1/08 3,650 4,033
23,154
OHIO - 2.2%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,785
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,883
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg. A) 4.75% 4/1/14 6,500 5,899
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,865 3,391
(Wtr. Cont. Loan Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,219
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,000
6.25% 6/1/03 (AMBAC Insured) 1,975 2,138
20,315
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,639
7% 12/1/04 (FGIC Insured) 2,540 2,911
5,550
PENNSYLVANIA - 2.8%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 3,000 2,962
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A, 6.10% 7/1/13 3,800 3,871
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg. (Single Family Mtg.)
Series 54A, 5.375% 10/1/28 (d) 1,000 1,009
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.:
Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 1,200 1,207
5.35% 7/1/99 1,335 1,350
(Graduate Health Sys. Oblig. Group) Series A&B,
7% 7/1/05 7,670 8,121
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) $ 2,000 $ 2,207
6.25% 8/1/10 (MBIA Insured) 2,000 2,200
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,173
26,100
SOUTH CAROLINA - 1.1%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,653
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,185
5.75% 1/1/10 (MBIA Insured) 4,705 4,893
9,731
TENNESSEE - 1.8%
Knox County Health Edl. & Hsg. Facs. Auth. Sanders Alliance
Hosp. Facs. Rev. Series C, 7.25% 1/1/10 (MBIA Insured) 2,660 3,149
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A (d)(g):
6% 2/15/05 (MBIA Insured) 1,000 1,059
6.25% 2/15/09 (MBIA Insured) 1,500 1,614
6.25% 2/15/10 (MBIA Insured) 1,000 1,076
Tennessee Gen. Oblig. Rfdg. Series A, 6% 5/1/03 8,640 9,288
16,186
TEXAS - 11.0%
Austin Independent School Dist. Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,066
7% 8/1/06 (PSF Guaranteed) 3,430 3,975
Birdville Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/11 (PSF Guaranteed) 8,665 4,192
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 15 16
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,150
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,275
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,521
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 4,245 2,690
0% 8/1/08 8,005 4,523
Series A, 7% 8/15/09 2,000 2,353
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Houston Gen. Oblig. Rfdg. Series C, 5.75% 4/1/12 $ 5,000 $ 5,131
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,706
0% 8/15/12 (PSF Guaranteed) 5,105 2,265
0% 8/15/13 (PSF Guaranteed) 3,610 1,498
Midlothian Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/09 (PSF Guaranteed) 1,970 1,074
Round Rock Independent School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 5,684
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series 1991 B 0% 2/1/05 (FGIC Insured) 12,285 8,415
Series B, 0% 2/1/07 (FGIC Insured) 10,000 6,138
Rfdg. 6% 2/1/04 6,000 6,413
Series 95, 6.375% 2/1/06 5,000 5,525
San Antonio Wtr. Rev. Rfdg. 6.5% 5/15/10 (MBIA Insured) 3,000 3,229
Spring Branch Independent School Dist. Rev. Rfdg.
6.50% 2/1/04 (PSF Guaranteed) 5,000 5,512
Texas A & M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,176
Texas College Student Loan Gen. Oblig. 5.80% 8/1/05 (d) 3,000 3,120
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,448
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 4,781
Texas Wtr. Dev. Board Rev. (State Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,604
101,480
UTAH - 4.1%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,831
6% 7/1/16 (AMBAC Insured) 10,345 10,733
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,303
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,296
6.50% 7/1/10 (MBIA Insured) 2,800 3,136
6% 7/1/16 (MBIA Insured) 10,000 10,363
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTAH - CONTINUED
Jordan County School Dist. 7.625% 6/15/05 $ 2,000 $ 2,367
Salt Lake City Hosp. Rev. (Intermountain Health Care
Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity)(e) 2,975 3,548
37,577
VIRGINIA - 3.0%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 3,825 3,744
5.25% 1/1/14 4,500 4,241
Henrico County Pub. Facs. Lease Rev. (Henrico County
Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,854
7.50% 8/1/05 2,590 3,046
Upper Occoquan Swr. Auth. Reg'l. Swr. Rev. Series A,
4.75% 7/1/29 (MBIA Insured) 10,050 8,756
Virginia Pub. School Auth. School Fing. Series A, 6% 8/1/05 4,255 4,617
27,258
WASHINGTON - 1.4%
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.
5.40% 7/1/12 10,000 9,725
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.
Compound Interest Rfdg. Series B, 0% 7/1/06
(MBIA Insured) 5,000 3,169
12,894
WISCONSIN - 2.6%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,727
Wisconsin Health & Edl. Facs. Auth. Rev.:
Rfdg. (Felician Care, Inc.) Series A, 7% 1/1/15
(AMBAC Insured) 2,000 2,125
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,400
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,503
23,755
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Infrastructure Fing. Auth.
Spl. Tax Series 1988 A, 7.75% 7/1/08 2,000 2,101
TOTAL MUNICIPAL BONDS
(Cost $856,897) 899,051
MUNICIPAL NOTES (C) - 0.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ILLINOIS - 0.5%
Chicago Gen. Oblig. Notes Series 1997, 3.65%, tender
2/5/98, LOC Morgan Guaranty Trust Co. $ 2,300 $ 2,298
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 4.50%, VRDN 2,300 2,300
4,598
TEXAS - 0.2%
Texas Gen. Oblig. TRAN Series 1996, 4.75% 8/29/97 2,000 2,003
TOTAL MUNICIPAL NOTES
(Cost $6,602) 6,601
CASH EQUIVALENTS - 1.8%
SHARES
Municipal Central Cash Fund (a)(b)
(Cost $16,797) 16,797,000 16,797
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $880,296) $ 922,449
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
53 U.S. Treasury Bond Futures Contracts Sept. 1997 $ 5,886 $ (54)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.6%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
9. At the period end, the seven-day yield of the Municipal Central Cash
Fund was 4.17% The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
10. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund. A
listing of the Municipal Central Cash Fund's holdings as of its most recent
fiscal period end is available upon request.
11. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
12. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
13. Security collateralized by an amount sufficient to pay interest and
principal.
14. 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 $298,000.
15. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
16. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.9% AAA, AA, A 78.6%
Baa 17.8% BBB 16.8%
Ba 0.9% 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 both S&P and Moody's amounted to 1.5%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 40.2%
Electric Revenue 16.7
Water and Sewer 8.4
Health Care 7.5
Special Tax 6.1
Others (individually less than 5%) 21.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $880,456,000. Net unrealized appreciation aggregated
$41,993,000, of which $42,882,000 related to appreciated investment
securities and $889,000 related to depreciated investment securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,620,000 all of which will expire on December 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $880,296) - $ 922,449
See accompanying schedule
Interest receivable 16,270
Other receivables 11
Prepaid expenses 15
TOTAL ASSETS 938,745
LIABILITIES
Payable for investments purchased $ 6,940
Delayed delivery
Payable for fund shares redeemed 7
Distributions payable 1,318
Accrued management fee 291
Payable for daily variation on futures contracts 30
Other payables and accrued expenses 174
TOTAL LIABILITIES 8,760
NET ASSETS $ 929,985
Net Assets consist of:
Paid in capital $ 905,399
Accumulated undistributed net realized gain (loss) (17,513)
on investments
Net unrealized appreciation (depreciation) on 42,099
investments
NET ASSETS $ 929,985
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $8.24
CLASS A:
NET ASSET VALUE and redemption price per share
($509 (divided by) 61.80 shares)
Maximum offering price per share (100/95.75 of $8.24) $8.61
CLASS T: $8.23
NET ASSET VALUE and redemption price per share
($2,694 (divided by) 327.46 shares)
Maximum offering price per share (100/96.50 of $8.23) $8.53
CLASS B: $8.24
NET ASSET VALUE and offering price per share
($1,146 (divided by) 139 shares) A
INITIAL CLASS: $8.24
NET ASSET VALUE, offering price and redemption price
per share ($924,503 (divided by) 112,215 shares)
INSTITUTIONAL CLASS: $8.23
NET ASSET VALUE, offering price and redemption price
per share ($1,133 (divided by) 137.60 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 25,550
EXPENSES
Management fee $ 1,831
Transfer agent fees 498
Distribution fees 7
Accounting fees and expenses 176
Non-interested trustees' compensation 3
Custodian fees and expenses 24
Registration fees 115
Audit 24
Legal 6
Miscellaneous 4
Total expenses before reductions 2,688
Expense reductions (98) 2,590
NET INTEREST INCOME 22,960
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 4,470
Futures contracts 91 4,561
Change in net unrealized appreciation (depreciation) on:
Investment securities 430
Futures contracts (116) 314
NET GAIN (LOSS) 4,875
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 27,835
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 22,960 $ 49,537
Net interest income
Net realized gain (loss) 4,561 8,975
Change in net unrealized appreciation (depreciation) 314 (21,297)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 27,835 37,215
FROM OPERATIONS
Distributions to shareholders (22,960) (49,537)
From net interest income
In excess of net investment income - (130)
TOTAL DISTRIBUTIONS (22,960) (49,667)
Share transactions - net increase (decrease) (27,697) (116,656)
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,822) (129,108)
NET ASSETS
Beginning of period 952,807 1,081,915
End of period $ 929,985 $ 952,807
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
PERIOD ENDED
JUNE 30, 1997 E
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.200
Income from Investment Operations
Net interest income .123
Net realized and unrealized gain (loss) .040
Total from investment operations .163
Less Distributions
From net interest income (.123)
Net asset value, end of period $ 8.240
TOTAL RETURN B, C 1.76%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 509
Ratio of expenses to average net assets .90% A,
D
Ratio of net interest income to average net assets 4.57% A
Portfolio turnover rate 34% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A SHARES) TO
JUNE 30, 1997.
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .182 .185
Net realized and unrealized gain (loss) .040 .200 G
Total from investment operations .222 .385
Less Distributions
From net interest income (.182) (.185)
Net asset value, end of period $ 8.230 $ 8.190
TOTAL RETURN B, C 2.75% 4.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,694 $ 3,878
Ratio of expenses to average net assets 1.00% A, D 1.00% A
, D
Ratio of expenses to average net assets after expense .92% A, E 1.00% A
reductions
Ratio of net interest income to average net assets 4.48% A 4.40% A
Portfolio turnover rate 34% A 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES) TO
DECEMBER 31, 1996.
G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .158 .160
Net realized and unrealized gain (loss) .050 .200 F
Total from investment operations .208 .360
Less Distributions
From net interest income (.158) (.160)
Net asset value, end of period $ 8.240 $ 8.190
TOTAL RETURN B, C 2.57% 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,146 $ 259
Ratio of expenses to average net assets 1.65% A, D 1.65% A,
D
Ratio of net interest income to average net assets 3.91% A 3.91% A
Portfolio turnover rate 34% A 35%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - INITIAL CLASS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 C 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
beginning of period
Income from
Investment
Operations
Net interest income .200 .405 .408 .455 .487 .519
Net realized .050 (.079) .904 (1.180) .600 .210
and unrealized
gain (loss)
Total from .250 .326 1.312 (.725) 1.087 .729
investment
operations
Less Distributions
From net interest (.200) (.405) (.408) (.455) (.487) (.519)
income
In excess of net - (.001) - - - -
interest income
From net - - - (.010) (.410) (.180)
realized gain
In excess of net - - (.004) (.130) - -
realized gain
Total distributions (.200) (.406) (.412) (.595) (.897) (.699)
Net asset value, $ 8.240 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
end of period
TOTAL RETURN B 3.10% 4.12% 18.15% (8.49) 13.17% 8.93%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 924,503 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650 $ 1,191,653
period (000 omitted)
Ratio of expenses to .56% A .56% .57% .53% .49% .49%
average net assets
Ratio of net interest 4.95% A 5.00% 5.14% 5.68% 5.51% 6.11%
income to average
net assets
Portfolio turnover 34% A 35% 72% 95% 74% 53%
rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .192 .196
Net realized and unrealized gain (loss) .040 .200 F
Total from investment operations .232 .396
Less Distributions
From net interest income (.192) (.196)
Net asset value, end of period $ 8.230 $ 8.190
TOTAL RETURN B, C 2.88% 5.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,133 $ 846
Ratio of expenses to average net assets .75% A, D .75% A,
D
Ratio of net interest income to average net assets 4.77% A 4.88% A
Portfolio turnover rate 34% A 35%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITIONAL CLASS
SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
9. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor 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.
The fund offers Class A, Class T, Class B, Initial Class and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to its
distribution plan. The fund commenced sale of a new Class A of shares on
March 3, 1997. Interest income, realized and unrealized capital gains and
losses, the common expenses of the fund, and certain fund-level expense
reductions are allocated on a pro rata basis to each class based on the
relative net assets of each class to the total net assets of the fund. Each
class of shares differs in its respective distribution, transfer agent,
registration, and certain other class-specific fees, expenses, and expense
reductions.
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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
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 dividends and capital
gain distributions are declared separately for each class.
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 litigation
proceeds, futures and options transactions, market discount and losses
deferred due to wash sales, and futures and options. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
effect the per-share allocation between net interest 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 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.
10. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Municipal
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
FMR. The Cash Fund is an open-end money market fund available only to
investment companies and other accounts managed by FMR and its affiliates.
The Cash Fund seeks preservation of capital, liquidity, and current income
by investing in high-quality, short-term municipal securities of various
states and municipalities. Income distributions from the Cash Fund are
declared daily and paid monthly from net interest income. Income
distributions received by the fund are recorded as interest income in the
accompanying financial statements.
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased 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 when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, if the counterparty does not
perform under the contract, or if the issuer does not issue the securities
due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains (losses) are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
11. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $156,185,000 and $192,900,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $52,766,000 and $66,703,000, respectively.
12. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser 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. The annual individual
fund fee rate is .25%. 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.
For the period, the management fee was equivalent to an annualized rate of
..40% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $ $ $
135 135
CLASS T
4,000 4,000
CLASS B
3,000 1,000
$ $ $ $
7,135 5,135
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1% (4% to 1% prior to January 2, 1997) of the lesser of
the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
cost of shares at the initial date of purchase or the net asset value of
the redeemed shares, excluding any reinvested dividends and capital gains.
Effective August 1, 1997, Class A's maximum sales charge was increased to
4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities, dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $ $ $
7,000 0
CLASS T
8,000 3,000
CLASS B
0 0*
$ $ $ $
15,000 3,000
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian,
transfer agent, and shareholder servicing agent for the fund's Class A,
Class T, Class B, Initial Class, and Institutional Class shares. UMB has
entered into sub-arrangements with Fidelity Service Company, Inc. (FSC)
with respect to the Initial Class and Fidelity Investments Institutional
Operations Company, Inc. (FIIOC) with respect to Class A, Class T, Class B,
and Institutional Class to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC and FSC, affiliates of FMR,
receive account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
classes of the fund. All fees are paid to FIIOC and FSC by UMB, which is
reimbursed by each class for such payments. FIIOC and FSC pay for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ $ .39% *
351
CLASS T UMB .19% *
3,000
CLASS B UMB .35% *
1,000
INITIAL CLASS UMB .11% *
493,000
INSTITUTIONAL CLASS UMB .26% *
1,000
$ $
498,351
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
UMB also has a sub-contract with FSC, under which FSC maintains the fund's
accounting records. The fee is based on the level of average net assets for
the month plus out-of-pocket expenses.
13. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A .90% $ $
7,000
CLASS T 1.00%
27,000
CLASS B 1.65%
29,000
INSTITUTIONAL CLASS .75%
32,000
$ $
95,000
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $1,000 under the
custodian arrangement, and each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST
CREDITS
CLASS T $ $
1,000
INITIAL CLASS $
1,000
$ $
2,000
14. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 B
1997 A
CLASS A
From net investment income $ $ $ $
4,000 -
CLASS T
From net investment income $ $ $ $
77,000 50,000
CLASS B
From net investment income $ $ $ $
12,000 4,000
INITIAL CLASS
From net investment income $ $ $ $
22,839,000 49,472,000
In excess of net investment income
- 130,000
Total $ $ $ $
22,839,000 49,602,000
INSTITUTIONAL CLASS
From net investment income $ $ $ $
28,000 11,000
$ $ $ $
22,960,000 49,667,000
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT
OF SALE OF SHARES) TO JUNE 30, 1997.
B DISTRIBUTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR THE
PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
15. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
AMOUNTS IN THOUSANDS 1997 A 1996 B 1997 A 1996 B
CLASS A $ $ $ $
Shares sold 62 - 503 -
Net increase (decrease) 62 - $ $ $ $
503 -
CLASS T $ $ $ $
Shares sold 204 489 1,671 3,951
Reinvestment of distributions
8 6 65 49
Shares redeemed
(358) (22) (2,908) (176)
Net increase (decrease) (146) 473 $ $ $ $
(1,172) 3,824
CLASS B $ $ $ $
Shares sold 106 31 868 250
Reinvestment of distributions
1 1 9 4
Net increase (decrease) 107 32 $ $ $ $
877 254
INITIAL CLASS $ $ $ $
Shares sold 2,919 10,284 23,846 83,373
Reinvestment of distributions
1,806 3,995 14,732 32,369
Shares redeemed
(8,195) (29,410) (66,766) (237,309)
Net increase (decrease) (3,470) (15,131) $ $ $ $
(28,188) (121,567)
INSTITUTIONAL CLASS $ $ $ $
Shares sold 110 109 903 882
Reinvestment of distributions
- 1 - 5
Shares redeemed
(76) (7) (620) (54)
Net increase (decrease) 34 103 $ $ $ $
283 833
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO JUNE 30, 1997.
B SHARE TRANSACTIONS FOR CLASS T, CLASS B, INSTITUTIONAL CLASS ARE FOR THE
PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO
DECEMBER 31, 1996.
16. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ $
7,000
CLASS T
29,000
CLASS B
29,000
INITIAL CLASS
18,000
INSTITUTIONAL CLASS
32,000
$ $
115,000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Thomas D. Maher, Assistant Vice President
George A. Fischer, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
MUNICIPAL BOND
FUND - INITIAL CLASS
SEMIANNUAL REPORT
JUNE 30, 1997
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 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 33 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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR MUNICIPAL BOND FUND - INITIAL CLASS
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Municipal Bond Fund - 3.10% 8.22% 37.25% 113.65%
Initial Class
Lehman Brothers Municipal Bond 3.20% 8.26% 40.90% 119.37%
Index
General Municipal Debt Funds 2.95% 7.81% 37.10% 111.62%
Average
CUMULATIVE TOTAL RETURNS show Initial Class performance in percentage terms
over a set period - in this case, six months, one year, five years or 10
years. For example, if you had 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 Initial Class returns to the performance of the Lehman
Brothers Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year. To
measure how Initial Class' performance stacked up against its peers, you
can compare it to the general municipal debt funds average, which reflects
the performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 238 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Municipal Bond Fund - 8.22% 6.54% 7.89%
Initial Class
Lehman Brothers Municipal Bond Index 8.26% 7.10% 8.17%
General Municipal Debt Funds Average 7.81% 6.51% 7.76%
AVERAGE ANNUAL TOTAL RETURNS take Initial Class' cumulative return and show
you what would have happened if Initial Class had performed at a constant
rate each year. (Note: Lipper calculates average annual total returns by
annualizing each fund's total return, then taking the arithmetic average.
This may produce a slightly different figure than that obtained by
averaging the cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10122.11 10102.00
1987/08/31 10168.98 10124.73
1987/09/30 9644.27 9751.43
1987/10/31 9732.29 9785.95
1987/11/30 9949.26 10041.46
1987/12/31 10143.01 10187.16
1988/01/31 10658.03 10550.03
1988/02/29 10759.49 10661.54
1988/03/31 10499.13 10537.87
1988/04/30 10534.99 10617.96
1988/05/31 10571.25 10587.27
1988/06/30 10771.48 10742.16
1988/07/31 10849.22 10812.20
1988/08/31 10873.13 10821.72
1988/09/30 11091.88 11017.59
1988/10/31 11340.79 11211.50
1988/11/30 11209.62 11108.80
1988/12/31 11390.93 11222.45
1989/01/31 11557.73 11454.53
1989/02/28 11438.23 11323.83
1989/03/31 11434.26 11296.77
1989/04/30 11764.23 11564.95
1989/05/31 11994.10 11805.16
1989/06/30 12165.25 11965.47
1989/07/31 12278.61 12128.32
1989/08/31 12169.08 12009.58
1989/09/30 12121.69 11973.79
1989/10/31 12264.75 12120.23
1989/11/30 12424.47 12332.34
1989/12/31 12480.35 12433.22
1990/01/31 12409.48 12374.41
1990/02/28 12524.34 12484.54
1990/03/31 12535.34 12488.29
1990/04/30 12370.42 12397.87
1990/05/31 12708.49 12668.52
1990/06/30 12842.41 12779.87
1990/07/31 13040.33 12967.74
1990/08/31 12792.99 12779.44
1990/09/30 12866.20 12786.73
1990/10/31 13019.60 13018.68
1990/11/30 13268.62 13280.49
1990/12/31 13342.79 13338.26
1991/01/31 13498.21 13517.26
1991/02/28 13568.64 13634.86
1991/03/31 13592.55 13639.76
1991/04/30 13782.44 13821.17
1991/05/31 13888.44 13944.04
1991/06/30 13894.29 13930.24
1991/07/31 14087.15 14099.91
1991/08/31 14264.94 14285.60
1991/09/30 14426.50 14471.60
1991/10/31 14570.62 14601.85
1991/11/30 14610.18 14642.59
1991/12/31 14932.13 14956.82
1992/01/31 14938.89 14990.92
1992/02/29 14961.09 14995.71
1992/03/31 14953.84 15001.26
1992/04/30 15103.32 15134.77
1992/05/31 15291.24 15312.91
1992/06/30 15565.85 15569.86
1992/07/31 16044.09 16036.65
1992/08/31 15812.94 15880.29
1992/09/30 15908.56 15984.15
1992/10/31 15583.24 15827.02
1992/11/30 16050.25 16110.48
1992/12/31 16265.40 16274.97
1993/01/31 16481.01 16464.25
1993/02/28 17151.99 17059.76
1993/03/31 16921.77 16879.44
1993/04/30 17116.81 17049.75
1993/05/31 17218.31 17145.57
1993/06/30 17532.41 17431.73
1993/07/31 17496.11 17454.57
1993/08/31 17955.83 17817.97
1993/09/30 18175.70 18020.92
1993/10/31 18176.88 18055.70
1993/11/30 17954.38 17896.63
1993/12/31 18407.74 18274.43
1994/01/31 18637.91 18483.12
1994/02/28 18074.79 18004.41
1994/03/31 17153.80 17271.27
1994/04/30 17234.26 17417.73
1994/05/31 17404.71 17568.74
1994/06/30 17268.04 17461.40
1994/07/31 17634.78 17781.46
1994/08/31 17674.62 17842.99
1994/09/30 17294.44 17581.05
1994/10/31 16849.95 17268.81
1994/11/30 16376.99 16956.59
1994/12/31 16844.98 17329.81
1995/01/31 17409.38 17825.09
1995/02/28 17989.59 18343.45
1995/03/31 18188.71 18554.21
1995/04/30 18176.56 18576.11
1995/05/31 18769.89 19168.87
1995/06/30 18590.38 19002.10
1995/07/31 18741.56 19182.24
1995/08/31 18986.70 19425.47
1995/09/30 19110.68 19548.43
1995/10/31 19379.34 19832.67
1995/11/30 19718.13 20161.69
1995/12/31 19902.79 20355.45
1996/01/31 20056.32 20509.13
1996/02/29 19917.56 20370.69
1996/03/31 19660.38 20110.36
1996/04/30 19572.28 20053.44
1996/05/31 19560.33 20045.42
1996/06/30 19741.76 20263.72
1996/07/31 19922.50 20448.12
1996/08/31 19903.47 20443.21
1996/09/30 20158.55 20729.41
1996/10/31 20421.50 20963.86
1996/11/30 20808.87 21347.50
1996/12/31 20722.16 21257.84
1997/01/31 20783.20 21298.02
1997/02/28 20962.58 21493.54
1997/03/31 20692.10 21207.03
1997/04/30 20828.99 21384.53
1997/05/31 21124.03 21706.15
1997/06/30 21364.90 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Municipal Bond Fund - Initial Class on June 30, 1987.
As the chart shows, by June 30, 1997, the value of the investment would
have grown to $21,365 - a 113.65% 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 $21,937 - a 119.37% 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 YEARS ENDED DECEMBER 31,
MONTHS
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dividend return 2.49% 5.08% 5.88% 5.01% 5.83% 6.31%
Capital appreciation return 0.61% -0.96% 12.27% -13.50% 7.34% 2.62%
Total return 3.10% 4.12% 18.15% -8.49% 13.17% 8.93%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the class. A capital appreciation return reflects both the amount paid
by the class to shareholders as capital gain distributions and changes in
the class' share price. Both returns assume the dividends or capital gains
paid by the class are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 3.33(cents) 20.01(cents) 40.35(cents)
Annualized dividend rate 4.91% 4.95% 4.96%
30-day annualized yield 4.62% - -
30-day annualized tax-equivalent yield 7.22% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average share price of $8.25 over the past one month, $8.16
over the past six months and $8.13 over the past one year, you can compare
the fund's income over these three periods. The 30-day annualized YIELD is
a standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36% federal
tax bracket 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 Fidelity Advisor
Municipal Bond Fund
Q. GEORGE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS AND PAST YEAR?
A. For the six months that ended June 30, 1997, the fund's Initial Class
shares had a total return of 3.10%. To get a sense of how the fund did
relative to its peers, the general municipal debt funds average returned
2.95% for the same period, according to Lipper Analytical Services. The
Lehman Brothers Municipal Bond Index, which tracks the types of securities
in which the fund invests, had a six-month return of 3.20%. For the
one-year period ending June 30, 1997, the fund's Initial Class shares had a
total return of 8.22%. For the same period, the general municipal debt
funds average returned 7.81%, according to Lipper, and the Lehman Brothers
index returned 8.26%.
Q. HOW WOULD YOU CHARACTERIZE THE MUNICIPAL BOND MARKET OVER THE PAST SIX
MONTHS?
A. I'd characterize it as a somewhat choppy environment. Evidence that the
economy was growing at a much-quicker-than-expected pace sent Treasury bond
yields higher and, correspondingly, their prices lower during much of the
period. On the other hand, yields on municipal securities didn't react as
negatively, and muni bond prices were more stable throughout the period.
The divergence between Treasuries and municipals was greatest in the
long-maturity end of the market. As an example, the yield on a 30-year
Treasury rose 0.15%, while the yield on a 30-year Aaa-rated muni fell
0.15%. In the short-maturity end of the market, the yield on a five-year
Treasury rose 0.20%, while the yield on a five-year Aaa-rated muni rose
only 0.10%. Municipal prices were supported by the fact that there was a
limited supply of municipals available while demand for them grew.
Q. WHICH OF THE FUND'S HOLDINGS HELPED PERFORMANCE? WHICH DETRACTED?
A. Bonds issued in New York and California were some of the fund's - and
the municipal market's - best performers during the period. Both states
enjoyed the benefits of having strengthening local economies, which
translated into higher revenue collections and better fiscal health. As far
as detractors go, I can't think of any specific bond that was a
disappointment. However, a higher stake in California bonds might have
helped the fund since they were among the market's best performers during
the period.
Q. HOW WAS THE FUND STRUCTURED DURING THE PAST SIX MONTHS?
A. In terms of maturity, I kept the fund heavily weighted in bonds with
maturities of between 10 and 15 years. There were a couple of reasons why I
emphasized these intermediate-maturity bonds. First, the yield these bonds
generate tends to be higher than the yield generated by owning a
combination of long- and short-maturity bonds. What's more, long-term bonds
tend to be callable, which means they can be redeemed by their issuer
before maturity. Callable bonds tend to rise less in up markets and fall
more in down markets. Intermediate-maturity bonds, on the other hand,
typically aren't susceptible to being called.
Q. AT THE END OF THE PERIOD, ABOUT 75% OF THE FUND'S HOLDINGS WERE IN BONDS
WITH CREDIT RATINGS OF A AND ABOVE AS JUDGED BY MOODY'S INVESTOR SERVICES.
WHY DID YOU FOCUS ON THESE BONDS WHEN BAA-RATED BONDS OFFERED HIGHER
YIELDS?
A. I didn't feel that Baa-rated bonds in general offered enough in the way
of additional yield to compensate for their added risk. Credit ratings
measure credit risk, meaning the risk that a municipal issuer will not
repay its debt as promised. Typically, the higher level of credit risk a
bond carries, the lower its credit rating and the higher its yield. But
during the past six months, there was very little difference between the
reward - or yield - offered by lower-quality bonds compared to
higher-quality securities.
Q. WERE THERE ANY SIGNIFICANT CHANGES IN THE WAY THE FUND'S HOLDINGS WERE
ALLOCATED AMONG SECTORS DURING THE PERIOD?
A. Not really. General obligation bonds (GOs) remained the fund's largest
sector concentration. A GO is backed by the full faith and credit - which
includes the taxing power - of a city, county, state or other issuer. A GO
is repaid with general revenue such as taxes. General revenues are
sensitive to both the economy and a municipality's fiscal health, both of
which have been strong during the period in many of the areas the fund
emphasized. In choosing GOs, I put an emphasis on staying diversified and
not taking on very large positions in any one security.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. Until investors feel like they have a good handle on where the economy,
interest rates and inflation are headed, the bond market is likely to
remain choppy. The past six months have been a relatively good period
compared to U.S. Treasuries and, by the end of the period, munis seemed
fairly valued in relation to their taxable counterparts. I think that the
municipal market will need to continue to experience strong demand and weak
supply in order to continue outperforming Treasuries.
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 current income
that is free from federal
income tax, consistent with
preservation of capital by
investing primarily in
investment-grade municipal
securities under normal
conditions
START DATE: August 19, 1976
SIZE: as of June 30, 1997,
more than $929 million
MANAGER: George Fischer,
since 1995; joined Fidelity
in 1989
(checkmark)
GEORGE FISCHER ON THE
RELATIONSHIP BETWEEN BOND
PRICES AND BOND YIELDS:
"When choosing investments
for the fund, I consider a
bond's price, its coupon - or
income - and its yield. While
a bond's coupon - which is the
interest rate the issuer
promises to pay the holder until
maturity - remains constant,
its price changes practically
every day. In fact, it's not
uncommon for a municipal
bond's price to fluctuate as
much as 1% any given day.
When a bond's price fluctuates
- - because of changes in
demand and supply, credit
quality or other factor - its
yield also changes.
"The relationship between a
bond's price and its yield can
be thought of as a seesaw:
yield up, price down; yield
down, price up. While a given
bond may look attractive
because it offers a high yield, I
also consider where future
yields will be since they
determine future prices and,
therefore, play into total
return."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1997
% OF % OF FUND'S
FUND'S INVESTMENTS
INVESTMEN IN THESE STATES
TS 6 MONTHS AGO
New York 17.2 16.4
Texas 11.2 9.7
California 9.3 10.0
Georgia 7.3 5.9
Illinois 6.3 6.8
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 40.2 38.0
Electric Revenue 16.7 17.7
Water and Sewer 8.4 9.4
Health Care 7.5 7.9
Special Tax 6.1 7.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 11.6 12.4
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, 1997
6 MONTHS AGO
Years 6.9 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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 52.9%
Aa, A 24.8%
Baa 17.4%
Ba, B 0.9%
Non-rated 1.5%
Short-term
investments 2.5%
Aaa 50.5%
Aa, A 27.9%
Baa 15.6%
Ba 0.8%
Non-rated 2.0%
Short-term
investments 3.2%
Row: 1, Col: 1, Value: 52.0
Row: 1, Col: 2, Value: 24.0
Row: 1, Col: 3, Value: 17.0
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 2.4
Row: 1, Col: 6, Value: 3.0
Row: 1, Col: 1, Value: 49.0
Row: 1, Col: 2, Value: 27.1
Row: 1, Col: 3, Value: 15.6
Row: 1, Col: 4, Value: 1.8
Row: 1, Col: 5, Value: 2.5
Row: 1, Col: 6, Value: 4.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.5%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(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 $ 4,075
ARIZONA - 1.9%
Agriculture Impt. & Pwr. Dist. Elec. Sys. Rev. Rfdg.
(Salt River Proj.) Series B, 6.50% 1/1/04 6,515 7,175
Arizona Trans. Board Hwy. Rev. Sub-Series A,
6.25% 7/1/04 2,000 2,133
Maricopa County School Dist. #1 Phoenix Elementary Rfdg.
(Cap. Appreciation) Second Series, 0% 7/1/05
(MBIA Insured) 2,660 1,802
Maricopa County Unified School Dist. #69 Rfdg.
(Cap. Appreciation) 0% 7/1/07 (AMBAC Insured) 3,050 1,845
Tucson Gen. Oblig. Rfdg. 6.40% 7/1/06 (FGIC Insured) 4,230 4,748
17,703
ARKANSAS - 0.4%
North Little Rock Elec. Rev. Rfdg. Series A, 6.15% 7/1/03
(MBIA Insured) 3,245 3,517
CALIFORNIA - 9.3%
California Gen. Oblig. 6.25% 10/1/19 10,500 11,314
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series A, 5.70% 8/1/16 (MBIA Insured) 3,125 3,148
Series B, 5.20% 8/1/26 (MBIA Insured)(d) 1,975 1,990
California Pub. Works Board Lease Rev.:
Rfdg. (Dept. Correction State Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 5,050 4,722
(California Univ. Proj.) Series A, 5.50% 6/1/10 2,250 2,309
(Dept. Correction State Prisons, Madera) Series E:
6% 6/1/07 3,000 3,191
5.50% 6/1/15 2,500 2,500
(Franchise Tax Board-PH II) Series A, 6.25% 9/1/11 1,150 1,200
California Rural Home Mtg. Fin. Auth. Lease Rev. Series A,
4.45% 8/1/01 (MBIA Insured) 4,875 4,857
California Statewide Commty. Dev. Auth. Rev. Ctfs. of Prtn.
(Sisters of Charity Leavenworth) 5% 12/1/14 2,750 2,575
Castaic Lake Wtr. Agcy. Ctfs. of Prtn. (Wtr. Sys. Impt. Proj.)
7% 8/1/11 (MBIA Insured) 1,475 1,731
Chino Basin Reg'l. Fing. Auth. Rev. Rfdg. (Muni. Wtr. Dist.
Swr. Sys. Proj.) 7% 8/1/09 (AMBAC Insured) 2,245 2,638
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 3,000 2,644
Foothill/Eastern Trans. Corridor Agcy. Toll Rd. Rev.
(Sr. Lien) Series A, 0% 1/1/08 (h) 4,000 2,670
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
CALIFORNIA - CONTINUED
Fresno Swr. Rev. Series A, 4.75% 9/1/26 (MBIA Insured) $ 7,055 $ 6,147
Modesto Irrigation Dist. Elec. Rev. Series A,
9.625% 1/1/11 (Escrowed to Maturity)(e) 4,390 5,669
Placer County Wtr. Agcy. Rev. (Middle Fork Proj.) Series A:
3.75% 7/1/12 7,820 6,676
3.75% 1/1/13 1,500 1,254
Santa Clara Redev. Agcy. Tax Allocation Rfdg. (Bayshore
North Proj.) 7% 7/1/10 (AMBAC Insured) 4,000 4,700
South Orange County Pub. Fin. Auth. Spl. Tax Rev.
(Foothill Area) Series C:
7.50% 8/15/06 (FGIC Insured) 8,140 9,788
7.50% 8/15/07 (FGIC Insured) 3,500 4,235
85,958
COLORADO - 1.8%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist) 6.625% 2/1/13 10,000 10,375
(PSL Health Sys. Proj.) Series A, 6.875% 2/15/23
(Pre-Refunded to 2/15/03 @ 102)(e) 4,000 4,495
El Paso County School Dist. #20 Rfdg. (Cap. Appreciation)
Series A, 0% 6/15/08 (AMBAC Insured) 2,600 1,462
16,332
CONNECTICUT - 0.8%
Connecticut Gen. Oblig. Series A, 7% 3/15/03 5,000 5,600
Connecticut Spl. Tax Oblig. Rev. (Trans. Infrastructure)
Series A, 6.50% 6/1/03 1,950 2,121
7,721
DISTRICT OF COLUMBIA - 1.8%
District of Columbia Gen. Oblig.:
Rfdg. Series A:
5.625% 6/1/02 (MBIA Insured) 1,500 1,554
5.875% 6/1/05 (MBIA Insured) 3,000 3,142
6% 6/1/11 (MBIA Insured) 1,000 1,045
Series E, 5% 6/1/04 (FGIC Insured) 1,000 1,000
District of Columbia Redev. Land Agcy. Spl. Tax Rev.
(Washington D.C. Sports Arena):
4.85% 11/1/97 850 850
5.625% 11/1/10 5,810 5,701
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured)(g) 3,300 3,325
16,617
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
FLORIDA - 0.4%
Lakeland Elec. & Wtr. Rev. Rfdg. (Jr. Sub. Lien)
6.50% 10/1/04 (FGIC Insured) $ 3,000 $ 3,330
GEORGIA - 7.3%
Atlanta Arpt. Facs. Rev. 6.25% 1/1/05 (AMBAC Insured) 16,820 18,292
Dalton City Util. Rev. Rfdg. Series 1997, 4% 1/1/98
(MBIA Insured) 1,000 1,001
Fulton County School Dist. Rfdg. 6.375% 5/1/14 2,500 2,813
Fulton County Wtr. & Swr. Rev. Rfdg.:
6.125% 1/1/05 (FGIC Insured) 4,000 4,325
6.375% 1/1/14 (FGIC Insured) 4,500 5,029
Georgia Gen. Oblig.:
Series A, 6.25% 4/1/06 12,200 13,511
Series B Impt. 7.20% 3/1/04 7,625 8,759
Series D:
6.80% 8/1/03 4,400 4,923
7.25% 9/1/06 3,000 3,555
Georgia Muni. Elec. Auth. Pwr. Rev. Series B,
6.20% 1/1/10 (AMBAC Insured) 5,000 5,462
67,670
ILLINOIS - 5.8%
Chicago Rfdg. Series A-2, 6.125% 1/1/12
(AMBAC Insured) 10,000 10,800
Chicago O'Hare Int'l. Arpt. Rev. Rfdg. (Gen. Arpt. Proj.)
(2nd Lien) Series A:
6.375% 1/1/12 (MBIA Insured) 3,000 3,229
6.375% 1/1/15 (MBIA Insured) 3,200 3,424
Chicago Park Dist. Rfdg. 6.25% 1/1/09 (FGIC Insured) 1,380 1,511
Chicago Wastewtr. Transmission Rev. Rfdg.
5.375% 1/1/13 (FGIC Insured) 9,430 9,394
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 3,000 3,690
Illinois Dedicated Tax Rev. (Civic Ctr.) Series A,
7% 12/15/13 (AMBAC Insured) 2,500 2,709
Illinois Reg'l. Trans. Auth.:
Series A, 8% 6/1/17 (AMBAC Insured) 3,000 3,915
Series D:
7.75% 6/1/04 (FGIC Insured) 1,115 1,303
7.75% 6/1/05 (FGIC Insured) 2,405 2,841
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ILLINOIS - CONTINUED
Metropolitan Pier & Exposition Auth. Dedicated Tax Rev.
(McCormick Place Expansion Proj.):
(Cap. Appreciation) Series A:
0% 6/15/08 (FGIC Insured) $ 3,890 $ 2,203
0% 6/15/10 (FGIC Insured) 8,100 4,030
0% 6/15/15 (FGIC Insured) 3,100 1,124
Series A:
6.50% 6/15/07 (FGIC Insured) (Pre-Refunded
to 6/15/03 @ 102)(e) 2,925 3,247
6.50% 6/15/07 (FGIC Insured) 75 82
53,502
INDIANA - 0.6%
Indiana Bond Bank Rev. (State Revolving Fund Prog.)
Series A, 7% 2/1/05 1,500 1,682
Indianapolis Resource Recovery Rev. Rfdg. (Ogden Martin
Sys. Inc. Proj.) 6.75% 12/1/06 (AMBAC Insured) 3,000 3,394
5,076
KANSAS - 0.2%
Kansas City Util. Sys. Rev. (Cap. Appreciation) 0% 3/1/09
(AMBAC Insured) (Escrowed to Maturity)(e) 3,975 2,136
LOUISIANA - 0.2%
New Orleans Rfdg. 6.50% 10/1/03 (AMBAC Insured) 1,500 1,650
MARYLAND - 1.2%
Baltimore Consolidated Pub. Impt. Series A,
7.25% 10/15/05 (FGIC Insured) 2,000 2,338
Maryland Health & Higher Edl. Facs. Auth. Rev. Rfdg.
(Good Samaritan Hosp.) 5.75% 7/1/13 2,600 2,668
Washington Metropolitan Area Trans. Auth. Gross Rev.
Rfdg. 6% 7/1/09 (FGIC Insured) 5,500 5,940
10,946
MASSACHUSETTS - 4.4%
Massachusetts Bay Trans. Auth. Rfdg. (Gen. Trans. Sys.)
Series A, 6.25% 3/1/12 2,000 2,205
Massachusetts Gen. Oblig. Consolidated Loan:
Series A, 7.50% 6/1/04 3,270 3,785
Series B, 4.875% 10/1/13 2,500 2,334
Massachusetts Gen. Oblig. Rfdg. Series A, 6% 7/1/05
(AMBAC Insured) 2,750 2,960
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Blood Institute) Series A, 6.50% 2/1/22 4,790 4,862
(New England Med. Ctr.) Series G, 5.375% 7/1/24
(MBIA Insured) 800 774
(Univ. Hosp.) Series C, 7.25% 7/1/19 (MBIA Insured) 3,500 3,811
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy. Rev.:
Rfdg. (Harvard Commty. Health Plan) Series B,
8.125% 10/1/17 $ 5,000 $ 5,312
(Massachusetts Biomedical) (Cap. Appreciation)
Series A-2, 0% 8/1/08 5,000 2,712
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev.:
Rfdg. Series B, 5% 7/1/12 (MBIA Insured) 2,715 2,576
Series A, 6.75% 7/1/08 (MBIA Insured) 2,500 2,722
Series B, 6.75% 7/1/08 (MBIA Insured) 5,995 6,527
40,580
MICHIGAN - 4.5%
Lowell Area Schools (Cap. Appreciation) 0% 5/1/20
(FGIC Insured) (Pre-Refunded 5/1/05 @ 33.646)(e) 21,685 4,961
Michigan Hosp. Fin. Auth. Rev. Rfdg.:
(Detroit Med. Ctr. Oblig. Group) Series A,
6.50% 8/15/18 5,000 5,206
(Sisters of Mercy Health Corp.) 5.375% 8/15/14
(MBIA Insured) 3,000 2,981
Michigan Hsg. Dev. Auth. Rental Hsg. Rev.:
Rfdg. Series B, 5.70% 4/1/12 3,750 3,778
Series B, 7.50% 4/1/10 6,000 6,428
Michigan Muni. Auth. Rev. Rfdg. (Local Gov't. Loan Prog.):
7% 5/1/02 (AMBAC Insured) 2,425 2,677
7% 11/1/02 (AMBAC Insured) 1,465 1,630
7% 5/1/03 (AMBAC Insured) 2,700 3,017
7% 11/1/03 (AMBAC Insured) 1,570 1,766
Michigan Pub. Pwr. Agcy. Rev. Rfdg. (Belle River Proj.)
Series B, 5% 1/1/19 5,750 5,261
Michigan Trunk Line Rev. (Cap. Appreciation) Series A,
0% 10/1/09 (AMBAC Insured) 8,010 4,195
41,900
MINNESOTA - 1.7%
Minneapolis Gen. Oblig.:
Rfdg. (Sales Tax) 6.25% 4/1/07 1,500 1,612
(Cap. Appreciation) Series B, 0% 12/01/04 1,800 1,269
Minnesota Gen. Oblig. Unltd. Tax 5.75% 8/1/05 3,315 3,543
Minnesota Hsg. Fin. Agcy. Single Family Mtg.:
Series I, 6.25% 1/1/15 1,915 1,968
Series K, 6.40% 1/1/15 3,340 3,474
Northern Minnesota Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg.
Series A, 7.30% 1/1/01 4,000 4,235
16,101
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Rev. Rfdg.
Series 1990 A, 9.25% 3/1/12 (FGIC Insured) $ 525 $ 564
MISSOURI - 1.0%
Kirkwood Ind. Dev. Auth. Health Care Corp. Rev.
(St. Joseph Hosp.) 7% 7/1/22 (Pre-Refunded to
7/1/02 @ 102)(e) 2,000 2,253
Missouri Higher Ed. Loan Auth. Student Loan Rev. (Sr. Lien)
Series A, 5.625% 2/15/01 4,000 4,100
Missouri Hsg. Dev. Commission Mtg. Rev. Series C,
5.50% 3/1/16 (d) 2,500 2,575
8,928
NEVADA - 0.9%
Clark County Ind. Dev. Rev. Rfdg. (Nevada Pwr. Co. Proj. C)
7.20% 10/1/22 (AMBAC Insured) 7,000 7,822
NEW JERSEY - 2.1%
Middlesex County Poll. Cont. Auth. Rev. Rfdg. (Fing. Poll.)
(Amerada Hess Corp.) 7.875% 6/1/22 7,750 8,845
New Jersey Trans. Trust Fund Auth. Rfdg. (Trans. Sys.):
Series A, 6.50% 6/15/05 (AMBAC Insured) 6,500 7,215
Series B, 6.50% 6/15/10 (MBIA Insured) 2,000 2,268
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. 10.375% 1/1/03
(Escrowed to Maturity)(e) 1,200 1,420
19,748
NEW MEXICO - 0.2%
Farmington Poll. Cont. Rev. Rfdg. (Pub. Svc. Co. of New
Mexico San Juan Proj.) 5.70% 12/1/16
(AMBAC Insured) 2,250 2,253
NEW YORK - 17.2%
Metropolitan Trans. Auth. Svc. Contract (Trans. Facs.)
Series 4, 7.75% 7/1/02 1,420 1,549
Nassau County Gen. Impt. Rfdg. Series A:
6.50% 5/1/04 (FGIC Insured) 7,425 8,195
6.50% 5/1/05 (FGIC Insured) 4,490 4,984
6.50% 5/1/06 (FGIC Insured) 4,000 4,470
New York City Gen. Oblig.
Rfdg.:
Series A, 7% 8/1/04 4,375 4,823
Series D:
6.30% 8/15/01 7,450 7,832
8% 2/1/05 2,550 2,977
Series B, 7.50% 2/1/03 (f) 10,000 11,050
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NEW YORK - CONTINUED
New York City Gen. Oblig. - continued
Series G:
5.40% 2/1/01 $ 6,000 $ 6,090
5.60% 2/1/02 14,120 14,455
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.
Series A, 7% 6/15/09 (FGIC Insured) 2,500 2,716
New York City Trust Cultural Resources Rev. (Museum of
Modern Art) Series One, 5% 1/1/00 (AMBAC Insured) 3,500 3,552
New York State Dorm. Auth. Rev.:
Rfdg. (Mental Health Svcs. Facs.) Series B, 6% 2/15/03 8,035 8,427
Rfdg. (State Univ. Edl. Facs.):
Series A:
5.50% 5/15/07 4,660 4,747
5.50% 5/15/13 7,500 7,434
Series B, 5.25% 5/15/09 4,000 3,955
(City Univ. Sys. Consolidated):
Series C, 7.50% 7/1/10 3,000 3,578
Series D:
7% 7/1/09 2,000 2,285
7% 7/1/09 (FGIC Insured) 3,780 4,423
2nd Gen. Series A, 5.75% 7/1/09 4,370 4,485
New York State Envir. Facs. Corp. Poll. Cont. Rev. Rfdg.
(State Wtr. Revolving Fund - New York City Muni. Wtr.)
5.75% 6/15/11 2,500 2,628
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 2,500 2,516
Series E:
6% 4/1/14 5,250 5,624
5.25% 4/1/16 8,425 8,225
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 2,180
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridge):
Series A, 6% 1/1/05 (MBIA Insured) 2,500 2,688
6% 4/1/03 2,500 2,613
7.25% 1/1/10 (Pre-Refunded to 1/1/01 @ 102)(e) 5,000 5,525
New York State Urban Dev. Corp. Rev. Rfdg. (Correctional
Cap. Facs.) Series A, 6.30% 1/1/03 6,000 6,390
Triborough Bridge & Tunnel Auth. Rev. (Convention Ctr.
Proj.) Series E, 7.25% 1/1/10 7,325 8,405
158,821
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
NORTH CAROLINA - 2.5%
Harnett County Ctfs. of Prtn.:
7.50% 12/1/03 (AMBAC Insured) $ 2,640 $ 3,053
7.50% 12/1/04 (AMBAC Insured) 2,865 3,352
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Rfdg.:
Series A, 5.20% 1/1/01 10,000 10,050
Series B:
7.25% 1/1/07 2,375 2,666
7% 1/1/08 3,650 4,033
23,154
OHIO - 2.2%
Cleveland Wtrwks. Rev. Rfdg. 1st Mtg. Series G,
5.50% 1/1/13 (MBIA Insured) 1,750 1,785
Ohio Bldg. Auth. Facs. (Administration Bldg. Fund)
Series A, 6% 10/1/06 1,750 1,883
Ohio Bldg. Auth. Workers Compensation
(W. Green Bldg. A) 4.75% 4/1/14 6,500 5,899
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.:
Rfdg. (Buckeye Pwr. Inc. Proj.) 7.80% 11/1/14
(AMBAC Insured) 2,865 3,391
(Wtr. Cont. Loan Fund) 6.50% 6/1/03 (MBIA Insured) 2,940 3,219
Ohio Wtr. Dev. Auth. Rev. Fresh Wtr. Series:
6.25% 6/1/02 (AMBAC Insured) 1,860 2,000
6.25% 6/1/03 (AMBAC Insured) 1,975 2,138
20,315
OREGON - 0.6%
Multnomah County School Dist. #3 (Park Rose):
7% 12/1/03 (FGIC Insured) 2,325 2,639
7% 12/1/04 (FGIC Insured) 2,540 2,911
5,550
PENNSYLVANIA - 2.8%
Delaware County Auth. Hosp. Rev. (Crozer-Chester)
6% 12/15/20 3,000 2,962
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A, 6.10% 7/1/13 3,800 3,871
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg. (Single Family Mtg.)
Series 54A, 5.375% 10/1/28 (d) 1,000 1,009
Philadelphia Hosp. & Higher Ed. Facs. Auth. Hosp. Rev.:
Rfdg. (Pennsylvania Hosp.):
5.05% 7/1/98 1,200 1,207
5.35% 7/1/99 1,335 1,350
(Graduate Health Sys. Oblig. Group) Series A&B,
7% 7/1/05 7,670 8,121
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
PENNSYLVANIA - CONTINUED
Philadelphia Wtr. & Wastewtr. Rev.:
6.25% 8/1/09 (MBIA Insured) $ 2,000 $ 2,207
6.25% 8/1/10 (MBIA Insured) 2,000 2,200
Pittsburgh Gen. Oblig. Series B, 6.25% 9/1/16
(MBIA Insured) 3,000 3,173
26,100
SOUTH CAROLINA - 1.1%
Charlston County Gen. Oblig. 6% 6/1/13 2,500 2,653
South Carolina Pub. Svc. Auth. Rev. Rfdg. Series A:
6.25% 2/1/06 (MBIA Insured) 2,000 2,185
5.75% 1/1/10 (MBIA Insured) 4,705 4,893
9,731
TENNESSEE - 1.8%
Knox County Health Edl. & Hsg. Facs. Auth. Sanders Alliance
Hosp. Facs. Rev. Series C, 7.25% 1/1/10 (MBIA Insured) 2,660 3,149
Memphis-Shelby County Arpt. Auth. Arpt. Rev. Rfdg.
Series A (d)(g):
6% 2/15/05 (MBIA Insured) 1,000 1,059
6.25% 2/15/09 (MBIA Insured) 1,500 1,614
6.25% 2/15/10 (MBIA Insured) 1,000 1,076
Tennessee Gen. Oblig. Rfdg. Series A, 6% 5/1/03 8,640 9,288
16,186
TEXAS - 11.0%
Austin Independent School Dist. Rfdg.:
(Cap. Appreciation) 0% 8/1/02 (PSF Guaranteed) 3,900 3,066
7% 8/1/06 (PSF Guaranteed) 3,430 3,975
Birdville Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/11 (PSF Guaranteed) 8,665 4,192
Corpus Christi Hsg. Fin. Corp. Single Family Mtg. Rev.
(Lomas & Nettleton Co.) Series A, 13.375% 6/1/13 15 16
Dallas Fort Worth Reg'l. Arpt. Rev. Rfdg. Series A,
7.375% 11/1/12 (FGIC Insured) 1,000 1,150
Dallas Gen. Oblig. 4.50% 2/15/14 2,500 2,275
Harris County Hosp. Dist. Mtg. Rev. Rfdg. 7.40% 2/15/10
(AMBAC Insured) 3,000 3,521
Harris County Toll Road Sub-Lien Rev.:
Rfdg. (Cap. Appreciation):
0% 8/1/06 4,245 2,690
0% 8/1/08 8,005 4,523
Series A, 7% 8/15/09 2,000 2,353
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
TEXAS - CONTINUED
Houston Gen. Oblig. Rfdg. Series C, 5.75% 4/1/12 $ 5,000 $ 5,131
Hurst Euless Bedford Independent School Dist. Rfdg.
(Cap. Appreciation):
0% 8/15/11 (PSF Guaranteed) 3,620 1,706
0% 8/15/12 (PSF Guaranteed) 5,105 2,265
0% 8/15/13 (PSF Guaranteed) 3,610 1,498
Midlothian Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/09 (PSF Guaranteed) 1,970 1,074
Round Rock Independent School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 2/15/08 (PSF Guaranteed) 9,800 5,684
San Antonio Elec. & Gas Rev.:
Rfdg. (Cap. Appreciation):
Series 1991 B 0% 2/1/05 (FGIC Insured) 12,285 8,415
Series B, 0% 2/1/07 (FGIC Insured) 10,000 6,138
Rfdg. 6% 2/1/04 6,000 6,413
Series 95, 6.375% 2/1/06 5,000 5,525
San Antonio Wtr. Rev. Rfdg. 6.5% 5/15/10 (MBIA Insured) 3,000 3,229
Spring Branch Independent School Dist. Rev. Rfdg.
6.50% 2/1/04 (PSF Guaranteed) 5,000 5,512
Texas A & M Univ. Perm. Univ. Fund Rfdg. 5.60% 7/1/05 3,000 3,176
Texas College Student Loan Gen. Oblig. 5.80% 8/1/05 (d) 3,000 3,120
Texas Muni. Pwr. Agcy. Rev. Rfdg. (Cap. Appreciation)
0% 9/1/04 (AMBAC Insured) 4,900 3,448
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 5,000 4,781
Texas Wtr. Dev. Board Rev. (State Revolving Fund Sr. Lien)
6% 7/15/03 6,150 6,604
101,480
UTAH - 4.1%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.:
Rfdg.:
Series A:
6.50% 7/1/10 (AMBAC Insured) 1,635 1,831
6% 7/1/16 (AMBAC Insured) 10,345 10,733
Series D, 5% 7/1/21 (MBIA Insured) 2,500 2,303
Spl. Oblig. Sixth Series B:
6.50% 7/1/04 (MBIA Insured) 3,000 3,296
6.50% 7/1/10 (MBIA Insured) 2,800 3,136
6% 7/1/16 (MBIA Insured) 10,000 10,363
MUNICIPAL BONDS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
UTAH - CONTINUED
Jordan County School Dist. 7.625% 6/15/05 $ 2,000 $ 2,367
Salt Lake City Hosp. Rev. (Intermountain Health Care
Hosp., Inc.) Series A, 8.125% 5/15/15
(Escrowed to Maturity)(e) 2,975 3,548
37,577
VIRGINIA - 3.0%
Hampton Museum Rev. Rfdg.:
5.25% 1/1/09 3,825 3,744
5.25% 1/1/14 4,500 4,241
Henrico County Pub. Facs. Lease Rev. (Henrico County
Reg'l. Jail Proj.):
7.50% 8/1/04 2,455 2,854
7.50% 8/1/05 2,590 3,046
Upper Occoquan Swr. Auth. Reg'l. Swr. Rev. Series A,
4.75% 7/1/29 (MBIA Insured) 10,050 8,756
Virginia Pub. School Auth. School Fing. Series A, 6% 8/1/05 4,255 4,617
27,258
WASHINGTON - 1.4%
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev.
5.40% 7/1/12 10,000 9,725
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev.
Compound Interest Rfdg. Series B, 0% 7/1/06
(MBIA Insured) 5,000 3,169
12,894
WISCONSIN - 2.6%
Wisconsin Gen. Oblig. Series A, 7% 5/1/05 12,890 14,727
Wisconsin Health & Edl. Facs. Auth. Rev.:
Rfdg. (Felician Care, Inc.) Series A, 7% 1/1/15
(AMBAC Insured) 2,000 2,125
(St. Lukes Med. Ctr. Proj.) 7.10% 8/15/11 (MBIA Insured) 4,000 4,400
Wisconsin Hsg. & Econ. Dev. Auth. Home Ownership Rev.
Rfdg. Series F, 5.20% 9/1/26 (d) 2,500 2,503
23,755
PUERTO RICO - 0.2%
Puerto Rico Commonwealth Infrastructure Fing. Auth.
Spl. Tax Series 1988 A, 7.75% 7/1/08 2,000 2,101
TOTAL MUNICIPAL BONDS
(Cost $856,897) 899,051
MUNICIPAL NOTES (C) - 0.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
(000S) (000S)
ILLINOIS - 0.5%
Chicago Gen. Oblig. Notes Series 1997, 3.65%, tender
2/5/98, LOC Morgan Guaranty Trust Co. $ 2,300 $ 2,298
Illinois Dev. Fin. Auth. Multi-Family Hsg. Rev. Rfdg.
(Garden Glen Apts.) Series 93, 4.50%, VRDN 2,300 2,300
4,598
TEXAS - 0.2%
Texas Gen. Oblig. TRAN Series 1996, 4.75% 8/29/97 2,000 2,003
TOTAL MUNICIPAL NOTES
(Cost $6,602) 6,601
CASH EQUIVALENTS - 1.8%
SHARES
Municipal Central Cash Fund (a)(b)
(Cost $16,797) 16,797,000 16,797
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $880,296) $ 922,449
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
53 U.S. Treasury Bond Futures Contracts Sept. 1997 $ 5,886 $ (54)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.6%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
17. At the period end, the seven-day yield of the Municipal Central Cash
Fund was 4.17% The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
18. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund. A
listing of the Municipal Central Cash Fund's holdings as of its most recent
fiscal period end is available upon request.
19. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
20. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
21. Security collateralized by an amount sufficient to pay interest and
principal.
22. 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 $298,000.
23. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
24. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 74.9% AAA, AA, A 78.6%
Baa 17.8% BBB 16.8%
Ba 0.9% 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 both S&P and Moody's amounted to 1.5%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 40.2%
Electric Revenue 16.7
Water and Sewer 8.4
Health Care 7.5
Special Tax 6.1
Others (individually less than 5%) 21.1
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $880,456,000. Net unrealized appreciation aggregated
$41,993,000, of which $42,882,000 related to appreciated investment
securities and $889,000 related to depreciated investment securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,620,000 all of which will expire on December 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $880,296) - $ 922,449
See accompanying schedule
Interest receivable 16,270
Other receivables 11
Prepaid expenses 15
TOTAL ASSETS 938,745
LIABILITIES
Payable for investments purchased $ 6,940
Delayed delivery
Payable for fund shares redeemed 7
Distributions payable 1,318
Accrued management fee 291
Payable for daily variation on futures contracts 30
Other payables and accrued expenses 174
TOTAL LIABILITIES 8,760
NET ASSETS $ 929,985
Net Assets consist of:
Paid in capital $ 905,399
Accumulated undistributed net realized gain (loss) (17,513)
on investments
Net unrealized appreciation (depreciation) on 42,099
investments
NET ASSETS $ 929,985
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JUNE 30, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $8.24
CLASS A:
NET ASSET VALUE and redemption price per share
($509 (divided by) 61.80 shares)
Maximum offering price per share (100/95.75 of $8.24) $8.61
CLASS T: $8.23
NET ASSET VALUE and redemption price per share
($2,694 (divided by) 327.46 shares)
Maximum offering price per share (100/96.50 of $8.23) $8.53
CLASS B: $8.24
NET ASSET VALUE and offering price per share
($1,146 (divided by) 139 shares) A
INITIAL CLASS: $8.24
NET ASSET VALUE, offering price and redemption price
per share ($924,503 (divided by) 112,215 shares)
INSTITUTIONAL CLASS: $8.23
NET ASSET VALUE, offering price and redemption price
per share ($1,133 (divided by) 137.60 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 25,550
EXPENSES
Management fee $ 1,831
Transfer agent fees 498
Distribution fees 7
Accounting fees and expenses 176
Non-interested trustees' compensation 3
Custodian fees and expenses 24
Registration fees 115
Audit 24
Legal 6
Miscellaneous 4
Total expenses before reductions 2,688
Expense reductions (98) 2,590
NET INTEREST INCOME 22,960
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 4,470
Futures contracts 91 4,561
Change in net unrealized appreciation (depreciation) on:
Investment securities 430
Futures contracts (116) 314
NET GAIN (LOSS) 4,875
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 27,835
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 22,960 $ 49,537
Net interest income
Net realized gain (loss) 4,561 8,975
Change in net unrealized appreciation (depreciation) 314 (21,297)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 27,835 37,215
FROM OPERATIONS
Distributions to shareholders (22,960) (49,537)
From net interest income
In excess of net investment income - (130)
TOTAL DISTRIBUTIONS (22,960) (49,667)
Share transactions - net increase (decrease) (27,697) (116,656)
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,822) (129,108)
NET ASSETS
Beginning of period 952,807 1,081,915
End of period $ 929,985 $ 952,807
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
PERIOD ENDED
JUNE 30, 1997 E
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.200
Income from Investment Operations
Net interest income .123
Net realized and unrealized gain (loss) .040
Total from investment operations .163
Less Distributions
From net interest income (.123)
Net asset value, end of period $ 8.240
TOTAL RETURN B, C 1.76%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 509
Ratio of expenses to average net assets .90% A,
D
Ratio of net interest income to average net assets 4.57% A
Portfolio turnover rate 34% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A SHARES) TO
JUNE 30, 1997.
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .182 .185
Net realized and unrealized gain (loss) .040 .200 G
Total from investment operations .222 .385
Less Distributions
From net interest income (.182) (.185)
Net asset value, end of period $ 8.230 $ 8.190
TOTAL RETURN B, C 2.75% 4.86%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,694 $ 3,878
Ratio of expenses to average net assets 1.00% A, D 1.00% A
, D
Ratio of expenses to average net assets after expense .92% A, E 1.00% A
reductions
Ratio of net interest income to average net assets 4.48% A 4.40% A
Portfolio turnover rate 34% A 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
F FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS T SHARES) TO
DECEMBER 31, 1996.
G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .158 .160
Net realized and unrealized gain (loss) .050 .200 F
Total from investment operations .208 .360
Less Distributions
From net interest income (.158) (.160)
Net asset value, end of period $ 8.240 $ 8.190
TOTAL RETURN B, C 2.57% 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,146 $ 259
Ratio of expenses to average net assets 1.65% A, D 1.65% A,
D
Ratio of net interest income to average net assets 3.91% A 3.91% A
Portfolio turnover rate 34% A 35%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - INITIAL CLASS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 C 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500 $ 8.470
beginning of period
Income from
Investment
Operations
Net interest income .200 .405 .408 .455 .487 .519
Net realized .050 (.079) .904 (1.180) .600 .210
and unrealized
gain (loss)
Total from .250 .326 1.312 (.725) 1.087 .729
investment
operations
Less Distributions
From net interest (.200) (.405) (.408) (.455) (.487) (.519)
income
In excess of net - (.001) - - - -
interest income
From net - - - (.010) (.410) (.180)
realized gain
In excess of net - - (.004) (.130) - -
realized gain
Total distributions (.200) (.406) (.412) (.595) (.897) (.699)
Net asset value, $ 8.240 $ 8.190 $ 8.270 $ 7.370 $ 8.690 $ 8.500
end of period
TOTAL RETURN B 3.10% 4.12% 18.15% (8.49) 13.17% 8.93%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 924,503 $ 947,824 $ 1,081,915 $ 1,005,309 $ 1,261,650 $ 1,191,653
period (000 omitted)
Ratio of expenses to .56% A .56% .57% .53% .49% .49%
average net assets
Ratio of net interest 4.95% A 5.00% 5.14% 5.68% 5.51% 6.11%
income to average
net assets
Portfolio turnover 34% A 35% 72% 95% 74% 53%
rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INTEREST INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.190 $ 7.990
Income from Investment Operations
Net interest income .192 .196
Net realized and unrealized gain (loss) .040 .200 F
Total from investment operations .232 .396
Less Distributions
From net interest income (.192) (.196)
Net asset value, end of period $ 8.230 $ 8.190
TOTAL RETURN B, C 2.88% 5.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,133 $ 846
Ratio of expenses to average net assets .75% A, D .75% A,
D
Ratio of net interest income to average net assets 4.77% A 4.88% A
Portfolio turnover rate 34% A 35%
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF INSTITIONAL CLASS
SHARES) TO DECEMBER 31, 1996.
F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
17. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor 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.
The fund offers Class A, Class T, Class B, Initial Class and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to its
distribution plan. The fund commenced sale of a new Class A of shares on
March 3, 1997. Interest income, realized and unrealized capital gains and
losses, the common expenses of the fund, and certain fund-level expense
reductions are allocated on a pro rata basis to each class based on the
relative net assets of each class to the total net assets of the fund. Each
class of shares differs in its respective distribution, transfer agent,
registration, and certain other class-specific fees, expenses, and expense
reductions.
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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
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 dividends and capital
gain distributions are declared separately for each class.
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 litigation
proceeds, futures and options transactions, market discount and losses
deferred due to wash sales, and futures and options. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
effect the per-share allocation between net interest 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 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.
18. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Municipal
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
FMR. The Cash Fund is an open-end money market fund available only to
investment companies and other accounts managed by FMR and its affiliates.
The Cash Fund seeks preservation of capital, liquidity, and current income
by investing in high-quality, short-term municipal securities of various
states and municipalities. Income distributions from the Cash Fund are
declared daily and paid monthly from net interest income. Income
distributions received by the fund are recorded as interest income in the
accompanying financial statements.
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased 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 when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, if the counterparty does not
perform under the contract, or if the issuer does not issue the securities
due to political, economic, or other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains (losses) are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
19. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $156,185,000 and $192,900,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $52,766,000 and $66,703,000, respectively.
20. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser 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. The annual individual
fund fee rate is .25%. 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.
For the period, the management fee was equivalent to an annualized rate of
..40% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $ $ $
135 135
CLASS T
4,000 4,000
CLASS B
3,000 1,000
$ $ $ $
7,135 5,135
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.25% and 3.50%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within six years of purchase (five years prior to
January 2, 1997). The Class B charge is based on declining rates which
range from 5% to 1% (4% to 1% prior to January 2, 1997) of the lesser of
the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
cost of shares at the initial date of purchase or the net asset value of
the redeemed shares, excluding any reinvested dividends and capital gains.
Effective August 1, 1997, Class A's maximum sales charge was increased to
4.75%.
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities, dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $ $ $
7,000 0
CLASS T
8,000 3,000
CLASS B
0 0*
$ $ $ $
15,000 3,000
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian,
transfer agent, and shareholder servicing agent for the fund's Class A,
Class T, Class B, Initial Class, and Institutional Class shares. UMB has
entered into sub-arrangements with Fidelity Service Company, Inc. (FSC)
with respect to the Initial Class and Fidelity Investments Institutional
Operations Company, Inc. (FIIOC) with respect to Class A, Class T, Class B,
and Institutional Class to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC and FSC, affiliates of FMR,
receive account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
classes of the fund. All fees are paid to FIIOC and FSC by UMB, which is
reimbursed by each class for such payments. FIIOC and FSC pay for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ $ .39% *
351
CLASS T UMB .19% *
3,000
CLASS B UMB .35% *
1,000
INITIAL CLASS UMB .11% *
493,000
INSTITUTIONAL CLASS UMB .26% *
1,000
$ $
498,351
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
UMB also has a sub-contract with FSC, under which FSC maintains the fund's
accounting records. The fee is based on the level of average net assets for
the month plus out-of-pocket expenses.
21. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A .90% $ $
7,000
CLASS T 1.00%
27,000
CLASS B 1.65%
29,000
INSTITUTIONAL CLASS .75%
32,000
$ $
95,000
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $1,000 under the
custodian arrangement, and each applicable class' expenses were reduced as
follows under the transfer agent arrangements:
TRANSFER
AGENT
INTEREST
CREDITS
CLASS T $ $
1,000
INITIAL CLASS $
1,000
$ $
2,000
22. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 B
1997 A
CLASS A
From net investment income $ $ $ $
4,000 -
CLASS T
From net investment income $ $ $ $
77,000 50,000
CLASS B
From net investment income $ $ $ $
12,000 4,000
INITIAL CLASS
From net investment income $ $ $ $
22,839,000 49,472,000
In excess of net investment income
- 130,000
Total $ $ $ $
22,839,000 49,602,000
INSTITUTIONAL CLASS
From net investment income $ $ $ $
28,000 11,000
$ $ $ $
22,960,000 49,667,000
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT
OF SALE OF SHARES) TO JUNE 30, 1997.
B DISTRIBUTIONS FOR CLASS T, CLASS B AND INSTITUTIONAL CLASS ARE FOR THE
PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO DECEMBER 31, 1996.
23. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
AMOUNTS IN THOUSANDS 1997 A 1996 B 1997 A 1996 B
CLASS A $ $ $ $
Shares sold 62 - 503 -
Net increase (decrease) 62 - $ $ $ $
503 -
CLASS T $ $ $ $
Shares sold 204 489 1,671 3,951
Reinvestment of distributions
8 6 65 49
Shares redeemed
(358) (22) (2,908) (176)
Net increase (decrease) (146) 473 $ $ $ $
(1,172) 3,824
CLASS B $ $ $ $
Shares sold 106 31 868 250
Reinvestment of distributions
1 1 9 4
Net increase (decrease) 107 32 $ $ $ $
877 254
INITIAL CLASS $ $ $ $
Shares sold 2,919 10,284 23,846 83,373
Reinvestment of distributions
1,806 3,995 14,732 32,369
Shares redeemed
(8,195) (29,410) (66,766) (237,309)
Net increase (decrease) (3,470) (15,131) $ $ $ $
(28,188) (121,567)
INSTITUTIONAL CLASS $ $ $ $
Shares sold 110 109 903 882
Reinvestment of distributions
- 1 - 5
Shares redeemed
(76) (7) (620) (54)
Net increase (decrease) 34 103 $ $ $ $
283 833
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD MARCH 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO JUNE 30, 1997.
B SHARE TRANSACTIONS FOR CLASS T, CLASS B, INSTITUTIONAL CLASS ARE FOR THE
PERIOD JULY 1, 1996 (COMMENCEMENT OF SALE OF SHARES) TO
DECEMBER 31, 1996.
24. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ $
7,000
CLASS T
29,000
CLASS B
29,000
INITIAL CLASS
18,000
INSTITUTIONAL CLASS
32,000
$ $
115,000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Thomas D. Maher, Assistant Vice President
George A. Fischer, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Co.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Municipal Bond Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
SPARTAN(registered trademark)
(registered trademark)
MICHIGAN MUNICIPAL INCOME
FUND
(FORMERLY FIDELITY MICHIGAN MUNICIPAL
INCOME FUND)
AND
FIDELITY
MICHIGAN MUNICIPAL MONEY
MARKET FUND
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
CHECK PAGE NUMBERS !!!
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN 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 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
FIDELITY MICHIGAN 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 35 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 39 Notes to the financial statements.
PROXY VOTING RESULTS 43
</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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you the information you need
to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
SPARTAN MICHIGAN 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. Total return
reflects the change in the value of an investment assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value). You can also look at the
fund's income, as reflected in the fund's yield, to measure performance. If
Fidelity had not reimbursed certain fund expenses, the past ten years total
returns, dividends and yields would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Spartan Michigan Municipal Income Fund 2.96% 7.43% 35.65% 110.43%
Lehman Brothers Michigan Municipal 3.27% 8.40% n/a n/a
Bond Index
Michigan Municipal Debt Funds Average 2.72% 7.61% 36.75% 112.39%
CUMULATIVE TOTAL RETURNS show the fund's performance over a set period - in
this case, six months, one year, five years or 10 years. For example, if
you had 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 Michigan Municipal Bond
Index - a total return performance benchmark for Michigan investment-grade
municipal bonds with maturities of at least one year. To measure how the
fund's performance stacked up against its peers, you can compare it to the
Michigan municipal debt funds average, which reflects the performance of
Michigan tax-exempt municipal bond funds with similar objectives tracked by
Lipper Analytical Services, Inc. The past six months average represents a
peer group of 48 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Michigan Municipal Income Fund 7.43% 6.29% 7.72%
Lehman Brothers Michigan Municipal 8.40% n/a n/a
Bond Index
Michigan Municipal Debt Funds Average 7.61% 6.46% 7.81%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking the arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10162.75 10102.00
1987/08/31 10185.59 10124.73
1987/09/30 9678.97 9751.43
1987/10/31 9742.24 9785.95
1987/11/30 9950.53 10041.46
1987/12/31 10122.33 10187.16
1988/01/31 10570.15 10550.03
1988/02/29 10701.59 10661.54
1988/03/31 10455.04 10537.87
1988/04/30 10498.46 10617.96
1988/05/31 10562.56 10587.27
1988/06/30 10758.40 10742.16
1988/07/31 10852.31 10812.20
1988/08/31 10906.50 10821.72
1988/09/30 11095.26 11017.59
1988/10/31 11327.15 11211.50
1988/11/30 11235.54 11108.80
1988/12/31 11439.68 11222.45
1989/01/31 11603.27 11454.53
1989/02/28 11532.43 11323.83
1989/03/31 11536.71 11296.77
1989/04/30 11874.55 11564.95
1989/05/31 12117.47 11805.16
1989/06/30 12273.67 11965.47
1989/07/31 12386.63 12128.32
1989/08/31 12289.62 12009.58
1989/09/30 12261.13 11973.79
1989/10/31 12384.92 12120.23
1989/11/30 12556.58 12332.34
1989/12/31 12608.23 12433.22
1990/01/31 12530.47 12374.41
1990/02/28 12637.27 12484.54
1990/03/31 12632.11 12488.29
1990/04/30 12414.10 12397.87
1990/05/31 12708.54 12668.52
1990/06/30 12817.35 12779.87
1990/07/31 12997.25 12967.74
1990/08/31 12800.60 12779.44
1990/09/30 12864.39 12786.73
1990/10/31 12986.27 13018.68
1990/11/30 13240.56 13280.49
1990/12/31 13257.38 13338.26
1991/01/31 13383.35 13517.26
1991/02/28 13483.40 13634.86
1991/03/31 13510.12 13639.76
1991/04/30 13734.44 13821.17
1991/05/31 13797.56 13944.04
1991/06/30 13777.18 13930.24
1991/07/31 13994.54 14099.91
1991/08/31 14162.70 14285.60
1991/09/30 14318.16 14471.60
1991/10/31 14473.99 14601.85
1991/11/30 14527.26 14642.59
1991/12/31 14853.18 14956.82
1992/01/31 14906.97 14990.92
1992/02/29 14931.86 14995.71
1992/03/31 14948.80 15001.26
1992/04/30 15081.29 15134.77
1992/05/31 15244.70 15312.91
1992/06/30 15512.33 15569.86
1992/07/31 16078.69 16036.65
1992/08/31 15851.67 15880.29
1992/09/30 15959.29 15984.15
1992/10/31 15689.61 15827.02
1992/11/30 16073.39 16110.48
1992/12/31 16269.63 16274.97
1993/01/31 16508.09 16464.25
1993/02/28 17171.63 17059.76
1993/03/31 16975.64 16879.44
1993/04/30 17156.86 17049.75
1993/05/31 17271.19 17145.57
1993/06/30 17567.74 17431.73
1993/07/31 17554.79 17454.57
1993/08/31 17970.88 17817.97
1993/09/30 18198.24 18020.92
1993/10/31 18225.91 18055.70
1993/11/30 18107.00 17896.63
1993/12/31 18519.90 18274.43
1994/01/31 18771.43 18483.12
1994/02/28 18229.36 18004.41
1994/03/31 17405.31 17271.27
1994/04/30 17491.76 17417.73
1994/05/31 17581.29 17568.74
1994/06/30 17529.65 17461.40
1994/07/31 17838.58 17781.46
1994/08/31 17882.76 17842.99
1994/09/30 17641.20 17581.05
1994/10/31 17275.34 17268.81
1994/11/30 16731.50 16956.59
1994/12/31 17130.02 17329.81
1995/01/31 17645.34 17825.09
1995/02/28 18153.92 18343.45
1995/03/31 18002.87 18554.21
1995/04/30 18037.74 18576.11
1995/05/31 18619.28 19168.87
1995/06/30 18403.10 19002.10
1995/07/31 18520.63 19182.24
1995/08/31 18771.05 19425.47
1995/09/30 18916.30 19548.43
1995/10/31 19199.25 19832.67
1995/11/30 19566.65 20161.69
1995/12/31 19770.29 20355.45
1996/01/31 19907.79 20509.13
1996/02/29 19747.58 20370.69
1996/03/31 19454.42 20110.36
1996/04/30 19382.16 20053.44
1996/05/31 19363.77 20045.42
1996/06/30 19587.39 20263.72
1996/07/31 19760.79 20448.12
1996/08/31 19723.01 20443.21
1996/09/30 19947.67 20729.41
1996/10/31 20158.25 20963.86
1996/11/30 20527.88 21347.50
1996/12/31 20438.10 21257.84
1997/01/31 20452.98 21298.02
1997/02/28 20658.02 21493.54
1997/03/31 20362.43 21207.03
1997/04/30 20520.76 21384.53
1997/05/31 20810.97 21706.15
1997/06/30 21042.66 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Spartan Michigan Municipal Income Fund on June 30, 1987. As the chart
shows, by June 30, 1997, the value of the investment would have grown to
$21,043 - a 110.43% 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 $21,937 - a 119.37% 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 YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend returns 2.52% 5.63% 6.15% 5.40% 6.28% 6.72%
Capital appreciation 0.44% -2.25% 9.26% -12.90% 7.55% 2.82%
returns
Total returns 2.96% 3.38% 15.41% -7.50% 13.83% 9.54%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.55(cents) 27.88(cents) 61.64(cents)
Annualized dividend rate 4.87% 5.00% 5.48%
30-day annualized yield 4.62% - -
30-day annualized tax-equivalent yield 7.55% - -
</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 $11.36 over
the past one month, $11.24 over the past six months and $11.25 over the
past one year, you can compare the fund's income over these three periods.
The 30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 38.82% combined effective 1997 federal and state tax bracket, but
does not reflect the payment of the federal alternative minimum tax, if
applicable. If Fidelity has not reimbursed certain fund expenses during the
period shown, the yield and tax-equivalent yield would have been 4.59% and
7.50%, respectively.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with David Murphy, Portfolio Manager of Spartan Michigan
Municipal Income Fund
Q. DAVE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS AND PAST YEAR?
A. For the six months that ended June 30, 1997, the fund had a total return
of 2.96%. To get a sense of how the fund did relative to its peers, the
Michigan municipal debt funds average returned 2.72% for the same period,
according to Lipper Analytical Services. The Lehman Brothers Michigan
Municipal Bond Index, which tracks the types of securities in which the
fund invests, had a six-month return of 3.27% as of June 30, 1997. For the
year ending June 30, 1997, the fund returned 7.43%, while the Michigan
municipal debt funds average returned 7.61%, according to Lipper. For the
same one-year period, the Lehman Brothers index returned 8.40%.
Q. HIGHER INTEREST RATES CAST A PALL OVER THE BOND MARKET DURING THE PAST
SIX MONTHS, ALTHOUGH MUNICIPALS FARED BETTER THAN U.S. TREASURIES. WHAT
ACCOUNTS FOR THE MUNICIPAL MARKET'S RELATIVELY STRONG PERFORMANCE?
A. A favorable supply and demand scenario was the key reason. Much of the
municipal market's better performance occurred toward the end of the period
when the available supply of tax-free bonds was limited. On the demand side
of the equation, there was evidence that some investors began to question
the high levels of the stock market and re-directed some of their
investment dollars into the municipal market. Additional municipal
purchases were triggered by upcoming municipal calls. By this I mean that
municipal issuers were expected to call - or redeem - a record amount of
their outstanding debt before maturity. In anticipation of those municipal
holdings being called, many investors bought new municipal bonds in their
place, increasing demand and raising prices.
Q. WHICH INDIVIDUAL HOLDINGS PERFORMED WELL DURING THE PAST SIX MONTHS?
WHICH HOLDINGS WERE DISAPPOINTMENTS?
A. On the positive side, bonds issued by Detroit Convention Facilities for
the Cobo Hall expansion project performed well and helped the fund's
performance. These bonds are backed by a combination of taxes - including
hotel occupancy and liquor taxes - which came in stronger than expected.
The fund's holdings in bonds issued by Michigan Strategic Fund for the
Environmental Research Institute of Michigan also made a positive
contribution to performance. The issuer tendered for, or bought back, these
bonds at a profit to the fund. On the negative side, bonds issued by
Michigan Health Care Corp., which has been in bankruptcy proceedings for
the past two years, modestly detracted from the fund's performance over the
past six months.
Q. HOW DID YOU STRUCTURE THE FUND DURING THE PERIOD?
A. With regard to maturity, I sold some bonds with maturities of between 10
and 15 years to make way for more bonds with maturities of between one and
five years. Here's why: During the period, yields on longer-term bonds
essentially remained flat, while yields on shorter-term bonds rose. To give
you an example, a 15-year Aaa-rated general obligation bond ended the
period with a yield of 5.20%, almost exactly where it started the period.
In contrast, the yield on a five-year Aaa-rated general obligation bond
ended the period at 4.40%, up from 4.25%. One of the basic laws of the bond
market is that bond prices generally move in the opposite direction of
their yields, and when bond yields rise their prices tend to fall. After
their yields had risen, I bought shorter maturity bonds because I felt that
they were attractively priced, offered better yields than they had
previously and had the appropriate amount of potential return given their
maturity.
Q. WHAT WERE OTHER FUNDAMENTAL ELEMENTS OF YOUR STRATEGY?
A. I continued to keep the fund "barbelled" in terms of the various
municipal bond coupons I could choose from. If you picture a barbell, the
middle is light and the ends are heavy. That's exactly how the fund looks.
On one end of the barbell are premium-coupon bonds, which pay higher annual
income than newly issued bonds and offer downside protection should the
market fall. On the other end are discount-coupon bonds, with annual income
below newly issued securities. They offer price appreciation potential
should the market rally.
Q. ACROSS THE NATION, THE HEALTH CARE INDUSTRY IS UNDERGOING RAPID CHANGE
WITH INCREASED COMPETITION AND MASSIVE CONSOLIDATION. HAVE THOSE TRENDS
AFFECTED HEALTH CARE ORGANIZATIONS IN MICHIGAN?
A. Not so far, because Michigan health care facilities have been relatively
immune to competitive and consolidation pressures. Many observers believe
that the state's constitution prohibits for-profit health care
organizations from acquiring Michigan hospitals. In a recent example,
Columbia/HCA - probably the nation's most aggressive acquirer of hospitals
- - was rebuffed by the state attorney general when it attempted to buy a
hospital in Lansing. In choosing health care investments for the fund, I
look for strong organizations with relatively high credit ratings, such as
Henry Ford and William Beaumont hospitals in the metro Detroit area, and
the University of Michigan Health Care System in Ann Arbor.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. As far as the Michigan municipal market goes, a lot will depend on the
strength of the auto industry. In my view, there aren't any tangible signs
that auto demand is slowing. From a national perspective, I'll be watching
supply and demand trends. During the past several years, the amount of
municipal bonds outstanding has shrunk considerably and, more recently, has
helped the municipal market outperform the taxable bond market. It's my
opinion that the total supply of municipals could increase slightly by the
end of this year from current levels. The question is, will there be enough
demand to digest that supply? I believe that will depend on how investors
perceive the attractiveness of municipals relative to other fixed-income
securities and especially equity investments.
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
Michigan residents by normally
investing in investment-grade
municipal securities whose
interest is free from federal
income tax and Michigan
income tax
FUND NUMBER: 081
TRADING SYMBOL: FMHTX
START DATE: November 12,
1985
SIZE: as of June 30, 1997,
more than $446 million
MANAGER: David Murphy,
since 1996; manager,
various Fidelity and Spartan
municipal income funds;
joined Fidelity in 1989
(checkmark)
DAVID MURPHY ON THE
STRENGTH OF MICHIGAN'S
ECONOMY AND ITS FISCAL
SITUATION:
"Michigan continues to enjoy
an economic expansion, which
has been driven primarily
by the rebound in the
automotive industry. Not only
has strong auto demand added
to job growth at the "Big Three"
- - Chrysler, Ford and General
Motors - but there also have
been significant employment
gains at the companies that
supply and service the auto
makers. The city of Detroit has
been one of the primary
beneficiaries of this strength. In
recent evidence of Detroit's
rebound, General Motors is
planning to expand its
corporate headquarters at the
downtown Renaissance
Center, rather than relocate
outside the city. From a fiscal
standpoint, Michigan's
employment growth has
translated into better revenue
collections for the state and
has aided the state in building
up its "rainy day" fund. The
state has made dramatic
improvements in its fiscal
situation since the beginning
of the decade and deserves
credit for making some tough
decisions - such as
equalizing school funding
across districts in the state."
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Health Care 22.6 18.2
General Obligation 18.4 20.3
Electric Revenue 11.8 10.6
Water & Sewer 9.6 9.5
Housing 8.2 6.7
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 13.1 14.6
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, 1997
6 MONTHS AGO
Years 6.9 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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Row: 1, Col: 1, Value: 45.7
Row: 1, Col: 2, Value: 37.4
Row: 1, Col: 3, Value: 3.9
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 1.6
Row: 1, Col: 6, Value: 1.7
Row: 1, Col: 7, Value: 9.699999999999999
Aaa 52.3%
Aa, A 32.9%
Baa 7.3%
Ba, B 0.0%
Caa, C 0.6%
Non-rated 2.8%
Short-term investments 4.1%
Aaa 46.7%
Aa, A 38.4%
Baa 3.9%
Ba, B 0.0%
Caa, C 0.6%
Non-rated 0.7%
Short-term investments 9.7%
Row: 1, Col: 1, Value: 52.3
Row: 1, Col: 2, Value: 31.9
Row: 1, Col: 3, Value: 7.3
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 1.6
Row: 1, Col: 6, Value: 3.8
Row: 1, Col: 7, Value: 5.1
SHOWN AS A PERCENTAGE OF THE FUND'S INVESTMENTS. WHERE MOODY'S RATINGS ARE
NOT AVAILABLE, WE HAVE USED S&P RATINGS.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL BONDS - 90.3%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - 89.0%
Anchor Bay School Dist. 5.50% 5/1/18
(MBIA Insured) Aaa $ 2,720,000 $ 2,706,400
Clinton Township Bldg. Auth. 4.75% 11/1/10
(AMBAC Insured) Aaa 2,810,000 2,673,013
Clintondale Commty. Schools 5.50% 5/1/15 Aa2 2,205,000 2,202,244
Comstock Pub. Schools (Cap. Appreciation)
0% 5/1/05 (Cap. Guaranty Insured) Aaa 1,300,000 879,125
Davison Commty. School Dist. 5.375% 5/1/16
(FGIC Insured) Aaa 1,000,000 978,750
Dearborn Swr. Disp. Sys. Rev.:
Series A, 5.10% 4/1/12 (MBIA Insured) Aaa 1,625,000 1,572,188
6.50% 4/1/03 (MBIA Insured) Aaa 1,030,000 1,123,988
6.50% 4/1/04 (MBIA Insured) Aaa 1,095,000 1,203,131
Detroit City School Dist. Rfdg. 5.125% 5/1/07 Aa2 1,000,000 1,000,000
Detroit Convention Facs. Rev. Rfdg.
(Cobo Hall Expansion Proj.) 5.25% 9/30/12 A 12,700,000 12,287,250
Detroit Econ. Dev. Corp. Ltd. Oblig. Rev.
(Michigan Health Care Corp. Proj.)
9.10% 12/1/09 (e) - 3,665,000 659,700
Detroit Gen. Oblig.:
4.40% 4/1/98 Baa 1,005,000 1,007,643
5% 4/1/00 (FGIC Insured) Aaa 1,210,000 1,226,638
5% 4/1/01 (FGIC Insured) Aaa 1,000,000 1,013,750
Detroit Gen. Oblig. (Distributable State Aid):
5.20% 5/1/07 (AMBAC Insured) Aaa 4,000,000 4,040,000
5.25% 5/1/08 (AMBAC Insured) Aaa 7,000,000 7,052,500
5.25% 5/1/09 (AMBAC Insured) Aaa 4,500,000 4,494,375
Detroit Hosp. Fing. Auth. Facs. Rev.
(Michigan Health Care Corp. Proj.)
10% 12/1/20 (e) C 14,520,000 2,613,600
Detroit Swr. Disp. Rev.:
Series A, 6% 7/1/05 (MBIA Insured) Aaa 1,885,000 2,031,088
6.25% 7/1/07 (MBIA Insured) Aaa 1,130,000 1,248,650
5.70% 7/1/23 (FGIC Insured) Aaa 10,000,000 9,825,000
Detroit Wtr. Supply Sys. Rev. Rfdg.:
6.20% 7/1/04 (FGIC Insured) Aaa 3,795,000 4,093,856
6.25% 7/1/12 (FGIC Insured) Aaa 1,000,000 1,063,750
6.50% 7/1/15 (FGIC Insured) Aaa 16,000,000 17,900,000
Eastern Michigan Univ. Rev. 5.90% 6/1/02
(AMBAC Insured) Aaa 1,000,000 1,058,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Ferndale School Dist. Rfdg.:
6% 5/1/07 (FGIC Insured) Aaa $ 1,250,000 $ 1,354,688
6% 5/1/08 (FGIC Insured) Aaa 1,300,000 1,405,625
6% 5/1/09 (FGIC Insured) Aaa 1,300,000 1,400,750
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
6.50% 7/1/20 Baa1 5,570,000 5,583,925
Forest Hills Pub. Schools Gen. Oblig. Unltd. Tax
7.375% 5/1/15
(Pre-Refunded to 5/1/00 @101) (d) Aa 2,000,000 2,177,500
Greater Detroit Resource Recovery Auth. Rev.:
6.25% 12/13/05 (AMBAC Insured) Aaa 4,000,000 4,370,000
5.50% 12/13/04 (AMBAC Insured) Aaa 2,000,000 2,085,000
6.25% 12/13/05 (AMBAC Insured) Aaa 2,000,000 2,185,000
Gull Lake Commty. School Dist.
(Cap. Appreciation) 0% 5/1/13
(FGIC Insured) Aaa 3,000,000 1,256,250
Harbor Springs Pub. School Bldg. Unltd. Tax:
0% 5/1/11 (AMBAC Insured) Aaa 1,280,000 606,400
0% 5/1/12 (AMBAC Insured) Aaa 1,390,000 618,550
0% 5/1/13 (AMBAC Insured) Aaa 1,455,000 609,281
Hartland Consolidated School Dist. Unltd. Tax
5.125% 5/1/17 (FGIC Insured) Aaa 2,375,000 2,259,219
Holly Area School Dist.:
6.625% 5/1/03 (FGIC Insured) Aaa 1,225,000 1,345,969
6.625% 5/1/06 (FGIC Insured) Aaa 1,150,000 1,285,125
Howell Pub. Schools Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 5/1/10
(AMBAC Insured) Aaa 1,130,000 567,825
Huron Valley School Dist. Rfdg. Unltd. Tax
(Cap. Appreciation) 0% 5/1/11
(FGIC Insured) Aaa 5,830,000 2,754,675
Imlay City Commty. School Dist. Rfdg.
(Cap. Appreciation) 0% 5/1/06
(FGIC Insured) Aaa 1,375,000 885,156
Kalamazoo City School Dist. Unltd. Tax
(School Bldg. & Site) 0% 5/1/07 Aa2 1,195,000 724,469
Kent County Refuse Disp. Sys. Ltd. Tax Rfdg.
8.40% 11/1/10 Aa 2,000,000 2,068,080
Kent Hosp. Fin. Auth. Rev. Rfdg. (Butterworth Hosp.)
Series A, 7.25% 1/15/13 A1 3,685,000 4,408,181
Lakeshore Pub. Schools (Berrien County) 6.80%
5/1/06 (MBIA Insured) Aaa 1,000,000 1,138,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Lansing Bldg. Auth. Rev. (Deferred Interest) 0%
6/1/12 (AMBAC Insured) Aaa $ 3,000,000 $ 1,305,000
Lowell Area School Unltd. Tax (Cap. Appreciation)
0% 5/1/15 (FGIC Insured) (Pre-Refunded to
5/1/05 @49.088) (d) Aaa 11,375,000 3,810,625
Marquette City Hosp. Fin. Auth. Rev. Rfdg.
(Marquette Gen. Hosp.) Series C:
7.50% 4/1/07
(Pre-Refunded to 4/1/99 @102) (d) A 1,000,000 1,073,750
5.875% 4/1/11 (FSA Insured) Aaa 2,750,000 2,866,875
7.50% 4/1/19
(Pre-Refunded to 4/1/99 @102) (d) A 1,190,000 1,277,763
Mason Pub. Schools Dist. 6.50% 5/1/05
(FGIC Insured) Aaa 1,200,000 1,321,500
Michigan Bldg. Auth. Rev.:
Rfdg. Series I:
6% 10/1/00 A1 1,375,000 1,435,156
6.25% 10/1/20 A1 1,500,000 1,526,250
Series II, 6.75% 10/1/11 A1 1,000,000 1,077,500
(Chippewa Correctional)
Series I, 0% 10/1/00 (d) Aaa 2,275,000 1,959,344
(Detroit Regional):
Series I (d):
0% 10/1/99 (Escrowed to Maturity) Aaa 2,000,000 1,812,500
0% 10/1/01 (Escrowed to Maturity) Aaa 1,000,000 818,750
0% 10/1/02 (Escrowed to Maturity) Aaa 2,000,000 1,555,000
0% 10/1/04 (Escrowed to Maturity) Aaa 8,120,000 5,704,300
6.25% 10/1/01 (AMBAC Insured) Aaa 1,000,000 1,067,500
(Facs. Prog.) Series I, 5.30% 10/1/10
(AMBAC Insured) Aaa 1,300,000 1,306,500
Michigan Comprehensive Trans. Rev. Rfdg.:
Series II, 7.625% 5/1/11 A1 2,145,000 2,243,970
Series B, 5.75% 5/15/04 A1 1,275,000 1,338,750
Michigan Gen. Oblig. (College Savings)
0% 8/1/01 Aa2 1,045,000 864,738
Michigan Hosp. Fin. Auth. Rev.:
Rfdg. (Bay Med. Ctr.) Series A, 8.25% 7/1/12 A3 3,000,000 3,367,500
Rfdg. (Detroit Med. Ctr. Sys.):
Series A:
6.375% 8/15/09 A2 1,000,000 1,047,500
6.50% 8/15/18 A2 4,000,000 4,165,000
Series B, 5.50% 8/15/23 A2 3,400,000 3,217,250
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev.: - continued
Rfdg. (McLaren Obligated Group) Series A,
5.375% 10/15/13 A1 $ 4,280,000 $ 4,130,200
Rfdg. (Mercy Health Svcs.) Series T,
6% 8/15/06 Aa3 1,250,000 1,323,438
Rfdg. (Sisters of Mercy Health Corp.) 5.375%
8/15/14 (MBIA Insured) Aaa 9,950,000 9,887,813
(Crittenton Hosp.) 5.25% 3/1/14 A1 6,520,000 6,218,450
(Daughters of Charity Health Sys.)
5.50% 11/1/05 Aa 3,485,000 3,628,756
(Daughters of Charity) (Providence Hosp.)
7% 11/1/21 Aa 1,000,000 1,081,250
(Mercy Health Svcs.):
Series Q:
6% 8/15/08 (AMBAC Insured) Aaa 1,130,000 1,211,925
6% 8/15/10 (AMBAC Insured) Aaa 1,265,000 1,337,738
5.375% 8/15/26 (AMBAC Insured) Aaa 2,000,000 1,920,000
Series R, 5.25% 8/15/10 (AMBAC Insured) Aaa 2,195,000 2,186,769
(Presbyterian Villages):
6.40% 1/1/15 - 1,000,000 1,022,500
6.50% 1/1/25 - 1,225,000 1,252,563
(St. John Hosp. & Med. Ctr.):
6% 5/15/08 (AMBAC Insured) Aaa 1,615,000 1,744,200
6% 5/15/09 (AMBAC Insured) Aaa 1,710,000 1,840,388
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Series B:
5.80% 4/1/19 A+ 4,650,000 4,650,000
7.55% 4/1/23 A+ 4,750,000 5,011,250
Michigan Hsg. Dev. Auth. Single Family Mtg. Rev.:
Series A:
6.80% 12/1/16 AA+ 8,000,000 8,520,000
7.70% 12/1/16 AA+ 2,490,000 2,589,600
5.15% 12/1/26 (AMBAC Insured) Aaa 2,500,000 2,512,500
Series C:
5.95% 12/1/14 AA+ 2,500,000 2,518,750
5.90% 12/1/15 AA+ 2,000,000 2,015,000
6% 12/1/16 AA+ 2,500,000 2,518,750
5.95% 12/1/17 AA+ 2,905,000 2,937,681
Michigan Job Dev. Auth. Poll. Cont. Rev.
(General Motors Corp.) 5.55% 4/1/09 A3 8,825,000 8,847,063
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Muni. Bond Auth. Rev.:
Rfdg. (Local Gov't. Loan Prog.) Series A:
6% 10/1/03 Aa1 $ 2,490,000 $ 2,667,413
0% 12/1/04 (FGIC Insured) Aaa 2,000,000 1,390,000
0% 12/1/05 (FGIC Insured) Aaa 1,855,000 1,217,344
0% 12/1/06 (FGIC Insured) Aaa 5,000,000 3,106,250
4.75% 12/1/09 (FGIC Insured) Aaa 6,000,000 5,737,500
(Cap. Appreciation) Series A, 0% 12/1/07
(FGIC Insured) Aaa 1,000,000 588,750
(Local Govt. Loan Prog.) Group 19, 7.50%
11/1/09 (AMBAC Insured) Aaa 1,000,000 1,060,000
Michigan Pub. Pwr. Agcy. Rev. Rfdg.
(Belle River Proj.) Series A:
5.70% 1/1/03 A1 2,000,000 2,092,500
5.25% 1/1/18 A1 15,000,000 14,212,500
Michigan South Central Pwr. Agcy. Pwr. Supply Sys.
Rev. Rfdg.:
5.90% 11/1/06 (MBIA Insured) Aaa 3,000,000 3,210,000
5% 11/1/09 (AMBAC Insured) Aaa 1,675,000 1,651,968
Michigan State Univ. Rev.:
Rfdg. Series A, 6.25% 8/15/15 Aa2 3,145,000 3,247,213
6% 2/15/03 (AMBAC Insured) Aaa 1,030,000 1,098,237
6% 2/15/06 (AMBAC Insured) Aaa 1,065,000 1,140,880
Michigan Strategic Fund Ltd. Oblig. Rev.:
Rfdg. (Detroit Edison Co.):
Series AA, 6.40% 9/1/25 (MBIA Insured) Aaa 5,000,000 5,318,750
Series BB:
7% 7/15/08 (MBIA Insured) Aaa 2,000,000 2,342,500
6.50% 2/15/16 (FGIC Insured) Aaa 1,250,000 1,325,000
7% 5/1/21 (AMBAC Insured) Aaa 8,500,000 10,200,000
Rfdg. (Environmental Research Institute):
6.25% 8/15/06 A- 2,660,000 2,796,325
6.375% 8/15/12 A- 1,770,000 1,838,587
Rfdg. (Ford Co. Proj.) Series A, 7.10% 2/1/06 A1 4,000,000 4,595,000
(Gladwin Pines Nursing Home Proj.)
(Midland Hosp. Ctr.) 8.75% 1/1/08 A- 1,640,000 1,698,138
(Michigan Health Care Corp. Proj.)
9.10% 12/1/14 (e) - 1,795,000 323,100
Michigan Strategic Fund Poll. Cont. Rev. Rfdg.
(General Motors Corp.) 6.20% 9/1/20 A3 1,500,000 1,561,875
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Trunk Line Series A:
5.75% 10/1/04 A1 $ 4,145,000 $ 4,362,613
5.40% 11/1/11 (FGIC Insured) A1 1,585,000 1,590,944
Mona Shores School Dist. & School Bldg. & Site
6.75% 5/1/10 (FGIC Insured) Aaa 2,220,000 2,547,450
Monroe County Poll. Cont. Rev. (Detroit Edison Proj.)
Series CC, 7.50% 12/1/19 (AMBACInsured) Aaa 5,000,000 5,456,250
Okemos Pub. School Dist. Rfdg.:
(Cap Appreciation) 0% 5/1/12 (MBIA Insured) Aaa 2,500,000 1,112,500
0% 5/1/13 (MBIA Insured) Aaa 1,700,000 709,750
Port Huron Area School Dist. Unltd. Tax
(Cap. Appreciation) (School Bldg. & Site)
0% 5/1/08 Aa2 1,975,000 1,110,937
Rochester Community School Dist. Rfdg. Unltd. Tax
5.625% 5/1/11 (FGIC Insured) Aaa 1,000,000 1,038,750
Romulus Commty. Schools (Cap. Appreciation)
Series I, 0% 5/1/06 (FSA Insured) Aaa 3,610,000 2,323,937
Royal Oak City School Dist. Unltd. Tax 0% 5/1/05
(AMBAC Insured) Aaa 3,000,000 2,036,250
Royal Oak Hosp. Fin. Auth. Hosp. Rev. Rfdg.
(William Beaumont Hosp.):
5.50% 1/1/14 Aa3 4,000,000 4,000,000
(Cap. Appreciation) Series K, 0% 11/15/05 Aa3 5,910,000 3,885,825
St. Clair Shores Econ. Dev. Corp. Ltd. Oblig. Rev.
(Bon Secours Health Sys.) Series B,
7.50% 9/1/15 A2 1,900,000 2,035,375
St. John's Pub. Schools 6.50% 5/1/07
(FGIC Insured) Aaa 1,400,000 1,571,500
Univ. of Michigan Hosp. Rev.:
Rfdg. 5.75% 12/1/12 Aa2 9,000,000 9,090,000
Series 1990, 7% 12/1/21
(Pre-Refunded to 12/1/00 @ 102) (d) Aa 1,000,000 1,098,750
Vicksburg Commty. Schools 7% 5/1/07
(MBIA Insured) Aaa 1,750,000 1,938,125
Walled Lake Cons. School Dist. Rfdg. 5.30%
5/1/09 (MBIA Insured) Aaa 3,550,000 3,594,375
Wayne Charter County Arpt. Rev. (Sub. Lien)
(Detroit Metropolitan Arpt.):
Rfdg. Series C, 5.25% 12/1/13
(MBIA Insured) Aaa 2,000,000 1,945,000
Series B, 6.875% 12/1/11
(MBIA Insured) (b) Aaa 1,500,000 1,633,125
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Wayne County Bldg. Auth. Ltd. Tax Series A,
8% 3/1/17
(Pre-Refunded to 3/1/02 @ 102) (d) Baa2 $ 2,250,000 $ 2,607,187
West Ottawa Pub. School Dist. Rfdg. 5.25%
5/1/10 (FGIC Insured) Aaa 2,325,000 2,330,812
West Ottawa Pub. School Dist. Unltd. Tax
Gen. Oblig. (Cap. Appreciation) 0%
5/1/06 (MBIA Insured)
(Pre-Refunded to 5/1/05 @95.91) (d) Aaa 4,110,000 2,686,912
Western Michigan Univ. Rev.:
Rfdg. 6.50% 7/15/21 (AMBAC Insured)
(Pre-Refunded to 7/15/01 @102) (d) Aaa 2,500,000 2,734,374
1.67% 7/15/17 (FGIC Insured) (f) Aaa 2,500,000 2,259,374
Western Townships Util. Auth. Swr. Disp. Sys.
Ltd. Tax 8.20% 1/1/18 BBB+ 2,500,000 2,665,625
396,900,982
PUERTO RICO - 1.3%
Puerto Rico Commonwealth Pub. Impt. Rfdg.
5.50% 7/1/99 Baa1 2,500,000 2,553,125
Puerto Rico Commonwealth Urban Renewal &
Hsg. Corp. Rfdg. 7.875% 10/1/04 Baa 2,800,000 3,027,500
5,580,625
TOTAL MUNICIPAL BONDS
(Cost $401,071,869) 402,481,607
MUNICIPAL NOTES (A) - 9.7%
MICHIGAN - 9.7%
Dearborn Econ. Dev. Corp. Ltd. Oblig. Rev.
(Oakbrook Common Proj.) Series 91, 4.15%,
LOC Mellon Bank, N.A., VRDN A-1 2,900,000 2,900,000
Delta County Econ. Dev. Corp. Envir. Impt. Rev.
(Mead Escanaba Paper Co. Proj.) VRDN:
Series 1985 D, 4.05%,
LOC Credit Suisse First Boston (BK) P-1 900,000 900,000
Series 1985 F, 4.05%
LOC Bank of Nova Scotia P-1 1,400,000 1,400,000
MUNICIPAL NOTES (A) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Detroit Wtr. Supply Sys. Rev. Participating VRDN,
Series SG-6, 4.30% (MBIA Insured)
(Liquidity Facility Societe Generale, France) (g) A-1+ $ 2,570,000 $
2,570,000
Michigan Higher Ed. Student Ln. Auth. Rev.
Series XII-F, 4.25% (BPA Kredietbank, NV)
(AMBAC Insured) VRDN VMIG 1 2,200,000 2,200,000
Michigan Hosp. Fin. Auth. Rev., VRDN:
Rfdg. (Mt. Clemens Gen. Hosp.) Series 1994,
4.15%, LOC Comerica Bank - Detroit VMIG 1 1,500,000 1,500,000
(Hosp. Equip. Loan Prog.) Series A, 4.30%,
LOC First of America Bank - Michigan VMIG 1 300,000 300,000
(St. Mary's Hosp. of Livonia) Series 1996 A,
4.15%, LOC Comerica Bank - Detroit VMIG 1 1,000,000 1,000,000
Michigan Hsg. Dev. Auth. Rental Hsg. Rev. Rfdg.
(Multi-family Hsg.) Series 1997 B, 4.15%,
LOC Landesbank Hessen-Thuringen, VRDN VMIG 1 3,500,000 3,500,000
Michigan Hsg. Dev. Auth. Single Family Mtg.
Participating VRDN, Series PT-19, 4.40%
(Liquidity Facility Credit Suisse First Boston (BK))
(b) (g) A-1+ 680,000 680,000
Michigan Muni Bond Auth. RAN Series 1996-A,
4.50% 7/3/97 SP-1+ 1,120,000 1,120,033
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN:
Rfdg. (Peachwood Ctr. Associates) Series 1995,
4.15%, LOC NBD Bank NA A-1+ 1,500,000 1,500,000
(Dow Chemical Co. Proj.) Series 1992,
4.25% P-1 2,000,000 2,000,000
(Orbital Fluid Technologies, Inc. Proj.)
Series 1996, 4.30%,
LOC Comerica Bank - Detroit (b) A-1+ 1,000,000 1,000,000
Michigan Strategic Fund Poll. Cont. Rev., VRDN:
Rfdg. (Consumers Pwr. Co. Proj.) Series 1988 A,
4.05%, LOC Union Bank of Switzerland P-1 6,700,000 6,700,000
(Gen. Motors Corp. Composite) 4.20% VMIG 2 2,900,000 2,900,000
Michigan Strategic Fund Solid Waste Disp. Rev.
(Grayling Gen. Station Proj.) Series 1990, 4.25%,
LOC Barclays Bank PLC, VRDN (b) VMIG 1 2,300,000 2,300,000
Michigan Trunk Line Participating VRDN, Series
SG-87, 4.35%
(Liquidity Societe Generale, France) (g) - 1,000,000 1,000,000
Midland County Econ. Dev. Corp. Econ. Dev. Ltd.
Oblig. Rev. (Dow Chemical Co. Proj.)
Series 1993 A, 4.10%, VRDN (b) P-1 1,200,000 1,200,000
MUNICIPAL NOTES (A) - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Monroe County Econ. Dev. Corp. Rev. Rfdg.
(Detroit Edison) Series 1992 CC, 4.25%
LOC Barclays Bank PLC, VRDN P-1 $ 300,000 $ 300,000
Univ. of Michigan Regents Hosp. Rev.
Series 1992 A, 4.05%, VRDN VMIG 1 3,400,000 3,400,000
Univ. of Michigan Regents Rev. (Intercollegiate
Athletic) 4.10%, VRDN VMIG 1 200,000 200,000
Univ. of Michigan Rev. (Medical Svc.)
Series 1995-A, 4.05%, VRDN VMIG 1 2,400,000 2,400,000
Wayne Charter County Arpt. Rev. Rfdg.
(Detroit Metro. Wayne County) Series 1996 A,
4.25%, LOC Bayerische Landesbank,
VRDN (b) VMIG 1 300,000 300,000
TOTAL MUNICIPAL NOTES
(Cost $43,270,033) 43,270,033
TOTAL INVESTMENTS - 100%
(Cost $444,341,902) $ 445,751,640
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
82 30-Year Treasury Bond Contracts Sept. 1997 $ 8,996,994 $ 110,131
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.0 %
SECURITY TYPE ABBREVIATIONS
RAN - Revenue Anticipation Notes
VRDN - Variable Rate Demand Notes
LEGEND
25. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
26. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
27. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
28. Security collateralized by an amount sufficient to pay interest and
principal.
29. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
30. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
31. Provides evidence of ownership in one or more underlying municipal
bonds.
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 74.0% AAA, AA, A 84.0%
Baa 3.3% BBB 2.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.6% CC, C 0.0%
D 0.6%
The percentage not rated by both S&P and Moody's amounted to 0.7%. FMR has
determined that unrated debt securities that are lower quality account for
0.2% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
Health Care 22.6%
General Obligation 18.4
Electric Revenue 11.8
Water and Sewer 9.6
Housing 8.2
Escrowed/Prerefunded 7.0
Industrial Development 5.5
Others (individually less than 5%) 16.9
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $444,341,902. Net appreciation aggregated $1,409,738, of
which $18,885,640 related to appreciated invest-
ment securities and $17,475,902 related to depreciated investment
securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $676,169
which will expire on December 31, 2003.
At December 31, 1996, the fund was required to defer $2,475,010 of losses
on futures contracts.
SPARTAN MICHIGAN MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $444,341,902) - $ 445,751,640
See accompanying schedule
Interest receivable 5,674,375
TOTAL ASSETS 451,426,015
LIABILITIES
Payable to custodian bank $ 157,187
Payable for investments purchased 3,913,425
Payable for fund shares redeemed 179,574
Distributions payable 278,892
Accrued management fee 125,985
Payable for daily variation on futures contracts 46,125
Other payables and accrued expenses 89,519
TOTAL LIABILITIES 4,790,707
NET ASSETS $ 446,635,308
Net Assets consist of:
Paid in capital $ 445,220,924
Accumulated undistributed net realized gain (loss) (105,485)
on investments
Net unrealized appreciation (depreciation) on 1,519,869
investments
NET ASSETS, for 39,364,453 shares outstanding $ 446,635,308
NET ASSET VALUE, offering price and redemption price per $11.35
share ($446,635,308 (divided by) 39,364,453 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INVESTMENT INCOME $ 12,400,913
Interest
EXPENSES
Management fee $ 871,559
Transfer agent, accounting and custodian fees and 380,774
expenses
Non-interested trustees' compensation 1,937
Registration fees 13,503
Audit 14,716
Legal 3,766
Miscellaneous 1,153
Total expenses before reductions 1,287,408
Expense reductions (38,293) 1,249,115
NET INVESTMENT INCOME 11,151,798
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 2,887,398
Futures contracts 173,205 3,060,603
Change in net unrealized appreciation (depreciation) on:
Investment securities (1,518,647)
Futures contracts 110,131 (1,408,516)
NET GAIN (LOSS) 1,652,087
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 12,803,885
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 11,151,798 $ 25,709,105
Net investment income
Net realized gain (loss) 3,060,603 1,831,360
Change in net unrealized appreciation (depreciation) (1,408,516) (12,978,543)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 12,803,885 14,561,922
FROM OPERATIONS
Distributions to shareholders (11,151,798) (25,709,105)
From net interest income
In excess of net interest income - (80,276)
TOTAL DISTRIBUTIONS (11,151,798) (25,789,381)
Share transactions 30,255,050 57,025,517
Net proceeds from sales of shares
Reinvestment of distributions 8,252,343 19,641,907
Cost of shares redeemed (49,253,410) (101,584,850)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (10,746,017) (24,917,426)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,093,930) (36,144,885)
NET ASSETS
Beginning of period 455,729,238 491,874,123
End of period $ 446,635,308 $ 455,729,238
OTHER INFORMATION
Shares
Sold 2,691,313 5,052,266
Issued in reinvestment of distributions 733,816 1,742,412
Redeemed (4,383,687) (9,019,787)
Net increase (decrease) (958,558) (2,225,109)
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 D 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.300 $ 11.560 $ 10.580 $ 12.340 $ 11.710 $ 11.410
of period
Income from Investment .279 .630 E .611 .687 .709 .733
Operations
Net interest income
Net realized and unrealized .050 (.258) .980 (1.590) .870 .320
gain (loss)
Total from investment .329 .372 1.591 (.903) 1.579 1.053
operations
Less Distributions
From net interest income (.279) (.630) (.611) (.687) (.709) (.733)
In excess of net - (.002) - - - -
interest income F
From net realized gain - - - (.080) (.240) (.020)
In excess of net realized - - - (.090) - -
gain
Total distributions (.279) (.632) (.611) (.857) (.949) (.753)
Net asset value, end of period $ 11.350 $ 11.300 $ 11.560 $ 10.580 $ 12.340 $ 11.710
TOTAL RETURN B 2.96% 3.38% 15.41% (7.50) 13.83% 9.54%
%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 446,635 $ 455,729 $ 491,874 $ 433,694 $ 563,492 $ 463,816
(000 omitted)
Ratio of expenses to average .57% A, .59% .59% .57% .59% .61%
net assets after expense C
reductions
Ratio of net interest income to 5.04% A 5.52% 5.49% 6.04% 5.79% 6.36%
average net assets
Portfolio turnover rate 14% A 29% 29% 18% 33% 15%
</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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (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.
E NET INTEREST INCOME PER SHARE REFLECTS A PAYMENT OF APPROXIMATELY $.049
RECEIVED FROM AN ISSUER THAT IS IN BANKRUPTCY.
F THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
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 value of an
investment, assuming reinvestment of the fund's dividend income and capital
gains (the profits earned upon the sale of securities that have grown in
value). 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, 1997 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Michigan Municipal 1.54% 3.06% 14.26% 27.98%
Money Market Fund
All Tax-Free Money Market Funds Average 1.53% 3.04% 14.13% 26.56%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or since
the fund started on January 12, 1990. For example, if you had 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 all tax-free money market
funds with similar objectives tracked by IBC Financial Data, Inc. The past
six months average represents a peer group of 430 mutual funds. (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, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Michigan Municipal 3.06% 2.70% 3.36%
Money Market Fund
All Tax-Free Money Market Funds Average 3.04% 2.68% 3.23%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the
fund had performed at a constant rate each year.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
6/30/97 3/31/97 12/30/96 9/30/96 7/1/96
Fidelity Michigan Municipal 3.54% 2.89% 3.38% 3.18% 2.91%
Money Market Fund
All Tax-Free Money Market 3.48% 2.93% 3.32% 3.18% 2.89%
Funds Average
Fidelity Michigan Municipal 5.79% 4.72% 5.52% 5.20% 4.76%
Money Market Fund
Tax-equivalent
</TABLE>
Row: 1, Col: 1, Value: 3.54
Row: 1, Col: 2, Value: 3.48
Row: 2, Col: 1, Value: 2.89
Row: 2, Col: 2, Value: 2.93
Row: 3, Col: 1, Value: 3.38
Row: 3, Col: 2, Value: 3.32
Row: 4, Col: 1, Value: 3.18
Row: 4, Col: 2, Value: 3.18
Row: 5, Col: 1, Value: 2.91
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 1997 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
NOTE TO SHAREHOLDERS: Diane McLaughlin became Portfolio Manager of Fidelity
Michigan Municipal Money Market Fund on July 1, 1997, after the period
ended.
Q. DIANE, WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS?
A. While the Federal Reserve Board in mid-1996 had stated its bias toward
raising short-term interest rates to dampen economic growth and head off
inflation, it had not acted by early 1997 and the market became complacent
with steady Fed policy. That sentiment changed in late February, however,
after Fed Chairman Alan Greenspan's Humphrey-Hawkins testimony before
Congress. Greenspan outlined his concerns that low unemployment might exert
upward pressure on the economy's core inflation. More importantly, he
mentioned the possibility that the Fed might raise the rate banks charge
each other for overnight loans - known as the fed funds target rate - from
the 5.25% level it had maintained since January 1996. The rationale behind
such a move would be to raise rates to curb inflation before it passed
through to the consumer. Shortly after Greenspan's remarks, data for
February showed an additional 293,000 non-farm jobs had been added to the
economy, lowering unemployment to 5.3%. Interest rates rose as the Fed's
March 25 Open Market Committee meeting approached and fears heightened that
there would be a shift in Fed policy. At that meeting, the Fed raised the
fed funds target rate by 0.25% to 5.50% as expected.
Q. HOW HAS THE ECONOMY PERFORMED SINCE THE FED'S MARCH MEETING?
A. First quarter 1997 data indicated continued economic strength, with
gross domestic product growing at a stronger-than-expected annual rate of
nearly 6%. In addition, in April unemployment fell to 4.9%, the lowest
level since 1973. Since then, economic data has shown signs of a slowdown
during the second quarter. Perhaps more importantly, inflation continues to
remain in check. In fact, in the first half of the year there were six
consecutive monthly drops in the producer price index, and the first half
of the year's consumer price index was the lowest in 10 years.
Q. WHAT WAS THE FUND'S STRATEGY DURING THE PERIOD?
A. Early in the period, the fund's maturity was at 47 days. As strong
first-quarter economic data was released, however, the fund's maturity
rolled down in anticipation of higher rates. The maturity reached a low of
19 days in early May, and ended the period at 24 days. Despite the lack of
an increase in rates by the Fed, the fund didn't give up yield by having a
shorter maturity. In fact, the fund actually picked up yield by having a
larger percentage invested in variable-rate demand notes (VRDNs) -
variable-rate securities that can be redeemed on short notice, typically
one or seven days. Year-to-date, these VRDNs have been priced at
historically attractive levels relative to the targeted fed funds rate.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1997, was 3.54%, compared to
3.39% six months ago. The latest yield was the equivalent of a taxable
yield of 5.79% for Michigan investors in the 38.82% combined federal and
state tax bracket. The fund's total return during the six-month period was
1.54%. That beat the total return of 1.53% for the all tax-free money
market funds average, according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. The Fed may not need to raise short-term rates further if the pace of
economic growth persists without any significant signs of inflation. The
fund plans to purchase one-year paper during the municipal market's annual
note borrowing season. The rates offered by these securities typically
increase as most borrowers issue notes at the same time, causing a
temporary imbalance between supply and demand. The fund will, however,
attempt to keep its maturity relatively neutral. This position will allow
me to extend the fund's average maturity with higher-yielding notes, if a
pick-up in
economic growth in the third and fourth quarters leads to price increases
and further action by the Fed.
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 tax-free
income while maintaining
a stable $1 share price by
investing in high-quality,
short-term municipal money
market securities
TRADING SYMBOL: FMIXX
FUND NUMBER: 420
START DATE: January 12, 1990
SIZE: as of June 30, 1997,
more than $264 million
MANAGER: Diane
McLaughlin, since July 1997;
manager, various Fidelity
and Spartan municipal
money market funds; joined
Fidelity in 1992
(checkmark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
6/30/97 12/31/96 6/30/96
0 - 30 79 69 69
31 - 90 12 11 14
91 - 180 8 9 11
181 - 397 1 11 6
WEIGHTED AVERAGE MATURITY
6/30/97 12/31/96 6/30/96
Michigan Municipal
Money Market Fund 24 days 47 days 46 days
All Tax-Free Money Market
Funds Average* 44 days 51 days 50 days
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Row: 1, Col: 1, Value: 69.0
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 14.0
Row: 1, Col: 5, Value: 2.0
Row: 1, Col: 1, Value: 66.0
Row: 1, Col: 2, Value: 17.0
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 11.0
Row: 1, Col: 5, Value: 4.0
Variable rate
demand notes
(VRDNs) 70%
Commercial
paper (including
CP mode) 15%
Tender bonds 0%
Municipal
notes 14%
Other 1%
Variable rate
demand notes
(VRDNs) 68%
Commercial
paper (including
CP mode) 17%
Tender bonds 1%
Municipal
notes 11%
Other 3%
* SOURCE: IBC'S MONEY FUND REPORT (registered trademark)
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL SECURITIES (A) - 100.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - 100.0%
Cornell Township Econ. Dev. Corp. Ind. Dev. Rev. Rfdg. Bonds
(Mead-Escana Paper Co. Proj.) Series 1990, 3.60%
8/12/97, LOC Credit Suisse First Boston (BK) CP mode $ 1,300,000 $
1,300,000
Delta County Econ. Dev. Corp. Envir. Impt. Rev.
(Mead-Escanaba Paper Co. Proj.) 4.15%,
LOC Union Bank of Switzerland, VRDN (b) 400,000 400,000
Detroit Downtown Dev. Auth. Rev. Rfdg. (Millender Ctr. Proj.)
Series 1988, 4.35%, LOC Sumitomo Bank Ltd., VRDN 1,000,000 1,000,000
Detroit School Dist. BAN 4.50% 5/1/98 3,600,000 3,617,424
Detroit Wtr. Supply Sys. Participating VRDN (c):
Series SG-6, 4.30% (Liquidity Facility Societe Generale, France)
(MBIA Insured) 3,000,000 3,000,000
Series SG-64, 4.35% (Liquidity Facility Societe Generale, France)
(MBIA Insured) 2,000,000 2,000,000
Detroit Wtr. & Swr. Disposal Rev. Bonds 6.75% 7/1/97 1,500,000 1,530,000
Flint Econ. Dev. Corp. Ltd. Oblig. Rev.
(Genessee County Real Estate Proj.) 4.20%,
LOC NBD Bank NA, VRDN (b) 1,000,000 1,000,000
Genesee County Econ Dev. Corp. Ltd. Oblig. Econ. Dev. Rev.
(Creative Foam Corp. Proj.) Series 1994, 4.20%,
LOC NBD Bank NA, VRDN (b) 3,000,000 3,000,000
Georgetown Charter Township Ind. Dev. Rev.
(J&F Steel Corp. Proj.) Series 1989, 4.30%,
LOC Societe Generale, France, VRDN (b) 1,000,000 1,000,000
Grand Rapids Econ. Dev. Corp. Ltd. Oblig. Rev.
(Holland Home Proj.) Series 1994 B, 4.20%,
LOC Old Kent Bank - Michigan, VRDN 2,250,000 2,250,000
Jackson County Econ. Dev. Corp. Rev.
(SPX Corp. Proj.) 3.85%,
LOC NBD Bank NA, VRDN 2,000,000 2,000,000
Kalamazoo Econ. Dev. Corp. Rev. Rfdg.
(La Quinta Motor Inns) Series 1991, 4.25%,
LOC NationsBank NA, VRDN 1,890,000 1,890,000
Livonia Econ. Dev. Corp., VRDN (b):
(Ajluni Proj.) 4.20%, LOC NBD Bank NA 2,000,000 2,000,000
(Foodland Distributors Corp.) 4.30%,
LOC Comerica Bank - Detroit 2,100,000 2,100,000
Melvindale Econ. Dev. Corp. Rev. (Des Jardins Ltd.)
Series 1990 A, 4.50%,
LOC Comerica Bank - Detroit, VRDN (b) 600,000 600,000
Michigan Bldg. Auth. Rev. Bonds Series 1, 3.90% 10/1/97 1,000,000
1,000,600
Michigan Gen. Oblig. TAN 4.50% 9/30/97 13,400,000 13,424,144
Michigan Higher Ed. Auth. Rev. (Davenport College of Bus.)
Series 1997, 4.20%, LOC Old Kent Bank - Michigan, VRDN 1,000,000
1,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Higher Ed. Student Loan Auth. Rev., VRDN (b):
Rfdg. Series XII-B, 4.25% (AMBAC Insured)
(BPA Kredietbank, NV) $ 9,600,000 $ 9,600,000
Rfdg. Series XII-F, 4.25% (MBIA Insured)
(BPA Kredietbank, NV) 2,200,000 2,200,000
Series XII-D, 4.25% (AMBAC Insured)
(BPA Kredietbank, NV) 5,400,000 5,400,000
Michigan Hosp. Fin. Auth. REv., VRDN:
(Chelsea Commty. Hosp.) Series 1995, 4.15%,
LOC Comerica Bank - Detroit 1,000,000 1,000,000
(Hospital Equip. Loan Prog.):
Series 1995 A, 4.30%,
LOC First of America Bank - Michigan 700,000 700,000
Series A, 4.30%, LOC First of America Bank - Michigan 11,100,000
11,100,000
4.30%, LOC First of America Bank - Michigan 4,200,000 4,200,000
Michigan Hsg. Dev. Auth. Multi-Family Hsg. Rev. Bonds
Series 1988 A (b):
3.80% 8/7/97,
LOC Credit Suisse First Boston (BK) CP mode 2,135,000 2,135,000
3.75% 8/26/97,
LOC Credit Suisse First Boston (BK) CP mode 4,000,000 4,000,000
3.75% 8/27/97,
LOC Credit Suisse First Boston (BK) CP mode 2,000,000 2,000,000
Michigan Hsg. Dev. Auth. Participating VRDN (b) (c):
Series PT-19 4.40%
(Liquidity Facility Credit Suisse First Boston (BK)) 6,670,000 6,670,000
Series PT-38, 4.40%
(FSA Insured) (Liquidity Facility Commerzbank AG) 4,710,000 4,710,000
Series PT-58, 4.40%
(Liquidity Facility Credit Suisse First Boston (BK) 8,175,000 8,175,000
Michigan Hsg. Dev. Auth. Rental Rev., VRDN:
Series 1994 C, 4.35%,
LOC Credit Suisse First Boston (BK) 1,000,000 1,000,000
Series 1997 B, 4.15%,
LOC Landesbank Hessen-Thuringen 5,300,000 5,300,000
Michigan Muni. Bond Auth. RAN:
Series 1996 A, 4.50% 7/3/97 13,500,000 13,500,419
Series 1996 B, 4.50% 7/25/97 2,000,000 2,000,631
Series 1996 D, 4.50% 9/19/97 5,000,000 5,005,607
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ind. Dev. Rev., VRDN:
(Althaus Family Investors II) Series 1997, 4.35%,
LOC Huntington Nat'l. Bank Columbus OH $ 2,800,000 $ 2,800,000
(Michigan Sugar Co.-Croswell Proj.) 4.20%,
LOC SunTrust Bank of Atlanta 2,500,000 2,500,000
Michigan Strategic Fund Ltd. Oblig. Rev., VRDN:
(C-Tec, Inc. Proj.) 4.30%, LOC SunTrust Bank of Atlanta (b) 1,500,000
1,500,000
(Detroit Edison) 4.25%, LOC Barclays Bank PLC 2,800,000 2,800,000
(Doss Ind. Dev. Co.) 4.20%,
LOC NBD Bank NA 3,800,000 3,800,000
(Envir. Quality Co. Proj.) Series 1995, 4.30%,
LOC Comerica Bank - Detroit 1,500,000 1,500,000
(Hi Tech Mold & Engineering) 4.20%,
LOC NBD Bank NA (b) 1,200,000 1,200,000
(Michigan Sugar Co.Caro Proj.) Series 1991,4.20%,
LOC SunTrust Bank of Atlanta 1,500,000 1,500,000
(Orbital Fluid Tech Proj.) Series 1996,
4.30%, LOC Comerica Bank - Detroit (b) 2,500,000 2,500,000
(PBL Enterprises, Inc.) Series 1997, 4.40%,
LOC Comerica Bank - Detroit (b) 3,500,000 3,500,000
(R.H. Wyner Proj.) Series 1996, 4.20%,
LOC State Street Bank & Trust Co. Boston 2,125,000 2,125,000
(TEI Investments, LLC Proj.) 4.30%,
LOC Comerica Bank - Detroit (b) 1,000,000 1,000,000
(The Spiratex Co. Proj.) Series 1994, 4.20%
LOC NBD Bank NA (b) 2,600,000 2,600,000
(Ultimate Hydroforming Inc. Proj.) 4.20%,
LOC NBD Bank NA (b) 800,000 800,000
(Uni Boring Co. Inc. Proj.) Series 1992, 4.20%
LOC NBD NA 1,800,000 1,800,000
(United Waste Sys. Proj.) Series 1995, 4.30%,
LOC Bank of America 4,300,000 4,300,000
Michigan Strategic Fund Poll. Cont. Rev., VRDN:
Rfdg. (Consumers Pwr. Co. Proj.) Series 1988 A, 4.05%,
LOC Union Bank of Switzerland 3,700,000 3,700,000
(General Motors Corp. Proj.) 4.20% 5,790,000 5,790,000
Michigan Strategic Fund Rev. Bonds
(Dow Chemical):
Series 1986:
3.55% 7/14/97, CP mode 2,000,000 2,000,000
, 3.80% 7/16/97, CP mode 2,000,000 2,000,000
3.65% 8/11/97, CP mode 2,000,000 2,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Rev. Bonds - continued
(Dow Chemical): - continued
Series 1988 (b):
3.95% 7/18/97, CP mode $ 3,700,000 $ 3,700,000
4% 8/7/97, CP mode 2,000,000 2,000,000
3.85% 8/13/97, CP mode 3,000,000 3,000,000
3.90% 8/14/97, CP mode 3,000,000 3,000,000
3.70% 8/20/97, CP mode 4,700,000 4,700,000
3.80% 8/20/97, CP mode 3,000,000 3,000,000
Michigan Strategic Fund Solid Waste Disp. Rev., VRDN:
(Grayling Gen. Station Proj.) Series 1990, 4.25%,
LOC Barclays Bank Ltd. (b) 8,900,000 8,900,000
(Great Lakes Recovery) 4.25%,
LOC NBD Bank NA (b) 3,000,000 3,000,000
Michigan Trunk Line Participating VRDN (c):
Series SG-44, 4.35%
(Liquidity Facility Societe Generale, France) 5,830,000 5,830,000
Series SG-87, 4.35% (FGIC Insured)
(Liquidity Facility Societe Generale, France) 3,000,000 3,000,000
Mona Shores School Dist. Participating VRDN,
Series SG-26, 4.35%
(Liquidity Facility Societe Generale, France) (c) 8,175,000 8,175,000
Monroe Poll. Cont. Participating VRDN,
Series 97M, 4.40% (AMBAC Insured)
(Liquidity Facility Caisse Des Depots et Consignations) (b)(c) 3,515,000
3,515,000
Rochester Hills Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cardell Corp.) 4.25%,
LOC Comerica Bank - Detroit, VRDN (b) 200,000 200,000
Sterling Heights Econ. Dev. Corp. Ltd. Oblig. Rev.
(Cherrywood Ctr. Assoc. Proj.) 4.30%,
LOC Comerica Bank - Detroit, VRDN (b) 4,700,000 4,700,000
Tolfree Memorial Hosp. Corp. Rev., VRDN:
Series 1996 B, 4.20%,
LOC First of America Bank - Michigan 3,500,000 3,500,000
Series 1997 D, 4.20%,
LOC First of America Bank - Michigan 1,600,000 1,600,000
Wayne County Arpt. Rev. Rfdg., VRDN (b):
Series 1996 A, 4.25%,
LOC Bayerische Landesbank Girozentrale 11,400,000 11,400,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Wayne County Arpt. Rev. Rfdg., VRDN (b): - continued
Series 1996 B, 4.20%,
LOC Bayerische Landesbank Girozentrale $ 1,000,000 $ 1,000,000
Wayne County Downriver Swr. Disposal Sys. Bonds,
3.80% 10/9/97, LOC Comerica Bank - Detroit, CP mode 5,460,000 5,460,000
TOTAL INVESTMENTS - 100% $264,203,825
Total Cost for Income Tax Purposes $ 264,203,825
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
CP - Commercial Paper
RAN - 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. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Provides evidence of ownership in one or more underlying municipal
bonds.
INCOME TAX INFORMATION
At December 31, 1996, the fund had a capital loss carryforward of
approximately $96,800 of which $1,600, $1,700, $10,300, $39,100, $4,800 and
$39,300 will expire on December 31, 1998, 1999, 2001, 2002, 2003 and 2004,
respectively.
FIDELITY MICHIGAN MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value - $ 264,203,825
See accompanying schedule
Cash 2,145,268
Interest receivable 2,115,713
TOTAL ASSETS 268,464,806
LIABILITIES
Payable for investments purchased $ 3,617,424
Distributions payable 23,248
Accrued management fee 86,137
Other payables and accrued expenses 61,551
TOTAL LIABILITIES 3,788,360
NET ASSETS $ 264,676,446
Net Assets consist of:
Paid in capital $ 264,781,678
Accumulated net realized gain (loss) on investments (105,232)
NET ASSETS, for 264,781,678 shares outstanding $ 264,676,446
NET ASSET VALUE, offering price and redemption price per $1.00
share ($264,676,446 (divided by) 264,781,678 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 4,760,359
EXPENSES
Management fee $ 506,450
Transfer agent, accounting and custodian fees and 251,959
expenses
Non-interested trustees' compensation 841
Registration fees 20,085
Audit 18,881
Legal 3,362
Miscellaneous 1,913
Total expenses before reductions 803,491
Expense reductions (1,932) 801,559
NET INTEREST INCOME 3,958,800
NET REALIZED GAIN (LOSS) ON INVESTMENTS (8,446)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,950,354
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
INCREASE (DECREASE) IN NET ASSETS
Operations $ 3,958,800 $ 6,967,085
Net interest income
Net realized gain (loss) (8,446) (39,267)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,950,354 6,927,818
FROM OPERATIONS
Distributions to shareholders from net interest income (3,958,800) (6,967,085)
Share transactions at net asset value of $1.00 per 295,793,367 498,526,631
share
Proceeds from sales of shares
Reinvestment of distributions from net interest 3,778,067 6,658,005
income
Cost of shares redeemed (295,478,200) (475,812,666)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES 4,093,234 29,371,970
RESULTING FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,084,788 29,332,703
NET ASSETS
Beginning of period 260,591,658 231,258,955
End of period $ 264,676,446 $ 260,591,658
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 1992
<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 Investment .015 .030 .033 .024 .020 .026
Operations
Net interest income
Less Distributions
From net interest (.015) (.030) (.033) (.024) (.020) (.026)
income
Net asset value, end $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
of period
TOTAL RETURN B 1.54% 3.00% 3.38% 2.44% 1.98% 2.66%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 264,676 $ 260,592 $ 231,259 $ 221,735 $ 175,190 $ 160,817
(000 omitted)
Ratio of expenses to .63% A .62% .63% .61% .62% .49%
average net assets C
Ratio of expenses to .62% A .61% .63% .61% .62% .49%
average net assets ,D D
after expense
reductions
Ratio of net interest 3.08% A 2.96% 3.32% 2.45% 1.96% 2.64%
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 AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
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, 1997 (Unaudited)
25. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Michigan Municipal Income Fund(the income fund) (formerly Fidelity
Michigan Municipal Income fund) is a fund of Fidelity Municipal Trust.
Fidelity Michigan 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 money market fund and the income 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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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 futures
and options transactions, market discount and losses deferred due to
futures and options.
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
which will reverse in a subsequent period. Distributions in excess of net
investment income 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.
26. OPERATING POLICIES.
FUTURES CONTRACTS. The income fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains and losses are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
27. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND Purchases and sales of securities, other than short-term
securities, aggregated $28,504,821 and $62,450,908, respectively.
The market value of futures contracts opened and closed during the period
amounted to $17,704,751 and $8,880,962, respectively.
28. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of each fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. The annual individual fund fee rate is .25%. 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. For the period, the
management fees were equivalent to annualized rates of .39% and .40%,
respectively of average net assets 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.
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 Company, Inc. (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 $275,438 and $92,237 for the income fund and $215,671 and
$28,620 for the money market fund, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .13% and .17% 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 $4,390.
29. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the income fund's
average net assets. For the period, the reimbursement reduced expenses by
$36,313.
5. EXPENSE REDUCTIONS - CONTINUED
In addition, each fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During the
period, the custodian and transfer agent fees were reduced by $1,079 and
$901, respectively, for the income fund and $0 and $1,932, respectively,
for the money market fund, under these arrangements.
PROXY VOTING RESULTS
A special meeting of the Fidelity Michigan Municipal Money Market Fund
shareholders was held on July 16, 1997. The results of votes taken among
shareholders on proposals are listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 444,689,929.498 96.136
Withheld 17,871,441.790 3.864
TOTAL 462,561,371.288 100.000
RALPH F. COX
Affirmative 443,768,598.498 95.937
Withheld 18,792,772.790 4.063
TOTAL 462,561,371.288 100.000
PHYLLIS BURKE DAVIS
Affirmative 443,103,899.148 95.794
Withheld 19,457,472.140 4.206
TOTAL 462,561,371.288 100.000
ROBERT M. GATES
Affirmative 443,950,387.378 95.977
Withheld 18,610,983.910 4.023
TOTAL 462,561,371.288 100.000
EDWARD C. JOHNSON 3RD
Affirmative 444,259,190.958 96.043
Withheld 18,302,180.330 3.957
TOTAL 462,561,371.288 100.000
E. BRADLEY JONES
Affirmative 442,923,945.528 95.755
Withheld 19,637,425.760 4.245
TOTAL 462,561,371.288 100.000
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 444,464,359.398 96.088
Withheld 18,097,011.890 3.912
TOTAL 462,561,371.288 100.000
PETER S. LYNCH
Affirmative 444,937,445.098 96.190
Withheld 17,623,926.190 3.810
TOTAL 462,561,371.288 100.000
WILLIAM O. MCCOY
Affirmative 444,154,888.538 96.021
Withheld 18,406,482.750 3.979
TOTAL 462,561,371.288 100.000
GERALD C. MCDONOUGH
Affirmative 443,149,018.198 95.803
Withheld 19,412,353.090 4.197
TOTAL 462,561,371.288 100.000
MARVIN L. MANN
Affirmative 444,770,167.908 96.154
Withheld 17,791,203.380 3.846
TOTAL 462,561,371.288 100.000
THOMAS R. WILLIAMS
Affirmative 444,019,634.298 95.992
Withheld 18,541,736.990 4.008
TOTAL 462,561,371.288 100.000
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 435,395,650.683 94.127
Against 13,012,889.495 2.813
Abstain 14,152,831.110 3.060
TOTAL 462,561,371.288 100.000
PROPOSAL 3
To amend the Trust Instrument to provide voting rights based on a
shareholder's total dollar investment in a fund, rather than on the number
of shares owned.
# OF TRUST % OF TRUST
SHARES VOTED SHARES VOTED
Affirmative 409,553,827.698 88.540
Against 31,050,994.330 6.713
Abstain 21,856,323.260 4.725
Not Voted 100,226.000 .022
TOTAL 462,561,371.288 100.000
# OF FUND % OF FUND
SHARES VOTED SHARES VOTED
Affirmative 123,195,674.730 87.113
Against 11,069,853.055 7.827
Abstain 7,155,455.420 5.060
TOTAL 141,420,983.205 100.000
PROPOSAL 4
To approve an amended management contract for the fund that would reduce
the management fee payable to FMR by the fund as FMR's assets under
management increase.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 118,860,493.150 84.047
Against 11,375,896.885 8.044
Abstain 11,184,593.170 7.909
TOTAL 141,420,983.205 100.000
PROPOSAL 5
Senior Securities - To add the ability to issue senior securities to the
extent permitted under the Investment Company Act of 1940 Act.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 114,718,335.680 81.118
Against 13,791,069.795 9.752
Abstain 12,911,577.730 9.130
TOTAL 141,420,983.205 100.000
PROPOSAL 6
Borrowing - To amend the borrowing limitation to require a reduction in
borrowing if borrowings exceed the 33 1/3% limit for any reason rather than
solely because of a decline in net assets.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 115,044,543.180 81.349
Against 14,002,096.055 9.901
Abstain 12,374,343.970 8.750
TOTAL 141,420,983.205 100.000
PROPOSAL 7
Concentration - To standardize language and explicitly exclude "tax-exempt
obligations issued or guaranteed by a U.S. territory or possession or a
state or local government, or a political subdivision thereof" from the
limitation on industry concentration.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 117,166,083.345 82.849
Against 13,470,024.720 9.525
Abstain 10,784,875.140 7.626
TOTAL 141,420,983.205 100.000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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
INVESTMENT SUB-ADVISER,
MONEY MARKET FUND
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President, FIXED INCOME FUNDS
Boyce Greer, Vice President, MONEY
MARKET FUNDS
David L. Murphy, Vice President -
INCOME FUND
Diane M. McLaughlin, Vice President - MONEY MARKET FUND
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant
Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
and
Fidelity Service Company, Inc.
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 LINE FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(registered trademark)
OHIO MUNICIPAL INCOME
FUND
(FORMERLY FIDELITY OHIO MUNICIPAL INCOME FUND)
AND
FIDELITY
OHIO MUNICIPAL MONEY MARKET
FUND
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
SPARTAN 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 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
PERFORMANCE 26 How the fund has done over time.
FUND TALK 28 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 30 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 31 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 39 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 43 Notes to the financial statements.
PROXY VOTING RESULTS 46
</TABLE>
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you the information you need
to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
SPARTAN 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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits the fund earned
upon the sale of securities that have grown in value). You can also look at
the fund's income, as reflected in the fund's yield, to measure
performance. If Fidelity had not reimbursed certain fund expenses total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTH YEAR YEARS YEARS
S
Spartan Ohio Municipal Income Fund 2.82% 8.04% 38.37% 116.19%
Lehman Brothers Ohio 4 Plus Year 3.06% 8.13% n/a n/a
Municipal Bond Index
Ohio Municipal Debt Funds Average 2.67% 7.50% 36.98% 109.94%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or 10
years. For example, if you had 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 - a total return performance
benchmark for Ohio investment-grade municipal bonds with maturities of at
least four years. 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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 52 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Ohio Municipal Income Fund 8.04% 6.71% 8.01%
Lehman Brothers Ohio 4 Plus Year 8.13% n/a n/a
Municipal Bond Index
Ohio Municipal Debt Funds Average 7.50% 6.49% 7.68%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each funds total return, then taking the arithmetic average. This may
produce a slightly different figure then that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10146.32 10102.00
1987/08/31 10156.60 10124.73
1987/09/30 9625.84 9751.43
1987/10/31 9637.82 9785.95
1987/11/30 9899.16 10041.46
1987/12/31 10081.60 10187.16
1988/01/31 10546.68 10550.03
1988/02/29 10687.36 10661.54
1988/03/31 10410.16 10537.87
1988/04/30 10461.46 10617.96
1988/05/31 10534.28 10587.27
1988/06/30 10731.89 10742.16
1988/07/31 10826.55 10812.20
1988/08/31 10848.68 10821.72
1988/09/30 11050.33 11017.59
1988/10/31 11285.10 11211.50
1988/11/30 11199.85 11108.80
1988/12/31 11384.96 11222.45
1989/01/31 11549.00 11454.53
1989/02/28 11451.43 11323.83
1989/03/31 11452.53 11296.77
1989/04/30 11761.89 11564.95
1989/05/31 12017.71 11805.16
1989/06/30 12174.46 11965.47
1989/07/31 12275.09 12128.32
1989/08/31 12148.63 12009.58
1989/09/30 12091.16 11973.79
1989/10/31 12247.17 12120.23
1989/11/30 12423.86 12332.34
1989/12/31 12521.84 12433.22
1990/01/31 12404.34 12374.41
1990/02/28 12544.65 12484.54
1990/03/31 12558.92 12488.29
1990/04/30 12368.01 12397.87
1990/05/31 12688.42 12668.52
1990/06/30 12819.39 12779.87
1990/07/31 13012.11 12967.74
1990/08/31 12807.45 12779.44
1990/09/30 12905.28 12786.73
1990/10/31 13089.30 13018.68
1990/11/30 13396.71 13280.49
1990/12/31 13460.86 13338.26
1991/01/31 13610.12 13517.26
1991/02/28 13695.89 13634.86
1991/03/31 13720.99 13639.76
1991/04/30 13935.03 13821.17
1991/05/31 14049.07 13944.04
1991/06/30 13998.51 13930.24
1991/07/31 14191.31 14099.91
1991/08/31 14333.25 14285.60
1991/09/30 14502.81 14471.60
1991/10/31 14633.46 14601.85
1991/11/30 14658.91 14642.59
1991/12/31 15001.59 14956.82
1992/01/31 15028.25 14990.92
1992/02/29 15037.98 14995.71
1992/03/31 15026.88 15001.26
1992/04/30 15147.80 15134.77
1992/05/31 15352.91 15312.91
1992/06/30 15623.73 15569.86
1992/07/31 16074.92 16036.65
1992/08/31 15895.59 15880.29
1992/09/30 15990.00 15984.15
1992/10/31 15698.99 15827.02
1992/11/30 16117.30 16110.48
1992/12/31 16301.24 16274.97
1993/01/31 16514.22 16464.25
1993/02/28 17102.50 17059.76
1993/03/31 16902.73 16879.44
1993/04/30 17057.80 17049.75
1993/05/31 17143.67 17145.57
1993/06/30 17428.82 17431.73
1993/07/31 17454.68 17454.57
1993/08/31 17860.98 17817.97
1993/09/30 18074.67 18020.92
1993/10/31 18086.55 18055.70
1993/11/30 17932.75 17896.63
1993/12/31 18348.46 18274.43
1994/01/31 18571.48 18483.12
1994/02/28 18078.46 18004.41
1994/03/31 17313.53 17271.27
1994/04/30 17445.53 17417.73
1994/05/31 17564.01 17568.74
1994/06/30 17537.19 17461.40
1994/07/31 17814.41 17781.46
1994/08/31 17870.90 17842.99
1994/09/30 17653.20 17581.05
1994/10/31 17309.83 17268.81
1994/11/30 16929.67 16956.59
1994/12/31 17330.73 17329.81
1995/01/31 17850.78 17825.09
1995/02/28 18346.30 18343.45
1995/03/31 18535.96 18554.21
1995/04/30 18574.42 18576.11
1995/05/31 19120.29 19168.87
1995/06/30 18954.78 19002.10
1995/07/31 19059.42 19182.24
1995/08/31 19282.17 19425.47
1995/09/30 19434.22 19548.43
1995/10/31 19692.83 19832.67
1995/11/30 19999.37 20161.69
1995/12/31 20171.83 20355.45
1996/01/31 20325.57 20509.13
1996/02/29 20192.37 20370.69
1996/03/31 19905.85 20110.36
1996/04/30 19828.12 20053.44
1996/05/31 19805.29 20045.42
1996/06/30 20009.85 20263.72
1996/07/31 20182.66 20448.12
1996/08/31 20179.38 20443.21
1996/09/30 20497.51 20729.41
1996/10/31 20746.47 20963.86
1996/11/30 21138.13 21347.50
1996/12/31 21024.92 21257.84
1997/01/31 21075.38 21298.02
1997/02/28 21246.62 21493.54
1997/03/31 20945.13 21207.03
1997/04/30 21087.49 21384.53
1997/05/31 21382.27 21706.15
1997/06/30 21618.72 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Spartan Ohio Municipal Income Fund on June 30, 1987. As the chart shows,
by June 30, 1997, the value of the investment would have grown to $21,619 a
116.19% increase on the initial investment. For comparison, look at how the
Lehman Brothers Municipal Bond Index - a total return performance benchmark
for investment-grade municipal bonds with maturities of at least one year -
did over the same period. With dividends reinvested, the same $10,000 would
have grown to $21,937 - a 119.37% 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 YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend returns 2.47% 4.98% 6.22% 5.37% 6.19% 6.63%
Capital 0.35% -0.75% 10.17% -10.92% 6.37% 2.03%
appreciation
returns
Total returns 2.82% 4.23% 16.39% -5.55% 12.56% 8.66%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.55(cents) 27.68(cents) 55.98(cents)
Annualized dividend rate 4.83% 4.92% 4.93%
30-day annualized yield 4.68% - -
30-day annualized tax-equivalent yield 7.86% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $11.45 over
the past one month, $11.35 over the past six months and $11.35 over the
past one 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 40.48% combined effective 1997 federal and state tax bracket, but
does not reflect the payment of the federal alternative minimum tax, if
applicable. If Fidelity had not reimbursed certain fund expenses during the
period shown, the yield and tax-equivalent yield would have been 4.65% and
7.81%.
SPARTAN OHIO MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: George Fischer became Portfolio Manager of Spartan
Ohio Municipal Income Fund on April 1, 1997.
Q. GEORGE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
A. For the six months that ended June 30, 1997, the fund had a total return
of 2.82%. To get a sense of how the fund did relative to its peers, the
Ohio municipal debt funds average returned 2.67% for the same period,
according to Lipper Analytical Services. The Lehman Brothers Ohio 4 Plus
Year Municipal Bond Index, which tracks the types of securities in which
the fund invests, had a six-month return of 3.06%. For the year that ended
June 30, 1997, the fund returned 8.04%, while the Ohio municipal debt funds
average returned 7.50%, again according to Lipper. For the same one-year
period, the Lehman Brothers index returned 8.13%.
Q. HOW WOULD YOU CHARACTERIZE THE MUNICIPAL BOND MARKET OVER THE PAST SIX
MONTHS?
A. Although I'd characterize it as a somewhat choppy period for all bonds,
municipal bonds fared better than U.S. Treasury securities. Evidence that
the economy was growing at a much-quicker-than-expected pace sent Treasury
bond yields higher and, correspondingly, their prices lower during much of
the period. On the other hand, yields on municipal securities didn't react
as negatively, and muni bond prices were more stable throughout the period.
The divergence between Treasuries and municipals was greatest in the
long-maturity end of the market. As an example, the yield on a 30-year
Treasury bond rose 0.15%, while the yield on a 30-year Aaa-rated muni fell
0.15%. In the short-maturity end of the market, the yield on a five-year
Treasury rose 0.20%, while the yield on a five-year Aaa-rated muni rose
only 0.10%. Municipal prices were supported by an environment where there
was a limited supply of municipals available, while demand for them grew.
Q. HOW WAS THE FUND STRUCTURED DURING THE PAST SIX MONTHS?
A. In terms of maturity, the fund was heavily weighted in bonds with
maturities of between 10 and 15 years. There were a couple of reasons why I
continued to emphasize these intermediate-maturity bonds. First, the yield
these bonds generated tended to be higher than the yield generated by
owning a combination of long- and short-maturity bonds. What's more,
long-term bonds tend to be callable, which means they can be redeemed by
their issuer before maturity. Callable bonds tend to rise less in up
markets and fall more in down markets. Intermediate-maturity bonds, on the
other hand, typically aren't susceptible to being called.
Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES SINCE TAKING OVER THE FUND?
A. No I haven't, and the basic strategy of the fund remained intact. I
continued to keep the fund's duration - which measures how sensitive it is
to changes in interest rates - in line with the Ohio municipal market as a
whole, as reflected by the fund's benchmark index. By maintaining a fairly
consistent duration, I hope to deliver better-than-market returns by
avoiding whipsaws when the market goes through its ups and downs.
Q. WERE THERE ANY CHANGES IN THE WAY THE FUND'S HOLDINGS WERE ALLOCATED
AMONG SECTORS DURING THE PERIOD?
A. Not really. General obligation bonds (GOs) remained the fund's largest
sector concentration. A GO is backed by the full faith and credit - which
includes the taxing power - of a city, county, state or other issuer. A GO
is repaid with general revenue such as taxes. General revenues are
dependent on both the economy and a municipality's fiscal health, both of
which were strong during the period in many of the areas the fund
emphasized. In choosing GOs, I put an emphasis on staying diversified and
not taking on very large positions in any one security.
Q. OF THE TOTAL AMOUNT OF NEW MUNICIPAL BONDS ISSUED IN OHIO OVER THE PAST
YEAR, ROUGHLY HALF WAS INSURED. WHAT CHALLENGES DID THAT PRESENT TO YOU AS
A PORTFOLIO MANAGER?
A. It made it increasingly more difficult to find relatively
higher-yielding bonds. Because of the limited number of opportunities to
pick up yield through an analysis of credit quality, I focused on
exploiting opportunities that arose due to a bond's structure. For example,
I'd analyze a bond's call feature, which determines whether it can be
redeemed by its issuer before maturity. Depending on their price and their
potential for appreciation, I would overweight non-callable bonds, which
can't be redeemed by their issuer before maturity, when I thought the
market would reward me for doing so. I also looked for opportunities that
arose when bonds were selling at prices cheaper than I believed to be their
fair value based on their coupon, maturity or other factors.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. Until investors feel like they have a good handle on where the economy,
interest rates and inflation are headed, the bond market is likely to
remain choppy. The past six months have been a relatively good period
compared to U.S. Treasuries and, by the end of the period, munis seemed
fairly valued in relation to their taxable counterparts. I think that the
municipal market will need to continue
to experience strong demand and weak supply in order to continue
outperforming Treasuries.
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 tax-free
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
FUND NUMBER: 088
TRADING SYMBOL: FOHFX
START DATE: November 15, 1985
SIZE: as of June 30, 1997,
more than $380 million
MANAGER: George Fischer,
since April 1997; manager,
Spartan Connecticut
Municipal Income Fund,
since 1996; joined Fidelity in
1989
(checkmark)
GEORGE FISCHER ON OHIO'S
FISCAL SITUATION:
"Ohio's economy continued to
be strong over the past six
months, which helped to
improve the state's and many
other municipalities' revenue
collections and, therefore, the
state's credit worthiness. But
from a fiscal point of view,
there are some question
marks on the horizon. Chief
among them is the state's
ability to deal with a recent
decision handed down by the
Ohio Supreme Court. That
decision mandated that the
state - rather than local
governments - is responsible
for ensuring that school funding
is fair and equal across Ohio's
many school districts. In the
next eight months, the state
will need to put forward a plan
- - which may be expensive -
to satisfy the Supreme Court."
SPARTAN OHIO MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 39.3 39.0
Water & Sewer 17.8 17.0
Health Care 10.1 10.0
Education 8.0 8.4
Electric Revenue 6.7 8.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 12.3 12.9
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, 1997
6 MONTHS AGO
Years 7.1 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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31,1996
Aaa 53.2%
Aa, A 33.3%
Baa 6.6%
Non-rated 4.2%
Short-term
investments 2.7%
Aaa 55.2%
Aa, A 31.1%
Baa 8.2%
Non-rated 3.3%
Short-term
investments 2.2%
Row: 1, Col: 1, Value: 53.2
Row: 1, Col: 2, Value: 33.3
Row: 1, Col: 3, Value: 6.6
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.2
Row: 1, Col: 6, Value: 2.7
Row: 1, Col: 1, Value: 55.2
Row: 1, Col: 2, Value: 31.1
Row: 1, Col: 3, Value: 8.199999999999999
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.3
Row: 1, Col: 6, Value: 2.2
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
SPARTAN OHIO MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 97.3%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - 94.8%
Adams County Valley Local School Dist. Unltd. Tax:
6.65% 12/1/03 (MBIA Insured) Aaa $ 1,000,000 $ 1,116,250
6.65% 12/1/04 (MBIA Insured) Aaa 1,000,000 1,125,000
6.65% 12/1/05 (MBIA Insured) Aaa 1,000,000 1,131,250
Akron Parking Facs. Ltd. Tax:
8.75% 11/1/03 A 160,000 193,200
8.75% 11/1/04 A 160,000 196,600
8.75% 11/1/05 A 160,000 200,000
Akron Str. Impt. Ltd. Tax Series 1985-1:
8.75% 11/1/03 A 200,000 241,500
8.75% 11/1/04 A 200,000 245,750
8.75% 11/1/05 A 200,000 250,000
Akron Wtrwks. Rev. Rfdg. (Mtg. Impt.)
4.875% 3/1/12 (MBIA Insured) Aaa 2,000,000 1,895,000
Alliance Wtrwks. Rev. (Cap. Appreciation)
0% 10/15/06 (FGIC Insured) Aaa 765,000 484,819
Bedford Hosp. Impt. Rev. Rfdg.
(Bedford Community Hosp.) 8.50% 5/15/09
(Pre-Refunded to 5/15/00 @ 102) (d) - 730,000 803,913
Buckeye Local School Dist. Rfdg.
(Jefferson County) (Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 375,000 236,250
0% 12/1/07 (AMBAC Insured) Aaa 760,000 454,100
Buckeye Valley Local School Dist.
(Delaware County) Series A,
6.85% 12/1/15 (MBIA Insured) Aaa 2,500,000 2,909,375
Cleveland Arpt. Sys. Rev. Series A,
6% 1/1/10 (FGIC Insured) Aaa 2,620,000 2,734,625
Cleveland Gen. Oblig. Rfdg.:
5.375% 9/1/11 (AMBAC Insured) Aaa 1,960,000 1,972,250
5.50% 9/1/16 (AMBAC Insured) Aaa 2,000,000 2,000,000
Cleveland Pub. Pwr. Sys. Rev.
(Capital Appreciation) (First Mtg.) Series A:
0% 11/15/08 (MBIA Insured) Aaa 5,480,000 3,103,050
0% 11/15/10 (MBIA Insured) Aaa 2,685,000 1,339,144
0% 11/15/11 (MBIA Insured) Aaa 2,685,000 1,261,950
Cleveland Wtrwks. Rev.:
Rfdg. First Mtg.:
Series F-92 A, 6.25% 1/1/15
(AMBAC Insured) Aaa 3,000,000 3,142,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cleveland Wtrwks. Rev.: - continued
Rfdg. First Mtg.: - continued
Series F-92 B:
6.125% 1/1/03 (AMBAC Insured) Aaa $ 1,000,000 $ 1,075,000
6.25% 1/1/05 (AMBAC Insured) Aaa 1,000,000 1,075,000
Series G, 5.50% 1/1/21 (MBIA Insured) Aaa 8,725,000 8,768,625
Series H, 5.75% 1/1/16 (MBIA Insured) Aaa 2,500,000 2,546,875
Columbus Gen. Oblig.:
Unltd. Tax Rfdg. Series B, 5.90% 1/1/01 Aaa 1,000,000 1,047,500
Series 1, 6% 5/15/10 Aaa 1,000,000 1,071,250
Unltd. Tax, 9.50% 4/15/04 Aaa 500,000 636,250
8.125% 5/1/01 Aaa 1,000,000 1,126,250
9.375% 4/15/07 Aaa 590,000 794,288
Columbus Swr. Impt. #26-E Unltd. Tax
6.50% 9/15/01 Aaa 2,000,000 2,162,500
Columbus Swr. Rev. Rfdg. 6.25% 6/1/08 A1 2,000,000 2,145,000
Columbus Wtrwks. Enlargement #44 Unltd. Tax
6% 5/1/12 Aaa 1,250,000 1,323,438
Cuyahoga County (Cap. Appeciation)
Unltd. Tax Rfdg. Series A:
0% 10/1/08 (MBIA Insured) Aaa 4,000,000 2,260,000
0% 10/1/09 (MBIA Insured) Aaa 4,200,000 2,241,750
0% 10/1/10 (MBIA Insured) Aaa 5,000,000 2,518,750
0% 10/1/11 (MBIA Insured) Aaa 2,400,000 1,140,000
0% 10/1/12 (MBIA Insured) Aaa 1,505,000 673,488
0% 10/1/13 (MBIA Insured) Aaa 1,500,000 631,875
Cuyahoga County Gen. Oblig.
5.50% 11/15/05 Aa 2,400,000 2,505,000
Cuyahoga County Hosp. Rev. Rfdg.
(Cleveland Clinic Foundation) Series A:
8% 12/1/08 Aa3 1,000,000 1,029,680
8% 12/1/15 Aa3 2,250,000 2,315,475
Dayton Arpt. Rev. Rfdg.
(James M. Cox Dayton Int'l. Arpt.)
5.15% 12/1/07 (AMBAC Insured) Aaa 1,300,000 1,329,250
Delaware City School Dist.:
Construction & Impt. (Cap. Appreciation)
Class B, 0% 12/1/08 (FGIC Insured) Aaa 1,100,000 618,750
Unltd. Tax:
5.50% 12/1/08 (FGIC Insured) Aaa 1,400,000 1,452,500
(Cap. Appreciation) 0% 12/1/09
(FGIC Insured) Aaa 1,000,000 532,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Delaware County Wtr. & Swr. 6.50% 12/1/03 A1 $ 1,750,000 $ 1,914,063
Dublin City School Dist.:
6.20% 12/1/19 (AMBAC Insured) Aaa 1,400,000 1,485,750
Unltd. Tax Rfdg. (Cap. Appreciation)
0% 12/1/04 (AMBAC Insured) Aaa 1,930,000 1,363,063
Fairfield City School Dist.:
Unltd. Tax 7.10% 12/1/07 (FGIC Insured) Aaa 1,120,000 1,321,600
7.45% 12/1/14 (FGIC Insured) Aaa 1,000,000 1,235,000
Franklin County Ltd. Tax:
(Courthouse) 6.375% 12/1/17,
(Pre-Refunded to 12/1/01 @ 102) (d) - 2,500,000 2,731,250
5.50% 12/1/15 Aaa 1,225,000 1,240,313
5.50% 12/1/16 Aaa 1,290,000 1,301,288
Franklin County Rev.
(Online Computer Library Ctr.):
7.20% 7/15/06 - 1,000,000 1,075,000
6% 4/15/12 - 3,500,000 3,517,500
Gateway Econ. Dev. Corp.
(Greater Cleveland Stadiums) Series 1990,
6.50% 9/15/14 - 3,000,000 3,075,000
Granville Village School Dist.
Unltd. Tax. Rfdg. (Cap. Appreciation):
0% 12/1/06 (AMBAC Insured) Aaa 625,000 393,750
0% 12/1/07 (AMBAC Insured) Aaa 665,000 397,338
0% 12/1/08 (AMBAC Insured) Aaa 650,000 365,625
0% 12/1/09 (AMBAC Insured) Aaa 645,000 341,044
Green County Wtr. Sys. Rev.:
Series A, 6% 12/1/16 (FGIC Insured) Aaa 2,500,000 2,631,250
(Cap. Appreciation)
0% 12/1/09 (AMBAC Insured) Aaa 775,000 409,781
Hamilton County:
5.25% 12/1/15 Aa2 1,795,000 1,754,613
5.25% 12/1/16 Aa2 1,900,000 1,845,375
5.25% 12/1/17 Aa2 2,005,000 1,947,356
Hamilton County Health Care Sys. Rev.:
Rfdg. (Providence Hosp.-Franciscan Sisters
Poor Health Sys.) 6.875% 7/1/15 Baa1 5,000,000 5,262,500
(Sisters of Charity Health Care) Series A:
6.25% 5/15/04 (AMBAC Insured) Aaa 1,000,000 1,053,750
6.25% 5/15/08 (AMBAC Insured) Aaa 4,220,000 4,515,400
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Hamilton County Swr. Sys. Rev. Rfdg. Series A:
5.45% 12/1/09 (FGIC Insured) Aaa $ 1,000,000 $ 1,037,500
6% 12/1/05 (FGIC Insured) Aaa 4,500,000 4,871,250
Hamilton Elec. Sys. Mtg. Rev. Rfdg.:
Series A, 6% 10/15/09 (FGIC Insured) Aaa 2,920,000 3,076,950
Series 1992 A, 6% 10/15/08 (FGIC Insured) Aaa 2,000,000 2,080,000
Hillard School Dist. Untld. Tax Series A:
6% 12/1/05 (FGIC Insured) Aaa 1,415,000 1,533,506
5% 12/1/09 (FGIC Insured) Aaa 1,000,000 987,500
Lakewood Gen. Oblig. Series A:
6.60% 12/1/08 Aa 1,525,000 1,734,688
6.60% 12/1/11 Aa 1,630,000 1,858,200
Lakota Local School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation):
0% 12/1/99 A1 445,000 399,944
0% 12/1/00 A1 625,000 534,375
0% 12/1/01 A1 590,000 479,375
0% 12/1/02 A1 555,000 428,044
0% 12/1/03 A1 260,000 189,800
0% 12/1/04 A1 730,000 504,613
0% 12/1/05 A1 690,000 451,950
0% 12/1/06 A1 650,000 400,563
0% 12/1/07 A1 610,000 355,325
Lima Swr. Sys. Rev. Rfdg. & Impt.
6.30% 12/1/12 (AMBAC Insured) Aaa 5,000,000 5,312,500
Logan Hocking Local School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) Series B, 0% 12/1/08
(AMBAC Insured) Aaa 1,065,000 599,063
Lowellville San. Swr. Sys. Rev.
(Browning-Ferris Industries, Inc.)
7.25% 6/1/06 A3 1,100,000 1,188,000
Lucas County Hosp. Rev.:
Rfdg. (Riverside Hosp. Proj.)
7.625% 6/1/15 Baa1 7,485,000 7,687,769
(Promedica Healthcare Oblig. Group)
6% 11/15/04 (MBIA Insured) Aaa 4,000,000 4,300,000
Mahoning Valley San. Dist.:
7.85% 12/15/12 - 1,200,000 1,288,500
7.85% 12/15/13 - 1,275,000 1,364,250
Mahoning Valley San. Dist. Wtr. Rev.
7.75% 5/15/14 - 3,250,000 3,522,188
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Marion County Hosp. Impt. Rev. Rfdg.
(Community Hosp.):
5.70% 5/15/02 - $ 1,500,000 $ 1,535,625
5.80% 5/15/03 - 1,825,000 1,875,188
6.10% 5/15/06 - 1,000,000 1,042,500
6.375% 5/15/11 - 1,500,000 1,546,875
Marysville Exempt Village School Unltd. Tax Rfdg.
(Cap. Appreciation):
0% 12/1/05 (AMBAC Insured) Aaa 795,000 530,663
0% 12/1/06 (AMBAC Insured) Aaa 750,000 475,313
0% 12/1/07 (AMBAC Insured) Aaa 690,000 414,000
Mason City Sch. Dist. Unltd. Tax:
6.05% 12/1/09 (FGIC Insured) Aaa 1,225,000 1,338,313
6.15% 12/1/10 (FGIC Insured) Aaa 1,420,000 1,558,450
Mentor Exempt Village School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation):
0% 12/1/00 (MBIA Insured) Aaa 755,000 649,300
0% 12/1/01 (MBIA Insured) Aaa 795,000 650,906
0% 12/1/02 (MBIA Insured) Aaa 845,000 660,156
0% 12/1/03 (MBIA Insured) Aaa 840,000 620,550
Middleburg Heights Hosp. Impt. Rev.
(Southwest Gen. Hosp.) 7.20% 8/15/19
(Pre-Refunded to 8/15/01 @ 102) (d) A2 2,000,000 2,245,000
Montgomery County Solid Waste Rev. Rfdg.
6% 11/1/05 (MBIA Insured) Aaa 1,940,000 2,092,775
Newark Wtr. Sys. Impt. (Cap. Appreciation)
0% 12/1/07 (AMBAC Insured) Aaa 455,000 273,000
North Canton School Dist. Impt. Unltd. Tax
5.90% 12/1/14 (AMBAC Insured) Aaa 2,000,000 2,067,500
Northeast Ohio Regional Swr. Dist. Wastewtr. Rev.
Rfdg. 6.25% 11/15/04 (AMBAC Insured) Aaa 1,000,000 1,093,750
Ohio Air Quality Dev. Auth.:
(Columbus & Southern Pwr. Co.) Series A,
6.375% 12/1/20, (FGIC Insured) Aaa 3,000,000 3,172,500
(Ohio Pwr. Co. Proj.) Series B,
7.40% 8/1/09 Baa1 3,250,000 3,428,750
Rfdg. (Dayton Pwr. & Lt. Co. Proj.)
6.10% 9/1/30 A1 4,000,000 4,115,000
Ohio Bldg. Auth.:
Rfdg. (Ohio Ctr. Arts) Series A,
5.45% 10/1/07 Aa3 2,000,000 2,077,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Bldg. Auth.: - continued
Rfdg. (State Correctional Facs.) Series A:
6.50% 10/1/03 Aa3 $ 2,750,000 $ 2,983,750
5.70% 10/1/04 Aa3 1,125,000 1,186,875
5.75% 10/1/05 Aa3 2,080,000 2,199,600
5.60% 10/1/07 Aa3 3,330,000 3,446,550
5.25% 10/1/09 Aa3 3,000,000 3,026,250
Rfdg. (State Facs.-Vern Riffe) Series A,
5.75% 10/1/04 (AMBAC Insured) Aaa 8,250,000 8,755,313
(Administration Bldg. Fund) Series A,
4.875% 10/1/10 Aa3 1,000,000 960,000
(Adult Correctional Facs.)
6% 4/1/06 (AMBAC Insured) Aaa 1,930,000 2,081,988
(Workers Compensation Bldg. A)
4.75% 4/1/14 A2 4,620,000 4,192,650
Ohio Cap. Corp. Multi-Family Hsg. Rev. Rfdg.:
Series C, 7.375% 7/1/23, (FNMA Coll.) - 2,000,000 2,066,480
Series A, 7.50% 1/1/24, (FNMA Coll.) - 1,000,000 1,056,250
Ohio Expositions Commission Ctfs. of Prtn.
(Agricenter Facs.) 8.25% 10/1/06 - 1,060,000 1,176,600
Ohio Gen. Oblig.:
Cap. Appreciation (Infrastructure Impt.)
Series 1989, 0% 9/1/07 Aa1 7,225,000 4,353,063
Cap. Appreciation (College Savings Bonds):
0% 8/1/09 Aa1 2,290,000 1,225,150
0% 8/1/10 Aa1 2,000,000 1,005,000
0% 8/1/14 Aa1 1,375,000 544,844
(Infrastructure Impt.):
6.50% 9/1/01 Aa1 1,000,000 1,082,500
6.65% 9/1/09 Aa1 1,000,000 1,146,250
Unltd. Tax Rfdg. Series R:
0% 9/1/00 Aa1 3,260,000 2,832,125
5.45% 9/1/03 Aa1 2,350,000 2,464,563
Unltd. Tax 5.75% 8/1/04 Aa1 1,000,000 1,066,250
6.50% 8/1/04 Aa1 5,670,000 6,300,788
6.65% 8/1/05 Aa1 3,000,000 3,393,750
6.15% 8/1/10 Aa1 3,530,000 3,860,938
Ohio Higher Edl. Facs. Commission Rev.
(Case Western Reserve Univ. Proj.):
7.70% 10/1/18 Aa3 70,000 71,985
Series B, 6.50% 10/1/02 Aa 2,250,000 2,539,688
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Higher Edl. Facs. Commission Rev.
(Case Western Reserve Univ. Proj.): - continued
Rfdg.:
6% 10/1/14 Aa $ 1,500,000 $ 1,616,250
6.125% 10/1/15 Aa 2,000,000 2,177,500
6.25% 10/1/16 Aa 2,500,000 2,750,000
6% 10/1/22 Aa 650,000 663,000
(Kenyon College Proj.)
5.90% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,058,750
Ohio Hsg. Fin. Agcy. Mtg. Rev. (Residential B-2)
5.375% 9/1/19 (c) - 4,000,000 4,010,000
Ohio Hsg. Fin. Agcy. Mtg. Residential Rev.
Series A-1, 5.30% 9/1/26
(GNMA Insured) (c) - 1,400,000 1,410,500
Ohio Poll. Cont. Rev. (Standard Oil Co.)
6.75% 12/1/15 Aa3 3,100,000 3,596,000
Ohio Pub. Facs. Commission Higher Ed. Facs.
Series II-a,
6.30% 5/1/03 (AMBAC Insured) Aaa 2,000,000 2,145,000
4.50% 11/1/09 (MBIA Insured) Aaa 2,600,000 2,460,250
Ohio Pub. Facs. Commission Mental Health
Cap. Facs. Series II-B, 5.125% 6/1/11
(FSA Insured) Aaa 2,600,000 2,557,750
Ohio Tpk. Commission (Tpk. Rev.) Series A:
6% 2/15/04 (FSA Insured) Aaa 5,140,000 5,519,075
6% 2/15/05 (FSA Insured) Aaa 2,000,000 2,152,500
6% 2/15/06 (FSA Insured): Aaa 2,200,000 2,378,750
6% 2/15/07 (FSA Insured) Aaa 3,100,000 3,351,875
5.60% 2/15/12 (MBIA Insured) Aaa 2,840,000 2,893,250
5.70% 2/15/13 (MBIA Insured) Aaa 2,660,000 2,723,175
5.70% 2/15/17 (MBIA Insured) Aaa 2,000,000 2,030,000
Ohio Wtr. Dev. Auth. Impt. Rev. Rfdg. (Pure Wtr.)
5.50% 12/1/18 (AMBAC Insured)
(Escrowed to Maturity) Aaa 2,500,000 2,481,250
Ohio Wtr. Dev. Auth. Rev.:
(Fresh Wtr.) 6.25% 12/1/02,
(AMBAC Insured) Aaa 1,915,000 2,070,594
(Pure Wtr.) Series I, 6% 12/1/16
(AMBAC Insured) Aaa 1,685,000 1,777,675
6.25% 12/1/03 (AMBAC Insured) Aaa 2,025,000 2,204,719
Ohio Wtr. Dev. Auth. Rev. Rfdg.
6% 6/1/07 (AMBAC Insured) Aaa 2,000,000 2,175,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Cont. Loan Fund) State Matching Series:
6.50% 1/1/04 (MBIA Insured) Aaa $ 1,000,000 $ 1,108,750
6.50% 12/1/05 (MBIA Insured) Aaa 2,735,000 3,042,688
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(North Star BHP Steel - Cargill)
6.30% 9/1/20 Aa3 6,350,000 6,643,688
Olentangy Local School Dist. Unltd. Tax:
7.75% 12/1/07 (BIG Insured) Aaa 500,000 618,750
7.75% 12/1/09 (BIG Insured) Aaa 100,000 125,000
7.75% 12/1/11 (BIG Insured) Aaa 190,000 239,400
Ottawa County San. Swr. Ltd. Tax
7.50% 10/1/14 (AMBAC Insured)
(Pre-Refunded 10/1/99 @ 102) (d) A1 500,000 544,375
Ottawa County San. Swr. Sys. Rev. Rfdg.
(Cap. Appreciation) (Danbury Proj.)
0% 10/1/06 (AMBAC Insured) Aaa 1,445,000 915,769
Pickerington Local School Dist. Constr. & Impt.
Unltd. Tax 5.8% 12/1/09 (FGIC Insured) Aaa 1,000,000 1,071,250
Portaage County Hosp. Rev.
(Robinson Memorial Hosp. Proj.)
6.50% 11/15/03 (MBIA Insured) Aaa 1,080,000 1,186,650
South Western City Sch. Dist. Rfdg.
(Franklin & Pickway Counties) Series A,
6.20% 12/1/06 (AMBAC Insured) Aaa 1,000,000 1,082,500
Southwest Local School Dist. Unltd. Tax
(Cap. Appreciation) (Hamilton County):
0% 12/1/04 (AMBAC Insured) Aaa 500,000 351,250
0% 12/1/05 (AMBAC Insured) Aaa 525,000 349,125
0% 12/1/06 (AMBAC Insured) Aaa 525,000 330,750
0% 12/1/07 (AMBAC Insured) Aaa 520,000 310,700
Springboro Commty. City School Dist. Unltd. Tax
Rfdg. (Cap. Appreciation)
0% 12/1/06 (AMBAC Insured) Aaa 915,000 575,306
Stark County 5.60% 11/15/08,
(AMBAC Insured) Aaa 1,150,000 1,190,250
Student Loan Fund Corp. Student Loan Rev.
Rfdg. Series A:
5.50% 12/1/01 (c) A1 5,180,000 5,270,650
5.75% 8/1/02 (c) A 3,475,000 3,592,281
7.25% 2/1/08 (c) A 4,000,000 4,190,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Student Loan Funding Corp. Cincinnati Student Loan
Rev. Sr. Sub-Series A:
5.75% 8/1/03 (c) A1 $ 2,000,000 $ 2,050,000
5.85% 8/1/04 (c) A1 5,500,000 5,616,875
Toledo Gen. Oblig.:
6.10% 12/1/04 (AMBAC Insured) Aaa 1,750,000 1,868,125
7.625% 12/1/04 (AMBAC Insured) Aaa 1,000,000 1,183,750
Toledo Wtrwks. Rev.
6% 11/15/06 (FGIC Insured) Aaa 1,000,000 1,088,750
Warren County Ltd. Tax 6.65% 12/1/11 Aa 500,000 576,875
Warren County 6.10% 12/1/12 Aa 500,000 548,125
Warren County Swr. Impt. (P&G Co./Lower Miami)
5.50% 12/1/16 Aa 1,455,000 1,462,275
Westlake City School Dist. Unltd. Tax Series A:
6.15% 12/1/05 Aa3 1,060,000 1,156,725
6.20% 12/1/06 Aa3 1,010,000 1,111,000
361,508,291
PUERTO RICO - 2.5%
Puerto Rico Elec. Pwr. Auth. Rev. Rfdg.
Series W, 7% 7/1/07 (MBIA Insured) Aaa 6,000,000 7,042,500
Puerto Rico Infrastructure Fing. Auth. Spl.
Tax Series 1988 A, 7.75% 7/1/08 Baa1 2,500,000 2,625,960
9,668,460
TOTAL MUNICIPAL BONDS
(Cost $359,186,382) 371,176,751
MUNICIPAL NOTES - 2.7%
OHIO - 2.7%
Columbus Var. Purpose Unltd. Tax
Series 1995 - 1, 4.10%,
BPA Westdeutsche Landesbank, VRDN VMIG 1 4,200,000 4,200,000
Cuyahoga County Hosp. Rev.
Cleveland Clinic:
Foundation Series A, 4.05% 1/1/26
LOC Morgan Guaranty Trust Co VMIG 1 2,000,000 2,000,000
MUNICIPAL NOTES - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OHIO - CONTINUED
Cuyahoga County Hosp. Rev.
Cleveland Clinic: - continued
Foundation Series 96-B, 4.05% 1/1/26 VMIG 1 $ 400,000 $ 400,000
Franklin County Hosp. Rev.:
(Holy Cross Health Sys. &
Mount Carmel Health Sys.)
Series 95, 4.15%, Liquidity
Morgan Guaranty Trust Co., VRDN VMIG 1 1,600,000 1,600,000
Rfdg. & Impt.
(US Healthcare Corp.) Series C, 4.10%
6/1/98, LOC Morgan Guaranty Trust Co. - 1,000,000 1,000,000
Twinsburg Ind. Dev. Rev. (United Stationers, Inc. Proj.)
4.40%, LOC Pittsburgh Nat'l. Bank, VRDN P-1 1,200,000 1,200,000
TOTAL MUNICIPAL NOTES
(Cost $10,400,000) 10,400,000
TOTAL INVESTMENTS - 100%
(Cost $369,586,382) $ 381,576,751
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
4. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
5. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
6. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
7. Security collateralized by an amount sufficient to pay interest and
principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.6% AAA, AA, A 76.4%
Baa 5.0% BBB 5.7%
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 both S&P and Moody's amounted to 4.15%. FMR has
determined that unrated debt securities that are lower quality account for
0% 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 39.3%
Water and Sewer 17.8%
Health Care 10.1%
Education 8.0%
Electric Revenue 6.7%
Transportation 6.6%
Others (individually less than 5%) 11.5%
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $369,586,382. Net unrealized appreciation aggregated
$11,990,369, of which $12,252,983 related to appreciated investment
securities and $262,614 related to depreciated investment securities.
At December 31, 1996, the fund was required to defer approximately
$1,223,000 of losses on futures contracts.
SPARTAN OHIO MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $369,586,382) - $ 381,576,751
See accompanying schedule
Cash 372,424
Interest receivable 4,628,947
TOTAL ASSETS 386,578,122
LIABILITIES
Payable for investments purchased $ 5,581,813
Payable for fund shares redeemed 300,746
Distributions payable 371,221
Accrued management fee 112,878
Other payables and accrued expenses 81,106
TOTAL LIABILITIES 6,447,764
NET ASSETS $ 380,130,358
Net Assets consist of:
Paid in capital $ 367,817,956
Accumulated undistributed net realized gain (loss) 322,033
on investments
Net unrealized appreciation (depreciation) on 11,990,369
investments
NET ASSETS, for 33,248,136 shares outstanding $ 380,130,358
NET ASSET VALUE, offering price and redemption price $11.43
per share ($380,130,358 (divided by) 33,248,136 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 10,236,028
EXPENSES
Management fee $ 735,150
Transfer agent, accounting and custodian fees and 319,690
expenses
Non-interested trustees' compensation 830
Registration fees 10,873
Audit 17,167
Legal 3,543
Miscellaneous 875
Total expenses before reductions 1,088,128
Expense reductions (28,641) 1,059,487
NET INTEREST INCOME 9,176,541
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,695,229
Futures contracts (63,337) 1,631,892
Change in net unrealized appreciation (depreciation) on (263,207)
investment securities
NET GAIN (LOSS) 1,368,685
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 10,545,226
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 9,176,541 $ 19,039,337
Net interest income
Net realized gain (loss) 1,631,892 3,423,033
Change in net unrealized appreciation (depreciation) (263,207) (6,935,610)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 10,545,226 15,526,760
FROM OPERATIONS
Distributions to shareholders (9,176,541) (19,039,337)
From net interest income
From net realized gain (1,332,076) (2,343,618)
TOTAL DISTRIBUTIONS (10,508,617) (21,382,955)
Share transactions 26,387,723 52,548,440
Net proceeds from sales of shares
Reinvestment of distributions 7,879,099 16,325,366
Cost of shares redeemed (35,799,379) (85,834,479)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (1,532,557) (16,960,973)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,495,948) (22,816,868)
NET ASSETS
Beginning of period 381,626,306 404,443,174
End of period $ 380,130,358 $ 381,626,306
OTHER INFORMATION
Shares
Sold 2,326,114 4,629,316
Issued in reinvestment of distributions 694,090 1,436,229
Redeemed (3,154,456) (7,582,296)
Net increase (decrease) (134,252) (1,516,751)
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 B 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE
DATA
Net asset value, $ 11.430 $ 11.590 $ 10.520 $ 12.020 $ 11.550 $ 11.320
beginning of period
Income from Investment .277 .560 .618 .657 .693 .718
Operations
Net interest income
Net realized and .040 (.090) 1.070 (1.310) .720 .230
unrealized gain
(loss)
Total from investment .317 .470 1.688 (.653) 1.413 .948
operations
Less Distributions
From net (.277) (.560) (.618) (.657) (.693) (.718)
interest income
From net realized gain (.040) (.070) - (.190) (.250) -
Total distributions (.317) (.630) (.618) (.847) (.943) (.718)
Net asset value, $ 11.430 $ 11.430 $ 11.590 $ 10.520 $ 12.020 $ 11.550
end of period
TOTAL RETURN C, D 2.82% 4.23% 16.39% (5.55) 12.56% 8.66%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 380,130 $ 381,626 $ 404,443 $ 350,267 $ 457,872 $ 384,861
period (000 omitted)
Ratio of expenses to .57% A .59% .58% .57% .57% .61%
average net assets , E
Ratio of net interest 4.92% A 4.93% 5.52% 5.88% 5.67% 6.31%
income to average
net assets
Portfolio turnover rate 17% A 43% 48% 22% 41% 20%
</TABLE>
E ANNUALIZED
F 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.
G TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
H THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
I FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER. (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.)
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
PERFORMANCE: THE BOTTOM LINE
To evaluate a money market fund's historical performance, you can look at
either total return or yield. Total return reflects the change in the value
of an investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that have
grown in value). Yield measures the income paid by a fund. Since a money
market fund tries to maintain a $1 share price, yield is an important
measure of performance. If Fidelity had not reimbursed certain fund
expenses the past five years and life of fund total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Fidelity Ohio Municipal Money Market Fun 1.59% 3.15% 14.79% 31.78%
d
Ohio Tax-Free Money Market Funds 1.57% 3.12% 14.65% 30.27%
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 29, 1989. For example, if you had 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 Ohio tax-free money market
funds average, which reflects the performance of Ohio tax-free money market
funds with similar objectives tracked by IBC Financial Data, Inc. The past
six months average represents a peer group of 16 mutual funds. (The periods
covered by IBC Financial Data, Inc. numbers are the closest available match
to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Ohio Municipal Money Market Fun 3.15% 2.80% 3.58%
d
Ohio Tax-Free Money Market Funds 3.12% 2.77% 3.45%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year.
YIELDS
6/30/97 3/31/97 12/30/96 9/30/96 7/1/96
Fidelity Ohio Municipal 3.58% 2.99% 3.45% 3.21% 2.94%
Money Market Fund
Ohio Tax-Free Money 3.26% 2.94% 3.36% 3.19% 2.93%
Market Funds Average
Ohio Municipal Money 6.01% 5.02% 5.80% 5.39% 4.94%
Market Tax-equivalent
Row: 1, Col: 1, Value: 3.58
Row: 1, Col: 2, Value: 0.0
Row: 2, Col: 1, Value: 3.0
Row: 2, Col: 2, Value: 0.0
Row: 3, Col: 1, Value: 3.45
Row: 3, Col: 2, Value: 3.36
Row: 4, Col: 1, Value: 3.21
Row: 4, Col: 2, Value: 3.19
Row: 5, Col: 1, Value: 2.94
Row: 5, Col: 2, Value: 2.93
Ohio Municipal
Money Market
Fund
Ohio Tax-Free
Money Market
Funds Average
5% -
4% -
3% -
2% -
1% -
0%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the Ohio 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 1997 federal
and state income tax rate of 40.48% and reflects that a portion of the
fund's income was subject to state taxes. A portion of the fund's income
may be subject to the alternative minimum tax.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS WILL VARY, AND REFLECT PAST
RESULTS RATHER THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
Yields on tax-free investments
are usually lower than yields
on taxable investments.
However, a straight
comparison between the two
may be misleading because it
ignores the way taxes reduce
taxable returns. Tax-equivalent
yield - the yield you'd have to
earn on a similar taxable
investment to match the
tax-free yield - makes the
comparison more
meaningful. Keep in mind that
the U.S. Government neither
insures nor guarantees a
money market fund. And there
is no assurance that a money
fund will maintain a $1 share
price.
(checkmark)
SPARTAN OHIO MUNICIPAL MONEY MARKET FUND
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Scott Orr, Portfolio Manager of Spartan Ohio Municipal
Money Market Fund
Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS, SCOTT?
A. We saw a fairly big pendulum swing in interest rate expectations over
the past six months. At the beginning of the period, the market had become
complacent with the Federal Reserve Board's monetary policy. At that time,
the economy was growing at a moderate pace and inflation remained under
control. The Fed had stayed on the sidelines, keeping the rate banks charge
each other for overnight loans - known as the fed funds rate - steady at
5.25% since January 1996. In February and March 1997, however, signs that
the economy was growing at a stronger clip changed market sentiment.
Expectations of a rate increase culminated in the Fed's announcement at its
March 25 Open Market Committee meeting that it had increased the fed funds
rate by 0.25% to 5.50%. For the next month or so, the market expected the
Fed to continue to raise rates. However, at its May meeting, the Fed
decided to hold off because economic growth had moderated again and
inflation was still benign. The lack of action by the Fed prompted most
market participants to shift back to the expectation of steady rates for
the next six to nine months.
Q. WHAT WAS THE FUND'S STRATEGY IN THIS ENVIRONMENT?
A. For much of the period, I expected rates to be higher in the ensuing
months. As a result, part of my strategy was to invest in variable-rate
securities because they move up or down with changes in interest rates. At
the same time, I sought to buy fixed-rate notes when they were expected to
provide higher yields than variable-rate securities over the terms of the
notes. There was a healthy supply of longer-term notes offering higher
yields in the Ohio market that I found to be attractive. As a result, the
fund tended to maintain an average maturity that was a bit longer than its
competitors, 64 days at the end of the period.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1997, was 3.58%, compared to
3.47% six months ago. For Ohio investors in the 40.48% combined state and
federal income tax bracket, the latest yield was the equivalent of a 6.01%
return on a taxable investment. Through June 30, 1997, the fund's six-month
total return was 1.59%, compared to 1.57% for the Ohio tax-free money
market funds average, according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. Even though there has been some recent moderation in the economy, I am
not convinced that the Fed has completely abandoned the possibility of
raising rates over the next six to nine months. However, without a
resurgence of economic strength or any sign of inflationary pressure, the
Fed may be able to stand pat for quite a while. As such, I believe the
markets will look a lot like they did through much of 1996, when investors
looked at statistics week by week to try to discern the strength of the
economy, the outlook for inflation and, hence, Fed policy.
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 tax-free
income while maintaining
a stable $1 share price by
investing in high-quality,
short-term municipal money
market securities whose
interest is free from federal
income tax and Ohio
individual income tax
FUND NUMBER: 419
TRADING SYMBOL: FOMXX
START DATE: August 29, 1989
SIZE: as of June 30, 1997,
more than $328 million
MANAGER: Scott Orr, since
August 1996; manager,
various Fidelity and Spartan
municipal money market
funds; joined Fidelity in 1989
(checkmark)
WORDS TO KNOW
COMMERCIAL PAPER: A security
issued by a municipality to
finance capital or operating
needs.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The time remaining
before an issuer is scheduled
to repay the principal amount
on a debt security. When the
fund's average maturity -
weighted by dollar amount -
is short, the fund manager is
anticipating a rise in interest
rates. When the average
maturity is long, the manager
is expecting rates to fall. When
the average maturity is
neutral, the manager wants
the flexibility to respond to
rising rates, while still
capturing a portion of the
higher yields available from
issues with longer maturities.
MUNICIPAL NOTE: A security
issued in advance of future tax
or other revenues and payable
from those specific sources.
TENDER BOND: A variable-rate,
usually long-term security that
give the bond holder the
option to redeem the bond at
face value before maturity.
VARIABLE RATE DEMAND NOTE
(VRDN): A tender bond that
can be redeemed on short
notice, typically one or seven
days. VRDNs are useful in
managing the fund's average
maturity and liquidity.
SPARTAN OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND % OF FUND % OF FUND
ASSETS ASSETS ASSETS
6/30/97 12/31/96 6/30/96
0 - 30 72 61 60
31 - 90 9 10 13
91 - 180 6 16 15
181 - 397 13 13 12
WEIGHTED AVERAGE MATURITY
6/30/97 12/31/96 6/30/96
Ohio Municipal 64 days 70 days 65 days
Money Market Fund
Ohio Tax-Free Money 53 days 60 days 58 days
Market Funds Average
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31,1996
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 28.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 4.0
Row: 1, Col: 5, Value: 65.0
Variable rate demand
notes (VRDNs) 61%
Commercial paper
(including CP mode) 5%
Tender bonds 5%
Municipal
notes 28%
Other 1%
Variable rate demand
notes (VRDNs) 65%
Commercial paper
(including CP mode) 4%
Tender bonds 3%
Municipal
notes 28%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 28.0
Row: 1, Col: 3, Value: 5.0
Row: 1, Col: 4, Value: 5.0
Row: 1, Col: 5, Value: 60.0
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investments in Securities
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - 100.0%
American Muni. Pwr. BAN:
(Bldg. Acquisition) 3.95% 11/12/97 $ 1,800,000 $ 1,800,000
(Cleveland Pub. Pwr. Proj.) 4.15% 9/3/97 7,750,000 7,750,000
3.95% 12/9/97 600,000 600,000
Ashtabula (Plasticolors, Inc. Proj.) Series 1996A,
4.40%, LOC Key Bank NA, VRDN 2,400,000 2,400,000
Beavercreek City Gen. Oblig. BAN 4% 8/15/97 5,000,000 5,001,920
Bedford Heights Ind. Dev. (Olympic Steel) Series 1989,
4.40%, LOC Nat'l. City Bank, Cleveland, VRDN (b) 1,250,000 1,250,000
Bexley Gen. Oblig. BAN 4.25% 6/25/98 2,000,000 2,006,610
Butler County VRDN:
(Middletown Regional Hosp. Proj.)
4.15%, LOC Star Bank NA, 2,200,000 2,200,000
(Meadow Ridge Apts.) Series 1996 A,
4.25% (FNMA Guaranteed) 7,600,000 7,600,000
Butler County Ind. Dev. Rev. (Trey Corrugated, Inc.) Series 1995,
4.40%, LOC First Bank of America Indiana, VRDN (b) 4,905,000 4,905,000
Cambridge Hosp. Fac. Rev. Bonds (Southeastern Reg. Med. Ctr.)
tender 7/1/97, 3.95%, LOC Nat'l City Bank Columbus 4,000,000 4,000,000
Clermont County Ind. Dev. Rev. (American Micro Prod. Proj.)
4.40%, LOC Star Bank, VRDN (b) 5,435,000 5,435,000
Cleveland City School Dist., Tender Option Ctfs.
Series BT-246, 4.275%
(Liquidity Facility Bankers Trust Co.) (c) 3,240,000 3,240,000
Columbus Various Purp. Adj. Rate Unltd. Tax Rev.
Series 1995-1, 4.10%,
(Liquidity Facility Westdeutsche Landesbank) VRDN 5,800,000 5,800,000
Cuyahoga County (The Great Lakes Brewing Co. Proj.)
Series 1997, 4.35%, LOC Huntington Nat'l. Bank,
VRDN (b) 5,700,000 5,700,000
Cuyahoga Falls City Gen. Oblig. BAN 4% 8/28/97 2,000,000 2,001,087
Dublin Central School Dist. Gen. Oblig.
BAN 4.33% 5/13/98 4,000,000 4,010,978
East Muskingum Gen. Oblig. BAN 4.22% 6/25/98 4,851,000 4,865,688
Elyria Gen. Oblig. BAN:
4.40% 10/10/97 1,000,000 1,000,797
4.25% 6/4/98 1,100,000 1,102,445
Erie County (Garbage and Refuse Dist.) BAN 4.50% 7/11/97 2,000,000
2,000,263
Euclid Gen. Oblig. BAN 4.05% 6/12/98 4,410,000 4,415,994
Fairfax Ind. Dev. Rev. (Johnson & Hardin Co. Proj.)
Series 1990, 4.40%, LOC Central Trust Co.,VRDN (b) 2,000,000 2,000,000
Finneytown Local School Dist. Gen. Oblig.
BAN 4.22% 7/17/97 1,270,000 1,270,339
Franklin County Ind. Dev. Rev. (Inland Products, Inc.)
4.40%, LOC PNC Bank, Ohio, VRDN (b) 900,000 900,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Franklin County (Colonial Courts) 4.30%, LOC Fed. Home
Loan Bank Indiana, VRDN (b) $ 2,500,000 $ 2,500,000
Greene County Gen. Oblig. BAN:
Series C, 4.25% 6/4/98 3,200,000 3,209,957
Series D, 4% 9/11/97 745,000 745,141
4% 12/11/97 3,000,000 3,004,515
Hamilton County:
(Beechwood Home Proj.) 4.25%,
LOC Star Bank NA, VRDN 4,100,000 4,100,000
(Metro Containers, Inc. Proj.) 4.30%,
LOC Bank One, VRDN (b) 2,500,000 2,500,000
Hamilton BAN (Golf Course Impt. Proj.) Series D,
4.25% 11/7/97 1,214,000 1,215,235
Hancock County Gen. Oblig. BAN 4.83% 11/21/97 3,000,000 3,012,224
Harrison County Econ. Dev. Rev. Ref. (Carriage of Cadiz Proj.)
4.22%, LOC KeyBank Nat'l., VRDN 1,830,000 1,830,000
Holmes County Ind. Dev. Rev. (Poultry Processing, Inc.)
Series 1990, 4.30%, LOC Rabobank Nederland, VRDN (b) 500,000 500,000
Kent City School Dist. Gen. Oblig. BAN 4% 7/15/97 1,000,000 1,000,132
Lake County Gen. Oblig. BAN 4% 3/12/98 1,000,000 1,001,670
Lake County Ind. Dev. Rev.:
(Norshar Co. Proj.) 4.30%, LOC Bank One, VRDN (b) 3,500,000 3,500,000
(American Bus. Co. Proj.) 4.35%,
LOC Huntington Nat'l. Bank, Columbus, VRDN (b) 1,400,000 1,400,000
Lakewood City Gen. Oblig. BAN:
Series A, 4.50% 5/8/98 3,211,600 3,223,912
4.15% 10/3/97 881,000 881,216
Lancaster Gen. Oblig. BAN 4.15% 11/18/97 1,060,000 1,060,976
Lebanon Gen. Oblig. BAN:
4% 5/28/98 1,000,000 1,000,000
4.17% 6/4/98 2,800,000 2,806,722
Lima Hosp. Rev. (Lima Memorial Hosp.) 4.20%,
LOC Bank One, VRDN 2,530,000 2,530,000
Lorain County Gen. Oblig. BAN 4.40% 9/19/97 1,000,000 1,000,842
Lorain County Independent Living & Hosp. Rev.
(Elyria United Methodist Village) 4.20%,
LOC Key Bank Nat'l. Assoc., VRDN 1,820,000 1,820,000
Lucas County VRDN:
(Beacon Place/Cubbin PJ) 4.20%, LOC Star Bank (d) 3,800,000 3,800,000
(The Toledo Zoological Society) 4.25%, LOC Key Bank 6,000,000 6,000,000
Lyndhurst Gen. Oblig. BAN 4% 3/18/98 1,000,000 1,001,368
Madeira Local School Dist. Gen. Oblig. BAN:
4.22% 7/17/97 1,000,000 1,000,267
4.50% 7/17/97 1,000,000 1,000,368
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Maumee Gen. Oblig. BAN 4.25% 4/29/98 $ 700,000 $ 700,556
Medina County Ind. Dev. Rev. VRDN:
(Fire-Dex Inc. Proj.) Series 1997, 4.40%, LOC Key Bank (b) 1,100,000
1,100,000
(North American Roto Engravers, Inc. Proj.) Series 1988,
4.30%, LOC Bank One Akron (b) 520,000 520,000
(Rembond Proj.) Series 1996, 4.30%, LOC Bank One (b) 3,000,000 3,000,000
Mentor (Timeless Enterprises Proj.)
4.40%, LOC KeyBank Nat'l., VRDN (b) 2,500,000 2,500,000
Miamisburg Gen. Oblig. BAN 4.29% 9/26/97 735,000 735,404
Middletown Ind. Dev. Rev. (Pilot Chemical Proj.) 4.30%,
LOC Bank One, Dayton, VRDN (b) 2,100,000 2,100,000
Montgomery County VRDN:
(Eastway Corp. & Prop. Resources) 4.35%,
LOC Huntington Nat'l. Bank, Columbus (b) 4,000,000 4,000,000
Multifamily Hsg. Rev. (Pedcor Investments - Lyons Gate)
4.30%, LOC Fed Home Loan Cincinnati (b) 3,000,000 3,000,000
Moreland Hills Gen. Oblig. BAN 3.95% 12/17/97 500,000 500,558
Ohio Air Quality Dev. Auth. Poll Cont. Rev. Bonds
(Duquesne Lt. Co. Proj.):
Series 88, 3.75%, 7/17/97, LOC Toronto-Dominion Bank,
CP mode 2,000,000 2,000,000
Series 88, 3.80%, 8/1/97, LOC Toronto-Dominion Bank,
CP mode 1,000,000 1,000,000
Ohio Envir. Impt. Rev. (Newark Group Industries, Inc. Proj.)
Series 1996, 4.30%,
LOC Chase Manhattan Bank, VRDN (b) 1,000,000 1,000,000
Ohio Hsg. Fin. Agcy. Multifamily Hsg. Rev. VRDN:
(Hunter's Glen Apt. Proj.) Series 1996, 4.35%,
LOC PNC Bank (b) 2,000,000 2,000,000
(Club at Spring Valley Apts.) Series 1996 A, 4.25%,
LOC KeyBank Nat'l. (b) 5,000,000 5,000,000
Ohio Hsg. Fin. Agcy. Participating VRDN (c):
Series PA-93, 4.35% (Liquidity Facility Merrill Lynch) (b) 4,865,000
4,865,000
Series 14, 4.45% (Liquidity Facility Bank of New York) (b) 3,300,000
3,300,000
Series 96C3501, 4.25%
(Liquidity Facility Citibank, New York) (b) 9,900,000 9,900,000
Ohio Hsg. & Fin. Agcy Single Family Mtg. Participating VRDN:
Series 96-5, 4.35%
(Liquidity Facility Bank of New York) (b)(c) 5,250,000 5,250,000
Series 96-6, 4.35%
(Liquidity Facility Bank of New York, NY) (b)(c) 3,650,000 3,650,000
Ohio Hsg. & Fin. Agcy. VRDN:
(Pedcor Investments Willowlake Apt. Proj.):
Series A, 4.30%, LOC Bank One, Columbus (b) 3,200,000 3,200,000
Series B, 4.40%, LOC Federal Home Loan Bank (b) 500,000 500,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Hsg. & Fin. Agcy. VRDN: - continued
(Pedcor Investments Willowlake Apt. Proj.): - continued
Series C, 4.40%, LOC Federal Home Loan Bank (b) $ 625,000 $ 625,000
Series D, 4.40%, LOC Federal Home Loan Bank (b) 625,000 625,000
Ohio Ind. Dev. Rev. VRDN:
(Aerolite Extrusion) Series 1991 IA, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 165,000 165,000
(Anomatic Corp.) Series 1989 I, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 190,000 190,000
(Arthur Corp.) Series 1989 IIIA, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 205,000 205,000
(Burnham Corp. Proj.) Series 1987 N, 4.30%,
LOC Bank One, Columbus (b) 130,000 130,000
(Burnham Corp. Proj.) Series 1988 II, 4.30%,
LOC PNC Bank Corp. (b) 180,000 180,000
(Carpenter/Clapp & Haney Tool Co.)
Series 1987 P, 4.30%, LOC Bank One, Columbus (b) 285,000 285,000
(CCE, Inc.) Series 1989 I, 4.30%,
LOC Nat'l. City Bank,Columbus (b) 780,000 780,000
(Cole Die & Tool) Series 1988 H, 4.30%,
LOC Banc One, Columbus (b) 165,000 165,000
(Die Matic, Inc.) Series 1987 O, 4.30%,
LOC Banc One, Columbus (b) 200,000 200,000
(Dramex Int'l., Inc.) Series 1988 I, 4.30%,
LOC Bank One, Columbus (b) 1,000,000 1,000,000
(Dramex Int'l., Inc.) Series 1988 II, 4.30%,
LOC PNC Bank Corp. (b) 200,000 200,000
(EPIC Technologies, Inc.) Series 1988 D, 4.30%,
LOC Banc One, Columbus (b) 220,000 220,000
(Gary W. James) Series 1986 B, 4.30%,
LOC Nat'l. City Bank, Cleveland (b) 240,000 240,000
(HGN Realty/Shalmet Ohio, Inc.) Series 1989 III A, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 1,640,000 1,640,000
(Hydro Tube Corp.) 4.30%,
LOC Nat'l. City Bank, Columbus (b) 85,000 85,000
(K&S Realty) Series 1989 III, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 250,000 250,000
(K&S Realty/Starr Fabricating, Inc.) Series 1989 III, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 230,000 230,000
(Kaufmans Bakery) Series 1987 K, 4.30%,
LOC Banc One, Columbus (b) 600,000 600,000
(Midwest Acoust-A-Fiber, Inc.) Series 1989 I, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 430,000 430,000
(Morrow Macke Realty) Series 1988 C, 4.30%,
LOC Bank One, Columbus (b) 560,000 560,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Ind. Dev. Rev. VRDN: - continued
(Oak Printing) Series 1991, 4.30%,
LOC Nat'l. City Bank, Columbus (b) $ 150,000 $ 150,000
(Plasticos Co.) Series 1989 IIIA, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 545,000 545,000
(Prentke Romich) Series 1989 III, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 70,000 70,000
(Samuel and Annie Sherman) Series 1989 III A, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 200,000 200,000
(SBD Properties Co.) Series 1986 L, 4.30%,
LOC Nat'l. City Bank, Cleveland (b) 180,000 180,000
(Sheffield Steel) Series 1988 B, 4.30%,
LOC Bank One, Columbus (b) 35,000 35,000
(Southwest Fin. Svcs.) Series 1986 J, 4.30%,
LOC Nat'l. City Bank, Cleveland (b) 70,000 70,000
(Standby Screw) Series 1991 IA, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 650,000 650,000
(Steubenville Area) Series 1988 II, 4.30%,
LOC PNC Bank Corp. (b) 315,000 315,000
(Thomas K. Issacs) Series 1990 IB, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 150,000 150,000
(United Steel Svc.) Series 1988 J, 4.30%,
LOC Bank One, Columbus (b) 560,000 560,000
(VRE, Inc.) Series 1988 F, 4.30%,
LOC Banc One, Columbus (b) 170,000 170,000
(Walker-Williams Lumber Co.) Series 1989 IIIA, 4.30%,
LOC Nat'l. City Bank, Columbus (b) 1,010,000 1,010,000
(Wooster Iron Metal Co.) Series 1988 R, 4.30%,
LOC Bank One, Columbus (b) 335,000 335,000
Ohio Higher Ed. Facs. Commty. Pooled Fin. Series 1996,
4.20%, LOC Fifth Third Bank, VRDN 3,000,000 3,000,000
Ohio Poll. Cont. Rev. (Sohio Wtr. Proj. - The British
Petroleum Co.) Series 1995, 4.05%, VRDN 1,000,000 1,000,000
Ohio School Dist. BAN 4.47% 6/30/98 (d) 2,000,000 2,011,320
Ohio Single Family Mtg. Bonds Series C-18, 3.70%,
tender 8/1/95 (Liquidity Facility Citibank) 3,125,000 3,125,000
Ohio Wtr. Dev. Auth. Poll. Cont. Rev. Bonds
(Duquesne Lt. Co. Proj.):
3.50%, 7/15/97, LOC Toronto Dominion, CP mode (b) 3,800,000 3,800,000
3.75%, 7/17/97, LOC Toronto Dominion, CP mode (b) 1,000,000 1,000,000
3.55%, 7/22/97, LOC Toronto Dominion, CP mode (b) 2,000,000 2,000,000
3.50%, 7/29/97, LOC Toronto Dominion, CP mode (b) 2,000,000 2,000,000
3.80%, 8/1/97, LOC Toronto Dominion, CP mode (b) 1,000,000 1,000,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Solid Waste Disp. Rev.
(American Steel & Wire Corp.)
4.40%, LOC Bank of America, Illinois, VRDN (b) $ 3,900,000 $ 3,900,000
Olentangy School Dist. Gen. Oblig. BAN 4.25% 8/15/97 4,000,000 4,002,687
Orange City School Dist. Gen. Oblig. BAN 4.25% 6/12/98 2,720,000
2,727,684
Oregon City School Dist Gen. Oblig. TAN 4.50% 12/30/97 2,050,000
2,053,966
Reynoldsburg City Gen. Oblig. BAN 4.15% 1/15/98 890,000 891,390
Richland County Ind'l. Dev. Rev. VRDN:
(Carton Services, Inc. Proj.) Series 1996, 4.40%,
LOC National CityBank, Cleveland (b) 1,980,000 1,980,000
(Sabin Robbins Paper Co.) Series 1997, 4.30%,
LOC Fifth Third Bank, Cincinnati 3,200,000 3,200,000
Scioto County Marine Term. Facs. Rev.
(Norfolk Southern Corp. Proj.) 5.50%, VRDN 11,800,000 11,800,000
Sharonville Ind. Dev. Rev. (Xtec, Inc.) Series 1991,
4.30%, LOC Fifth Third Bank, VRDN (b) 800,000 800,000
Solon Ind. Dev. Rev. (Cleveland Twist Drill Co.) Series 1995,
4.40%, LOC NationsBank,VRDN (b) 1,000,000 1,000,000
Springdale Gen. Oblig. BAN:
4.50% 9/19/97 2,000,000 2,001,723
Springfield Gen. Oblig. BAN:
4.60% 8/14/97 1,500,000 1,500,868
4.17% 6/18/98 1,250,000 1,252,543
Springfield City School Dist. Rfdg. Gen. Oblig. Bonds
(Clark County) 3.65% 12/1/97 540,000 540,000
Stark County Ind. Dev. Rev. VRDN:
(H-P Products, Inc. Proj.) 4.40%, LOC Key Bank (b) 3,200,000 3,200,000
(Liquid Cont. Corp. Proj.) Series 1987, 4.30%,
LOC Bank One (b) 330,000 330,000
Stow County Gen. Oblig. BAN 4% 12/18/97 1,940,000 1,943,044
Student Loan Fdg. Corp. Rev. VRDN:
Series 1990-A1, 4.30%,
LOC Nat'l. Westminster Bank PLC (b) 5,700,000 5,700,000
Series 1990-A2, 4.30%,
LOC Nat'l. Westminster Bank PLC (b) 9,700,000 9,700,000
Series 1990-A3, 4.30%,
LOC Nat'l. Westminster Bank PLC (b) 6,400,000 6,400,000
Summit County Gen. Oblig. BAN 4.50% 6/4/98 5,000,000 5,028,058
Summit County Ind. Dev. Rev.:
Bonds:
(Kuchar Proj.) 3.90%, tender 10/1/97,
LOC Bank One Akron (b) 470,000 470,000
(SGS Tool Co. Proj.) 3.80%, tender 10/1/97,
LOC Bank One Akron (b) 1,800,000 1,800,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
OHIO - CONTINUED
Summit County Ind. Dev. Rev.: - continued
Bonds: - continued
(Spark Tec Int'l. Proj.) Series 1989, 4.05%,
tender 11/1/97, LOC Bank One Akron (b) $ 185,000 $ 185,000
(Commercial Alloys Corp.) 4.30%,
LOC Star Bank, VRDN (b) 4,500,000 4,500,000
(Hampshire Properties) 4.30%,
LOC Key Bank Nat'l, VRDN (b) 1,070,000 1,070,000
(Kaiser Dev. Proj.) 4.30%,
LOC Bank One Akron, VRDN 850,000 850,000
(Keltec, Inc. Proj.) Series 1987, 4.30%, LOC Bank One,
VRDN (b) 340,000 340,000
(Kuchar Proj.) Series 1987, 4.30%, LOC Bank One,
VRDN (b) 905,000 905,000
(Mannix County Proj.) Series 1987, 4.30%,
LOC Bank One Akron, VRDN (b) 1,865,000 1,865,000
(Summit Plastic Co. Proj.) 4.40%,
LOC National CityBank, VRDN (b) 3,240,000 3,240,000
(Triumph Holdings Proj.) 4.40%,
LOC Nat'l. City Bank Northeast, VRDN (b) 1,820,000 1,820,000
Trumbull County Ind. Dev. Rev. (McDonald Steel Co.)
Series 1990, 4.40%, LOC Pittsburg Nat'l Bank, VRDN (b) 1,800,000
1,800,000
Twinsburg Ind. Dev. Rev. (United Stationers, Inc. Proj.)
4.40%, LOC Pittsburg Nat'l Bank, VRDN (b) 400,000 400,000
Union County Gen. Oblig. BAN 4.17% 6/25/98 1,500,000 1,503,832
Van Wert County Ind. Dev. Auth. Rev.
(Toledo Molding & Die, Inc.) Series 1994,
4.30% LOC Bank One, VRDN (b) 2,955,000 2,955,000
Wadsworth City Gen. Oblig. BAN 3.80% 12/19/97 1,600,000 1,600,000
Warren County Ind. Dev. Rev. (Johnson & Hardin Enterprise)
Series 1990 A, 4.40%, LOC Central Trust, VRDN (b) 2,900,000 2,900,000
Washington County Gen. Oblig. BAN 4.25% 11/05/97 1,385,000 1,386,855
Washington County Ind. Dev. Rev. (Forma Scientific, Inc. Proj.)
4.40%, LOC Bank One, Akron, VRDN (b) 400,000 400,000
Wood County Ind. Dev. Rev. (TL Industries & AMPP, Inc. Proj.)
4.40%, LOC Nat'l. City Northwest, VRDN (b) 1,850,000 1,850,000
333,896,154
TOTAL INVESTMENTS - 100% $ 333,896,154
Total Cost for Income Tax Purposes $ 333,896,154
SECURITY TYPE ABBREVIATIONS
BAN - Bond Anticipation Notes
RAN - 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. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Provides evidence of ownership in one or more underlying municipal
bonds.
4. Security purchased on a delayed delivery or when-issued basis.
INCOME TAX INFORMATION
At June 30, 1997, the fund had a capital loss carryforward of approximately
$79,000 of which $5,000, $6,000, $11,000, $7,000 and $50,000 will expire on
December 31, 1998, 2000, 2002, 2003 and 2004, respectively.
FIDELITY OHIO MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value - $ 333,896,154
See accompanying schedule
Cash 1,676,329
Interest receivable 2,562,644
TOTAL ASSETS 338,135,127
LIABILITIES
Payable for investments purchased $ 3,200,000
Regular delivery
Delayed delivery 5,811,320
Distributions payable 27,338
Accrued management fee 105,870
Other payables and accrued expenses 63,070
TOTAL LIABILITIES 9,207,598
NET ASSETS $ 328,927,529
Net Assets consist of:
Paid in capital $ 329,011,102
Accumulated net realized gain (loss) on investments (83,573)
NET ASSETS, for 329,011,102 shares outstanding $ 328,927,529
NET ASSET VALUE, offering price and redemption price $1.00
per share ($328,927,529 (divided by) 329,011,102 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 6,060,675
EXPENSES
Management fee $ 632,462
Transfer agent, accounting and custodian fees and 288,357
expenses
Non-interested trustees' compensation 377
Registration fees 19,543
Audit 14,040
Legal 3,363
Miscellaneous 887
Total expenses before reductions 959,029
Expense reductions (3,328) 955,701
NET INTEREST INCOME 5,104,974
NET REALIZED GAIN (LOSS) ON INVESTMENTS (4,192)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,100,782
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 5,104,974 $ 9,461,291
Net interest income
Net realized gain (loss) (4,192) (49,874)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,100,782 9,411,417
FROM OPERATIONS
Distributions to shareholders from net interest income (5,104,974) (9,461,291)
Share transactions at net asset value of $1.00 per share 295,977,236 616,078,137
Proceeds from sales of shares
Reinvestment of distributions 4,946,578 9,169,404
Cost of shares redeemed (299,585,013) (593,825,109)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,338,801 31,422,432
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,334,609 31,372,558
NET ASSETS
Beginning of period 327,592,920 296,220,362
End of period $ 328,927,529 $ 327,592,920
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 1992
<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 Investment .016 .030 .034 .025 .021 .028
Operations
Net interest income
Less Distributions
From net (.016) (.030) (.034) (.025) (.021) (.028)
interest income
Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
TOTAL RETURN B 1.59% 3.08% 3.48% 2.50% 2.09% 2.81%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 328,928 $ 327,593 $ 296,220 $ 301,691 $ 262,371 $ 270,248
period (000 omitted)
Ratio of expenses to .60% .60% .61% .57% .59% .58%
average net assets A C
Ratio of expenses to .60% .59% .61% .57% .59% .58%
average net assets A D
after expense
reductions
Ratio of net interest 3.18% 3.03% 3.42% 2.48% 2.07% 2.78%
income to average A
net assets
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
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.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
30. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Ohio Municipal Income Fund (the income fund)(formerly Fidelity Ohio
Municipal 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 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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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
its fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned. For the
money market fund, accretion of market discount represents unrealized gain
until realized at the time of a security disposition or maturity.
EXPENSES. Most expenses of each trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions to shareholders from
realized capital gains on investments, if any, are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
These differences, which may result in distribution reclassifications, are
primarily due to differing treatments for futures transactions, market
discount, and losses deferred due to futures. The income fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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 interest income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary book and tax basis differences
which 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.
31. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. Each fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased on a when-issued or forward commitment basis are
identified as such in each applicable fund's schedule of investments. Each
fund may receive compensation for interest forgone in the purchase of a
when-issued security. With respect to purchase commitments, each fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the commitment. The payables and
receivables associated with the purchases and sales of when-issued
securities having the same settlement date and broker are offset.
When-issued securities that have been purchased from and sold to different
brokers are reflected as both payables and receivables in the applicable
statements of assets and liabilities under the caption "Delayed delivery."
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract, or if
the issuer does not issue the securities due to political, economic, or
other factors.
FUTURES CONTRACTS. The income fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains and losses are realized upon
the expiration or closing of the futures contracts. Futures contracts are
valued at the settlement price established each day by the board of trade
or exchange on which they are traded.
32. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $31,389,933 and $33,227,137, respectively.
The market value of futures contracts opened and closed during the period
amounted to $4,659,478 and $4,673,116, respectively.
33. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of each fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
..3700% for the period. The annual individual fund fee rate is .25%. 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. For the period, the
management fees were equivalent to annualized rates of .39% of average net
assets for the income and money market funds, respectively.
34. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
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.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the custodian
and transfer, and shareholder servicing agent for the funds. The Bank has
entered into a sub-contract with Fidelity Service Company, Inc. (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 $224,534 and $84,830 for the income
fund and $241,191 and $35,854 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.
35. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the income fund's
average net assets. For the period, the reimbursement reduced expenses by
$27,726 for the Income fund.
In addition, each fund has entered into arrangements with its transfer
agent whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of the fund's expenses. During the period, the
transfer agent fees were reduced by $915 and $3,328, for the income and
money market funds respectively, under these arrangements.
PROXY VOTING RESULTS
A special meeting of Fidelity Ohio Municipal Money Market Fund's
shareholders was held on July 16, 1997. The results of votes taken among
shareholders on proposals are listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
J. GARY BURKHEAD
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,689,929.498 96.136
Withheld 17,871,441.790 3.864
TOTAL 462,561,371.288 100.000
RALPH F. COX
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 443,768,598.498 95.937
Withheld 18,792,772.790 4.063
TOTAL 462,561,371.288 100.000
PHYLLIS BURKE DAVIS
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 443,103,899.148 95.794
Withheld 19,457,472.140 4.206
TOTAL 462,561,371.288 100.000
ROBERT M. GATES
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 443,950,387.378 95.977
Withheld 18,610,983.910 4.023
TOTAL 462,561,371.288 100.000
EDWARD C. JOHNSON 3RD
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,259,190.958 96.043
Withheld 18,302,180.330 3.957
TOTAL 462,561,371.288 100.000
E. BRADLEY JONES
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 442,923,945.528 95.755
Withheld 19,637,425.760 4.245
TOTAL 462,561,371.288 100.000
DONALD J. KIRK
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,464,359.398 96.088
Withheld 18,097,011.890 3.912
TOTAL 462,561,371.288 100.000
PETER S. LYNCH
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,937,445.098 96.190
Withheld 17,623,926.190 3.810
TOTAL 462,561,371.288 100.000
WILLIAM O. MCCOY
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,154,888.538 96.021
Withheld 18,406,482.750 3.979
TOTAL 462,561,371.288 100.000
GERALD C. MCDONOUGH
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 443,149,018.198 95.803
Withheld 19,412,353.090 4.197
TOTAL 462,561,371.288 100.000
MARVIN L. MANN
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,770,167.908 96.154
Withheld 17,791,203.380 3.846
TOTAL 462,561,371.288 100.000
THOMAS R. WILLIAMS
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 444,019,634.298 95.992
Withheld 18,541,736.990 4.008
TOTAL 462,561,371.288 100.000
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 435,395,650.683 94.127
Against 13,012,889.495 2.813
Abstain 14,152,831.110 3.060
TOTAL 462,561,371.288 100.000
PROPOSAL 3
To amend the Declaration of Trust to provide voting rights based on a
shareholder's total dollar investment in a fund, rather than on the number
of shares owned.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE TRUST OF THE TRUST
Affirmative 409,553,827.698 88.540
Against 31,050,994.330 6.713
Abstain 21,856,323.260 4.725
Not voted 100,226.000 .002
TOTAL 462,561,371.288 100.000
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
Affirmative 162,785,427.340 90.048
Against 8,822,602.395 4.880
Abstain 9,168,640.670 5.072
TOTAL 180,776,670.405 100.000
PROPOSAL 4
To approve an amended management contract for the fund that would reduce
the management fee payable to FMR by the fund as FMR's assets under
management increase.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 154,251,638.510 85.327
Against 11,768,056.855 6.510
Abstain 14,756,975.040 8.163
TOTAL 180,776,670.405 100.000
PROPOSAL 5
Senior Securities - To add the ability to issue senior securities to the
extent permitted under the Investment Company Act of 1940.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 151,011,834.465 83.535
Against 14,440,065.160 7.988
Abstain 15,324,770.780 8.477
TOTAL 180,776,670.405 100.000
PROPOSAL 6
Borrowing - To amend the borrowing limitation to require a reduction in
borrowing if borrowings exceed the 33 1/3% limit for any reason rather than
solely because of a decline in net assets.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 150,249,449.500 83.113
Against 15,172,642.095 8.393
Abstain 15,354,578.810 8.494
TOTAL 180,776,670.405 100.000
PROPOSAL 7
Concentration - To standardize language and explicitly exclude "tax-exempt
obligations issued or guaranteed by a U.S. territory or possession or a
state or local government, or a political subdivision thereof " from the
limitation on industry concentration.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 152,584,176.335 84.405
Against 13,808,479.040 7.638
Abstain 14,384,015.030 7.957
TOTAL 180,776,670.405 100.000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
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(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* 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.
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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
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President -
INCOME FUND
George A. Fischer, Vice President -
INCOME FUND
Boyce Greer, Vice President -
MONEY MARKET FUND
Scott A. Orr, Vice President -
MONEY MARKET FUND
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
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for the deaf and hearing impaired
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FIDELITY
AGGRESSIVE MUNICIPAL
FUND
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 29 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you 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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value). You can also look at the
fund's income, as reflected in its yield, to measure performance. If
Fidelity had not reimbursed certain fund expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Aggressive Municipal Fund 3.63% 8.41% 37.84% 115.90%
Lehman Brothers Municipal Bond Index 3.20% 8.26% 40.90% 119.37%
High Yield Municipal Debt Funds Average 3.42% 8.53% 38.45% 113.58%
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 had 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
investment-grade municipal bonds with maturities of at least one year. To
measure how the fund's performance stacked up against its peers, you can
compare it to the high yield municipal debt funds average, which reflects
the performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 49 mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Aggressive Municipal Fund 8.41% 6.63% 8.00%
Lehman Brothers Municipal Bond Index 8.26% 7.10% 8.17%
High Yield Municipal Debt Funds Average 8.53% 6.71% 7.86%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking the arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10110.27 10102.00
1987/08/31 10167.37 10124.73
1987/09/30 9884.20 9751.43
1987/10/31 9744.99 9785.95
1987/11/30 9895.15 10041.46
1987/12/31 10045.57 10187.16
1988/01/31 10437.85 10550.03
1988/02/29 10582.22 10661.54
1988/03/31 10493.86 10537.87
1988/04/30 10518.17 10617.96
1988/05/31 10580.75 10587.27
1988/06/30 10757.90 10742.16
1988/07/31 10849.79 10812.20
1988/08/31 10913.57 10821.72
1988/09/30 11083.16 11017.59
1988/10/31 11274.13 11211.50
1988/11/30 11237.67 11108.80
1988/12/31 11392.13 11222.45
1989/01/31 11527.75 11454.53
1989/02/28 11511.82 11323.83
1989/03/31 11537.69 11296.77
1989/04/30 11777.58 11564.95
1989/05/31 11988.73 11805.16
1989/06/30 12148.34 11965.47
1989/07/31 12256.16 12128.32
1989/08/31 12237.88 12009.58
1989/09/30 12243.61 11973.79
1989/10/31 12254.61 12120.23
1989/11/30 12405.61 12332.34
1989/12/31 12474.92 12433.22
1990/01/31 12463.08 12374.41
1990/02/28 12561.99 12484.54
1990/03/31 12609.19 12488.29
1990/04/30 12529.68 12397.87
1990/05/31 12720.85 12668.52
1990/06/30 12825.34 12779.87
1990/07/31 13044.97 12967.74
1990/08/31 12916.40 12779.44
1990/09/30 13038.03 12786.73
1990/10/31 13126.11 13018.68
1990/11/30 13341.35 13280.49
1990/12/31 13408.53 13338.26
1991/01/31 13472.09 13517.26
1991/02/28 13604.26 13634.86
1991/03/31 13642.19 13639.76
1991/04/30 13821.71 13821.17
1991/05/31 13917.20 13944.04
1991/06/30 13968.77 13930.24
1991/07/31 14190.53 14099.91
1991/08/31 14390.00 14285.60
1991/09/30 14554.76 14471.60
1991/10/31 14668.28 14601.85
1991/11/30 14719.42 14642.59
1991/12/31 14987.05 14956.82
1992/01/31 15040.08 14990.92
1992/02/29 15075.82 14995.71
1992/03/31 15118.52 15001.26
1992/04/30 15260.70 15134.77
1992/05/31 15457.32 15312.91
1992/06/30 15662.64 15569.86
1992/07/31 16135.45 16036.65
1992/08/31 15975.40 15880.29
1992/09/30 16065.17 15984.15
1992/10/31 15877.82 15827.02
1992/11/30 16184.44 16110.48
1992/12/31 16361.37 16274.97
1993/01/31 16607.39 16464.25
1993/02/28 17189.99 17059.76
1993/03/31 17045.63 16879.44
1993/04/30 17221.49 17049.75
1993/05/31 17357.99 17145.57
1993/06/30 17646.01 17431.73
1993/07/31 17697.70 17454.57
1993/08/31 18079.32 17817.97
1993/09/30 18300.46 18020.92
1993/10/31 18337.47 18055.70
1993/11/30 18211.88 17896.63
1993/12/31 18591.93 18274.43
1994/01/31 18796.19 18483.12
1994/02/28 18369.25 18004.41
1994/03/31 17583.76 17271.27
1994/04/30 17667.31 17417.73
1994/05/31 17799.75 17568.74
1994/06/30 17742.14 17461.40
1994/07/31 18045.59 17781.46
1994/08/31 18097.96 17842.99
1994/09/30 17864.50 17581.05
1994/10/31 17570.59 17268.81
1994/11/30 17128.60 16956.59
1994/12/31 17510.20 17329.81
1995/01/31 18020.79 17825.09
1995/02/28 18489.26 18343.45
1995/03/31 18512.19 18554.21
1995/04/30 18543.10 18576.11
1995/05/31 19073.20 19168.87
1995/06/30 18919.62 19002.10
1995/07/31 19036.94 19182.24
1995/08/31 19238.58 19425.47
1995/09/30 19384.90 19548.43
1995/10/31 19618.26 19832.67
1995/11/30 19950.69 20161.69
1995/12/31 20117.32 20355.45
1996/01/31 20252.49 20509.13
1996/02/29 20192.45 20370.69
1996/03/31 19770.91 20110.36
1996/04/30 19710.74 20053.44
1996/05/31 19690.21 20045.42
1996/06/30 19914.38 20263.72
1996/07/31 20070.75 20448.12
1996/08/31 20119.29 20443.21
1996/09/30 20309.52 20729.41
1996/10/31 20539.19 20963.86
1996/11/30 20893.24 21347.50
1996/12/31 20832.89 21257.84
1997/01/31 20917.44 21298.02
1997/02/28 21117.76 21493.54
1997/03/31 20901.44 21207.03
1997/04/30 21071.02 21384.53
1997/05/31 21337.17 21706.15
1997/06/30 21589.90 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Aggressive Municipal Fund on June 30, 1987. As the chart shows,
by June 30, 1997, the value of the investment would have grown to $21,590 -
a 115.90% 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 $21,937 - a 119.37% 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 YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend return 2.93% 6.18% 6.93% 6.15% 6.80% 7.31%
Capital appreciation 0.70% -2.62% 7.96% -11.97% 6.83% 1.86%
return
Total return 3.63% 3.56% 14.89% -5.82% 13.63% 9.17%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 6.47(cents) 32.63(cents) 68.40(cents)
Annualized dividend rate 6.87% 5.80% 6.04%
30-day annualized yield 4.89% - -
30-day annualized tax-equivalent yield 7.64% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average share price of $11.46 over the past one month, $11.34
over the past six months and $11.32 over the past one year, you can compare
the fund's income over these three periods. The 30-day annualized YIELD is
a standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the fund's tax-free yield, if you're in the 36% federal
tax bracket, but does not reflect the payment of the federal alternative
minimum tax, if applicable. If Fidelity had not reimbursed certain
expenses, the yield and the tax-equivalent yield would have been 4.86% and
7.59%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: David Murphy became Portfolio Manager of Fidelity
Aggressive Municipal Fund on April 15, 1997.
Q. DAVE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
A. Fairly well. For the six months that ended June 30, 1997, the fund had a
total return of 3.63%. To get a sense of how the fund did relative to its
peers, the high yield municipal debt funds average returned 3.42% for the
same period, according to Lipper Analytical Services. The Lehman Brothers
Municipal Bond Index had a six-month return of 3.20% as of June 30, 1997.
For the year ended June 30, 1997, the fund returned 8.41%, while the high
yield municipal debt funds average returned 8.53%, according to Lipper. For
the same one-year period, the Lehman Brothers index returned 8.26%.
Q. HIGHER INTEREST RATES CAST A PALL OVER THE BOND MARKET DURING THE PAST
SIX MONTHS, ALTHOUGH MUNICIPALS IN GENERAL AND HIGH-YIELD MUNICIPALS IN
PARTICULAR FARED BETTER THAN U.S. TREASURIES. WHAT ACCOUNTS FOR HIGH-YIELD
MUNICIPALS' RELATIVELY STRONG PERFORMANCE?
A. The municipal market as a whole was buoyed by favorable supply and
demand factors - a situation that was even more pronounced in the
high-yield municipal segment of the market. Much of municipals' better
performance occurred toward the end of the period when the available supply
of tax-free bonds was limited. On the demand side of the equation, there
was evidence that some investors began to question the high levels of the
stock market and redirected some of their investment dollars into the
municipal market. Additional municipal purchases were triggered by upcoming
issuer calls. By this I mean that municipal issuers were expected to call -
or redeem - a record amount of their municipal debt before maturity. In
anticipation of those municipal holdings being called, investors bought new
municipal bonds in their place, increasing demand and raising prices.
Within the high-yield segment of the municipal market, demand was even
stronger than for the municipal market as a whole, while the amount of new
high-yield bonds issued was quite light.
Q. WHICH INDIVIDUAL HOLDINGS PERFORMED WELL DURING THE PAST SIX MONTHS?
WHICH HOLDINGS WERE DISAPPOINTMENTS?
A. On the positive side, two of the fund's holdings - Michigan Strategic
Fund for Mercy Services and New Hampshire Health and Education for River
Woods - were advance-refunded during the period. 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
this 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. On the negative side, Detroit Hospital
Financing Authority for Michigan Healthcare Corp., which has been in
bankruptcy proceedings for the past two years, modestly detracted from the
fund's performance over the past six months.
Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND?
A. I began to reduce the fund's stake in industrial development bonds.
Known as "IDBs," these bonds are issued by corporate entities through
municipal authorities for some purpose that is deemed for the public good -
such as economic development or pollution control. Even after I reduced the
fund's stake in IDBs, it continued to have a heavier weighting in these
bonds than its benchmark.
Q. WERE THERE OTHER CHANGES?
A. In terms of maturity ranges, I sold some bonds with maturities of 20
years or more to make way for more bonds with maturities of between one and
10 years. There were two reasons for this strategy. First, I didn't feel
that longer-term bonds offered enough additional yield to compensate for
their added sensitivity to interest rates. What's more, long-maturity bonds
can be susceptible to being called - or redeemed - by their issuer prior to
maturity. Typically, these calls come when current interest rates are lower
than a given bond's stated coupon. While that may be good for the issuer
because it lowers its debt costs, it's not so good for the bond holder. A
holder of called bonds will have to surrender the bond and its relatively
high income payments and reinvest the proceeds at lower interest rates.
Q. WHY DID YOU ADD TO THE FUND'S EXISTING HOLDINGS IN BONDS ISSUED BY
CALIFORNIA AND NEW YORK?
A. I added some California bonds because the state is enjoying a strong
economy and higher tax revenues. Moreover, the state has benefited from a
budget surplus and, in my view, won't have to scramble to balance its
budget next year. Bonds issued by New York City also were attractive as the
city's economy continues to expand and tax revenues rise. I like the fact
that the city has been reasonably conservative in its budgeting, not
relying on a continuation of the dramatic boost from Wall Street for the
coming year.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. During the past several years, the amount of municipal bonds outstanding
has shrunk considerably. This lack of supply has helped the municipal
market outperform the taxable bond market over the past six months. It's my
opinion that the total supply of municipals could increase slightly by the
end of this year from current levels. The question is, will there be enough
demand to digest that supply? In my view, that will depend on how investors
perceive the attractiveness of municipals relative to other fixed-income
securities and especially to equity investments. I don't anticipate buying
more lower-quality securities until I feel that the reward - or yield - is
adequate to compensate for the added risk. But I don't really anticipate
that happening unless the economy slows dramatically.
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 income by
investing in municipal
securities of any quality
FUND NUMBER: 012
TRADING SYMBOL: FATFX
START DATE: September 13,
1985
SIZE: as of June 30, 1997,
more than $850 million
MANAGER: David Murphy,
since April 1997; manager,
various Fidelity and Spartan
municipal income funds;
joined Fidelity in 1989
(checkmark)
DAVID MURPHY ON REDUCING THE
FUND'S STAKE IN
BELOW-INVESTMENT-GRADE
BONDS:
"The fund's stake in bonds
rated below investment grade
fell during the period. My
rationale for shifting toward
higher-quality bonds was
two-fold. First, I wanted to sell
to lock in some of the strong
performance that had
occurred in the
below-investment-grade part of
the municipal market. During
the period, the demand for
these lower-quality,
higher-yielding bonds was
quite strong. This strong
demand, in turn, helped
below-investment-grade bond
prices perform well relative to
higher-quality segments of
the market. Second, my view
was that the yields offered by
lower-quality securities were
no longer adequate enough to
compensate for their added
risk. The difference in yield
between lower-quality and
insured bonds - which is
known as the quality spread
- - currently is as small as I've
ever seen it in the 15 years
I've been investing in the
municipal market. So, when I
replaced lower-quality,
higher-yielding bonds with
higher-quality bonds, I wasn't
forced to give up much
additional yield."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1997
% OF % OF FUND'S
FUND'S INVESTMENTS
INVESTMEN IN THESE STATES
TS 6 MONTHS AGO
New York 13.3 11.0
California 8.3 6.5
Massachusetts 7.9 8.7
Pennsylvania 6.9 8.1
Illinois 5.6 4.7
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 22.5 17.8
Electric Revenue 17.1 18.6
Health Care 15.9 21.9
Industrial Development 10.4 18.5
Transportation 7.6 5.5
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 14.2 16.8
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, 1997
6 MONTHS AGO
Years 6.9 7.1
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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 38.0%
Aa, A 18.7%
Baa 25.7%
Ba, B 1.4%
Caa, Ca, C 0.3%
Non-rated 11.7%
Short-term
investments 4.2%
Aaa 23.0%
Aa, A 15.7%
Baa 22.0%
Ba, B 10.5%
Caa, Ca, C 0.3%
Non-rated 25.9%
Short-term
investments 2.6%
Row: 1, Col: 1, Value: 37.0
Row: 1, Col: 2, Value: 18.7
Row: 1, Col: 3, Value: 24.7
Row: 1, Col: 4, Value: 2.4
Row: 1, Col: 5, Value: 1.3
Row: 1, Col: 6, Value: 11.7
Row: 1, Col: 7, Value: 4.2
Row: 1, Col: 1, Value: 21.0
Row: 1, Col: 2, Value: 15.7
Row: 1, Col: 3, Value: 22.0
Row: 1, Col: 4, Value: 10.5
Row: 1, Col: 5, Value: 1.3
Row: 1, Col: 6, Value: 25.9
Row: 1, Col: 7, Value: 2.6
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED DEBT
SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT JUNE 30, 1997 AND
DECEMBER 31, 1996 ACCOUNT FOR 9.2% AND 23.3% RESPECTIVELY, OF THE FUND'S
INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 95.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ALABAMA - 0.5%
Cullman Med. Ctr. (Cullman Reg'l. Med. Ctr.)
Series A, 6.50% 2/15/23 Baa3 $ 4,000,000 $ 4,050,000
ARIZONA - 1.4%
Maricopa County Hosp. Rev. Rfdg.
(Sun Health Corp.) 5.65% 4/1/06 Baa1 3,625,000 3,665,781
Sierra Vista Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.):
8.75% 12/1/16 (Pre-Refunded to
12/1/98 @ 103) (f) - 4,000,000 4,370,000
6.75% 12/1/26 - 2,000,000 2,040,000
Tucson Gen. Oblig. Rfdg. 6.75% 7/1/03
(FGIC Insured) Aaa 1,800,000 2,004,750
12,080,531
ARKANSAS - 0.2%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (e) Aaa 2,025,000 2,070,562
CALIFORNIA - 8.3%
California Dept. of Wtr. Resources Rev.
(Central Valley Proj.) Series O, 4.75% 12/1/25 Aa 4,000,000 3,510,000
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series A, 5.30% 8/1/14 (MBIA Insured) Aaa 1,265,000 1,274,488
Series B, 5.20% 8/1/26 (MBIA Insured) (e) Aaa 1,800,000 1,813,500
Series R, 6.15% 8/1/27 (MBIA Insured) (e) Aaa 1,000,000 1,017,500
California Pub. Wks. Board Lease Rev.:
(Various California State Univ. Projs.) Series A:
Rfdg. 5.50% 10/1/13 A 5,755,000 5,733,419
Rfdg. 5.50% 6/1/14 A1 3,665,000 3,683,325
6.50% 9/1/05 A 1,155,000 1,271,944
5.25% 12/1/13 A 3,750,000 3,618,750
(Various Commty. College Projs.)
Series A, 5.50% 12/1/08 A1 2,415,000 2,457,263
(Dept. of Corrections) Series A,
5.50% 1/1/14 (AMBAC Insured) Aaa 3,750,000 3,745,313
Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. (Sr. Lien) (Cap. Appreciation) Series A,
0% 1/1/08 (h) Baa 4,000,000 2,670,000
Los Angeles County Metropolitan Transit Auth.
Sales Tax Rev. 1st Tier Sr. Series A,
5.90% 7/1/14 (MBIA Insured) Aaa 2,245,000 2,323,575
Los Angeles Wastewtr. Sys. Rev. Rfdg. Series D:
4.70% 11/1/17 (FGIC Insured) Aaa 8,330,000 7,309,575
4.70% 11/1/19 (FGIC Insured) Aaa 10,000,000 8,700,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Rfdg. (Geothermal Proj.) Series A,
5.85% 7/1/10 (AMBAC Insured) Aaa $ 4,000,000 $ 4,265,000
Port Oakland Port Rev. (Cap. Appreciation)
Series F, 0% 11/1/09 (MBIA Insured) Aaa 7,000,000 3,675,000
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev.:
(Proctor & Gamble Proj.):
7% 7/1/04 BBB- 1,200,000 1,321,500
6.375% 7/1/10 BBB- 1,500,000 1,580,625
Sacramento Pwr. Auth. Cogeneration Proj. Rev.
6.50% 7/1/09 BBB- 2,200,000 2,332,000
San Francisco City & County Arpts. Commty. Int'l.
Arpt. Rev. Rfdg. 2nd Series Issue 2,
6.75% 5/1/13 (MBIA Insured) Aaa 1,000,000 1,106,250
Upland Ctfs. of Prtn. (San Antonio Commty.
Hosp.) 5.25% 1/1/08 A 3,500,000 3,430,000
West & Central Basin Fing. Auth. Rev.
(West Basin Rfdg. Proj.) Series A,
5% 8/1/13 (AMBAC Insured) Aaa 3,000,000 2,838,750
69,677,777
COLORADO - 3.4%
Colorado Health Facs. Auth. Rev. Rfdg.
(Rocky Mountain Adventist):
6.625% 2/1/13 Baa 6,100,000 6,328,750
6.625% 2/1/22 Baa 3,400,000 3,506,250
Denver City & County Arpt. Rev.
Series A:
(Cap. Appreciation) 0% 11/15/05
(MBIA Insured) (e) Aaa 1,480,000 963,850
6.60% 11/15/97 (e) Baa1 1,000,000 1,009,080
6.90% 11/15/98 (e) Baa1 3,850,000 3,970,313
7% 11/15/99 (e) Baa1 2,750,000 2,887,500
8% 11/15/17 (e) Baa1 1,600,000 1,651,088
Series C, 6.50% 11/15/06 (e) Baa1 4,075,000 4,329,688
Series D, 7.40% 11/15/01 (e) Baa1 3,000,000 3,258,750
Highlands Ranch Metropolitan Dist. #2
6.50% 6/15/10 (FSA Insured) Baa1 1,000,000 1,128,750
29,034,019
CONNECTICUT - 1.7%
Connecticut Health & Edl. Facs. Auth. Rev.
(New Britain Mem. Hosp.) Series A,
7.75% 7/1/22 BBB- 6,100,000 6,572,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONNECTICUT - CONTINUED
Eastern Connecticut Resources Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A:
5% 1/1/04 (e) A- $ 900,000 $ 882,000
5.50% 1/1/14 (e) A- 5,000,000 4,756,250
5.50% 1/1/20 (e) A- 2,250,000 2,089,687
14,300,687
DISTRICT OF COLUMBIA - 3.1%
District of Columbia Gen. Oblig. Series A,
6% 6/1/03 Ba2 1,520,000 1,558,000
District of Columbia Gen. Oblig. Unltd. Tax Rfdg.:
Series A:
5.625% 6/1/02 Ba2 1,815,000 1,830,881
5.75% 6/1/03 Ba2 2,280,000 2,308,500
5.875% 6/1/05 (AMBAC Insured) Aaa 1,250,000 1,312,500
Series A-3:
5.30% 6/1/04 (AMBAC Insured) Aaa 3,120,000 3,174,600
5.40% 6/1/05 (AMBAC Insured) Aaa 2,660,000 2,713,200
Series B-3, 5.30% 6/1/05 (MBIA Insured) Aaa 5,000,000 5,068,750
Series C, 5.25% 12/1/03 (FGIC Insured) Aaa 2,170,000 2,213,400
District of Columbia Hosp. Rev. (Hosp. for
Sick Children) Series A, 8.875% 1/1/21 - 2,870,000 3,139,062
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A (MBIA Insured):
5.95% 4/1/14 (g) Aaa 2,000,000 2,032,500
6% 4/1/18 (g) Aaa 700,000 705,250
26,056,643
FLORIDA - 2.3%
Broward County Resources Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 2,230,000 2,427,913
Florida Muni. Pwr. Agcy. Rev. Rfdg.
(Stanton II Proj.) 4.50% 10/1/27
(AMBAC Insured) Aaa 2,300,000 1,909,000
Jacksonville Elec. Auth. Rev. Rfdg. (St. John's
River Pwr. Park Sys.) 5.375% 10/1/16 Aa1 9,500,000 9,357,500
Orlando Util. Commission Wtr. & Elec. Rev.
Series B, 5.25% 10/1/23 Aa 2,750,000 2,585,000
Pasco County Solid Waste Disp. & Resource
Recovery Sys. Rev. 6% 4/1/06
(AMBAC Insured) (e)(g) Aaa 3,000,000 3,135,000
19,414,413
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ILLINOIS - 5.6%
Chicago Midway Arpt. Rev. Series B,
6% 1/1/05 (MBIA Insured) (e) Aaa $ 1,360,000 $ 1,436,500
Chicago O'Hare Int'l. Arpt. Rev. Rfdg.
(2nd Lien) (Gen. Arpt. Proj.) Series A:
6.25% 1/1/08 (MBIA Insured) Aaa 5,250,000 5,676,563
6.25% 1/1/09 (AMBAC Insured) (e) Aaa 6,100,000 6,542,250
6.375% 1/1/15 (MBIA Insured) Aaa 2,300,000 2,461,000
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev.:
Rfdg. (Delta Airlines, Inc.) 6.45% 5/1/18 Ba2 1,750,000 1,787,188
(American Airlines, Inc. Proj.) Series A,
7.875% 11/1/25 (e) Baa2 4,720,000 5,121,200
(Passenger Facs. Charge) Series A,
5.60% 1/1/10 (AMBAC Insured) Aaa 4,500,000 4,590,000
Cooke & Will Counties Township High School
Dist. #206 Series A, 0% 12/1/03
(AMBAC Insured) (Escrowed to Maturity) (f) Aaa 2,100,000 1,543,500
Illinois Dev. Fin. Auth. Poll. Cont. Rev. Rfdg.
(Commonwealth Edison Co. Proj.) Series D,
6.75% 3/1/15 (AMBAC Insured) Aaa 6,000,000 6,570,000
Illinois Health Facs. Auth. Rev. (Glen Oaks Med. Ctr.)
Series D, 9.50% 11/15/15
(Escrowed to Maturity) (f) Baa1 3,545,000 4,134,356
Metropolitan Pier & Exposition Auth.
Dedicated State Tax Rev. (Cap. Appreciation)
(McCormick Place Expansion Proj.) Series A:
0% 6/15/08 (FGIC Insured) Aaa 4,000,000 2,265,000
0% 6/15/08 (MBIA Insured) Aaa 6,000,000 3,397,500
0% 6/15/09 (FGIC Insured) Aaa 4,000,000 2,125,000
47,650,057
INDIANA - 0.3%
Indiana Health Facs. Fing. Auth. Hosp. Rev.
Rfdg. (Clarian Health Partners, Inc.)
Series A, 5.50% 2/15/16 Aa3 3,000,000 2,910,000
KENTUCKY - 1.2%
Kenton County Arpt. Board Arpt. Rev.:
Spl. Facs. (Delta Airlines Proj.) Series A,
7.50% 2/1/20 (e) Baa3 5,100,000 5,508,000
Rfdg. (Cincinnati/Northern Kentucky Int'l Arpt.)
Series A, 5.65% 3/1/04 (MBIA Insured) (e) Aaa 1,480,000 1,537,350
Owensboro Elec. Lt. & Pwr. Rev. Series B:
0% 1/1/09 (AMBAC Insured) Aaa 2,000,000 1,097,500
0% 1/1/10 (AMBAC Insured) Aaa 4,440,000 2,286,600
10,429,450
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
LOUISIANA - 3.2%
Lake Charles Hbr. & Term. Dist. Port Facs. Rev.
Rfdg. (Trunkline LNG Co. Proj.) Series 1992,
7.75% 8/15/22 Baa2 $ 14,900,000 $ 16,892,875
Louisiana Gen. Oblig. Series A,
6.75% 5/15/03 (MBIA Insured) Aaa 4,000,000 4,415,000
New Orleans Gen. Oblig. Rfdg. (Cap.
Appreciation) 0% 9/1/08 (AMBAC Insured) Aaa 10,000,000 5,612,500
26,920,375
MARYLAND - 0.2%
Baltimore Consolidated Pub. Impt. Rfdg.
Series A, 7.25% 10/15/04 (FGIC Insured) Aaa 1,545,000 1,784,475
MASSACHUSETTS - 7.9%
Boston Rev. (Boston City Hosp.) Series A, 7.625%
2/15/21 (FHA Guaranteed) (MBIA Insured)
(Pre-Refunded to 8/15/00 @ 102) (f) Aaa 2,500,000 2,778,125
Massachusetts Bay Trans. Auth.
Series B, 6.20% 3/1/16 A1 3,800,000 4,184,750
Massachusetts Gen. Oblig. Rfdg. Series A:
6.25% 7/1/04 A1 3,505,000 3,816,069
5.50% 2/1/11 (MBIA Insured) Aaa 9,000,000 9,090,000
Massachusetts Health & Edl. Facs. Auth. Rev.:
(1st Mtg.) (Fairview Extended Care)
Series A, 10.25% 1/1/21 - 12,000,000 13,635,000
(New England Med. Ctr.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 900,000 870,750
Massachusetts Hsg. Fin. Agcy. (Hsg. Rev. Rental)
Series A, 6.60% 7/1/14 (AMBAC Insured) (e) Aaa 2,500,000 2,650,000
Massachusetts Ind. Fin. Agcy. Ind. Rev.:
Rfdg. (Emerson College) 8.90% 1/1/18 - 10,000,000 10,950,000
(Atlanticare Med. Ctr.) Series A, 10.125% 11/1/14 - 3,300,000 3,465,000
(Cap. Appreciation) (Massachusetts Biomedical)
Series A-2:
0% 8/1/03 A1 6,300,000 4,662,000
0% 8/1/06 A1 4,000,000 2,500,000
0% 8/1/09 A 6,000,000 3,060,000
(Union Mission Proj.) 9.55% 9/1/26
(FHA Guaranteed) Aaa 3,985,000 4,527,956
Massachusetts Muni. Wholesale Elec. Co. Pwr.
Supply Sys. Rev. Series D, 6% 7/1/06 Baa2 800,000 833,000
67,022,650
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MICHIGAN - 2.4%
Detroit Hosp. Fin. Auth. Facs. Rev. Rfdg.
(Michigan Healthcare Corp. Proj.) 10% 12/1/20 (a) C $ 5,935,000 $ 1,068,300
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
7.80% 7/1/14 Baa1 4,750,000 5,106,250
Highland Park Hosp. Fin. Auth. Hosp. Facs. Rev. (a):
(Lakeside Commty. Hosp. Proj.) 10% 3/1/20 - 9,330,000 23,325
(Michigan Health Care Corp. Proj.) Series A,
9.875% 12/1/19 C 7,350,000 1,323,000
Michigan Strategic Fund Ltd. Oblig. Rev.
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20
(Pre-Refunded to 5/15/00 @ 102) (f) - 11,400,000 12,896,250
20,417,125
MINNESOTA - 1.4%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Healthcare Sys. Rev. Rfdg. (Healthspan Health
Sys. Corp.) Series A, 4.75% 11/15/18
(AMBAC Insured) Aaa 4,000,000 3,575,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.):
Series A, 9.75% 11/1/17 Baa 2,420,000 2,509,613
Series B, 9.75% 11/1/17 Baa 1,000,000 1,035,910
Series D, 9.75% 11/1/17 Baa 4,500,000 4,666,635
11,787,158
MISSOURI - 0.3%
Boone County Ind. Dev. Auth. Ind. Rev.
(1st Mtg.) (Fairview Extended Care) Series A,
10.125% 1/1/11 (Pre-Refunded to
1/1/01 @ 103) (f) - 2,175,000 2,620,875
NEBRASKA - 1.1%
Nebraska Pub. Pwr. Dist. Rev. Rfdg.
(Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 10,000,000 9,187,500
NEVADA - 0.5%
Clark County Gen. Oblig. Rfdg. Series A,
4.75% 6/1/10 (MBIA Insured) Aaa 4,825,000 4,523,438
NEW HAMPSHIRE - 1.1%
New Hampshire Higher Edl. & Health Facs.
Auth. Rev.:
(1st Mtg.) (River Woods at Exeter):
8% 3/1/01 - 1,200,000 1,226,196
9% 3/1/23 (Pre-Refunded to
3/1/03 @ 103) (f) - 3,170,000 3,910,987
(Littleton Hosp. Assoc., Inc.)
Series A, 9.50% 5/1/20 - 3,595,000 3,819,687
8,956,870
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW JERSEY - 3.4%
New Jersey Econ. Dev. Auth. Econ. Dev. Rev.
Rfdg. (Stolt Term. Proj.) 10.50% 1/15/18 - $ 3,500,000 $ 3,693,550
New Jersey Trans. Trust Fund Auth. Rfdg.
(Trans. Sys.) Series A:
6% 6/15/03 (AMBAC Insured) Aaa 4,035,000 4,322,494
6% 6/15/04 (AMBAC Insured) Aaa 8,900,000 9,567,500
5.50% 6/15/11 (MBIA Insured) Aaa 6,650,000 6,741,437
New Jersey Trans. Corp. Series A,
5.40% 9/1/02 (FSA Insured) Aaa 4,400,000 4,548,500
28,873,481
NEW MEXICO - 0.6%
Albuquerque Arpt. Rev. Rfdg.:
6.50% 7/1/08 (AMBAC Insured) (e) Aaa 1,250,000 1,385,938
6.75% 7/1/09 (AMBAC Insured) (e) Aaa 1,150,000 1,298,063
Univ. of New Mexico Rev. Rfdg. Series A,
6% 6/1/21 A1 1,940,000 2,051,550
4,735,551
NEW YORK - 13.3%
New York City Gen. Oblig.:
Rfdg. Series A, 5.70% 8/1/02 Baa1 1,700,000 1,753,125
Rfdg. Series D, 6.60% 2/1/03 Baa1 500,000 535,000
Rfdg. Unltd. Tax Series E, 6.50%
2/15/04 (FGIC Insured) Aaa 3,000,000 3,277,500
Series B:
5.70% 8/15/02 Baa1 4,000,000 4,125,000
7.50% 2/1/03 Baa1 14,000,000 15,470,000
Series L, 4.75% 8/1/98 Baa1 4,400,000 4,426,004
New York City Ind. Dev. Agcy. Ind. Dev. Rev.
(Japan Airlines Co. Ltd. Proj.) Series 1991,
6% 11/1/15, LOC Morgan Guaranty Trust Co.
(FSA Insured) (e) Aaa 1,000,000 1,046,250
New York City Muni. Assistance Corp.:
Series E, 6% 7/1/04 Aa2 5,000,000 5,362,500
Rfdg. Series J, 6% 7/1/04 Aa2 3,200,000 3,432,000
(Spl. Tax) 6.0% 7/1/05 Aa2 8,000,000 8,590,000
New York City Trust Cultural Resource Rev.
(American Museum of Nat'l. History) Series A,
5.65% 4/1/27 (MBIA Insured) Aaa 1,700,000 1,700,000
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.):
Series A:
5.50% 5/15/09 Baa1 3,000,000 3,033,750
5.50% 5/15/10 Baa1 1,500,000 1,505,625
5.50% 5/15/13 Baa1 5,250,000 5,204,062
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev. Rfdg.
(State Univ. Edl. Facs.):
Series A: - continued
5.25% 5/15/15 Baa1 $ 10,000,000 $ 9,625,000
5.875% 5/15/17 Baa1 3,300,000 3,399,000
Series B, 5.50% 5/15/08 Baa1 3,000,000 3,045,000
New York State Local Gov't. Assistance Corp.
Rfdg.:
(Cap. Appreciation) Series C, 0% 4/1/13 A3 10,000,000 4,150,000
Series A, 5.50% 4/1/04 (AMBAC Insured) Aaa 3,250,000 3,380,000
Series C, 5.50% 4/1/17 A3 4,250,000 4,276,562
Series E, 5% 4/1/21 A3 5,000,000 4,668,750
New York State Mtg. Agcy. Rev. (Homeowner
Mtg.) Series 48, 6.05% 4/1/17 (e) Aa2 5,000,000 5,087,500
New York State Thruway Auth. Hwy. & Bridge
Trust Fund Series A, 5.80% 4/1/09 A3 1,500,000 1,550,625
New York State Thruway Auth. Scv. Contract
Rev. (Local Hwy. & Bridge) 5.75% 4/1/16 Baa1 6,930,000 6,895,350
Niagara County Ind. Dev. Agcy. Rev.
(Wintergarden Inn Assoc. Proj.) 10% 6/1/11 (a) - 4,210,000 1,894,500
Triborough Bridge & Tunnel Auth. Gen. Purpose
Rev. Rfdg. Series Y, 5.50% 1/1/17 Aa 4,500,000 4,545,000
111,978,103
NORTH CAROLINA - 1.5%
North Carolina Eastern Muni. Pwr. Agcy. Pwr.
Sys. Rev. Rfdg.:
Series A:
5.50% 1/1/04 (MBIA Insured) Aaa 1,000,000 1,035,000
5.50% 1/1/05 (MBIA Insured) Aaa 1,000,000 1,032,500
Series B, 7.25% 1/1/07 Baa1 5,000,000 5,612,500
Series C, 7% 1/1/07 Baa1 1,750,000 1,933,750
North Carolina Muni. Pwr. Agcy. Rev. Rfdg.
(#1 Catawba Elec.) 6.25% 1/1/17
(AMBAC Insured) Aaa 2,900,000 3,030,500
12,644,250
OHIO - 1.1%
Ohio Hsg. Fin. Agcy. Mtg. Residential Rev.
Series A-1, 5.30% 9/1/26 (e) AAA 3,040,000 3,062,800
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
6.50% 12/1/03 (MBIA Insured) (i) Aaa 2,925,000 3,221,156
Stark County Ind. Dev. Rev. Rfdg.
(Kroger Co. Proj.) 7.20% 9/1/12 Baa3 3,100,000 3,398,375
9,682,331
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
OKLAHOMA - 0.9%
Oklahoma County Ind. Auth. Rev. (Epworth
Village Proj.) Series A, 10.25% 4/1/19
(Pre-Refunded to 4/1/99 @ 102) (f) - $ 2,900,000 $ 3,219,000
Tulsa Muni. Arpt. Trust Rev. (American Airlines
Corp. Proj.) 7.35% 12/1/11 Baa2 3,600,000 3,946,500
7,165,500
PENNSYLVANIA - 6.9%
Cumberland County Muni. Auth. Rev.
(Carlisle Hosp.) 6.80% 11/15/23 Baa 3,800,000 3,956,750
Delaware County Auth. Rev. (1st Mtg. Riddle
Village Proj.):
Series 1992, 8.75% 6/1/10
(Pre-Refunded to 6/1/02 @ 102) (f) Aaa 2,000,000 2,397,500
7% 6/1/00 (Escrowed to Maturity) (f) Aaa 500,000 516,335
8.25% 6/1/22 (Escrowed to Maturity) (f) Aaa 4,500,000 5,461,875
9.25% 6/1/22 (Pre-Refunded to
6/1/02 @ 102) (f) Aaa 6,170,000 7,527,400
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Facs.) Series A,
6.10% 7/1/13 Baa1 3,400,000 3,463,750
Pennsylvania Convention Ctr. Auth. Rev. Rfdg.
Series A:
6.60% 9/1/09 (MBIA Insured) Aaa 3,000,000 3,292,500
6.75% 9/1/19 Baa 4,500,000 4,843,125
Pennsylvania Hsg. Fin. Agcy. Rev. Rfdg.
(Single Family Mtg.) Series 54A,
5.375% 10/1/28 (e) Aa 1,000,000 1,008,750
Philadelphia Gen. Oblig.:
6.25% 5/15/11 (MBIA Insured) Aaa 3,400,000 3,676,250
6.25% 5/15/13 (MBIA Insured) Aaa 3,835,000 4,098,656
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev. (Graduate Health Sys. Oblig. Group):
Rfdg. 5.95% 7/1/03 Baa2 3,500,000 3,613,750
Series A&B:
7% 7/1/05 Ba 1,250,000 1,323,437
7.25% 7/1/18 Ba 2,450,000 2,624,562
Philadelphia Wtr. & Swr. Rev. (Cap. Appreciation)
14th Series, 0% 10/1/05 (MBIA Insured) Aaa 3,000,000 1,991,250
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 1,000,000 1,120,000
6.75% 8/1/05 (MBIA Insured) Aaa 1,000,000 1,126,250
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rfdg. Series A:
(Cap. Appreciation) 0% 9/1/06
(FGIC Insured) (Escrowed to Maturity) (f) Aaa 3,000,000 1,920,000
4.75% 9/1/16 (FGIC Insured) Aaa 5,000,000 4,500,000
58,462,140
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
SOUTH CAROLINA - 2.6%
Charleston County Health Facs. Rev. Rfdg.
(1st Mtg. Episcopal Proj.):
Series A, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) (f) - $ 2,945,000 $ 3,478,781
Series B, 9.75% 4/1/16
(Pre-Refunded to 4/1/01 @ 102) (f) - 2,070,000 2,445,188
Charleston County Resource Recovery Rev.
(Foster Wheeler) Series A, 9.25% 1/1/10 (e) A 4,500,000 4,726,440
Piedmont Muni. Pwr. Agcy. Elec. Rev. Rfdg.
Series B, 5.25% 1/1/11 (MBIA Insured) Aaa 4,500,000 4,449,375
South Carolina Pub. Svc. Auth. Rev. Rfdg.
Series A:
6.25% 1/1/04 (MBIA Insured) Aaa 2,565,000 2,776,612
6.50% 1/1/08 (MBIA Insured) Aaa 3,330,000 3,712,950
21,589,346
TENNESSEE - 0.6%
Metropolitan Gov't. Nashville & Davidson
County Wtr. & Swr. Rev. Rfdg. 6% 1/1/07
(MBIA Insured) Aaa 1,000,000 1,083,750
Springfield Ind. Dev. Board Ind. Dev. Rev.
Rfdg. (Kroger Co. Proj.) 7.25% 5/1/11 Baa3 3,500,000 3,863,125
4,946,875
TEXAS - 5.0%
Alliance Arpt. Auth. Spl. Facs. Rev. (American
Airlines, Inc. Proj.):
7% 12/1/11 (e) Baa2 7,000,000 7,883,750
7.50% 12/1/29 (e) Baa2 2,000,000 2,155,000
Brazos River Auth. Poll. Cont. Rev.
(Texas Util. Elec. Co. Proj.) Series A:
9.25% 3/1/18 (e) Baa1 2,300,000 2,413,689
8.25% 1/1/19 (e) Baa1 5,920,000 6,297,400
Conroe Independent School Dist. Rfdg. (Cap.
Appreciation) 0% 2/15/09 Aaa 1,100,000 599,500
El Paso Wtr. & Swr. Rev. (Cap. Appreciation):
0% 3/1/05 (MBIA Insured) Aaa 2,650,000 1,808,625
0% 3/1/06 (MBIA Insured) Aaa 3,700,000 2,391,125
Houston Wtr. and Swr. Sys. Rev. Rfdg. Series B,
6.25% 12/1/05 (FGIC Insured) Aaa 2,000,000 2,180,000
Plano Independent School Dist. 5.50% 2/15/01 Aaa 2,000,000 2,065,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
TEXAS - CONTINUED
Round Rock Independent School Dist. Rfdg. &
School Bldg. Unltd. Tax (Cap. Appreciation)
0% 8/15/09 (MBIA Insured) Aaa $ 7,430,000 $ 3,947,187
Sabine River Auth. Poll. Cont. Rev. (Util. Elec.
Proj.) Series B, 8.25% 10/1/20 (e) Baa1 1,250,000 1,376,562
San Antonio Elec. & Gas Rev. Rfdg.:
(Cap. Appreciation) Series B,
0% 2/1/08 (FGIC Insured) Aaa 2,000,000 1,155,000
5.25% 2/1/10 Aa1 3,500,000 3,508,750
Texas Pub. Fin. Auth. Bldg. Rev.:
Rfdg. (Cap. Appreciation)
0% 2/1/09 (MBIA Insured) Aaa 2,000,000 1,085,000
Series A, 6% 8/1/03 (AMBAC Insured) Aaa 800,000 856,000
Texas Wtr. Dev. Board Rev. 6.30% 7/15/06 Aa1 2,000,000 2,155,000
41,877,588
UTAH - 4.3%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev.
Rfdg.:
Series A, 6.50% 7/1/08 (AMBAC Insured) Aaa 1,500,000 1,687,500
Series B:
6.25% 7/1/03 (MBIA Insured) Aaa 6,000,000 6,472,500
5.75% 7/1/16 (MBIA Insured) Aaa 5,500,000 5,541,250
6% 7/1/16 (MBIA Insured) Aaa 15,500,000 16,061,875
Series D, 5% 7/1/21 (MBIA Insured) Aaa 2,300,000 2,118,875
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 3,650,000 4,074,313
Utah Hsg. Fin. Agcy. (Residential Mtg.) (Cap.
Appreciation) Series 1983 A, 0% 7/1/16 A+ 50,004 7,125
35,963,438
VERMONT - 0.3%
Vermont Ind. Dev. Auth. Ind. Dev. Rev. (Radisson
Hotel) Series B-1, 7.75% 11/15/15 - 2,000,000 2,167,500
VIRGINIA - 3.9%
Charlottesville Ind. Dev. Auth. Ind. Dev. Rev.
Rfdg. (Kroger Co. Proj.) 7.25% 5/1/10 Baa3 3,250,000 3,550,625
Loudoun County Ind. Dev. Auth. Residential Care
Facs. Rev. (Falcons Landing Proj.) Series A:
9.25% 11/1/04 - 1,100,000 1,204,500
8.75% 11/1/24 - 13,900,000 14,838,250
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
VIRGINIA - CONTINUED
Richmond Metropolitan Expressway Rev. Rfdg.
Series A, 6% 7/15/08 (FGIC Insured) Aaa $ 2,645,000 $ 2,797,088
Southeastern Pub. Svc. Auth. Rev. Rfdg. Sr.
Series A:
5.15% 7/1/09 (MBIA Insured) Aaa 4,000,000 4,025,000
5.25% 7/1/10 (MBIA Insured) Aaa 4,000,000 4,025,000
Virginia State Gen. Oblig. 5% 6/1/04 Aaa 2,750,000 2,811,875
33,252,338
WASHINGTON - 4.7%
Douglas County Pub. Util. Dist. #1 Wells
Hydroelec. Rev. Rfdg. (Pacific Pwr. & Lt. Co.)
8.75% 9/1/18 A 1,395,000 1,757,700
Washington Gen. Oblig. Rfdg. Series R,
5.60% 9/1/04 Aa 2,500,000 2,625,000
Washington Pub. Pwr. Supply Sys. Rev.:
(Nuclear Proj. #1) Rfdg. Series B, 7% 7/1/08 Aa1 1,000,000 1,131,250
(Nuclear Proj. #2):
Rfdg. 5.55% 7/1/10 (FGIC Insured) Aaa 5,300,000 5,253,625
Rfdg. Series B, 5.625% 7/1/12 (MBIA Insured) Aaa 6,500,000 6,491,875
5.40% 7/1/12 Aa1 11,600,000 11,281,000
(Nuclear Proj. #3):
Rfdg. (Cap. Appreciation) Series B,
0% 7/1/08 (MBIA Insured) Aaa 3,000,000 1,691,250
5.40% 7/1/12 Aa1 10,000,000 9,525,000
39,756,700
WEST VIRGINIA - 0.6%
Kanawha County Ind. Dev. Rev. Rfdg.
(Topvalco, Inc. Proj.) 7.125% 11/1/12 Baa3 4,500,000 4,888,125
TOTAL MUNICIPAL BONDS
(Cost $ 795,923,860) 808,877,871
CASH EQUIVALENTS - 4.2%
SHARES
Municipal Central Cash Fund (c)(d)
(Cost $ 35,470,027) 35,470,027 35,470,027
TOTAL INVESTMENTS - 100%
(Cost $ 831,393,887) $ 844,347,898
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
126 U.S. Treasury Bond Futures Sept. 1997 $ 13,993,875 $ 291,170
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.7%
LEGEND
5. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
6. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
7. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund. A
listing of the Municipal Central Cash Fund's holdings as of its most recent
fiscal period end is available upon request.
8. At the period end, the seven-day yield of the Municipal Central Cash
Fund was 4.17%. The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
9. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
10. Security collateralized by an amount sufficient to pay interest and
principal.
11. Security purchased on a delayed delivery or when-issued basis (see Note
2 of Notes to Financial Statements).
12. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
13. 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 $402,809.
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 54.7% AAA, AA, A 54.1%
Baa 24.3% BBB 17.9%
Ba 1.4% BB 3.1%
B 0.0% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.3% CC, C 0.0%
D 0.3%
The percentage not rated by both S&P and Moody's amounted to 11.7%. FMR has
determined that unrated debt securities that are lower quality account for
9.2% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 22.5%
Electric Revenue 17.1
Health Care 15.9
Industrial Development 10.4
Transportation 7.6
Special Tax 5.4
Escrowed/Pre-Refunded 5.4
Water and Sewer 5.2
Others (individually less than 5%) 10.5
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $831,520,877. Net unrealized appreciation aggregated
$12,827,021, of which $37,252,671 related to appreciated investment
securities and $24,425,650 related to depreciated investment securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $19,155,000 of which $1,444,000, $8,549,000, and $9,162,000
will expire on December 31, 2002, 2003, and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $831,393,887) - $ 844,347,898
See accompanying schedule
Interest receivable 14,264,029
Redemption fees receivable 37
TOTAL ASSETS 858,611,964
LIABILITIES
Payable for investments purchased $ 5,809,143
Delayed delivery
Payable for fund shares redeemed 347,145
Distributions payable 1,378,762
Accrued management fee 252,649
Payable for daily variation on futures contracts 70,875
Other payables and accrued expenses 162,028
TOTAL LIABILITIES 8,020,602
NET ASSETS $ 850,591,362
Net Assets consist of:
Paid in capital $ 860,413,167
Accumulated undistributed net realized gain (loss) (23,066,986)
on investments
Net unrealized appreciation (depreciation) on 13,245,181
investments
NET ASSETS, for 74,360,415 shares outstanding $ 850,591,362
NET ASSET VALUE, offering price and redemption price per $11.44
share ($850,591,362 (divided by) 74,360,415 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 26,805,352
EXPENSES
Management fee $ 1,717,928
Transfer agent, accounting and custodian fees and 682,757
expenses
Non-interested trustees' compensation 1,861
Registration fees 28,846
Audit 28,454
Legal 4,186
Miscellaneous 2,040
Total expenses before reductions 2,466,072
Expense reductions (46,978) 2,419,094
NET INTEREST INCOME 24,386,258
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (2,126)
Futures contracts 578,563 576,437
Change in net unrealized appreciation (depreciation) on:
Investment securities 4,812,263
Futures contracts 291,170 5,103,433
NET GAIN (LOSS) 5,679,870
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 30,066,128
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE DECEMBER 31,
30,1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 24,386,258 $ 53,461,352
Net interest income
Net realized gain (loss) 576,437 (9,461,466)
Change in net unrealized appreciation (depreciation) 5,103,433 (14,818,477)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 30,066,128 29,181,409
FROM OPERATIONS
Distributions to shareholders (24,386,258) (53,461,352)
From net interest income
In excess of net interest income - (302,777)
TOTAL DISTRIBUTIONS (24,386,258) (53,764,129)
Share transactions 69,176,490 114,637,849
Net proceeds from sales of shares
Reinvestment of distributions 17,041,186 38,125,747
Cost of shares redeemed (93,386,219) (186,338,274)
Redemption fees 64,592 88,615
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (7,103,951) (33,486,063)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,424,081) (58,068,783)
NET ASSETS
Beginning of period 852,015,443 910,084,226
End of period $ 850,591,362 $ 852,015,443
OTHER INFORMATION
Shares
Sold 6,098,133 10,105,497
Issued in reinvestment of distributions 1,501,327 3,363,911
Redeemed (8,235,635) (16,452,415)
Net increase (decrease) (636,175) (2,983,007)
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 D 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.360 $ 11.670 $ 10.810 $ 12.330 $ 11.880 $ 11.800
beginning of period
Income from Investment .326 .699 .709 .770 .783 .834
Operations
Net interest income
Net realized and .079 (.307) .858 (1.473) .788 .208
unrealized gain
(loss)
Total from investment .405 .392 1.567 (.703) 1.571 1.042
operations
Less Distributions
From net interest (.326) (.699) (.709) (.770) (.783) (.834)
income
In excess of net - (.004) - - - -
interest income E
From net realized - - - (.050) (.340) (.130)
gain
Total distributions (.326) (.703) (.709) (.820) (1.123) (.964)
Redemption fees added .001 .001 .002 .003 .002 .002
to paid in capital
Net asset value, $ 11.440 $ 11.360 $ 11.670 $ 10.810 $ 12.330 $ 11.880
end of period
TOTAL RETURN B, C 3.63% 3.56% 14.89% (5.82) 13.63% 9.17%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 850,591 $ 852,015 $ 910,084 $ 796,153 $ 952,225 $ 761,683
period (000 omitted)
Ratio of expenses to .58% A, .63% .64% .63% .64% .64%
average net assets F
Ratio of net interest 5.84% A 6.14% 6.24% 6.69% 6.37% 7.01%
income to average
net assets
Portfolio turnover rate 54% A 35% 39% 40% 54% 43%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (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.
E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
36. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Aggressive Municipal 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. Effective July 31,
1997, the Board of Trustees approved a change in the fund's name from
Fidelity Aggressive Municipal Fund to Spartan Aggressive Municipal Fund.
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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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 litigation
proceeds, futures and options transactions, market discount, capital loss
carryforwards and losses deferred due to wash sales, and futures and
options.
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
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS -
CONTINUED
between net interest income and realized and unrealized gain (loss).
Accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences which will reverse in a
subsequent period.
Any taxable gain remaining at fiscal year end is distributed in the
following year.
REDEMPTION FEES. Shares held in the fund less than 180 days are subject to
a redemption fee equal to 1% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
37. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Municipal
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
Fidelity Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in high-quality,
short-term
municipal securities of various states and municipalities. Income
distributions from the Cash Fund are declared daily and paid monthly from
net interest income. Income distributions received by the fund are recorded
as interest income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased 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 when-issued
security. With respect to purchase commitments, the fund identifies
securities as segregated in its custodial records with a value at least
equal to the amount of the commitment. The payables and receivables
associated with the purchases and sales of when-issued securities having
the same settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected as
both payables and receivables in the statement of assets and liabilities
under the caption "Delayed delivery." Losses may arise due to changes in
the market value of the underlying securities, if the counterparty does not
perform under the contract, or if the issuer does not issue the securities
due to political, economic, or other factors.
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains and losses are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
38. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $217,255,678 and $252,068,637, respectively.
The market value of futures contracts opened and closed during the period
amounted to $84,895,783 and $71,771,641, respectively.
39. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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. The annual individual
fund fee rate is .25%. 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.
For the period, the management fee was equivalent to an annualized rate of
..41% of average net assets. Effective March 1, 1997, FMR voluntarily agreed
to reduce the individual fund fee rate from .30% to .25%.
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 Company, Inc. (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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
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 $519,925 and $140,340,
respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% of average net assets.
40. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the fund's average
net assets. For the period, the reimbursement reduced expenses by $44,529.
Effective August 1, 1997, the fund's expense limitation will be changed
from .55% to .53% of average net assets.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by $509
and $1,940, respectively, under these arrangements.
41. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Aggressive Municipal Fund has approved an
Agreement and Plan of Reorganization ("Agreement") between the fund and
Spartan Aggressive Municipal Fund ("Reorganization"). The Agreement
provides for the transfer of all of the assets and the assumption of all of
the liabilities of Spartan Aggressive Municipal Fund in exchange solely for
the number of shares of the fund having the same aggregate net asset value
as the outstanding shares of Spartan Aggressive Municipal Fund at the close
of business on the day that the Reorganization is effective. The
Reorganization, which has been approved by the vote of a majority (as
defined by the Investment Company Act of 1940) of outstanding voting
securities of Spartan Aggressive Municipal Fund, will become effective on
July 31, 1997.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* 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
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Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
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Irvine, CA
10100 Santa Monica Blvd.
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
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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
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Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
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8065 Beneva Road
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1502 N. Westshore Blvd.
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GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
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Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
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INDIANA
4729 East 82nd Street
Indianapolis, IN
LOUISIANA
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MAINE
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MARYLAND
7401 Wisconsin Avenue
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1 West Pennsylvania Ave.
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MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
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MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
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8885 Ladue Road
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200 North Broadway
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NEW JERSEY
150 Essex Street
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56 South Street
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501 Route 17, South
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NEW YORK
1055 Franklin Avenue
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NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
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OHIO
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400 East Las Colinas Blvd.
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14100 San Pedro
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19740 IH 45 North
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UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
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VIRGINIA
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McLean, VA
WASHINGTON
411 108th Avenue, N.E.
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511 Pine Street
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WASHINGTON, DC
1900 K Street, N.W.
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WISCONSIN
595 North Barker Road
Brookfield, WI
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If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
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TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
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PHIC)FOR NON-RETIREMENT
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OVERNIGHT EXPRESS
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2300 Litton Lane - KH1A
Hebron, KY 41048
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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
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SELLING SHARES
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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
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Limited Term Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Spartan Arizona Municipal Income
Spartan California Intermediate Municipal Income
Spartan California Municipal Income
Spartan Connecticut Municipal Income
Spartan Florida Municipal Income
Spartan Insured Municipal Income
Spartan Intermediate Municipal Income
Spartan Maryland Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Spartan Municipal Income
Spartan New Jersey Municipal Income
Spartan New York Intermediate Municipal Income
Spartan New York Municipal Income
Spartan Ohio Municipal Income
Spartan Pennsylvania Municipal Income
Spartan Short-Intermediate
Municipal Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
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for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress 1-800-544-5555
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MINNESOTA MUNICIPAL INCOME
FUND
(FORMERLY FIDELITY MINNESOTA
MUNICIPAL INCOME FUND)
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months
and one year.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 23 Notes to the financial statements.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you 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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend 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, as reflected in the fund's yield, to measure
performance. If Fidelity had not reimbursed certain fund expenses, the
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Spartan Minnesota 3.03% 7.65% 35.32% 104.25%
Municipal Income Fund
Lehman Brothers Minnesota Enhanced 3.27% 7.92% n/a n/a
Municipal Bond Index
Minnesota Municipal Debt Funds Average 2.74% 7.19% 35.40% 104.72%
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 had 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 - a total return
performance benchmark for Minnesota investment-grade municipal bonds with
maturities of at least one year. 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 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The past six
months average represents a peer group of 44 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Minnesota Municipal Income Fun 7.65% 6.24% 7.40%
d
Lehman Brothers Minnesota Enhanced 7.92% n/a n/a
Municipal Bond Index
Minnesota Municipal Debt Funds Average 7.19% 6.25% 7.42%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Lipper calculates average annual total returns by annualizing each
fund's total return, then taking the arithmetic average. This may produce a
slightly different figure that that obtained by averaging the cumulative
total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10156.08 10102.00
1987/08/31 10205.38 10124.73
1987/09/30 9582.42 9751.43
1987/10/31 9693.22 9785.95
1987/11/30 9925.84 10041.46
1987/12/31 10118.94 10187.16
1988/01/31 10550.08 10550.03
1988/02/29 10691.93 10661.54
1988/03/31 10430.00 10537.87
1988/04/30 10492.28 10617.96
1988/05/31 10586.42 10587.27
1988/06/30 10743.91 10742.16
1988/07/31 10795.93 10812.20
1988/08/31 10816.09 10821.72
1988/09/30 11009.68 11017.59
1988/10/31 11261.17 11211.50
1988/11/30 11185.37 11108.80
1988/12/31 11394.97 11222.45
1989/01/31 11550.35 11454.53
1989/02/28 11473.32 11323.83
1989/03/31 11485.72 11296.77
1989/04/30 11778.67 11564.95
1989/05/31 11936.86 11805.16
1989/06/30 12072.13 11965.47
1989/07/31 12162.46 12128.32
1989/08/31 12079.68 12009.58
1989/09/30 12021.92 11973.79
1989/10/31 12191.68 12120.23
1989/11/30 12364.70 12332.34
1989/12/31 12447.46 12433.22
1990/01/31 12361.42 12374.41
1990/02/28 12501.66 12484.54
1990/03/31 12514.36 12488.29
1990/04/30 12353.90 12397.87
1990/05/31 12605.40 12668.52
1990/06/30 12724.72 12779.87
1990/07/31 12942.46 12967.74
1990/08/31 12731.25 12779.44
1990/09/30 12841.32 12786.73
1990/10/31 13000.25 13018.68
1990/11/30 13285.18 13280.49
1990/12/31 13346.10 13338.26
1991/01/31 13458.56 13517.26
1991/02/28 13546.63 13634.86
1991/03/31 13569.65 13639.76
1991/04/30 13733.73 13821.17
1991/05/31 13871.55 13944.04
1991/06/30 13816.06 13930.24
1991/07/31 13995.54 14099.91
1991/08/31 14136.03 14285.60
1991/09/30 14237.71 14471.60
1991/10/31 14286.44 14601.85
1991/11/30 14255.67 14642.59
1991/12/31 14480.33 14956.82
1992/01/31 14543.64 14990.92
1992/02/29 14604.39 14995.71
1992/03/31 14627.57 15001.26
1992/04/30 14730.97 15134.77
1992/05/31 14892.79 15312.91
1992/06/30 15093.71 15569.86
1992/07/31 15465.08 16036.65
1992/08/31 15306.76 15880.29
1992/09/30 15342.99 15984.15
1992/10/31 15056.46 15827.02
1992/11/30 15404.64 16110.48
1992/12/31 15584.75 16274.97
1993/01/31 15822.43 16464.25
1993/02/28 16310.84 17059.76
1993/03/31 16158.62 16879.44
1993/04/30 16310.13 17049.75
1993/05/31 16421.22 17145.57
1993/06/30 16689.83 17431.73
1993/07/31 16710.84 17454.57
1993/08/31 17060.41 17817.97
1993/09/30 17304.42 18020.92
1993/10/31 17326.41 18055.70
1993/11/30 17181.01 17896.63
1993/12/31 17520.69 18274.43
1994/01/31 17724.11 18483.12
1994/02/28 17261.00 18004.41
1994/03/31 16511.71 17271.27
1994/04/30 16606.86 17417.73
1994/05/31 16721.53 17568.74
1994/06/30 16661.35 17461.40
1994/07/31 16966.60 17781.46
1994/08/31 17003.96 17842.99
1994/09/30 16783.61 17581.05
1994/10/31 16419.75 17268.81
1994/11/30 16055.42 16956.59
1994/12/31 16467.79 17329.81
1995/01/31 16947.27 17825.09
1995/02/28 17433.88 18343.45
1995/03/31 17620.31 18554.21
1995/04/30 17637.27 18576.11
1995/05/31 18122.49 19168.87
1995/06/30 17974.20 19002.10
1995/07/31 18044.72 19182.24
1995/08/31 18249.24 19425.47
1995/09/30 18384.26 19548.43
1995/10/31 18640.50 19832.67
1995/11/30 18927.91 20161.69
1995/12/31 19102.29 20355.45
1996/01/31 19222.35 20509.13
1996/02/29 19128.58 20370.69
1996/03/31 18883.37 20110.36
1996/04/30 18807.76 20053.44
1996/05/31 18804.12 20045.42
1996/06/30 18973.25 20263.72
1996/07/31 19144.36 20448.12
1996/08/31 19119.90 20443.21
1996/09/30 19325.65 20729.41
1996/10/31 19569.95 20963.86
1996/11/30 19920.38 21347.50
1996/12/31 19824.09 21257.84
1997/01/31 19854.45 21298.02
1997/02/28 20022.61 21493.54
1997/03/31 19780.65 21207.03
1997/04/30 19920.87 21384.53
1997/05/31 20192.62 21706.15
1997/06/30 20425.09 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Spartan Minnesota Municipal Income Fund on June 30, 1987. As the chart
shows, by June 30, 1997, the value of the investment would have grown to
$20,425 - a 104.25% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade municipal bonds with maturities
of at least one year - did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 would have grown to $21,937 - a
119.37% 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 YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend returns 2.57% 5.22% 6.40% 5.42% 6.25% 6.51%
Capital appreciation 0.46% -1.44% 9.60% -11.43% 6.17% 1.12%
returns
Total returns 3.03% 3.78% 16.00% -6.01% 12.42% 7.63%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.56(cents) 27.62(cents) 55.29(cents)
Annualized dividend rate 5.04% 5.11% 5.09%
30-day annualized yield 4.70% - -
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 $11.00 over
the past one month, $10.89 over the past six months and $10.87 over the
past one 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 1997 federal and state tax bracket, but
does not reflect the payment of the federal alternative minimum tax, if
applicable. If Fidelity had not reimbursed certain fund expenses during the
period shown, the yield and tax-equivalent yield would have been 4.66% and
7.96%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Jonathan Short, Portfolio Manager of Spartan Minnesota
Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. Given that the municipal bond market was somewhat weak, I'm pleased with
the fund's performance relative to its peers. For the six-month period that
ended June 30, 1997, the fund had a total return of 3.03%. To get a sense
of how the fund did relative to its competitors, the Minnesota municipal
debt funds average returned 2.74% for the same six-month period, as tracked
by Lipper Analytical Services. Additionally, the Lehman Brothers Minnesota
Enhanced Municipal Bond Index returned 3.27%. For the 12-month period that
ended June 30, 1997, the fund had a total return of 7.65%, the Minnesota
municipal debt funds average returned 7.19%, according to Lipper, and the
Lehman Brothers index returned 7.92%.
Q. THE BOND MARKET WAS SOMEWHAT JITTERY DURING THE SIX-MONTH PERIOD. WHAT
CAUSED ALL THE UNCERTAINTY AND HOW DID MUNICIPALS FARE IN THE MIDST OF IT?
A. The main reason for the bond market's skittishness was the fear of
inflation. Worried that the economy was growing at too quick a pace - and
much faster than anticipated - investors sent Treasury bond yields higher
and prices lower. Bond investors, of course, react negatively to even the
threat of higher inflation because it can eat away at the fixed- income
payments their bonds generate. While there weren't any tangible signs that
inflation was on the upswing, investors continued to be concerned about the
future and whether the Federal Reserve Board would raise interest rates as
an anti-inflationary measure some time down the road, as it did in March.
Municipals, however, fared better during this troubled period, and their
yields generally ended the period where they had started it.
Q. WHY DID MUNICIPALS OUTPACE TREASURIES?
A. Municipals' strong performance can be attributed to the fact that their
supply was limited and the demand for them increased. As a result, tax-free
bonds generally were able to hold their ground better than many taxable
fixed-income investments, including Treasuries.
Q. HOW DID YOU ALTER YOUR STRATEGY DURING THE PAST SIX MONTHS?
A. While I did buy and sell bonds based on what I believed their value to
be relative to other bonds available in the marketplace, my basic strategy
remained intact. I continued to keep the fund's duration - which measures
how sensitive it is to changes in interest rates - in line with the
Minnesota municipal market as a whole, as reflected by the fund's benchmark
index. In theory, I guess it's possible to accurately predict where
interest rates are headed. But practically speaking, it has proved to be
very difficult to do so with consistency over any meaningful stretch of
time.
Q. HOWEVER, IT APPEARS THAT YOU SOLD SOME LONGER-TERM BONDS - WHICH ARE THE
MOST SENSITIVE OF ALL BOND MATURITIES TO RISING INTEREST RATES - DURING THE
PAST SIX MONTHS. DIDN'T THAT SIGNAL THAT YOU WERE GETTING MORE DEFENSIVE IN
LIGHT OF HIGHER INTEREST RATES?
A. No, it was a function of where I found the best value. In my view,
longer-term bonds with maturities of more than 20 years didn't offer enough
yield advantage over shorter-term bonds to compensate for their added
interest rate sensitivity. In my view, the better risk/reward payoff was
found in intermediate bonds. So I continued to concentrate the fund's
investments in intermediate bonds with maturities of between 10 and 20
years, where I felt the reward adequately compensated for their risk.
Q. HEALTH CARE AND ELECTRIC REVENUE BONDS WERE TWO OF THE FUND'S LARGEST
SECTOR CONCENTRATIONS AT THE END OF THE PERIOD. SINCE BOTH SECTORS ARE
FACING DIFFICULT CHALLENGES, HOW DO YOU CHOOSE WHICH INVESTMENTS ARE
APPROPRIATE FOR THE FUND?
A. In the health care sector, the main challenges are consolidation,
cost-cutting and competition. I emphasized health care facilities that I
believed were well-positioned in their service area and that had strong
relationships with doctors and various payers, including insurance
companies and the government. With input from Fidelity's research analysts,
I targeted hospitals - such as the Mayo Clinic - with strong market share,
sensible balance sheets and effective management teams. Health care bonds
typically offer high yields relative to other sectors, which is one reason
why I think they are attractive investments for the fund. Turning to
electric providers, I preferred those that I thought had reasonable enough
cost structures to allow them to do well in a more competitive environment.
Given the potential for more competition among electric providers, I
reduced the fund's stake in electric utility bonds because I felt it was
prudent to lock in some of their recent strong performance.
Q. WHAT'S YOUR OUTLOOK?
A. The supply and demand outlook for municipals appears favorable. I don't
expect to see a tremendous amount of new bonds issued, and the increase in
supply we're likely to see will be easily digested if demand remains firm.
I believe demand will depend on how attractive investors find municipals
relative to other fixed-income investments - including U.S. Treasuries -
and stocks. How municipals fare over the next year will depend heavily on
the direction of interest rates. That said, we may continue to see some
volatility in the bond market as long as there are conflicting signs about
the economy and inflation.
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 Minnesota residents by
normally investing in
investment-grade municipal
securities whose interest is
free from federal income
tax and Minnesota personal
income tax
FUND NUMBER: 082
TRADING SYMBOL: FIMIX
START DATE: November
21, 1985
SIZE: as of June 30, 1997,
more than $291 million
MANAGER: Jonathan Short,
since 1995; manager,
Fidelity California Municipal
Income, Fidelity California
Insured Municipal Income,
Spartan Arizona Municipal
Income, Spartan California
Municipal Income, Spartan
California Intermediate
Municipal Income and
Spartan Florida Municipal
Income funds, since 1995;
Fidelity Advisor California
Municipal Income Fund,
since 1996; joined Fidelity
in 1990
(checkmark)
JONATHAN SHORT ON
MINNESOTA GENERAL
OBLIGATION BONDS:
"General obligation bonds
(GOs) remained the fund's
largest sector concentration,
which, in part, reflects my
optimistic view of the state's
economy, fiscal situation and
creditworthiness. A GO is
backed by the full faith and credit
- - which includes the taxing
power - of a city, county,
state or other issuer, and is
repaid with general revenue
such as taxes. General
revenues - which are
sensitive to the strength of the
economy - have been
strong during the period in
many areas of
Minnesota. As a function of
this economic strength, the
state's fiscal situation has
improved because tax
revenues have increased.
The state ended its 1997
fiscal year with a very large
surplus, which has been used
to increase the state's budget
reserves. I consider that to be
a positive for the state's
creditworthiness and I'm
optimistic about the state's
fiscal situation."
INVESTMENT CHANGES
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 30.4 29.7
Health Care 23.3 19.5
Electric Revenue 12.9 15.7
Housing 11.4 10.3
Education 10.0 9.2
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 14.0 14.4
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, 1997
6 MONTHS AGO
Years 6.8 7.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 6.1
Row: 1, Col: 4, Value: 42.6
Row: 1, Col: 5, Value: 45.8
Aaa 48.8%
Aa, A 43.6%
Baa 6.1%
Non-rated 0.1%
Short-term
investments 1.4%
Aaa 46.8%
Aa, A 42.6%
Baa 6.5%
Non-rated 0.1%
Short-term
investments 4.0%
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 5.7
Row: 1, Col: 4, Value: 42.6
Row: 1, Col: 5, Value: 47.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 96.0%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - 95.2%
Albany Independent School Dist. #745 Unltd. Tax
(School Dist. Credit Enhancement Prog.)
Series A, 6% 2/1/16 Aa1 $ 1,000,000 $ 1,033,750
Bagley Independent School Dist. #162 Unltd. Tax:
4.85% 2/1/13 AA 1,020,000 954,975
4.85% 2/1/14 AA 1,100,000 1,021,625
Bemidji Hosp. Facs. Rev.
(1st Mtg. - North Country Health)
Series A, 7% 9/1/21
(Pre-Refunded to 9/1/01 @ 102) (d) AAA 1,000,000 1,113,750
Bloomington Gen. Oblig. Rfdg. Unltd. Tax
6.50% 12/1/00 Aa1 5,200,000 5,557,500
Breckenridge Hosp. Facs. Rev.
(Franciscan Sisters Healthcare)
Series B-2, 9.375% 9/1/17
(Pre-Refunded to 9/1/97 @ 102) (d) - 445,000 457,763
Chanhassen Gen. Oblig. Impt. Unltd. Tax
Series D:
0% 2/1/03 (AMBAC Insured) Aaa 1,730,000 1,325,613
0% 2/1/04 (AMBAC Insured) Aaa 1,700,000 1,234,625
Cloquet Poll. Cont. Rev. Rfdg.
(Potlach Corp. Proj.) 5.90% 10/1/26 A- 2,000,000 2,012,500
Dakota County Hsg. & Redev. Auth. St. Paul
Rev. Rfdg. (Single Family Mtg.)
Series A, 8.10% 9/1/12 (GNMA Coll.) AAA 260,000 271,375
Eden Prairie Multi-Family Hsg. Rev.
(Preserve Place Apts.)
8% 7/1/28 (FHA Guaranteed) AAA 1,000,000 1,023,750
Elk River Independent School Dist. #728 Untld. Tax
(School Dist. Credit Enhancement Prog.)
5.15% 2/1/11 Aa1 1,600,000 1,588,000
Hennepin County Lease Rev. Ctfs. of Prtn.
Series A, 6.80% 5/15/17 Aa2 5,000,000 5,262,500
Lakeville Independent School Dist. #194 Unltd. Tax
(School Dist. Credit Enhancement Prog.):
0% 2/1/04 Aa1 3,040,000 2,185,000
0% 2/1/05 Aa1 2,810,000 1,910,800
Maple Grove Impt. Unltd. Tax
Series A, 5.20% 2/1/17 Aa 1,120,000 1,085,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minneapolis Commty. Dev. Agcy. Tax Increment
Rev. (Cap. Appreciation):
0% 9/1/07 (MBIA Insured) Aaa $ 2,860,000 $ 1,719,575
0% 9/1/08 (MBIA Insured) Aaa 4,600,000 2,604,750
Minneapolis Convention Ctr. Sales Tax Rev.
(Chamber Bdlg. - Skyway Proj.) 0% 2/1/06 (g) - 713,000 356,500
Minneapolis Gen. Oblig.:
(Cap. Appreciation):
Series A:
0% 12/1/11 Aaa 2,830,000 1,308,875
0% 12/1/12 Aaa 2,000,000 870,000
Unltd. Tax Series B:
0% 12/1/02 Aaa 790,000 618,175
0% 12/1/03 Aaa 1,000,000 743,750
0% 12/1/06 Aaa 3,355,000 2,130,425
0% 12/1/07 Aaa 1,000,000 602,500
0% 12/1/08 Aaa 2,685,000 1,523,738
Rfdg. (Sports Arena Proj.):
6% 4/1/06 Aaa 1,055,000 1,151,269
6% 10/1/06 (e) Aaa 1,000,000 1,095,000
Unltd. Tax Rfdg. (Sales Tax):
5.60% 10/1/00 Aaa 1,000,000 1,041,250
6.15% 10/1/05 Aaa 2,000,000 2,152,500
6.25% 4/1/07 Aaa 2,000,000 2,150,000
Unltd. Tax Rfdg. Series B, 5.10% 9/1/08 Aaa 2,000,000 2,030,000
Minneapolis Hosp. Rev. Rfdg.
(Fairview Hosp. & Healthcare)
6.50% 1/1/11 (MBIA Insured) Aaa 3,000,000 3,225,000
Minneapolis Spl. School Dist. Ctfs. of Prtn. Untld.
Tax Series A, 5.80% 2/1/10 (MBIA Insured) Aaa 2,000,000 2,065,000
Minneapolis & St. Paul Hsg. Fin. Board Rev.
(Single Family Phase IX) 7.25% 8/1/21 (b) AAA 2,095,000 2,218,081
Minneapolis & St. Paul Hsg. & Redev. Auth. Health
Care Sys. Rev.:
(Health One Obligated Group)
Series A, 7.40% 8/15/11, (MBIA Insured) Aaa 2,750,000 2,994,063
Rfdg. (Healthspan Health Sys. Corp.)
Series A, 4.75% 11/15/18
(AMBAC Insured) Aaa 4,000,000 3,575,000
Minneapolis & St. Paul Metropolitan Arpts.
Commission Unltd. Tax
Series 7, 7.80% 1/1/15 (b) Aaa 3,000,000 3,187,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Gen. Oblig.:
(Duluth Arpt.) Series B, 6.25% 8/1/14 (b) Aaa $ 1,000,000 $ 1,042,500
Rfdg. Unltd. Tax:
5.30% 8/1/10 Aaa 1,450,000 1,462,688
4.90% 8/1/11 Aaa 1,290,000 1,248,075
Unltd. Tax:
6.40% 8/1/01 Aaa 1,000,000 1,075,000
5.60% 10/1/01 Aaa 3,000,000 3,142,500
5.80% 8/1/03 Aaa 1,000,000 1,065,000
5.60% 10/1/04 Aaa 1,000,000 1,060,000
6.625% 8/1/07
(Pre-Refunded to 8/1/01 @ 100) (d) AAA 1,000,000 1,081,250
6% 8/1/05 Aaa 10,255,000 11,139,494
6% 5/1/06 Aaa 2,000,000 2,177,500
6% 11/1/06 Aaa 1,500,000 1,638,750
5.20% 5/1/07 Aaa 5,000,000 5,106,250
Minnesota Higher Ed. Facs. Auth. Mtg. Rev.
(St. Thomas Univ.) Series 3 C,
6.25% 9/1/16 A2 2,310,000 2,361,975
Minnesota Higher Ed. Facs. Auth. Rev.:
Rfdg.:
(Hamline Univ.) Series 4-I:
6% 10/1/12 Baa1 1,000,000 1,018,750
6% 10/1/16 Baa1 1,000,000 1,011,250
(MacAlester College) Series 3-J,
6.40% 3/1/22 Aa3 2,175,000 2,289,188
(St. Thomas Univ.) Series 3-R1:
5% 10/1/01 A2 1,000,000 1,011,250
5.60% 10/1/15 A2 1,000,000 1,005,000
Series 3-R2, 5.45% 9/1/07 A2 650,000 667,875
Series 3-R2, 5.60% 9/1/14 A2 4,275,000 4,312,406
(Carleton College):
Series 4-N:
5.25% 11/1/04 Aa3 870,000 896,100
5.25% 11/1/05 Aa3 945,000 969,806
5% 11/1/18 Aa3 1,000,000 937,500
(Macalester College) Series 4-C:
5.20% 3/1/08 Aa3 1,070,000 1,071,338
5.50% 3/1/12 Aa3 815,000 827,225
Series 3-L1, 5.75% 11/1/12 Aa3 2,000,000 2,067,500
(St. Thomas Univ.) Series 4-M,
5.35% 4/1/17 A2 1,000,000 968,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Minnesota Hsg. Fin. Agcy. (Single Family Mtg.)
Series A:
6.95% 7/1/16 Aa2 $ 835,000 $ 885,100
7.45% 7/1/22 (b) Aa 2,855,000 3,022,731
7.95% 7/1/22 (b) Aa2 2,220,000 2,339,325
8% 7/1/29 (b) Aa2 400,000 416,500
Series B:
7.25% 7/1/16 Aa2 895,000 908,130
5.80% 7/1/25 (b) Aa2 7,000,000 7,000,000
Series D:
7.35% 7/1/16 Aa2 2,025,000 2,111,063
8.80% 7/1/16 Aa2 1,250,000 1,299,238
Series E, 6.85% 1/1/24 (b) Aa2 1,000,000 1,046,250
Series H, 6.50% 1/1/26 (b) Aa2 1,730,000 1,775,413
Minnesota Hsg. Fin. Agcy. Hsg. Dev.
Series A:
6.95% 2/1/14 Aa2 1,000,000 1,055,000
6.95% 8/1/17 Aa2 1,000,000 1,053,750
7.05% 8/1/27 Aa2 1,250,000 1,317,188
Minnesota Pub. Facs. Auth. Wtr. Poll. Cont. Rev.
Series A:
6.35% 3/1/01 Aaa 1,000,000 1,066,250
6.10% 3/1/02 Aaa 1,855,000 1,975,575
7% 3/1/04 Aaa 1,495,000 1,696,825
Minnesota Univ. Rfdg. 4.80% 8/15/03 Aa3 8,000,000 8,040,000
Montevideo Independent School Dist. #129
Unltd. Tax 4.90% 2/1/14 Aa 1,000,000 945,000
Northern Muni. Pwr. Agcy. Elec. Sys. Rev. Rfdg:
Series A, 7.25% 1/1/16 A2 5,020,000 5,302,375
Series B, 5.50% 1/1/18 (AMBAC Insured) Aaa 4,500,000 4,477,500
Northfield College Facs. Rev. Rfdg.
(St. Olaf College Proj.):
6.30% 10/1/12 A 1,455,000 1,525,931
6.40% 10/1/21 A 1,690,000 1,766,050
Redwood Falls Independent Sch. Dist. #637 Rfdg.
5.125% 4/1/15 (AMBAC Insured) Aaa 1,450,000 1,399,250
Rochester Health Care Facs. Rev:
(Mayo Foundation/Mayo Med. Ctr.)
Series H, 6.026% 11/15/15 AA+ 13,000,000 13,406,250
Series I:
5.90% 11/15/09 AA+ 1,000,000 1,073,750
5.90% 11/15/10 AA+ 2,250,000 2,407,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Rosemont Independent School Dist. #196 Unltd
Tax Rfdg.( School Credit Enhancement Prog.):
Series B, 0% 6/1/13 (FSA Insured) Aaa $ 2,000,000 $ 847,500
Series C, 5.30% 2/1/01 (FGIC Insured) Aaa 2,000,000 2,055,000
St. Cloud Hosp. Facs. Rev. Rfdg.
(St. Cloud Hosp.):
Series A, 5.50% 7/1/05 (AMBAC Insured) Aaa 995,000 1,036,044
Series B, 5% 7/1/20 (AMBAC Insured) Aaa 2,000,000 1,832,500
St. Cloud Independent School Dist. #742 Rfdg.
Series A, 6.10% 2/1/10, (FGIC Insured) Aaa 1,000,000 1,046,250
St. Louis County Jail Rev. Unltd. Tax
Series A, 4.75% 2/1/08 (AMBAC Insured) Aaa 1,420,000 1,356,100
St. Louis Park Mn. Health Care Facs. Rev.
Series B 1993, 5.10% 7/1/13 (AMBAC Insured) Aaa 3,600,000 3,379,500
St. Louis Park Hosp. Facs. Auth. Rev.
(Healthsystem Obligated A) 5.20% 7/1/23,
(AMBAC Insured) Aaa 10,000,000 9,312,500
St. Louis Park Mtg. Rev. (Park Ridge Apt. Proj.)
9.375% 9/20/20 (GNMA Coll.) AAA 1,200,000 1,242,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.:
(Healtheast Proj.) :
Series A, 9.75% 11/1/17 Baa 2,315,000 2,400,724
Series B:
9.625% 11/1/08 Baa 2,395,000 2,480,046
6.625% 11/1/17 Baa 3,500,000 3,626,875
9.75% 11/1/17 Baa 3,000,000 3,107,730
Rfdg. Series A, 6.625% 11/1/17 Baa 4,000,000 4,145,000
St. Paul Independent School Dist. #625 Unltd. Tax:
(School Dist. Credit Enhancement Prog.):
Series A, 4.75% 2/1/16 Aa1 1,000,000 915,000
Series B, 5.80% 2/1/12 Aa1 1,200,000 1,237,500
Series C:
6.125% 2/1/03 Aa 1,225,000 1,313,813
6.125% 2/1/04 Aa 1,300,000 1,402,375
6.125% 2/1/05 Aa 1,350,000 1,461,375
St. Paul Port Auth. Energy Park Tax Increment Rev.
Rfdg. 5% 2/1/08 (FSA Insured) Aaa 1,000,000 991,250
St. Paul Swr. Rev. Rfdg. Series A, 8% 12/1/08 Aa2 2,500,000 2,646,875
Seaway Port Auth. Duluth Ind. Dev. Dock &
Wharf Rev. Rfdg. (Cargill, Inc. Proj.) Series B,
6.80% 5/1/12 (f) Aa3 2,750,000 2,963,125
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - CONTINUED
Southern Minnesota Muni. Pub. Pwr. Agcy. Pwr.
Supply Sys. Rev.:
(Cap. Appreciation)
Series B, 0% 1/1/01 (MBIA Insured) Aaa $ 2,500,000 $ 2,131,250
Rfdg. Series A:
5% 1/1/09 A2 2,250,000 2,190,938
5% 1/1/12 A2 6,500,000 6,110,000
0% 1/1/20 ( MBIA Insured) Aaa 12,500,000 3,578,125
Virginia Independent School Dist. #706 Unltd. Tax
Series A:
5% 4/1/11 (AMBAC Insured) Aaa 630,000 615,031
5% 4/1/13 (AMBAC Insured) Aaa 1,180,000 1,134,275
Washington County Hsg. & Redev. Auth. Jail Facs.
Rev. Unltd. Tax 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 Unltd.
Tax (School Dist. Credit Enhancement Prog.):
0% 2/1/02 (MBIA Insured) Aaa 1,550,000 1,253,563 0% 2/1/03 (MBIA
Insured) Aaa 1,180,000 904,175
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply
Rev.:
Rfdg. Series A:
6.25% 1/1/04 (AMBAC Insured) Aaa 2,600,000 2,817,750
6.25% 1/1/05 (AMBAC Insured) Aaa 3,000,000 3,262,500
5.375% 1/1/08 (AMBAC Insured) Aaa 4,000,000 4,105,000
Series A, 6.375% 1/1/16 (Escrowed
to Maturity) (d) Aaa 2,000,000 2,175,000
Series B:
6% 1/1/03 (AMBAC Insured) Aaa 1,935,000 2,060,775
6% 1/1/04 (AMBAC Insured) Aaa 1,000,000 1,070,000
274,679,555
PUERTO RICO - 0.8%
Puerto Rico Commonwealth Gen. Oblig. Rfdg.
Series A, 6% 7/1/14 Baa1 1,000,000 1,025,000
Puerto Rico Indl. Med. & Environmental Poll. Cont.
Facs. Fing. Auth. Rev. (Motorola, Inc.)
Series A, 6.75% 1/1/14 (f) Aa3 1,250,000 1,360,938
2,385,938
TOTAL MUNICIPAL BONDS
(Cost $266,519,216) $ 277,065,493
MUNICIPAL NOTES (A) - 4.0%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MINNESOTA - 4.0%
Duluth Health Facs. Rev. Bond Rfdg.
(Miller Dwan Medical Center)
Series 1996, 4.25% 6/1/19
LOC Credit Local De France, VRDN A1+ $ 3,500,000 $ 3,500,000
Minneapolis Commty. Dev. Rev.
(Mount Sinai Med. Bldg. Proj.) 4.20%
8/1/99 LOC Norwest Bank NA, MN, VRDN A1+ 300,000 300,000
Minneapolis Convention Ctr. Participating VRDN,
Series 96-B, 4.35%, (Liquidity Facility Norwest
Bank NA, MN) (h) A1+ 850,000 850,000
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev.:
Rfdg. (Children's Health Care)
Series 1995-B, 4.10% 8/15/25
(FSA Insured) BPA Norwest Bank, VRDN VMIG 1 5,800,000 5,800,000
Participating VRDN, Series 1996-E,
4.35% (FSA Insured) (Liquidity Facility
Norwest Bank NA, MN) (h) A1+ 1,000,000 1,000,000
TOTAL MUNICIPAL NOTES
(Cost $11,450,000) 11,450,000
TOTAL INVESTMENTS - 100%
(Cost $277,969,216) $ 288,515,493
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
65 Municipal Bond Contracts Sept. 1997 $ 7,572,500 $ (101,246)
20 US Treasury Bond Contracts Sept. 1997 2,221,250 20,444
$ (80,802)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.4%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
14. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
15. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
16. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
17. Security collateralized by an amount sufficient to pay interest and
principal.
18. 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 $251,850.
19. 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 $4,324,063 or 1.5% of net
assets.
20. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
21. 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 78.0% AAA, AA, A 81.3%
Baa 6.4% BBB 6.6%
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 both S&P and Moody's amounted to 0.1%. 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 30.4%
Health Care 23.3
Electric Revenue 12.9
Education 11.4
Housing 10.0
Others (individually less than 5%) 12.0
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997 the aggregate cost of investment securities for income tax
purposes was $277,977,051. Net unrealized appreciation aggregated
$10,538,442 of which $11,125,694 related to appreciated investment
securities and $587,252 related to depreciated investment securities.
At December 31, 1996 the fund had a capital loss carryforward of
approximately $7,963,000 which will expire on December 31, 2003.
At December 31, 1996, the fund was required to defer approximately $628,000
of losses on futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $277,969,216) - $ 288,515,493
See accompanying schedule
Interest receivable 4,871,558
TOTAL ASSETS 293,387,051
LIABILITIES
Payable to custodian bank $ 110,031
Payable for investments purchased 985,398
Payable for fund shares redeemed 445,127
Distributions payable 286,027
Accrued management fee 85,874
Payable for daily variation on futures contracts 31,563
Other payables and accrued expenses 69,074
TOTAL LIABILITIES 2,013,094
NET ASSETS $ 291,373,957
Net Assets consist of:
Paid in capital $ 288,033,955
Accumulated undistributed net realized gain (loss) (7,125,473)
on investments
Net unrealized appreciation (depreciation) on 10,465,475
investments
NET ASSETS, for 26,519,440 shares outstanding $ 291,373,957
NET ASSET VALUE, offering price and redemption price per $10.99
share ($291,373,957 (divided by) 26,519,440 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 8,180,496
EXPENSES
Management fee $ 567,020
Transfer agent, accounting and custodian fees and 249,523
expenses
Non-interested trustees' compensation 619
Registration fees 9,995
Audit 17,402
Legal 2,927
Miscellaneous 886
Total expenses before reductions 848,372
Expense reductions (35,210) 813,162
NET INTEREST INCOME 7,367,334
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,320,018
Futures contracts 164,303 1,484,321
Change in net unrealized appreciation (depreciation) on:
Investment securities (95,565)
Futures contracts (91,923) (187,488)
NET GAIN (LOSS) 1,296,833
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 8,664,167
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 7,367,334 $ 15,532,027
Net interest income
Net realized gain (loss) 1,484,321 2,138,799
Change in net unrealized appreciation (depreciation) (187,488) (6,917,262)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 8,664,167 10,753,564
FROM OPERATIONS
Distributions to shareholders (7,367,334) (15,532,027)
From net interest income
Share transactions 23,067,467 40,026,719
Net proceeds from sales of shares
Reinvestment of distributions 5,578,488 12,073,203
Cost of shares redeemed (33,000,475) (68,056,886)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (4,354,520) (15,956,964)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,057,687) (20,735,427)
NET ASSETS
Beginning of period 294,431,644 315,167,071
End of period $ 291,373,957 $ 294,431,644
OTHER INFORMATION
Shares
Sold 2,116,355 3,684,478
Issued in reinvestment of distributions 512,204 1,111,807
Redeemed (3,031,416) (6,278,054)
Net increase (decrease) (402,857) (1,481,769)
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1997
(UNAUDITED) 1996 1995 1994 1993 D 1992
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.940 $ 11.100 $ 10.130 $ 11.520 $ 10.850 $ 10.730
beginning of period
Income from .276 .562 .613 .633 .647 .674
Investment
Operations
Net interest income
Net realized and .050 (.160) .972 (1.310) .670 .120
unrealized gain
(loss)
Total from .326 .402 1.585 (.677) 1.317 .794
investment
operations
Less Distributions
From net (.276) (.562) (.613) (.633) (.647) (.674)
interest income
From net realized - - - (.060) - -
gain
In excess of net - - (.002) (.020) - -
realized gain
Total distributions (.276) (.562) (.615) (.713) (.647) (.674)
Net asset value, $ 10.990 $ 10.940 $ 11.100 $ 10.130 $ 11.520 $ 10.850
end of period
TOTAL RETURN B, C 3.03% 3.78% 16.00% (6.01) 12.42% 7.63%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 291,374 $ 294,432 $ 315,167 $ 276,934 $ 342,196 $ 280,781
period (000 omitted)
Ratio of expenses to .57% .60% .57% .59% .61% .67%
average net assets A,E
Ratio of net interest 5.12% 5.15% 5.69% 5.97% 5.73% 6.25%
income to average A
net assets
Portfolio turnover rate 16% 17% 49% 26% 37% 12%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (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.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
42. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Minnesota Municipal Income Fund (the fund) (formerly Fidelity
Minnesota Municipal Income 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. 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.
Short-term securities with remaining maturities of sixty days or less for
which quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
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 losses deferred due to futures and options.
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). Accumulated undistributed net realized gain
(loss) on investments may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or 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.
43. OPERATING POLICIES.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains and losses are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
RESTRICTED SECURITIES. The fund is 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, the
fund had no investments in restricted securities (excluding 144A issues).
44. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $22,280,223 and $33,355,040, respectively.
The market value of futures contracts opened and closed during the period
amounted to $27,467,190 and $20,995,570, respectively.
45. 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. The annual individual fund fee rate is .25%. In the
event that these rates were lower than the contractual rates in effect
during the period, FMR voluntarily implemented the above
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
MANAGEMENT FEE - CONTINUED
rates, as they resulted in the same or a lower management fee. For the
period, the management fee was equivalent to an annualized rate of .39% of
average net assets.
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 Company, Inc. (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 $177,495 and $59,980, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .12% of average net assets.
46. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the fund's average
net assets. For the period, the reimbursement reduced expenses by $24,300.
In addition, the fund has entered into an arrangement with its custodian
and transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by $4,377
and $6,533, respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
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)(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GR
PHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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
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DELAWARE
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GEORGIA
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HAWAII
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ILLINOIS
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INDIANA
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LOUISIANA
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MAINE
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MARYLAND
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MASSACHUSETTS
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Boston, MA
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416 Belmont Street
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MICHIGAN
280 North Woodward Ave.
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29155 Northwestern Hwy.
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MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
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200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
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56 South Street
Morristown, NJ
501 Route 17, South
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NEW YORK
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NORTH CAROLINA
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Charlotte, NC
2200 West Main Street
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OHIO
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28699 Chagrin Boulevard
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1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
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Philadelphia, PA
439 Fifth Avenue
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TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
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Houston, TX
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Houston, TX
400 East Las Colinas Blvd.
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14100 San Pedro
San Antonio, TX
19740 IH 45 North
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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
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
(registered trademark)
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Jonathan D. Short, Vice President
Thomas D. Maher, Assistant Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company. Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Spartan Insured Municipal Income
Limited Term Municipal Income
Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Municipal Income
New York Insured Municipal Income
New York Municipal Income
Spartan Ohio Municipal Income
Spartan Aggressive Municipal
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
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(registered trademark)
PENNSYLVANIA
MUNICIPAL
FUNDS
SEMIANNUAL REPORT
JUNE 30, 1997
CONTENTS
<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 31 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 35 Notes to the financial statements.
PROXY VOTING RESULTS 39
</TABLE>
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you the information you need
to make the investments that are right for 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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits the fund earned
upon the sale of securities that have grown in value). You can also look at
the fund's income, as measured by the fund's yield, to measure performance.
If Fidelity had not reimbursed certain fund expenses, the past ten years
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Spartan Pennsylvania Municipal Income Fu 2.63% 7.55% 40.98% 122.49%
nd
Lehman Brothers Pennsylvania 3.06% 8.07% n/a n/a
Municipal Bond Index
Pennsylvania Municipal Debt Funds 2.88% 7.69% 38.35% 114.29%
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 had 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 - a total return benchmark for
Pennsylvania investment-grade municipal bonds with maturities of at least
one year. 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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 62 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Pennsylvania Municipal Income Fu 7.55% 7.11% 8.33%
nd
Lehman Brothers Pennsylvania 8.07% n/a n/a
Municipal Bond Index
Pennsylvania Municipal Debt Funds 7.69% 6.70% 7.91%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking the arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10185.84 10102.00
1987/08/31 10203.97 10124.73
1987/09/30 9568.99 9751.43
1987/10/31 9547.21 9785.95
1987/11/30 9824.83 10041.46
1987/12/31 10006.24 10187.16
1988/01/31 10508.76 10550.03
1988/02/29 10682.33 10661.54
1988/03/31 10355.32 10537.87
1988/04/30 10418.36 10617.96
1988/05/31 10491.87 10587.27
1988/06/30 10699.94 10742.16
1988/07/31 10771.05 10812.20
1988/08/31 10788.67 10821.72
1988/09/30 11024.60 11017.59
1988/10/31 11344.04 11211.50
1988/11/30 11245.07 11108.80
1988/12/31 11428.57 11222.45
1989/01/31 11589.50 11454.53
1989/02/28 11489.93 11323.83
1989/03/31 11487.06 11296.77
1989/04/30 11784.02 11564.95
1989/05/31 11997.74 11805.16
1989/06/30 12186.25 11965.47
1989/07/31 12303.63 12128.32
1989/08/31 12187.64 12009.58
1989/09/30 12147.73 11973.79
1989/10/31 12315.30 12120.23
1989/11/30 12460.88 12332.34
1989/12/31 12549.06 12433.22
1990/01/31 12479.75 12374.41
1990/02/28 12590.29 12484.54
1990/03/31 12592.34 12488.29
1990/04/30 12407.39 12397.87
1990/05/31 12717.12 12668.52
1990/06/30 12832.77 12779.87
1990/07/31 13000.35 12967.74
1990/08/31 12812.04 12779.44
1990/09/30 12876.78 12786.73
1990/10/31 13062.63 13018.68
1990/11/30 13342.92 13280.49
1990/12/31 13452.43 13338.26
1991/01/31 13627.42 13517.26
1991/02/28 13706.08 13634.86
1991/03/31 13736.12 13639.76
1991/04/30 13951.81 13821.17
1991/05/31 14118.20 13944.04
1991/06/30 14048.00 13930.24
1991/07/31 14257.67 14099.91
1991/08/31 14453.45 14285.60
1991/09/30 14621.47 14471.60
1991/10/31 14747.78 14601.85
1991/11/30 14787.43 14642.59
1991/12/31 15133.04 14956.82
1992/01/31 15173.86 14990.92
1992/02/29 15182.04 14995.71
1992/03/31 15180.90 15001.26
1992/04/30 15340.06 15134.77
1992/05/31 15531.57 15312.91
1992/06/30 15782.06 15569.86
1992/07/31 16278.55 16036.65
1992/08/31 16108.92 15880.29
1992/09/30 16195.16 15984.15
1992/10/31 15946.24 15827.02
1992/11/30 16326.32 16110.48
1992/12/31 16512.24 16274.97
1993/01/31 16729.78 16464.25
1993/02/28 17385.74 17059.76
1993/03/31 17187.65 16879.44
1993/04/30 17355.02 17049.75
1993/05/31 17461.17 17145.57
1993/06/30 17756.81 17431.73
1993/07/31 17735.06 17454.57
1993/08/31 18180.13 17817.97
1993/09/30 18447.40 18020.92
1993/10/31 18456.65 18055.70
1993/11/30 18299.01 17896.63
1993/12/31 18688.58 18274.43
1994/01/31 18932.17 18483.12
1994/02/28 18472.48 18004.41
1994/03/31 17659.68 17271.27
1994/04/30 17751.61 17417.73
1994/05/31 17951.43 17568.74
1994/06/30 17921.84 17461.40
1994/07/31 18210.75 17781.46
1994/08/31 18273.01 17842.99
1994/09/30 18013.89 17581.05
1994/10/31 17703.90 17268.81
1994/11/30 17282.82 16956.59
1994/12/31 17747.48 17329.81
1995/01/31 18291.19 17825.09
1995/02/28 18844.55 18343.45
1995/03/31 19110.85 18554.21
1995/04/30 19167.63 18576.11
1995/05/31 19679.71 19168.87
1995/06/30 19487.27 19002.10
1995/07/31 19657.91 19182.24
1995/08/31 19865.77 19425.47
1995/09/30 20089.25 19548.43
1995/10/31 20335.03 19832.67
1995/11/30 20654.39 20161.69
1995/12/31 20841.95 20355.45
1996/01/31 21047.48 20509.13
1996/02/29 20894.44 20370.69
1996/03/31 20607.33 20110.36
1996/04/30 20513.81 20053.44
1996/05/31 20482.22 20045.42
1996/06/30 20686.47 20263.72
1996/07/31 20874.02 20448.12
1996/08/31 20881.91 20443.21
1996/09/30 21129.45 20729.41
1996/10/31 21359.60 20963.86
1996/11/30 21751.83 21347.50
1996/12/31 21678.97 21257.84
1997/01/31 21707.82 21298.02
1997/02/28 21892.64 21493.54
1997/03/31 21606.75 21207.03
1997/04/30 21756.62 21384.53
1997/05/31 22035.71 21706.15
1997/06/30 22248.94 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Spartan Pennsylvania Municipal Income Fund on June 30, 1987. As the
chart shows, by June 30, 1997, the value of the investment would have grown
to $22,249 - a 122.49% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade municipal bonds with maturities
of at least one year - did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 would have grown to $21,937 - a
119.37% 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 YEARS ENDED DECEMBER 31,
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend returns 2.44% 5.01% 6.52% 5.73% 6.68% 7.00%
Capital appreciation 0.19% -1.00% 10.91% -10.77% 6.49% 2.11%
returns
Total returns 2.63% 4.01% 17.43% -5.04% 13.17% 9.11%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund are reinvested, if any. For the periods through December 31,
1996, capital appreciation and total returns include the effect of the $5
account closeout fee on an average size account.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.11(cents) 25.14(cents) 51.19(cents)
Annualized dividend rate 4.75% 4.86% 4.90%
30-day annualized yield 4.69% - -
30-day annualized tax-equivalent yield 7.54% - -
</TABLE>
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.53 over
the past one month, $10.44 over the past six months and $10.44 over the
past one 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 1997 federal and state tax bracket. A
portion of the fund's income may be subject to the federal alternative
minimum tax.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS:
Jonathan Short became Portfolio Manager of Spartan Pennsylvania Municipal
Income Fund on April 1, 1997.
Q. HOW DID THE FUND PERFORM, JON?
A. For the six-month period that ended June 30, 1997, the fund had a total
return of 2.63%. To get a sense of how the fund did relative to its
competitors, the Pennsylvania municipal debt funds average returned 2.88%
for the same six-month period, as tracked by Lipper Analytical Services.
Additionally, the Lehman Brothers Pennsylvania Municipal Bond Index
returned 3.06%. For the 12-month period that ended June 30, 1997, the fund
had a total return of 7.55%, the Pennsylvania municipal debt funds average
returned 7.69%, according to Lipper, and the Lehman Brothers index returned
8.07%.
Q. THE BOND MARKET WAS SOMEWHAT JITTERY DURING THE SIX-MONTH PERIOD. WHAT
CAUSED ALL THE UNCERTAINTY AND HOW DID MUNICIPALS FARE IN THE MIDST OF IT?
A. The main reason for the bond market's skittishness was the fear of
inflation. Worried that the economy was growing at too quick a pace - and
much faster than anticipated - investors sent Treasury bond yields higher
and prices lower. Bond investors, of course, react negatively to even the
threat of higher inflation because it can eat away at the fixed-income
payments their bonds generate. While there weren't any tangible signs that
inflation was on the upswing, investors continued to be concerned about the
future and whether the Federal Reserve Board would raise interest rates as
an anti-inflationary measure sometime down the road. Municipals, however,
fared better during this troubled period, and their yields generally ended
the period where they had started it. Municipals' strong performance can be
attributed to the fact that the supply of them was limited while demand
increased. As a result, tax-free bonds generally were able to hold their
ground better than many taxable fixed-income investments, including
Treasuries.
Q. ARE THERE SIGNIFICANT DIFFERENCES BETWEEN YOUR INVESTMENT STYLE AND THAT
OF THE FUND'S PREVIOUS MANAGER?
A. No, there aren't. While I did buy and sell bonds based on what I
believed their value to be relative to other bonds available in the
marketplace, my basic strategy is the same as the previous manager's
strategy. I continued to keep the fund's duration - which measures how
sensitive it is to changes in interest rates - in line with the
Pennsylvania municipal market as a whole, as reflected by the fund's
benchmark index. In theory, I guess it's possible to accurately predict
where interest rates are headed. But practically speaking, it has proved to
be very difficult to do so with consistency over any meaningful stretch of
time. By maintaining a fairly consistent duration, I hope to deliver
better-than-market returns by avoiding whipsaws when the market goes
through its ups and downs.
Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER?
A. I changed the way the fund's investments were allocated among bonds with
various maturities, specifically by adding more intermediate-term bonds
with maturities of between 10 and 16 years. In my view, longer-term bonds -
with maturities of more than 20 years - didn't offer an adequate amount of
yield to compensate for their heightened sensitivity to interest rate
changes. Generally speaking, the longer a bond's maturity, the more its
price will fall when interest rates rise and vice versa. When I took over
the fund and through the end of the period, I felt that
intermediate-maturity bonds offered the best reward given their risk.
What's more, long-term bonds tend to be callable, which means they can be
redeemed by their issuer before maturity. Callable bonds tend to rise less
in up markets and fall more in down markets. I like the fact that
intermediate-maturity bonds, on the other hand, typically aren't
susceptible to being called.
Q. AT THE END OF THE PERIOD, ONLY ABOUT 9% OF THE FUND'S INVESTMENTS WERE
IN BONDS WITH CREDIT RATINGS OF BAA AS JUDGED BY MOODY'S INVESTORS SERVICE.
WHY DID THE FUND HAVE SO LITTLE INVESTED IN HIGHER-YIELDING BAA-RATED
BONDS?
A. Generally speaking, bonds rated Baa carry a fairly large amount of
additional yield over higher-rated bonds in order to compensate investors
for the additional credit risk they carry - the risk of the issuer
defaulting on its debt, in other words. For a variety of reasons having to
do with the strength of the economy, the improving creditworthiness of
various municipal issuers and the scarcity of higher-yielding bonds, the
difference in yield between Baa-rated and higher-rated municipals remained
small. To give you an example, the yield on a 15-year Aaa-rated
Pennsylvania general obligation bond (GO) was 5.35%, while a Baa-rated
15-year GO offered a yield of 5.75% at the end of the period. In my view,
Baa-rated bonds didn't offer adequate reward in the form of yield to
compensate for their added risks. What's more, I was able to maintain the
fund's high credit quality without sacrificing much yield.
Q. WHAT'S YOUR OUTLOOK?
A. From a supply and demand standpoint, I'm optimistic about municipals. I
don't expect to see a tremendous amount of new bonds issued, and the
increase in supply we're likely to see will be easily digested if demand
remains firm. How municipals fare over the next year will depend heavily on
the direction of interest rates. That said, we may continue to see some
volatility in the bond market as long as there are conflicting signs about
the economy and inflation trends.
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: to provide high current
income exempt from federal
and Pennsylvania personal
income taxes by investing
normally in investment-grade
municipal securities
FUND NUMBER: 402
TRADING SYMBOL: FPXTX
START DATE: August 6, 1986
SIZE: as of June 30, 1997,
more than $261 million
MANAGER: Jonathan Short,
since April 1997; manager,
various Fidelity and Spartan
Municipal funds; joined
Fidelity in 1990
(checkmark)
JONATHAN SHORT ON THE
PENNSYLVANIA ECONOMY:
"Over the past year, the state
of Pennsylvania showed
several signs of economic
improvement. The strongest
evidence of economic
improvement came in the
form of job growth, which
increased about two percent
over the past year. I think it's a
positive sign that the state's
job growth is broad based,
meaning there were
employment gains in the
manufacturing, as well as in
the retail and service sectors.
Because economic growth has
been stronger than expected,
the state recently posted a
$500 million budgetary
surplus, which was another
positive development. The
main question from here is
how will consolidation among
some of Pennsylvania's major
employers affect the state's
employment outlook? I
believe that the merger of Bell
Atlantic and Nynex and the
acquisition of Conrail by
Norfolk Southern & CSX
could lead to job losses.
What's more, business taxes
are still high relative to other
surrounding states, even after
recent reductions in the
state's corporate tax rate.
High corporate taxes could
impede the state's ability to
attract new business."
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENT CHANGES
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 35.0 38.2
Water & Sewer 13.3 11.1
Health Care 10.1 7.1
Education 9.7 8.8
Escrowed/Pre-Refunded 9.2 10.8
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 12.5 12.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1997
6 MONTHS AGO
Years 6.7 7.1
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.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 61.0%
Aa, A 28.0%
Baa 9.2%
Non-rated 1.0%
Short-term
investments 0.8%
Aaa 55.8%
Aa, A 28.3%
Baa 11.8%
Non-rated 3.4%
Short-term
investments 0.7%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 2.2
Row: 1, Col: 3, Value: 9.0
Row: 1, Col: 4, Value: 27.8
Row: 1, Col: 5, Value: 59.0
Row: 1, Col: 1, Value: 1.5
Row: 1, Col: 2, Value: 3.4
Row: 1, Col: 3, Value: 11.8
Row: 1, Col: 4, Value: 28.3
Row: 1, Col: 5, Value: 55.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 99.2%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
PENNSYLVANIA - 98.8%
Allegheny County Gen. Oblig. (Cap. Appreciation)
Series 18, 0% 4/1/11 (MBIA Insured) Aaa $ 2,560,000 $ 1,235,200
Allegheny County Higher Ed. Bldg. Auth. Rev.
(Duquesne Univ. Proj.) 6.50% 3/1/10
(AMBAC Insured) Aaa 400,000 447,500
Allegheny County Hosp. Dev. Auth. Rev. Rfdg.
(Univ. of Pittsburgh Medical Center)
5.55% 4/1/12 (MBIA Insured) Aaa 2,845,000 2,877,006
Allegheny County Ind. Dev. Auth. Rev.
(YMCA Pittsburgh Proj.) Series 1990,
8.75% 3/1/10 - 2,435,000 2,602,406
Allegheny County Residential Fin. Auth.
Mtg. Single-Family Rev.:
Series H, 8% 6/1/17 (GNMA Coll.) Aaa 185,000 190,781
Series 1990, 7.95% 6/1/23 (GNMA Coll.) (c) Aaa 1,320,000 1,381,050
Allegheny County San. Auth. Swr. Rev.
0% 12/1/12 (FGIC Insured) (Escrowed
to Maturity) (d) Aaa 2,260,000 997,225
Bethlehem Wtr. Auth. Rev. Rfdg. 4.875%
11/15/14 (MBIA Insured) Aaa 3,700,000 3,417,875
Delaware County Auth. Hosp. Rev.:
(Crozer-Chester):
6% 12/15/09 Baa1 1,000,000 1,007,500
6% 12/15/20 Baa1 6,700,000 6,616,250
Delaware County Gen. Oblig. Rfdg.
5.30% 11/15/01 Aa 2,200,000 2,271,500
Delaware County Ind. Dev. Auth. Rfdg. Resource
Recovery Facs. Series A, 6.10% 7/1/13 Baa1 1,300,000 1,324,375
Erie County Series B, 6.75% 9/1/16 (FGIC
Insured) (Pre-Refunded 9/1/01 @ 100) (d) Aaa 1,000,000 1,086,250
Harrisburg Auth. Rev. (Pooled Bond Program)
Series I, 5.625% 4/1/15 (MBIA Insured) Aaa 6,000,000 6,052,500
Lehigh County Gen. Purpose Auth. Series B, 9%
7/1/15 (Pre-Refunded to 11/15/01 @ 102) (d) Aaa 1,020,000 1,020,000
Meadville Rfdg. Series B, 6% 10/1/05
(AMBAC Insured) Aaa 3,210,000 3,462,783
Northumberland County Auth. Commonwealth
Lease Rev. 0% 10/15/10 (MBIA Insured)
(Escrowed to Maturity) (d) Aaa 1,000,000 493,750
Pennsbury School Dist. Rfdg.:
6% 8/15/05 (FGIC Insured) Aaa 1,605,000 1,741,425
6.80% 8/15/14 (FGIC Insured)
(Pre-Refunded to 8/15/04 @ 100) (d) Aaa 1,025,000 1,153,125
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Convention Ctr. Auth. Rev.
Rfdg. Series A:
6.60% 9/1/09 (MBIA Insured) Aaa $ 9,150,000 $ 10,042,125
6.70% 9/1/14 (MBIA Insured) Aaa 3,965,000 4,416,019
6.75% 9/1/19 (MBIA Insured) Aaa 2,670,000 2,970,375
Pennsylvania Gen. Oblig.:
Series 1:
Rfdg. 5% 4/15/13 A1 7,665,000 7,339,238
Rfdg. 5.30% 5/1/04 A1 2,500,000 2,578,125
6% 9/15/01 A1 1,100,000 1,164,625
6.125% 9/15/03 A1 2,000,000 2,142,500
Series 2:
(Cap. Appreciation) 0% 7/1/07
(AMBAC Insured) Aaa 1,770,000 1,079,700
Rfdg. 5.10% 6/15/03 (MBIA Insured) Aaa 1,000,000 1,022,500
5.50% 7/1/01 A1 4,135,000 4,290,063
5.60% 7/1/02 A1 1,000,000 1,046,250
6.25% 7/1/10 A1 2,000,000 2,207,500
6.25% 7/1/11 A1 1,200,000 1,324,500
Series 3:
6.10% 11/15/03 (AMBAC Insured)
(Pre-Refunded to 11/15/01 @ 101.50) (d) Aaa 10,310,000 11,096,138
6.10% 11/15/04 (FGIC Insured) (e) Aaa 1,000,000 1,085,000
Pennsylvania Higher Ed. Assistance Agcy.
Student Loan Rev.:
6.173% 3/1/22 (AMBAC Insured) (c) Aaa 4,000,000 4,045,000
6.854% 9/3/26 (AMBAC Insured) (c) Aaa 2,000,000 2,085,000
Pennsylvania Higher Edl. Facs. Auth.:
College & Univ. Rev. Rfdg.:
(Carnegie-Mellon Univ.) 6% 11/1/05 AA- 1,000,000 1,087,500
(Univ. of Pennsylvania):
Series A:
7% 9/1/01 Aa2 2,000,000 2,190,000
6.50% 9/1/02 Aa2 2,750,000 2,990,625
6.50% 9/1/04 Aa2 2,650,000 2,924,938
5.90% 9/1/15 Aa2 1,200,000 1,230,000
Series B:
6.50% 9/1/02 Aa2 1,950,000 2,110,875
6.50% 9/1/04 Aa2 2,100,000 2,317,875
7% 9/1/05 Aa2 2,000,000 2,292,500
Health Svc. Rev. 5.35% 1/1/08 Aa 4,000,000 4,085,000
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Hsg. Fin. Agcy.:
Single-Family Mtg.:
Series 51, 5.65% 4/1/20 (c) Aa $ 2,875,000 $ 2,896,563
Series 52B, 5.55% 10/1/12 (c) Aa 1,580,000 1,603,700
Series 53A, 5.40% 10/1/27 (c) Aa 1,000,000 1,008,750
Series 54A, 5.375% 10/1/28 (c) Aa 500,000 504,375
Series V, 7.80% 4/1/16 Aa 500,000 516,875
6.10% 10/1/13 (c) Aa 5,000,000 5,081,250
Pennsylvania Ind. Dev. Auth. Econ. Dev. Rev.:
7% 7/1/06 (AMBAC Insured) Aaa 1,000,000 1,146,250
7% 1/1/07 (AMBAC Insured) Aaa 1,500,000 1,728,750
7% 7/1/07 (AMBAC Insured) Aaa 2,650,000 3,070,688
5.80% 1/1/08 (AMBAC Insured) Aaa 2,000,000 2,130,000
5.80% 7/1/09 (AMBAC Insured) Aaa 1,295,000 1,375,938
Pennsylvania Intergovernmental Coop Auth.
Spl. Tax Rev.:
Rfdg. Series A, 5% 6/15/13 A 1,750,000 1,623,125
(Philadelphia City Funding Prog.):
6.75% 6/15/21 (Pre-Refunded to
6/15/05 @ 100) (d) Aaa 2,190,000 2,474,700
6.80% 6/1/22 (Pre-Refunded to
6/15/02 @ 100) (d) Aaa 2,000,000 2,197,500
Pennsylvania Turnpike Commission Rev.:
Rfdg. Series P, 5.70% 12/1/05 A1 1,460,000 1,525,700
Series L, 6.25% 6/1/11 (AMBAC Insured) Aaa 3,000,000 3,195,000
Series J, 7.20% 12/1/17 (FGIC Insured)
(Pre-Refunded to 12/1/01 @ 102) (d) Aaa 1,000,000 1,125,000
Series N, 5.50% 12/1/17 A1 5,000,000 4,887,500
Philadelphia Arpt. Rev. Rfdg. 6% 6/15/08
(FGIC Insured) (c) (f) Aaa 3,000,000 3,120,000
Philadelphia Gas Works Rev. Rfdg.
Series A-14, 6.375% 7/1/26 Baa1 5,905,000 6,104,294
Philadelphia Gen. Oblig.:
Rfdg. 5.125% 5/15/03 (FGIC Insured) Aaa 8,000,000 8,130,000
6.25% 5/15/10 (MBIA Insured) Aaa 3,200,000 3,476,000
Philadelphia Hosp. & Higher Ed. Facs.
Auth. Rev. Rfdg.:
6.05% 7/1/04 Baa2 2,500,000 2,600,000
6.15% 7/1/05 Baa2 2,100,000 2,194,500
6.25% 7/1/06 Baa2 2,600,000 2,726,750
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Philadelphia Muni. Auth. Rev. (Cap.
Appreciation) (Muni. Svcs. Bldg. Lease):
0% 3/15/11 (FSA Insured) Aaa $ 1,000,000 $ 475,000
0% 3/15/14 (FSA Insured) Aaa 7,360,000 2,888,800
Philadelphia Redev. Auth. Hsg. Rev. Sub-
Series 3, 8.125% 8/1/26 (GNMA Coll.) Aaa 45,000 47,445
Philadelphia Wtr. & Swr. Rev. (Cap. Appreciation)
14th Series, 0% 10/1/08 (MBIA Insured) Aaa 5,300,000 2,961,375
Philadelphia Wtr. & Wastewtr. Rev.:
6.75% 8/1/04 (MBIA Insured) Aaa 2,085,000 2,335,200
6.75% 8/1/05 (MBIA Insured) Aaa 3,110,000 3,502,638
5.65% 6/15/12 (FGIC Insured) Aaa 7,000,000 6,982,500
Pittsburgh Gen. Oblig. Series A:
5.875% 9/1/00 (MBIA Insured) Aaa 1,315,000 1,374,175
5.50% 9/1/14 (AMBAC Insured) Aaa 5,310,000 5,422,838
Pittsburgh School Dist. (Cap. Appreciation)
Series C:
0% 8/1/07 (AMBAC Insured) Aaa 2,610,000 1,572,525
0% 8/1/08 (AMBAC Insured) Aaa 2,000,000 1,140,000
Pittsburgh Wtr. & Swr. Auth. Wtr. & Swr. Sys.
Rev. Rdfg. Series A:
0% 9/1/04 (FGIC Insured)
(Escrowed to Maturity) (d) Aaa 5,000,000 3,518,750
6.50% 9/1/13 (FGIC Insured) Aaa 10,000,000 11,262,500
4.75% 9/1/16 (FGIC Insured) Aaa 3,000,000 2,700,000
Scranton Parking Auth. Parking Rev. 8.125%
9/15/14, LOC Northeastern Bank
(Pre-Refunded to 9/15/98 @ 100) (d) A 500,000 523,125
Southeastern Pennsylvania Transp. Auth. Spl. Rev.:
Series A:
6.50% 3/1/03 (FGIC Insured) Aaa 2,520,000 2,753,100
6.50% 3/1/04 (FGIC Insured) Aaa 1,485,000 1,633,500
5.35% 3/1/09 (FGIC Insured) Aaa 4,000,000 4,070,000
Wilson Area School Dist. (Cap. Appreciation):
0% 5/15/09 (AMBAC Insured) Aaa 3,275,000 1,752,125
0% 5/15/10 (AMBAC Insured) Aaa 3,280,000 1,656,400
0% 5/15/11 (AMBAC Insured) Aaa 3,500,000 1,662,500
Wyoming Ind. Dev. Auth. Poll. Cont. Rev. Rfdg.
(Proctor & Gamble Paper Proj.) 5.55%
5/1/10 (c) Aa2 5,000,000 5,162,500
MUNICIPAL BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
York City Swr. Auth. Swr. Rev. (Cap.
Appreciation) 0% 12/1/12 (MBIA Insured) Aaa $ 3,235,000 $ 1,374,875
253,757,551
PUERTO RICO - 0.4%
Puerto Rico Commonwealth Urban Renewal &
Hsg. Corp. Rfdg. 7.875% 10/1/04 Baa 1,000,000 1,081,250
TOTAL MUNICIPAL BONDS
(Cost $246,576,741) 254,838,801
MUNICIPAL NOTES (B) - 0.8%
PENNSYLVANIA - 0.8%
Allegheny County Hosp. Dev. Auth. Health Center
Rev. Series 1990-B, 4.20%, VRDN
(MBIA Insured) VMIG 1 1,100,000 1,100,000
Pennsylvania Higher Edl. Facs. Rev.
(Carnegie-Mellon Univ.) 4.15% VRDN (BPA
Morgan Guaranty Trust Co., New York) A-1+ 1,000,000 1,000,000
TOTAL MUNICIPAL NOTES
(Cost $2,100,000) 2,100,000
TOTAL INVESTMENTS - 100%
(Cost $248,676,741) 256,938,801
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
81 Municipal Bond Contracts Sept. 1997 $ 9,436,500 $ 133,422
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.7%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
22. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
23. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
24. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
25. Security collateralized by an amount sufficient to pay interest and
principal.
26. 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 $265,825.
27. Restricted security - Investment in securities not registered under the
Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on the holding is as follows:
ACQUISITION
SECURITY DATE COST
Philadelphia
Arpt. Rev. Rfdg.
6% 6/15/08
(FDIC Insured) 6/27/97 $ 3,120,000
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 88.3% AAA, AA, A 88.5%
Baa 9.2% BBB 8.7%
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 both S&P and Moody's amounted to 1.0%.
The distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 35.0%
Water and Sewer 13.3
Health Care 10.1
Education 9.7
Escrowed/Pre-Refunded 9.2
Housing 5.2
Transportation 5.0
Others (individually less than 5%) 12.5
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $248,676,741. Net unrealized appreciation aggregated
$8,262,060, of which $8,369,623 related to appreciated investment
securities and $107,563 related to depreciated investment securities.
At December 31, 1996, the fund was required to defer approximately
$1,726,000 of losses on futures contracts.
SPARTAN PENNSYLVANIA MUNICIPAL INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $248,676,741) - $ 256,938,801
See accompanying schedule
Cash 11,351
Receivable for investments sold 4,563,215
Interest receivable 3,481,315
Redemption fees receivable 14
Receivable for daily variation on futures contracts 25,313
TOTAL ASSETS 265,020,009
LIABILITIES
Payable for investments purchased $ 3,132,690
Payable for fund shares redeemed 81,288
Distributions payable 249,344
Accrued management fee 118,288
Other payables and accrued expenses 3,229
TOTAL LIABILITIES 3,584,839
NET ASSETS $ 261,435,170
Net Assets consist of:
Paid in capital $ 254,438,275
Accumulated undistributed net realized gain (loss) on (1,398,587)
investments
Net unrealized appreciation (depreciation) on 8,395,482
investments
NET ASSETS, for 24,872,319 shares outstanding $ 261,435,170
NET ASSET VALUE, offering price and redemption price $10.51
per share ($261,435,170 (divided by) 24,872,319 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 7,070,869
EXPENSES
Management fee $ 718,355
Non-interested trustees' compensation 1,136
Total expenses before reductions 719,491
Expense reductions (258) 719,233
NET INTEREST INCOME 6,351,636
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 940,842
Futures contracts (597,540) 343,302
Change in net unrealized appreciation (depreciation) on:
Investment securities 103,049
Futures contracts 117,978 221,027
NET GAIN (LOSS) 564,329
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,915,965
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 6,351,636 $ 13,767,988
Net interest income
Net realized gain (loss) 343,302 2,378,566
Change in net unrealized appreciation (depreciation) 221,027 (5,809,290)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,915,965 10,337,264
FROM OPERATIONS
Distributions to shareholders (6,351,636) (13,767,988)
From net interest income
From net realized gain - (1,824,023)
TOTAL DISTRIBUTIONS (6,351,636) (15,592,011)
Share transactions 11,025,820 21,774,414
Net proceeds from sales of shares
Reinvestment of distributions 4,759,517 11,734,811
Cost of shares redeemed (25,896,266) (45,710,814)
Redemption fees 4,740 8,045
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (10,106,189) (12,193,544)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,541,860) (17,448,291)
NET ASSETS
Beginning of period 270,977,030 288,425,321
End of period $ 261,435,170 $ 270,977,030
OTHER INFORMATION
Shares
Sold 1,054,658 2,081,780
Issued in reinvestment of distributions 456,121 1,121,799
Redeemed (2,481,901) (4,380,499)
Net increase (decrease) (971,122) (1,176,920)
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 D 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.490 $ 10.670 $ 9.620 $ 11.130 $ 10.590 $ 10.370
beginning of period
Income from .251 .520 .590 .652 .679 .693
Investment
Operations
Net interest income
Net realized and .020 (.109) 1.049 (1.201) .679 .219
unrealized gain
(loss)
Total from .271 .411 1.639 (.549) 1.358 .912
investment
operations
Less Distributions (.251) (.520) (.590) (.652) (.679) (.693)
From net interest
income
From net - (.071) - (.310) (.140) -
realized gain
Total distributions (.251) (.591) (.590) (.962) (.819) (.693)
Redemption fees .000 .000 .001 .001 .001 .001
added to paid in
capital
Net asset value, end $ 10.510 $ 10.490 $ 10.670 $ 9.620 $ 11.130 $ 10.590
of period
TOTAL RETURN B 2.63% 4.02% 17.44% (5.04) 13.18% 9.11
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 261,435 $ 270,977 $ 288,425 $ 241,729 $ 306,246 $ 242,375
period (000 omitted)
Ratio of expenses to .55% .55% .55% .55% .55% .55
average net assets A %
Ratio of expenses to .55% .53% .55% .55% .55% .55
average net assets A C %
after expense
reductions
Ratio of net interest 4.86% 4.98% 5.73% 6.33% 6.13% 6.65
income to average A %
net assets
Portfolio turnover rate 20% 53% 49% 26% 38% 8
A %
</TABLE>
F ANNUALIZED
G TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS
SHOWN.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
I 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.
SPARTAN PENNSYLVANIA 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 the value of an
investment, assuming reinvestment of the fund's dividend income, and
capital gains (the profits earned upon the sale of securities that have
grown in value), and the effect of the fund's $5 account closeout fee.
Yield measures the income paid by a fund. Since a money market fund tries
to maintain a $1 share price, yield is an important measure of performance.
If Fidelity had not reimbursed certain fund expenses, the past five and 10
years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Spartan Pennsylvania Municipal 1.63% 3.26% 15.38% 48.38%
Money Market
All Tax-Free Money Market Funds Average 1.53% 3.04% 14.13% 44.04%
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 had 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 all tax-free money market funds tracked by IBC Financial
Data, Inc. The past six months average represents a peer group of 430
mutual funds. (The periods covered by IBC Financial Data, Inc. numbers are
the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Pennsylvania Municipal 3.26% 2.90% 4.03%
Money Market
All Tax-Free Money Market Funds Averag 3.04% 2.68% 3.71%
e
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year.
YIELDS
6/30/97 3/31/97 12/30/96 9/30/96 7/1/96
Spartan Pennsylvania 3.68% 3.10% 3.54% 3.39% 3.08%
Municipal Money Market
All Tax-Free 3.48% 2.93% 3.32% 3.18% 2.89%
Money Market Funds
Average
Spartan Pennsylvania 5.92% 4.98% 5.69% 5.45% 4.95%
Municipal Money Market -
Tax-equivalent
Row: 1, Col: 1, Value: 4.18
Row: 1, Col: 2, Value: 3.95
Row: 2, Col: 1, Value: 3.08
Row: 2, Col: 2, Value: 2.87
Row: 3, Col: 1, Value: 3.08
Row: 3, Col: 2, Value: 2.89
Row: 4, Col: 1, Value: 3.39
Row: 4, Col: 2, Value: 3.18
Row: 5, Col: 1, Value: 3.54
Row: 5, Col: 2, Value: 3.32
Spartan Pennsylvania
Municipal Money
Market
All Tax-Free Money
Market Funds
Average
5% -
4% -
3% -
2% -
1% -
0%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the 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 1997 federal
and state income tax rate of 37.79%. 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. In fact,
there is no assurance that a
money fund will maintain a $1
share price.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS:
Diane McLaughlin became Portfolio Manager of Spartan Pennsylvania Municipal
Money Market Fund on July 1, 1997, after the period ended.
Q. DIANE, WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS?
A. While the Federal Reserve Board in mid-1996 had stated its bias toward
raising short-term interest rates to dampen economic growth and head off
inflation, it had not acted by January 1997, and the market became
complacent with steady Fed policy. That sentiment changed in late February,
however, after Fed Chairman Alan Greenspan's Humphrey-Hawkins testimony
before Congress. Greenspan outlined his concerns that low unemployment
might exert upward pressure on the economy's core inflation. More
importantly, he mentioned the possibility that the Fed might raise the rate
banks charge each other for overnight loans - known as the fed funds target
rate - from the 5.25% level it had maintained since January 1996. The
rationale behind such a move would be to raise rates to curb inflation
before it passed through to the consumer. Shortly after Greenspan's
remarks, data for February showed an additional 293,000 non-farm jobs had
been added to the economy, lowering unemployment to 5.3%. Interest rates
rose as the Fed's March 25 Open Market Committee meeting approached and
fears heightened that there would be a shift in Fed policy. At that
meeting, the Fed raised the fed funds target rate by 0.25% to 5.50% as
expected.
Q. HOW HAS THE ECONOMY PERFORMED SINCE THE FED'S MARCH MEETING?
A. First quarter 1997 data indicated continued economic strength, with
gross domestic product growing at a stronger-than-expected annual rate of
nearly 6%. In addition, in April unemployment fell to 4.9%, the lowest
level since 1973. Since then, economic data has shown signs of a slowdown
during the second quarter. Perhaps more importantly, inflation continues to
remain in check. In fact, in the first half of the year there were six
consecutive monthly drops in the producer price index, and the first half
of the year's consumer price index was the lowest in 10 years.
Q. WHAT WAS THE FUND'S STRATEGY DURING THE PERIOD?
A. Early in the period, the fund's maturity was at 55 days. As strong
first-quarter economic data was released, however, the fund's maturity
rolled down in anticipation of higher rates. The maturity reached a low of
20 days in mid-June, and ended the period at 31 days. The fund's maturity
increased toward the end of the period because of the purchase of one-year
paper during the municipal market's annual note borrowing season. The rates
offered by these securities typically increase as most borrowers issue
notes at the same time, causing a temporary imbalance between supply and
demand. Prior to the purchase of these longer securities, the fund didn't
give up yield by having a shorter maturity in spite of the lack of an
increase in rates by the Fed. In fact, the fund actually picked up yield by
having a larger percentage invested in variable rate demand notes (VRDNs) -
variable-rate securities that can be redeemed on short notice, typically
one or seven days. Year-to-date, these VRDNs have been priced at
historically attractive ratios relative to the targeted fed funds rate.
Q. HOW DID THE FUND PERFORM?
A. The fund's seven-day yield on June 30, 1997, was 3.68%, compared to
3.56% six months ago. The latest yield was the equivalent of a taxable
yield of 5.92% for Pennsylvania investors in the 37.79% combined federal
and state tax bracket. The fund's total return during the six-month period
was 1.63%. That beat the total return of 1.53% for the all tax-free money
market funds average, according to IBC Financial Data, Inc.
Q. WHAT'S YOUR OUTLOOK?
A. The Fed may not need to raise short-term rates further if the pace of
economic growth persists without any significant signs of inflation. I will
probably purchase more one-year notes as the municipal borrowing season
continues, but will keep the fund's maturity relatively neutral. This
position will allow me to extend the fund's average maturity with
higher-yielding notes if a pick-up in economic growth in the third and
fourth quarters leads to price increases and further action by the Fed.
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: to seek high current
income exempt from federal
and Pennsylvania state
income tax by investing in
high-quality, short-term
municipal money market
securities, while maintaining
a $1.00 share price
FUND NUMBER: 401
TRADING SYMBOL: FPTXX
START DATE: August 6, 1986
SIZE: as of June 30, 1997,
more than $225 million
MANAGER: Diane
McLaughlin, since July 1997;
manager, various Fidelity
and Spartan municipal
money market funds; joined
Fidelity in 1992
(checkmark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND % OF FUND % OF FUND
ASSETS ASSETS ASSETS
6/30/97 12/31/96 6/30/96
0 - 30 85 67 83
31 - 90 7 12 3
91 - 180 1 3 7
181 - 397 7 18 7
WEIGHTED AVERAGE MATURITY
6/30/97 12/31/96 6/30/96
Spartan Pennsylvania 31 days 55 days 44 days
Municipal
Money Market Fund
All Tax-Free Money Market 44 days 51 days 50 days
Funds Average *
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 4.0
Row: 1, Col: 3, Value: 13.0
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 38.0
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 18.0
Row: 1, Col: 3, Value: 15.0
Row: 1, Col: 4, Value: 65.0
Variable rate
demand notes
(VRDNs) 78%
Commercial paper
(including
CP mode) 13%
Municipal
notes 4%
Other 5%
Variable rate
demand notes
(VRDNs) 66%
Commercial paper
(Including
CP mode) 15%
Municipal
notes 18%
Other 1%
* SOURCE: IBC'S MONEY FUND SOURCE(registered trademark)
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL SECURITIES (A) - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - 100%
Allegheny County Hosp. Dev. Auth. Rev.
(St. Margaret Mem. Hosp.) Series 1992 A,
4.40%, LOC Mellon Bank, NA, VRDN $ 8,865,000 $ 8,865,000
Allegheny County Ind. Dev. Auth. Ind. Dev. Rev.
(Union Elec. Steel Co. Proj.) :
Series 1996 A, 4.40%, LOC PNC Bank, NA,
VRDN (b) 3,120,000 3,120,000
Series 1996 B, 4.40%, LOC PNC Bank, NA,
VRDN (b) 500,000 500,000
Allegheny County Ind. Dev. Auth.:
(R.I. Lampus Co. Proj.) Series 1997 A, 4.40%,
LOC Nat'l. City Bank of Pennsylvania, VRDN (b) 2,560,000 2,560,000
(Doren, Inc. Proj.) Series 1997 C, 4.40%, LOC Nat'l.
City Bank of Pennsylvania, VRDN (b) 2,325,000 2,325,000
Beaver County Ind. Dev. Auth. Poll. Cont. Rev. (Duquesne
Lt. Co. Beaver Valley Proj.) Series 1990 B, 4.05%,
LOC Barclays PLC, VRDN (b) 600,000 600,000
Berks County Ind. Dev. Auth. Mfg. Facs. Rev.:
(The Bachman Co. Proj.) Series 1994, 4.45%,
LOC Corestates Bank, VRDN (b) 2,310,000 2,310,000
(Grafika Commercial Printing, Inc.) Series 1995,
4.45%, LOC Corestates Bank, VRDN (b) 1,655,000 1,655,000
Berks County Ind. Dev. Auth. Facs. Rev.
(RAM Industries, Inc.) Series 1996, 4.45%,
LOC Corestates Bank, VRDN (b) 3,200,000 3,200,000
Berks County Ind. Dev. Auth. Rev.:
Bonds (Citizens Utilities Co. Proj.) Series 1996
3.85% 8/12/97 CP mode (b) 4,200,000 4,200,000
(Construction Fastener Proj.) Series 1996 B,
4.45%, LOC Corestates Bank, VRDN (b) 1,030,000 1,030,000
Bucks County Ind. Dev. Auth. (Associates Proj.)
Series 1993, 4.45%, LOC Corestates Bank, VRDN (b) 1,290,000 1,290,000
Butler County Ind. Dev. Auth. (Armco, Inc. Proj.) Series 1996 A,
4.40%, LOC Chase Manhattan, VRDN (b) 1,400,000 1,400,000
Carbon County Ind. Dev. Auth. Resource Recovery Rev.
Bonds (Panther Creek Partners Proj.):
Series 1990 A, 3.90% 7/11/97, LOC Nat'l.
Westminster Bank, PLC, CP mode (b) 2,800,000 2,800,000
Series 1990 B, 3.85% 7/22/97, LOC Nat'l.
Westminster Bank, PLC, CP mode (b) 2,200,000 2,200,000
Series 1991 A, 3.85% 8/14/97, LOC Nat'l.
Westminster Bank, PLC, CP mode (b) 2,500,000 2,500,000
Series 1991 A, 3.85% 8/20/97, LOC Nat'l.
Westminster Bank, PLC, CP mode (b) 1,500,000 1,500,000
Chester County Ind. Dev. Auth. Rfdg. Rev. (General Motors
Corp. Proj.) Series 1996, 4.20%, VRDN 2,800,000 2,800,000
Chester County Health & Ed. Facs. Auth. Rev Bonds
Series 1996 A, 3.90% 7/1/97 (MBIC Insured) 1,165,000 1,165,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Cumberland County Ind. Dev. Auth. (Lane Enterprises,
Inc. Proj.) 4.45%, LOC Corestates Bank, VRDN (b) $ 2,600,000 $ 2,600,000
Delaware County Auth. Hosp. Rev. (Crozer-Chester Med. Ctr.)
Series 1996, 4.23%, LOC Kriedietbank NV, VRDN 4,900,000 4,900,000
Delaware County Ind. Dev. Auth. Poll. Cont. Rev.
(Philadelphia Elec.) Series 1988 B:
3.65% 7/8/97 (FGIC Insured) (Liquidity Facility
FGIC Security Purchase, Inc.) CP mode 4,000,000 4,000,000
3.70% 7/23/97 (FGIC Insured) (Liquidity Facility
FGIC Security Purchase, Inc.) CP mode 1,000,000 1,000,000
Delaware Valley Reg'l. Fin. Auth. Local Gov't.:
Series 1985 A, 4.15%, LOC Credit Suisse First
Boston, VRDN 1,400,000 1,400,000
Series 1986, 4.15%, LOC Credit Suisse First
Boston, VRDN 2,400,000 2,400,000
Doylestown Hosp. Auth. Rev. (Doylestown Hosp.)
Participating VRDN, Series BT-63, 4.31%
(Liquidity Facility ADP) (c) 10,098,000 10,098,000
Emmaus Gen. Auth. Rev. Local Gov't. Rev. Pool Prog.:
(Franklin Reg.) Series 1989 D-10, 4.20%, LOC Canadian
Imperial Bank of Commerce, VRDN 2,500,000 2,500,000
(Saucon Valley) Series D-12, 4.20%, LOC Canadian
Imperial Bank of Commerce, VRDN 1,900,000 1,900,000
Series 1989 E-7, 4.30%, LOC Midland Bank PLC, VRDN 3,100,000 3,100,000
Series 1989 G-7, 4.30% (Liquidity Facility Midland
Bank PLC) VRDN 3,000,000 3,000,000
Erie County Ind. Dev. Auth. Rev. (Carlisle Corp. Proj.)
Series 1993, 4.30%, LOC SunTrust Bank, VRDN (b) 1,000,000 1,000,000
Lancaster Higher Ed. Facs. Auth. College Rev.
(Franklin & Marshall College Proj.):
4.10% (BPA Chase Manhattan Bank) VRDN 5,000,000 5,000,000
4.125%, VRDN 850,000 850,000
Lehigh County Ind. Dev. Auth. Poll. Cont. Rev.
(Allegheny Elec. Coop., Inc. Proj.):
Series 1984 A, 3.80%, LOC Rabobank Nederland,
VRDN 500,000 500,000
Series 1984 B, 3.80%, LOC Rabobank
Nederland, VRDN 1,000,000 1,000,000
Lycoming County Ind. Dev. Auth. (Coastal
Aluminum Rolling Mills) Series 1995, 4.45%,
LOC Corestates Bank, VRDN (b) 1,910,000 1,910,000
Montgomery County Ind. Dev. Auth. Rev.:
(H.P. Cadwallader, Inc. Proj.) Series 1995, 4.45%,
LOC Corestates Bank, VRDN (b) 1,030,000 1,030,000
(RJI Limited Partnership Proj.) Series 1992, 4.45%,
LOC Corestates Bank, VRDN (b) 1,705,000 1,705,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Montgomery County Ind. Dev. Auth. Rev.: - continued
(Sirius Dev. Assoc. Proj.) 4.40%, LOC PNC Bank,
VRDN (b) $ 1,500,000 $ 1,500,000
Moon Ind. Dev. Auth. Rev. (One Thorn Run Center Proj.)
Series 1995 A, 4.25%, LOC Nat'l. City Bank of
Pennsylvania, VRDN (b) 3,420,000 3,420,000
North Pennsylvania Wtr. Auth. Rev. Participating VRDN, Series
SGA-30, 4.35% (Liquidity Facility Societe Generale) (c) 10,000,000
10,000,000
Northampton County Ind. Dev. Auth. Rev.:
(Bedford Park Proj.):
Series 1996 A, 4.35%, LOC Harris Trust, VRDN (b) 2,105,000 2,105,000
Series 1996 B, 4.35%, LOC Harris Trust, VRDN (b) 950,000 950,000
Bonds (Citizens Utilities Co. Proj.) Series 1991, 3.75%
7/24/97 CP mode (b) 1,100,000 1,100,000
(Victoria Vogue Proj.) 4.45%, LOC Corestates
Bank, VRDN (b) 2,615,000 2,615,000
Northeastern Hosp. & Ed. Auth. (Allhealth Pooled Fing.)
Series 1996, 4.25%, LOC Chase Manhattan Bank,
VRDN 5,000,000 5,000,000
Northumberland County Ind. Dev. Auth. (Foster
Wheeler Mt. Carmel, Inc. Proj.):
Series 1987 A, 4.25%, LOC Union Bank of
Switzerland, VRDN (b) 17,380,000 17,380,000
Series 1987 B, 4.25%, LOC Union Bank of
Switzerland, VRDN (b) 2,340,000 2,340,000
Pennsylvania Econ. Dev. Fin. Auth. Econ. Rev.:
(Esschem, Inc.) Series 1991 D-10, 4.40%,
LOC PNC Bank, NA, VRDN (b) 700,000 700,000
(Henry Molded Prod., Inc.) Series 1992 A-4, 4.40%,
LOC PNC Bank, NA, VRDN (b) 700,000 700,000
(Landmark LP) Series 1995 I-3, LOC PNC Bank, NA,
VRDN (b) 2,100,000 2,100,000
(McDowell Manufacturing Co. Proj.) Series 1996 F-4,
4.40%, LOC PNC Bank, VRDN (b) 1,000,000 1,000,000
(Pappafava Proj. ) Series 1989 D-7, 4.40%,
LOC PNC Bank, NA, VRDN (b) 200,000 200,000
(Payne Printery Proj.) Series 1989 B-8, 4.40%, LOC
PNC Bank, NA, VRDN (b) 275,000 275,000
(Port Erie Plastics Proj.) Series 1989 D-9, 4.40%,
LOC PNC Bank, NA, VRDN (b) 500,000 500,000
(Respironics, Inc. Proj.) Series 1989 F, 4.40%, LOC PNC Bank,
NA, VRDN (b) 800,000 800,000
(The Babcock & Wilcox Co. Proj.) Series 1989 A-2,
4.40%, LOC PNC Bank, NA, VRDN (b) 4,825,000 4,825,000
Series 1996 A-1, 4.40%, LOC PNC Bank, NA,
VRDN (b) 625,000 625,000
Series 1996 A-2, 4.40%, LOC PNC Bank, NA,
VRDN (b) 2,100,000 2,100,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Econ. Dev. Fin. Auth. Econ. Rev.: - continued
Series 1996 A-3, 4.40%, LOC PNC Bank, NA,
VRDN (b) $ 1,000,000 $ 1,000,000
Series 1996 A-7, 4.40%, LOC PNC Bank, NA,
VRDN (b) 750,000 750,000
Series 1996 A-8, 4.40%, LOC PNC Bank, NA,
VRDN (b) 900,000 900,000
(Suntory Wtr. Group, Inc. Proj.) Series1992 D,
4.30%, LOC Wachovia Bank & Trust, VRDN (b) 4,900,000 4,900,000
Pennsylvania Energy Dev. Auth. Rev. (B & W Edensburg
Proj.) Series 1986, 4.25%, LOC Swiss Bank Corp.,
VRDN (b) 600,000 600,000
Pennsylvania State Bonds Series A, 6.80% 5/15/98 1,000,000 1,024,747
Pennsylvania Higher Ed. Assistance Agcy. Student Loan Rev.:
Series 88-B, 4.25%, LOC Student Loan Marketing
Assoc., VRDN (b) 4,000,000 4,000,000
Series 1997 A, 4.25%, LOC Student Loan Marketing
Assoc., VRDN (b) 5,000,000 5,000,000
Pennsylvania Higher Ed. Facs. Auth.:
(Carnegie Mellon Univ.) Series 1995 A, 4.15%
(BPA Morgan Guaranty Trust Co.) VRDN 2,700,000 2,700,000
(Temple University) Series 1984, 4.05%,
LOC Landesbank Hessen-Thuringen, VRDN 300,000 300,000
Pennsylvania Tpk. Commission Oil Franchise Tax Rev.
Bonds, Series 1994 A, 4.60% 12/1/97 (AMBAC Insured) 2,235,000 2,243,667
Philadelphia Arpt. Rev. Bonds 5% 6/15/98
(FGIC Insured) (d) 7,865,000 7,943,021
Philadelphia Redev. Auth. RAN (Southwark Plaza Proj.)
Series 1996, 3.85% 12/30/97, LOC FGIC/Capital
Market Svc. (b) 8,000,000 8,000,000
Pittsburgh Wtr. & Swr. Sys. Rev. Participating VRDN,
Series BT-181, 4.275% (Liquidity Facility Bankers
Trust Co.) (c) 4,935,000 4,935,000
Schuylkill County Ind. Dev. Auth. Rev.:
(Craftex Mills, Inc. Proj.) Series 1996, 4.45%,
LOC Corestates Bank, NA, VRDN (b) 2,000,000 2,000,000
(Interlock Realty Co.) 4.40%, LOC Star Bank, VRDN (b) 50,000 50,000
(Metal Sales Manufacturing Corp.) Series 1995,
4.30%, LOC Star Bank, VRDN (b) 1,200,000 1,200,000
(Prime Packaging, Inc. Proj.) Series 1995, 4.45%
LOC Corestates Bank, VRDN (b) 1,935,000 1,935,000
Venango Ind. Dev. Auth. Resource Recovery Rev.
Bonds (Scrubgrass Generating Co. Proj.):
Series 1990 A:
3.85% 8/20/97, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 3,000,000 3,000,000
3.90% 8/14/97, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 1,400,000 1,400,000
MUNICIPAL SECURITIES (A) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Venango Ind. Dev. Auth. Resource Recovery Rev.
Bonds (Scrubgrass Generating Co. Proj.): - continued
Series 1990 A: - continued
3.95% 7/15/97, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) $ 3,000,000 $ 3,000,000
3.80% 8/13/97, LOC Nat'l. Westminster
Bank, PLC, CP mode (b) 2,500,000 2,500,000
Series 1990 B, 3.80% 7/11/97, LOC Nat'l.
Westminster Bank, PLC, CP mode (b) 2,000,000 2,000,000
Westmoreland County Ind. Dev. Auth. (Nat'l.
Waste & Energy Corp.) 4.40%, LOC Fleet Bank,
NA, VRDN (b) 9,200,000 9,200,000
York City Gen. Auth. Pooled Fing. Rev. Series 1996,
4.15%, LOC First Union Nat'l. Bank of North
Carolina, VRDN 6,500,000 6,500,000
TOTAL INVESTMENTS - 100% $ 233,229,435
Total Cost for Income Tax Purposes $ 233,229,435
SECURITY TYPE ABBREVIATIONS
CP - Commercial Paper
RAN - 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. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
3. Provides evidence of ownership in one or more underlying municipal
bonds.
4. Security purchased on a delayed delivery or when-issued basis (see Note
#2 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1996, the fund had a capital loss carryforward of
approximately $65,000 of which $5,000, $5,000, $19,000, $10,000 and $26,000
will expire on December 31, 1997, 1998, 2002, 2003 and 2004, respectively.
SPARTAN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value - $ 233,229,435
See accompanying schedule
Cash 553,592
Interest receivable 1,140,704
TOTAL ASSETS 234,923,731
LIABILITIES
Payable for investments purchased $ 1,400,000
Regular delivery
Delayed delivery 7,952,852
Distributions payable 25,169
Accrued management fee 91,621
Other payables and accrued expenses 4,354
TOTAL LIABILITIES 9,473,996
NET ASSETS $ 225,449,735
Net Assets consist of:
Paid in capital $ 225,513,285
Accumulated net realized gain (loss) on investments (63,550)
NET ASSETS, for 225,511,334 shares outstanding $ 225,449,735
NET ASSET VALUE, offering price and redemption price $1.00
per share ($225,449,735 (divided by) 225,511,334 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 4,306,204
EXPENSES
Management fee $ 570,452
Non-interested trustees' compensation 1,103
Total expenses before reductions 571,555
Expense reductions (2,698) 568,857
NET INTEREST INCOME 3,737,347
NET REALIZED GAIN (LOSS) ON INVESTMENTS 1,161
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,738,508
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 3,737,347 $ 7,511,918
Net interest income
Net realized gain (loss) 1,161 (26,471)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,738,508 7,485,447
FROM OPERATIONS
Distributions to shareholders from net interest income (3,737,347) (7,511,918)
Share transactions at net asset value of $1.00 per share 73,772,897 168,791,356
Proceeds from sales of shares
Reinvestment of distributions from net interest income 3,603,862 7,197,082
Cost of shares redeemed (94,314,567) (175,218,462)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES (16,937,808) 769,976
RESULTING FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (16,936,647) 743,505
NET ASSETS
Beginning of period 242,386,382 241,642,877
End of period $ 225,449,735 $ 242,386,382
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 1992
<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 .016 .032 .035 .026 .022 .029
Investment
Operations
Net interest income
Less Distributions
From net interest (.016) (.032) (.035) (.026) (.022) (.029)
income
Net asset value, end $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
of period
TOTAL RETURN B 1.63% 3.21% 3.56% 2.61% 2.21% 2.90%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end $ 225,450 $ 242,386 $ 241,643 $ 257,608 $ 240,983 $ 243,335
of period
(000 omitted)
Ratio of expenses to .50% A .50% .50% .50% .50% .47%
average net assets C
Ratio of expenses to .50% A .48% .50% .50% .50% .47%
average net assets D
after expense
reductions
Ratio of net interest 3.27% A 3.17% 3.50% 2.58% 2.19% 2.88%
income to average
net assets
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ACCOUNT CLOSEOUT FEE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS
SHOWN.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
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.
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
47. 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 money
market fund and the income 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. Securities (including
restricted securities) for which market 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. Short-term securities with remaining maturities of sixty days
or less for which quotations are not readily available are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 market
discount, capital loss carryforwards and losses deferred due to futures and
options. The income fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net interest income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments may include temporary book and tax differences which
will reverse in a sequent period. 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 income 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.
48. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. Each fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased on a when-issued or forward commitment basis are
identified as such in each applicable fund's schedule of investments. Each
fund may receive compensation for interest forgone in the purchase of a
when-issued security. With respect to purchase commitments, each fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the commitment. The payables and
receivables associated with the purchases and sales of when-issued
securities having the same settlement date and broker are offset.
When-issued securities that have been purchased from and sold to different
brokers are reflected as both payables and receivables in the applicable
statements of assets and liabilities under the caption "Delayed delivery."
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract, or
2. OPERATING POLICIES -
CONTINUED
WHEN-ISSUED SECURITIES -
CONTINUED
if the issuer does not issue the securities due to political, economic, or
other factors.
FUTURES CONTRACTS. Each fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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. Gains and losses are realized upon the expiration or closing of the
futures contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded.
RESTRICTED SECURITIES. Each fund is 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 $3,120,000 or
2.1% of net assets for the income fund.
49. PURCHASES AND SALES OF INVESTMENTS.
INCOME FUND. Purchases and sales of securities, other than short-term
securities, aggregated $25,298,556 and $39,350,585, respectively.
The market value of futures contracts opened and closed during the period
amounted to $24,253,336 and $17,617,648, respectively.
50. 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
FMR also bears the cost of providing shareholder services to each fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the funds' shareholders which amounted to
$990 and $3,341 for the period for the income and money market funds,
respectively. Effective April 1, 1997, these transaction fees were
eliminated for the income fund.
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.
51. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of each fund with its custodian
and transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During the
period, the income and money market fund's expenses were reduced by $258
and $2,698, respectively, under these arrangements.
PROXY VOTING RESULTS
A special meeting of Spartan Pennsylvania Municipal Money Market Fund's
shareholders was held on July 16, 1997. The results of votes taken among
shareholders on proposals are listed below.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
SHARES VOTED SHARES VOTED
J. GARY BURKHEAD
Affirmative 444,689,929.498 96.136
Withheld 17,871,441.790 3.864
TOTAL 462,561,371.288 100.000
RALPH F. COX
Affirmative 443,768,598.498 95.937
Withheld 18,792,772.790 4.063
TOTAL 462,561,371.288 100.000
PHYLLIS BURKE DAVIS
Affirmative 443,103,899.148 95.794
Withheld 19,457,472.140 4.206
TOTAL 462,561,371.288 100.000
ROBERT M. GATES
Affirmative 443,950,387.378 95.977
Withheld 18,610,983.910 4.023
TOTAL 462,561,371.288 100.000
EDWARD C. JOHNSON 3RD
Affirmative 444,259,190.958 96.043
Withheld 18,302,180.330 3.957
TOTAL 462,561,371.288 100.000
E. BRADLEY JONES
Affirmative 442,923,945.528 95.755
Withheld 19,637,425.760 4.245
TOTAL 462,561,371.288 100.000
# OF % OF
SHARES VOTED SHARES VOTED
DONALD J. KIRK
Affirmative 444,464,359.398 96.088
Withheld 18,097,011.890 3.912
TOTAL 462,561,371.288 100.000
PETER S. LYNCH
Affirmative 444,937,445.098 96.190
Withheld 17,623,926.190 3.810
TOTAL 462,561,371.288 100.000
WILLIAM O. MCCOY
Affirmative 444,154,888.538 96.021
Withheld 18,406,482.750 3.979
TOTAL 462,561,371.288 100.000
GERALD C. MCDONOUGH
Affirmative 443,149,018.198 95.803
Withheld 19,412,353.090 4.197
TOTAL 462,561,371.288 100.000
MARVIN L. MANN
Affirmative 444,770,167.908 96.154
Withheld 17,791,203.380 3.846
TOTAL 462,561,371.288 100.000
THOMAS R. WILLIAMS
Affirmative 444,019,634.298 95.992
Withheld 18,541,736.990 4.008
TOTAL 462,561,371.288 100.000
PROPOSAL 2
To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the trust.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 435,395,650.683 94.127
Against 13,012,889.495 2.813
Abstain 14,152,831.110 3.060
TOTAL 462,561,371.288 100.000
PROPOSAL 3
To amend the Declaration of Trust to provide voting rights based on a
shareholder's total dollar investment in a fund, rather than on the number
of shares owned.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE TRUST OF THE TRUST
Affirmative 409,553,827.698 88.560
Against 31,050,994.330 6.714
Abstain 21,856,323.260 4.726
TOTAL 462,461,145.288 100.000
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
Affirmative 123,572,725.628 88.100
Against 11,158,538.880 7.956
Abstain 5,532,227.170 3.944
TOTAL 140,263,491.678 100.000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
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(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
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WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
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Fidelity On-line Xpress+ software for Windows combines comprehensive
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research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* 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.
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For directions and hours,
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Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
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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
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OHIO
600 Vine Street
Cincinnati, OH
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1903 East Ninth Street
Cleveland, OH
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121 S.W. Morrison Street
Portland, OR
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Philadelphia, PA
439 Fifth Avenue
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TENNESSEE
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Memphis, TN
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10000 Research Boulevard
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7001 Preston Road
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1155 Dairy Ashford Street
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2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
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McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
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INVESTMENT ADVISER
(registered trademark)
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SUB-ADVISER, MONEY MARKET FUND
FMR Texas Inc.
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OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning Jr., Vice President - INCOME FUND
Dwight D. Churchill, Vice President - INCOME FUND
Boyce Greer, Vice President -
MONEY MARKET FUND
Diane M. McLaughlin, Vice President - MONEY MARKET FUND
Jonathan D. Short, Vice President -
INCOME FUND
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox*
Phyllis Burke Davis*
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Marvin L. Mann*
William O. McCoy*
Gerald C. McDonough*
Robert C. Pozen
Thomas R. Williams*
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
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Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
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(2_FIDELITY_LOGOS)SPARTAN(registered trademark)
INSURED MUNICIPAL INCOME FUND
(FORMERLY FIDELITY INSURED MUNICIPAL
INCOME FUND)
SEMIANNUAL REPORT
JUNE 30, 1997
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 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 25 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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first six months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 20%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the first half of the year, as positive news
on the inflation front helped soften the effects of a hike in short-term
interest rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while 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. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you 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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value). You can also look at the
fund's income, as reflected in its yield, to measure performance. If
Fidelity had not reimbursed certain fund expenses, the total returns would
have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Spartan Insured Municipal 2.97% 8.02% 38.56% 113.14%
Income
Lehman Brothers Insured Municipal 3.12% 8.34% 42.17% n/a
Bond Index
Insured Municipal Debt 2.42% 7.19% 36.05% 110.48%
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 had 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 - a total return performance
benchmark for municipal 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 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
The past six months average represents a peer group of 50 mutual funds.
These benchmarks reflect reinvestment of dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Spartan Insured Municipal Income 8.02% 6.74% 7.86%
Lehman Brothers Insured Municipal 8.34% 7.29% n/a
Bond Index
Insured Municipal Debt 7.19% 6.34% 7.71%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking an arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
1987/06/30 10000.00 10000.00
1987/07/31 10093.51 10102.00
1987/08/31 10151.18 10124.73
1987/09/30 9584.81 9751.43
1987/10/31 9780.31 9785.95
1987/11/30 10020.89 10041.46
1987/12/31 10206.13 10187.16
1988/01/31 10698.73 10550.03
1988/02/29 10787.45 10661.54
1988/03/31 10470.33 10537.87
1988/04/30 10530.64 10617.96
1988/05/31 10559.74 10587.27
1988/06/30 10739.39 10742.16
1988/07/31 10798.77 10812.20
1988/08/31 10838.39 10821.72
1988/09/30 11041.51 11017.59
1988/10/31 11328.91 11211.50
1988/11/30 11149.98 11108.80
1988/12/31 11348.06 11222.45
1989/01/31 11526.39 11454.53
1989/02/28 11398.65 11323.83
1989/03/31 11398.76 11296.77
1989/04/30 11708.78 11564.95
1989/05/31 11934.64 11805.16
1989/06/30 12096.22 11965.47
1989/07/31 12194.97 12128.32
1989/08/31 12074.49 12009.58
1989/09/30 12032.59 11973.79
1989/10/31 12162.84 12120.23
1989/11/30 12362.07 12332.34
1989/12/31 12420.37 12433.22
1990/01/31 12339.14 12374.41
1990/02/28 12462.16 12484.54
1990/03/31 12475.14 12488.29
1990/04/30 12312.19 12397.87
1990/05/31 12621.15 12668.52
1990/06/30 12724.10 12779.87
1990/07/31 12920.33 12967.74
1990/08/31 12709.63 12779.44
1990/09/30 12768.72 12786.73
1990/10/31 12957.02 13018.68
1990/11/30 13264.17 13280.49
1990/12/31 13299.66 13338.26
1991/01/31 13489.72 13517.26
1991/02/28 13583.12 13634.86
1991/03/31 13544.62 13639.76
1991/04/30 13699.31 13821.17
1991/05/31 13843.03 13944.04
1991/06/30 13806.18 13930.24
1991/07/31 14003.10 14099.91
1991/08/31 14163.78 14285.60
1991/09/30 14350.94 14471.60
1991/10/31 14477.01 14601.85
1991/11/30 14498.47 14642.59
1991/12/31 14839.06 14956.82
1992/01/31 14848.69 14990.92
1992/02/29 14855.73 14995.71
1992/03/31 14817.29 15001.26
1992/04/30 14943.50 15134.77
1992/05/31 15138.68 15312.91
1992/06/30 15381.95 15569.86
1992/07/31 15864.33 16036.65
1992/08/31 15650.75 15880.29
1992/09/30 15738.87 15984.15
1992/10/31 15376.35 15827.02
1992/11/30 15826.00 16110.48
1992/12/31 16013.07 16274.97
1993/01/31 16215.06 16464.25
1993/02/28 16999.81 17059.76
1993/03/31 16774.60 16879.44
1993/04/30 16959.67 17049.75
1993/05/31 17026.01 17145.57
1993/06/30 17339.30 17431.73
1993/07/31 17332.94 17454.57
1993/08/31 17763.99 17817.97
1993/09/30 17980.25 18020.92
1993/10/31 17957.73 18055.70
1993/11/30 17745.58 17896.63
1993/12/31 18230.13 18274.43
1994/01/31 18440.54 18483.12
1994/02/28 17883.82 18004.41
1994/03/31 16914.67 17271.27
1994/04/30 16959.68 17417.73
1994/05/31 17175.91 17568.74
1994/06/30 16996.26 17461.40
1994/07/31 17383.29 17781.46
1994/08/31 17420.45 17842.99
1994/09/30 17114.29 17581.05
1994/10/31 16747.54 17268.81
1994/11/30 16346.15 16956.59
1994/12/31 16821.49 17329.81
1995/01/31 17471.56 17825.09
1995/02/28 18067.17 18343.45
1995/03/31 18259.11 18554.21
1995/04/30 18258.05 18576.11
1995/05/31 18837.93 19168.87
1995/06/30 18547.73 19002.10
1995/07/31 18711.10 19182.24
1995/08/31 18955.52 19425.47
1995/09/30 19066.86 19548.43
1995/10/31 19377.39 19832.67
1995/11/30 19751.78 20161.69
1995/12/31 19962.80 20355.45
1996/01/31 20127.96 20509.13
1996/02/29 19970.92 20370.69
1996/03/31 19651.78 20110.36
1996/04/30 19564.85 20053.44
1996/05/31 19531.55 20045.42
1996/06/30 19730.88 20263.72
1996/07/31 19915.35 20448.12
1996/08/31 19895.74 20443.21
1996/09/30 20164.22 20729.41
1996/10/31 20418.92 20963.86
1996/11/30 20825.92 21347.50
1996/12/31 20698.20 21257.84
1997/01/31 20746.20 21298.02
1997/02/28 20927.63 21493.54
1997/03/31 20628.61 21207.03
1997/04/30 20802.38 21384.53
1997/05/31 21103.30 21706.15
1997/06/30 21313.75 21937.32
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Spartan Insured Municipal Income Fund on June 30, 1987. As the chart
shows, by June 30, 1997, the value of the investment would have grown to
$21,314 - a 113.14% 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 $21,937 - a 119.37% 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 YEARS ENDED DECEMBER 31,
MONTHS
ENDED
JUNE 30,
1997 1996 1995 1994 1993 1992
Dividend return 2.47% 4.93% 5.97% 5.01% 5.77% 6.13%
Capital appreciation 0.50% -1.25% 12.70% -12.74% 8.08% 1.78%
return
Total return 2.97% 3.68% 18.67% -7.73% 13.85% 7.91%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JUNE 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.85(cents) 28.82(cents) 57.19(cents)
Annualized dividend rate 4.93% 4.90% 4.85%
30-day annualized yield 4.66% - -
30-day annualized tax-equivalent yield 7.28% - -
</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 $11.98 over
the past one month, $11.85 over the past six months and $11.80 over the
past one year, you can compare the fund's income over these three periods.
The 30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. The tax-equivalent yield shows what you would have to
earn on a taxable investment to equal the fund's tax-free yield, if you're
in the 36% federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain expenses during the period shown, the yield and the tax equivalent
yield would have been 4.63% and 7.23%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George Fischer, Portfolio Manager of Spartan Insured
Municipal Bond Fund
Q. GEORGE, HOW DID THE FUND PERFORM OVER THE PAST SIX MONTHS?
A. For the six months that ended June 30, 1997, the fund had a total return
of 2.97%. To get a sense of how the fund did relative to its peers, the
insured municipal debt funds average returned 2.42% for the same period,
according to Lipper Analytical Services. The Lehman Brothers Insured
Municipal Bond Index, which tracks the types of securities in which the
fund invests, had a six-month return of 3.12%. For the year that ended June
30, 1997, the fund returned 8.02%, while the insured municipal debt funds
average returned 7.19%, according to Lipper. For the same one-year period,
the Lehman Brothers index returned 8.34%.
Q. HOW WOULD YOU CHARACTERIZE THE MUNICIPAL BOND MARKET OVER THE PAST SIX
MONTHS?
A. With yields moving both up and down during the period, I'd characterize
it as a somewhat choppy environment, although municipal bonds fared better
than U.S. Treasury securities. Evidence that the economy was growing at a
much-quicker-than-expected pace sent Treasury bond yields higher and,
correspondingly, their prices lower during much of the period. On the other
hand, yields on municipal securities didn't react as negatively, and muni
bond prices were more stable
throughout the period. The divergence between Treasuries and municipals was
greatest in the long-maturity end of the market. As an example, the yield
on a 30-year Treasury yield rose 0.15%, while the yield on a 30-year
Aaa-rated muni fell 0.15%. In the short-maturity end of the market, the
yield on a five-year Treasury rose 0.20%, while the yield on a five-year
Aaa-rated muni rose only 0.10%. Municipal prices were supported by the fact
that there was a limited supply of municipals available while demand for
them grew.
Q. THE WORD "INSURED" OFTEN IMPLIES THAT AN INVESTOR 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 bond
prices - like other bond 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 - but not its
price at any given moment - are guaranteed by a municipal bond insurer.
Q. WHICH OF THE FUND'S HOLDINGS HELPED PERFORMANCE? WHICH DETRACTED?
A. Bonds issued in New York and California were some of the fund's - and
the municipal market's - best performers during the period. Both states
enjoyed the benefits of having strengthening local economies, which
translated into higher revenue collections and better fiscal health. As far
as detractors go, I can't think of any specific bond that was a
disappointment. However, a higher stake in California bonds might have
helped the fund since they were among the market's best performers during
the period.
Q. HOW WAS THE FUND STRUCTURED DURING THE PAST SIX MONTHS?
A. In terms of maturity, I kept the fund heavily weighted in bonds with
maturities of between 10 and 15 years. There were a couple of reasons why I
emphasized intermediate-maturity bonds. First, the yield these bonds
generate tends to be higher than the yield generated by owning a
combination of long- and short-maturity bonds. What's more, long-term bonds
tend to be callable, which means they can be redeemed by their issuer
before maturity. Callable bonds tend to rise less in up markets and fall
more in down markets. Intermediate-maturity bonds, on the other hand,
typically aren't susceptible to being called.
Q. WERE THERE ANY SIGNIFICANT CHANGES IN THE WAY THE FUND'S HOLDINGS WERE
ALLOCATED AMONG SECTORS DURING THE PERIOD?
A. Not really. General obligation bonds (GOs) remained the fund's largest
sector concentration. A GO is backed by the full faith and credit - which
includes the taxing power - of a city, county, state or other issuer. A GO
is repaid with general revenue such as taxes. General revenues are
sensitive to both the economy and a municipality's fiscal health, both of
which have been strong during the period in many of the areas the fund
emphasized. In choosing GOs, I put an emphasis on staying diversified and
not taking on very large positions in any one security.
Q. WHAT'S YOUR OUTLOOK FOR MUNICIPALS?
A. Until investors feel like they have a good handle on where the economy,
interest rates and inflation are headed, the bond market is likely to
remain choppy. The past six months have been a relatively good period
compared to U.S. Treasuries and, by the end of the period, munis seemed
fairly valued in relation to their taxable counterparts. I think that the
municipal market will need to continue to experience strong demand and weak
supply in order to continue outperforming Treasuries.
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 income
free from federal income tax
with preservation of capital
FUND NUMBER: 013
TRADING SYMBOL: FMUIX
START DATE: November 13,
1985
SIZE: as of June 30, 1997,
more than $315 million
MANAGER: George Fischer,
since 1995; manager,
Spartan Connecticut
Municipal Income Fund,
since 1996; joined Fidelity in
1989
(checkmark)
GEORGE FISCHER ON THE
RELATIONSHIP BETWEEN BOND
PRICES AND BOND YIELDS:
"When choosing investments
for the fund, I consider a
bond's price, its coupon - or
income - and its yield. While
a bond's coupon - which is the
interest rate the issuer
promises to pay the holder
until maturity - remains
constant, its price changes
practically every day. In fact,
it's not uncommon for a
municipal bond's price to
fluctuate as much as 1% any
given day. A bond's yield is its
coupon divided by its price.
For example, a bond selling
for $1,000 with a 10% coupon
offers a 10% current yield.
When a bond's price fluctuates
- - because of changes in
demand and supply, credit
quality or other factors - its
yield also changes. The
relationship between a bond's
price and its yield can be
thought of as a seesaw; yield
up, price down; yield down,
price up. When investing, I try
to get bonds that offer
competitive current yields of
course. But at the same time,
I also consider where future
yields will be since they
determine future prices and,
therefore, play into total
return."
INVESTMENT CHANGES
TOP FIVE STATES AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STATES
6 MONTHS AGO
California 11.4 11.3
Massachusetts 8.8 8.9
Illinois 8.5 7.6
Texas 8.4 7.9
New York 5.2 5.1
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
General Obligation 25.8 22.5
Electric Revenue 19.6 21.4
Health Care 15.0 14.3
Water & Sewer 8.7 8.9
Education 7.1 6.8
AVERAGE YEARS TO MATURITY AS OF JUNE 30, 1997
6 MONTHS AGO
Years 13.4 13.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JUNE 30, 1997
6 MONTHS AGO
Years 7.6 7.9
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
Aaa 89.1%
Aa, A 9.1%
Short-term
investments 1.8%
Aaa 86.5%
Aa, A 10.5%
Short-term
investments 3.0%
Row: 1, Col: 1, Value: 1.8
Row: 1, Col: 2, Value: 9.1
Row: 1, Col: 3, Value: 89.09999999999999
Row: 1, Col: 1, Value: 3.0
Row: 1, Col: 2, Value: 10.5
Row: 1, Col: 3, Value: 86.5
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS. AMOUNTS
SHOWN ARE AS
A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
MUNICIPAL BONDS - 98.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ALABAMA - 0.7%
Huntsville Rfdg. Gen. Oblig. Series D, 6% 8/1/08 $ 2,200,000 $ 2,348,500
ARIZONA - 0.9%
Arizona Trans. Board Excise Tax Rev. Rfdg. (Maricopa
County) 6% 7/1/05 (AMBAC Insured) 2,500,000 2,700,000
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (c) 945,000 966,263
CALIFORNIA - 10.8%
California Hsg. Fin. Agcy. Rev. Rfdg. (Home Mtg.) Series A,
5.30% 8/1/14 (MBIA Insured) 1,600,000 1,612,000
California Pub. Works Board Lease Rev. Rfdg.
(Dept. Corrections St. Prisons) Series A,
5% 12/1/19 (AMBAC Insured) 1,450,000 1,355,750
California Rural Home Mtg. Fin. Auth. Lease Rev.
Series A, 4.45% 8/1/01 (MBIA Insured) 1,625,000 1,618,900
Compton Commty. Redev. Agcy. Rfdg. Tax Allocation
Series A, 6.50% 8/1/13 (FSA Insured) 4,000,000 4,360,000
East Bay Muni. Util. Dist.:
Wastewtr. Treatment Sys. Rev. Rfdg.
4.75% 6/1/21 (FGIC Insured) 2,300,000 2,026,875
Wtr. Sys. Rev. Rfdg. 4.75% 6/1/21
(FGIC Insured) 1,450,000 1,277,813
Los Angeles County Trans. Commission Sales Tax
Rev. 6.25% 7/1/13 (MBIA Insured) 2,300,000 2,423,625
M-S-R Pub. Pwr. Agcy. San Juan Proj. Rev. Series E,
6.50% 7/1/05 (MBIA Insured) 1,685,000 1,819,800
Oceanside Ctfs. of Prtn. Rfdg. (Oceanside Civic
Ctr. Proj.) 6% 8/1/08 (MBIA Insured) 1,350,000 1,476,563
Pleasant Hill Jt. Pwrs. Fin. Auth. Lease Rev. (Cap. Impt. Prog.)
Series A, 5% 12/1/12 (MBIA Insured) 1,490,000 1,426,675
Sacramento City Fing. Auth.:
(Tax Allocation Proj.) (Cap. Appreciation) Series B,
0% 11/1/07 (MBIA Insured) 1,810,000 1,076,950
Lease Rev. Rfdg. Series A, 5.375% 11/1/14
(AMBAC Insured) 4,000,000 3,960,000
San Francisco City & County Swr. Rev. Rfdg.
5.90% 10/1/07 (AMBAC Insured) 4,000,000 4,255,000
Santa Barbara Wtr. Rev. Rfdg. Series A,
4.80% 9/1/14 (AMBAC Insured) 1,400,000 1,268,750
Univ. of California Rev. (Multiple Purpose Proj.)
Series D, 6.10% 9/1/10 (MBIA Insured) 1,000,000 1,056,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
West & Central Basin Fing. Auth. Rev. Rfdg.
(West Basin Rfdg. Proj.) Series A, 5% 8/1/13
(AMBAC Insured) $ 3,000,000 $ 2,838,750
33,853,701
COLORADO - 2.9%
Adams County School Dist. No. 12 Unltd. Tax Rfdg.
(Thornton) 6.20% 12/15/10 (FGIC Insured) 1,000,000 1,065,000
Colorado Univ. Hosp. Auth. Hosp. Rev. Series A,
6.25% 11/15/12 (AMBAC Insured) 1,000,000 1,066,250
Denver City & County School Dist. #1 Rfdg. Series A,
0% 12/1/08 (MBIA Insured) 10,400,000 5,772,000
Highlands Ranch Metropolitan Dist. #2 Rfdg.
(Cap. Guaranty) 6.50% 6/15/12 (FSA Insured) 1,000,000 1,126,250
Jefferson County Single Family Mtg. Rev. Series 1991 A,
8.875% 10/1/13 (MBIA Insured) 105,000 111,563
9,141,063
CONNECTICUT - 2.5%
Connecticut Health & Edl. Facs. Auth. Rev. (St. Raphael Hosp.)
Series H, 5.25% 7/1/12 (AMBAC Insured) 3,035,000 3,053,969
Connecticut Resource Recovery Auth. Rev. Rfdg.
(Middle Connecticut Sys.) Series A, 5.375% 11/15/10
(MBIA Insured) 2,100,000 2,107,875
Connecticut Spl. Tax Rev. (Trans. Infrastructure)
6% 10/1/06 (MBIA Insured) 2,500,000 2,696,875
7,858,719
DISTRICT OF COLUMBIA - 2.0%
District of Columbia Gen. Oblig. Rfdg. Series D,
6% 6/1/05 (Ambac Insured) 3,695,000 3,921,319
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 6% 4/1/18 (MBIA Insured) (h) 1,200,000 1,209,000
Washington D.C. Metropolitan Area Trans. Auth.
Gross Rev. Rfdg. 5.25% 7/1/14 (FGIC Insured) 1,300,000 1,264,250
6,394,569
FLORIDA - 0.6%
Dade County Seaport Rev. Rfdg. Series 95,
6.20% 10/1/10 (MBIA Insured) 1,000,000 1,087,500
Gainesville Util. Sys. Rev. 5% 10/1/16 1,000,000 933,750
2,021,250
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GEORGIA - 2.5%
Atlanta Downtown Dev. Auth. Rev. Rfdg.
(Underground Atlanta Proj.) 6.25% 10/1/12 $ 1,250,000 $ 1,315,625
Georgia Gen. Oblig. 6% 7/1/04 4,535,000 4,914,806
Georgia Muni. Elec. Pwr. Rev. Series O,
7.80% 1/1/20 (AMBAC Insured) 1,500,000 1,553,790
7,784,221
ILLINOIS - 8.1%
Chicago Gen. Oblig. Rfdg. Series A-2:
5.25% 1/1/01 (AMBAC Insured) 5,510,000 5,633,975
6.25% 1/1/15 (AMBAC Insured) 4,885,000 5,312,438
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 1,076,250
6.375% 1/1/15 (MBIA Insured) 1,200,000 1,284,000
Chicago Residential Mtg. Rev. Rfdg. (Cap. Appreciation)
Series B, 0% 10/1/09 (MBIA Insured) 5,290,000 2,261,475
Cook County Commty. College Dist. #508 Series C,
7.70% 12/1/07 (MBIA Insured) 2,500,000 3,075,000
Illinois Health Facs. Auth. Rev. (Swedish American Hosp.)
5.375% 11/15/13 (AMBAC Insured) 3,000,000 2,910,000
Illinois Reg'l. Trans. Auth. Series C, 7.75% 6/1/13
(FGIC Insured) 2,045,000 2,538,356
Illinois Toll Hwy. Auth. Hwy. Rev. 6% 1/1/09
(FGIC Insured) 1,000,000 1,075,000
25,166,494
INDIANA - 2.4%
Indiana Health Facs. Fing. Auth. Hosp. Rev. Rfdg.
(Columbus Reg'l. Hosp.) 7% 8/15/15 (FSA Insured) 2,000,000 2,300,000
Indiana Muni. Pwr. Agcy. (Pwr. Supply Sys. Rev.)
Series B, 5.50% 1/1/16 (MBIA Insured) 2,000,000 1,997,500
Indianapolis Arpt. Auth. Rev. Rfdg. Series A,
5.60% 7/1/15 (FGIC Insured) 1,000,000 993,750
Jasper County Poll. Cont. Rev. Rfdg. (Northern Indiana
Pub. Svc.) 7.10% 7/1/1 (MBIA Insured) 2,000,000 2,162,500
7,453,750
KANSAS - 2.2%
Reno County Mtg. Rev. Rfdg. (Single Family) Series B,
8.70% 9/1/11 510,000 547,613
Wichita Hosp. Rev. Series III-A, 6.465% 10/20/17
(MBIA Insured) 6,000,000 6,307,500
6,855,113
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
KENTUCKY - 1.9%
Jefferson County Hosp. Rev. (Alliant Health Sys. Proj.)
6.367% 10/9/08 (FGIC Insured) $ 4,000,000 $ 4,290,000
Kentucky Tpk. Auth. Econ. Dev. Road Rev. Rfdg.
(Revitalization Proj.) 5.50% 7/1/09 (AMBAC Insured) 1,630,000 1,687,050
5,977,050
LOUISIANA - 1.2%
East Baton Rouge Parish Sales & Use Tax Series ST-A,
4.80% 2/1/12 (FGIC Insured) 1,000,000 926,250
New Orleans Gen. Oblig. Rfdg. (Cap. Appreciation)
0% 9/1/09 (AMBAC Insured) 3,000,000 1,578,750
New Orleans Pub. Impt. Unltd. Tax 7% 9/1/19 (FGIC Insured)
(Pre-Refunded to 9/1/02 @ 100) (d) 1,000,000 1,111,250
3,616,250
MARYLAND - 0.9%
Montgomery County Gen. Oblig. 5.60% 7/1/04 2,775,000 2,927,625
MASSACHUSETTS - 8.8%
Boston Gen. Oblig. Series A:
4.875% 9/1/09 (FSA Insured) 1,000,000 970,000
4.875% 9/1/11 (FSA Insured) 1,925,000 1,833,563
Boston Metropolitan Dist. Gen. Oblig. Rfdg.
8% 12/1/03 (MBIA Insured) 1,260,000 1,485,225
Haverhill Gen. Oblig. Rfdg. Series A,
6.70% 9/1/10 (AMBAC Insured) 5,000,000 5,387,500
Holyoke Gen. Oblig. Ltd. Tax 8.15% 6/15/06 (MBIA Insured)
(Pre-Refunded to 6/15/02 @ 103) (d) 2,205,000 2,610,169
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Bentley College) Series H, 6.90% 7/1/21 (MBIA Insured) 6,720,000
7,324,800
(Northeastern Univ.) Series B, 7.60% 10/1/10
(AMBAC Insured) 1,000,000 1,060,000
Rfdg. (Massachusetts Gen. Hosp.) Series F,
6.25% 7/1/12 (AMBAC Insured) 2,000,000 2,217,500
Massachusetts Muni. Wholesale Elec. Co. Pwr. Supply Sys.
Rev. 5% 7/1/10 (AMBAC Insured) 1,610,000 1,553,650
Palmer Gen. Oblig. Rfdg. 5.50% 10/1/10
(MBIA Insured) 3,000,000 3,022,500
27,464,907
MICHIGAN - 1.9%
Jackson County Hosp. Fin. Auth. Hosp. Rev. Rfdg. (W A Foote
Mem. Hosp.) Series A, 4.75% 6/1/15 (FGIC Insured) 2,000,000 1,797,500
Michigan Bldg. Auth. Rev. Series II, 6.25% 10/1/20
(MBIA Insured) 1,100,000 1,146,750
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
MICHIGAN - CONTINUED
Michigan Hosp. Fin. Auth. Rev. Rfdg. (Sisters of Mercy
Health Corp.) 5.375% 8/15/14 (MBIA Insured) $ 3,000,000 $ 2,981,250
5,925,500
MINNESOTA - 4.1%
Edina Hosp. Sys. Rev. (Fairview Hosp.) Series A,
7.125% 7/1/19 (MBIA Insured) 2,780,000 2,960,700
Minneapolis & St. Paul Hsg. & Redev. Auth. Healthcare
Sys. Rev. Rfdg. (Healthspan Health Sys. Corp.)
Series A, 4.75% 11/15/18 (AMBAC Insured) 1,000,000 893,750
Minnesota Univ. Rfdg. 4.80% 8/15/03 5,000,000 5,025,000
St. Cloud Hosp. Facs. Auth. Rev. Rfdg. (St. Cloud Hosp. Proj.)
Series C, 5.25% 10/1/13 (AMBAC Insured) 2,000,000 1,957,500
Western Minnesota Muni. Pwr. Agcy. Pwr. Supply Rev.
Series B, 6% 1/1/04 (AMBAC Insured) 1,890,000 2,022,300
12,859,250
NEW JERSEY - 3.0%
New Jersey Health Care Facs. Fin. Auth. Rev. (Christ Hosp.
Group Issue) 7% 7/1/06 (Connie Lee Insured) 1,635,000 1,876,163
New Jersey Tpk. Auth. Tpk. Rev. Rfdg. Series C,
6.50% 1/1/09 (AMBAC Insured) (e) 1,000,000 1,120,000
Passaic County Utils. Auth. Solid Waste Disp. Resource
Recovery Rev. Rfdg. 0% 3/1/00 (MBIA Insured) 5,880,000 5,233,200
Warren County Poll. Cont. Fing. Auth. Resource Recovery Rev.
6.55% 12/1/06 (MBIA Insured) 1,000,000 1,098,750
9,328,113
NEW MEXICO - 2.2%
Albuquerque Arpt. Rev. Rfdg. 6.70% 7/1/18
(AMBAC Insured) (c) 2,500,000 2,737,500
Albuquerque Refuse Removal & Disp. Resource Recovery
Rev. Rfdg. 5.25% 7/1/09 (AMBAC Insured) 2,500,000 2,546,875
Rio Rancho Wtr. & Wastewtr. Rev. Series A,
5.90% 5/15/15 (FSA Insured) 1,600,000 1,634,000
6,918,375
NEW YORK - 5.2%
New York City Gen. Oblig. Rfdg. Series H,
6% 8/1/07 (FGIC Insured) 4,000,000 4,300,000
New York City Ind. Dev. Agcy. Ind. Dev. Rev. (Japan Airlines
Co. Ltd. Proj.) Series 91, 6% 11/1/15
LOC Morgan Guaranty Trust Co. (FSA Insured) (c) 1,000,000 1,046,250
New York State Dorm. Auth. Lease Rev. Rfdg. (State Univ.
Dorm. Facs.) Series A, 6% 7/1/03 (AMBAC Insured) 2,500,000 2,675,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev. Rfdg. (State Univ. Edl. Facs.)
Series A, 5.25% 5/15/15 (AMBAC Insured) $ 2,500,000 $ 2,450,000
New York State Local Gov't. Assistance Corp. Rfdg.:
Series C, 5.50% 4/1/17 1,000,000 1,006,250
Series E, 6% 4/1/14 2,000,000 2,142,500
New York State Med. Care Facs. Fing. Agcy. Rev.
(Mtg. Proj.) Series A, 6.20% 2/15/15 (FHA Insured) 1,500,000 1,567,500
New York State Urban Dev. Corp. Rev.
5.10% 1/1/09 (AMBAC Insured) 1,000,000 1,005,000
16,192,500
NORTH CAROLINA - 1.0%
North Carolina Muni. Pwr. Agcy. #1 Rev. (Catawba Elec.)
5% 1/1/18 (MBIA Insured) 3,300,000 3,036,000
NORTH DAKOTA - 2.5%
Mercer County Poll. Cont. Rev. Rfdg. (Basin Electric Pwr.)
(Antelope Valley Station Proj.) 7.20% 6/30/13
(AMBAC Insured) 6,500,000 7,775,625
OREGON - 0.6%
Portland Swr. Sys. Rev. Series A, 6.25% 6/1/15 1,875,000 1,975,781
PENNSYLVANIA - 2.9%
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 1,567,500
Pennsylvania Convention Ctr. Auth. Rev. Series A,
6.70% 9/1/16 (FGIC Insured) (Escrowed to Maturity) (d) 2,000,000
2,312,500
Pennsylvania Hsg. Fin. Agcy. Rfdg.:
(Multi-Family Section 8) Series C, 8.10%
7/1/13 (FHA Insured) 2,000,000 2,170,000
(Single Family Mtg.) Series 51, 5.65% 4/1/20 (c) 1,500,000 1,511,250
Philadelphia Wtr. & Wastewtr. Rev. 6.25% 8/1/09
(MBIA Insured) 1,230,000 1,357,613
8,918,863
SOUTH CAROLINA - 4.4%
Lexington County Health Svcs. Dist. Inc. Hosp. Rev.
7% 10/1/08 (FSA Insured) 3,000,000 3,296,250
Richland County Hosp. Facs. Rev. (Commty. Provider
Pooled Loan) Series A, 7.125% 7/1/17 (FSA Insured)
(Escrowed to Maturity) (d) 1,500,000 1,670,625
South Carolina Ed. Assistance Auth. Insured Student Loan Rev.:
6.40% 9/1/02 (c) 1,500,000 1,599,375
6.625% 9/1/06 (c) 2,000,000 2,130,000
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
SOUTH CAROLINA - CONTINUED
South Carolina Gen. Oblig. 5.75% 8/1/04 $ 2,300,000 $ 2,455,250
South Carolina Svc. Auth. Rev. (Forward Deal Settlement)
6.25% 1/1/03 (AMBAC Insured) 2,500,000 2,690,625
13,842,125
SOUTH DAKOTA - 0.4%
South Dakota Lease Rev. Rfdg. (Trust Cfts.) Series A,
6.625% 9/1/12 (FSA Insured) 1,000,000 1,112,500
TENNESSEE - 2.7%
Knox County Health Edl. & Hsg. Facs. Rev. Rfdg.
(Sanders Alliance Hosp. Facs.) Series C,
5.75% 1/1/14 (MBIA Insured) 2,000,000 2,062,500
Metropolitan Gov't. Nashville & Davidson County
Wtr. & Swr. Rev. Rfdg. (Cap. Appreciation)
0% 1/1/12 (FGIC Insured) (a) 5,600,000 6,230,000
8,292,500
TEXAS - 7.9%
Austin Util. Sys. Rev. Rfdg. (Cap. Appreciation)
0% 11/15/10 (AMBAC Insured) 2,400,000 1,173,000
Conroe Independent School Dist. Rfdg. (Cap. Appreciation)
0% 2/15/07 (PSF Guaranteed) 1,000,000 616,250
Dallas Independent School Dist. Unltd. Tax Rfdg.
(Cap. Appreciation) 0% 8/15/07 (PSF Insured) 3,810,000 2,290,763
Fort Bend Independent School Dist. Gen. Oblig.
7% 2/15/05 (PSF Insured) 2,500,000 2,853,125
Houston Wtr. & Swr. Sys. Rev. Rfdg. (Sr. Lien) Series C,
0% 12/1/06 (AMBAC Insured) 6,735,000 4,184,119
Matagorda County Navigation Dist. #1 Rev. Rfdg.
(Houston Lt. & Pwr. Proj.) Series C, 7.125% 7/1/19
(FGIC insured) 1,700,000 1,810,500
San Antonio Elec. & Gas Rev. Rfdg. (Cap. Appreciation)
Series B, 0% 2/1/10 (FGIC insured) 14,000,000 7,105,000
San Antonio Gen. Impt. Rfdg. (Cap. Appreciation)
Series C, 0% 8/1/06 1,920,000 1,216,800
Spring Independent School Dist. 4.875% 8/15/10
(PSF Insured) 1,500,000 1,445,625
Texas Pub. Fin. Auth. Bldg. Rev. Rfdg. (Cap. Appreciation)
Series 1990, 0% 2/1/12 (MBIA Insured) 4,400,000 1,974,500
24,669,682
MUNICIPAL BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
UTAH - 4.2%
Intermountain Pwr. Agcy. Pwr. Supply Sys. Rev. Rfdg.:
Spl. Oblig. Sixth Series B:
6.50% 7/1/05 (MBIA Insured) $ 2,000,000 $ 2,207,500
6.50% 7/1/10 (MBIA Insured) 1,000,000 1,120,000
6% 7/1/16 (MBIA Insured) 3,000,000 3,108,750
Series B, 5.75% 7/1/16 (MBIA Insured) 5,760,000 5,803,200
Series D, 5% 7/1/21 (MBIA Insured) 900,000 829,125
13,068,575
VIRGINIA - 1.2%
Virginia Beach Dev. Auth. Hosp. Facs. Rev.
(Virginia Beach Gen. Hosp. Proj.):
6% 2/15/12 (AMBAC Insured) 2,150,000 2,287,063
6% 2/15/13 (AMBAC Insured) 1,460,000 1,549,425
3,836,488
WASHINGTON - 4.8%
Benton County Pub. Util. Dist. #1 Elec. Rev. Rfdg.
6% 11/1/04 (AMBAC Insured) 1,740,000 1,863,975
Washington Pub. Pwr. Supply Sys. Rev. Rfdg.:
Nuclear Proj. #1 Series B, 7.25% 7/1/12
(FGIC Insured) (Pre-Refunded to 7/1/00 @ 102) (d) 1,500,000 1,644,375
Nuclear Proj. #2:
5.55% 7/1/10 (FGIC Insured) 8,000,000 7,930,000
Series A, 6% 7/1/07 2,500,000 2,634,375
Nuclear Proj. #3 Series B, 7% 7/1/05 (FGIC Insured) 750,000 800,625
14,873,350
WYOMING - 0.5%
Wyoming Muni. Pwr. Agcy. Pwr. Supply Rev. Rfdg.
Series A, 6.125% 1/1/16 (MBIA Insured) 1,500,000 1,565,625
TOTAL MUNICIPAL BONDS
(Cost $295,091,165) 306,720,327
MUNICIPAL NOTES (B) - 1.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CALIFORNIA - 0.6%
Los Angeles Unified School Dist. Tax & Rev. Series B,
4.50% 9/30/97 TRAN $ 2,000,000 $ 2,003,200
ILLINOIS - 0.4%
Chicago Gen. Oblig. Tender Notes Series 1997, 3.65%,
tender 2/5/98, LOC Morgan Guaranty Trust Co. 1,200,000 1,198,980
TEXAS - 0.5%
Texas Gen. Oblig. Series 1996, 4.75% 8/29/97 TRAN 1,500,000 1,502,010
TOTAL MUNICIPAL NOTES
(Cost $4,704,264) 4,704,190
CASH EQUIVALENTS - 0.3%
SHARES
Municipal Central Cash Fund (f)(g)
(Cost $855,835) 855,835 855,835
TOTAL INVESTMENTS - 100%
(Cost $300,651,264) $ 312,280,352
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
20 US Treasury Bond Future Contracts September, 1997 $ 2,172,056 $ 49,194
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.7%
SECURITY TYPE ABBREVIATIONS
TRAN - Tax and Revenue Anticipation Notes
LEGEND
5. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. Private activity obligations whose interest is subject to the federal
alternative minimum tax for individuals.
8. Security collateralized by an amount sufficient to pay interest and
principal.
9. 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 $156,800.
10. Information in this report regarding holdings by state and security
types do not reflect the holdings of the Municipal Central Cash Fund. A
listing of the Municipal Central Cash Fund's holdings as of its most recent
fiscal period end is available upon request.
11. At the period end, the seven-day yield of the Municipal Central Cash
Fund was 4.17% The yield refers to the income earned by investing in the
fund over the seven-day period, expressed as an annual percentage.
12. Security purchased on a delayed delivery or a when-issued basis (see
Note 2 of Notes to Financial Statements).
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 96.4% AAA, AA, A 98.0%
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 distribution of municipal securities by revenue source, as a percentage
of total value of investment in securities, is as follows:
General Obligation 25.8%
Electric Revenue 19.6
Health Care 15.0
Water & Sewer 8.7
Education 7.1
Transportation 5.8
Others (individually less than 5%) 18.0
TOTAL 100.0%
INCOME TAX INFORMATION
At June 30, 1997, the aggregate cost of investment securities for income
tax purposes was $300,651,460. Net unrealized appreciation aggregated
$11,628,892, of which $12,184,410 related to appreciated investment
securities and $555,518 related to depreciated investment securities.
At December 31, 1996, the fund had a capital loss carryforward of
approximately $2,242,000 all of which will expire on December 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JUNE 30, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $300,651,264) - $ 312,280,352
See accompanying schedule
Interest receivable 5,150,602
TOTAL ASSETS 317,430,954
LIABILITIES
Payable to custodian bank $ 13,704
Payable for investments purchased 1,190,148
on delayed delivery basis
Payable for fund shares redeemed 436,635
Distributions payable 467,567
Accrued management fee 102,982
Payable for daily variation on futures contracts 11,250
Other payables and accrued expenses 64,952
TOTAL LIABILITIES 2,287,238
NET ASSETS $ 315,143,716
Net Assets consist of:
Paid in capital $ 304,416,121
Accumulated undistributed net realized gain (loss) (950,687)
on investments
Net unrealized appreciation (depreciation) on 11,678,282
investments
NET ASSETS, for 26,367,138 shares outstanding $ 315,143,716
NET ASSET VALUE, offering price and redemption price $11.95
per share ($315,143,716 (divided by) 26,367,138 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INTEREST INCOME $ 8,660,998
EXPENSES
Management fee $ 623,740
Transfer agent, accounting and custodian fees and 280,853
expenses
Non-interested trustees' compensation 708
Registration fees 23,963
Audit 24,980
Legal 1,619
Miscellaneous 939
Total expenses before reductions 956,802
Expense reductions (38,231) 918,571
NET INTEREST INCOME 7,742,427
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,231,198
Futures contracts 150,993 1,382,191
Change in net unrealized appreciation (depreciation) on:
Investment securities 203,506
Futures contracts 45,333 248,839
NET GAIN (LOSS) 1,631,030
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 9,373,457
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 7,742,427 $ 16,510,227
Net interest income
Net realized gain (loss) 1,382,191 1,420,872
Change in net unrealized appreciation (depreciation) 248,839 (6,245,623)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 9,373,457 11,685,476
FROM OPERATIONS
Distributions to shareholders (7,742,427) (16,510,227)
From net interest income
Share transactions 27,112,369 96,451,875
Net proceeds from sales of shares
Reinvestment of distributions 5,216,648 11,267,262
Cost of shares redeemed (49,145,498) (129,582,316)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (16,816,481) (21,863,179)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (15,185,451) (26,687,930)
NET ASSETS
Beginning of period 330,329,167 357,017,097
End of period $ 315,143,716 $ 330,329,167
OTHER INFORMATION
Shares
Sold 2,287,781 8,173,060
Issued in reinvestment of distributions 440,313 957,709
Redeemed (4,146,423) (11,003,240)
Net increase (decrease) (1,418,329) (1,872,471)
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1997
(UNAUDITED) 1996 1995 1994 1993 C 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.890 $ 12.040 $ 10.690 $ 12.370 $ 11.720 $ 11.630
beginning of period
Income from .288 .574 .599 .627 .655 .689
Investment
Operations
Net interest income
Net realized and .060 (.150) 1.358 (1.560) .930 .200
unrealized
gain (loss)
Total from investment .348 .424 1.957 (.933) 1.585 .889
operations
Less Distributions (.288) (.574) (.599) (.627) (.655) (.689)
From net interest
income
From net - - (.008) (.120) (.280) (.110)
realized gain
Total distributions (.288) (.574) (.607) (.747) (.935) (.799)
Net asset value, end $ 11.950 $ 11.890 $ 12.040 $ 10.690 $ 12.370 $ 11.720
of period
TOTAL RETURN B, F 2.97% 3.68% 18.67% (7.73) 13.85% 7.91%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 315,144 $ 330,329 $ 357,017 $ 319,551 $ 448,396 $ 371,122
period (000 omitted)
Ratio of expenses to .58% A, .61% .61% .58% .61% .63%
average net assets E
Ratio of expenses to .58% A .60% .61% .58% .61% .63%
average net assets D
after expense
reductions
Ratio of net interest 4.90% A 4.87% 5.24% 5.52% 5.31% 5.91%
income to average
net assets
Portfolio turnover rate 22% A 31% 61% 56% 78% 69%
</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.
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.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Spartan Insured Municipal Income Fund (the fund) (formerly Fidelity Insured
Municipal Income 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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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 futures
and options transactions and market discount.
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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Municipal
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
Fidelity Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in high-quality,
short-term municipal securities of various states and municipalities.
Income distributions from the Cash Fund are declared daily and paid monthly
from net interest income. Income distributions received by the fund are
recorded as interest income in the accompanying financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying securities
is fixed at the time the transaction is negotiated. The market values of
the securities purchased 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 when-issued security. With respect to
purchase commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases and
sales of when-issued securities having the same settlement date and broker
are offset. When-issued securities that have been purchased from and sold
to different brokers are reflected as both payables and receivables in the
statement of assets and liabilities under the caption "Delayed delivery."
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract, or if
the issuer does not issue the securities due to political, economic, or
other factors.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends 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
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS - CONTINUED
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. Gains and losses are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on
which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $34,388,475 and $54,783,144, respectively.
The market value of futures contracts opened and closed during the period
amounted to $25,137,640 and $23,693,028, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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. The annual individual fund fee rate is .25%. 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. For the period, the management fee was
equivalent to an annualized rate of .39% of average net assets.
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 Company, Inc. (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 $203,651 and $67,771, respectively.
For the period, the transfer agent fees were equivalent to an annualized
rate of .13% of average net assets.
5. EXPENSE REDUCTIONS.
Effective April 1, 1997, FMR voluntarily agreed to reimburse operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of .55% of the funds average
net assets. For the period, the reimbursement reduced expenses by $38,231.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
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1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* 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
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TOTAL
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DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
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For directions and hours,
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ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
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
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
1907 West State Road 434
Longwood, FL
4001 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, 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 Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
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
155 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
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 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
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, 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
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
George A. Fischer, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Thomas D. Maher, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
* INDEPENDENT TRUSTEES
FIDELITY'S MUNICIPAL BOND FUNDS
Aggressive Municipal
California Insured Municipal Income
California Municipal Income
Spartan Insured Municipal Income
Limited Term Municipal Income
Spartan Massachusetts Municipal Income
Spartan Michigan Municipal Income
Spartan Minnesota Municipal Income
Municipal Income
New York Municipal Income
New York Municipal Income Insured
Spartan Ohio Municipal Income
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
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